<PAGE>
Compass Life
Sun Life of Canada (U.S.) Variable Account E
Directors and Officers of
Sun Life Assurance Company of Canada (U.S.)
JOHN D. McNEIL, Chairman and Director
DONALD A. STEWART, 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
MARGARET SEARS MEAD, Assistant Vice President and Secretary
L. BROCK THOMSON, Vice President and
Treasurer
Sun Life Assurance Company
of Canada (U.S.)
Variable Life Insurance Service Center
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
General Distributor
Clarendon Insurance Agency, Inc.
500 Boylston Street, Boston, Massachusetts 02116
Legal Counsel
Covington & Burling
1201 Pennsylvania Avenue, N.W.
P.O. Box 7566, Washington, D.C. 20044
Auditors
Deloitte & Touche LLP
125 Summer Street, Boston, Massachusetts 02110
This report is prepared for the general information of
contract owners. It is authorized for distribution to
prospective purchasers only if preceded or accompanied
by an effective prospectus.
[COMPASS LIFE LOGO]
SINGLE PREMIUM VARIABLE
LIFE INSURANCE
---------------------------------------------
ANNUAL REPORT, DECEMBER 31, 1996
[LOGO]
ISSUED BY
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
A WHOLLY OWNED SUBSIDIARY OF
SUN LIFE ASSURANCE COMPANY OF CANADA
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT E
STATEMENT OF CONDITION-- December 31, 1996
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C> <C>
Investments in MFS/Sun Life Series Trust: Shares Cost Value
---------- ----------- -----------
Capital Appreciation Series ("CAS")......................................... 646,429 $18,370,496 $23,162,764
Conservative Growth Series ("CGS").......................................... 797,090 12,513,765 21,121,130
Government Securities Series ("GSS")........................................ 651,632 8,021,921 8,384,669
High Yield Series ("HYS")................................................... 701,951 6,012,701 6,466,906
Managed Sectors Series ("MSS").............................................. 127,941 3,156,894 3,358,415
Money Market Series ("MMS")................................................. 8,020,003 8,020,003 8,020,003
Total Return Series ("TRS")................................................. 509,234 8,057,684 9,899,476
World Governments Series ("WGS")............................................ 111,741 1,310,648 1,257,950
Zero Coupon Series:
2000 Portfolio ("ZCS - 2000")............................................. 488,282 4,437,959 4,337,044
----------- -----------
Net Assets:............................................................. $69,902,071 $86,008,357
----------- -----------
----------- -----------
NET ASSETS APPLICABLE TO CONTRACT OWNERS:
<CAPTION>
Units Unit Value Value
---------- ----------- -----------
<S> <C> <C> <C>
CAS -- Level 1................................................................ 608,526 $ 37.45869 $22,794,147
CAS -- Level 2................................................................ 9,838 37.46977 368,617
CGS -- Level 1................................................................ 632,355 32.72154 20,689,399
CGS -- Level 2................................................................ 13,181 32.73119 431,731
GSS -- Level 1................................................................ 436,340 18.98516 8,286,076
GSS -- Level 2................................................................ 5,190 18.99077 98,593
HYS -- Level 1................................................................ 283,104 22.40622 6,337,833
HYS -- Level 2................................................................ 5,759 22.41283 129,073
MSS -- Level 1................................................................ 99,578 33.70718 3,358,415
MMS -- Level 1................................................................ 524,146 15.24904 7,989,963
MMS -- Level 2................................................................ 1,969 15.25355 30,040
TRS -- Level 1................................................................ 406,929 24.32866 9,899,476
WGS -- Level 1................................................................ 68,055 18.55348 1,257,950
ZCS - 2000 -- Level 1......................................................... 227,240 19.07089 4,333,216
ZCS - 2000 -- Level 2......................................................... 200 19.07653 3,828
-----------
Net Assets:............................................................. $86,008,357
-----------
-----------
</TABLE>
See notes to financial statements
1
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT E
STATEMENT OF OPERATIONS-- Year Ended December 31, 1996
<TABLE>
<CAPTION>
CAS CGS GSS HYS MSS MMS
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
----------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME:
Dividend income and capital
gain distributions
received................... $1,877,337 $ 782,221 $ 491,167 $ 490,041 $ 330,190 $ 424,255
----------- ----------- ----------- ------------ ----------- -----------
EXPENSES:
Mortality and expense risk
charges.................... $ 133,333 $ 117,602 $ 53,465 $ 38,032 $ 15,931 $ 53,250
Minimum death benefit
guarantee charges.......... 55,554 49,000 22,277 15,847 6,638 22,187
Administrative charges...... 77,779 68,602 31,187 22,186 9,294 31,063
----------- ----------- ----------- ------------ ----------- -----------
Total expenses............ $ 266,666 $ 235,204 $ 106,929 $ 76,065 $ 31,863 $ 106,500
----------- ----------- ----------- ------------ ----------- -----------
Net investment income... $1,610,671 $ 547,017 $ 384,238 $ 413,976 $ 298,327 $ 317,755
----------- ----------- ----------- ------------ ----------- -----------
REALIZED AND UNREALIZED GAINS
(LOSSES):
Realized gains on investment
transactions:
Proceeds from sales....... $5,022,931 $2,451,560 $1,981,051 $ 2,042,429 $1,099,726 $7,738,279
Cost of investments
sold..................... 3,877,429 1,015,754 1,730,566 1,849,053 867,520 7,738,279
----------- ----------- ----------- ------------ ----------- -----------
Net realized gains...... $1,145,502 $1,435,806 $ 250,485 $ 193,376 $ 232,206 $ --
----------- ----------- ----------- ------------ ----------- -----------
Net unrealized appreciation
(depreciation) on
investments:
End of year............... $4,792,268 $8,607,365 $ 362,748 $ 454,205 $ 201,521 $ --
Beginning of year......... 3,663,604 6,389,673 963,242 414,253 304,183 --
----------- ----------- ----------- ------------ ----------- -----------
Change in unrealized
appreciation
(depreciation) $1,128,664 $2,217,692 $ (600,494) $ 39,952 $ (102,662) $ --
----------- ----------- ----------- ------------ ----------- -----------
Realized and
unrealized gains
(losses)............. $2,274,166 $3,653,498 $ (350,009) $ 233,328 $ 129,544 $ --
----------- ----------- ----------- ------------ ----------- -----------
INCREASE IN NET ASSETS FROM
OPERATIONS................... $3,884,837 $4,200,515 $ 34,229 $ 647,304 $ 427,871 $ 317,755
----------- ----------- ----------- ------------ ----------- -----------
----------- ----------- ----------- ------------ ----------- -----------
<CAPTION>
TRS WGS ZCS-2000
Sub-Account Sub-Account Sub-Account Total
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
INCOME:
Dividend income and capital
gain distributions
received................... $ 697,027 $ 188,258 $ 168,674 $ 5,449,170
----------- ----------- ----------- ------------
EXPENSES:
Mortality and expense risk
charges.................... $ 57,987 $ 8,229 $ 26,774 $ 504,603
Minimum death benefit
guarantee charges.......... 24,161 3,429 11,156 210,249
Administrative charges...... 33,826 4,801 15,619 294,357
----------- ----------- ----------- ------------
Total expenses............ $ 115,974 $ 16,459 $ 53,549 $ 1,009,209
----------- ----------- ----------- ------------
Net investment income... $ 581,053 $ 171,799 $ 115,125 $ 4,439,961
----------- ----------- ----------- ------------
REALIZED AND UNREALIZED GAINS
(LOSSES):
Realized gains (losses) on
investment transactions:
Proceeds from sales....... $1,306,285 $ 324,834 $ 548,405 $ 22,515,500
Cost of investments
sold..................... 900,241 331,851 632,905 18,943,598
----------- ----------- ----------- ------------
Net realized gains
(losses)............... $ 406,044 $ (7,017) $ (84,500) $ 3,571,902
----------- ----------- ----------- ------------
Net unrealized appreciation
(depreciation) on
investments:
End of year............... $1,841,792 $ (52,698) $ (100,915) $ 16,106,286
Beginning of year......... 1,669,083 69,769 (98,384) 13,375,423
----------- ----------- ----------- ------------
Change in unrealized
appreciation
(depreciation) $ 172,709 $ (122,467) $ (2,531) $ 2,730,863
----------- ----------- ----------- ------------
Realized and
unrealized gains
(losses)............. $ 578,753 $ (129,484) $ (87,031) $ 6,302,765
----------- ----------- ----------- ------------
INCREASE IN NET ASSETS FROM
OPERATIONS................... $1,159,806 $ 42,315 $ 28,094 $ 10,742,726
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
</TABLE>
See notes to financial statements
2
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT E
STATEMENTS OF CHANGES IN NET ASSETS-- December 31, 1996
<TABLE>
<CAPTION>
CAS Sub-Account CGS Sub-Account GSS Sub-Account
------------------------ ------------------------ ------------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
------------------------ ------------------------ ------------------------
1996 1995 1996 1995 1996 1995
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income........................... $ 1,610,671 $ 220,395 $ 547,017 $ 210,662 $ 384,238 $ 402,588
Net realized gains.............................. 1,145,502 1,197,990 1,435,806 717,957 250,485 72,442
Net unrealized gains (losses)................... 1,128,664 3,805,391 2,217,692 3,882,347 (600,494) 810,237
----------- ----------- ----------- ----------- ----------- -----------
Increase in net assets from operations...... $ 3,884,837 $ 5,223,776 $ 4,200,515 $ 4,810,966 $ 34,229 $ 1,285,267
----------- ----------- ----------- ----------- ----------- -----------
CONTRACT OWNER TRANSACTIONS:
Transfers between Sub-Accounts.................. $ 406,813 $ 30,985 $ 209,628 $ 372,570 $ 620 $ (80,047)
Transfers (to) from loan value account.......... (371,100) (341,832) (164,547) (257,945) 68,064 (65,641)
Contract surrenders............................. (1,303,907) (309,953) (832,679) (473,809) (419,571) (162,097)
Charges for life insurance protection........... (164,104) (184,086) (179,663) (195,760) (110,439) (123,137)
Death benefits.................................. (67,980) (59,511) (266,296) (41,671) (148,118) (22,875)
----------- ----------- ----------- ----------- ----------- -----------
Decrease in net assets from contract
owner transactions......................... $(1,500,278) $ (864,397) $(1,233,557) $ (596,615) $ (609,444) $ (453,797)
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets......... $ 2,384,559 $ 4,359,379 $ 2,966,958 $ 4,214,351 $ (575,215) $ 831,470
NET ASSETS:
Beginning of year............................... 20,778,205 16,418,826 18,154,172 13,939,821 8,959,884 8,128,414
----------- ----------- ----------- ----------- ----------- -----------
End of year..................................... $23,162,764 $20,778,205 $21,121,130 $18,154,172 $ 8,384,669 $ 8,959,884
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
HYS Sub-Account MSS Sub-Account MMS Sub-Account
------------------------ ------------------------ ------------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
------------------------ ------------------------ ------------------------
1996 1995 1996 1995 1996 1995
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income........................... $ 413,976 $ 335,526 $ 298,327 $ 48,009 $ 317,755 $ 348,345
Net realized gains.............................. 193,376 144,144 232,206 233,070 -- --
Net unrealized gains (losses)................... 39,952 374,747 (102,662) 434,359 -- --
----------- ----------- ----------- ----------- ----------- -----------
Increase in net assets from operations...... $ 647,304 $ 854,417 $ 427,871 $ 715,438 $ 317,755 $ 348,345
----------- ----------- ----------- ----------- ----------- -----------
CONTRACT OWNER TRANSACTIONS:
Transfers between Sub-Accounts.................. $ 127,598 $ 384,549 $ 841,756 $ 76,558 $(1,576,921) $ 2,291,851
Transfers (to) from loan value account.......... (179,983) (141,322) (47,472) (37,589) (547,645) 30,002
Contract surrenders............................. (156,008) (220,625) (113,989) (178,651) (729,566) (416,956)
Charges for life insurance protection........... (65,102) (73,531) (26,864) (28,004) (160,409) (162,021)
Death benefits.................................. (74,967) (40,067) -- (17,324) (37,706) (12,713)
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets from
contract
owner transactions......................... $ (348,462) $ (90,996) $ 653,431 $ (185,010) $(3,052,247) $ 1,730,163
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets......... $ 298,842 $ 763,421 $ 1,081,302 $ 530,428 $(2,734,492) $ 2,078,508
NET ASSETS:
Beginning of year............................... 6,168,064 5,404,643 2,277,113 1,746,685 10,754,495 8,675,987
----------- ----------- ----------- ----------- ----------- -----------
End of year..................................... $ 6,466,906 $ 6,168,064 $ 3,358,415 $ 2,277,113 $ 8,020,003 $10,754,495
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
3
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT E
STATEMENTS OF CHANGES IN NET ASSETS-- continued
<TABLE>
<CAPTION>
TRS WGS
Sub-Account Sub-Account ZCS-1995
---------------------- ------------------------ Sub-Account
-----------
Year Ended Year Ended
December 31, December 31, Year Ended
---------------------- ------------------------ December
1996 1995 1996 1995 31, 1995*
---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................................. $ 581,053 $ 214,212 $ 171,799 $ 52,194 $ 345,130
Net realized gains (losses)........................... 406,044 326,578 (7,017) (12,918) (46,937)
Net unrealized gains (losses)......................... 172,709 1,319,571 (122,467) 136,952 (76,612)
---------- ---------- ----------- ----------- -----------
Increase (decrease) in net assets from
operations....................................... $1,159,806 $1,860,361 $ 42,315 $ 176,228 $ 221,581
---------- ---------- ----------- ----------- -----------
CONTRACT OWNER TRANSACTIONS:
Transfers between Sub-Accounts........................ $ 31,593 $ 977,352 $ (174,084) $ (192,299) $(4,796,664)
Transfers (to) from loan value account................ (90,446) (335,840) 164 14,205 (56,211)
Contract surrenders................................... (425,897) (340,800) (57,309) 182 (172,868)
Charges for life insurance protection................. (129,803) (132,156) (19,196) (20,025) (52,087)
Death benefits........................................ (30,852) (54,511) -- -- --
---------- ---------- ----------- ----------- -----------
Increase (decrease) in net assets from contract
owner transactions............................... $ (645,405) $ 114,045 $ (250,425) $ (197,937) $(5,077,830)
---------- ---------- ----------- ----------- -----------
Increase (decrease) in net assets............... $ 514,401 $1,974,406 $ (208,110) $ (21,709) $(4,856,249)
NET ASSETS:
Beginning of year..................................... 9,385,075 7,410,669 1,466,060 1,487,769 4,856,249
---------- ---------- ----------- ----------- -----------
End of year........................................... $9,899,476 $9,385,075 $ 1,257,950 $ 1,466,060 $ --
---------- ---------- ----------- ----------- -----------
---------- ---------- ----------- ----------- -----------
</TABLE>
* Reflects expiration of the Sub-Account on November 15, 1995.
<TABLE>
<CAPTION>
ZCS-2000
Sub-Account Total
---------------------- ------------------------
Year Ended Year Ended
December 31, December 31,
---------------------- ------------------------
1996 1995 1996 1995
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income................................................... $ 115,125 $ 134,647 $ 4,439,961 $ 2,311,708
Net realized gains (losses)............................................. (84,500) (149,936) 3,571,902 2,482,390
Net unrealized gains (losses)........................................... (2,531) 586,260 2,730,863 11,273,252
---------- ---------- ----------- -----------
Increase in net assets from operations.............................. $ 28,094 $ 570,971 $10,742,726 $16,067,350
---------- ---------- ----------- -----------
CONTRACT OWNER TRANSACTIONS:
Transfers between Sub-Accounts.......................................... $ 132,997 $ 935,145 $ -- $ --
Transfers (to) from loan value account.................................. (125,832) (48,163) (1,458,797) (1,240,336)
Contract surrenders..................................................... (220,855) (101,767) (4,259,781) (2,377,344)
Charges for life insurance protection................................... (28,118) (13,308) (883,698) (984,115)
Death benefits.......................................................... (65,097) (7,276) (691,016) (255,948)
---------- ---------- ----------- -----------
Increase (decrease) in net assets from contract owner
transactions....................................................... $ (306,905) $ 764,631 $(7,293,292) $(4,857,743)
---------- ---------- ----------- -----------
Increase (decrease) in net assets................................. $ (278,811) $1,335,602 $ 3,449,434 $11,209,607
NET ASSETS:
Beginning of year....................................................... 4,615,855 3,280,253 82,558,923 71,349,316
---------- ---------- ----------- -----------
End of year............................................................. $4,337,044 $4,615,855 $86,008,357 $82,558,923
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>
See notes to financial statements
4
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT E
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
Sun Life of Canada (U.S.) Variable Account E (the "Variable Account"), a
separate account of Sun Life Assurance Company of Canada (U.S.), the Sponsor,
was established on December 3, 1985 as a funding vehicle for single premium
variable life insurance 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") as selected by contract owners. The Series Trust is
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 the investment adviser to the Series Trust.
(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 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 shares of the Series
Trust 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
Certain charges based on the value of the Variable Account are paid to the
Sponsor from the Variable Account at the end of each valuation period as
follows: (i) an administrative charge of 0.35% for the first ten contract years
and 0.20% thereafter; (ii) a mortality and expense risk charge of 0.60%; and
(iii) a minimum death benefit guarantee charge of 0.25% for the first ten
contract years with no deduction thereafter. Accounts are transferred from Level
1 to Level 2 in the month following the tenth contract anniversary.
5
<PAGE>
On each Monthly Anniversary Day after the Contract Date, a charge for providing
life insurance protection is imposed by the Sponsor against the contract's
account value. This charge will be based upon the Sponsor's expectations of
future mortality experience, but it will never be higher than the amount based
upon the 1980 CSO Mortality Table C, and in most cases it will be lower.
The Sponsor does not deduct a sales charge from the premium payment. 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 8% of the single premium payment made under
the contract.
(4) UNIT ACTIVITY FROM CONTRACT OWNER TRANSACTIONS
<TABLE>
<CAPTION>
GSS --
Level 1
Sub-Account
CAS -- Level 1 CGS -- Level 1 ---------
Sub-Account Sub-Account
-------------------- CAS -- Level 2 -------------------- CGS -- Level 2 Year
Sub-Account Sub-Account Ended
Year Ended ------------------- Year Ended ------------------- December
December 31, December 31, 31,
-------------------- Year Ended -------------------- Year Ended ---------
1996 1995 December 31, 1996* 1996 1995 December 31, 1996* 1996
--------- --------- ------------------- --------- --------- ------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Units Outstanding
Beginning of Year............ 665,756 698,988 -- 687,402 716,855 -- 473,737
Units transferred between
Sub-Accounts............... (2,022) (478) 9,838 (5,988) 13,636 13,181 (4,713)
Units transferred (to) from
loan value account......... (10,667) (12,465) -- (5,495) (11,250) -- 4,030
Units surrendered........... (37,670) (11,287) -- (27,922) (21,099) -- (22,611)
Units cancelled in payment
of charges for life
insurance protection....... (4,793) (6,725) -- (6,168) (8,677) -- (5,950)
Units cancelled in payment
of death benefits.......... (2,078) (2,277) -- (9,474) (2,063) -- (8,153)
--------- --------- ----- --------- --------- ------ ---------
Units Outstanding
End of Year.................. 608,526 665,756 9,838 632,355 687,402 13,181 436,340
--------- --------- ----- --------- --------- ------ ---------
--------- --------- ----- --------- --------- ------ ---------
<CAPTION>
GSS -- Level 2
Sub-Account
-------------------
Year Ended
1995 December 31, 1996*
--------- -------------------
<S> <C> <C>
Units Outstanding
Beginning of Year............ 499,934 --
Units transferred between
Sub-Accounts............... (5,087) 5,194
Units transferred (to) from
loan value account......... (4,039) (4 )
Units surrendered........... (8,697) --
Units cancelled in payment
of charges for life
insurance protection....... (7,009) --
Units cancelled in payment
of death benefits.......... (1,365) --
--------- -----
Units Outstanding
End of Year.................. 473,737 5,190
--------- -----
--------- -----
</TABLE>
* For the period December 5, 1996 (commencement of Level 2 units) to December
31, 1996.
<TABLE>
<CAPTION>
MMS --
Level 1
Sub-Account
HYS -- Level 1 MSS -- Level 1 ---------
Sub-Account Sub-Account
-------------------- HYS -- Level 2 -------------------- Year
Sub-Account Ended
Year Ended ------------------- Year Ended December
December 31, December 31, 31,
-------------------- Year Ended -------------------- ---------
1996 1995 December 31, 1996* 1996 1995 1996
--------- --------- ------------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Units Outstanding
Beginning of Year.............................. 304,918 309,038 -- 78,440 78,621 731,286
Units transferred between Sub-Accounts........ 864 21,415 5,763 27,225 9,531 (108,242)
Units transferred (to) from loan value
account...................................... (8,664) (7,637) (4 ) (1,554) (1,562) (36,943)
Units surrendered............................. (7,260) (11,883) -- (3,667) (6,278) (48,683)
Units cancelled in payment of charges for life
insurance protection......................... (3,092) (3,875) -- (866) (1,065) (10,716)
Units cancelled in payment of death
benefits..................................... (3,662) (2,140) -- -- (807) (2,556)
--------- --------- ----- --------- --------- ---------
Units Outstanding
End of Year.................................... 283,104 304,918 5,759 99,578 78,440 524,146
--------- --------- ----- --------- --------- ---------
--------- --------- ----- --------- --------- ---------
<CAPTION>
MMS -- Level 2
Sub-Account
---------------------
Year Ended
1995 December 31, 1996**
--------- ---------------------
<S> <C> <C>
Units Outstanding
Beginning of Year.............................. 614,665 --
Units transferred between Sub-Accounts........ 155,162 1,969
Units transferred (to) from loan value
account...................................... 2,265 --
Units surrendered............................. (28,683) --
Units cancelled in payment of charges for life
insurance protection......................... (11,239) --
Units cancelled in payment of death
benefits..................................... (884) --
--------- -----
Units Outstanding
End of Year.................................... 731,286 1,969
--------- -----
--------- -----
</TABLE>
* For the period December 5, 1996 (commencement of Level 2 units) to December
31, 1996.
** For the period December 20, 1996 (commencement of Level 2 units) to December
31, 1996.
6
<PAGE>
<TABLE>
<CAPTION>
ZCS -
2000 --
Level 1
Sub-Account
TRS -- Level 1 WGS -- Level 1 ---------
Sub-Account Sub-Account ZCS - 1995 -- Level
-------------------- -------------------- 1 Year
Sub-Account Ended
Year Ended Year Ended ------------------- December
December 31, December 31, 31,
-------------------- -------------------- Year Ended ---------
1996 1995 1996 1995 December 31, 1995* 1996
--------- --------- --------- --------- ------------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Units Outstanding
Beginning of Year............................ 434,795 430,093 81,725 95,214 323,616 243,738
Units transferred between Sub-Accounts...... 2,106 48,842 (9,411) (13,270) (305,385) 7,081
Units transferred (to) from loan value
account.................................... (3,998) (17,344) 8 953 (3,688) (6,693)
Units surrendered........................... (18,847) (16,945) (3,197) -- (11,161 ) (11,980)
Units cancelled in payment of charges for
life insurance protection.................. (5,739) (6,835) (1,070) (1,172) (3,382 ) (1,506)
Units cancelled in payment of death
benefits................................... (1,388) (3,016) -- -- -- (3,400)
--------- --------- --------- --------- -------- ---------
Units Outstanding
End of Year.................................. 406,929 434,795 68,055 81,725 -- 227,240
--------- --------- --------- --------- -------- ---------
--------- --------- --------- --------- -------- ---------
<CAPTION>
ZCS - 2000 -- Level 2
Sub-Account
-----------------------
Year Ended
1995 December 31, 1996**
--------- -----------------------
<S> <C> <C>
Units Outstanding
Beginning of Year............................ 205,289 --
Units transferred between Sub-Accounts...... 48,091 200
Units transferred (to) from loan value
account.................................... (2,722) --
Units surrendered........................... (5,729) --
Units cancelled in payment of charges for
life insurance protection.................. (758) --
Units cancelled in payment of death
benefits................................... (433) --
--
---------
Units Outstanding
End of Year.................................. 243,738 200
--
--
---------
---------
</TABLE>
* Reflects expiration of the Sub-Account on November 15, 1995.
** For the period December 5, 1996 (commencement of Level 2 units) to December
31, 1996.
7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Contract Owners participating in Sun Life of Canada (U.S.) Variable
Account E
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 E (the "Variable Account") as of December 31, 1996, the
related statement of operations for the year then ended and the statements of
changes in net assets for the years ended December 31, 1996 and 1995. 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, 1996 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,
1996, 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 7, 1997
8
