<PAGE>
Compass Life
LOGO
Sun Life of Canada (U.S.) Variable Account E
Directors and Officers of
Sun Life Assurance Company of Canada (U.S.)
SINGLE PREMIUM VARIABLE
JOHN D. McNEIL, Chairman and Director
LIFE INSURANCE
DONALD A. STEWART, President and Director
---------------------------------------------
DAVID D. HORN, Director
ANNUAL REPORT, DECEMBER 31, 1997
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.
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
[LOGO]
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
ISSUED BY
This report is prepared for the general information of
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
contract owners. It is authorized for distribution to
prospective purchasers only if preceded or
accompanied by an effective prospectus.
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT E
STATEMENT OF CONDITION-- December 31, 1997
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C> <C>
Investments in MFS/Sun Life Series Trust: Shares Cost Value
---------- ----------- -----------
Capital Appreciation Series ("CAS")...... 656,172 $25,047,526 $26,337,718
Conservative Growth Series ("CGS")....... 820,933 23,845,032 27,215,513
Government Securities Series ("GSS")..... 621,525 7,804,006 8,105,069
High Yield Series ("HYS")................ 733,895 6,802,717 7,126,662
Managed Sectors Series ("MSS")........... 128,937 3,639,410 3,759,717
Money Market Series ("MMS").............. 5,927,679 5,927,679 5,927,679
Total Return Series ("TRS").............. 397,060 7,795,955 8,464,220
World Governments Series ("WGS")......... 119,485 1,296,638 1,281,676
Zero Coupon Series:
2000 Portfolio ("ZCS - 2000").......... 405,641 3,538,475 3,614,086
----------- -----------
Net Assets:.......................... $85,697,438 $91,832,340
----------- -----------
----------- -----------
NET ASSETS APPLICABLE TO CONTRACT OWNERS:
<CAPTION>
Units Unit Value Value
---------- ----------- -----------
<S> <C> <C> <C>
CAS -- Level 1............................. 92,847 $ 45.5724 $ 4,231,628
CAS -- Level 2............................. 482,707 45.7681 22,106,090
CGS -- Level 1............................. 78,746 42.6648 3,358,018
CGS -- Level 2............................. 556,809 42.8479 23,857,495
GSS -- Level 1............................. 62,704 20.4003 1,280,454
GSS -- Level 2............................. 332,752 20.4879 6,824,615
HYS -- Level 1............................. 43,889 25.0645 1,093,651
HYS -- Level 2............................. 238,993 25.1722 6,033,011
MSS -- Level 1............................. 35,850 41.8430 1,502,552
MSS -- Level 2............................. 53,716 42.0228 2,257,165
MMS -- Level 1............................. 133,612 15.8319 2,111,490
MMS -- Level 2............................. 240,045 15.8999 3,816,189
TRS -- Level 1............................. 83,559 29.3203 2,449,376
TRS -- Level 2............................. 204,285 29.4462 6,014,844
WGS -- Level 1............................. 21,982 18.1917 395,295
WGS -- Level 2............................. 48,519 18.2699 886,381
ZCS - 2000 -- Level 1...................... 62,003 20.1520 1,249,719
ZCS - 2000 -- Level 2...................... 116,837 20.2386 2,364,367
-----------
Net Assets:.......................... $91,832,340
-----------
-----------
</TABLE>
See notes to financial statements
1
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT E
STATEMENT OF OPERATIONS-- Year Ended December 31, 1997
<TABLE>
<CAPTION>
CAS CGS GSS HYS MSS
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
INCOME:
Dividend income and capital
gain distributions
received................... $ 2,137,277 $ 1,232,476 $ 550,787 $ 469,340 $ 343,927
------------ ------------ ----------- ----------- ------------
EXPENSES:
Mortality and expense risk
charges.................... $ 127,534 $ 123,597 $ 41,502 $ 34,852 $ 18,463
Minimum death benefit
guarantee charges.......... 53,138 51,498 17,292 14,522 7,693
Administrative charges...... 74,396 72,099 24,210 20,331 10,770
------------ ------------ ----------- ----------- ------------
Total expenses............ $ 255,068 $ 247,194 $ 83,004 $ 69,705 $ 36,926
------------ ------------ ----------- ----------- ------------
Net investment income... $ 1,882,209 $ 985,282 $ 467,783 $ 399,635 $ 307,001
------------ ------------ ----------- ----------- ------------
REALIZED AND UNREALIZED GAINS:
Realized gains on investment
transactions:
Proceeds from sales....... $ 24,439,046 $ 21,795,716 $8,225,766 $6,404,662 $ 3,849,764
Cost of investments
sold..................... 18,000,328 11,065,321 8,030,033 5,892,499 3,384,623
------------ ------------ ----------- ----------- ------------
Net realized gains...... $ 6,438,718 $ 10,730,395 $ 195,733 $ 512,163 $ 465,141
------------ ------------ ----------- ----------- ------------
Net unrealized appreciation
on investments:
End of year............... $ 1,290,192 $ 3,370,481 $ 301,063 $ 323,945 $ 120,307
Beginning of year......... 4,792,268 8,607,365 362,748 454,205 201,521
------------ ------------ ----------- ----------- ------------
Change in unrealized
appreciation............. $ (3,502,076) $ (5,236,884) $ (61,685) $ (130,260) $ (81,214)
------------ ------------ ----------- ----------- ------------
Realized and
unrealized gains..... $ 2,936,642 $ 5,493,511 $ 134,048 $ 381,903 $ 383,927
------------ ------------ ----------- ----------- ------------
INCREASE IN NET ASSETS FROM
OPERATIONS:.................. $ 4,818,851 $ 6,478,793 $ 601,831 $ 781,538 $ 690,928
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
<CAPTION>
MMS TRS WGS ZCS-2000
Sub-Account Sub-Account Sub-Account Sub-Account Total
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
INCOME:
Dividend income and capital
gain distributions
received................... $ 367,459 $ 1,018,943 $ 50,246 $ 230,910 $ 6,401,365
------------ ------------ ----------- ----------- ------------
EXPENSES:
Mortality and expense risk
charges.................... $ 39,873 $ 49,226 $ 6,561 $ 20,407 $ 462,015
Minimum death benefit
guarantee charges.......... 16,613 20,511 2,734 8,503 192,504
Administrative charges...... 23,259 28,716 3,827 11,904 269,512
------------ ------------ ----------- ----------- ------------
Total expenses............ $ 79,745 $ 98,453 $ 13,122 $ 40,814 $ 924,031
------------ ------------ ----------- ----------- ------------
Net investment income... $ 287,714 $ 920,490 $ 37,124 $ 190,096 $ 5,477,334
------------ ------------ ----------- ----------- ------------
REALIZED AND UNREALIZED GAINS
(LOSSES):
Realized gains (losses) on
investment transactions:
Proceeds from sales....... $ 12,036,394 $ 12,025,510 $ 965,808 $3,490,848 $ 93,233,514
Cost of investments
sold..................... 12,036,394 9,944,402 1,063,520 3,646,050 73,063,170
------------ ------------ ----------- ----------- ------------
Net realized gains
(losses)............... $ -- $ 2,081,108 $ (97,712) $ (155,202) $ 20,170,344
------------ ------------ ----------- ----------- ------------
Net unrealized appreciation
(depreciation) on
investments:
End of year............... $ -- $ 668,265 $ (14,962) $ 75,611 $ 6,134,902
Beginning of year......... -- 1,841,792 (52,698) (100,915) 16,106,286
------------ ------------ ----------- ----------- ------------
Change in unrealized
appreciation
(depreciation)........... $ -- $ (1,173,527) $ 37,736 $ 176,526 $ (9,971,384)
------------ ------------ ----------- ----------- ------------
Realized and
unrealized gains
(losses)............. $ -- $ 907,581 $ (59,976) $ 21,324 $ 10,198,960
------------ ------------ ----------- ----------- ------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:...... $ 287,714 $ 1,828,071 ($ 22,852) $ 211,420 $ 15,676,294
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
</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, 1997
<TABLE>
<CAPTION>
CAS Sub-Account CGS Sub-Account
------------------------ ------------------------
Year Ended Year Ended
December 31, December 31,
------------------------ ------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income...................... $ 1,882,209 $ 1,610,671 $ 985,282 $ 547,017
Net realized gains......................... 6,438,718 1,145,502 10,730,395 1,435,806
Net unrealized gains (losses).............. (3,502,076) 1,128,664 (5,236,884) 2,217,692
----------- ----------- ----------- -----------
Increase in net assets from
operations............................ $ 4,818,851 $ 3,884,837 $ 6,478,793 $ 4,200,515
----------- ----------- ----------- -----------
CONTRACT OWNER TRANSACTIONS:
Transfers between Sub-Accounts............. $ 646,078 $ 406,813 $ 1,029,899 $ 209,628
Transfers (to) from loan value account..... (579,340) (371,100) (232,983) (164,547)
Contract surrenders........................ (154,828) (1,303,907) (168,671) (832,679)
Charges for life insurance protection...... (1,294,571) (164,104) (983,800) (179,663)
Death benefits............................. (261,236) (67,980) (28,855) (266,296)
----------- ----------- ----------- -----------
Decrease in net assets from contract
owner transactions.................... $(1,643,897) $(1,500,278) $ (384,410) $(1,233,557)
----------- ----------- ----------- -----------
Increase (decrease) in net assets.... $ 3,174,954 $ 2,384,559 $ 6,094,383 $ 2,966,958
NET ASSETS:
Beginning of year.......................... 23,162,764 20,778,205 21,121,130 18,154,172
----------- ----------- ----------- -----------
End of year................................ $26,337,718 $23,162,764 $27,215,513 $21,121,130
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
HYS Sub-Account MSS Sub-Account
------------------------ ------------------------
Year Ended Year Ended
December 31, December 31,
------------------------ ------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income...................... $ 399,635 $ 413,976 $ 307,001 $ 298,327
Net realized gains......................... 512,163 193,376 465,141 232,206
Net unrealized gains (losses).............. (130,260) 39,952 (81,214) (102,662)
----------- ----------- ----------- -----------
Increase in net assets from
operations............................ $ 781,538 $ 647,304 $ 690,928 $ 427,871
----------- ----------- ----------- -----------
CONTRACT OWNER TRANSACTIONS:
Transfers between Sub-Accounts............. $ 329,847 $ 127,598 $ 597,968 $ 841,756
Transfers (to) from loan value account..... (104,301) (179,983) (586,318) (47,472)
Contract surrenders........................ (55,836) (156,008) (34,468) (113,989)
Charges for life insurance protection...... (256,676) (65,102) (266,808) (26,864)
Death benefits............................. (34,816) (74,967) -- --
----------- ----------- ----------- -----------
Increase (decrease) in net assets from
contract
owner transactions.................... $ (121,782) $ (348,462) $ (289,626) $ 653,431
----------- ----------- ----------- -----------
Increase (decrease) in net assets.... $ 659,756 $ 298,842 $ 401,302 $ 1,081,302
NET ASSETS:
Beginning of year.......................... 6,466,906 6,168,064 3,358,415 2,277,113
----------- ----------- ----------- -----------
End of year................................ $ 7,126,662 $ 6,466,906 $ 3,759,717 $ 3,358,415
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
GSS Sub-Account
------------------------
Year Ended
December 31,
------------------------
1997 1996
----------- -----------
OPERATIONS:
<S> <C> <C>
Net investment income...................... $ 467,783 $ 384,238
Net realized gains......................... 195,733 250,485
Net unrealized gains (losses).............. (61,685) (600,494)
----------- -----------
Increase in net assets from
operations............................ $ 601,831 $ 34,229
----------- -----------
CONTRACT OWNER TRANSACTIONS:
Transfers between Sub-Accounts............. $ (544,385) $ 620
Transfers (to) from loan value account..... (14,858) 68,064
Contract surrenders........................ (91,691) (419,571)
Charges for life insurance protection...... (161,757) (110,439)
Death benefits............................. (68,740) (148,118)
----------- -----------
Decrease in net assets from contract
owner transactions.................... $ (881,431) $ (609,444)
----------- -----------
Increase (decrease) in net assets.... $ (279,600) $ (575,215)
NET ASSETS:
Beginning of year.......................... 8,384,669 8,959,884
----------- -----------
End of year................................ $ 8,105,069 $ 8,384,669
----------- -----------
----------- -----------
MMS Sub-Account
------------------------
Year Ended
December 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income...................... $ 287,714 $ 317,755
Net realized gains......................... -- --
Net unrealized gains (losses).............. -- --
----------- -----------
Increase in net assets from
operations............................ $ 287,714 $ 317,755
----------- -----------
CONTRACT OWNER TRANSACTIONS:
Transfers between Sub-Accounts............. $(1,283,448) $(1,576,921)
Transfers (to) from loan value account..... (76,529) (547,645)
Contract surrenders........................ (137,588) (729,566)
Charges for life insurance protection...... (762,820) (160,409)
Death benefits............................. (119,653) (37,706)
----------- -----------
Increase (decrease) in net assets from
contract
owner transactions.................... $(2,380,038) $(3,052,247)
----------- -----------
Increase (decrease) in net assets.... $(2,092,324) $(2,734,492)
NET ASSETS:
Beginning of year.......................... 8,020,003 10,754,495
----------- -----------
End of year................................ $ 5,927,679 $ 8,020,003
----------- -----------
----------- -----------
</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 Sub-Account WGS Sub-Account
-------------------------- ------------------------
Year Ended Year Ended
December 31, December 31,
-------------------------- ------------------------
1997 1996 1997 1996
------------ ----------- ----------- -----------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income...................... $ 920,490 $ 581,053 $ 37,124 $ 171,799
Net realized gains......................... 2,081,108 406,044 (97,712) (7,017)
Net unrealized gains (losses).............. (1,173,527) 172,709 37,736 (122,467)
------------ ----------- ----------- -----------
Increase (decrease) in net assets from
operations............................ $ 1,828,071 $ 1,159,806 $ (22,852) $ 42,315
------------ ----------- ----------- -----------
CONTRACT OWNER TRANSACTIONS:
Transfers between Sub-Accounts............. $ (328,063) $ 31,593 $ 136,938 $ (174,084)
Transfers (to) from loan value account..... (132,559) (90,446) (3,301) 164
Contract surrenders........................ (97,262) (425,897) (14,692) (57,309)
Charges for life insurance protection...... (2,638,585) (129,803) (72,367) (19,196)
Death benefits............................. (66,858) (30,852) -- --
------------ ----------- ----------- -----------
Increase (decrease) in net assets from
contract
owner transactions.................... $ (3,263,327) $ (645,405) $ 46,578 $ (250,425)
------------ ----------- ----------- -----------
Increase (decrease) in net assets.... $ (1,435,256) $ 514,401 $ 23,726 $ (208,110)
NET ASSETS:
Beginning of year.......................... 9,899,476 9,385,075 1,257,950 1,466,060
------------ ----------- ----------- -----------
End of year................................ $ 8,464,220 $ 9,899,476 $ 1,281,676 $ 1,257,950
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
<CAPTION>
ZCS-2000 Sub-Account Total
-------------------------- ------------------------
Year Ended Year Ended
December 31, December 31,
-------------------------- ------------------------
1997 1996 1997 1996
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income...................... $ 190,096 $ 115,125 $ 5,477,334 $ 4,439,961
Net realized gains (losses)................ (155,202) (84,500) 20,170,344 3,571,902
Net unrealized gains (losses).............. 176,526 (2,531) (9,971,384) 2,730,863
------------ ----------- ----------- -----------
Increase in net assets from
operations............................ $ 211,420 $ 28,094 $15,676,294 $10,742,726
------------ ----------- ----------- -----------
CONTRACT OWNER TRANSACTIONS:
Transfers between Sub-Accounts............. $ (584,834) $ 132,997 $ -- $ --
Transfers (to) from loan value account..... (111,442) (125,832) (1,841,631) (1,458,797)
Contract surrenders........................ (21,919) (220,855) (776,955) (4,259,781)
Charges for life insurance protection...... (216,183) (28,118) (6,653,567) (883,698)
Death benefits............................. -- (65,097) (580,158) (691,016)
------------ ----------- ----------- -----------
Decrease in net assets from contract
owner transactions.................... $ (934,378) $ (306,905) $(9,852,311) $(7,293,292)
------------ ----------- ----------- -----------
Increase (decrease) in net assets.... $ (722,958) $ (278,811) $ 5,823,983 $ 3,449,434
NET ASSETS:
Beginning of year.......................... 4,337,044 4,615,855 86,008,357 82,558,923
------------ ----------- ----------- -----------
End of year................................ $ 3,614,086 $ 4,337,044 $91,832,340 $86,008,357
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
</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, an affiliate 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>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT E
NOTES TO FINANCIAL STATEMENTS -- continued
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>
CAS -- Level 1 CAS -- Level 2
Sub-Account Sub-Account
------------------- ---------------
Year Ended Year Ended
December 31, December 31,
------------------- ---------------
1997 1996 1997 1996*
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Units Outstanding
Beginning of Year........................... 608,526 665,756 9,838 --
Units transferred between Sub-Accounts..... (486,418) (2,022) 497,782 9,838
Units transferred (to) from loan value
account................................... (8,244) (10,667) (5,741) --
Units surrendered.......................... (17,337) (37,670) (1,402) --
Units cancelled in payment of charges for
life insurance protection................. (2,241) (4,793) (12,763) --
Units cancelled in payment of death
benefits.................................. (1,439) (2,078) (5,007) --
--------- ------- ------- ------
Units Outstanding
End of Year................................. 92,847 608,526 482,707 9,838
--------- ------- ------- ------
--------- ------- ------- ------
<CAPTION>
CGS -- Level 1 CGS -- Level 2
Sub-Account Sub-Account
-------------------- ------------------
Year Ended Year Ended
December 31, December 31,
-------------------- ------------------
1997 1996 1997 1996*
--------- -------- -------- -------
<S> <C> <C> <C> <C>
Units Outstanding
Beginning of Year........................... 632,355 687,402 13,181 --
Units transferred between Sub-Accounts..... (538,615) (5,988) 565,351 13,181
Units transferred (to) from loan value
account................................... (1,710) (5,495) (4,213) --
Units surrendered.......................... (2,748) (27,922) (1,716) --
Units cancelled in payment of charges for
life insurance protection................. (9,717) (6,168) (15,794) --
Units cancelled in payment of death
benefits.................................. (819) (9,474) -- --
--------- -------- -------- -------
Units Outstanding
End of Year................................. 78,746 632,355 556,809 13,181
--------- -------- -------- -------
--------- -------- -------- -------
</TABLE>
<TABLE>
<CAPTION>
GSS -- Level 1 GSS -- Level 2
Sub-Account Sub-Account
------------------- ---------------
Year Ended Year Ended
December 31, December 31,
------------------- ---------------
1997 1996 1997 1996*
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Units Outstanding
Beginning of Year........................... 436,340 473,737 5,190 --
Units transferred between Sub-Accounts..... (364,865) (4,713) 336,087 5,194
Units transferred (to) from loan value
account................................... (840) 4,030 75 (4)
Units surrendered.......................... (2,759) (22,611) (1,947) --
Units cancelled in payment of charges for
life insurance protection................. (2,350) (5,950) (5,897) --
Units cancelled in payment of death
benefits.................................. (2,822) (8,153) (756) --
--------- ------- ------- ------
Units Outstanding
End of Year................................. 62,704 436,340 332,752 5,190
--------- ------- ------- ------
--------- ------- ------- ------
<CAPTION>
HYS -- Level 1 HYS -- Level 2
Sub-Account Sub-Account
-------------------- -----------------
Year Ended Year Ended
December 31, December 31,
-------------------- -----------------
1997 1996 1997 1996*
--------- -------- -------- ------
<S> <C> <C> <C> <C>
Units Outstanding
Beginning of Year........................... 283,104 304,918 5,759 --
Units transferred between Sub-Accounts..... (228,936) 864 241,994 5,763
Units transferred (to) from loan value
account................................... (1,595) (8,664) (2,737) (4)
Units surrendered.......................... (1,293) (7,260) (1,069) --
Units cancelled in payment of charges for
life insurance protection................. (5,919) (3,092) (4,954) --
Units cancelled in payment of death
benefits.................................. (1,472) (3,662) -- --
--------- -------- -------- ------
Units Outstanding
End of Year................................. 43,889 283,104 238,993 5,759
--------- -------- -------- ------
--------- -------- -------- ------
</TABLE>
* For the period December 5, 1996 (commencement of Level 2 units) to December
31, 1996.
6
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT E
NOTES TO FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
MSS -- Level 1 MMS -- Level 1 MMS -- Level 2
Sub-Account Sub-Account Sub-Account
---------------- MSS -- Level 2 ------------------- -----------------
Sub-Account
Year Ended ------------------- Year Ended Year Ended
December 31, December 31, December 31,
---------------- Year Ended ------------------- -----------------
1997 1996 December 31, 1997## 1997 1996 1997 1996**
------- ------- ------------------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Units Outstanding
Beginning of Year........................... 99,578 78,440 -- 524,146 731,286 1,969 --
Units transferred between Sub-Accounts..... (45,994) 27,225 59,823 (351,244) (108,242) 269,405 1,969
Units transferred (to) from loan value
account................................... (12,311) (1,554) (3,585) (2,890) (36,943) (2,029) --
Units surrendered.......................... (698) (3,667) (191) (6,639) (48,683) (2,219) --
Units cancelled in payment of charges for
life insurance protection................. (4,725) (866) (1,821) (22,637) (10,716) (26,362) --
Units cancelled in payment of death
benefits.................................. -- -- (510) (7,124) (2,556) (719) --
------- ------- ------ -------- -------- -------- ------
Units Outstanding
End of Year................................. 35,850 99,578 53,716 133,612 524,146 240,045 1,969
------- ------- ------ -------- -------- -------- ------
------- ------- ------ -------- -------- -------- ------
<CAPTION>
TRS -- Level 1
Sub-Account
------------------ TRS -- Level 2
Sub-Account
Year Ended -------------------
December 31,
------------------ Year Ended
1997 1996 December 31, 1997#
-------- ------- -------------------
<S> <C> <C> <C>
Units Outstanding
Beginning of Year........................... 406,929 434,795 --
Units transferred between Sub-Accounts..... (308,338) 2,106 295,002
Units transferred (to) from loan value
account................................... (1,611) (3,998) (3,280)
Units surrendered.......................... (2,349) (18,847) (1,308)
Units cancelled in payment of charges for
life insurance protection................. (9,851) (5,739) (84,765)
Units cancelled in payment of death
benefits.................................. (1,221) (1,388) (1,364)
-------- ------- -------
Units Outstanding
End of Year................................. 83,559 406,929 204,285
-------- ------- -------
-------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
WGS -- Level 1 ZCS - 2000 -- Level 1
Sub-Account WGS -- Level 2 Sub-Account
--------------- Sub-Account -----------------------
-------------------
Year Ended Year Ended
December 31, Year Ended December 31,
--------------- December 31, -----------------------
1997 1996 1997### 1997 1996
------- ------ ------------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Units Outstanding
Beginning of Year........................... 68,055 81,725 -- 227,240 243,738
Units transferred between Sub-Accounts..... (43,258) (9,411) 50,714 (154,492) 7,081
Units transferred (to) from loan value
account................................... (72) 8 (113) (4,168) (6,693)
Units surrendered.......................... (551) (3,197) (260) (822) (11,980)
Units cancelled in payment of charges for
life insurance protection................. (2,192) (1,070) (1,822) (5,755) (1,506)
Units cancelled in payment of death
benefits.................................. -- -- -- -- (3,400)
------- ------ ------ ---------- ----------
Units Outstanding
End of Year................................. 21,982 68,055 48,519 62,003 227,240
------- ------ ------ ---------- ----------
------- ------ ------ ---------- ----------
<CAPTION>
ZCS - 2000 -- Level 2
Sub-Account
-----------------------
Year Ended
December 31,
-----------------------
1997 1996*
---------- ----------
<S> <C> <C>
Units Outstanding
Beginning of Year........................... 200 --
Units transferred between Sub-Accounts..... 123,821 200
Units transferred (to) from loan value
account................................... (1,566) --
Units surrendered.......................... (304) --
Units cancelled in payment of charges for
life insurance protection................. (5,314) --
Units cancelled in payment of death
benefits.................................. -- --
--
----------
Units Outstanding
End of Year................................. 116,837 200
--
--
----------
----------
</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.
# For the period January 7, 1997 (commencement of Level 2 units) to December
31, 1997.
## For the period January 14, 1997 (commencement of Level 2 units) to December
31, 1997.
### For the period January 28, 1997 (commencement of Level 2 units) to December
31, 1997.
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, 1997, the
related statement of operations for the year then ended and the statements of
changes in net assets for the years ended December 31, 1997 and 1996. 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, 1997 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,
1997, 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 6, 1998
8
