<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT D
STATEMENT OF CONDITION-- December 31, 1998
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C> <C>
Investments in mutual funds: Shares Cost Value
--------- ------------ ------------
Massachusetts Investors Trust
("MIT")*............................. 2,209,842 $ 35,062,914 $ 44,745,910
Massachusetts Investors Growth Stock
Fund ("MIG")*........................ 1,161,390 14,529,926 18,477,243
MFS Total Return Fund ("MTR")*........ 2,275,559 34,610,122 34,050,978
MFS Growth Opportunities Fund
("MGO")*............................. 334,192 4,724,425 5,331,193
MFS Bond Fund ("MFB")*................ 194,787 2,593,444 2,588,895
MFS World Governments Fund ("MWG")*... 166,362 1,838,745 1,756,609
MFS/Sun Life Series Trust:
Capital Appreciation Series
("CAS")............................ 1,254,168 47,198,539 57,607,205
Government Securities Series
("GSS")............................ 769,362 9,707,726 10,305,289
High Yield Series ("HYS")........... 534,580 4,856,683 4,898,634
Money Market Series ("MMS")......... 6,498,056 6,498,056 6,498,056
------------ ------------
$161,620,580 $186,260,012
------------
------------
<CAPTION>
LIABILITIES:
<S> <C> <C> <C>
Payable to sponsor............................................... (3,492)
------------
Net Assets................................................. $186,256,520
------------
------------
</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................... 567,275 $ 53.6738 $ 30,436,584 $131,156 $ 30,567,740
MIT-Level 3................... 196,235 54.1658 10,526,835 -- 10,526,835
MIT-Level 4................... 90,975 40.1197 3,650,896 -- 3,650,896
MIG-Level 2................... 165,654 60.7145 10,057,916 -- 10,057,916
MIG-Level 3................... 89,584 67.2213 6,020,422 -- 6,020,422
MIG-Level 4................... 69,102 34.7168 2,398,905 -- 2,398,905
MTR-Level 2................... 628,337 36.7917 23,057,325 -- 23,057,325
MTR-Level 3................... 206,850 33.6069 6,937,518 -- 6,937,518
MTR-Level 4................... 157,727 25.7020 4,056,135 -- 4,056,135
MGO-Level 2................... 95,086 41.3383 3,955,130 -- 3,955,130
MGO-Level 3................... 23,225 44.4667 1,036,184 -- 1,036,184
MGO-Level 4................... 11,370 29.7048 339,879 -- 339,879
MFB-Level 2................... 76,030 21.7979 1,689,658 -- 1,689,658
MFB-Level 3................... 23,254 22.0998 529,198 -- 529,198
MFB-Level 4................... 19,478 18.3057 370,039 -- 370,039
MWG-Level 2................... 35,699 22.2095 792,595 -- 792,595
MWG-Level 3................... 16,947 19.7003 334,086 -- 334,086
MWG-Level 4................... 45,525 13.8399 629,928 -- 629,928
CAS-Level 2................... 628,268 55.0679 34,586,982 152,158 34,739,140
CAS-Level 3................... 111,749 58.6886 6,552,836 6,146 6,558,982
CAS-Level 4................... 284,604 57.3332 16,307,861 -- 16,307,861
GSS-Level 2................... 317,889 21.5873 6,860,311 3,223 6,863,534
GSS-Level 3................... 107,677 21.0469 2,268,691 3,347 2,272,038
GSS-Level 4................... 56,137 20.7986 1,167,772 -- 1,167,772
HYS-Level 2................... 147,334 24.4991 3,609,716 2,680 3,612,396
HYS-Level 3................... 32,554 22.8613 744,705 2,857 747,562
HYS-Level 4................... 24,009 22.4017 538,709 -- 538,709
MMS-Level 2................... 254,576 16.4256 4,175,336 2,610 4,177,946
MMS-Level 3................... 113,042 15.3200 1,730,160 -- 1,730,160
MMS-Level 4................... 39,132 15.0569 590,031 -- 590,031
------------ ----------- ------------
Net Assets....................................... $185,952,343 $304,177 $186,256,520
------------ ----------- ------------
------------ ----------- ------------
</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
STATEMENT OF OPERATIONS-- Year Ended December 31, 1998
<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............... $ 2,669,612 $1,476,147 $ 5,528,388 $ 570,081 $ 178,127 $ 111,968
Mortality and expense risk charges.... (511,201) (182,555 ) (414,243) (55,579 ) (29,973) (20,888)
----------- ---------- ----------- ---------- ------------ -----------
Net investment income............. $ 2,158,411 $1,293,592 $ 5,114,145 $ 514,502 $ 148,154 $ 91,080
----------- ---------- ----------- ---------- ------------ -----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (loss) on investment
transactions:
Proceeds from sales................. $16,064,722 $7,417,805 $13,637,991 $1,348,937 $ 1,182,550 $1,255,881
Cost of investments sold............ (10,555,425) (5,715,466) 11,637,406 (1,102,232) (1,134,467) (1,294,592)
----------- ---------- ----------- ---------- ------------ -----------
Net realized gains (loss)......... $ 5,509,297 $1,702,339 $ 2,000,585 $ 246,705 $ 48,083 $ (38,711)
----------- ---------- ----------- ---------- ------------ -----------
Net unrealized appreciation
(depreciation) on investments:
End of year......................... $ 9,682,996 $3,947,317 $ (559,144) $ 606,768 $ (4,549) $ (82,136)
Beginning of year................... 8,980,397 1,463,577 2,995,992 214,997 112,279 (87,189)
----------- ---------- ----------- ---------- ------------ -----------
Change in unrealized appreciation
(depreciation)................... $ 702,599 $2,483,740 $(3,555,136) $ 391,771 $ (116,828) $ 5,053
----------- ---------- ----------- ---------- ------------ -----------
Realized and unrealized gains
(losses)........................... $ 6,211,896 $4,186,079 $(1,554,551) $ 638,476 $ (68,745) $ (33,658)
----------- ---------- ----------- ---------- ------------ -----------
INCREASE IN NET ASSETS FROM
OPERATIONS............................. $ 8,370,307 $5,479,671 $ 3,559,594 $1,152,978 $ 79,409 $ 57,422
----------- ---------- ----------- ---------- ------------ -----------
----------- ---------- ----------- ---------- ------------ -----------
<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............... $ 6,135,644 $ 610,457 $ 375,283 $ 314,213 $ 17,969,920
Mortality and expense risk charges.... (596,658) (129,219 ) (65,775) (75,388 ) (2,081,479)
----------- ---------- ----------- ---------- ------------
Net investment income............. $ 5,538,986 $ 481,238 $ 309,508 $ 238,825 $ 15,888,441
----------- ---------- ----------- ---------- ------------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains on investment
transactions:
Proceeds from sales................. $25,243,635 $5,213,276 $ 2,784,436 $6,012,715 $ 80,161,948
Cost of investments sold............ (17,481,182) (5,074,541) (2,515,280) (6,012,715) (62,523,306)
----------- ---------- ----------- ---------- ------------
Net realized gains................ $ 7,762,453 $ 138,735 $ 269,156 $ -- $ 17,638,642
----------- ---------- ----------- ---------- ------------
Net unrealized appreciation on
investments:
End of year......................... $10,408,666 $ 597,563 $ 41,951 $ -- $ 24,639,432
Beginning of year................... 11,134,186 432,466 635,781 -- 25,882,486
----------- ---------- ----------- ---------- ------------
Change in unrealized
appreciation..................... $ (725,520) $ 165,097 $ (593,830) $ -- $ (1,243,054)
----------- ---------- ----------- ---------- ------------
Realized and unrealized gains
(losses)........................... $ 7,036,933 $ 303,832 $ (324,674) $ -- $ 16,395,588
----------- ---------- ----------- ---------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS............................. $12,575,919 $ 785,070 $ (15,166) $ 238,825 $ 32,284,029
----------- ---------- ----------- ---------- ------------
----------- ---------- ----------- ---------- ------------
</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,
-------------------------- ------------------------ -------------------------
1998 1997 1998 1997 1998 1997
------------ ------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................. $ 2,158,411 $ 2,992,016 $ 1,293,592 $ 2,323,691 $ 5,114,145 $ 4,246,865
Net realized gains.................... 5,509,297 8,194,722 1,702,339 1,176,338 2,000,585 4,392,240
Net unrealized gains (losses)......... 702,599 1,593,276 2,483,740 2,198,495 (3,555,136) (664,202)
------------ ------------ ----------- ----------- ----------- ------------
Increase in net assets from
operations....................... $ 8,370,307 $ 12,780,014 $ 5,479,671 $ 5,698,524 $ 3,559,594 $ 7,974,903
------------ ------------ ----------- ----------- ----------- ------------
PARTICIPANT TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $ 4,615,049 $ 7,414,274 $ 1,648,663 $ 1,659,301 $ 3,371,244 $ 6,596,639
Net transfers between Sub-Accounts
and Fixed Account.................. (179,472) 926,030 583,305 277,942 (1,254,402) (1,493,129)
Withdrawals, surrenders,
annuitizations and contract
charges............................ (13,124,763) (26,661,131) (4,889,909) (5,570,136) (9,074,024) (25,159,273)
------------ ------------ ----------- ----------- ----------- ------------
Net accumulation activity......... $ (8,689,186) $(18,320,827) $(2,657,941) $(3,632,893) $(6,957,182) $(20,055,763)
------------ ------------ ----------- ----------- ----------- ------------
Annuitization Activity:
Annuitizations...................... $ 117,436 $ -- $ -- $ -- $ -- $ --
Annuity payments and contract
charges............................ (6,831) -- -- -- -- --
Adjustments to annuity reserve...... (439) -- -- -- -- --
------------ ------------ ----------- ----------- ----------- ------------
Net annuitization activity........ $ 110,166 $ -- $ -- $ -- $ -- $ --
------------ ------------ ----------- ----------- ----------- ------------
Decrease in net assets from
participant transactions............. $ (8,579,020) $(18,320,827) $(2,657,941) $(3,632,893) $(6,957,182) $(20,055,763)
------------ ------------ ----------- ----------- ----------- ------------
Increase (decrease) in net assets... $ (208,713) $ (5,540,813) $ 2,821,730 $ 2,065,631 $(3,397,588) $(12,080,860)
NET ASSETS:
Beginning of year..................... 44,954,184 50,494,997 15,655,513 13,589,882 37,448,566 49,529,426
------------ ------------ ----------- ----------- ----------- ------------
End of year........................... $ 44,745,471 $ 44,954,184 $18,477,243 $15,655,513 $34,050,978 $ 37,448,566
------------ ------------ ----------- ----------- ----------- ------------
------------ ------------ ----------- ----------- ----------- ------------
</TABLE>
See notes to financial statements
3
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT D
STATEMENT OF CHANGES IN NET ASSETS-- continued
<TABLE>
<CAPTION>
MGO MFB MWG
Sub-Account Sub-Account Sub-Account
-------------------------- ------------------------ -------------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
-------------------------- ------------------------ -------------------------
1998 1997 1998 1997 1998 1997
------------ ------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................. $ 514,502 $ 487,195 $ 148,154 $ 266,293 $ 91,080 $ 71,033
Net realized gains (losses)........... 246,705 501,748 48,083 139,774 (38,711) (20,089)
Net unrealized gains (losses)......... 391,771 (124,934) (116,828) (18,882) 5,053 (81,457)
------------ ------------ ----------- ----------- ----------- ------------
Increase (decrease) in net assets
from operations.................. $ 1,152,978 $ 864,009 $ 79,409 $ 387,185 $ 57,422 $ (30,513)
------------ ------------ ----------- ----------- ----------- ------------
PARTICIPANT TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $ 497,233 $ 671,571 $ 314,355 $ 614,719 $ 257,208 $ 410,460
Net transfers between Sub-Accounts
and Fixed Account.................. 225,820 19,958 (108,141) (247,713) (382,786) (339,526)
Withdrawals, surrenders,
annuitizations and contract
charges............................ (860,467) (1,534,890) (461,894) (3,388,353) (317,138) (1,019,371)
------------ ------------ ----------- ----------- ----------- ------------
Net accumulation activity......... $ (137,414) $ (843,361) $ (255,680) $(3,021,347) $ (442,716) $ (948,437)
------------ ------------ ----------- ----------- ----------- ------------
Decrease in net assets from
participant transactions........... $ (137,414) $ (843,361) $ (255,680) $(3,021,347) $ (442,716) $ (948,437)
------------ ------------ ----------- ----------- ----------- ------------
Increase (decrease) in net assets... $ 1,015,564 $ 20,648 $ (176,271) $(2,634,162) $ (385,294) $ (978,950)
NET ASSETS:
Beginning of year..................... 4,315,629 4,294,981 2,765,166 5,399,328 2,141,903 3,120,853
------------ ------------ ----------- ----------- ----------- ------------
End of year........................... $ 5,331,193 $ 4,315,629 $ 2,588,895 $ 2,765,166 $ 1,756,609 $ 2,141,903
------------ ------------ ----------- ----------- ----------- ------------
------------ ------------ ----------- ----------- ----------- ------------
</TABLE>
See notes to financial statements
4
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT D
STATEMENT 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,
---------------------------- ----------------------------- ------------
1998 1997 1998 1997 1998
------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................. $ 5,538,986 $ 4,127,154 $ 481,238 $ 1,286,592 $ 309,508
Net realized gains.................... 7,762,453 6,325,453 138,735 62,610 269,156
Net unrealized gains (losses)......... (725,520) 601,031 165,097 (19,750) (593,830)
------------ ------------- ------------- ------------- ------------
Increase (decrease) in net assets
from operations.................. $ 12,575,919 $ 11,053,638 $ 785,070 $ 1,329,452 $ (15,166)
------------ ------------- ------------- ------------- ------------
PARTICIPANT TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $ 4,587,562 $ 6,447,175 $ 924,333 $ 2,574,283 $ 507,550
Net transfers between Sub-Accounts
and Fixed
Account............................ (174,891) 865,318 (179,536) (1,799,091) (454,744)
Withdrawals, surrenders,
annuitizations and
contract charges................... (9,072,386) (18,586,687) (3,281,848) (13,777,389) (1,191,705)
------------ ------------- ------------- ------------- ------------
Net accumulation activity......... $ (4,659,715) $ (11,274,194) $ (2,537,051) $ (13,002,197) $ (1,138,899)
------------ ------------- ------------- ------------- ------------
Annuitization Activity:
Annuitizations...................... $ -- $ -- $ -- $ -- $ --
Annuity payments and contract
charges............................ (13,867) (12,103) (2,138) (2,042) (1,925)
Adjustments to annuity reserve...... (1,562) (7,554) (133) (170) 7
------------ ------------- ------------- ------------- ------------
Net annuitization activity........ $ (15,429) $ (19,657) $ (2,271) $ (2,212) $ (1,918)
------------ ------------- ------------- ------------- ------------
Decrease in net assets from
participant transactions............. $ (4,675,144) $ (11,293,851) $ (2,539,322) $ (13,004,409) $ (1,140,817)
------------ ------------- ------------- ------------- ------------
Increase (decrease) in net assets... $ 7,900,775 $ (240,213) $ (1,754,252) $ (11,674,957) $ (1,155,983)
NET ASSETS:
Beginning of year..................... 49,705,208 49,945,421 12,057,596 23,732,553 6,054,650
------------ ------------- ------------- ------------- ------------
End of year........................... $ 57,605,983 $ 49,705,208 $ 10,303,344 $ 12,057,596 $ 4,898,667
------------ ------------- ------------- ------------- ------------
------------ ------------- ------------- ------------- ------------
<CAPTION>
1997
------------
<S> <C>
OPERATIONS:
Net investment income................. $ 550,929
Net realized gains.................... 515,244
Net unrealized gains (losses)......... (30,493)
------------
Increase (decrease) in net assets
from operations.................. $ 1,035,680
------------
PARTICIPANT TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $ 1,164,890
Net transfers between Sub-Accounts
and Fixed
Account............................ (275,269)
Withdrawals, surrenders,
annuitizations and
contract charges................... (5,055,478)
------------
Net accumulation activity......... $ (4,165,857)
------------
Annuitization Activity:
Annuitizations...................... $ --
Annuity payments and contract
charges............................ (1,847)
Adjustments to annuity reserve...... (12)
------------
Net annuitization activity........ $ (1,859)
------------
Decrease in net assets from
participant transactions............. $ (4,167,716)
------------
Increase (decrease) in net assets... $ (3,132,036)
NET ASSETS:
Beginning of year..................... 9,186,686
------------
End of year........................... $ 6,054,650
------------
------------
</TABLE>
See notes to financial statements
5
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT D
STATEMENT OF CHANGES IN NET ASSETS-- continued
<TABLE>
<CAPTION>
MMS
Sub-Account Total
---------------------------- -----------------------------
Year Ended Year Ended
December 31, December 31,
---------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income................. $ 238,825 $ 401,612 $ 15,888,441 $ 16,753,380
Net realized gains.................... -- -- 17,638,642 21,288,040
Net unrealized gains (losses)......... -- -- (1,243,054) 3,453,084
------------ ------------- ------------- -------------
Increase in net assets from
operations....................... $ 238,825 $ 401,612 $ 32,284,029 $ 41,494,504
------------ ------------- ------------- -------------
PARTICIPANT TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $ 802,246 $ 1,325,566 $ 17,525,443 $ 28,878,878
Net transfers between Sub-Accounts
and
Fixed Account...................... 1,431,968 210,852 (492,879) (1,854,628)
Withdrawals, surrenders,
annuitizations and
contract charges................... (2,316,756) (8,920,064) (44,590,890) (109,672,772)
------------ ------------- ------------- -------------
Net accumulation activity......... $ (82,542) $ (7,383,646) $ (27,558,326) $ (82,648,522)
------------ ------------- ------------- -------------
Annuitization Activity:
Annuitizations...................... $ -- $ -- $ 117,436 $ --
Annuity payments and contract
charges............................ (221) (221) (24,982) (16,213)
Adjustments to annuity reserve...... (7) (9) (2,134) (7,745)
------------ ------------- ------------- -------------
Net annuitization activity........ $ (228) $ (230) $ 90,320 $ (23,958)
------------ ------------- ------------- -------------
Decrease in net assets from
participant transactions............. $ (82,770) $ (7,383,876) $ (27,468,006) $ (82,672,480)
------------ ------------- ------------- -------------
Increase (decrease) in net assets... $ 156,055 $ (6,982,264) $ 4,816,023 $ (41,177,976)
NET ASSETS:
Beginning of year..................... 6,342,082 13,324,346 181,440,497 222,618,473
------------ ------------- ------------- -------------
End of year........................... $ 6,498,137 $ 6,342,082 $ 186,256,520 $ 181,440,497
------------ ------------- ------------- -------------
------------ ------------- ------------- -------------
</TABLE>
See notes to financial statements
6
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT D
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.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Sponsor's 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 taxable and,
therefore, no provision has been made for federal income taxes.
7
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT D
NOTES TO FINANCIAL STATEMENTS -- continued
(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
- ---------- ------------------------- ------------
<S> <C> <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.
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.
A deduction, when applicable, is made for premium taxes or similar state or
local taxes. It is currently the policy of the Sponsor to deduct the taxes from
the amount applied to provide an annuity at the time annuity payments commence;
however, the Sponsor reserves the right to deduct such taxes when incurred.
(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.
8
<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 1998 1997 1998 1997 1998 1997 1998 1997 1998 1997
- ----------- -------- ---------- ------- -------- --------- -------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MIT-Level 2 668,603 1,035,562 62,980 119,997 (16,795) (78,771) (147,513) (408,185) 567,275 668,603
MIT-Level 3 347,926 374,426 17,821 56,588 (45,958) 87,556 (123,554) (170,644) 196,235 347,926
MIT-Level 4 -- 101,111 18,926 20,016 77,367 13,893 (5,318) (135,020) 90,975 --
MIG-Level 2 225,178 286,668 15,127 24,657 112 (6,604) (74,763) (79,543) 165,654 225,178
MIG-Level 3 118,801 146,881 9,647 18,311 (20,150) 9,095 (18,714) (55,486) 89,584 118,801
MIG-Level 4 -- 7,527 11,428 995 60,010 5,279 (2,336) (13,801) 69,102 --
MTR-Level 2 759,684 1,220,754 63,621 122,825 (29,130) (95,836) (165,838) (488,059) 628,337 759,684
MTR-Level 3 403,015 447,243 17,807 69,668 (115,565) 59,761 (98,407) (173,657) 206,850 403,015
MTR-Level 4 17 212,122 23,626 45,961 141,628 (11,935) (7,544) (246,131) 157,727 17
MGO-Level 2 100,623 128,456 9,995 14,964 1,211 (2,534) (16,743) (40,263) 95,086 100,623
MGO-Level 3 29,668 27,750 2,401 6,533 (2,227) 3,047 (6,617) (7,662) 23,225 29,668
MGO-Level 4 -- 3,601 1,670 641 9,880 (624) (180) (3,618) 11,370 --
MFB-Level 2 86,309 119,172 8,189 13,246 (4,987) (6,694) (13,481) (39,415) 76,030 86,309
MFB-Level 3 41,360 74,041 3,535 7,182 (14,129) (1,215) (7,512) (38,648) 23,254 41,360
MFB-Level 4 -- 98,114 3,393 12,307 16,625 (5,773) (540) (104,648) 19,478 --
MWG-Level 2 50,083 80,813 4,145 7,813 (9,529) (14,242) (9,000) (24,301) 35,699 50,083
MWG-Level 3 55,415 70,547 2,132 13,242 (34,966) (2,198) (5,634) (26,176) 16,947 55,415
MWG-Level 4 -- -- 9,171 -- 37,118 -- (764) -- 45,525 --
CAS-Level 2 680,351 779,654 52,252 78,476 (7,521) (28,613) (96,814) (149,166) 628,268 680,351
CAS-Level 3 431,268 408,890 13,268 55,556 (280,709) 45,603 (52,078) (78,781) 111,749 431,268
CAS-Level 4 5,247 178,569 27,865 22,562 288,727 (180) (37,235) (195,704) 284,604 5,247
GSS-Level 2 377,706 496,576 27,776 51,339 (8,985) (55,743) (78,608) (114,466) 317,889 377,706
GSS-Level 3 225,343 344,849 13,066 43,387 (71,055) 7,712 (59,677) (170,605) 107,677 225,343
GSS-Level 4 2,450 454,901 4,162 43,269 71,003 (48,251) (21,478) (447,469) 56,137 2,450
HYS-Level 2 161,891 177,022 14,548 20,630 (13,379) (9,930) (15,726) (25,831) 147,334 161,891
HYS-Level 3 89,331 97,148 3,878 8,624 (38,390) 9,157 (22,265) (25,598) 32,554 89,331
HYS-Level 4 102 163,622 2,247 23,922 33,560 (11,531) (11,900) (175,911) 24,009 102
MMS-Level 2 246,919 364,557 32,188 52,788 55,799 32,929 (80,330) (203,355) 254,576 246,919
MMS-Level 3 158,492 281,464 17,325 19,839 (8,342) 11,873 (54,433) (154,684) 113,042 158,492
MMS-Level 4 6,803 271,307 1,532 15,511 44,744 (31,926) (13,947) (248,089) 39,132 6,803
</TABLE>
9
<PAGE>
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 Massachusetts
Investors Trust Sub-Account, Massachusetts Investors Growth Stock Sub-Account,
MFS Total Return Sub-Account, MFS Growth Opportunities Sub-Account, MFS Bond
Sub-Account, MFS World Governments Sub-Account, MFS Capital Appreciation
Sub-Account, MFS Government Securities Sub-Account, MFS High Yield Sub-Account,
and MFS Money Market Sub-Account of Sun Life of Canada (U.S.) Variable Account D
(the "Sub-Accounts") as of December 31, 1998, 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 Sub-Accounts as of December 31, 1998,
the results of their operations and the changes in their net assets for the
respective stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 4, 1999
<PAGE>
COMPASS-G
DIRECTORS AND OFFICERS OF
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
DONALD A. STEWART, Chairman and Director
C. JAMES PRIEUR, President and Director
S. CAESAR RABOY, Senior Vice President and
Deputy General Manager and Director
RICHARD B. BAILEY, Director
M. COLYER CRUM, Director
DAVID D. HORN, Director
JOHN S. LANE, Director
ANGUS A. MacNAUGHTON, Director
JOHN D. McNEIL, Director
PETER F. DEMUTH, Vice President, Chief
Counsel and Assistant Secretary
JAMES M. A. ANDERSON, Vice President, Investments
ROBERT P. VROLYK, Vice President and Actuary
L. BROCK THOMSON, Vice President and
Treasurer
ELLEN B. KING, Secretary
SUN LIFE ASSURANCE COMPANY
OF CANADA (U.S.)
ANNUITY SERVICE MAILING ADDRESS:
Sun Life Retirement Products and Services
P.O. Box 1024, Boston, Massachusetts 02103-9986
GENERAL DISTRIBUTOR
Clarendon Insurance Agency, Inc.
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, Massachusetts 02110-2875
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, 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 on any business day.
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.
COG2-2/99 25M
[LOGO]
PROFESSIONALLY MANAGED COMBINATION
FIXED/VARIABLE GROUP ANNUITY
FOR QUALIFIED AND NON-QUALIFIED
RETIREMENT PLANS
---------------------------------------------
ANNUAL REPORT, DECEMBER 31, 1998
[LOGO]
ISSUED BY
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
A WHOLLY OWNED SUBSIDIARY OF
SUN LIFE OF CANADA (U.S.) HOLDINGS, INC.
