<PAGE>
Registration No. 333-13087
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
POST-EFFECTIVE
AMENDMENT NO. 1 TO
FORM S-6
FOR REGISTRATION UNDER
THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
_______________
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
(Exact name of trust)
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Exact name of depositor)
ONE SUN LIFE EXECUTIVE PARK, WELLESLEY HILLS, MASSACHUSETTS 02181
(Address of depositor's principal executive office)
Copies to:
MARGARET SEARS MEAD, SECRETARY RUTH S. EPSTEIN, ESQ.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) COVINGTON & BURLING
ONE SUN LIFE EXECUTIVE PARK 1201 PENNSYLVANIA AVENUE, N.W.
WELLESLEY HILLS, MASSACHUSETTS 02181 P.O. BOX 7566
(Name and address of agent for service) WASHINGTON, D.C. 20044
/X/ It is proposed that this filing become effective on May 1, 1997 pursuant
to paragraph (b) of Rule 485.
PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES UNDER THE
SECURITIES ACT OF 1933. THE REGISTRANT NEED NOT FILE A RULE 24f-2 NOTICE FOR
THE FISCAL YEAR ENDED DECEMBER 31, 1996, BECAUSE IT DID NOT SELL ANY
SECURITIES PURSUANT TO THIS DECLARATION DURING THIS PERIOD.
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- --------------------------------------------------------------------------------
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
REGISTRATION ON FORM S-6
CROSS-REFERENCE SHEET
REQUIRED BY RULE 404(C) UNDER THE SECURITIES ACT OF 1933
FORM N-8B-2
ITEM NO. LOCATION IN PROSPECTUS; CAPTION
- ----------- -------------------------------
1 COVER PAGE.
2 COVER PAGE; THE COMPANY, THE VARIABLE ACCOUNT AND
THE FUNDS -- THE COMPANY.
3 COVER PAGE; THE COMPANY, THE VARIABLE ACCOUNT AND
THE FUNDS -- THE COMPANY; THE COMPANY, THE VARIABLE
ACCOUNT AND THE FUNDS -- THE VARIABLE ACCOUNT.
4 DISTRIBUTION OF THE POLICIES.
5 THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS --
THE VARIABLE ACCOUNT.
6 THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS --
THE VARIABLE ACCOUNT.
9 LEGAL PROCEEDINGS
10 SUMMARY OF THE POLICY; THE POLICY; PREMIUM
PAYMENTS; DEATH BENEFIT; ACCOUNT VALUE; CHARGES,
DEDUCTIONS AND REFUNDS; POLICY LOANS; GENERAL
PROVISIONS -- ADDITIONS, DELETIONS OR SUBSTITUTION OF
INVESTMENTS; GENERAL PROVISIONS -- CHANGE IN THE
OPERATION OF THE VARIABLE ACCOUNT; GENERAL PROVISIONS
-- MATURITY; GENERAL PROVISIONS -- MODIFICATION;
GENERAL PROVISIONS -- VOTING RIGHTS; FEDERAL TAX
STATUS.
11 SUMMARY OF THE POLICY; THE COMPANY, THE VARIABLE
ACCOUNT AND THE FUNDS -- THE VARIABLE ACCOUNT; THE
COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS -- THE
FUNDS.
I-2
<PAGE>
FORM N-8B-2
ITEM NO. LOCATION IN PROSPECTUS; CAPTION
- ----------- -------------------------------
12 SUMMARY OF THE POLICY; THE COMPANY, THE VARIABLE
ACCOUNT AND THE FUNDS -- THE FUNDS.
13 SUMMARY OF THE POLICY; THE COMPANY, THE VARIABLE
ACCOUNT AND THE FUNDS -- THE FUNDS, CHARGES,
DEDUCTIONS AND REFUNDS; DISTRIBUTION OF THE POLICIES.
14 THE POLICY -- APPLICATION AND ISSUANCE OF A POLICY.
15 THE POLICY -- APPLICATION AND ISSUANCE OF A POLICY; THE
POLICY -- FREE LOOK PERIOD; PREMIUM PAYMENTS -- PLANNED
PERIODIC PREMIUMS; PREMIUM PAYMENTS -- ALLOCATION OF NET
PREMIUM; ACCOUNT VALUE -- ACCOUNT VALUE IN THE
SUB-ACCOUNTS; ACCOUNT VALUE -- TRANSFER PRIVILEGES.
16 PREMIUM PAYMENTS -- ALLOCATION OF NET PREMIUM; ACCOUNT
VALUE -- ACCOUNT VALUE IN THE SUB-ACCOUNTS; ACCOUNT
VALUE -- NET INVESTMENT FACTOR; ACCOUNT VALUE --
ACCOUNT VALUE IN THE LOAN ACCOUNT; ACCOUNT VALUE --
TRANSFER PRIVILEGES; ACCOUNT VALUE -- ALLOCATION OF
PARTIAL SURRENDER; POLICY LOANS.
17 THE POLICY -- FREE LOOK PERIOD; ACCOUNT VALUE --
SURRENDER; ACCOUNT VALUE -- PARTIAL SURRENDER;
ACCOUNT VALUE -- ALLOCATION OF PARTIAL SURRENDER;
POLICY LOANS.
18 THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS
-- THE VARIABLE ACCOUNT; ACCOUNT VALUE -- ACCOUNT
VALUE IN THE SUB-ACCOUNTS; ACCOUNT VALUE -- NET
INVESTMENT FACTOR.
I-3
<PAGE>
FORM N-8B-2
ITEM NO. LOCATION IN PROSPECTUS; CAPTION
- ----------- -------------------------------
19 GENERAL PROVISIONS -- REPORT TO OWNER; OTHER
CONTRACTUAL ARRANGEMENTS -- ADMINISTRATION.
20 NOT APPLICABLE.
21 DEATH BENEFIT -- BENEFITS AT DEATH; ACCOUNT VALUE --
ACCOUNT VALUE IN THE LOAN ACCOUNT; POLICY LOANS.
22 NOT APPLICABLE.
23 THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS.
24 NOT APPLICABLE.
25 THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS
-- THE COMPANY.
26 NOT APPLICABLE.
27 THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS
-- THE COMPANY.
28 THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS
-- THE COMPANY; THE COMPANY'S DIRECTORS AND EXECUTIVE
OFFICERS.
29 THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS
-- THE COMPANY; THE COMPANY'S DIRECTORS AND EXECUTIVE
OFFICERS.
30 NOT APPLICABLE.
31 NOT APPLICABLE.
32 NOT APPLICABLE.
33 NOT APPLICABLE.
I-4
<PAGE>
FORM N-8B-2
ITEM NO. LOCATION IN PROSPECTUS; CAPTION
- ----------- -------------------------------
34 NOT APPLICABLE.
35 DISTRIBUTION OF THE POLICIES.
37 NOT APPLICABLE.
38 DISTRIBUTION OF THE POLICIES.
39 DISTRIBUTION OF THE POLICIES.
40 NOT APPLICABLE.
41 DISTRIBUTION OF THE POLICIES.
42 NOT APPLICABLE.
43 NOT APPLICABLE.
44 THE POLICY -- APPLICATION AND ISSUANCE OF A POLICY; THE
POLICY -- FREE LOOK PERIOD; PREMIUM PAYMENTS -- PLANNED
PERIODIC PREMIUMS; PREMIUM PAYMENTS -- ALLOCATION OF NET
PREMIUM; ACCOUNT VALUE -- ACCOUNT VALUE IN THE
SUB-ACCOUNTS; ACCOUNT VALUE -- TRANSFER PRIVILEGES.
45 NOT APPLICABLE.
46 THE POLICY -- APPLICATION AND ISSUANCE OF A POLICY; THE
POLICY -- FREE LOOK PERIOD; PREMIUM PAYMENTS -- PLANNED
PERIODIC PREMIUMS; PREMIUM PAYMENTS -- ALLOCATION OF NET
PREMIUM; ACCOUNT VALUE -- ACCOUNT VALUE IN THE
SUB-ACCOUNTS; ACCOUNT VALUE -- TRANSFER PRIVILEGES.
47 NOT APPLICABLE.
48 THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS
-- THE COMPANY; THE COMPANY, THE VARIABLE ACCOUNT AND
THE FUNDS -- THE VARIABLE ACCOUNT.
49 NOT APPLICABLE.
50 THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS
-- THE VARIABLE ACCOUNT.
51 COVER PAGE; THE POLICY; PREMIUM PAYMENTS; DEATH
BENEFIT; ACCOUNT VALUE; CHARGES, DEDUCTIONS AND
REFUNDS; POLICY LOANS; GENERAL PROVISIONS.
I-5
<PAGE>
FORM N-8B-2
ITEM NO. LOCATION IN PROSPECTUS; CAPTION
- ----------- -------------------------------
52 GENERAL PROVISIONS -- ADDITION, DELETION OR SUBSTITUTION OF
INVESTMENTS; GENERAL PROVISIONS -- CHANGE IN THE OPERATION
OF THE VARIABLE ACCOUNT; GENERAL PROVISIONS -- MODIFICATION.
53 FEDERAL TAX STATUS -- TAX TREATMENT OF THE COMPANY.
54 NOT APPLICABLE.
55 NOT APPLICABLE.
I-6
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS
ATTACHED HERETO AND MADE A PART HEREOF IS THE PROSPECTUS OF SUN LIFE OF
CANADA (U.S.) VARIABLE ACCOUNT G DATED MAY 1, 1997.
<PAGE>
Sun Life
Corporate VUL-SM-
P r o s p e c t u s
DATED MAY 1, 1997
<PAGE>
This booklet contains the prospectus
for Sun Life Corporate VUL and the
prospectuses for the underlying funds.
<PAGE>
PROSPECTUS
MAY 1, 1997
SUN LIFE CORPORATE VUL-SM-
--------------------------------------------------
ISSUED BY
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
A WHOLLY-OWNED SUBSIDIARY OF SUN LIFE ASSURANCE COMPANY OF CANADA.
ONE SUN LIFE EXECUTIVE PARK (ATTN: CORPORATE MARKETS)
WELLESLEY HILLS, MASSACHUSETTS 02181
(800) 432-1102 EXT. 2438
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This Prospectus describes Sun Life Corporate VUL, a flexible premium
variable universal life insurance policy (the "Policy") offered by Sun Life
Assurance Company of Canada (U.S.) (the "Company"). The Policy is designed for
use by corporations and other employers, to provide life insurance benefits,
flexibility of premium payments, and a variety of investment options.
The Policy provides a choice of two death benefit options and two tests to
be used to determine if the Policy qualifies as "life insurance" under federal
tax laws. The Policy has a Cash Surrender Value which generally increases with
the payment of each Premium, decreases to reflect charges, and varies with the
investment performance of the underlying investment options. There is no minimum
Cash Surrender Value. You may also borrow against your Account Value, within
certain limits. Additional life insurance coverage is available under an
Additional Protection Benefit Rider.
The Policy will remain in effect so long as the Account Value less your
Policy Debt is sufficient to cover charges assessed against the Policy.
The Policy allows you to allocate Net Premiums and Account Value among 17
Sub-Accounts, each of which invests in a corresponding investment portfolio of
one of the following mutual funds: MFS/Sun Life Series Trust, Fidelity Variable
Insurance Products Fund, Fidelity Variable Insurance Products Fund II, Neuberger
& Berman Advisers Management Trust, JPM Series Trust II and Templeton Variable
Products Series Fund.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
MFS/SUN LIFE SERIES TRUST, FIDELITY VARIABLE INSURANCE PRODUCTS FUND, FIDELITY
VARIABLE INSURANCE PRODUCTS FUND II, NEUBERGER & BERMAN ADVISERS MANAGEMENT
TRUST, JPM SERIES TRUST II AND TEMPLETON VARIABLE PRODUCTS SERIES FUND. YOU
SHOULD RETAIN THESE PROSPECTUSES FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Summary 1
Definitions 4
Summary of the Policy 7
Use of the Policy 8
The Company, the Variable Account and the Funds 8
The Company 8
The Variable Account 9
The Funds 9
Performance Information 12
The Policy 15
Application and Issuance of a Policy 15
Free Look Period 15
Premium Payment 16
Planned Periodic Premiums 16
General Premium Limits 16
Tax Limits on Premium Payments 16
Allocation of Net Premium 16
Modified Endowment Contracts 17
Death Benefit 17
Death Benefit Compliance Test 17
Death Benefit Options 17
Benefits at Death 18
Changes in the Death Benefit Option 18
APB Rider 18
Minimum Face Amount 19
Changes in Face Amount 19
Decreases in Face Amount 19
Increases in Face Amount 19
Account Value 20
Account Value in the Sub-Accounts 20
Net Investment Factor 21
Account Value in the Loan Account 21
Transfer Privileges 22
Surrender 22
Partial Surrender 22
Allocation of Partial Surrender 22
Insufficient Value 22
Grace Period 22
Charges, Deductions and Refunds 23
Expense Charges Deducted as a Percent of Premium 23
Sales Load Refund at Surrender 23
Expense Charges Deducted as a Percent of Assets 23
Expenses of the Underlying Funds 24
Expense Charges Deducted on a Per Policy Basis 24
Monthly Cost of Insurance 24
Reduction of Charges 25
</TABLE>
2
<PAGE>
TABLE OF CONTENTS--(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Policy Loans 25
General Provisions 26
Addition, Deletion or Substitution of Investments 26
Alteration 26
Assignments 26
Change in Operation of the Variable Account 26
Conversion 26
Deferral of Payment 27
Entire Contract 27
Illustrations 27
Incontestability 27
Maturity 27
Misstatement of Age or Sex (Non-Unisex Policy) 27
Modification 28
Nonparticipating 28
Procedure 28
Report to Owner 28
Rights of Beneficiary 28
Rights of Owner 28
Splitting Units 28
Suicide 29
Termination 29
Voting Rights 29
Distribution of the Policies 29
Other Contractual Arrangements 30
Administration 30
Custodian 30
Reinsurance 30
Federal Tax Status 30
Tax Treatment of the Company and the Variable Account 30
Taxation of Policy Proceeds 31
The Company's Directors and Executive Officers 33
State Regulation 35
Legal Proceedings 36
Legal Matters 36
Experts 36
Accountants 36
Registration Statements 36
Financial Statements 37
Appendix A--Illustrations of Death Benefits, Account Values
and Cash Surrender Values A-1
</TABLE>
-------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUSES.
3
<PAGE>
DEFINITIONS
The following terms as used in the Prospectus have the indicated meanings.
ACCOUNT VALUE: The sum of the amounts in each Sub-Account of the Variable
Account with respect to the Policy and the amount of the Loan Account.
ADDITIONAL PROTECTION BENEFIT RIDER ("APB RIDER"): A rider available that
allows you to add life insurance coverage to the Policy.
ANNIVERSARY: The same day in each succeeding year as the day of the year
corresponding to the Issue Date.
APB RIDER DEATH BENEFIT: The death benefit under the APB Rider.
APB RIDER FACE AMOUNT: The amount of APB Rider coverage you request, as
specified in the Application. It is used in determining the Death Benefit. You
may apply for a varying amount of APB Rider coverage, subject to the Company's
limits and requirements, as described in this prospectus.
APPLICATION: Your application for the Policy.
ATTAINED AGE: The Insured's Issue Age plus the number of completed Policy
Years.
BASE DEATH BENEFIT: The death benefit under the Policy, exclusive of any
APB Rider Death Benefit or any other supplemental benefits.
BENEFICIARY: The person or entity entitled to receive the Policy Proceeds
as they become due at death.
BUSINESS DAY: Any day that we are open for business.
CASH SURRENDER VALUE: The Account Value decreased by the balance of any
outstanding Policy Debt, increased by the Sales Load Refund at Surrender, if
any.
CLASS: The risk, underwriting, and substandard table rating, if any,
classification of the Insured.
COMPANY: Sun Life Assurance Company of Canada (U.S.) (also referred to as
"we, us, our").
DAILY RISK PERCENTAGE: The daily rate for deduction of the mortality and
expense risk charge.
DEATH BENEFIT: The sum of the Base Death Benefit and the APB Rider Death
Benefit, if any.
DUE PROOF: Such evidence as we may reasonably require in order to establish
that Policy Proceeds are due and payable.
EFFECTIVE DATE OF COVERAGE: Initially, the Investment Start Date; with
respect to any increase in the Total Face Amount, the Monthly Anniversary Day
that falls on or next follows the date we approve the supplemental application
for such increase; with respect to any decrease in the Total Face Amount, the
Monthly Anniversary Day that falls on or next follows the date we receive your
request.
EXPENSE CHARGES APPLIED TO PREMIUM: The expense charges applied to Premium,
consisting of the charges for premium tax, the federal deferred acquisition cost
("DAC") tax, and the sales load.
FUND: A mutual fund in which a Sub-Account invests.
GENERAL ACCOUNT: The assets held by us other than those allocated to the
Sub-Accounts of the Variable Account or any other separate account of the
Company. There is no General Account investment option available under this
Policy.
INSURED: The person on whose life the Policy is issued.
INVESTMENT START DATE: The date the first Premium is applied, which will be
the later of the Issue Date, the Business Day we approve the application for a
Policy, or the Business Day we receive a Premium equal to or in excess of the
Minimum Premium.
ISSUE AGE: The Insured's age as of the Insured's birthday nearest the Issue
Date.
4
<PAGE>
ISSUE DATE: A date specified in your Policy as the date from which Policy
Anniversaries, Policy Years and Policy Months are measured.
LOAN ACCOUNT: An account established for the Policy, the value of which is
the principal amount of any outstanding loan against the Policy, plus credited
interest thereon.
MATURITY: The Anniversary on which the Insured's Attained Age is 100.
MINIMUM PREMIUM: The Premium amount due and payable as of the Issue Date,
as specified in your Policy. The Minimum Premium varies based on the Issue Age,
sex, and Class of the Insured and the Total Face Amount of the Policy.
MONTHLY ANNIVERSARY DAY: The same day in each succeeding month as the day
of the month corresponding to the Issue Date.
MONTHLY COST OF INSURANCE: A deduction made on a monthly basis for the
insurance coverage provided by the Policy.
MONTHLY EXPENSE CHARGE: A per Policy deduction made on a monthly basis for
administration and other expenses.
MORTALITY AND EXPENSE RISK PERCENTAGE: The annual percentage rate deducted
from the Account Value in the Sub-Accounts for the mortality and expense risk
charge. This annual rate is converted to a daily rate, the Daily Risk
Percentage, and deducted from the Account Value on a daily basis.
NET PREMIUM: The amount you pay as the Premium less the Expense Charges
Applied to Premium.
OUR PRINCIPAL OFFICE: Sun Life Assurance Company of Canada (U.S.) (Attn:
Corporate Markets), One Sun Life Executive Park, Wellesley Hills, Massachusetts,
02181, or such other address as we may specify to you by written notice.
OWNER: The person, persons or entity entitled to the ownership rights
stated in the Policy while the Insured is alive (also referred to as "you,
your").
PARTIAL SURRENDER: A surrender of a portion of the Account Value in
exchange for a payment to the Owner, in accordance with the Policy.
POLICY: The life insurance contract, Sun Life Corporate VUL, including the
Application, any riders or endorsements and any applications therefor.
POLICY DEBT: The principal amount of any outstanding loan against the
Policy, plus accrued but unpaid interest on such loan.
POLICY MONTH: A Policy Month is a one-month period commencing on the Issue
Date or any Monthly Anniversary Day and ending on the next Monthly Anniversary
Day.
POLICY PROCEEDS: The amount determined in accordance with the terms of this
Policy that is payable at the death of the Insured prior to Maturity. This
amount is the Base Death Benefit, decreased by the amount of any outstanding
Policy Debt, and increased by the amounts payable under any APB Rider Death
Benefit and any other supplemental benefits.
POLICY YEAR: A Policy Year is a one-year period commencing on the Issue
Date or any Anniversary and ending on the next Anniversary.
PREMIUM: An amount paid to us by the Owner or on the Owner's behalf as
consideration for the benefits provided by the Policy.
SALES LOAD REFUND AT SURRENDER: The portion of any Premium paid in the
Policy Year of surrender which is refunded upon surrender in the first three
Policy Years, determined in the manner specified in the Policy.
5
<PAGE>
SERVICE CENTER: Andesa TPA, Inc., 1605 N. Cedar Crest Blvd., Suite 502,
Allentown, Pennsylvania, 18104-2351, (610) 821-8980 or such other service center
or address as we may hereafter specify to you by written notice.
SPECIFIED FACE AMOUNT: The amount of life insurance coverage you request as
specified in the Policy, exclusive of any APB Rider. It is used in determining
the Death Benefit. You may increase or decrease the Specified Face Amount as
described in this Prospectus.
SUB-ACCOUNTS: Sub-Accounts into which the assets of the Variable Account
are divided, each of which corresponds to an investment choice available to you.
TARGET PREMIUM: An amount of Premium specified in your Policy. The Target
Premium varies based on the Insured's Issue Age, sex, and Specified Face Amount.
The sales load deduction applied to Premiums paid in the first seven Policy
Years and the Sales Load Refund at Surrender for surrender in the first three
Policy Years is higher on premium paid up to Target Premium and lower on premium
paid above Target Premium. Use of the APB Rider will affect Target Premium and
policy Values as described in this prospectus in the section DEATH BENEFIT--APB
Rider.
TOTAL FACE AMOUNT: The sum of the Specified Face Amount and the APB Rider
Face Amount.
UNIT: A unit of measurement that we use to calculate the value of each
Sub-Account.
UNIT VALUE: The value of each Unit of assets in a Sub-Account.
VALUATION DATE: Any day that benefits vary and on which the New York Stock
Exchange, we, and the relevant Fund are open for business. A Valuation Date will
also include any day that may be required by any applicable Securities and
Exchange Commission Rules and Regulations.
VALUATION PERIOD: A period of time from one determination of Unit Values to
the next subsequent determination of Unit Values. We will determine Unit Values
for each Valuation Date as of the close of the New York Stock Exchange on that
Valuation Date.
VARIABLE ACCOUNT: Sun Life of Canada (U.S.) Variable Account G, a separate
account of the Company consisting of assets set aside by the Company, the
investment performance of which is kept separate from that of the general assets
of the Company (also referred to as "Variable Account G").
WE, US AND OUR: The Company and the Company's.
YOU AND YOUR: The Owner and the Owner's.
6
<PAGE>
SUMMARY OF THE POLICY
The Policy is an individual flexible premium variable universal life
insurance policy offered by Sun Life Assurance Company of Canada (U.S.). The
Policy may be owned by an individual, a corporation or other entity. The Policy
may be used for such purposes as financing non-tax qualified executive benefit
plans. The Policy is subject to our policy issue rules. You must have an
insurable interest in the life of the Insured. (See "USE OF THE POLICY.")
Premium payments under the Policy are flexible, and you choose the amount
and frequency of your Premium payments. The Policy will remain in effect so long
as your Account Value less Policy Debt is sufficient to cover any charges
against the Policy. (See "PREMIUM PAYMENTS.")
Net Premiums and Account Value may be allocated among any of the investment
options available under the Policy, each of which is represented by a
Sub-Account under the Policy. Each Sub-Account invests in a corresponding
portfolio (the "Portfolios") of one of the following mutual funds (the "Funds"):
MFS/Sun Life Series Trust
<TABLE>
<S> <C>
- - Capital Appreciation Series - Total Return Series
- - Emerging Growth Series - World Growth Series
- - Government Securities Series
</TABLE>
Fidelity Variable Insurance Products Fund ("VIP") and Fidelity Variable
Insurance Products
Fund II ("VIP II")
<TABLE>
<S> <C>
- - VIP II Contrafund Portfolio - VIP High Income Portfolio
- - VIP Equity Income Portfolio - VIP II Index 500 Portfolio
- - VIP Growth Portfolio - VIP Money Market Portfolio
</TABLE>
Neuberger & Berman Advisers Management Trust
<TABLE>
<S> <C>
- - Limited Maturity Bond Portfolio - Partners Portfolio
</TABLE>
JPM Series Trust II (Advised by JP Morgan Investment Management Inc.)
<TABLE>
<S> <C>
- - Bond Portfolio - Small Company Portfolio
- - Equity Portfolio
</TABLE>
Templeton Variable Products Series Fund
<TABLE>
<S> <C>
- - Templeton Stock Fund: Class 1
</TABLE>
(See "THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS -- The Funds.")
You may change your allocation percentages and transfer your Account Value
among Sub-Accounts, within certain limits. (See "PREMIUM PAYMENTS -- Allocation
of Net Premium" and "ACCOUNT VALUE -- Transfer Privileges.")
The Policy offers a choice of death benefit options and a choice between two
tests to be used to determine if the Policy qualifies as "life insurance" under
federal tax laws. The two tests are the Cash Value Accumulation Test and the
Guideline Premium Test. If the Cash Value Accumulation Test is chosen, only
death benefit Option A is available. Death benefit Option A results in a level
Base Death Benefit equal to the Specified Face Amount, unless the life insurance
test requires a greater amount. Death benefit Option B results in a variable
Base Death Benefit equal to the Specified Face Amount plus Account Value, unless
the life insurance test chosen requires a greater amount. The life insurance
test you choose cannot be changed after issue. If you choose the Guideline
Premium Test, you may change your death benefit option. (See "DEATH BENEFIT.")
We deduct from Premium payments a charge to cover our federal deferred
acquisition tax cost, which is currently 1.25% of Premium (guaranteed not to
exceed this rate), and for premium tax, which is currently the rate charged in
your state of residence for state and local taxes (guaranteed not to exceed 4%
of Premium in most states). In each of the first seven Policy Years, we deduct a
sales load equal to 8.75% of Premium up to
7
<PAGE>
Target Premium, as specified in your Policy, and 2.25% of Premium in excess of
Target Premium. No sales load is deducted after the seventh Policy Year. We also
deduct a daily mortality and expense risk charge, currently at an annual rate of
0.75% of the Variable Account's net asset value for the first ten Policy Years
and 0.35% thereafter (guaranteed not to exceed 0.90%), and monthly cost of
insurance charges for the insurance protection provided under the Policy. We
deduct a Monthly Expense Charge of $13.75 during the first Policy Year, and
$7.50 thereafter (guaranteed not to exceed $13.75 per month). Account Value also
reflects the deduction of management fees and other expenses incurred by the
underlying investment Portfolios. (See "CHARGES, DEDUCTIONS AND REFUND.")
There are no surrender charges. Upon full surrender during the first three
Policy Years, you will receive a partial refund of the sales load deducted in
that year. Partial Surrenders are permitted once per Policy Year after the first
Policy Year. No refund of sales load is provided for Partial Surrenders. Loans
are available under the Policy at any time. (See "CHARGES, DEDUCTIONS AND
REFUNDS.")
An APB Rider, which provides additional life insurance coverage, is
available with the Policy as an optional benefit. The cost of the APB Rider is
included in the Monthly Cost of Insurance deduction. (See "DEATH BENEFIT -- APB
Rider.")
The Policy offers other benefits and features described in greater detail in
this Prospectus. You should consult the Policy concerning the insurance coverage
and rights afforded to you under the Policy.
This summary is intended to provide only a very brief overview of the more
significant aspects of the Policy. Further detail is provided in the Prospectus
and the Policy.
USE OF THE POLICY
The Policy is designed to provide to corporations and other entities life
insurance coverage on their employees or other persons in whose lives they have
an insurable interest, and may be used in connection with various types of
non-tax qualified executive benefit plans. At the same time, the Policy provides
an Account Value which will be to some extent responsive to changes in the
economic environment, including inflationary forces and changes in rates of
return available from various types of investments. A range of investment
options is provided under the Policy. You, as the Owner, will have all rights
and privileges under the Policy.
The Policy's Account Value and Cash Surrender Value will fluctuate and are
subject to the risks of changing economic conditions, as well as the risks
inherent in the ability of the various Funds' managements to make necessary
changes in their portfolios to anticipate changes in economic conditions. There
is no minimum or guaranteed Account Value attainable or Cash Surrender Value
payable under the Policy.
It may not be advantageous to replace existing insurance or supplement an
existing life insurance policy with the Policy.
THE COMPANY, THE VARIABLE ACCOUNT, AND THE FUNDS
THE COMPANY
The Company is a stock life insurance company incorporated under the laws of
Delaware on January 12, 1970. Its Executive Office mailing address is One Sun
Life Executive Park, Wellesley Hills, Massachusetts 02181, telephone (617)
237-6030. It has obtained authorization to do business in forty-eight states,
the District of Columbia and Puerto Rico, and it is anticipated that the Company
will be authorized to do business in all states except New York. The Company
issues life insurance policies and individual and group annuities. The Company
has formed a wholly-owned subsidiary, Sun Life Insurance and Annuity Company of
New York, which issues individual fixed and combination fixed/variable annuity
contracts and group life and long-term disability insurance in New York. The
Company's other subsidiaries are Massachusetts Financial Services Company and
Sun Capital Advisers, Inc., registered investment advisers, Sun Investment
Services Company, a registered broker-dealer and investment adviser, Sun Benefit
Services, Company, Inc., which offers claims, administrative and pension
brokerage services, New London Trust, F.S.B., a federally
8
<PAGE>
chartered savings bank, Massachusetts Casualty Insurance Company, which issues
individual disability income policies, and Sun Life Financial Services Limited,
which provides administrative services to Sun Life Assurance Company of Canada
in connection with non-U.S. business.
The Company is a wholly-owned subsidiary of Sun Life Assurance Company of
Canada, 150 King Street West, Toronto, Ontario, Canada MFH 1J9 ("Sun Life
(Canada)"). Sun Life (Canada) is a mutual life insurance company incorporated
pursuant to Act of Parliament of Canada in 1865 and currently transacts
business in all of the Canadian provinces and territories, in all states except
New York, and in the District of Columbia, Puerto Rico, the Virgin Islands,
Great Britain, Ireland, Hong Kong, Bermuda and the Philippines. It is expected
that as of May 1, 1997, all of the outstanding common stock of the Company will
be held by a wholly-owned subsidiary of Sun Life (Canada), Sun Life of Canada
(U.S.) Holdings, Inc., which has been formed to serve as the holding company for
the U.S. subsidiaries of Sun Life (Canada) and for general corporate financing
purposes.
THE VARIABLE ACCOUNT
Pursuant to a resolution of the Board of Directors, the Variable Account was
established by the Company on July 25, 1996. Under Delaware insurance law and
under the Policy, the income, gains or losses of the Variable Account are
credited to or charged against the assets of the Variable Account without regard
to the other income, gains or losses of the Company. These assets are held in
relation to the Policies described in this Prospectus and such other variable
life insurance contracts as we have issued and designated and may, in the
future, issue and designate as providing benefits which vary in accordance with
the investment performance of the Variable Account. Although the assets
maintained in the Variable Account will not be charged with any liabilities
arising out of any other business conducted by the Company, all obligations
arising under the Policy, including the promise to make all benefit payments,
are general corporate obligations of the Company.
The Company is the legal owner of the assets of the Variable Account. We are
required to maintain at all times assets in the Variable Account with a total
market value at least equal to the reserves and other liabilities relating to
the variable life insurance benefits under the contracts participating in the
Variable Account. In addition to these assets, the Variable Account's assets may
include amounts we have contributed to commence operation of the Variable
Account, and may include accumulations of the charges we make against the
Variable Account. From time to time these additional assets may be transferred
in cash to our General Account. Before making any such transfer, we will
consider any possible adverse impact the transfer might have on the Variable
Account.
The Variable Account meets the definition of a separate account under the
federal securities laws and is registered as a unit investment trust under the
Investment Company Act of 1940. Registration with the Securities and Exchange
Commission (the "Commission") does not involve supervision of the management or
investment practices or policies of the Variable Account or of the Company by
the Commission. For state law purposes, the Variable Account is treated as a
part or division of the Company. We are the custodian of the assets of the
Variable Account.
The assets of the Variable Account are divided into Sub-Accounts, each of
which invests exclusively in shares of a single corresponding investment
portfolio. Currently there are 17 Sub-Accounts, and Sub-Accounts may be added or
deleted in the future. Income, gains and losses, whether or not realized, from
the assets of each Sub-Account are credited to or charged against that
Sub-Account without regard to income, gains or losses in other Sub-Accounts of
the Variable Account. All amounts allocated to the Variable Account will be used
to purchase shares of one or more of the Funds, as you designate. Deductions and
surrenders from the Variable Account will, in effect, be made by redeeming the
number of Fund shares at net asset value equal in total value to the amount to
be deducted. The Variable Account will be fully invested in Fund shares at all
times.
The Variable Account can choose to receive distributions from the Funds in
either cash or additional shares. It is expected that the Variable Account will
choose to receive distributions in additional shares. If the Variable Account
chooses to receive distributions in cash, it will reinvest the cash in the Funds
to purchase additional shares at their net asset value.
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<PAGE>
THE FUNDS
The following is a brief description of the Funds and a summary of the
investment objectives of each Portfolio. More comprehensive information,
including a discussion of potential risks, is found in the current prospectuses
for each Fund, which are distributed with and must accompany this Prospectus.
You should read the accompanying prospectuses carefully before investing.
Additional prospectuses and the Statements of Additional Information for each of
the Funds can be obtained from the Company's Office at the address and telephone
number listed on page one of this Prospectus.
MFS/SUN LIFE SERIES TRUST. MFS/Sun Life Series Trust (the "MFS Series
Fund") is an open-end investment management company registered under the
Investment Company Act of 1940 (a "mutual fund") organized as a Massachusetts
business trust. The MFS Series Fund is managed by Massachusetts Financial
Services, Inc. ("MFS"), a subsidiary of the Company. In addition, the World
Growth Series is managed by the following subadvisers: Oechsle International
Advisors, L.P., an independent international investment adviser, Foreign &
Colonial Management Limited ("FCM"), and Foreign & Colonial Emerging Markets
Limited, a subsidiary of FCM. The MFS Series Fund is composed of twenty
independent portfolios of securities, five of which are currently available for
investment by the Variable Account.
- CAPITAL APPRECIATION SERIES seeks capital appreciation by investing in
securities of all types, with major emphasis on common stocks.
- EMERGING GROWTH SERIES seeks long term growth of capital by investing
primarily (i.e., at least 80% of its assets under normal circumstances) in
common stocks of emerging growth companies. Emerging growth companies
include companies that MFS believes are early in their life cycle but
which have the potential to become major enterprises. Dividend and
interest income from portfolio securities, if any, is incidental to its
objective of long-term growth of capital.
- GOVERNMENT SECURITIES SERIES seeks current income and preservation of
capital by investing in U.S. Government and U.S. Government-related
securities.
- TOTAL RETURN SERIES seeks primarily to obtain above-average income
(compared to a portfolio entirely invested in equity securities)
consistent with prudent employment of capital; its secondary objective is
to take advantage of opportunities for growth of capital and income.
Assets will be allocated and reallocated from time to time between money
market, fixed income and equity securities. Under normal market
conditions, at least 25% of the series assets will be invested in fixed
income securities and at least 40% and no more than 75% of its assets will
be invested in equity securities.
- WORLD GROWTH SERIES seeks capital appreciation by investing in securities
of companies worldwide growing at rates expected to be well above the
growth rate of the overall U.S. economy.
FIDELITY VIP FUND AND VIP FUND II. Variable Insurance Products Fund ("VIP")
and Variable Insurance Products Fund II ("VIP II") are mutual funds organized as
Massachusetts business trusts. VIP and VIP II are both managed by Fidelity
Management & Research Company ("FMR"), located at 82 Devonshire Street, Boston,
Massachusetts 02109. FMR is the management arm of Fidelity Investments, which
was established in 1946 and is one of the largest investment management
organizations in the United States. Various Fidelity companies perform
activities required for the operation of VIP and VIP II, and affiliates of FMR
may assist it in the choosing of investments for the funds.
Each of the VIP and VIP II is composed of five portfolios of securities, for
a total of 10 portfolios, of which six portfolios, in the aggregate, are
available for investment under the Policy.
- VIP II CONTRAFUND PORTFOLIO seeks long-term capital appreciation.
Portfolio purchases will normally be common stock and securities
convertible into common stock of companies believed to be undervalued due
to an overly pessimistic appraisal by the public.
- VIP EQUITY-INCOME PORTFOLIO seeks reasonable income by investing primarily
in income producing equity securities. The portfolio seeks to achieve a
yield in excess of the composite yield of the Standard & Poor's 500
Composite Stock Index ("S&P 500"), a recognized measure of U.S. stock
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<PAGE>
market performance. At least 65% of the portfolio's assets will be
invested in income-producing common or preferred stock, with the remainder
normally invested in convertible and non-convertible debt obligations.
- VIP GROWTH PORTFOLIO seeks capital appreciation. Portfolio purchases
normally will be common stocks of both smaller, less-known companies and
well-known, established companies although the investments are not
restricted to any one type of security. Dividend income will only be
considered if it might have an effect on stock values.
- VIP HIGH INCOME PORTFOLIO seeks a high level of current income by
investing in high income producing, lower-rated debt securities (sometimes
called "junk bonds"), preferred stocks including convertible securities
and restricted securities.
- VIP II INDEX 500 PORTFOLIO seeks investment results that correspond to the
total return of common stocks publicly traded in the United States, as
presented by the S&P 500. The portfolio will primarily invest in equity
securities of companies that compose the S&P 500. The portfolio will also
purchase short-term debt securities for cash management purposes and use
various investment techniques, such as futures contracts, to adjust its
exposure to the S&P 500.
- VIP MONEY MARKET PORTFOLIO seeks to obtain as high a level of current
income as is consistent with preserving capital and providing liquidity.
The Portfolio will invest in high quality U.S. dollar-denominated money
market instruments of domestic and foreign issuers.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST. Neuberger & Berman Advisers
Management Trust ("AMT") is a mutual fund organized as a Delaware business
trust. AMT is composed of seven separate portfolios (each an "AMT Portfolio").
Each AMT Portfolio invests all of its net investable assets in its corresponding
series (each an "AMT Series") of Advisers Managers Trust, an open-end management
investment company. All AMT Series of Advisers Managers Trust are managed by
Neuberger & Berman Management Inc. Each AMT Series invests in accordance with an
investment objective, policies, and limitations identical to those of its
corresponding AMT Portfolio. The Policy provides for investment in shares of the
two AMT Portfolios described below.
- LIMITED MATURITY BOND PORTFOLIO primarily seeks the highest current income
consistent with low risk to principal and liquidity; and secondarily,
total return. AMT Limited Maturity Bond Portfolio invests in a diversified
portfolio consisting primarily of U.S. Government and Agency securities
and investment grade debt securities. This AMT Series' dollar-weighted
average portfolio duration may range up to four years.
- PARTNERS PORTFOLIO seeks capital growth through an investment approach
that is designed to increase capital with reasonable risk. Its investment
program seeks securities believed to be undervalued based on strong
fundamentals such as low price-to-earning ratios, consistent cash flow,
and a company's track record through all parts of the market cycle.
JPM SERIES TRUST II. The JPM Series Trust II ("JPM") is a mutual fund
organized as a Delaware business trust. JPM is advised by JP Morgan Investment
Management Inc. JPM is composed of five separate portfolios of securities, each
of which has separate investment objectives and policies. The Policy provides
for investment in the three portfolios of JPM described below.
- JPM BOND PORTFOLIO seeks to provide a high total return consistent with
moderate risk of capital and maintenance of liquidity by investing broadly
in the fixed-income markets.
- JPM EQUITY PORTFOLIO seeks to provide a high total return by investing in
selected equity securities of large and mid-sized U.S. corporations with
market capitalizations above $1.5 billion.
- JPM SMALL COMPANY PORTFOLIO seeks to provide a high total return by
investing in equity securities of companies primarily with market
capitalizations of less than $2 billion.
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<PAGE>
TEMPLETON VARIABLE PRODUCTS SERIES FUND. Templeton Variable Products Series
Fund ("TVPSF") is a mutual fund organized as a Massachusetts business trust.
TVPSF has contracted with Templeton Investment Counsel, Inc. to manage the
Templeton Stock Fund. TVPSF is composed of nine separate series, each of which
has separate investment objectives and policies and eight of which offer two
classes of shares. The Policy provides for investment in the class and series of
TVPSF described below.
- TEMPLETON STOCK FUND: CLASS 1 seeks capital growth through a policy of
investing primarily in common stocks issued by companies, large and small,
in various nations throughout the world. In pursuit of this objective, the
fund will normally maintain at least 65% of its assets in common and
preferred stocks.
INVESTMENT ADVISORY FEES AND EXPENSES. Each portfolio has an investment
adviser and pays an investment advisory fee, which is deducted daily from each
portfolio's net assets. In addition, each portfolio incurs operational and other
expenses that are deducted from each portfolio's net assets. See the prospectus
for each Fund for the amount of these fees and expenses.
Certain of the investment advisers to the Funds may reimburse us for
administrative costs in connection with administering the Funds as variable
funding options. These amounts are not charged to the Funds or Owners, but are
paid from assets of the advisers.
MIXED AND SHARED FUNDING. Shares of all the Funds are sold to insurance
company separate accounts that issue both variable annuity and variable life
insurance policies ("mixed funding"). Shares of all Funds other than the MFS
Series Fund are sold to separate accounts of insurance companies that may or may
not be affiliated with the Company or each other ("shared funding"). The MFS
Series Fund sells shares only to separate accounts of the Company and its
affiliates. It is conceivable that, in the future, such mixed or shared funding
may not be advantageous for certain variable life insurance or variable annuity
policy owners. Although neither the Company nor the Funds currently foresee any
such disadvantages either to variable life insurance or to variable annuity
policy owners, the Company and each Fund's Board of Trustees/Directors have
agreed to monitor events in order to identify any material irreconcilable
conflicts between policy owners that may arise and to determine what action, if
any, should be taken in response thereto. If such a conflict were to occur, one
of the separate accounts might withdraw its investment in a Fund. This might
force that Fund to sell portfolio securities at disadvantageous prices.
PERFORMANCE INFORMATION
From time to time we may advertise "Total Return" and "Average Annual Total
Return." Such figures are based on historical earnings and are not intended to
indicate future performance.
"Total Return" for a Portfolio refers to the total of the income generated
by the Portfolio net of total Portfolio operating expenses plus capital gains
and losses, realized or unrealized. "Total Return" for the Sub-Accounts refers
to the total of the income generated by the Portfolio net of total Portfolio
operating expenses plus capital gains and losses, realized or unrealized, and
net of the mortality and expense risk charge. "Average Annual Total Return"
reflects the hypothetical annually compounded return that would have produced
the same cumulative return if the Portfolio's or Sub-Account's performance had
been constant over the entire period. Because Average Annual Total Returns tend
to smooth out variations in the return of the Portfolio, they are not the same
as actual year-by-year results.
Performance information may be compared, in reports and promotional
literature, to: (i) the S&P 500, Dow Jones Industrial Average, Lehman Brothers
Aggregate Bond Index or other unmanaged indices so that investors may compare
the Sub-Account results with those of a group of unmanaged securities widely
regarded by investors as representative of the securities markets in general;
(ii) other groups of variable life separate accounts or other investment
products tracked by Lipper Analytical Services, a widely used independent
research firm which ranks mutual funds and other investment products by overall
performance, investment objectives, and assets, or tracked by other services,
companies, publications, or persons, such as Morningstar, Inc., who rank such
investment products on overall performance or other criteria; or (iii) the
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Consumer Price Index (a measure for inflation) to assess the real rate of return
from an investment in the Sub-Account. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
We may provide in advertising, sales literature, periodic publications or
other materials information on various topics of interest to Owners and
prospective Owners. These topics may include the relationship between sectors of
the economy and the economy as a whole and its effect on various securities
markets, investment strategies and techniques (such as value investing, market
timing, dollar cost averaging, asset allocation, constant ratio transfer and
account rebalancing), the advantages and disadvantages of investing in
tax-deferred and taxable investments, customer profiles and hypothetical
purchase and investment scenarios, financial management and tax and retirement
planning, and investment alternatives to certificates of deposit and other
financial instruments, including comparisons between the Policies and the
characteristics of and market for such financial instruments.
The Policies are first being offered to the public in 1997. However, total
return data may be advertised based on the period of time that the Portfolios
have been in existence. The results for any period prior to the Policies being
offered will be calculated as if the Policies had been offered during that
period of time, with all charges assumed to be those applicable to the Policies.
PORTFOLIO PERFORMANCE FOR PERIOD ENDING: DECEMBER 31, 1996
The following performance information of the Portfolios reflects the total
of the income generated by the Portfolio net of total Portfolio operating
expenses plus capital gains and losses, realized or unrealized. It does not
reflect any Policy or Variable Account charges.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN OF THE PORTFOLIOS
- -------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO
INCEPTION LIFE OF
PORTFOLIO DATE 1 YR. 3 YR. 5 YR. 10 YR. PORTFOLIO
- ----------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
MFS/Sun Life Capital Appreciation Series 07/19/85 21.48% 16.34% 18.12% 15.80% 18.13%
MFS/Sun Life Emerging Growth Series 05/01/95 17.15% NA NA NA 28.72%
MFS/Sun Life Government Securities Series 07/19/85 1.85% 5.36% 8.31% 7.91% 7.18%
MFS/Sun Life Total Return Series 05/02/88 14.10% 12.23% 11.72% NA 12.17%
MFS/Sun Life World Growth Series 11/16/93 13.02% 10.50% NA NA 12.26%
Fidelity VIP II Contrafund Portfolio 01/03/95 21.22% NA NA NA 30.19%
Fidelity VIP Equity Income Portfolio 10/09/86 14.28% 18.24% 17.98% 13.74% 13.42%
Fidelity VIP Growth Portfolio 10/09/86 14.71% 15.79% 15.16% 15.15% 14.81%
Fidelity VIP High Income Portfolio 09/19/85 14.03% 10.63% 14.96% 11.12% 12.00%
Fidelity VIP II Index 500 Portfolio 08/27/92 22.71% 19.37% NA NA 17.06%
Fidelity VIP Money Market Portfolio 04/01/82 5.41% 5.17% 4.53% 5.96% 6.99%
Neuberger & Berman AMT Limited Maturity Bond
Portfolio 09/10/84 4.31% 4.93% 5.32% 6.68% 8.28%
Neuberger & Berman AMT Partners Portfolio 03/22/94 29.57% NA NA NA 21.73%
JPM Bond Portfolio 01/03/95 2.09% NA NA NA 9.25%
JPM Equity Portfolio 01/03/95 21.14% NA NA NA 27.45%
JPM Small Company Portfolio 01/03/95 21.74% NA NA NA 27.29%
Templeton Stock Fund: Class 1 08/24/88 22.42% 14.45% 16.56% NA 13.47%
</TABLE>
The annualized yield for the Fidelity VIP Money Market Portfolio for the
seven days ending December 31, 1996 was 5.27%.
SUB-ACCOUNT INVESTMENT PERFORMANCE
Although as of the date of this Prospectus the Sub-Accounts have not
commenced operations and therefore have no performance history, the following
performance information of the Sub-Accounts assumes that the Sub-Accounts have
been in operation for the same periods as the corresponding Portfolio and
investing in the corresponding Portfolio. It reflects the total of the income
generated by the Portfolio net of total Portfolio operating expenses, plus
capital gains and losses, realized or unrealized, net of the mortality and
expense risk charge (at the current rate of 0.75% of net asset value for the
first ten years and 0.35% thereafter, rather than the guaranteed rate of 0.90%).
THE FOLLOWING SUB-ACCOUNT PERFORMANCE FIGURES DO NOT REFLECT THREE OTHER
SIGNIFICANT CHARGES. IF THESE CHARGES WERE INCLUDED, THE TOTAL RETURN FIGURES
WOULD BE LOWER. FIRST, THE TOTAL RETURN
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FIGURES DO NOT REFLECT THE DEDUCTION FROM PREMIUMS OF THE EXPENSE CHARGES
APPLIED TO PREMIUM. SECOND, MONTHLY COST OF INSURANCE CHARGES HAVE NOT BEEN
DEDUCTED. THIRD, THE FIGURES DO NOT REFLECT THE DEDUCTION OF THE MONTHLY EXPENSE
CHARGE.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN OF THE SUB-ACCOUNT
- -------------------------------------------------------------------------------------------------------------------------------
SUB-ACCOUNT 1 YR. 3 YR. 5 YR. 10 YR. LIFE OF PORTFOLIO
- ------------------------------------------------------- ---------- ---------- ---------- ---------- ----------------------
<S> <C> <C> <C> <C> <C>
MFS/Sun Life Capital Appreciation Series 20.58% 15.47% 17.24% 14.94% 17.31%
MFS/Sun Life Emerging Growth Series 16.28% NA NA NA 27.76%
MFS/Sun Life Government Securities Series 1.09% 4.58% 7.50% 7.11% 6.44%
MFS/Sun Life Total Return Series 13.25% 11.39% 10.89% NA 11.34%
MFS/Sun Life World Growth Series 12.18% 9.68% NA NA 11.42%
Fidelity VIP II Contrafund Portfolio 20.32% NA NA NA 29.22%
Fidelity VIP Equity Income Portfolio 13.43% 17.36% 17.10% 12.89% 12.59%
Fidelity VIP Growth Portfolio 13.86% 14.93% 14.30% 14.29% 13.97%
Fidelity VIP High Income Portfolio 13.18% 9.81% 14.10% 10.29% 11.22%
Fidelity VIP II Index 500 Portfolio 21.80% 18.48% NA NA 16.19%
Fidelity VIP Money Market Portfolio 4.63% 4.39% 3.75% 5.17% 6.33%
Neuberger & Berman AMT Limited Maturity Bond Portfolio 3.53% 4.15% 4.54% 5.89% 7.55%
Neuberger & Berman AMT Partners Portfolio 28.61% NA NA NA 20.82%
JPM Bond Portfolio 1.33% NA NA NA 8.44%
JPM Equity Portfolio 20.24% NA NA NA 26.50%
JPM Small Company Portfolio 20.83% NA NA NA 26.34%
Templeton Stock Fund: Class 1 21.51% 13.60% 15.69% NA 12.63%
</TABLE>
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<PAGE>
THE POLICY
This Prospectus describes the standard features of the Policy. There may be
differences in your Policy due to requirements of the state where your Policy is
issued. Any such changes will be defined in your Policy.
APPLICATION AND ISSUANCE OF A POLICY
To purchase a Policy, you must submit an application to our Principal
Office, so that we may follow certain underwriting procedures designed to
determine the insurability of the proposed Insured. We offer the Policy on a
regular (medical) underwriting, simplified underwriting, and guaranteed issue
basis (each such basis is referred to as an underwriting Class). The proposed
Insured generally must be less than 81 years old for medical issue, 76 years old
for simplified issue, and 71 years old for guaranteed issue underwriting
classes. Medical and simplified issue policies may require medical exams and
further information before the proposed application is approved. Availability of
guaranteed issue policies must be pre-approved based on information you provide
on a master application along with specific requirements which must be met by
all members of the group of proposed Insureds. Proposed Insureds must be
acceptable risks based on our underwriting limits and standards. A policy cannot
be issued until the underwriting process has been completed to our satisfaction
and we reserve the right to reject an application that does not meet our
underwriting requirements or to "rate" an insured as a substandard risk, which
will result in the charging of increased Monthly Cost of Insurance charges
and/or flat extra charges.
The Policy is designed for use only by an Owner who has an insurable
interest in the life of the Insured. Under the applicable state law and for tax
purposes, the Policy will not qualify as life insurance unless this insurable
interest requirement is satisfied. You should consult with a qualified adviser
to ensure that you have an insurable interest in the life of the Insured up to
the full amount of the Death Benefit. You should consult with a qualified
adviser when determining the Total Face Amount of the Policy and prior to
undertaking any action or making any change that increases the Policy's Death
Benefit.
Pending approval of the application, any initial Premium will be held in our
General Account. Upon approval of the application, your Policy on the life of
the Insured will be issued to you, which will set forth your rights and our
obligations. The Minimum Premium is due and payable as of the Issue Date. The
Effective Date of Coverage for the Policy, which initially is the Investment
Start Date, will be the later of the Issue Date, the date we approve the
application for the Policy, or the date you pay a Premium equal to or in excess
of the Minimum Premium. If an application is not approved, any Premium payment
will be returned promptly.
FREE LOOK PERIOD
Your Policy has a "Right to Return" provision, which gives you certain
cancellation rights. If you are not satisfied with your Policy, you may return
it by delivering or mailing it to our Principal Office or to the sales
representative through whom you purchased the Policy within 20 days from the
date of receipt (unless a different period is applicable under state law) or
within 45 days after your application is signed, whichever period ends later
(the "Free Look Period").
A Policy returned under this provision will be deemed void as though it had
never been applied for. You will receive a refund equal to the sum of (1) the
difference between any Premium payments made, including fees and charges, and
the amounts allocated to the Variable Account, (2) the value of the amounts
allocated to the Variable Account on the date the cancellation request is
received by the Company or the sales representative through whom you purchased
the Policy, and (3) any fees or charges imposed on amounts allocated to the
Variable Account. However, if your Policy provides for a full refund under its
"Right to Return" provision, you will receive a refund of all Premium payments
made, with no adjustment for investment experience.
If your Policy provides for such a full refund during the Free Look Period,
beginning on the Investment Start Date all Net Premium will be allocated to the
VIP Money Market Sub-Account until the expiration of the Free Look Period, at
which time your Account Value and future Net Premium will be allocated in
accordance with your instructions. (See "PREMIUM PAYMENTS -- Allocation of Net
Premium.")
15
<PAGE>
PREMIUM PAYMENT
The Policy is designed to offer you a wide range of Premium flexibility. In
general, subject to the limits described below, you may choose the frequency and
amount of Premium payments (your Premium pattern). The charges and deductions
and Policy rights with respect to transfers, loans and partial surrenders remain
the same regardless of the Premium pattern you choose. Your Premium pattern may
affect whether the Policy is treated as a Modified Endowment Contract, which can
cause Policy distributions and loans to be subject to tax. (See "FEDERAL TAX
STATUS -- Taxation of Policy Proceeds.")
All Premium payments are payable to us, and should be mailed to our
Principal Office.
PLANNED PERIODIC PREMIUMS
While you are not required to make Premium payments according to a fixed
schedule, you may select a planned periodic Premium schedule and corresponding
billing period, subject to our Premium limits. In general, the billing period
must be annual or semiannual. We will send reminder notices for the planned
periodic Premium at the beginning of each billing period unless reminder notices
have been suspended as described below. However, you are not required to pay the
planned periodic Premium; you may increase or decrease Premium payments, subject
to our limits, and you may skip a planned payment or make unscheduled payments.
You may change your planned payment schedule or the billing period, subject to
our approval. Depending on the investment performance of the Sub-Accounts you
select, the planned periodic Premium may not be sufficient to keep your Policy
in force, and you may need to change your planned payment schedule or make
additional payments in order to prevent termination of your Policy. We will
suspend reminder notices at your written request, and we reserve the right to
suspend reminder notices if Premiums are not being paid (except for notices in
connection with the grace period (see "ACCOUNT VALUE -- Grace Period")). We will
notify you prior to suspending reminder notices.
GENERAL PREMIUM LIMIT
We reserve the right to limit the number of Premium payments we accept on an
annual basis. No Premium payment may be less than $100 without our consent,
although we will accept a smaller Premium payment if it is necessary to keep
your Policy in force. We reserve the right not to accept a Premium payment that
causes the Base Death Benefit to increase by an amount that exceeds the Premium
received. Evidence of insurability satisfactory to us may be required before we
accept such a Premium. Moreover, you should consult with a qualified adviser
concerning whether such a Premium causes the Death Benefit to exceed your
insurable interest in the Insured. (See "THE POLICY -- Application and Issuance
of a Policy.")
TAX LIMITS ON PREMIUM PAYMENTS
If the death benefit compliance test you have specified is the Guideline
Premium Test (see "DEATH BENEFIT -- Death Benefit Compliance Test"), we will not
accept Premium payments that would, in our opinion, cause the Policy to fail to
qualify as life insurance under that test. The maximum Premium limit for each
year is the largest Premium that can be paid such that the sum of all Premiums
paid will not exceed the limitations referred to in Section 7702 of the Internal
Revenue Code, or any successor provision. Maximum Premium limits for each year
(based on reasonable industry interpretations) will be shown in your annual
report. If a Premium payment is made in excess of these limits, we will accept
only that portion of the Premium within those limits, and will refund the
remainder to you. No such maximum Premium limitations apply under the Cash Value
Accumulation Test.
ALLOCATION OF NET PREMIUM
The Net Premium is the amount you pay as the Premium less the Expense
Charges Applied to Premium. In general, Net Premium will be allocated to the
Sub-Accounts in accordance with the allocation percentages specified by you,
subject to special provisions applicable during the Free Look Period. (See "THE
POLICY -- Free Look Period.") Your initial allocation of Net Premium will be
specified in the application. There are no limitations concerning the number of
Sub-Accounts to which Net Premium may be allocated, although the minimum
allocation for any Sub-Account to which you choose to allocate Account Value is
5% of Net Premium, and percentages must be in whole numbers.
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You may change the allocation of future Net Premium at any time pursuant to
written or telephone request to the Service Center. Telephone requests will be
honored only if we have a properly completed telephone authorization form for
you on file. We and our agents and affiliates will not be responsible for losses
resulting from acting upon telephone requests reasonably believed to be genuine.
We will use reasonable procedures to confirm that instructions communicated by
telephone are genuine. The procedures we follow for transactions initiated by
telephone include requirements that you identify yourself by name and identify a
personal identification number. For additional protection, all changes in
allocation percentages by telephone may be recorded. An allocation change will
be effective as of the date the Service Center receives the request for that
change. The Policy also permits certain transfers of Account Value among
Sub-Accounts. (See "ACCOUNT VALUE -- Transfer Privileges.")
MODIFIED ENDOWMENT CONTRACTS
Federal income tax law provides special rules for the income taxation of
proceeds from life insurance policies that are defined as "Modified Endowment
Contracts." If your Policy is a Modified Endowment Contract, some or all of the
Policy loans, surrenders, partial surrenders and other distributions under the
Policy will likely be taxable and subject to an additional 10% tax. Whether your
Policy is a Modified Endowment Contract depends primarily upon whether you have
paid Premiums in excess of a prescribed "7-pay" limit or undertaken other
actions with respect to the Policy. For further discussion of this determination
and the rules that will apply, see "FEDERAL TAX STATUS -- Taxation of Policy
Proceeds."
At the time a Premium is received that would, in our opinion, cause the
Policy to become a Modified Endowment Contract based on reasonable industry
interpretations, the Company will so notify the Owner and will not credit the
Premium unless it has received specific instructions from the Owner to do so. If
such instructions are not received within 24 hours of the date we send
notification to the Owner, the Premium will be immediately returned.
DEATH BENEFIT
DEATH BENEFIT COMPLIANCE TEST
The Policy must satisfy either of two death benefit compliance tests in
order to qualify as life insurance under Section 7702 of the Internal Revenue
Code: the Cash Value Accumulation Test or the Guideline Premium Test. Each test
effectively requires that the Policy's Death Benefit must always be equal to or
greater than the Account Value multiplied by a certain percentage (the "Death
Benefit Percentage"). Thus, the Policy has been structured so that your Base
Death Benefit may increase above your Specified Face Amount in order to comply
with the applicable test. The Death Benefit Percentage for the Guideline Premium
Test varies only by age. The Death Benefit Percentage for the Cash Value
Accumulation Test varies by age and sex. As a general matter, the Death Benefit
Percentages for the Guideline Premium Test are lower than those for the Cash
Value Accumulation Test. The Guideline Premium Test also imposes maximum Premium
limits whereas the Cash Value Accumulation Test does not.
You must select and specify one of the two death benefit compliance tests in
your application. Once your policy is issued, you may not change this selection.
In general, where maximum accumulation of Account Value during the initial
Policy Years is a primary objective, the Cash Value Accumulation Test is more
appropriate. Where your primary objective is the most economically efficient
method of obtaining a specified amount of coverage, the Guideline Premium Test
is generally more appropriate. Since your selection of the death benefit
compliance test depends on complex factors and may not be changed, you should
consult with a qualified tax adviser before making this election.
DEATH BENEFIT OPTIONS
The Policy provides the following two death benefit options for determining
the Base Death Benefit. You must select and specify one of the two death benefit
options in your application. You may change your death benefit option in the
manner described below.
Option A -- Specified Face Amount. The Base Death Benefit is the greater of
the Specified Face Amount, or the Account Value multiplied by the applicable
Death Benefit Percentage.
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<PAGE>
Option B -- Specified Face Amount Plus Account Value. The Base Death Benefit
is the greater of the Specified Face Amount plus the Account Value, or the
Account Value multiplied by the applicable Death Benefit Percentage. Option B is
not available if the death benefit compliance test is the Cash Value
Accumulation Test.
At any time the Base Death Benefit is defined as the Account Value
multiplied by the applicable Death Benefit Percentage, and the Base Death
Benefit less the Account Value exceeds the Total Face Amount, we reserve the
right to distribute Account Value to you as a partial surrender to the extent
necessary so that the Base Death Benefit less the Account Value equals the Total
Face Amount. You will not have the option of providing evidence of insurability
to maintain your level of death benefit.
BENEFITS AT DEATH
The Policy Proceeds will be paid as they become due upon the death of the
Insured prior to Maturity. We will make payment when we receive Due Proof of
that death. The Policy Proceeds equal the amount of the Base Death Benefit
decreased by the amount of any outstanding Policy Debt, and increased by the
amounts payable under any APB Rider Death Benefit and any other supplemental
benefits. The Death Benefit used to determine Policy Proceeds is based on the
Specified Face Amount, Total Face Amount and Account Value in effect, on the
date of death.
CHANGES IN THE DEATH BENEFIT OPTION
If the death benefit compliance test you have chosen is the Guideline
Premium Test, you may change the death benefit option either from Option A to
Option B, or from Option B to Option A. If the death benefit compliance test you
have chosen is the Cash Value Accumulation Test, only Option A is available, and
you may not change to Option B. Changes in the death benefit option are subject
to our underwriting rules in effect at the time of change. Requests for a change
must be made in writing to our Service Center. The effective date of the change
will be the Policy Anniversary on or next following the date of receipt of your
request.
If the death benefit option change is from Option B to Option A, the
Specified Face Amount will be increased by the Account Value. If the death
benefit option change is from Option A to Option B, the Specified Face Amount
will be reduced by the Account Value. In either case, the amount of the Base
Death Benefit at the time of change will not be altered, but the change in death
benefit option will affect the determination of the Base Death Benefit from that
point on. Under the Guideline Premium Test, a change in death benefit option
could cause total Premiums theretofore paid to exceed the maximum premium
limitation determined under the test. The change also could reduce the maximum
premium limitation for future Premium payments. If the change results in total
Premiums paid exceeding the maximum premium limitation, the Company will require
you to undertake a partial surrender of the Policy (see "DEATH BENEFIT --
Partial Surrender" and "FEDERAL TAX STATUS -- Taxation of Policy Proceeds"). You
should consult a qualified tax adviser prior to changing the death benefit
option.
APB RIDER
The Policy can be issued with an APB Rider, which provides life insurance
coverage, annually renewable to Attained Age 100, on the life of the Insured.
The amount of coverage under the APB Rider, the APB Rider Death Benefit, is
initially the APB Rider Face Amount that you have the flexibility to specify in
your Policy. Subsequently, the amount of the APB Rider Death Benefit is adjusted
automatically by the Company; if the Base Death Benefit under the Policy exceeds
the Specified Face Amount (or for death benefit Option B, the Specified Face
Amount plus Account Value) as a result of an increase in Account Value (see
"DEATH BENEFIT -- Death Benefit Compliance Test"), the APB Rider Death Benefit
will be reduced by an equivalent amount, under the formula set forth below.
The APB Rider Death Benefit is the greater of zero or the result of (a) less
(b) where:
(a) is the APB Rider Face Amount, and
(b) is the excess, if any, of the Base Death Benefit over
- the Specified Face Amount for death benefit Option A policies, or
- the Specified Face Amount plus the Account Value for death benefit
Option B policies.
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The cost of the APB Rider is included in the Monthly Cost of Insurance
deduction. (See "CHARGES, DEDUCTIONS AND REFUNDS -- Monthly Cost of Insurance.")
Two otherwise identical policies with the same Total Face Amount will have
different Target Premiums depending on the mixture of Specified Face Amount and
APB Rider Face Amount. The policy with more APB Rider will have lower Target
Premium (see "DEFINITIONS -- Target Premium") and consequently, lower sales load
deductions (see "CHARGES, DEDUCTIONS AND REFUNDS"); however, conversion rights
do not apply to the APB Rider (see "GENERAL PROVISIONS -- Conversion") and
guaranteed maximum cost of insurance rates associated with the APB Rider Death
Benefit exceed those associated with the Base Death Benefit (see"CHARGES,
DEDUCTIONS AND REFUNDS -- Monthly Cost of Insurance").
An APB Rider will terminate on the earliest of the following dates: (1)
receipt of your written request for termination, (2) lapse of the Policy because
of insufficient value, or (3) termination of the Policy.
MINIMUM FACE AMOUNT
The sum of the Specified Face Amount and the APB Rider Face Amount, the
Total Face Amount, generally must be at least equal to a minimum of $50,000, of
which the Specified Face Amount must be at least equal to a minimum of $5,000.
The Company reserves the right to waive these minimums and also reserves the
right to offer the Policy only in conjunction with an APB Rider with a certain
APB Rider Face Amount.
CHANGES IN FACE AMOUNT
After the end of the first Policy Year, you may change the Specified Face
Amount and, if it is part of the Policy, the APB Rider Face Amount. Unless you
specify otherwise, a change in the Policy's Total Face Amount will first be
applied, to the extent possible, to the APB Rider Face Amount. You must send
your request for a change to our Service Center, in writing. The Effective Date
of Coverage for changes is:
- for any increase in coverage, the Monthly Anniversary Day that falls on or
next follows the date we approve the supplemental application for such
increase, and
- for any decrease in coverage, the Monthly Anniversary Day that falls on or
next follows the date we receive your request.
DECREASES IN FACE AMOUNT
The Specified Face Amount may not decrease to less than the minimum
Specified Face Amount. A decrease in Specified Face Amount or APB Rider Face
Amount may not decrease the Policy's Total Face Amount to an amount less than
the minimum Total Face Amount. A decrease in face amount will be applied to the
initial face amount and to each increase in face amount in the following order:
- first, to the most recent increase;
- second, to the next most recent increases in reverse chronological order;
and
- finally, to the initial face amount.
If you have chosen the Guideline Premium Test, a decrease in the Specified
Face Amount or APB Rider Face Amount could cause total Premiums theretofore paid
to exceed the maximum premium limitation determined under the test. The decrease
also will reduce the maximum premium limitation for future Premium payments. If
the decrease results in total Premiums paid exceeding the maximum premium
limitation, the Company will require you to undertake a partial surrender of the
Policy (see"DEATH BENEFIT -- Partial Surrender" and "FEDERAL TAX STATUS --
Taxation of Policy Proceeds"). You should consult a qualified tax adviser prior
to decreasing the Specified Face Amount or APB Rider Face Amount.
INCREASES IN FACE AMOUNT
An increase in the face amount is subject to our underwriting rules in
effect at the time of the increase. You may be required to submit evidence of
the Insured's insurability satisfactory to us. Moreover, you should consult with
a qualified adviser concerning whether your insurable interest in the Insured
will support such an increase. (See "THE POLICY -- Application and Issuance of a
Policy.")
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ACCOUNT VALUE
The Account Value is the sum of the amounts in each Sub-Account of the
Variable Account with respect to your Policy, plus the amount of the Loan
Account. The Account Value varies depending upon the Premiums paid, Expense
Charges Applied to Premium, Mortality and Expense Risk Percentage deductions,
Monthly Expense Charges, Monthly Cost of Insurance charges, Policy loans and
loan repayments, Partial Surrenders, fees, and the Net Investment Factor
(determined as provided below) for the Sub-Accounts to which your Account Value
is allocated.
We measure the amounts in the Sub-Accounts in terms of Units and Unit
Values. On any given day, the amount you have in a Sub-Account is equal to the
Unit Value multiplied by the number of Units credited to you in that
Sub-Account. The Units for each Sub-Account will have different Unit Values.
Amounts allocated to a Sub-Account will be used to purchase Units of the
Sub-Account. Units are redeemed when you make partial surrenders, undertake
Policy loans or transfer amounts from a Sub-Account, and for payment of the
Mortality and Expense Risk Charge, the Monthly Expense Charge, and the Monthly
Cost of Insurance Charge. The number of Units of each Sub-Account purchased or
redeemed is determined by dividing the dollar amount of the transaction by the
Unit Value for the Sub-Account. The Unit Value for each Sub-Account was
initially established at $10.00. The Unit Value for any subsequent Valuation
Date is equal to the Unit Value for the preceding Valuation Date multiplied by
the Net Investment Factor. The Unit Value of a Sub-Account for any Valuation
Date is determined as of the close of the Valuation Period ending on that
Valuation Date.
Transactions are processed on the date we receive a Premium at Our Principal
Office or any acceptable written or telephonic request is received at the
Service Center. If your Premium or request is received on a date that is not a
Valuation Date, or after the close of the New York Stock Exchange on a Valuation
Date, the transaction will be processed on the next subsequent Valuation Date.
ACCOUNT VALUE IN THE SUB-ACCOUNTS
The Account Value attributable to each Sub-Account of the Variable Account
on the Investment Start Date equals:
- that portion of Net Premium received and allocated to the Sub-Account,
less
- the Monthly Expense Charges due on the Issue Date and subsequent Monthly
Anniversary Days through the Investment Start Date, and
- the Monthly Cost of Insurance deductions due from the Issue Date through
the Investment Start Date.
The Account Value attributable to each Sub-Account of the Variable Account
on subsequent Valuation Dates is equal to:
- the Account Value attributable to the Sub-Account on the preceding
Valuation Date multiplied by that Sub-Account's Net Investment Factor,
less the Daily Risk Percentage multiplied by the number of days in the
Valuation Period multiplied by the Account Value in the Sub-Account,
plus
- that portion of Net Premium received and allocated to the Sub-Account
during the current Valuation Period,
- any amounts transferred by you to the Sub-Account from another Sub-Account
during the current Valuation Period,
- that portion of any loan repayment allocated to the Sub-Account during the
current Valuation Period, and
- that portion of any interest credited on the Loan Account which is
allocated to the Sub-Account during the current Valuation Period,
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less
- any amounts transferred by you from the Sub-Account to another Sub-Account
during the current Valuation Period,
- that portion of any partial surrenders deducted from the Sub-Account
during the current Valuation Period,
- that portion of any Policy loan transferred from the Sub-Account to the
Loan Account during the current Valuation Period,
- if a Monthly Anniversary Day occurs during the current Valuation Period,
that portion of the Monthly Expense Charge for the Policy month just
beginning charged to the Sub-Account,
- if a Monthly Anniversary Day occurs during the current Valuation Period,
that portion of the Monthly Cost of Insurance for the Policy month just
ending charged to the Sub-Account, and
- if you surrender during the current Valuation Period, that portion of the
pro-rata Monthly Cost of Insurance for the Policy month charged to the
Sub-Account.
NET INVESTMENT FACTOR
The Net Investment Factor is an index applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. The Net
Investment Factor may be greater or less than or equal to one; therefore your
Account Value allocated to the Sub-Account may increase, decrease or remain the
same.
The Net Investment Factor for each Sub-Account for any Valuation Period is
determined by dividing (a) by (b) where
(a) is the net result of:
(1) the net asset value of a Fund share held in the Sub-Account
determined as of the end of the Valuation Period, plus
(2) the per share amount of any dividend or other distribution declared
on Fund shares held in the Sub-Account if the"ex-dividend" date
occurs during the Valuation Period, plus or minus
(3) a per share credit or charge with respect to any taxes paid, or
reserved for by the Company during the Valuation Period which are
determined by the Company to be attributable to the operation of the
Sub-Account (no federal income taxes are applicable under present
law); and
(b) is the net asset value of a Fund share held in the Sub-Account
determined as of the end of the preceding Valuation Period.
ACCOUNT VALUE IN THE LOAN ACCOUNT
The Account Value in the Loan Account is zero on the Investment Start Date.
The Account Value in the Loan Account on any day after the Investment Start
Date equals:
- the Account Value in the Loan Account on the preceding day credited with
interest at the rate specified in the Policy as the "interest credited on
Loan Account rate" of 4%,
plus
- any amount transferred from Sub-Accounts to the Loan Account for Policy
loans requested on that day,
less
- any loan repayments made on that day, and
- if that day is a Policy Anniversary, any amount transferred to the
Sub-Accounts by which the Loan Account Value exceeds the outstanding
Policy loan.
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TRANSFER PRIVILEGES
Subject to our rules as they may exist from time to time and to any limits
that may be imposed by the Funds, including those set forth in the Policy, you
may at any time transfer to another Sub-Account all or a portion of the Account
Value allocated to a Sub-Account. We will make transfers pursuant to an
authorized written or telephone request to the Service Center. Telephone
requests will be honored only if we have a properly completed telephone
authorization form for you on file. We and our agents and affiliates will not be
responsible for losses resulting from acting upon telephone requests reasonably
believed to be genuine. We will use reasonable procedures to confirm that
instructions communicated by telephone are genuine. The procedures we follow for
transactions initiated by telephone include requirements that you identify
yourself by name and identify a personal identification number. Transfers may be
requested by indicating the transfer of either a specified dollar amount or a
specified percentage of the Sub-Account's value from which the transfer will be
made. If you request a transfer based on a specified percentage of the
Sub-Account's value, that percentage will be converted into a request for the
transfer of a specified dollar amount based on application of the specified
percentage to the Sub-Account's value at the time the request is received.
These transfer privileges are subject to our consent. We reserve the right
to impose limitations on transfers, including, but not limited to: (1) the
minimum amount that may be transferred; and (2) the minimum amount that may
remain in a Sub-Account following a transfer from that Sub-Account. In addition,
transfer privileges are subject to any restrictions that may be imposed by the
Funds.
SURRENDER
You may surrender the Policy for the Cash Surrender Value at any time. The
Cash Surrender Value is the Account Value, decreased by the balance of any
outstanding Policy Debt, increased by the Sales Load Refund at Surrender, if
any.
PARTIAL SURRENDER
You may make a Partial Surrender of the Policy once each Policy Year after
the first Policy Year by written request to the Service Center. The maximum
amount of any Partial Surrender is the Account Value decreased by the balance of
any outstanding Policy Debt. Unless you provide evidence satisfactory to us that
the Insured is still an acceptable risk based on our underwriting limits and
standards, the Total Face Amount will be reduced to the extent necessary so
that:
- the Death Benefit less the Account Value immediately after the Partial
Surrender,
does not exceed
- the Death Benefit less the Account Value immediately before the Partial
Surrender.
If you provide such evidence, you will have the option of keeping the Death
Benefit equal to what it was immediately prior to the Partial Surrender. The
Specified Face Amount remaining in force after the Partial Surrender must be no
lower than the minimum Specified Face Amount. A Partial Surrender may not
decrease the Policy's Total Face Amount to an amount less than the minimum Total
Face Amount.
ALLOCATION OF PARTIAL SURRENDER
You may allocate the Partial Surrender among the Sub-Accounts of the
Variable Account. If you do not specify the allocation, then the Partial
Surrender will be allocated among the Sub-Accounts in the same proportion that
the Account Value of each Sub-Account bears to the aggregate Account Value of
all Sub-Accounts on the date of Partial Surrender.
INSUFFICIENT VALUE
If, on a Valuation Date, the Account Value less the outstanding Policy Debt
is less than or equal to zero, then the Policy will terminate for no value,
subject to the grace period.
GRACE PERIOD
If, on a Valuation Date, your Policy will terminate by reason of
insufficient value, we will allow a grace period. This grace period will allow
61 calendar days from that Valuation Date for the payment of a Net Premium that
is sufficient to cover the deductions from the Account Value. These deductions
include the Monthly Cost of Insurance, the Monthly Expense Charge and the Daily
Risk Percentage charge. Notice of Premium due will be mailed to your last known
address or the last known address of any assignee of record. We will assume that
your last known address is the address shown on the application (or notice of
assignment), unless we receive written
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notice of a change in address in a form satisfactory to us. If the Premium due
is not paid within 61 days after the beginning of the grace period, then the
Policy and all rights to benefits will terminate without value at the end of the
61 day period. The Policy will continue to remain in force during this grace
period. If the Policy Proceeds become payable during the grace period, then any
overdue Monthly Cost of Insurance and Monthly Expense Charge will be deducted
from the amount payable by us.
CHARGES, DEDUCTIONS AND REFUNDS
EXPENSE CHARGES DEDUCTED AS A PERCENT OF PREMIUM
The Expense Charges Applied to Premium will be the sum of the charges for
premium tax, the federal deferred acquisition cost ("DAC") tax, and the
applicable sales load rates. The Expense Charges Applied to Premium are
multiplied by each Premium you pay and the result will be deducted from the
Premium payment.
All states and a few cities and municipalities impose taxes on premiums paid
for life insurance. These charges vary from 2% to 4% of premium in most states,
depending on the state of residence of the Owner (Kentucky currently charges a
tax of 7% of premium). The premium tax percentage rate charged against the
Premium on your Policy will be determined from time to time and will equal the
rate we expect to pay for premium taxes in your state of residence. In no event
will the premium tax rate exceed 4%, except that for Kentucky Policy Owners, in
no event will the premium tax rate exceed 9%. In the event your state of
residence changes, the premium tax rate will be adjusted to reflect the rate for
the new state of residence.
We also make a deduction of 1.25% of Premium, which is the rate
approximately equal to our expenses in paying federal DAC taxes associated with
the Policies. The charge for DAC tax expenses is guaranteed not to exceed this
rate.
A sales load rate of 8.75% is deducted from Premium paid up to Target
Premium for each of the first seven Policy Years. A sales load rate of 2.25% is
deducted from Premium paid in excess of Target Premium for each of the first
seven Policy Years. The amount of Target Premium is specified in your Policy.
All Premium paid in a Policy Year is aggregated to determine which portion of a
Premium exceeds Target Premium. There is no sales load imposed after the seventh
Policy Year. The sales load rates are guaranteed not to exceed these amounts.
The sales load is designed primarily to compensate us for a portion of the
expenses incurred in distributing the Policy, including agent compensation, the
cost of prospectuses, and advertising. We may reduce or waive the sales load for
certain group or sponsored arrangements or corporate purchasers. (See "CHARGES,
DEDUCTIONS, AND REFUNDS -- Reduction of Charges.")
SALES LOAD REFUND AT SURRENDER
If you surrender your Policy during the first three Policy Years, a portion
of the sales load charged against the Premium payments made in the Policy Year
of surrender will be refunded. We will refund 6% of Premium paid up to Target
Premium, and the entire sales load charged against Premium paid in excess of
Target Premium. The refund only applies to Premiums paid in the Policy Year of
surrender (rather than applying to Premiums paid since issue). This refund is
not available for partial surrenders or Policy loans. There is no refund for
surrenders occurring after the third Policy Year.
EXPENSE CHARGES DEDUCTED AS A PERCENT OF ASSETS
We deduct a daily charge from the assets of the Variable Account for
mortality and expense risks we assume in connection with the Policy. The amount
of the daily charge is the Daily Risk Percentage multiplied by the net asset
value of the Variable Account. The Daily Risk Percentage will be determined by
us from time to time based on our expectations of future interest, mortality
experience, persistency, expenses and taxes. During the first ten Policy Years,
the Daily Risk Percentage is currently .0020471%, which is equivalent to an
annual rate of 0.75%; beginning in the eleventh Policy Year, the Daily Rate
Percentage decreases to .0009572%, which is equivalent to an annual rate of
0.35%. In no event will the Daily Risk Percentage exceed .0024548%, which is
equivalent to an annual rate of .90%.
The Company does not take any federal, state or local taxes into account
when determining the Net Investment Factor (see "FEDERAL TAX STATUS -- Tax
Treatment of the Company and the Variable Account"). We reserve the right to
impose charges for such taxes.
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EXPENSES OF THE UNDERLYING FUNDS
Because the Variable Account purchases shares of the Funds, your Account
Value will reflect investment management fees and other expenses incurred by the
Funds. The following table illustrates these fees and expenses paid by each of
the Portfolios of Funds as a percentage of average net assets based on
information for the year ended December 31, 1996. These fees and expenses are
more fully described in the accompanying prospectuses. The data with respect to
the Funds' annual expenses have been provided to us by the Funds. We have not
independently verified such data.
FEE TABLE
Annual Fund Expenses (as a percentage of Fund average net assets)
<TABLE>
<CAPTION>
TOTAL ANNUAL
MANAGEMENT FEES OTHER EXPENSES EXPENSES
--------------- -------------- ------------
<S> <C> <C> <C>
MFS/Sun Life Capital Appreciation Series 0.75% 0.05% 0.80%
MFS/Sun Life Emerging Growth Series 0.61% 0.09% 0.70%
MFS/Sun Life Government Securities Series 0.55% 0.08% 0.63%
MFS/Sun Life Total Return Series 0.68% 0.04% 0.72%
MFS/Sun Life World Growth Series 0.90% 0.14% 1.04%
Fidelity VIP II Contrafund Portfolio 0.61% 0.13% 0.74%(1)
Fidelity VIP Equity-Income Portfolio 0.51% 0.07% 0.58%(1)
Fidelity VIP Growth Portfolio 0.61% 0.08% 0.69%(1)
Fidelity VIP High Income Portfolio 0.59% 0.12% 0.71%
Fidelity VIP II Index 500 Portfolio 0.13% 0.15% 0.28%(2)
Fidelity VIP Money Market Portfolio 0.21% 0.09% 0.30%
Neuberger & Berman AMT Limited Maturity Bond Portfolio 0.65% 0.13% 0.78%(3)
Neuberger & Berman AMT Partners Portfolio 0.84% 0.11% 0.95%(3)
JPM Bond Portfolio 0.30% 0.45% 0.75%(4)
JPM Equity Portfolio 0.40% 0.50% 0.90%(4)
JPM Small Company Portfolio 0.60% 0.55% 1.15%(4)
Templeton Stock Fund: Class 1 0.70% 0.18% 0.88%(5)
</TABLE>
- ----------
(1) A portion of the brokerage commissions that certain funds pay was used to
reduce funds expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent whereby interest earned
on uninvested cash balances was used to reduce custodian and transfer agent
expenses. Including these reductions, the total operating expenses presented
in the table would have been .56% for Equity Income Portfolio, .67% for
Growth Portfolio and .71% for Contrafund Portfolio.
(2) FMR agreed to reimburse a portion of Index 500 Portfolio's expenses during
the period. Without this reimbursement, the fund's management fee, other
expenses and total expenses would have been .28%, .15% and .43%
respectively.
(3) Neuberger & Berman Management has voluntarily undertaken to reimburse each
Portfolio for certain expenses that exceed 1% of average daily net assets.
This undertaking can be terminated upon sixty days' written notice.
(4) This information reflects current fees and expenses, restated to reflect an
agreement by Morgan Guaranty Trust Company of New York, an affiliate of J.P.
Morgan Investment Management Inc., to reimburse the Fund to the extent
certain expenses exceed in any fiscal year 0.75%, 0.90% and 1.15% of the
average daily net assets of JPM Bond Portfolio, JPM Equity Portfolio and JPM
Small Company Portfolio, respectively.
(5) Management fees and total operating expenses have been restated to reflect
the management fee schedule approved by shareholders and effective May 1,
1997. See fund prospectus for details. Actual management fees and total fund
operating expenses before May 1, 1997 were lower.
EXPENSE CHARGES DEDUCTED ON A PER POLICY BASIS
We deduct a Monthly Expense Charge of $13.75 at the beginning of each month
during the first Policy Year and $7.50 for months thereafter. The Monthly
Expense Charge will be determined from time to time based on our expectations of
future expenses. However, the Monthly Expense Charge will not be greater than
$13.75 in any Policy month. This charge is designed to reimburse us for actual
administrative costs we incur, and we do not expect to make a profit from this
charge. The Monthly Expense Charge deduction will be allocated among
Sub-Accounts in the same proportion that the Account Value of each Sub-Account
bears to the aggregate Account Value of all Sub-Accounts immediately prior to
the deduction.
MONTHLY COST OF INSURANCE
We deduct a Monthly Cost of Insurance charge from your Account Value to
cover anticipated costs of providing insurance coverage. This charge is made, in
arrears, at the end of each Policy Month. If you surrender your Policy on any
day other than a Monthly Anniversary Day, a pro-rata charge will be made. The
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Monthly Cost of Insurance deduction will be allocated among Sub-Accounts in the
same proportion that the Account Value of each Sub-Account bears to the
aggregate Account Value of all Sub-Accounts immediately prior to the deduction.
The Monthly Cost of Insurance deduction is the sum of
- the monthly cost of insurance rate (described below )multiplied by the Net
Amount at Risk (as defined below) divided by 1000; the "Net Amount at
Risk" equals the Base Death Benefit at the end of the Policy Month before
the deduction of the Monthly Cost of Insurance less the Account Value at
the end of the Policy Month before the deduction of the Monthly Cost of
Insurance;
- the monthly cost of insurance rate for the APB Rider Death Benefit, if
any, times the APB Rider Death Benefit divided by 1000;
- the monthly rider cost for any other riders that are a part of the Policy;
- the flat extra, if any, specified in the Policy, times the Total Face
Amount divided by 1000.
The Account Value deduction occurs first to the initial Total Face Amount and
second to successive increases.
The monthly cost of insurance rates are based on the length of time the
Policy has been in force and the Insured's sex (in the case of Non-Unisex
Policies), Issue Age, Class and table rating, if any. The monthly cost of
insurance rates for the Base Death Benefit and the APB Rider Death Benefit are
currently the same but may differ in the future. The monthly cost of insurance
rates will be determined by us from time to time based on our expectations of
future experience with respect to mortality, persistency, interest rates,
expenses and taxes. However, the maximum monthly cost of insurance rates for the
Base Death Benefit for Insureds that are not rated substandard risks will not
exceed the monthly rates based on the 1980 CSO Mortality Tables A (for male and
unisex) and G (for females). Generally, the maximum monthly cost of insurance
rates for the APB Rider Death Benefit for Insureds that are not rated
substandard risks will not exceed 125% of the monthly rates based on the 1980
CSO Mortality Tables A (for male and unisex) and G (for females). Monthly cost
of insurance rates for Classes with substandard risk ratings are based on
multiples of these tables. Flat extras apply only with respect to certain types
of substandard risk Classes, and, if applicable, will be specified in your
Policy.
REDUCTION OF CHARGES
We reserve the right to reduce any of the charges and deductions described
in this section in connection with the sale of any Policy when it is expected
that the nature of the sale will result in savings of costs underlying the
charge or deduction. We will determine the propriety and amount of the reduction
in our discretion. We may modify the qualification requirements that enable a
sale to receive such a reduction as experience is gained. Any such reduction
will not be unfairly discriminatory against the interests of any Policy Owner.
POLICY LOANS
You may request a Policy loan of up to 90% of your Account Value, decreased
by the balance of any outstanding Policy Debt on the date the Policy loan is
made. Account Value equal to the amount of the Policy loan will be transferred
from the Sub-Accounts to the Loan Account on the date the Policy loan is made.
You may allocate the Policy loan among the Sub-Accounts. If you do not specify
the allocation, then the Policy loan will be allocated among the Sub-Accounts in
the same proportion that the Account Value of each Sub-Account bears to the
aggregate Account Value of all Sub-Accounts immediately prior to the loan.
Interest on the Policy loan will accrue daily at the Policy loan interest
rate of 5% in Policy Years one through ten and 4.25% thereafter. This interest
shall be due and payable to us in arrears on each Policy Anniversary. Any unpaid
interest will be added to the principal amount as an additional Policy loan and
will bear interest at the same rate and in the same manner as the prior Policy
loan.
All funds we receive from you will be credited to your Policy as Premium
unless we have received written notice, in form satisfactory to us, that the
funds are for loan repayment. In the event you have a loan against
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the Policy, it is generally advantageous to repay the loan rather than make a
Premium payment because Premium payments incur expense charges whereas loan
repayments do not. Loan repayments will first reduce the outstanding balance of
the Policy loan and then accrued but unpaid interest on such loans. We will
accept repayment of any Policy loan at any time before Maturity. The amount of
the loan repayment up to the outstanding balance of the Policy loan will be
transferred from the Loan Account to the Sub-Accounts. You may allocate the loan
repayment among the Sub-Accounts. If you do not specify the allocation, then the
loan repayment will be allocated among the Sub-Accounts in the same proportion
that the Account Value of each Sub-Account bears to the total Account Value less
the Loan Account immediately prior to the loan repayment.
GENERAL PROVISIONS
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
Shares of any or all of the Portfolios may not always be available for
purchase by the Sub-Accounts of the Variable Account, or we may decide that
further investment in any such shares is no longer appropriate. In either event,
shares of other registered open end investment companies or unit investment
trusts may be substituted both for Portfolio shares already purchased by the
Variable Account and/or as the security to be purchased in the future, provided
that these substitutions have been approved, if required, by the Securities and
Exchange Commission. In addition, the investment policy of the Variable Account
will not be changed without the approval of the Insurance Commissioner of the
State of Delaware. We also reserve the right to eliminate or combine existing
Sub-Accounts or to transfer assets between Sub-Accounts. In the event of any
substitution or other act pursuant to this provision, we may make appropriate
amendment to the Policy to reflect the substitution.
ALTERATION
Our sales representatives do not have the authority to either alter or
modify the Policy or to waive any of its provisions. The only persons with this
authority are our president, actuary, secretary, or one of our vice presidents.
ASSIGNMENTS
During the lifetime of the Insured, you may assign all or some of your
rights under the Policy. All assignments must be filed at our Service Center and
must be in written form satisfactory to us. The assignment will then be
effective as of the date you signed the form, subject to any action taken before
it was received by us at our Service Center. We are not responsible for the
validity or legal effect of any assignment.
CHANGE IN THE OPERATION OF THE VARIABLE ACCOUNT
At our election, and subject to any necessary vote by those having voting
rights, the Variable Account may be operated as a unit investment trust or a
management company under the Investment Company Act of 1940. It is currently
registered as an investment company under the Investment Company Act of 1940 and
may be deregistered in the event registration is no longer required. In the
event of any change in the operation of the Variable Account pursuant to this
provision, we may make appropriate amendment to the Policy to reflect the change
and take such other action as may be necessary and appropriate to effect the
change.
CONVERSION
You may convert the Policy into a flexible premium universal life policy
offered by Sun Life Assurance Company of Canada during the first 24 months after
the Issue Date while the Policy is in force. Choice of a new policy is subject
to our approval and will be restricted to those policies that offer the same
Class and rating as your Policy. The new policy will be issued with the same
Class and rating as the Policy without evidence of the insured's insurability.
The conversion provision does not apply to the APB Rider, if any, or to any
supplemental benefits that may be attached to the Policy. Riders or supplemental
benefits will terminate automatically when the Policy is converted.
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DEFERRAL OF PAYMENT
We will usually pay any amount due from the Variable Account within seven
days after the Valuation Date following our receipt of written notice or, in the
case of death of the Insured, Due Proof of such death. Payment of any amount
payable from the Variable Account on death, surrender, partial surrender, or
Policy loan may be postponed whenever:
- the New York Stock Exchange ("NYSE") is closed, other than customary
weekend and holiday closing, or trading on the NYSE is otherwise
restricted,
- the Securities and Exchange Commission, by order, permits postponement for
the protection of Policy Owners, or
- an emergency exists as determined by the Securities and Exchange
Commission, as a result of which disposal of securities is not reasonably
practicable, or it is not reasonably practicable to determine the value of
the assets of the Variable Account.
ENTIRE CONTRACT
The entire contract with us consists of the Policy, including the
Application and any attached copies of supplemental applications for increases
in the face amount. Any illustrations prepared in connection with the Policy do
NOT form a part of our contract with you and are intended solely to provide
information about possible future performance, based solely on data available at
the time such illustrations are prepared.
ILLUSTRATIONS
Upon request, we will provide you with an illustration of future Account
Value and Death Benefits. This illustration will be furnished to you for a
nominal fee not to exceed $25.
INCONTESTABILITY
All statements made in the Application or in a supplemental application are
representations and not warranties. We will rely on these statements when
approving the issuance, increase in face amount, increase in Base Death Benefit
over Premium paid, or change in death benefit option of the Policy. No statement
can be used by us in defense of a claim unless the statement was made in the
application or in a supplemental application. In the absence of fraud, after the
Policy has been in force during the lifetime of the Insured for a period of two
years from its Issue Date, we cannot contest it except for non-payment of
Premiums in accordance with the Insufficient Value provision. However, any
increase in the Total Face Amount which is effective after the Issue Date will
be incontestable only after such increase has been in force during the lifetime
of the Insured for two years from the effective date of coverage of such
increase. Any increase in Base Death Benefit over Premium paid or increase in
Base Death Benefit due to a death benefit option change will be incontestable
only after such increase has been in force during the lifetime of the Insured
for two years from the date of the increase.
MATURITY
If the Insured is living and the Policy is in force on the date of Maturity,
the Cash Surrender Value is payable to you. It is possible that insurance
coverage may not continue to Maturity, even if planned periodic Premiums are
paid in a timely manner.
MISSTATEMENT OF AGE OR SEX (NON-UNISEX POLICY)
If the age or (in the case of a Non-Unisex Policy) sex of the Insured is
stated incorrectly in the Application, the amounts payable by us will be
adjusted as follows:
- Misstatement discovered at death: The Death Benefit will be recalculated
to that which would be purchased by the most recently charged Monthly Cost
of Insurance rate for the correct age or (for a Non-Unisex Policy) sex.
- Misstatement discovered prior to death: The Account Value will be
recalculated from the Issue Date using the Monthly Cost of Insurance rates
based on the correct age or (for a Non-Unisex Policy) sex.
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MODIFICATION
Upon notice to you, we may modify the Policy if such modification:
- is necessary to make the Policy or the Variable Account comply with any
law or regulation issued by a governmental agency to which the Company or
the Variable Account is subject, or
- is necessary to assure continued qualification of the Policy under the
Internal Revenue Code or other federal or state laws as a life insurance
policy, or
- is necessary to reflect a change in the operation of the Variable Account
or the Sub-Accounts, or
- adds, deletes or otherwise changes Sub-Account options.
We also reserve the right to modify certain provisions of the Policy as stated
in those provisions. In the event of any such modification, we may make
appropriate amendment to the Policy to reflect such modification.
NONPARTICIPATING
The Policy does not pay dividends.
PROCEDURE
You do not need the consent of a Beneficiary or a contingent Owner in order
to exercise any of your rights. However, you must give us written notice of the
requested action. The request must be filed at our Service Center and must be in
written form satisfactory to us. Your request will then, except as otherwise
specified in the Policy, be effective as of the date you signed the form,
subject to any action taken before it was received by us at our Service Center.
REPORT TO OWNER
We will send you a report at least once each Policy Year. The report will
show current Policy values, Premiums paid, and deductions made since the last
report. It will also show the balance of any outstanding Policy loans and
accrued interest on such loans. There is no charge for this report.
RIGHTS OF BENEFICIARY
The Beneficiary has no rights in the Policy until the death of the Insured.
If a Beneficiary is alive at that time, the Beneficiary will be entitled to
payment of the Policy Proceeds as they become due.
RIGHTS OF OWNER
While the Insured is alive, unless you have assigned any of these rights,
you may:
- transfer ownership to a new Owner;
- name a contingent Owner who will automatically become the Owner of the
Policy if you die before the Insured;
- change or revoke a contingent Owner;
- change or revoke a Beneficiary;
- exercise all other rights in the Policy;
- increase or decrease the Specified Face Amount or APB Rider Face Amount,
subject to the provisions of the Policy;
- change the death benefit option, subject to the provisions of the Policy.
When you transfer your rights to a new Owner, you automatically revoke any prior
contingent Owner designation. When you want to change or revoke a prior
Beneficiary designation, you have to specify that action. You do not affect a
prior Beneficiary when you merely transfer ownership, or change or revoke a
contingent Owner designation.
SPLITTING UNITS
We reserve the right to split or combine the value of Units. In effecting
any such change, strict equity will be preserved and no change will have a
material effect on the benefits or other provisions of the Policy.
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SUICIDE
In most states, if the Insured, whether sane or insane, commits suicide
within two years after the Issue Date, we will not pay any part of the Policy
Proceeds. We will refund to you the Premiums paid, less the amount of any Policy
Debt and any Partial Surrenders.
TERMINATION
The Policy terminates on the earlier of the date we receive your request to
surrender, the expiration date of the grace period (see "Account Value -- Grace
Period"), the date of death of the Insured, or the date of Maturity.
VOTING RIGHTS
To the extent required by law, we will vote shares of the Funds held by each
Sub-Account in accordance with instructions received from Policy Owners with
Account Value allocated to the relevant Sub-Account. Each person having a voting
interest will be provided with proxy materials of the relevant Fund together
with an appropriate form with which to give us voting instructions. Shares held
in each Sub-Account for which no timely instructions are received will be voted
in proportion to the instructions received from all persons with an interest in
such Sub-Account who furnish us with voting instructions. We will also vote
shares held in the Separate Account that we own and which are not attributable
to Policies in the same proportion.
We will determine the number of votes as to which you have the right to give
voting instructions as of the record date established for the relevant Fund.
This number is determined by dividing your Account Value in the Sub-Account, if
any, by the net asset value of one share in the corresponding Fund in which the
assets of the Sub-Account are invested.
We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that the shares be voted so as
(1) to cause a change in the subclassification or investment objective of one or
more of the Funds; or (2) to approve or disapprove an investment advisory
contract for a Fund. In addition, we may disregard voting instructions in favor
of any change in the investment policies or in any investment advisor or
principal underwriter initiated by Policy Owners or the Board of
Trustees/Directors any of the Funds. Our disapproval of any such change must be
reasonable and, in the case of a change in investment policies or investment
adviser, based on a good faith determination that such change would be contrary
to state law or otherwise is inappropriate in light of the objectives and
purposes of the Fund. In the event we disregard voting instructions, a summary
of and the reasons for that action will be included in the next periodic report
to Policy Owners.
If the Investment Company Act of 1940 or any rules thereunder should be
amended or if the present interpretation of the Investment Company Act of 1940
or such rules should change, and as a result the Company determines that it is
permitted to vote shares in its own right, whether or not such shares are
attributable to the Policies, we reserve the right to do so.
DISTRIBUTION OF THE POLICIES
The Policy will be sold by licensed insurance agents in those states where
the Policy may be lawfully sold. Such agents will be registered representatives
of broker-dealers registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers, Inc. ("NASD") and who
have entered into distribution agreements with the Company and the General
Distributor, Sun Investment Services Company ("Sun Investment"). Sun Investment
is a corporation organized under the laws of Delaware on August 6, 1970, and is
a wholly-owned subsidiary of the Company. Sun Investment is a broker-dealer
registered under the Securities Exchange Act of 1934 and is a member of the
NASD. As such, it serves as the principal underwriter for the Policies. Sun
Investment is located at One Sun Life Executive Park, Wellesley Hills,
Massachusetts 02181.
The maximum commission payable by us will be 15% of Premium in the first
Policy Year and 9% of Premium in Policy Years two through seven. A maximum
commission rate of 0.10% of Account Value in the Sub-Accounts for Policy Years
one through seven and 0.20% of Account Value in the Sub-Accounts thereafter may
also be paid.
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We may also pay expense allowances, bonuses, and training allowances.
Registered representatives who meet specified production levels may qualify,
under our sales incentive programs, to receive non-cash compensation such as
expense-paid trips, expense-paid educational seminars and merchandise.
OTHER CONTRACTUAL ARRANGEMENTS
ADMINISTRATION
We have entered into a contract with Andesa TPA, Inc. (1605 N. Cedar Crest
Blvd., Suite 502, Allentown, Pennsylvania, 18104-2351) under which Andesa TPA,
Inc. has agreed to perform certain administrative functions relating to the
Policies and the Variable Account. These functions include, among other things,
maintaining records of the name, address, taxpayer identification number, Policy
number and Account Value of each Policy and other pertinent information
necessary for the administration of the Policies. Andesa TPA, Inc. is not an
affiliate of the Company.
CUSTODIAN
We are the custodian of the assets of the Variable Account. We will purchase
shares in connection with amounts allocated to the Sub-Accounts in accordance
with the instructions of the Owner, redeem shares for the purposes of meeting
the contractual obligations of the Variable Account and pay charges relative to
the Variable Account. The shares of the Funds purchased by the Variable Account,
to the extent represented by separate certificates, will be kept physically
segregated and held separate from the assets of our General Account or any other
separate account.
REINSURANCE
We intend to reinsure a portion of the risks assumed under the Policies. You
will not have any rights against the reinsurer(s); we remain fully liable for
the benefits under the Policy.
FEDERAL TAX STATUS
The discussion contained herein is general in nature, is based upon the
Company's understanding of current federal income tax laws and is not intended
as tax advice. Congress has the power to enact legislation affecting the tax
treatment of life insurance contracts, and such legislation -- as well as any
new judicial or administrative interpretation of federal income tax law-could be
applied retroactively. Also, because the Internal Revenue Code of 1986, as
amended (the "Code"), is not in force in the Commonwealth of Puerto Rico, some
references in this discussion will not apply to Policies issued in Puerto Rico.
Any person contemplating the purchase of a Policy or any transaction involving a
Policy should consult a qualified tax adviser. THE COMPANY DOES NOT MAKE ANY
REPRESENTATION OR PROVIDE ANY GUARANTEE REGARDING THE TAX STATUS, FEDERAL, STATE
OR LOCAL, OF ANY POLICY OR ANY TRANSACTION INVOLVING THE POLICIES.
TAX TREATMENT OF THE COMPANY AND THE VARIABLE ACCOUNT
The Company is taxed as a life insurance company under Subchapter L of the
Code. Although the operations of the Variable Account are accounted for
separately from other operations of the Company for purposes of federal income
taxation, the Variable Account currently is not separately taxable as a
regulated investment company or other taxable entity.
Taxes paid or reserved for by the Company that are attributable to the
earnings of the Variable Account could affect the Net Investment Factor, which
affects your Account Value (see "ACCOUNT VALUE -- Net Investment Factor). Under
existing federal income tax law, however, the income (consisting primarily of
interest, dividends and net capital gains) of the Variable Account, to the
extent that it is applied to increase reserves under the Policy, is not taxable
to the Company. Similarly, no significant state or local income taxes are
attributable to the earnings of the Variable Account. Therefore, the Company
currently does not take any federal, state or local taxes into account when
determining the Net Investment Factor. The Company may take taxes into account
when determining the Net Investment Factor in future years if, due to a change
in law, a change in the Company's tax status or otherwise, such taxes are
attributable to the earnings of the Variable Account.
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TAXATION OF POLICY PROCEEDS
Section 7702 of the Code provides that, if certain tests are met, a life
insurance policy will be treated as a life insurance contract for tax purposes.
Provided that the Owner has an insurable interest in the Insured, the Company
believes that the Policy meets these tests, and hence should receive the same
federal income tax treatment as a fixed life insurance contract. As such: (1)
the Death Benefit will be eligible for exclusion from the gross income of the
Beneficiary under Section 101 of the Code; and (2) the Owner will not be deemed
to be in constructive receipt of the increases in Cash Surrender Values,
including additions attributable to interest, dividends, appreciation or gains
realized upon transfers among the Sub-Accounts, under the Policy until actual
receipt thereof. CORPORATE OWNERS, HOWEVER, MIGHT BE SUBJECT TO ALTERNATIVE
MINIMUM TAX ON THE ANNUAL INCREASES IN CASH SURRENDER VALUES AND ON THE DEATH
BENEFIT.
To qualify as a life insurance contract under Section 7702 of the Code, the
Policy must satisfy certain actuarial requirements. Section 7702 specifies that
the required actuarial calculations be based on mortality charges that meet the
reasonable mortality charge requirements set forth in the Code, and other
charges reasonably expected to be actually paid. The law relating to
reasonableness standards for mortality and other charges is based on statutory
language and certain IRS pronouncements that do not address all relevant issues.
Accordingly, although the Company believes that the mortality and other charges
that are used in the calculations (including those used with respect to Policies
issued to so-called "sub-standard risks") meet the applicable requirements, it
cannot offer complete assurance. It is possible that future regulations will
contain standards that would require the Company to modify the mortality and
other charges used in the calculations, and the Company reserves the right to
make any such modifications.
For a variable contract like the Policy to qualify as life insurance for
federal income tax purposes, it also must comply with the diversification rules
found in Code Section 817 and the regulations promulgated thereunder. The
Company believes that the Variable Account complies with the diversification
requirements prescribed by Treas. Reg. Section 1.817-5. When these regulations
were proposed, the preamble to the regulations stated that the Internal Revenue
Service may promulgate guidelines under which a variable contract will not be
treated as a life insurance contract for tax purposes if the owner has excessive
control over the investments underlying the contract. Although the Company
believes that the Owner does not have excessive control over the assets
underlying the Policy, it cannot offer complete assurance prior to the issuance
of such guidelines, which may have retroactive effect. If guidelines are
promulgated, the Company will take any action (including modification of the
Policy or the Variable Account) necessary to comply with the guidelines.
Upon the complete surrender or lapse of a Policy, the amount by which the
sum of the Policy's Cash Surrender Value and any unpaid Policy Debt exceeds the
Owner's Investment in the Policy (as defined below) is treated as ordinary
income subject to tax. Any loss incurred upon surrender generally is not
deductible.
For purposes of the preceding paragraph and the following paragraphs, the
term Investment in the Policy means (i) the aggregate amount of any Premiums or
other consideration paid for a Policy, minus (ii) the aggregate amount received
under a Policy which is excluded from gross income of the Owner (other than loan
amounts), plus (iii) the amount of any loan from, or secured by,a Policy that is
a Modified Endowment Contract (defined below) to the extent that such amount is
included in the gross income of the Owner. The repayment of a Policy loan (or
the payment of interest on a loan) does not affect Investment in the Policy.
The tax consequences of distributions from, and loans taken from or secured
by, a Policy depend on whether the Policy is classified as a Modified Endowment
Contract under Section 7702A of the Code. Due to the flexibility of the payment
of premiums and other rights you have under the Policy, classification of the
Policy as a Modified Endowment Contract will depend upon the individual
operation of each Policy. A Policy is a Modified Endowment Contract if the
aggregate amount paid under the Policy at any time during the first seven Policy
Years exceeds the sum of the net level premiums that would have been paid on or
before such time if the Policy provided for paid up future benefits after the
payment of seven level annual premiums. If there is a reduction in benefits
during the first seven Policy Years, the foregoing computation is made as if the
Policy originally had been issued at the reduced benefit level. If there is a
"material change" to the Policy,
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the seven year testing period for Modified Endowment Contract status is
restarted. A life insurance contract received in exchange for a Modified
Endowment Contract also will be treated as a Modified Endowment Contract.
The Company has undertaken measures to prevent payment of a Premium from
inadvertently causing the Policy to become a Modified Endowment Contract (see
"PREMIUM PAYMENTS -- Modified Endowment Contracts"). In general, an Owner should
consult a qualified tax adviser before undertaking any transaction involving the
Policy to determine whether such transaction would cause the Policy to become a
Modified Endowment Contract.
Provided that a Policy is not a Modified Endowment Contract, cash
distributions from the Policy are treated first as a nontaxable return of the
Owner's Investment in the Policy and then as a distribution of the Policy's
inside buildup, which is subject to tax. (An exception to this general rule
occurs in the case that a cash distribution is made in connection with certain
reductions in the Death Benefit under the Policy in the first fifteen contract
years. Such a cash distribution is taxed in whole or in part as ordinary
income.) Loans from, or secured by, a Policy that is not a Modified Endowment
Contract generally are treated as bona fide indebtedness, and hence are not
included in the gross income of the Owner.
If a Policy is a Modified Endowment Contract, distributions from the Policy
are treated as ordinary income subject to tax up to the amount equal to the
excess of the Account Value (which includes unpaid policy loans) immediately
before the distribution over the Investment in the Policy. Loans taken from, or
secured by, such a Policy, as well as due but unpaid interest thereon, are taxed
in the same manner as distributions from the Policy. A 10 percent additional tax
is imposed on the portion of any distribution from, or loan taken from or
secured by, a Modified Endowment Contract that is included in income except
where the distribution or loan is made on or after the Owner attains age 59 1/2,
is attributable to the Owner's becoming disabled, or is part of a series of
substantially equal periodic payments for the life (or life expectancy) of the
Owner or the joint lives (or joint life expectancies) of the Owner and the
Owner's Beneficiary. These exceptions likely do not apply where the Policy is
not owned by an individual (or held in trust for an individual). For purposes of
the computations described in this paragraph, all Modified Endowment Contracts
issued by the Company (or its affiliates) to the same Owner during any calendar
year are treated as one Modified Endowment Contract.
Because there are limits on the deductibility of policy loan interest, an
Owner should consult a qualified tax adviser regarding the deducting of any
Policy loan interest.
An Owner generally will not recognize gain upon the exchange of the Policy
for another life insurance policy issued by the Company or another insurance
company, except to the extent that the Owner receives cash in the exchange or is
relieved of Policy indebtedness as a result of the exchange. In no event will
the gain recognized exceed the amount by which the Policy's Account Value (which
includes unpaid Policy loans) exceeds the Owner's Investment in the Policy.
A transfer of the Policy, a change in the Owner, a change in the
Beneficiary, certain other changes to the Policy and particular uses of the
Policy (including use in a so called "split-dollar" arrangement) may have tax
consequences depending upon the particular circumstances and should not be
undertaken prior to consulting with a qualified tax adviser. For instance, if
the Owner transfers the Policy or designates a new Owner in return for valuable
consideration (or, in some cases, if the transferor is relieved of a liability
as a result of the transfer), then the Death Benefit payable upon the death of
the Insured may in certain circumstances be includible in taxable income to the
extent that the Death Benefit exceeds the prior consideration paid for the
transfer and any Premiums and other amounts subsequently paid by the transferee.
Further, in such a case, if the consideration received exceeds the transferor's
Investment in the Policy, the difference will be taxed to the transferor as
ordinary income.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the individual
circumstances of each Owner or Beneficiary.
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THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS
The directors and principal officers of the Company are listed below,
together with information as to their ages, dates of election and principal
business occupations during the last five years (if other than their present
business occupations). Except as otherwise indicated, the directors and officers
of the Company who are associated with Sun Life Assurance Company of Canada
and/or its subsidiaries have been associated with Sun Life Assurance Company of
Canada for more than five years either in the position shown or in other
positions.
JOHN D. MCNEIL, 63, Chairman and Director (1982*)
150 King Street West
Toronto, Ontario, Canada M5H 1J9
He is Chairman and a Director of Sun Life Assurance Company of Canada and
Sun Life Insurance and Annuity Company of New York; a Director of Massachusetts
Financial Services Company; Chairman and a Trustee of MFS/Sun Life Series Trust;
Chairman and a Member of the Boards of Managers of Money Market Variable
Account, High Yield Variable Account, Capital Appreciation Variable Account,
Government Securities Variable Account, World Governments Variable Account,
Total Return Variable Account and Managed Sectors Variable Account; and a
Director of Shell (Canada) Limited and Canadian Pacific, Ltd.
DONALD A. STEWART, 50, President and Director (1996*)
150 King Street West
Toronto, Ontario, Canada M5H 1J9
He is President and a Director of Sun Life Assurance Company of Canada, and
Sun Life Insurance and Annuity Company of New York; and a Director of
Massachusetts Casualty Insurance Company, Massachusetts Financial Services
Company and Sun Life Financial Services Limited.
DAVID D. HORN, 55, Senior Vice President and General Manager and Director (1970,
1985*)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Senior Vice President and General Manager for the United States of Sun
Life Assurance Company of Canada; Chairman and President and a Director of Sun
Investment Services Company; Senior Vice President and a Director of Sun Life
Insurance and Annuity Company of New York; President and a Director of Sun
Benefit Services Company, Inc., Sun Canada Financial Co., and Sun Life Financial
Services Limited; a Director of Sun Capital Advisers, Inc. and Massachusetts
Casualty Insurance Company; a Trustee of MFS/ Sun Life Series Trust; and a
Member of the Boards of Managers of Money Market Variable Account, High Yield
Variable Account, Capital Appreciation Variable Account, Government Securities
Variable Account, World Governments Variable Account, Total Return Variable
Account and Managed Sectors Variable Account.
ANGUS A. MACNAUGHTON, 65, Director (1985*)
Metro Tower, Suite 1170,
950 Tower Lane
Foster City, California 94404
He is President of Genstar Investment Corporation and a Director of Sun Life
Assurance Company of Canada, Sun Life Insurance and Annuity Company of New York,
Canadian Pacific, Ltd., Stelco, Inc. and Varian Associates, Inc.
JOHN S. LANE, 62, Director (1991*)
150 King Street West
Toronto, Ontario, Canada M5H 1J9
- ---------
* Year elected director.
33
<PAGE>
He is Senior Vice President, Investments of Sun Life Assurance Company of
Canada; and a Director of Sun Investment Services Company, Sun Capital Advisers,
Inc. and Sun Life Insurance and Annuity Company of New York.
RICHARD B. BAILEY, 70, Director (1983*)
500 Boylston Street
Boston, Massachusetts 02116
He is a Director of Sun Life Insurance and Annuity Company of New York and a
Director/Trustee of certain Funds in the MFS Family of Funds. Prior to October
1, 1991, he was Chairman and a Director of Massachusetts Financial Services
Company.
A. KEITH BRODKIN, 61, Director (1990*)
500 Boylston Street
Boston, Massachusetts 02116
He is Chairman and a Director of Massachusetts Financial Services Company; a
Director of Sun Life Insurance and Annuity Company of New York; and a
Director/Trustee and/or Officer of the Funds in the MFS Family of Funds.
M. COLYER CRUM, 64, Director (1986*)
104 W. Cliff Street
Weston, MA 02193
He is Professor Emeritus of the Harvard Business School; and a Director of
Sun Life Assurance Company of Canada, Sun Life Insurance and Annuity Company of
New York, Merrill Lynch Ready Assets Trust, Merrill Lynch Basic Value Fund,
Inc., Merrill Lynch Special Value Fund, Inc., Merrill Lynch Capital Fund, Inc.,
Merrill Lynch U.S.A. Government Reserves, Merrill Lynch Natural Resources Trust,
Merrill Lynch U.S. Treasury Money Fund, MuniVest California Insured Fund, Inc.,
MuniVest Florida Fund, Inc., MuniVest Michigan Insured Fund, Inc., MuniVest New
Jersey Fund,Inc., MuniVest New York Insured Fund, Inc., MuniYield Florida
Insured Fund, MuniYield Insured Fund II, Inc., MuniYield Michigan Insured Fund,
Inc., MuniYield New Jersey Insured Fund, Inc., MuniYield New York Insured Fund
III, Inc. and MuniYield Pennsylvania Fund. Prior to July, 1996, he was a
Professor at the Harvard Business School.
S. CAESAR RABOY, 60, Senior Vice President and Deputy General Manager (1996*)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Senior Vice President and Deputy General Manager for the United States
of Sun Life Assurance Company of Canada; Senior Vice President of Sun Life
Insurance and Annuity Company of New York; and Vice President and a Director of
Sun Life Financial Services Limited.
ROBERT A. BONNER, 52, Vice President, Pensions (1986)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Vice President, Individual Insurance for the United States of Sun Life
Assurance Company of Canada.
C. JAMES PRIEUR, 46, Vice President, Investments (1993)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Vice President, Investments for the United States of Sun Life
Assurance Company of Canada; Vice President, Investments of Sun Investment
Services Company, Massachusetts Casualty Insurance Company and Sun Life
Insurance and Annuity Company of New York; and a Director of Sun Capital
Advisers, Inc., New London Trust, F.S.B. and Sun Canada Financial Co.
- ---------
* Year elected director.
34
<PAGE>
ROBERT P. VROLYK, 44, Vice President and Actuary (1986)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Vice President, Finance for the United States of Sun Life Assurance
Company of Canada; Vice President, Controller and Actuary of Sun Life Insurance
and Annuity Company of New York; a Director of Massachusetts Casualty Insurance
Company; and Vice President and a Director of Sun Canada Financial Co.
MARGARET SEARS MEAD, 47, Assistant Vice President and Secretary (1996)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
She is Assistant Vice President and Counsel for the Unites States of Sun
Life Assurance Company of Canada and Assistant Vice President and Secretary of
Sun Life Insurance and Annuity Company of New York.
L. BROCK THOMSON, 55, Vice President and Treasurer (1974)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Vice President, Portfolio Management for the United States of Sun Life
Assurance Company of Canada; Vice President and Treasurer of Sun Investment
Services Company, Sun Capital Advisers, Inc., Sun Benefit Services Company, Inc.
and Sun Life Insurance and Annuity Company of New York; and Assistant Treasurer
of Massachusetts Casualty Insurance Company.
The directors, officers and employees of the Company are covered under a
commercial blanket bond and a liability policy. The directors, officers and
employees of Massachusetts Financial Services Company and Sun Investment
Services Company are covered under a fidelity bond and errors and omissions
policy.
No shares of the Company are owned by any executive officer or director. The
Company is a wholly-owned subsidiary of Sun Life Assurance Company of Canada,
150 King Street West, Toronto, Ontario, Canada M5H 1J9.
STATE REGULATION
The Company is subject to the laws of the State of Delaware governing life
insurance companies and to regulation by the Commissioner of Insurance of
Delaware. An annual statement is filed with the Commissioner of Insurance on or
before March 1st in each year relating to the operations of the Company for the
preceding year and its financial condition on December 31st of such year. Its
books and records are subject to review or examination by the Commissioner or
his agents at any time and a full examination of its operations is conducted at
periodic intervals.
The Company is also subject to the insurance laws and regulations of the
other states and jurisdictions in which it is licensed to operate. The laws of
the various jurisdictions establish supervisory agencies with broad
administrative powers with respect to licensing to transact business, overseeing
trade practices, licensing agents, approving policy forms, establishing reserve
requirements, fixing maximum interest rates on life insurance policy loans and
minimum rates for accumulation of surrender values, prescribing the form and
content of required financial statements and regulating the type and amounts of
investments permitted. Each insurance company is required to file detailed
annual reports with supervisory agencies in each of the jurisdictions in which
it does business and its operations and accounts are subject to examination by
such agencies at regular intervals.
In addition, many states regulate affiliated groups of insurers, such as the
Company, its parent and its affiliates, under insurance holding company
legislation. Under such laws, inter-company transfers of assets and dividend
payments from insurance subsidiaries may be subject to prior notice or approval,
depending on the size of such transfers and payments in relation to the
financial positions of the companies involved.
35
<PAGE>
Under insurance guaranty fund laws in most states, insurers doing business
therein can be assessed (up to prescribed limits) for policyholder losses
incurred by insolvent companies. The amount of any future assessments of the
Company under these laws cannot be reasonably estimated. However, most of these
laws do provide that an assessment may be excused or deferred if it would
threaten an insurer's own financial strength and many permit the deduction of
all or a portion of any such assessment from any future premium or similar taxes
payable.
Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the business
in a variety of ways. Current and proposed federal measures which may
significantly affect the insurance business include employee benefit regulation,
removal of barriers preventing banks from engaging in the insurance business,
tax law changes affecting the taxation of insurance companies, the tax treatment
of insurance products and its impact on the relative desirability of various
personal investment vehicles, and proposed legislation to prohibit the use of
gender in determining insurance and pension rates and benefits.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Variable Account. The
Company and its subsidiaries are engaged in various kinds of routine litigation
which, in management's judgment, is not of material importance to their
respective total assets or material with respect to the Variable Account.
LEGAL MATTERS
The organization of the Company, its authority to issue the Policies and the
validity of the form of the Policies have been passed upon by Margaret Sears
Mead, Assistant Vice President and Secretary of the Company.
EXPERTS
Actuarial matters concerning the policy have been examined by John E.
Coleman, FSA, MAAA, Product Officer for Corporate Markets of Sun Life Assurance
Company of Canada, as stated in his opinion filed as an exhibit to the
registration statement.
ACCOUNTANTS
The financial statements of the Variable Account as of December 31, 1996 and
for the period December 23, 1996 (Date of Deposit) through December 31, 1996 and
the financial statements of the Company as of December 31, 1996 and 1995, and
for the years ended December 31, 1996, 1995 and 1994 included in this Prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports appearing herein, and are included in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
REGISTRATION STATEMENTS
A registration statement has been filed with the Securities and Exchange
Commission, Washington, D.C., under the Securities Act of 1933 as amended, with
respect to the Policies offered by this Prospectus. This Prospectus does not
contain all the information set forth in the registration statement and the
exhibits filed as part of the registration statement, to all of which reference
is hereby made for further information concerning the Variable Account, the
Company, MFS/Sun Life Series Trust, Fidelity Variable Insurance Products Fund,
Fidelity Variable Insurance Products Fund II, Neuberger & Berman Advisers
Management Trust, JPM Series Trust II, Templeton Variable Products Series Fund,
and the Policy. Statements found in this Prospectus as to the terms of the
Policies and other legal instruments are summaries, and reference is made to
such instruments as filed.
36
<PAGE>
FINANCIAL STATEMENTS
The financial statements of the Company which are included in this
Prospectus, should be considered only as bearing on the ability of the Company
to meet its obligations with respect to the death benefit and the Company's
assumption of the mortality and expense risks. They should not be considered as
bearing on the investment performance of the shares of the MFS Series Fund, VIP,
VIP II, AMT, JPM, and TVPSF held in the Sub-Accounts of the Variable Account.
The Variable Account value of the interests of Owners and Beneficiaries under
the Policies is affected primarily by the investment results of those funds.
37
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
STATEMENT OF ASSETS AND LIABILITIES--DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C> <C>
Investments in Fidelity Variable Insurance Products Fund: Shares Cost Value
--------- --------- ---------
Fidelity VIP Money Market Portfolio....................... 100,116 $ 100,116 $ 100,116
--------- --------- ---------
--------- ---------
Net Assets............................................ $ 100,116
---------
---------
NET ASSETS:
<CAPTION>
Value
---------
<S> <C> <C> <C>
Net Assets Applicable to Sponsor........................... $ 100,116
---------
Net Assets............................................ $ 100,116
---------
---------
Value per Unit (10,000 units)............................. $ 10.0116
---------
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
38
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
STATEMENT OF OPERATIONS-- For the period from date of deposit, December 23,
1996, through December 31, 1996
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Distributions received on shares of Fidelity VIP Money Market Portfolio.......... $ 116
---------
Net Investment Income............................................................ 116
---------
Net Increase in Net Assets from Operations....................................... $ 116
---------
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
39
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
STATEMENTS OF CHANGES IN NET ASSETS-- For the period from date of deposit,
December 23, 1996, through December 31,
1996
<TABLE>
<CAPTION>
INCREASE IN NET ASSETS FROM OPERATIONS:
<S> <C>
Net investment income.......................................................... $ 116
---------
Net increase in net assets from operations................................... 116
---------
Net Increase in Net Assets....................................................... 116
---------
NET ASSETS:
Beginning of Period............................................................ 100,000
---------
End of Period.................................................................. $ 100,116
---------
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
40
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
NOTES TO STATEMENT OF CONDITION
1. ORGANIZATION
Sun Life of Canada (U.S.) Variable Account G (the "Variable Account"), a
separate account of Sun Life Assurance Company of Canada (U.S.), the Sponsor,
was established on July 25, 1996 as a funding vehicle for the variable portion
of certain individual 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.
Net assets applicable to the Sponsor represent seed money provided by the
Sponsor in exchange for units in the Variable Account.
The assets of the Variable Account are divided into Sub-Accounts. Each
Sub-Account is invested in shares of certain Portfolios of one of the following
mutual funds as specified by the prospectus: MFS/Sun Life Series Trust, Fidelity
Variable Insurance Products Fund, Fidelity Variable Insurance Products Fund II,
Neuberger & Berman Advisers Management Trust, JPM Series Trust II and Templeton
Variable Products Series Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS--
Investments in shares of an investment portfolio of one of the mutual funds are
recorded at their net asset value which equals fair value. Investment
transactions are recorded on the trade date. Dividend distributions are recorded
on the ex-dividend date.
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.
INDEPENDENT AUDITORS' REPORT
TO THE CONTRACT OWNERS PARTICIPATING IN SUN LIFE OF CANADA (U.S.) VARIABLE
ACCOUNT G
AND THE BOARD OF DIRECTORS OF SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.):
We have audited the accompanying Statement of Assets and Liabilities of Sun Life
of Canada (U.S.) Variable Account G (the "Variable Account") as of December 31,
1996 and the related Statements of Operations and Changes in Net Assets for the
period December 23, 1996 (Date of Deposit) through December 31, 1996. These
financial statements are the responsibility of management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit 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 with the custodian of securities held for the Variable Account as
of December 31, 1996. 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 Sun Life of Canada (U.S.) Variable
Account G as of December 31, 1996 and the results of its operations and changes
in net assets for the period then ended in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 22, 1997
41
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
STATUTORY STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND
CAPITAL STOCK AND SURPLUS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1996 1995
-------------- --------------
(IN 000'S)
<S> <C> <C>
ADMITTED ASSETS
Bonds $ 2,258,858 $ 2,706,067
Preferred stock 0 1,149
Mortgage loans 938,932 1,066,911
Investments in subsidiaries 144,043 138,282
Real estate 100,385 95,574
Other invested assets 51,378 38,387
Policy loans 40,554 38,355
Cash 1,305 (20,280)
Investment income due and accrued 68,190 62,719
Funds withheld on reinsurance assumed 878,798 741,091
Due from separate accounts 220,999 148,675
Other assets 27,509 26,349
-------------- --------------
General account assets 4,730,951 5,043,279
Unitized separate account assets 6,919,219 5,275,808
Non-unitized separate account assets 2,108,835 2,040,596
-------------- --------------
Total Assets $ 13,759,005 $ 12,359,683
-------------- --------------
-------------- --------------
LIABILITIES
Policy reserves $ 2,099,980 $ 1,937,302
Annuity and other deposits 1,898,309 2,290,656
Policy benefits in process of payment 2,677 5,884
Accrued expenses and taxes 57,719 44,114
Other liabilities 63,987 36,080
Due to (from) parent and affiliates--net (41,326) (130,502)
Interest maintenance reserve 28,676 25,218
Asset valuation reserve 53,911 42,099
-------------- --------------
General account liabilities 4,163,933 4,250,851
Unitized separate account liabilities 6,919,094 5,275,784
Non-unitized separate account liabilities 2,108,835 2,040,596
-------------- --------------
13,191,862 11,567,231
-------------- --------------
CAPITAL STOCK AND SURPLUS
Capital Stock Par value $1,000:
Authorized, 10,000 shares;
issued and outstanding, 5,900 shares 5,900 5,900
Surplus 561,243 786,552
-------------- --------------
Total capital stock and surplus 567,143 792,452
-------------- --------------
Total Liabilities, Capital Stock and Surplus $ 13,759,005 $ 12,359,683
-------------- --------------
-------------- --------------
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
42
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
STATUTORY STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
(IN 000'S)
Premiums and annuity considerations $ 282,466 $ 279,407 $ 316,008
Deposit-type funds 1,775,230 1,545,542 1,647,623
Considerations for supplementary
contracts without life contingencies
and dividend accumulations 2,340 1,088 2,906
Net investment income 303,753 312,872 315,433
Amortization of interest maintenance
reserve 1,557 1,025 4,128
Miscellaneous income 71,903 57,864 30,988
---------- ---------- ----------
Total 2,437,249 2,197,798 2,317,086
---------- ---------- ----------
Death benefits 12,394 15,317 4,836
Annuity benefits 146,654 140,497 135,256
Surrender benefits and other fund
withdrawals 1,507,263 1,074,396 965,186
Interest on policy or contract funds 2,205 739 572
Payments on supplementary contracts
without life contingencies and of
dividend accumulations 2,120 1,888 2,334
Increase in aggregate reserves for life
and accident and health policies and
contracts 162,678 171,975 219,334
Increase in liability for premium and
other deposit funds (392,348) 13,553 (69,541)
Increase in reserve for supplementary
contracts without life contingencies
and for dividend and coupon
accumulations 327 (663) 714
---------- ---------- ----------
Total 1,441,293 1,417,702 1,258,691
Commissions on premiums and annuity
considerations (direct business only) 109,894 88,037 93,576
Commissions and expense allowances on
reinsurance assumed 18,910 22,012 59,085
General insurance expenses 37,206 34,580 31,243
Insurance taxes, licenses and fees,
excluding federal income taxes 8,431 7,685 5,638
Increase in loading on and cost of
collection in excess of loading on
deferred and uncollected premiums 901 (1,377) (2,650)
Net transfers to Separate Account 678,663 551,784 820,671
---------- ---------- ----------
Total 2,295,298 2,120,423 2,266,254
---------- ---------- ----------
Net gain from operations before
dividends to policyholders and federal
income tax 141,951 77,375 50,832
Dividends to policyholders 29,189 25,722 22,928
---------- ---------- ----------
Net gain from operations after dividends
to policyholders and before federal
income tax 112,762 51,653 27,904
Federal income taxes incurred (excluding
tax on capital gains) (2,702) 17,807 19,469
---------- ---------- ----------
Net gain from operations after dividends
to policyholders and federal income tax
and before realized capital gains or
(losses) 115,464 33,846 8,435
Net realized capital gains or (losses)
less capital gains tax and transferred
to the interest maintenance reserve 7,560 2,069 (6,978)
---------- ---------- ----------
NET INCOME $ 123,024 $ 35,915 $ 1,457
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
43
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
STATUTORY STATEMENTS OF CHANGES IN CAPITAL STOCK AND SURPLUS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
(IN 000'S)
CAPITAL AND SURPLUS, BEGINNING OF YEAR $ 792,452 $ 455,489 $ 483,188
---------- ---------- ----------
Net income 123,024 35,915 1,457
Change in net unrealized capital gains or (losses) (1,715) 2,009 (671)
Change in non-admitted assets and related items 67 (2,270) (1,485)
Change in asset valuation reserve (11,812) (13,690) (8,376)
Other changes in surplus in Separate Accounts Statement 100 (4,038) (227)
Increase (decrease) in surplus notes (335,000) 315,000 0
Miscellaneous gains and losses in surplus 27 4,037 (18,397)
---------- ---------- ----------
Net change in capital and surplus for the year (225,309) 336,963 (27,699)
---------- ---------- ----------
Capital and surplus, end of year $ 567,143 $ 792,452 $ 455,489
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
44
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
STATUTORY STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
(IN 000'S)
Cash Provided
Premiums, annuity considerations and
deposit funds received $ 2,059,577 $ 1,826,456 $ 2,287,695
Considerations for supplementary
contracts and dividend accumulations
received 2,340 1,088 2,906
Net investment income received 324,914 374,398 351,058
Other income received 88,295 25,348 30,989
----------- ----------- -----------
Total receipts 2,475,126 2,227,290 2,672,648
----------- ----------- -----------
Benefits paid (other than dividends) 1,671,483 1,231,936 1,326,223
Insurance expenses and taxes paid
(other than federal income and
capital gains taxes) 172,015 150,463 187,699
Net cash transfers to Separate Accounts 755,605 568,188 963,127
Dividends paid to policyholders 22,689 17,722 13,303
Federal income tax (recoveries)
payments (excluding tax on capital
gains) (15,363) (20,655) 2,976
Other--net 2,205 739 572
----------- ----------- -----------
Total payments 2,608,634 1,948,393 2,493,900
----------- ----------- -----------
Net cash from operations (133,508) 278,897 178,748
----------- ----------- -----------
Proceeds from long-term investments
sold, matured or repaid (after
deducting taxes on capital gains of
$1,554,873 for 1996, $8,610,951 for
1995 and $19,271,876 for 1994) 1,768,147 1,658,655 1,508,156
Issuance (repayment) of surplus notes (335,000) 315,000
Other cash provided 147,956 419,446 26,512
----------- ----------- -----------
Total cash provided 1,581,103 2,393,101 1,534,668
----------- ----------- -----------
Cash Applied
Cost of long-term investments acquired 1,318,880 1,749,714 1,442,155
Other cash applied 235,982 796,207 264,233
----------- ----------- -----------
Total cash applied 1,554,862 2,545,921 1,706,388
----------- ----------- -----------
Net change in cash and short-term
investments (107,267) 126,077 7,028
Cash and short-term investments:
Beginning of year 197,326 71,249 64,221
----------- ----------- -----------
End of year $ 90,059 $ 197,326 $ 71,249
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
45
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO STATUTORY FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
GENERAL
Sun Life Assurance Company of Canada (U.S.) (the "Company") is incorporated as a
life insurance company and is currently engaged in the sale of individual fixed
and variable annuities, group fixed and variable annuities and group pension
contracts. The Company also underwrites a block of individual life insurance
business through a reinsurance contract with its parent. Sun Life Assurance
Company of Canada (the "parent company") is a mutual life insurance company.
The Company, which is domiciled in the State of Delaware, prepares its financial
statements in accordance with statutory accounting practices prescribed or
permitted by the State of Delaware Insurance Department. Prescribed accounting
practices include practices described in a variety of publications of the
National Association of Insurance Commissioners (NAIC), as well as state laws,
regulations and general administrative rules. Permitted accounting practices
encompass all accounting practices not so prescribed. The permitted accounting
practices adopted by the Company are not material to the financial statements.
Prior to 1996, statutory accounting practices were recognized by the insurance
industry and the accounting profession as generally accepted accounting
principles for mutual life insurance companies and stock life insurance
companies wholly owned by mutual life insurance companies. In April 1993, the
Financial Accounting Standards Board ("FASB") issued an interpretation (the
"Interpretation"), that became effective in 1996, that has changed the previous
practice of mutual life insurance companies (and stock life insurance companies
that are wholly-owned subsidiaries of mutual life insurance companies) with
respect to utilizing statutory basis financial statements for general purposes,
in that it will no longer allow such financial statements to be described as
having been prepared in conformity with generally accepted accounting principles
("GAAP"). Consequently, these financial statements prepared in conformity with
statutory accounting practices as described above, vary from and are not
intended to present the Company's financial position and results of operations
and capital in conformity with generally accepted accounting principles. (See
Note 19 for further discussion relative to the Company's basis of financial
statement presentation.) The effects on the financial statements of the
variances between the statutory basis of accounting and GAAP, although not
reasonably determinable, are presumed to be material.
INVESTED ASSETS AND RELATED RESERVES
Bonds are carried at cost adjusted for amortization of premium or accrual of
discount. Investments in non-insurance subsidiaries are carried on the equity
basis. Investments in insurance subsidiaries are carried at their statutory
surplus values. Mortgage loans acquired at a premium or discount are carried at
amortized values and other mortgage loans at the amounts of the unpaid balances.
Real estate investments are carried at the lower of cost adjusted for
accumulated depreciation or appraised value, less encumbrances. Short-term
investments are carried at amortized cost, which approximates fair value.
Depreciation of buildings and improvements is calculated using the straight-line
method over the estimated useful life of the property, generally 40 to 50 years.
POLICY AND CONTRACT RESERVES
The reserves for life insurance and annuity contracts, developed by accepted
actuarial methods, have been established and maintained on the basis of
published mortality tables using assumed interest rates and valuation methods
that will provide reserves at least as great as those required by law and
contract provisions.
46
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES: (CONTINUED):
INCOME AND EXPENSES
For life and annuity contracts, premiums are recognized as revenues over the
premium paying period, whereas commissions and other costs applicable to the
acquisition of new business are charged to operations as incurred.
SEPARATE ACCOUNTS
The Company has established unitized separate accounts applicable to various
classes of contracts providing for variable benefits. Contracts for which funds
are invested in separate accounts include variable life insurance and individual
and group qualified and non-qualified variable annuity contracts.
Assets and liabilities of the separate accounts, representing net deposits and
accumulated net investment earnings less fees, held primarily for the benefit of
contract holders are shown as separate captions in the financial statements.
Assets held in the separate accounts are carried at market values.
The Company has also established a non-unitized separate account for amounts
allocated to the fixed portion of certain combination fixed/variable deferred
annuity contracts. The assets of this account are available to fund general
account liabilities and general account assets are available to fund liabilities
of this account.
Gains (losses) from mortality experience and investment experience, not
applicable to contract owners, are transferred to (from) the general account.
Accumulated gains (losses) that have not been transferred are recorded as a
payable (receivable) to (from) the general account. Amounts payable to the
general account of the Company were $220,999,000 in 1996 and $148,675,000 in
1995.
CHANGES IN ACCOUNTING PRINCIPLES AND REPORTING
During 1996, the Company changed its method of accounting and reporting for
deposits withdrawals, and benefits with respect to unitized separate accounts.
Previously, deposits were recorded as direct increases in liabilities of the
separate accounts while withdrawals and benefits were recorded as direct
decreases in that liability. Effective for 1996, the Company recorded: deposits
as revenue in the general account; withdrawals and benefits as expenses in the
general account; and the transfer of those funds between the general account and
the separate account are reflected as an expense (income) item. Amounts
presented for the years ended December 31, 1995 and 1994 have been restated to
conform to this presentation. The effect of this change was to increase revenues
and expenses by $1.4 billion in 1996, $878 million in 1995, and $988 million in
1994; there is no impact on net income of the general account. This new method
of reporting is consistent with the accounting treatment for deposits and
withdrawals and benefits of the non-unitized separate account of the Company,
and is consistent with prescribed statutory accounting practices.
Prior to 1996, dividends paid to the Company by its subsidiaries and the
undistributed gains (losses) of those subsidiaries were included in net income
of the Company. For Annual Statement reporting, dividends were (and continue to
be) reported in net income while undistributed gains (losses) are reported
directly to surplus (as a separate component of unassigned surplus). As a
result, net income as reported in these financial statements is $2.5 million
less than net income reported in the Annual Statement in 1995 and $1.4 million
greater than the Annual Statement in 1994. Effective for 1996, the Company
changed its method of accounting for investments in subsidiaries to conform with
the prescribed statutory accounting practices used in the preparation of its
Annual Statement. As a result of the change, $5.7 million in undistributed
losses of subsidiaries are reported directly as a separate component of
unassigned surplus rather than being included in net income for the year ended
December 31, 1996. The amounts as reported in prior years have not been
restated.
47
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES: (CONTINUED):
The Company has also revised the form of its statutory statements of operations,
changes in capital stock and surplus, and cash flow in order to match more
exactly the presentation used in the preparation of its Annual Statement. As a
result, reclassifications have been made in the amounts reported in 1995 and
1994 audited financial statements to conform to the presentation used for the
1996 amounts. Other than as described in the preceding paragraph, none of the
changes have impacted net income or statutory surplus as reported in the 1995
and 1994 audited financial statements.
OTHER
Preparation of the financial statements requires management to make estimates
and assumptions that affect reported amounts of assets, liabilities, revenues
and expenses. Actual results could differ from those estimates.
2. INVESTMENTS IN SUBSIDIARIES:
The Company owns all of the outstanding shares of Sun Life Insurance and Annuity
Company of New York (Sun Life (N.Y.)), Massachusetts Casualty Insurance Company
(MCIC), Sun Investment Services Company (Sunesco), New London Trust, F.S.B.
(NLT), Sun Life Financial Services Limited, Inc. (SLFSL), Sun Benefit Services
Company, Inc. (Sunbesco), Sun Capital Advisers, Inc. (Sun Capital), and Sun Life
Finance Corporation (Sunfinco).
The Company owns 94.8% of the outstanding shares of Massachusetts Financial
Services Company (MFS). The Company previously owned 100% of the shares. During
1996, MFS issued additional shares to officers of MFS, thereby reducing the
Company's ownership to 94.8%.
Sun Life (N.Y.) is engaged in the sale of individual fixed and variable annuity
contracts and group life and disability insurance contracts in the State of New
York. MCIC is a life insurance company which issues only individual disability
income policies. Sunesco is a registered investment adviser and broker-dealer.
NLT is a federally chartered savings bank. SLFSL serves as the marketing
administrator for the distribution of the Parent company's offshore products.
Sun Capital, a registered investment adviser, Sunfinco, and Sunbesco are
currently inactive.
MFS, a registered investment adviser, serves as investment adviser to the mutual
funds in the MFS family of funds and certain mutual funds and separate accounts
established by the Company, and, through a subsidiary, provides investment
advice to substantial private clients.
In 1994, the Company reduced its carrying value of MCIC by $18,397,000, the
unamortized amount of goodwill. The reduction was accounted for as a direct
charge to surplus.
On December 31, 1996, the Company issued to the parent a $58,000,000 note which
is scheduled for repayment on February 15, 1997 at an interest rate of 5.70%.
Also on December 31, 1996, the Company was issued a $58,000,000 note by MFS at
an interest rate of 5.76% due on demand on or after March 1, 1997. On December
31, 1996 and 1995 the Company had an additional $20,000,000 in notes issued by
MFS, scheduled to mature in 2000. All of these notes are reported as due from
parent and affiliates.
During 1996, 1995 and 1994, the Company contributed capital in the following
amounts to its subsidiaries:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- ------------ ------------
<S> <C> <C> <C>
MCIC $ 10,000,000 $ 6,000,000 $ 6,000,000
SLFSL 1,500,000 0 0
</TABLE>
48
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
2. INVESTMENTS IN SUBSIDIARIES: (CONTINUED):
Summarized combined financial information of the Company's subsidiaries as of
December 31, 1996, 1995 and 1994 and for the years then ended, follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
(IN 000'S)
<S> <C> <C> <C>
Intangible assets $ 9,646 $ 12,174 $ 13,485
Other assets 1,376,014 1,233,372 1,165,595
Liabilities (1,241,617) (1,107,264) (1,044,273)
------------ ------------ ------------
Total net assets $ 144,043 $ 138,282 $ 134,807
------------ ------------ ------------
------------ ------------ ------------
Total revenues $ 717,280 $ 570,794 $ 495,097
Operating expenses (624,199) (504,070) (425,891)
Income tax expense (42,820) (31,193) (29,374)
------------ ------------ ------------
Net income $ 50,261 $ 35,531 $ 39,832
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
3. BONDS:
The amortized cost and estimated fair value of investments in debt securities
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
(IN 000'S)
Long-term Bonds:
United States government and government agencies and
authorities $ 267,756 $ 12,272 $ (8,927) $ 271,101
States, provinces and political subdivisions 2,253 20 (0) 2,273
Foreign governments 18,812 1,351 (0) 20,163
Public utilities 415,641 24,728 (1,223) 439,146
Transportation 167,937 14,107 (2,243) 179,801
Finance 290,025 7,912 (472) 297,465
All other corporate bonds 1,007,680 42,338 (14,496) 1,035,522
------------ ----------- ----------- ------------
Total long-term bonds 2,170,104 102,728 (27,361) 2,245,471
Short-term bonds:
U.S. Treasury Bills, bankers acceptances and
commercial paper 88,754 0 0 88,754
------------ ----------- ----------- ------------
$ 2,258,858 $ 102,728 $ (27,361) $ 2,334,225
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
</TABLE>
49
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
3. BONDS: (CONTINUED):
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
(IN 000'S)
Long-term Bonds:
United States government and government agencies and
authorities $ 467,597 $ 22,783 $ (443) $ 489,937
States, provinces and political subdivisions 2,252 81 (0) 2,333
Foreign governments 38,303 4,551 (6) 42,848
Public utilities 513,704 45,466 (203) 558,967
Transportation 215,786 22,794 (2,221) 236,359
Finance 225,074 13,846 (84) 238,836
All other corporate bonds 1,025,745 67,371 (7,415) 1,085,701
------------ ----------- ------------ ------------
Total long-term bonds 2,488,461 176,892 (10,372) 2,654,981
Short-term bonds:
U.S. Treasury Bills, bankers acceptances and
commercial paper 217,606 0 0 217,606
------------ ----------- ------------ ------------
$ 2,706,067 $ 176,892 $ (10,372) $ 2,872,587
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
</TABLE>
The amortized cost and estimated fair value of bonds at December 31, 1996 and
1995 are shown below by contractual maturity. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call and/or prepayment penalties.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
------------ ------------
<S> <C> <C>
(IN 000'S)
Maturities:
Due in one year or less $ 314,130 $ 315,507
Due after one year through five years 743,215 751,858
Due after five years through ten years 268,376 280,153
Due after ten years 714,504 775,051
------------ ------------
$ 2,040,225 $ 2,122,569
Mortgage-backed securities 218,633 211,656
------------ ------------
$ 2,258,858 $ 2,334,225
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
--------------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
------------ ------------
<S> <C> <C>
(IN 000'S)
Maturities:
Due in one year or less $ 558,775 $ 561,119
Due after one year through five years 824,446 846,230
Due after five years through ten years 256,552 269,549
Due after ten years 884,187 1,000,908
------------ ------------
2,523,960 2,677,806
Mortgage-backed securities 182,107 194,781
$ 2,706,067 $ 2,872,587
------------ ------------
------------ ------------
</TABLE>
50
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
3. BONDS: (CONTINUED):
Proceeds from sales and maturities of investments in debt securities during
1996, 1995, and 1994 were $1,554,016,000, $1,510,553,000, and $1,390,974,000,
gross gains were $16,975,000, $24,757,000, and $15,025,000 and gross losses were
$10,885,000, $5,742,000, and $30,041,000 , respectively.
Bonds included above with an amortized cost of approximately $2,060,000 and
$2,059,000 at December 31, 1996 and 1995, respectively, were on deposit with
governmental authorities as required by law.
4. SECURITIES LENDING:
The Company has a securities lending program operated on its behalf by the
Company's primary custodian, Chemical Bank of New York. The custodian has
indemnified the Company against losses arising from this program. The total par
value of securities out on loan was $51,537,000 and $250,729,000 and the income
resulting from this program was $137,000, $2,000 and $26,000 at December 31,
1996, 1995 and 1994, respectively.
5. MORTGAGE LOANS:
The Company invests in commercial first mortgage loans throughout the United
States. The Company monitors the condition of the mortgage loans in its
portfolio. In those cases where mortgages have been restructured, appropriate
provisions have been made. In those cases where, in management's judgement, the
mortgage loans' values are impaired, appropriate losses are recorded.
The following table shows the geographical distribution of the mortgage
portfolio.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
---------- ------------
(IN 000'S)
<S> <C> <C>
California $ 154,272 $ 153,811
Massachusetts 79,929 83,999
Michigan 57,119 69,125
New York 67,742 81,480
Ohio 75,405 83,915
Pennsylvania 115,584 141,468
Washington 75,819 91,900
All other 313,062 361,213
---------- ------------
$ 938,932 $ 1,066,911
---------- ------------
---------- ------------
</TABLE>
The Company has restructured mortgage loans totalling $29,261,000, and
$49,846,000 at December 31, 1996 and 1995, respectively, against which there are
provisions of $5,893,000 and $8,799,000 at December 31, 1996 and 1995,
respectively.
The Company has made commitments of mortgage loans on real estate into the
future. The outstanding commitments for these mortgages amount to $9,800,000 and
$13,100,000 at December 31, 1996 and 1995, respectively.
51
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
6. INVESTMENTS GAINS AND LOSSES:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN 000'S)
<S> <C> <C> <C>
Net realized gains (losses)
Bonds $ 5,631 $ 3,935 $ (858)
Mortgage loans 763 292 (5,689)
Real estate 599 391 (334)
Other assets 567 (2,549) (97)
--------- --------- ---------
$ 7,560 $ 2,069 $ (6,978)
--------- --------- ---------
--------- --------- ---------
Changes in unrealized gains (losses):
Common stock of affiliates $ (5,739) $ 0 $ 0
Mortgage loans (600) (1,574) 0
Real estate 4,624 3,583 (671)
--------- --------- ---------
$ (1,715) $ 2,009 $ (671)
--------- --------- ---------
--------- --------- ---------
</TABLE>
Realized capital gains and losses on bonds and mortgages which relate to changes
in levels of interest rates are charged or credited to an interest maintenance
reserve (IMR) and amortized into income over the remaining contractual life of
the security sold. The gross realized capital gains and losses credited or
charged to the interest maintenance reserve were a credit of $7,710,000 in 1996,
a credit of $12,714,000 in 1995, and a charge of $14,070,000 in 1994. All gains
and losses are transferred net of applicable taxes.
7. NET INVESTMENT INCOME:
Net investment income consisted of:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
(IN 000'S)
<S> <C> <C> <C>
Interest income from bonds $ 178,695 $ 205,445 $ 200,338
Income from investment in common stock of affiliates 50,408 35,403 39,577
Interest income from mortgage loans 92,591 99,766 106,404
Real estate investment income 16,249 14,979 12,950
Interest income from policy loans 2,790 2,777 2,669
Other 1,710 2,672 1,212
---------- ---------- ----------
Gross investment income 342,443 361,042 363,150
Interest on surplus notes (23,061) (31,813) (31,150)
Investment expenses (15,629) (16,357) (16,567)
---------- ---------- ----------
$ 303,753 $ 312,872 $ 315,433
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
8. DERIVATIVES:
The Company uses derivative instruments for interest risk management purposes,
including hedges against specific interest rate risk and to minimize the
Company's exposure to fluctuations in interest rates. The Company's use of
derivatives has included U.S. Treasury futures, conventional interest rate
swaps, and forward spread lock interest rate swaps.
52
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
8. DERIVATIVES: (CONTINUED):
In the case of interest rate futures, gains or losses on contracts that qualify
as hedges are deferred until the earliest of the completion of the hedging
transaction, determination that the transaction will no longer take place, or
determination that the hedge is no longer effective. Upon completion of the
hedge, where it is impractical to allocates gains (losses) to specific hedged
assets or liabilities, gains ( losses) are deferred in IMR and amortized over
the remaining life of the hedged assets. At December 31, 1996 and December 31,
1995 there were no futures contracts outstanding.
In the case of interest rate and foreign currency swap agreements and forward
spread lock interest rate swap agreements, gains or losses on terminated swaps
are deferred in IMR and amortized over the shorter of the remaining life of the
hedged asset or the remaining term of the swap contract. The net differential to
be paid or received on interest rate swaps is recorded monthly as interest rates
change.
<TABLE>
<CAPTION>
SWAPS OUTSTANDING
AT DECEMBER 31, 1996
---------------------------------
NOTIONAL MARKET VALUE
PRINCIPAL AMOUNTS OF POSITIONS
------------------ -------------
(IN 000'S)
<S> <C> <C>
Conventional interest rate swaps $ 429,000 $ (2,443)
Foreign currency swap 2,100 70
Forward spread lock swaps 50,000 (50)
</TABLE>
<TABLE>
<CAPTION>
SWAPS OUTSTANDING
AT DECEMBER 31, 1995
---------------------------------
NOTIONAL MARKET VALUE
PRINCIPAL AMOUNTS OF POSITIONS
------------------ -------------
(IN 000'S)
<S> <C> <C>
Conventional interest rate swaps $ 367,000 $ 3,275
Foreign currency swap 2,745 290
Forward spread lock swaps 50,000 112
</TABLE>
The market value is the estimated amount that the Company would receive or pay
on termination or sale, taking into account current interest rates and the
current creditworthiness of the counterparties. The Company is exposed to
potential credit loss in the event of non-performance by counterparties. The
counterparties are major financial institutions and management believes that the
risk of incurring losses related to credit risk is remote.
9. LEVERAGED LEASES:
The Company is a lessor in a leveraged lease agreement entered into on October
21, 1994, under which equipment having an estimated economic life of 25-40 years
was leased for a term of 9.75 years. The Company's equity investment represented
22.9% of the purchase price of the equipment. The balance of the purchase price
was furnished by third-party long-term debt financing, collateralized by the
equipment and non-recourse to the Company. At the end of the lease term, the
Master Lessee may exercise a fixed price purchase option to purchase the
equipment.
53
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
9. LEVERAGED LEASES: (CONTINUED):
The Company's net investment in leveraged leases is composed of the following
elements:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1996 1995
---------- ----------
(IN 000'S)
<S> <C> <C>
Lease contracts receivable $ 101,244 $ 111,611
Less non-recourse debt 101,227 (111,594)
---------- ----------
17 17
Estimated residual value of leased assets 41,150 41,150
Less unearned and deferred income (11,501) (13,132)
---------- ----------
Investment in leveraged leases 29,666 28,035
Less fees (188) (213)
---------- ----------
Net investment in leveraged leases $ 29,478 $ 27,822
---------- ----------
---------- ----------
</TABLE>
The net investment is classified as other invested assets in the accompanying
statements of admitted assets, liabilities, capital stock and surplus.
10. REINSURANCE:
The Company has agreements with the parent company which provide that the parent
company will reinsure the mortality risks of the individual life insurance
contracts sold by the Company. Under these agreements basic death benefits and
supplementary benefits are reinsured on a yearly renewable term basis and
coinsurance basis, respectively. Reinsurance transactions under these agreements
had the effect of decreasing income from operations by approximately $1,603,000,
$2,184,000, and $2,138,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
Effective January 1, 1991, the Company entered into an agreement with the parent
company under which certain individual life insurance contracts issued by the
parent company were reinsured by the Company on a 90% coinsurance basis. Also,
effective January 1, 1991, the Company entered into an agreement with the parent
company which provides that the parent company will reinsure the mortality risks
in excess of $500,000 per policy for the individual life insurance contracts
assumed by the Company in the reinsurance agreement described above. Such death
benefits are reinsured on a yearly renewable term basis. These agreements had
the effect of increasing income from operations by approximately $35,161,000 and
$11,821,000 for the years ended December 31, 1996 and 1995, respectively, and
decreasing income by approximately $29,188,000 for the year ended December 31,
1994. The life reinsurance assumed agreement requires the reinsurer to withhold
funds in amounts equal to the reserves assumed.
54
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
10. REINSURANCE: (CONTINUED):
The following are summarized pro-forma results of operations of the Company for
the years ended December 31, 1996, 1995 and 1994 before the effect of
reinsurance transactions with the parent company.
<TABLE>
<CAPTION>
PRO-FORMA RESULTS PRE-REINSURANCE
YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
(IN 000'S)
<S> <C> <C> <C>
Income:
Premiums, annuity deposits and other revenues $ 1,858,145 $ 1,619,337 $ 2,053,408
Net investment income and realized gains 312,870 315,967 312,582
------------ ------------ ------------
Subtotal 2,171,015 1,935,304 2,365,990
------------ ------------ ------------
Benefits and Expenses:
Policyholder benefits 1,928,720 1,760,917 2,183,282
Other expenses 155,531 130,302 130,456
------------ ------------ ------------
Subtotal 2,084,251 1,891,219 2,313,738
------------ ------------ ------------
Income from operations $ 86,764 $ 44,085 $ 52,252
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The Company has an agreement with an unrelated company which provides
reinsurance of certain individual life insurance contracts on a modified
coinsurance basis and under which all deficiency reserves related to these
contracts are reinsured. Reinsurance transactions under this agreement had the
effect of decreasing income from operations by $46,000 in 1996, and by
$1,599,000 in 1995, and increasing income from operations by $1,854,404 in 1994.
55
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
11. WITHDRAWAL CHARACTERISTICS OF ANNUITY ACTUARIAL RESERVES AND DEPOSIT
LIABILITIES:
Withdrawal characteristics of general account and separate account annuity
reserves and deposits:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------
AMOUNT % OF TOTAL
-------------- ------------
(IN 000'S)
<S> <C> <C>
Subject to discretionary withdrawal-with adjustment
--with market value adjustment $ 3,547,683 30.44%
--at book value less surrender charges (surrender charge >5%) 5,626,117 48.27
--at book value (minimal or no charge or adjustment) 1,264,586 10.85
Not subject to discretionary withdrawal provision 1,218,157 10.44
-------------- ------
Total annuity actuarial reserves and deposit liabilities $ 11,656,543 100.00%
-------------- ------
-------------- ------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
----------------------------
AMOUNT % OF TOTAL
-------------- ------------
(IN 000'S)
<S> <C> <C>
Subject to discretionary withdrawal-with adjustment
--with market value adjustment $ 3,796,596 36.36%
--at book value less surrender charges (surrender charge >5%) 4,066,126 38.94
--at book value (minimal or no charge or adjustment) 1,278,215 12.24
Not subject to discretionary withdrawal provision 1,301,259 12.46
-------------- ------
Total annuity actuarial reserves and deposit liabilities $ 10,442,196 100.00%
-------------- ------
-------------- ------
</TABLE>
12. RETIREMENT PLANS:
The Company participates with its parent company in a non-contributory defined
benefit pension plan covering essentially all employees. The benefits are based
on years of service and compensation.
The funding policy for the pension plan is to contribute an amount which at
least satisfies the minimum amount required by ERISA. The Company is charged for
its share of the pension cost based upon its covered participants. Pension plan
assets consist principally of separate accounts of the parent company.
The Company's share of the group's accrued pension cost at December 31, 1996,
1995 and 1994 was $446,000, $420,000, and $417,000, respectively. The Company's
share of net periodic pension cost was $27,000, $3,000, and $417,000, for 1996,
1995 and 1994, respectively.
The Company also participates with its parent and certain affiliates in a 401(k)
savings plan for which substantially all employees are eligible. The Company
matches, up to specified amounts, employees' contributions to the plan. Company
contributions were $233,000, $185,000 and $152,000 for the years ended December
31, 1996, 1995, and 1994, respectively.
OTHER POST-RETIREMENT BENEFIT PLANS:
In addition to pension benefits the Company provides certain health, dental, and
life insurance benefits ("post-retirement benefits") for retired employees and
dependents. Substantially all employees may become eligible for these benefits
if they reach normal retirement age while working for the Company, or retire
early upon satisfying an alternate age plus service condition. Life insurance
benefits are generally set at a fixed amount.
56
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
12. RETIREMENT PLANS: (CONTINUED):
Effective January 1, 1994, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 106, "Employer's Accounting for Post-retirement Benefits
Other than Pensions.' SFAS No. 106 requires the Company to accrue the estimated
cost of retiree benefit payments during the years the employee provides
services. SFAS No. 106 allows recognition of the cumulative effect of the
liability in the year of adoption or the amortization of the obligation over a
period of up to 20 years. The Company has elected to recognize this obligation
of approximately $400,000 over a period of ten years. The Company's cash flows
are not affected by implementation of this standard, but implementation
decreased net income by $209,000, $142,000, and $114,000 for the years ended
December 31, 1996, 1995 and 1994, respectively. Effective June 5, 1996, the
Company made certain changes regarding eligibility and benefits to its post-
retirement health benefits plans for retirees on or after that date. The impact
of these changes is a decrease of 1996 post-retirement benefit costs of
$599,000. The Company's post-retirement health care plans currently are not
funded.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following table presents the carrying amounts and estimated fair values of
the Company's financial instruments at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------
CARRYING AMOUNT ESTIMATED FAIR VALUE
----------------- --------------------
(IN 000'S)
<S> <C> <C>
ASSETS
Bonds $ 2,258,858 $ 2,339,126
Mortgages 938,932 958,909
LIABILITIES
Insurance reserves 122,606 122,606
Individual annuities 373,488 367,878
Pension products 1,911,284 1,922,602
Derivatives -- (2,423)
<CAPTION>
DECEMBER 31, 1995
---------------------------------------
CARRYING AMOUNT ESTIMATED FAIR VALUE
----------------- --------------------
(IN 000'S)
<S> <C> <C>
ASSETS
Bonds $ 2,706,067 $ 2,872,586
Mortgages 1,066,911 1,111,895
LIABILITIES
Insurance reserves 124,066 124,066
Individual annuities 434,261 431,263
Pension products 2,227,882 2,265,386
Derivatives -- 3,387
</TABLE>
The major methods and assumptions used in estimating the fair values of
financial instruments are as follows:
57
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
13. FAIR VALUE OF FINANCIAL INSTRUMENTS: (CONTINUED):
The fair values of short-term bonds are estimated to be the amortized cost. The
fair values of long-term bonds which are publicly traded are based upon market
prices or dealer quotes. For privately placed bonds, fair values are estimated
taking into account prices for publicly traded bonds of similar credit risk and
maturity and repayment and liquidity characteristics.
The fair values of the Company's general account reserves and liabilities under
investment-type contracts (insurance, annuity and pension contracts that do not
involve mortality or morbidity risks) are estimated using discounted cash flow
analyses or surrender values. Those contracts that are deemed to have short-term
guarantees have a carrying amount equal to the estimated market value.
The fair values of mortgages are estimated by discounting future cash flows
using current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
The fair values of derivative financial instruments are estimated using the
process described in Note #8.
14. STATUTORY INVESTMENT VALUATION RESERVES:
The asset valuation reserve ("AVR") provides a reserve for losses from
investments in bonds, stocks, mortgage loans, real estate and other invested
assets with related increases or decreases being recorded directly to surplus.
Realized capital gains and losses on bonds and mortgages which relate to changes
in levels of interest rates are charged or credited to an interest maintenance
reserve ("IMR") and amortized into income over the remaining contractual life of
the security sold.
The tables shown below present changes in the major elements of the AVR and IMR.
<TABLE>
<CAPTION>
1996 1995
-------------------- --------------------
AVR IMR AVR IMR
--------- --------- --------- ---------
(IN 000'S) (IN 000'S)
<S> <C> <C> <C> <C>
Balance, beginning of year $ 42,099 $ 25,218 $ 28,409 $ 18,140
Realized investment gains (losses), net of tax 3,160 5,011 (1,524) 7,977
Amortization of investment (gains) losses 0 (1,557) 0 (899)
Unrealized investment gains (losses) 1,502 0 3,650 0
Required by formula 7,150 4 11,564 0
--------- --------- --------- ---------
Balance, end of year $ 53,911 $ 28,676 $ 42,099 $ 25,218
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
15. FEDERAL INCOME TAXES:
The Company and its subsidiaries file a consolidated federal income tax return.
Federal income taxes are calculated for the consolidated group based upon
amounts determined to be payable as a result of operations within the current
year. No provision is recognized for timing differences which may exist between
financial statement and taxable income. Such timing differences include
reserves, depreciation and accrual of market discount on bonds. Cash payments
for federal income taxes were approximately $19,264,000, $12,429,000 and
$43,200,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
16. SURPLUS NOTES AND NOTE RECEIVABLE:
The Company had issued and outstanding surplus notes to its parent with an
aggregate carrying value of $335,000,000 during the period 1982 through January
16, 1996 at interest rates between 7.25% and 10%. The Company repaid all
principal and interest associated with these surplus notes on January 16, 1996.
58
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
16. SURPLUS NOTES AND NOTE RECEIVABLE: (CONTINUED):
On December 19, 1995 the Company issued surplus notes totalling $315,000,000 to
an affiliate, Sun Canada Financial Co., at interest rates between 5.75% and
7.25%. Of these notes, $157,500,000 will mature in the year 2007, and
$157,500,000 will mature in the year 2015. Interest on these notes is payable
semi-annually.
Principal and interest on surplus notes are payable only to the extent that the
Company meets specified requirements regarding free surplus exclusive of the
principal amount and accrued interest, if any, on these notes; and, in the case
of principal repayments, with the consent of the Delaware Insurance
Commissioner. In addition, with regard to surplus notes outstanding through
January 16, 1996, subsequent to December 31, 1994 interest payments required the
consent of the Delaware Insurance Commissioner. Payment of principal and
interest on the notes issued in 1995 also requires the consents of the Delaware
Insurance Commissioner and Canadian Office of the Superintendent of Financial
Institutions.
During 1996, 1995 and 1994, the Company obtained the required consents, and
expensed $23,061,000, $31,813,000 and $31,150,000 in respect of interest on
surplus notes for the years 1996, 1995 and 1994, respectively.
On December 19, 1995, the parent borrowed $120,000,000 at 5.6% through a
short-term note from the Company maturing on January 16, 1996. The note, which
is included in due from parent and affiliates at December 31, 1995, was repaid
in full by the parent at maturity.
17. MANAGEMENT AND SERVICE CONTRACTS:
The Company has an agreement with its parent company which provides that the
parent company will furnish, as requested, personnel as well as certain services
and facilities on a cost-reimbursement basis. Expenses under this agreement
amounted to approximately $20,192,000 in 1996, $20,293,000 in 1995, and
$18,452,000 in 1994.
18. RISK-BASED CAPITAL:
Effective December 31, 1993 the NAIC adopted risk-based capital requirements for
life insurance companies. The risk-based capital requirements provide a method
for measuring the minimum acceptable amount of adjusted capital that a life
insurer should have, as determined under statutory accounting practices, taking
into account the risk characteristics of its investments and products. The
Company has met the minimum risk-based capital requirements at December 31, 1996
and 1995.
19. ACCOUNTING POLICIES AND PRINCIPLES:
The financial statements of the Company have been prepared on the basis of
statutory accounting practices, which prior to 1996, were considered by the
insurance industry and the accounting profession to be in accordance with GAAP
for mutual life insurance companies. The primary differences between statutory
accounting practices and GAAP are described as follows. Under statutory
accounting practices, financial statements are not consolidated and investments
in subsidiaries are shown at net equity value. Accordingly, the assets,
liabilities and results of operations of the Company's subsidiaries are not
consolidated with the assets, liabilities and results of operations,
respectively, of the Company. Changes in net equity value of the common stock of
the Company's United States life insurance subsidiaries are directly reflected
in the Company's surplus. Changes in the net equity value of the common stock of
all other subsidiaries are directly reflected in the Company's Investment
Valuation Reserves. Dividends paid by subsidiaries to the Company are included
in the Company's net investment income.
59
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
19. ACCOUNTING POLICIES AND PRINCIPLES: (CONTINUED):
Other differences between statutory accounting practices and GAAP include the
following: Statutory accounting practices do not recognize the following assets
or liabilities which are reflected under GAAP-- deferred policy acquisition
costs, deferred federal income taxes and statutory non-admitted assets. Asset
Valuation Reserves and Interest Maintenance Reserves are established under
statutory accounting practices but not under GAAP. Methods for calculating real
estate depreciation and investment valuation allowances differ under statutory
accounting practices than under GAAP. Actuarial assumptions and reserving
methods differ under statutory accounting practices and GAAP. Premiums for
universal life and investment type products are recognized as income for
statutory purposes and as deposits to policyholders' accounts for GAAP.
Because the Company's management uses financial information prepared in
conformity with accounting principles generally accepted in Canada in the normal
course of business, the management of the Company has determined that the cost
of complying with Statement No. 120 would exceed the benefits that the Company,
or the users of its financial statements would experience. Consequently, the
Company has elected not to apply such standards in the preparation of these
financial statements.
60
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
We have audited the accompanying statutory statements of admitted assets,
liabilities, and capital stock and surplus of Sun Life Assurance Company of
Canada (U.S.) as of December 31, 1996 and 1995, and the related statutory
statements of operations, changes in capital stock and surplus, and cash flow
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's 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 audits 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. An audit also includes
assessing the accounting principles used and signficant 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.
As described more fully in Notes 1 and 19 to the financial statements, the
Company prepared these financial statements using accounting practices
prescribed or permitted by the Insurance Department of the State of Delaware,
which practices differ from generally accepted accounting principles. The
effects on the financial statements of the variances between the statutory basis
of accounting and generally accepted accounting principles, although not
reasonably determinable, are presumed to be material.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the admitted assets, liabilities, and capital stock and
surplus of Sun Life Assurance Company of Canada (U.S.) as of December 31, 1996
and 1995, and the results of its operations and its cash flow for each of the
three years in the period ended December 31, 1996 on the basis of accountng
described in Notes 1 and 19.
However, because of the effects of the matter discussed in the second preceding
paragraph, in our opinion, the financial statements referred to above do not
present fairly, in conformity with generally accepted accounting principles, the
financial position of Sun Life Assurance Company of Canada (U.S.) as of December
31, 1996 and 1995 or the results of its operations or its cash flow for each of
the three years in the period ended Decemeber 31, 1996.
In our previous report dated February 7, 1996, we expressed an opinion that the
1995 and 1994 financial statements, prepared using accounting practices
prescribed or permitted by the Insurance Department of the State of Delaware,
presented fairly, in all material respects, the financial position of Sun Life
Assurance Company of Canada (U.S.) as of December 31, 1995, and the results of
its operations, and its cash flow for the years ended December 31, 1995 and 1994
in conformity with generally accepted accounting principles. As described in
Notes 1 and 19 to the financial statements, pursuant to the provisions of
Statement of Financial Accounting Standards No. 120, ACCOUNTING AND REPORTING BY
MUTUAL LIFE INSURANCE ENTERPRISES AND BY INSURANCE ENTERPRISES FOR CERTAIN
LONG-DURATION PARTICIPATING CONTRACTS, financial statements of mutual life
insurance enterprises (and stock life insurance companies that are wholly owned
subsidiaries of mutual life insurance companies) for periods ending on or before
December 15, 1996, prepared using accounting practices prescribed or permitted
by insurance regulators, are not considered presentations in conformity with
generally accepted accounting principles when presented for comparative purposes
with the enterprise's financial statements for periods subsequent to the
effective date of Statement No. 120. Accordingly, our present opinion on the
presentation of the 1995 and 1994 financial statements in accordance with
generally accepted accounting principles, as presented herein, is different from
that expressed in our previous report.
As management as stated in Note 19, because the Company's management uses
financial information prepared in accordance with accounting principles
generally accepted in Canada in the normal course of business, the management of
Sun Life Assurance Company of Canada (U.S.) has determined that the cost of
complying with Statement No. 120 would exceed the benefits that the Company, or
the users of its financial statements, would experience. Consequently, the
Company has elected not to apply such standards in the preparation of these
financial statements.
DELOITTE & TOUCHE LLP
February 3, 1997
61
<PAGE>
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS,
ACCOUNT VALUES AND CASH SURRENDER VALUES
<PAGE>
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS, SURRENDER VALUES
AND ACCUMULATED PREMIUMS
The Tables on the following pages illustrate the way in which a Policy's
Death Benefit, Account Value and Cash Surrender Value could vary over an
extended period of time. They assume that all Premiums are allocated to and
remain in the Variable Account for the entire period shown and are based on
hypothetical gross annual investment returns for the Portfolios (i.e.,
investment income and capital gains and losses, realized or unrealized)
equivalent to constant gross annual rates of 0%, 6%, and 12% over the periods
indicated.
All Tables illustrate a Policy where the Insured is a male, Issue Age 45, in
the preferred (non-tobacco) rate class. These illustrations all assume a Total
Face Amount of $500,000 and payment of an annual Premium of $12,600. Tables 1,
2, 5 and 6 assume a Specified Face Amount of $500,000. Tables 3 and 4 assume a
Specified Face Amount of $50,000 and an APB Rider Face Amount of $450,000.
Tables 1 and 2 are based on guaranteed issue underwriting, Death Benefit Option
A, the Cash Value Accumulation Test and a Specified Face Amount of $500,000.
Tables 3 and 4 are based on the same assumptions, except that the Total Face
Amount reflects a Specified Face Amount of $50,000 and an APB Rider Face Amount
of $450,000. Tables 5 and 6 are based on full medical underwriting, Death
Benefit Option B, the Guideline Premium Test, and a Specified Face Amount of
$500,000. Tables 1, 3 and 5 differ from Tables 2, 4 and 6, respectively, only in
that Tables 1, 3 and 5 reflect the deduction of current Policy charges as
outlined below, while Tables 2, 4 and 6 reflect the deduction of Policy charges
at the guaranteed maximum rates (except that Kentucky Policy Owners will have
higher premium tax deductions than those reflected).
The Account Values and Death Benefits would be different from those shown if
the gross annual investment rates of return averaged 0%, 6%, and 12% over a
period of years, but fluctuated above or below such averages for individual
Policy Years. The values would also be different depending on the allocation of
a Policy's total Account Value among the Sub-Accounts of the Variable Account,
if the actual rates of return averaged 0%, 6% or 12%, but the rates of each
Portfolio varied above and below such averages.
The amounts shown for the Death Benefits and Account Values take into
account all charges and deductions imposed under the Policy based on the
assumptions set forth in the Tables. These include: Expense Charges Applied to
Premium, assuming a premium tax rate of 2% for Tables 1, 3 and 5 and 4% for
Tables 2, 4 and 6. The Daily Risk Percentage charged against the Separate
Account for mortality and expense risks, at an effective annual rate of 0.75%
for the first 10 Policy Years and 0.35% thereafter for Tables 1, 3 and 5, and
0.90% for all Policy Years for Tables 2, 4 and 6; the Monthly Expense Charge of
$13.75 per month for the first Policy Year and $7.50 per month thereafter for
Tables 1, 3 and 5, and $13.75 per month for all Policy Years for Tables 2, 4,
and 6; and the Monthly Cost of Insurance based on current charges for Tables 1,
3 and 5, and guaranteed charges for Tables 2, 4, and 6.
The amounts shown in the Tables also take into account the Portfolios'
advisory fees and operating expenses, which are assumed to be at an annual rate
of 0.7412% of the average daily net assets of each Portfolio. This is based upon
a simple average of the advisory fees and expenses of all the Portfolios for the
most recent fiscal year taking into account any applicable expense caps or
expense reimbursement arrangements. Actual fees and expenses of the Portfolios
may be more or less than 0.7412%, will vary from year to year, and will depend
upon how Account Value is allocated among the Sub-Accounts. See the individual
prospectus for each Portfolio for more information on Portfolio expenses.
The gross annual rates of investment return of 0%, 6% and 12% correspond to
net annual rates of -1.48%, 4.48%, and 10.43%, respectively, during the first 10
Policy Years and -1.09%, 4.89%, and 10.87%, respectively, thereafter taking into
account the current Daily Risk Percentage and the assumed 0.7412% charge for the
Portfolio's advisory fees and operating expenses; and -1.63%, 4.32% and 10.27%,
respectively taking into account the guaranteed Daily Risk Percentage.
A-1
<PAGE>
The hypothetical returns shown in the Tables do not reflect any charges for
income taxes against the Separate Account since no charges are currently made.
If, in the future, such charges are made, in order to produce the illustrated
death benefits and cash values, the gross annual investment rate of return would
have to exceed 0%, 6%, or 12% by a sufficient amount to cover the tax charges.
The second column of each Table shows the amount which would accumulate if
an amount equal to each Premium were invested and earned interest, after taxes,
at 5% per year, compounded annually.
We will furnish upon request a comparable Table using any specific set of
circumstances. In addition to a Table assuming Policy charges at their maximum,
we will furnish a Table assuming current Policy charges.
A-2
<PAGE>
TABLE 1
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
SUN LIFE CORPORATE VUL
MALE, PREFERRED, GI, AGE 45
$500,000 SPECIFIED FACE AMOUNT
ANNUAL PREMIUM: $12,600.00
DEATH BENEFIT OPTION A
CASH VALUE ACCUMULATION TEST
CURRENT POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS NET -1.48% NET 4.48% NET 10.43%
PAID PLUS ------------------------------- ------------------------------- ----------------------------------
INTEREST CASH CASH CASH
POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------- --------- ---------- -------- -------- ---------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 13,230 10,927 10,171 500,000 11,567 10,811 500,000 12,206 11,450 500,000
2 27,121 20,657 19,901 500,000 22,565 21,809 500,000 24,550 23,794 500,000
3 41,708 30,038 29,282 500,000 33,850 33,094 500,000 37,975 37,219 500,000
4 57,023 38,399 38,399 500,000 44,762 44,762 500,000 51,929 51,929 500,000
5 73,104 47,298 47,298 500,000 56,878 56,878 500,000 68,110 68,110 500,000
6 89,989 56,018 56,018 500,000 69,501 69,501 500,000 85,959 85,959 500,000
7 107,719 64,585 64,585 500,000 82,680 82,680 500,000 105,684 105,684 500,000
8 126,335 74,093 74,093 500,000 97,601 97,601 500,000 128,713 128,713 500,000
9 145,881 83,393 83,393 500,000 113,148 113,148 500,000 154,144 154,144 500,000
10 166,406 92,502 92,502 500,000 129,370 129,370 500,000 182,257 182,257 500,000
11 187,956 101,792 101,792 500,000 146,853 146,853 500,000 214,179 214,179 500,000
12 210,584 110,844 110,844 500,000 165,112 165,112 500,000 249,547 249,547 530,144
13 234,343 119,659 119,659 500,000 184,197 184,197 500,000 288,497 288,497 596,529
14 259,290 128,233 128,233 500,000 204,162 204,162 500,000 331,364 331,364 667,150
15 285,484 136,610 136,610 500,000 225,102 225,102 500,000 378,576 378,576 742,464
16 312,989 144,651 144,651 500,000 246,980 246,980 500,000 430,417 430,417 822,590
17 341,868 152,387 152,387 500,000 269,894 269,894 502,852 487,359 487,359 908,022
18 372,191 159,831 159,831 500,000 293,735 293,735 533,765 549,911 549,911 999,279
19 404,031 166,940 166,940 500,000 318,452 318,452 564,678 618,554 618,554 1,096,819
20 437,463 173,732 173,732 500,000 344,086 344,086 595,700 693,897 693,897 1,201,313
Age 60 285,484 136,610 136,610 500,000 225,102 225,102 500,000 378,576 378,576 742,464
Age 65 437,463 173,732 173,732 500,000 344,086 344,086 595,700 693,897 693,897 1,201,313
Age 70 631,430 201,785 201,785 500,000 486,219 486,219 753,264 1,193,598 1,193,598 1,849,154
Age 75 878,986 217,108 217,108 500,000 652,779 652,779 917,468 1,975,671 1,975,671 2,776,766
</TABLE>
(1) Assumes a $12,600.00 premium is paid at the beginning of each Policy Year.
Values will be different if premiums are paid with a different frequency or
in different amounts.
(2) Assumes that no policy loans have been made. Excessive loans or partial
surrenders may cause this Policy to lapse due to insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICY OWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE FUNDS. THE CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY LOANS OR PARTIAL SURRENDERS
WERE MADE. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
A-3
<PAGE>
TABLE 2
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
SUN LIFE CORPORATE VUL
MALE, PREFERRED, GI, AGE 45
$500,000 SPECIFIED FACE AMOUNT
ANNUAL PREMIUM: $12,600.00
DEATH BENEFIT OPTION A
CASH VALUE ACCUMULATION TEST
GUARANTEED POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS NET -1.63% NET 4.32% NET 10.27%
PAID PLUS ------------------------------- ------------------------------- ----------------------------------
INTEREST CASH CASH CASH
POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------- --------- ---------- -------- -------- ---------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 13,230 9,037 8,281 500,000 9,617 8,861 500,000 10,198 9,442 500,000
2 27,121 17,043 16,287 500,000 18,721 17,965 500,000 20,471 19,715 500,000
3 41,708 24,768 24,012 500,000 28,072 27,316 500,000 31,658 30,902 500,000
4 57,023 31,457 31,457 500,000 36,924 36,924 500,000 43,101 43,101 500,000
5 73,104 38,608 38,608 500,000 46,788 46,788 500,000 56,411 56,411 500,000
6 89,989 45,461 45,461 500,000 56,915 56,915 500,000 70,953 70,953 500,000
7 107,719 51,986 51,986 500,000 67,290 67,290 500,000 86,838 86,838 500,000
8 126,335 59,256 59,256 500,000 79,066 79,066 500,000 105,431 105,431 500,000
9 145,881 66,142 66,142 500,000 91,136 91,136 500,000 125,799 125,799 500,000
10 166,406 72,616 72,616 500,000 103,491 103,491 500,000 148,136 148,136 500,000
11 187,956 78,665 78,665 500,000 116,146 116,146 500,000 172,684 172,684 500,000
12 210,584 84,270 84,270 500,000 129,110 129,110 500,000 199,717 199,717 500,000
13 234,343 89,429 89,429 500,000 142,410 142,410 500,000 229,566 229,566 500,000
14 259,290 94,125 94,125 500,000 156,071 156,071 500,000 262,454 262,454 528,412
15 285,484 98,339 98,339 500,000 170,116 170,116 500,000 298,118 298,118 584,669
16 312,989 102,028 102,028 500,000 184,559 184,559 500,000 336,734 336,734 643,548
17 341,868 105,146 105,146 500,000 199,417 199,417 500,000 378,508 378,508 705,216
18 372,191 107,625 107,625 500,000 214,705 214,705 500,000 423,647 423,647 769,835
19 404,031 109,388 109,388 500,000 230,439 230,439 500,000 472,356 472,356 837,581
20 437,463 110,356 110,356 500,000 246,654 246,654 500,000 524,859 524,859 908,666
Age 60 285,484 98,339 98,339 500,000 170,116 170,116 500,000 298,118 298,118 584,669
Age 65 437,463 110,356 110,356 500,000 246,654 246,654 500,000 524,859 524,859 908,666
Age 70 631,430 100,579 100,579 500,000 336,971 336,971 522,045 853,795 853,795 1,322,723
Age 75 878,986 51,882 51,882 500,000 435,361 435,361 611,891 1,320,751 1,320,751 1,856,289
</TABLE>
(1) Assumes a $12,600.00 premium is paid at the beginning of each Policy Year.
Values will be different if premiums are paid with a different frequency or
in different amounts.
(2) Assumes that no policy loans have been made. Excessive loans or partial
surrenders may cause this Policy to lapse due to insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICY OWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE FUNDS. THE CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY LOANS OR PARTIAL SURRENDERS
WERE MADE. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
A-4
<PAGE>
TABLE 3
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
SUN LIFE CORPORATE VUL
MALE, PREFERRED, GI, AGE 45
$50,000 SPECIFIED FACE AMOUNT
$450,000 APB RIDER FACE AMOUNT
ANNUAL PREMIUM: $12,600.00
DEATH BENEFIT OPTION A
CASH VALUE ACCUMULATION TEST
CURRENT POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS NET -1.48% NET 4.48% NET 10.43%
PAID PLUS ------------------------------- ------------------------------- ----------------------------------
INTEREST CASH CASH CASH
POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------- --------- ---------- -------- -------- ---------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 13,230 11,189 10,802 500,000 11,866 11,479 500,000 12,544 12,157 500,000
2 27,121 21,542 21,155 500,000 23,565 23,178 500,000 25,671 25,284 500,000
3 41,708 31,539 31,152 500,000 35,585 35,197 500,000 39,963 39,576 500,000
4 57,023 40,877 40,877 500,000 47,636 47,636 500,000 55,247 55,247 500,000
5 73,104 50,379 50,379 500,000 60,560 60,560 500,000 72,494 72,494 500,000
6 89,989 59,696 59,696 500,000 74,030 74,030 500,000 91,524 91,524 500,000
7 107,719 68,852 68,852 500,000 88,098 88,098 500,000 112,558 112,558 500,000
8 126,335 78,311 78,311 500,000 103,281 103,281 500,000 136,331 136,331 500,000
9 145,881 87,564 87,564 500,000 119,105 119,105 500,000 162,587 162,587 500,000
10 166,406 96,628 96,628 500,000 135,617 135,617 500,000 191,618 191,618 500,000
11 187,956 105,891 105,891 500,000 153,434 153,434 500,000 224,602 224,602 500,000
12 210,584 114,917 114,917 500,000 172,047 172,047 500,000 261,057 261,057 554,595
13 234,343 123,709 123,709 500,000 191,509 191,509 500,000 301,188 301,188 622,770
14 259,290 132,261 132,261 500,000 211,875 211,875 500,000 345,353 345,353 695,316
15 285,484 140,619 140,619 500,000 233,243 233,243 500,000 393,996 393,996 772,704
16 312,989 148,644 148,644 500,000 255,578 255,578 500,000 447,404 447,404 855,055
17 341,868 156,367 156,367 500,000 278,904 278,904 519,639 506,068 506,068 942,879
18 372,191 163,801 163,801 500,000 303,120 303,120 550,819 570,510 570,510 1,036,710
19 404,031 170,905 170,905 500,000 328,224 328,224 582,006 641,224 641,224 1,137,018
20 437,463 177,695 177,695 500,000 354,258 354,258 613,311 718,841 718,841 1,244,497
Age 60 285,484 140,619 140,619 500,000 233,243 233,243 500,000 393,996 393,996 772,704
Age 65 437,463 177,695 177,695 500,000 354,258 354,258 613,311 718,841 718,841 1,244,497
Age 70 631,430 205,816 205,816 500,000 498,581 498,581 772,415 1,233,593 1,233,593 1,911,116
Age 75 878,986 221,401 221,401 500,000 667,655 667,655 938,376 2,039,175 2,039,175 2,866,019
</TABLE>
(1) Assumes a $12,600.00 premium is paid at the beginning of each Policy Year.
Values will be different if premiums are paid with a different frequency or
in different amounts.
(2) Assumes that no policy loans have been made. Excessive loans or partial
surrenders may cause this Policy to lapse due to insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICY OWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE FUNDS. THE CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY LOANS OR PARTIAL SURRENDERS
WERE MADE. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
A-5
<PAGE>
TABLE 4
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
SUN LIFE CORPORATE VUL
MALE, PREFERRED, GI, AGE 45
$50,000 SPECIFIED FACE AMOUNT
$450,000 APB RIDER FACE AMOUNT
ANNUAL PREMIUM: $12,600.00
DEATH BENEFIT OPTION A
CASH VALUE ACCUMULATION TEST
GUARANTEED POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS NET -1.63% NET 4.32% NET 10.27%
PAID PLUS ------------------------------- ------------------------------- ----------------------------------
INTEREST CASH CASH CASH
POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------- --------- ---------- -------- -------- ---------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 13,230 8,790 8,403 500,000 9,395 9,008 500,000 10,001 9,614 500,000
2 27,121 16,879 16,491 500,000 18,617 18,230 500,000 20,432 20,044 500,000
3 41,708 24,668 24,281 500,000 28,079 27,692 500,000 31,787 31,400 500,000
4 57,023 31,770 31,770 500,000 37,407 37,407 500,000 43,785 43,785 500,000
5 73,104 38,943 38,943 500,000 47,371 47,371 500,000 57,303 57,303 500,000
6 89,989 45,794 45,794 500,000 57,593 57,593 500,000 72,086 72,086 500,000
7 107,719 52,284 52,284 500,000 68,055 68,055 500,000 88,253 88,253 500,000
8 126,335 58,849 58,849 500,000 79,238 79,238 500,000 106,475 106,475 500,000
9 145,881 64,994 64,994 500,000 90,671 90,671 500,000 126,465 126,465 500,000
10 166,406 70,678 70,678 500,000 102,342 102,342 500,000 148,433 148,433 500,000
11 187,956 75,884 75,884 500,000 114,264 114,264 500,000 172,642 172,642 500,000
12 210,584 80,584 80,584 500,000 126,444 126,444 500,000 199,395 199,395 500,000
13 234,343 84,769 84,769 500,000 138,913 138,913 500,000 229,065 229,065 500,000
14 259,290 88,413 88,413 500,000 151,693 151,693 500,000 261,898 261,898 527,291
15 285,484 91,483 91,483 500,000 164,808 164,808 500,000 297,513 297,513 583,483
16 312,989 93,921 93,921 500,000 178,271 178,271 500,000 336,077 336,077 642,292
17 341,868 95,657 95,657 500,000 192,095 192,095 500,000 377,795 377,795 703,886
18 372,191 96,597 96,597 500,000 206,293 206,293 500,000 422,872 422,872 768,427
19 404,031 96,626 96,626 500,000 220,881 220,881 500,000 471,515 471,515 836,091
20 437,463 95,627 95,627 500,000 235,892 235,892 500,000 523,948 523,948 907,088
Age 60 285,484 91,483 91,483 500,000 164,808 164,808 500,000 297,513 297,513 583,483
Age 65 437,463 95,627 95,627 500,000 235,892 235,892 500,000 523,948 523,948 907,088
Age 70 631,430 70,721 70,721 500,000 320,222 320,222 500,000 852,443 852,443 1,320,628
Age 75 878,986 0 0 0 416,827 416,827 585,843 1,318,777 1,318,777 1,853,514
</TABLE>
(1) Assumes a $12,600.00 premium is paid at the beginning of each Policy Year.
Values will be different if premiums are paid with a different frequency or
in different amounts.
(2) Assumes that no policy loans have been made. Excessive loans or partial
surrenders may cause this Policy to lapse due to insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICY OWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE FUNDS. THE CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY LOANS OR PARTIAL SURRENDERS
WERE MADE. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
A-6
<PAGE>
TABLE 5
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
SUN LIFE CORPORATE VUL
MALE, PREFERRED, MI, AGE 45
$500,000 SPECIFIED FACE AMOUNT
ANNUAL PREMIUM: $12,600.00
DEATH BENEFIT OPTION B
GUIDELINE PREMIUM TEST
CURRENT POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS NET -1.48% NET 4.48% NET 10.43%
PAID PLUS ------------------------------- --------------------------------- ----------------------------------
INTEREST CASH CASH CASH
POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------- --------- ---------- -------- -------- ---------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 13,230 11,111 10,355 510,355 11,755 10,999 510,999 12,399 11,643 511,643
2 27,121 21,095 20,339 520,339 23,023 22,267 522,267 25,028 24,272 524,272
3 41,708 30,776 30,020 530,020 34,636 33,880 533,880 38,811 38,055 538,055
4 57,023 39,439 39,439 539,439 45,890 45,890 545,890 53,151 53,151 553,150
5 73,104 48,618 48,618 548,618 58,334 58,334 558,334 69,713 69,713 569,713
6 89,989 57,672 57,672 557,672 71,347 71,347 571,347 88,016 88,016 588,016
7 107,719 66,503 66,503 566,503 84,851 84,851 584,851 108,134 108,134 608,134
8 126,335 76,200 76,200 576,200 100,019 100,019 600,019 131,474 131,474 631,474
9 145,881 85,628 85,628 585,628 115,737 115,737 615,737 157,117 157,117 657,117
10 166,406 94,774 94,774 594,774 132,011 132,011 632,011 185,283 185,283 685,283
11 187,956 104,010 104,010 604,010 149,415 149,415 649,415 217,052 217,052 717,052
12 210,584 112,895 112,895 612,895 167,413 167,413 667,413 252,009 252,009 752,009
13 234,343 121,391 121,391 621,391 185,991 185,991 685,991 290,459 290,459 790,459
14 259,290 129,467 129,467 629,467 205,140 205,140 705,140 332,743 332,743 832,743
15 285,484 137,132 137,132 637,132 224,895 224,895 724,895 379,283 379,283 879,283
16 312,989 144,159 144,159 644,159 245,045 245,045 745,045 430,297 430,297 930,297
17 341,868 150,709 150,709 650,709 265,771 265,771 765,771 486,435 486,435 986,435
18 372,191 156,794 156,794 656,794 287,105 287,105 787,105 548,261 548,261 1,048,261
19 404,031 162,335 162,335 662,335 308,993 308,993 808,993 616,304 616,304 1,116,304
20 437,463 167,350 167,350 667,350 331,472 331,472 831,472 691,253 691,253 1,191,253
Age 60 285,484 137,132 137,132 637,132 224,895 224,895 724,895 379,283 379,283 879,283
Age 65 437,463 167,350 167,350 667,350 331,472 331,472 831,472 691,253 691,253 1,191,253
Age 70 631,430 182,058 182,058 682,058 450,881 450,881 950,881 1,195,691 1,195,691 1,695,691
Age 75 878,986 173,396 173,396 673,396 576,616 576,616 1,076,616 2,011,143 2,011,143 2,511,143
</TABLE>
(1) Assumes a $12,600.00 premium is paid at the beginning of each Policy Year.
Values will be different if premiums are paid with a different frequency or
in different amounts.
(2) Assumes that no policy loans have been made. Excessive loans or partial
surrenders may cause this Policy to lapse due to insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICY OWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE FUNDS. THE CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY LOANS OR PARTIAL SURRENDERS
WERE MADE. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
A-7
<PAGE>
TABLE 6
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
SUN LIFE CORPORATE VUL
MALE, PREFERRED, MI, AGE 45
$500,000 SPECIFIED FACE AMOUNT
ANNUAL PREMIUM: $12,600.00
DEATH BENEFIT OPTION B
GUIDELINE PREMIUM TEST
GUARANTEED POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS NET -1.63% NET 4.32% NET 10.27%
PAID PLUS ----------------------------- ------------------------------- ----------------------------------
INTEREST CASH CASH CASH
POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------- --------- --------- ------- -------- ---------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 13,230 8,993 8,237 508,237 9,571 8,815 508,815 10,149 9,393 509,393
2 27,121 16,913 16,157 516,157 18,577 17,821 517,821 20,313 19,557 519,557
3 41,708 24,505 23,749 523,749 27,769 27,013 527,013 31,312 30,556 530,556
4 57,023 31,009 31,009 531,009 36,388 36,388 536,388 42,463 42,463 542,463
5 73,104 37,917 37,917 537,917 45,927 45,927 545,927 55,347 55,347 555,347
6 89,989 44,465 44,465 544,465 55,624 55,624 555,624 69,291 69,291 569,291
7 107,719 50,613 50,613 550,613 65,438 65,438 565,438 84,359 84,359 584,359
8 126,335 57,418 57,418 557,418 76,489 76,489 576,489 101,843 101,843 601,843
9 145,881 63,739 63,739 563,739 87,635 87,635 587,635 120,730 120,730 620,730
10 166,406 69,535 69,535 569,535 98,829 98,829 598,829 141,110 141,110 641,110
11 187,956 74,784 74,784 574,784 110,041 110,041 610,041 163,105 163,105 663,105
12 210,584 79,456 79,456 579,456 121,232 121,232 621,232 186,840 186,840 686,840
13 234,343 83,540 83,540 583,540 132,381 132,381 632,381 212,472 212,472 712,472
14 259,290 87,010 87,010 587,010 143,449 143,449 643,449 240,159 240,159 740,159
15 285,484 89,836 89,836 589,836 154,392 154,392 654,392 270,070 270,070 770,070
16 312,989 91,965 91,965 591,965 165,138 165,138 665,138 302,364 302,364 802,364
17 341,868 93,333 93,333 593,333 175,602 175,602 675,602 337,208 337,208 837,208
18 372,191 93,857 93,857 593,857 185,674 185,674 685,674 374,764 374,764 874,764
19 404,031 93,441 93,441 593,441 195,225 195,225 695,225 415,193 415,193 915,193
20 437,463 91,997 91,997 591,997 204,124 204,124 704,124 458,682 458,682 958,682
Age 60 285,484 89,836 89,836 589,836 154,392 154,392 654,392 270,070 270,070 770,070
Age 65 437,463 91,997 91,997 591,997 204,124 204,124 704,124 458,682 458,682 958,682
Age 70 631,430 66,870 66,870 566,870 234,494 234,494 734,494 730,573 730,573 1,230,573
Age 75 878,986 897 897 500,897 223,122 223,122 723,122 1,118,007 1,118,007 1,618,007
</TABLE>
(1) Assumes a $12,600.00 premium is paid at the beginning of each Policy Year.
Values will be different if premiums are paid with a different frequency or
in different amounts.
(2) Assumes that no policy loans have been made. Excessive loans or partial
surrenders may cause this Policy to lapse due to insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICY OWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE FUNDS. THE CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY LOANS OR PARTIAL SURRENDERS
WERE MADE. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
A-8
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
SUBJECT TO THE TERMS AND CONDITIONS OF SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE UNDERSIGNED REGISTRANT HEREBY UNDERTAKES TO FILE
WITH THE SECURITIES AND EXCHANGE COMMISSION SUCH SUPPLEMENTARY AND PERIODIC
INFORMATION, DOCUMENTS AND REPORTS AS MAY BE PRESCRIBED BY ANY RULE OR
REGULATION OF THE COMMISSION HERETOFORE OR HEREAFTER DULY ADOPTED PURSUANT TO
AUTHORITY CONFERRED IN THAT SECTION.
UNDERTAKING WITH RESPECT TO INDEMNIFICATION
INSOFAR AS INDEMNIFICATION FOR LIABILITY ARISING UNDER THE SECURITIES
ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS AND CONTROLLING PERSONS
OF THE DEPOSITOR PURSUANT TO ITS CERTIFICATE OF INCORPORATION, BY-LAWS, OR
OTHERWISE, THE DEPOSITOR HAS BEEN ADVISED THAT IN THE OPINION OF THE
SECURITIES AND EXCHANGE COMMISSION SUCH INDEMNIFICATION IS AGAINST PUBLIC
POLICY AS EXPRESSED IN THE ACT AND IS, THEREFORE, UNENFORCEABLE. IN THE EVENT
THAT A CLAIM FOR INDEMNIFICATION AGAINST SUCH LIABILITIES (OTHER THAN THE
PAYMENT BY THE DEPOSITOR OF EXPENSES INCURRED OR PAID BY A DIRECTOR, OFFICER
OR CONTROLLING PERSON OF THE DEPOSITOR IN THE SUCCESSFUL DEFENSE OF ANY
ACTION, SUIT OR PROCEEDING) IS ASSERTED BY SUCH DIRECTOR, OFFICER OR
CONTROLLING PERSON IN CONNECTION WITH THE SECURITIES BEING REGISTERED, THE
DEPOSITOR WILL, UNLESS IN THE OPINION OF ITS COUNSEL THE MATTER HAS BEEN
SETTLED BY CONTROLLING PRECEDENT, SUBMIT TO A COURT OF APPROPRIATE
JURISDICTION THE QUESTION WHETHER SUCH INDEMNIFICATION BY IT IS AGAINST
PUBLIC POLICY AS EXPRESSED IN THE ACT AND WILL BE GOVERNED BY THE FINAL
ADJUDICATION OF SUCH ISSUE.
REPRESENTATION WITH RESPECT TO SECTION 26(e) OF THE INVESTMENT COMPANY
ACT OF 1940.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) (SUN LIFE OF CANADA (U.S.))
REPRESENTS THAT THE FEES AND CHARGES DEDUCTED UNDER THE POLICY, IN THE
AGGREGATE, ARE REASONABLE IN RELATION TO THE SERVICES RENDERED, THE EXPENSES
TO BE INCURRED, AND THE RISKS ASSUMED BY SUN LIFE OF CANADA (U.S.)
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
THIS REGISTRATION STATEMENT COMPRISES THE FOLLOWING PAPERS AND DOCUMENTS:
THE FACING SHEET
CROSS-REFERENCE SHEET
THE PROSPECTUS CONSISTING OF ___ PAGES
THE UNDERTAKING TO FILE REPORTS
THE UNDERTAKING WITH RESPECT TO INDEMNIFICATION
REPRESENTATION PURSUANT TO SECTION 26(e) OF THE
INVESTMENT COMPANY ACT OF 1940
THE SIGNATURES
WRITTEN CONSENTS OF THE FOLLOWING PERSONS:
MARGARET SEARS MEAD, ESQ.
JOHN E. COLEMAN, FSA, MAAA
DELOITTE & TOUCHE LLP
II-2
<PAGE>
THE FOLLOWING EXHIBITS:
1. THE FOLLOWING EXHIBITS CORRESPOND TO THOSE REQUIRED BY
PARAGRAPH A OF THE INSTRUCTIONS AS TO EXHIBITS IN FORM N-8B-2:
(1) RESOLUTION OF THE BOARD OF DIRECTORS OF SUN LIFE
ASSURANCE COMPANY OF CANADA (U.S.) DATED DECEMBER 3,
1985 AUTHORIZING THE ESTABLISHMENT OF CANADA (U.S.)
VARIABLE ACCOUNT G.**
(2) NOT APPLICABLE
(3) DISTRIBUTING CONTRACTS:
(A) AGREEMENT BETWEEN TRUST OR DEPOSITOR AND PRINCIPAL
UNDERWRITER.*
(B) SPECIMEN OF TYPICAL AGREEMENTS BETWEEN PRINCIPAL
UNDERWRITER AND DEALERS, MANAGERS, SALES
SUPERVISORS AND SALESMEN.*
(C) SCHEDULE OF SALES COMMISSIONS REFERRED TO IN ITEM
38(c).*
(4) NOT APPLICABLE
(5) FORM OF POLICY AND RIDER
(A) FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE
INSURANCE POLICY*
(B) ADDITIONAL PROTECTION BENEFIT RIDER*
________________
* INCORPORATED BY REFERENCE TO THE PRE-EFFECTIVE AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT OF SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
ON FORM S-6, FILE NO. 333-13087.
** INCORPORATED BY REFERENCE TO THE REGISTRATION STATEMENT OF SUN LIFE OF
CANADA (U.S.) VARIABLE ACCOUNT F ON FORM N-4, FILE NO. 33-29852.
*** INCORPORATED BY REFERENCE TO THE REGISTRATION STATEMENT OF THE DEPOSITOR ON
FORM S-1, FILE NO. 33-29851.
II-3
<PAGE>
(6) (I) CERTIFICATE OF INCORPORATION OF SUN LIFE ASSURANCE
COMPANY OF CANADA (U.S.)***
(II) BY-LAWS OF SUN LIFE ASSURANCE COMPANY OF CANADA
(U.S.)***
(7) NOT APPLICABLE
(8) AGREEMENTS BETWEEN THE TRUST OR THE DEPOSITOR
CONCERNING THE TRUST WITH THE ISSUER, DEPOSITOR,
PRINCIPAL UNDERWRITER OR INVESTMENT ADVISER OF ANY
UNDERLYING INVESTMENT COMPANY OR ANY AFFILIATED PERSON
OF SUCH PERSONS.
(A) PARTICIPATION AGREEMENT WITH VARIABLE INSURANCE
PRODUCTS FUND*
(B) PARTICIPATION AGREEMENT WITH VARIABLE INSURANCE
PRODUCTS FUND II*
(C) FUND PARTICIPATION AGREEMENT WITH JPM SERIES
TRUST II*
(D) PARTICIPATION AGREEMENT WITH MFS/SUN LIFE
INSURANCE TRUST*
(E) FUND PARTICIPATION AGREEMENT WITH NEUBERGER &
BERMAN ADVISERS MANAGEMENT TRUST*
(F) FUND PARTICIPATION AGREEMENT WITH TEMPLETON
VARIABLE PRODUCTS SERIES FUND*
(9) NOT APPLICABLE
(10) FORM OF APPLICATION FOR FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE POLICY.*
(11) MEMORANDUM DESCRIBING SUN LIFE ASSURANCE COMPANY
OF CANADA (U.S.)'S ISSUANCE, TRANSFER AND REDEMPTION
PROCEDURES FOR THE POLICIES.*
2. OPINION AND CONSENT OF COUNSEL AS TO THE LEGALITY OF THE
SECURITIES BEING REGISTERED.
3. NONE.
4. NOT APPLICABLE.
5. NOT APPLICABLE.
6. ACTUARIAL OPINION AND CONSENT.
7. (A) POWERS OF ATTORNEY*
(B) POWER OF ATTORNEY OF S. CAESAR RABOY
8. CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT.
________________
* INCORPORATED BY REFERENCE TO THE PRE-EFFECTIVE AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT OF SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
ON FORM S-6, FILE NO. 333-13087.
** INCORPORATED BY REFERENCE TO THE REGISTRATION STATEMENT OF SUN LIFE OF
CANADA (U.S.) VARIABLE ACCOUNT F ON FORM N-4, FILE NO. 33-29852.
*** INCORPORATED BY REFERENCE TO THE REGISTRATION STATEMENT OF THE DEPOSITOR ON
FORM S-1, FILE NO. 33-29851.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT, SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G HAS DULY CAUSED THIS
REGISTRATION STATEMENT ON FORM S-6 TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED AND ITS SEAL TO BE HEREUNTO AFFIXED AND
ATTESTED, ALL IN THE TOWN OF WELLESLEY, AND COMMONWEALTH OF MASSACHUSETTS ON
THE 30TH DAY OF APRIL, 1997.
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
(REGISTRANT)
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(DEPOSITOR)
BY* /s/ John D. McNeil
------------------------------------
John D. McNeil, Chairman
Attest /s/ Margaret Sears Mead
--------------------------
Margaret Sears Mead, Assistant Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* /s/ John D. McNeil Chairman and Director
- ---------------------------- (Principal Executive APRIL 30, 1997
John D. McNeil Officer)
* /s/ Robert P. Vrolyk Vice President and
- ---------------------------- Actuary (Principal APRIL 30, 1997
Robert P. Vrolyk Financial & Accounting
Officer)
* /s/ A. Keith Brodkin Director
- --------------------------- APRIL 30, 1997
A. Keith Brodkin
_______________
* By Margaret Sears Mead pursuant to Power of Attorney filed with
Pre-Effective Amendment No. 1 to the Registration Statement of Sun Life of
Canada (U.S.) Variable Account G on Form S-6, File No. 333-13087.
II-5
<PAGE>
* /s/ M. Colyer Crum Director
- ---------------------------- APRIL 30, 1997
M. Colyer Crum
* /s/ Richard B. Bailey Director
- ---------------------------- APRIL 30, 1997
Richard B. Bailey
* /s/ David D. Horn Senior Vice President and
- ---------------------------- General Manager and APRIL 30, 1997
David D. Horn Director
* /s/ John S. Lane Director
- ---------------------------- APRIL 30, 1997
John S. Lane
* /s/ Angus A. MacNaughton Director
- ---------------------------- APRIL 30, 1997
Angus A. MacNaughton
* /s/ Donald A. Stewart President and Director
- ---------------------------- APRIL 30, 1997
Donald A. Stewart
** /s/ S. Caesar Raboy Senior Vice President and
- ---------------------------- Deputy General Manager APRIL 30, 1997
S. Caesar Raboy and Director
__________________________
* By Margaret Sears Mead pursuant to Power of Attorney filed with
Pre-Effective Amendment No. 1 to the Registration Statement of Sun Life of
Canada (U.S.) Variable Account G on Form S-6, File No. 333-13087.
** By Margaret Sears Mead pursuant to Power of Attorney filed herewith.
II-6
<PAGE>
EXHIBIT INDEX
1.(3) DISTRIBUTING CONTRACTS:
(A) AGREEMENT BETWEEN TRUST OR DEPOSITOR AND PRINCIPAL
UNDERWRITER.+
(B) SPECIMEN OF TYPICAL AGREEMENTS BETWEEN PRINCIPAL
UNDERWRITER AND DEALERS, MANAGERS, SALES
SUPERVISORS AND SALESMEN.+
(C) SCHEDULE OF SALES COMMISSIONS REFERRED TO IN ITEM
38(c).+
1.(5) FORM OF POLICY AND RIDER
(A) FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE
INSURANCE POLICY+
(B) ADDITIONAL PROTECTION BENEFIT RIDER+
1.(8) AGREEMENTS BETWEEN THE TRUST OR THE DEPOSITOR
CONCERNING THE TRUST WITH THE ISSUER, DEPOSITOR,
PRINCIPAL UNDERWRITER OR INVESTMENT ADVISER OF ANY
UNDERLYING INVESTMENT COMPANY OR ANY AFFILIATED PERSON
OF SUCH PERSONS.
(A) PARTICIPATION AGREEMENT WITH VARIABLE INSURANCE
PRODUCTS FUND+
(B) PARTICIPATION AGREEMENT WITH VARIABLE INSURANCE
PRODUCTS FUND II+
(C) FUND PARTICIPATION AGREEMENT WITH JPM SERIES
TRUST II+
(D) PARTICIPATION AGREEMENT WITH MFS/SUN LIFE
INSURANCE TRUST+
(E) FUND PARTICIPATION AGREEMENT WITH NEUBERGER &
BERMAN ADVISERS MANAGEMENT TRUST+
(F) FUND PARTICIPATION AGREEMENT WITH TEMPLETON
VARIABLE PRODUCTS SERIES FUND+
1.(10) FORM OF APPLICATION FOR FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE POLICY.+
1.(11) MEMORANDUM DESCRIBING SUN LIFE ASSURANCE COMPANY OF
CANADA (U.S.)'S ISSUANCE, TRANSFER AND REDEMPTION
PROCEDURES FOR THE POLICIES.+
2. OPINION AND CONSENT OF COUNSEL AS TO THE LEGALITY OF THE
SECURITIES BEING REGISTERED.
6. ACTUARIAL OPINION AND CONSENT.
7. (A) POWERS OF ATTORNEY.*
(B) POWER OF ATTORNEY OF S. CAESAR RABOY
8. CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT.
* INCORPORATED BY REFERENCE TO THE PRE-EFFECTIVE AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT OF SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
ON FORM S-6, FILE NO. 333-13087.
II-7
<PAGE>
[SUNLIFE LETTERHEAD]
April 25, 1997
Board of Directors
Sun Life Assurance Company of Canada (U.S.)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
Re: Variable Account G; File No. 333-13087
Dear Sirs:
Reference is made to Post-Effective Amendment No. 1 to the Registration
Statement ("Registration Statement") filed with the Securities and Exchange
Commission with respect to the proposed sale of an indefinite principal
amount of flexible premium variable universal life insurance policies
("Contracts") to be issued in connection with Sun Life of Canada (U.S.)
Variable Account G ("Account"), a separate account of Sun Life Assurance
Company of Canada (U.S.) ("Sun Life (U.S.)"), a Delaware corporation. I wish
to advise you that I have reviewed the corporate records of Sun Life (U.S.)
in establishing the Account, and have examined the Registration Statement,
with exhibits and Amendments thereto, and such other documents as I deem
necessary for the purposes of this opinion.
Based upon the foregoing, I am of the opinion that:
(1) Sun Life (U.S.) is duly organized and in good standing under the laws
of the State of Delaware and has the authority to issue the Contracts
in all jurisdictions where it is authorized to do a variable life
insurance business and the Contracts have been approved by the
appropriate regulatory authorities;
(2) The Account is duly established and validly existing separate account
of Sun Life (U.S.) under the laws of the State of Delaware;
(3) The Contracts, as and when issued pursuant to the terms, provisions
and conditions as set forth in the Registration Statement and
Amendments thereto, will be validly issued and will be legal and
binding obligations of Sun Life (U.S.) in accordance with their
terms; and
(4) The assets held in the Account are not chargeable with liabilities
arising out of any other business Sun Life (U.S.) may conduct.
<PAGE>
Board of Directors
April 25, 1997
Page Two
This opinion is limited to the above matters and I have not addressed
the question of taxation of the Contracts. I hereby consent to the
filing of this opinion as an exhibit to the Registration Statement and
to the use of my name under the caption "Legal Matters" in the
Prospectus contained in the Registration Statement.
Very truly yours,
/s/ Margaret Sears Mead
Assistant Vice President and Secretary
MSM:sh
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> DEC-23-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 100,116
<INVESTMENTS-AT-VALUE> 100,116
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 100,116
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 10,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 100,116
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.012
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
April 23, 1997
Gentlemen:
In my capacity as Product Officer for Sun Life Assurance Company of Canada, I
have provided actuarial advice concerning: (a) the preparation of a
registration statement for Sun Life of Canada (U.S.) Variable Account G filed
on Form S-6 with the Securities Exchange Commission under the Securities Act
of 1933 (the "Registration Statement") regarding the offer and sale of
flexible premium variable universal life insurance policies (the "Policies");
and (b) the preparation of policy forms for the Policies described in the
Registration Statement.
It is my professional opinion that:
The illustrations of cash surrender values, account values, death benefits
and accumulated premiums in the Appendix to the prospectus contained in the
Registration Statement, are based on the assumptions stated in the
illustrations, and are consistent with the provisions of the Policies. The
rate structure of the Policies has not been designed so as to make the
relationship between premiums and benefits, as shown in the illustrations,
appear to be more favorable to prospective purchasers of Policies aged 45 in
the rate classes illustrated than to prospective purchasers of Policies, for
male or females, at other ages.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name under the heading "Experts"
in the prospectus.
Very truly yours,
/s/ John E. Coleman
John E. Coleman, FSA, MAAA
Product Officer
<PAGE>
Exhibit 8
We consent to the use in this Registration Statement No. 333-13087 of
Sun Life of Canada (U.S.) Variable Account G on Form S-6 of our report dated
April 22, 1997 accompanying the financial statement of Sun Life of Canada
(U.S.) Variable Account G and to the use of our report dated February 3, 1997
accompanying the financial statements of Sun Life Assurance Company of Canada
(U.S.) appearing in the Prospectus, which is a part of such Registration
Statement, and to the incorporation by reference of our reports dated
February 3, 1997 appearing in the Annual Report on Form 10-K of Sun Life
Assurance Company of Canada (U.S.) for the year ended December 31, 1996.
We also consent to the references to us under the heading "Accountants" in
such Prospectus.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 22, 1997
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that S. Caesar Raboy, whose signature
appears below, constitutes and appoints Bonnie S. Angus, David D. Horn,
Margaret Sears Mead and David N. Brown, and each of them, his
attorneys-in-fact, each with the power of substitution, for him in any and
all capacities, to sign Registration Statements on Form S-6 and N-8B-2 of Sun
Life of Canada (U.S.) Variable Account G, and any amendments thereto, and to
file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact or his substitute or
substitutes, may do or cause to be done by virtue hereof.
/s/ S. Caesar Raboy April 25, 1997
- --------------------------------- --------------------
S. Caesar Raboy Date
