<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT E
STATEMENT OF CONDITION -- December 31, 1998
<TABLE>
<CAPTION>
ASSETS:
Investments in MFS/Sun Life Series Trust: Shares Cost Value
---------- ------------ ------------
<S> <C> <C> <C>
Capital Appreciation Series ("CAS")............. 638,145 $ 25,240,316 $ 29,311,671
Conservative Growth Series ("CGS").............. 806,316 24,792,864 30,839,696
Government Securities Series ("GSS")............ 603,475 7,598,519 8,083,297
High Yield Series ("HYS")....................... 665,743 6,195,470 6,100,549
Managed Sectors Series ("MSS").................. 141,802 3,883,464 4,005,160
Money Market Series ("MMS")..................... 6,989,396 6,989,314 6,989,395
Total Return Series ("TRS")..................... 408,206 8,261,401 8,679,889
World Governments Series ("WGS")................ 78,980 859,907 965,698
Zero Coupon Series:
Portfolio 2000("ZCS-2000")...................... 387,267 3,360,497 3,473,479
------------ ------------
Net Assets:............................................. $ 87,181,752 $ 98,448,834
------------ ------------
------------ ------------
</TABLE>
NET ASSETS APPLICABLE TO CONTRACT OWNERS:
<TABLE>
<CAPTION>
Units Unit Value Value
--------- ---------- ------------
<S> <C> <C> <C>
CAS-Level 1......................... 46,335 $ 57.9585 $ 2,686,253
CAS-Level 2......................... 454,818 58.4400 26,625,418
CGS-Level 1......................... 36,127 52.2056 1,884,079
CGS-Level 2......................... 550,067 52.6393 28,955,617
GSS-Level 1......................... 38,842 21.9176 852,775
GSS-Level 2......................... 326,819 22.0998 7,230,522
HYS-Level 1......................... 17,206 24.9172 422,303
HYS-Level 2......................... 225,883 25.1243 5,678,246
MSS-Level 1......................... 11,622 46.4190 542,423
MSS-Level 2......................... 73,971 46.8049 3,462,737
MMS-Level 1......................... 82,874 16.4300 1,357,980
MMS-Level 2......................... 339,983 16.5666 5,631,415
TRS-Level 1......................... 38,827 32.3732 1,256,466
TRS-Level 2......................... 228,221 32.6423 7,423,423
WGS-Level 1......................... 4,750 20.7553 93,329
WGS-Level 2......................... 41,683 20.9279 872,369
ZCS-2000-Level 1.................... 19,758 21.3606 422,416
ZCS-2000-Level 2.................... 141,678 21.5382 3,051,063
------------
Net Assets:............................................ $ 98,448,834
------------
------------
</TABLE>
See notes to financial statements
1
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT E
STATEMENTS OF OPERATIONS -- Year Ended December 31, 1998
<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 AND EXPENSES:
Dividend income and capital gain
distributions received............... $3,222,138 $2,093,465 $ 429,238 $ 444,519 $ 548,350 $ 329,146
----------- ----------- ----------- ------------ ----------- -----------
EXPENSES:
Mortality and expense risk charges.... $ 115,835 $ 121,939 $ 34,337 $ 28,221 $ 16,028 $ 30,458
Minimum death benefit guarantee
charges.............................. 48,264 50,807 14,307 11,759 6,678 12,690
Administrative charges................ 67,571 71,132 20,030 16,463 9,350 17,766
----------- ----------- ----------- ------------ ----------- -----------
Total expenses...................... $ 231,670 $ 243,878 $ 68,674 $ 56,443 $ 32,056 $ 60,914
----------- ----------- ----------- ------------ ----------- -----------
Net investment income............. $2,990,468 $1,849,587 $ 360,564 $ 388,076 $ 516,294 $ 268,232
----------- ----------- ----------- ------------ ----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales................. $8,138,418 $5,441,028 $2,421,245 $ 2,261,003 $3,631,859 $5,741,442
Costs of investments sold........... 7,249,470 4,068,990 2,351,626 2,198,894 3,722,179 5,741,442
----------- ----------- ----------- ------------ ----------- -----------
Net realized gains (losses)....... $ 888,948 $1,372,038 $ 69,619 $ 62,109 $ (90,320) $ --
----------- ----------- ----------- ------------ ----------- -----------
Net unrealized appreciation
(depreciation) on investments:
End of year......................... $4,071,355 $6,046,832 $ 484,778 $ (94,921) $ 121,696 $ 81
Beginning of year................... 1,290,192 3,370,481 301,063 323,945 120,307 --
----------- ----------- ----------- ------------ ----------- -----------
Change in unrealized appreciation
(depreciation)................... $2,781,163 $2,676,351 $ 183,715 $ (418,866) $ 1,389 $ 81
----------- ----------- ----------- ------------ ----------- -----------
Realized and unrealized gains
(losses)............................. $3,670,111 $4,048,389 $ 253,334 $ (356,757) $ (88,931) $ 81
----------- ----------- ----------- ------------ ----------- -----------
INCREASE IN NET ASSETS FROM
OPERATIONS........................... $6,660,579 $5,897,976 $ 613,898 $ 31,319 $ 427,363 $ 268,313
----------- ----------- ----------- ------------ ----------- -----------
----------- ----------- ----------- ------------ ----------- -----------
<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............... $ 944,898 $ 13,636 $ 212,590 $ 8,237,980
----------- ----------- ----------- ------------
EXPENSES:
Mortality and expense risk charges.... $ 38,323 $ 4,601 $ 15,540 $ 405,282
Minimum death benefit guarantee
charges.............................. 15,966 1,917 6,475 168,863
Administrative charges................ 22,355 2,684 9,065 236,416
----------- ----------- ----------- ------------
Total expenses...................... $ 76,644 $ 9,202 $ 31,080 $ 810,561
----------- ----------- ----------- ------------
Net investment income............. $ 868,254 $ 4,434 $ 181,510 $ 7,427,419
----------- ----------- ----------- ------------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales................. $2,571,306 $1,067,863 $1,222,792 $ 32,496,956
Costs of investments sold........... 2,346,129 1,068,752 1,228,134 29,975,616
----------- ----------- ----------- ------------
Net realized gains (losses)....... $ 225,177 $ (889) $ (5,342) $ 2,521,340
----------- ----------- ----------- ------------
Net unrealized appreciation
(depreciation) on investments:
End of year......................... $ 418,488 $ 105,791 $ 112,982 $ 11,267,082
Beginning of year................... 668,265 (14,962) 75,611 6,134,902
----------- ----------- ----------- ------------
Change in unrealized appreciation
(depreciation)................... $ (249,777) $ 120,753 $ 37,371 $ 5,132,180
----------- ----------- ----------- ------------
Realized and unrealized gains
(losses)........................... $ (24,600) $ 119,864 $ 32,029 $ 7,653,520
----------- ----------- ----------- ------------
INCREASE IN NET ASSETS FROM
OPERATIONS............................. $ 843,654 $ 124,298 $ 213,539 $ 15,080,939
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
</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, 1998
<TABLE>
<CAPTION>
CAS CGS GSS
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............................ $ 2,990,468 $ 1,882,209 $ 1,849,587 $ 985,282 $ 360,564 $ 467,783
Net realized gains............................... 888,948 6,438,718 1,372,038 10,730,395 69,619 195,733
Net unrealized gains (losses).................... 2,781,163 (3,502,076) 2,676,351 (5,236,884) 183,715 (61,685)
----------- ----------- ----------- ----------- ---------- -----------
Increase in net assets from operations....... $ 6,660,579 $ 4,818,851 $ 5,897,976 $ 6,478,793 $ 613,898 $ 601,831
----------- ----------- ----------- ----------- ---------- -----------
CONTRACT OWNER TRANSACTIONS:
Transfers between Sub-Accounts................... $ (765,823) $ 646,078 $ (209,959) $ 1,029,899 $ 184,794 $ (544,385)
Transfers to loan value account.................. (667,691) (579,340) (478,245) (232,983) (158,811) (14,858)
Contract surrenders.............................. (1,159,053) (1,294,571) (397,789) (983,800) (495,964) (161,757)
Charges for life insurance protection............ (147,415) (154,828) (172,639) (168,671) (80,019) (91,691)
Death benefits................................... (946,644) (261,236) (1,015,161) (28,855) (85,670) (68,740)
----------- ----------- ----------- ----------- ---------- -----------
Decrease in net assets from contract owner
transactions.................................... $(3,686,626) $(1,643,897) $(2,273,793) $ (384,410) $ (635,670) $ (881,431)
----------- ----------- ----------- ----------- ---------- -----------
Increase (decrease) in net assets.............. $ 2,973,953 $ 3,174,954 $ 3,624,183 $ 6,094,383 $ (21,772) $ (279,600)
NET ASSETS:
Beginning of year................................ 26,337,718 23,162,764 27,215,513 21,121,130 8,105,069 8,384,669
----------- ----------- ----------- ----------- ---------- -----------
End of year...................................... $29,311,671 $26,337,718 $30,839,696 $27,215,513 $8,083,297 $ 8,105,069
----------- ----------- ----------- ----------- ---------- -----------
----------- ----------- ----------- ----------- ---------- -----------
<CAPTION>
HYS MSS MMS
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............................ $ 388,076 $ 399,635 $ 516,294 $ 307,001 $ 268,232 $ 287,714
Net realized gains (losses)...................... 62,109 512,163 (90,320) 465,141 -- --
Net unrealized gains (losses).................... (418,866) (130,260) 1,389 (81,214) 81 --
----------- ----------- ----------- ----------- ---------- -----------
Increase in net assets from operations....... $ 31,319 $ 781,538 $ 427,363 $ 690,928 $ 268,313 $ 287,714
----------- ----------- ----------- ----------- ---------- -----------
CONTRACT OWNER TRANSACTIONS:
Transfers between Sub-Accounts................... $ (348,204) $ 329,847 $ 81,592 $ 597,968 $1,451,763 $(1,283,448)
Transfers to loan value account.................. (23,783) (104,301) (185,353) (586,318) (90,938) (76,529)
Contract surrenders.............................. (551,609) (256,676) (42,285) (266,808) (442,507) (762,820)
Charges for life insurance protection............ (46,752) (55,836) (35,874) (34,468) (122,919) (137,588)
Death benefits................................... (87,084) (34,816) -- -- (1,996) (119,653)
----------- ----------- ----------- ----------- ---------- -----------
Increase (decrease) in net assets from contract
owner transactions............................ $(1,057,432) $ (121,782) $ (181,920) $ (289,626) $ 793,403 $(2,380,038)
----------- ----------- ----------- ----------- ---------- -----------
Increase (decrease) in net assets............ $(1,026,113) $ 659,756 $ 245,443 $ 401,302 $1,061,716 $(2,092,324)
NET ASSETS:
Beginning of year................................ 7,126,662 6,466,906 3,759,717 3,358,415 5,927,679 8,020,003
----------- ----------- ----------- ----------- ---------- -----------
End of year...................................... $ 6,100,549 $ 7,126,662 $ 4,005,160 $ 3,759,717 $6,989,395 $ 5,927,679
----------- ----------- ----------- ----------- ---------- -----------
----------- ----------- ----------- ----------- ---------- -----------
</TABLE>
See notes to financial statements
3
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT E
STATEMENTS OF CHANGES IN NET ASSETS -- December 31, 1998 -- continued
<TABLE>
<CAPTION>
TRS WGS
Sub-Account Sub-Account
----------------------- ------------------------
Year Ended Year Ended
December 31, December 31,
----------------------- ------------------------
1998 1997 1998 1997
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income........................................................ $ 868,254 $ 920,490 $ 4,434 $ 37,124
Net realized gains (losses).................................................. 225,177 2,081,108 (889) (97,712)
Net unrealized gains (losses)................................................ (249,777) (1,173,527) 120,753 37,736
---------- ----------- ----------- -----------
Increase (decrease) in net assets from operations........................ $ 843,654 $ 1,828,071 $ 124,298 $ (22,852)
---------- ----------- ----------- -----------
CONTRACT OWNER TRANSACTIONS:
Transfers between Sub-Accounts............................................... $ 42,584 $ (328,063) $ (409,530) $ 136,938
Transfers from loan value account............................................ (134,636) (132,559) 3,877 (3,301)
Contract surrenders.......................................................... (399,794) (2,638,585) (23,214) (72,367)
Charges for life insurance protection........................................ (66,761) (97,262) (11,409) (14,692)
Death benefits............................................................... (69,378) (66,858) -- --
---------- ----------- ----------- -----------
Increase (decrease) in net assets from contract owner transactions......... $ (627,985) $(3,263,327) $ (440,276) $ 46,578
---------- ----------- ----------- -----------
Increase (decrease) in net assets........................................ $ 215,669 $(1,435,256) $ (315,978) $ 23,726
NET ASSETS:
Beginning of year............................................................ 8,464,220 9,899,476 1,281,676 1,257,950
---------- ----------- ----------- -----------
End of year.................................................................. $8,679,889 $ 8,464,220 $ 965,698 $ 1,281,676
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
<CAPTION>
ZCS-2000
Sub-Account Total
----------------------- ------------------------
Year Ended Year Ended
December 31, December 31,
----------------------- ------------------------
1998 1997 1998 1997
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income........................................................ $ 181,510 $ 190,096 $ 7,427,419 $ 5,477,334
Net realized gains (losses).................................................. (5,342) (155,202) 2,521,340 20,170,344
Net unrealized gains (losses)................................................ 37,371 176,526 5,132,180 (9,971,384)
---------- ----------- ----------- -----------
Increase in net assets from operations................................... $ 213,539 $ 211,420 $15,080,939 $15,676,294
---------- ----------- ----------- -----------
CONTRACT OWNER TRANSACTIONS:
Transfers between Sub-Accounts............................................... $ (27,217) $ (584,834) $ -- $ --
Transfers to loan value account.............................................. (117,344) (111,442) (1,852,924) (1,841,631)
Contract surrenders.......................................................... (190,173) (216,183) (3,702,388) (6,653,567)
Charges for life insurance protection........................................ (19,412) (21,919) (703,200) (776,955)
Death benefits............................................................... -- -- (2,205,933) (580,158)
---------- ----------- ----------- -----------
Decrease in net assets from contract owner transactions.................... $ (354,146) $ (934,378) $(8,464,445) $(9,852,311)
---------- ----------- ----------- -----------
Increase (decrease) in net assets........................................ $ (140,607) $ (722,958) $ 6,616,494 $ 5,823,983
NET ASSETS:
Beginning of year............................................................ 3,614,086 4,337,044 91,832,340 86,008,357
---------- ----------- ----------- -----------
End of year.................................................................. $3,473,479 $ 3,614,086 $98,448,834 $91,832,340
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
</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") 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 taxable, and
therefore, no provision has been made for federal income taxes.
(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
5
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT E
NOTES TO FINANCIAL STATEMENTS -- continued
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.
On each Monthly Anniversary Date 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 CGS-Level 1
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>
Units Outstanding
Beginning of Year.......................... 92,847 608,526 482,707 9,838 78,746 632,355
Units transferred between Sub-Accounts... (45,455) (486,418) 28,736 497,782 (40,339) (538,615)
Units transferred (to) from loan value
account................................. 430 (8,244) (12,565) (5,741) (91) (1,710)
Units surrendered........................ (1,137) (17,337) (23,466) (1,402) (1,069) (2,748)
Units cancelled in payment of charges for
life insurance protection............... (350) (2,241) (2,545) (12,763) (311) (9,717)
Units cancelled in payment of death
benefits................................ -- (1,439) (18,049) (5,007) (809) (819)
-------- -------- -------- -------- -------- --------
Units Outstanding
End of Year................................ 46,335 92,847 454,818 482,707 36,127 78,746
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
<CAPTION>
CGS-Level 2 GSS-Level 1 GSS-Level 2
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>
Units Outstanding
Beginning of Year.......................... 556,809 13,181 62,704 436,340 332,752 5,190
Units transferred between Sub-Accounts... 34,927 565,351 (22,653) (364,865) 31,761 336,087
Units transferred (to) from loan value
account................................. (9,084) (4,213) (111) (840) (7,241) 75
Units surrendered........................ (8,422) (1,716) (602) (2,759) (23,198) (1,947)
Units cancelled in payment of charges for
life insurance protection............... (3,340) (15,794) (496) (2,350) (3,268) (5,897)
Units cancelled in payment of death
benefits................................ (20,823) -- -- (2,822) (3,987) (756)
-------- -------- -------- -------- -------- --------
Units Outstanding
End of Year................................ 550,067 556,809 38,842 62,704 326,819 332,752
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>
6
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT E
NOTES TO FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
HYS-Level 1 HYS-Level 2 MSS-Level 1
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>
Units Outstanding
Beginning of Year.......................... 43,889 283,104 238,993 5,759 35,850 99,578
Units transferred between Sub-Accounts... (26,154) (228,936) 13,090 241,994 (22,738) (45,994)
Units transferred (to) from loan value
account................................. 88 (1,595) (1,007) (2,737) (1,187) (12,311)
Units surrendered........................ -- (1,293) (20,572) (1,069) -- (698)
Units cancelled in payment of charges for
life insurance protection............... (168) (5,919) (1,662) (4,954) (303) (4,725)
Units cancelled in payment of death
benefits................................ (449) (1,472) (2,959) -- -- --
------- ---------- -------- -------- -------- --------
Units Outstanding
End of Year................................ 17,206 43,889 225,883 238,993 11,622 35,850
------- ---------- -------- -------- -------- --------
------- ---------- -------- -------- -------- --------
<CAPTION>
MSS-Level 2 MMS-Level 1 MMS-Level 2
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>
Units Outstanding
Beginning of Year.......................... 53,716 -- 133,612 524,146 240,045 1,969
Units transferred between Sub-Accounts... 24,929 59,823 (42,257) (351,244) 132,055 269,405
Units transferred to loan value
account................................. (2,788) (3,585) (3,427) (2,890) (2,230) (2,029)
Units surrendered........................ (1,361) (191) (1,540) (6,639) (25,686) (2,219)
Units cancelled in payment of charges for
life insurance protection............... (525) (1,821) (3,514) (22,637) (4,078) (26,362)
Units cancelled in payment of death
benefits................................ -- (510) -- (7,124) (123) (719)
------- ---------- -------- -------- -------- --------
Units outstanding
End of Year.............................. 73,971 53,716 82,874 133,612 339,983 240,045
------- ---------- -------- -------- -------- --------
------- ---------- -------- -------- -------- --------
</TABLE>
*** For the period January 13, 1997 (commencement of level 2 units) to December
31, 1997
7
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT E
NOTES TO FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
TRS-Level 1 TRS-Level 2 WGS-Level 1
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>
Units Outstanding
Beginning of Year.............................................. 83,559 406,929 204,285 -- 21,982 68,055
Units transferred between Sub-Accounts....................... (37,608) (308,338) 38,610 295,002 (17,007) (43,258)
Units transferred to loan value account...................... (58) (1,611) (4,388) (3,280) (55) (72)
Units surrendered............................................ (5,081) (2,349) (7,889) (1,308) -- (551)
Units cancelled in payment of charges for life insurance
protection.................................................. (454) (9,851) (1,701) (84,765) (170) (2,192)
Units cancelled in payment of death benefits................. (1,531) (1,221) (696) (1,364) -- --
--------- --------- --------- --------- --------- ---------
Units outstanding
End of Year.................................................... 38,827 83,559 228,221 204,285 4,750 21,982
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
<CAPTION>
WGS-Level 2 ZCS-2000-Level 1 ZCS-2000-Level 2
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>
Units Outstanding
Beginning of Year.............................................. 48,519 -- 62,003 227,240 116,837 200
Units transferred between Sub-Accounts....................... (5,411) 50,714 (35,269) (154,492) 33,694 123,821
Units transferred (to) from loan value account............... 262 (113) (2,887) (4,168) (2,818) (1,566)
Units surrendered............................................ (1,257) (260) (3,970) (822) (5,225) (304)
Units cancelled in payment of charges for life insurance
protection.................................................. (430) (1,822) (119) (5,755) (810) (5,314)
Units cancelled in payment of death benefits................. -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Units outstanding
End of Year.................................................... 41,683 48,519 19,758 62,003 141,678 116,837
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
* For the period January 7, 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.
8
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Participants 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 Capital Appreciation
Sub-Account, Conservative Growth Sub-Account, Government Securities Sub-Account,
High Yield Sub-Account, Managed Sectors Sub-Account, Money Market Sub-Account,
Total Return Sub-Account, World Governments Sub-Account and Zero Coupon
Portfolio 2000 Sub-Account of Sun Life of Canada (U.S.) Variable Account E (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
----------------------------------------
This report is prepared for the general information of contract owners. It is
authorized for distribution to prospective purchasers only when preceded or
accompanied by an effective prospectus.
9
<PAGE>
COMPASS-LIFE
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT E
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
ELLEN B. KING, Secretary
L. BROCK THOMSON, Vice President and Treasurer
SUN LIFE ASSURANCE COMPANY
OF CANADA (U.S.)
Variable Life Service Unit, SC 1278
One Sun Life Executive Park
Wellesley Hills, MA 02481
Call Toll Free 1-800-445-4070
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
AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, Massachusetts 02110-1616
ISSUED BY
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.),
A WHOLLY-OWNED SUBSIDIARY OF
SUN LIFE OF CANADA (U.S.) HOLDINGS, INC.
CO2-2/99 6M
LOGO
SINGLE PREMIUM VARIABLE
LIFE INSURANCE
-------------------------------------------------
ANNUAL REPORT, DECEMBER 31, 1998
LOGO
