<PAGE>
Sun Life of Canada (U.S.) Variable Account G
Directors and Officers of
Sun Life Assurance Company of Canada (U.S.)
---------------------------------------------
JOHN D. McNEIL, Chairman and Director
ANNUAL REPORT, DECEMBER 31, 1997
DONALD A. STEWART, President and Director
DAVID D. HORN, Director
RICHARD B. BAILEY, Director
A. KEITH BRODKIN, Director
M. COLYER CRUM, Director
JOHN S. LANE, Director
ANGUS A. MacNAUGHTON, Director
MARGARET SEARS MEAD, Assistant Vice President and
Secretary
L. BROCK THOMSON, Vice President and
Treasurer
Sun Life Assurance Company
of Canada (U.S.)
Variable Life Insurance Service Center
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
Corporate Markets
Clarendon Insurance Agency, Inc.
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
Legal Counsel
Covington & Burling
1201 Pennsylvania Avenue, N.W.
P.O. Box 7566, Washington, D.C. 20044
Auditors
Deloitte & Touche LLP
125 Summer Street, Boston, Massachusetts 02110
ISSUED BY
This report is prepared for the general information of
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
contract owners. It is authorized for distribution to
prospective purchasers only if preceded or
accompanied by an effective prospectus.
Sun Life Corporate VUL
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
STATEMENT OF CONDITION-- December 31, 1997
<TABLE>
<CAPTION>
ASSETS:
Investments in MFS/Sun Life Series Trust: Shares Cost Value
---------- ---------- ----------
<S> <C> <C> <C>
Capital Appreciation Series ("CAS")....................................................... -- $ -- $ --
Emerging Growth Series ("EGS")............................................................ 157 2,566 2,823
Government Securities Series ("GSS")...................................................... 11,986 155,804 156,303
Total Return Series ("TRS")............................................................... -- -- --
World Growth Series ("WGO")............................................................... 14,050 195,302 206,258
Investments in Fidelity Variable Insurance Products Fund:
Equity Income Protfolio ("FEI")........................................................... 531 11,825 12,904
Growth Portfolio ("FGP").................................................................. 6,650 245,181 246,710
High Income Portfolio ("FHI")............................................................. -- -- --
Money Market Portfolio ("FMM")............................................................ 105,701 105,701 105,701
Investments in Fidelity Variable Insurance Products Fund II:
Contrafund Portfolio ("FCN").............................................................. 327 5,911 6,519
Index 500 Portfolio ("FIP")............................................................... 8,550 875,071 978,008
Investments in Neuberger & Berman Advisers Management Trust:
Limited Maturity Bond Portfolio ("NLM")................................................... 188 2,566 2,656
Partners Portfolio ("NPP")................................................................ 5,998 122,590 123,550
Investments in JPM Series Trust II:
Bond Portfolio ("JBP").................................................................... 8,788 99,309 99,214
Equity Portfolio ("JEP").................................................................. -- -- --
Small Company Portfolio ("JSC")........................................................... -- -- --
Investments in Templeton Variable Products Series Fund:
Templeton Stock Fund ("TSF").............................................................. 3,442 80,591 79,825
---------- ----------
Net Assets:........................................................................... $1,902,417 $2,020,471
---------- ----------
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
NET ASSETS:
Units Unit Value Value
--------- ----------- ---------
CAS............................................................................. -- $ 9.9283 $ --
<S> <C> <C> <C>
EGS............................................................................. 257 11.0026 2,823
GSS............................................................................. 14,789 10.5688 156,303
TRS............................................................................. -- 10.4715 --
WGO............................................................................. 19,525 10.5640 206,258
FEI............................................................................. 1,182 10.9124 12,904
FGP............................................................................. 24,099 10.2373 246,710
FHI............................................................................. -- 10.6343 --
FCN............................................................................. 591 11.0288 6,519
FIP............................................................................. 84,660 11.5522 978,008
NLM............................................................................. 257 10.3519 2,656
NPP............................................................................. 11,653 10.6022 123,550
JBP............................................................................. 9,348 10.6129 99,214
JEP............................................................................. -- 10.2235 --
JSC............................................................................. -- 10.9171 --
TSF............................................................................. 8,289 9.6304 79,825
---------
Net Assets Applicable to Contract Owners.................................... 1,914,770
---------
Net Assets Applicable to Sponsor (FMM).......................................... 10,000 10.5701 105,701
---------
TOTAL NET ASSETS........................................................... $2,020,471
---------
---------
</TABLE>
See notes to financial statements
Continued
1
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
STATEMENT OF OPERATIONS-- Year Ended December 31, 1997
<TABLE>
<CAPTION>
CAS EGS GSS TRS
Sub-Account Sub-Account Sub-Account Sub-Account
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Dividend income and capital gain distributions received... $ -- $ -- $ -- $ --
------ ------ --- ------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment transactions:
Proceeds from sales..................................... $ -- $ 56 $ 58 $ --
Costs of investments sold............................... -- 50 56 --
------ ------ --- ------
Net realized gains (losses)........................... $ -- $ 6 $ 2 $ --
------ ------ --- ------
Net unrealized appreciation (depreciation) on investments:
End of year............................................. $ -- $ 257 $ 499 $ --
Beginning of year....................................... -- -- -- --
------ ------ --- ------
Change in unrealized appreciation (depreciation)...... $ -- $ 257 $ 499 $ --
------ ------ --- ------
Realized and unrealized gains (losses).............. $ -- $ 263 $ 501 $ --
------ ------ --- ------
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS........... $ -- $ 263 $ 501 $ --
------ ------ --- ------
------ ------ --- ------
<CAPTION>
WGO
Sub-Account
-----------
<S> <C>
NET INVESTMENT INCOME:
Dividend income and capital gain distributions received... $ --
-----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment transactions:
Proceeds from sales..................................... $ 5,033
Costs of investments sold............................... 4,730
-----------
Net realized gains (losses)........................... $ 303
-----------
Net unrealized appreciation (depreciation) on investments:
End of year............................................. $ 10,956
Beginning of year....................................... --
-----------
Change in unrealized appreciation (depreciation)...... $ 10,956
-----------
Realized and unrealized gains (losses).............. $ 11,259
-----------
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS........... $ 11,259
-----------
-----------
</TABLE>
<TABLE>
<CAPTION>
FEI FGP FHI FMM FCN
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Dividend income and capital gain distributions received... $ -- $ -- $ -- $ 8,584 $ --
------ ------ --- ----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment transactions:
Proceeds from sales..................................... $ 219 $ 10 $ -- $ 615,415 $ 114
Costs of investments sold............................... 207 10 -- 615,415 106
------ ------ --- ----------- -----------
Net realized gains (losses)........................... $ 12 $ -- $ -- $ -- $ 8
------ ------ --- ----------- -----------
Net unrealized appreciation (depreciation) on investments:
End of year............................................. $ 1,079 $ 1,529 $ -- $ -- $ 608
Beginning of year....................................... -- -- -- -- --
------ ------ --- ----------- -----------
Change in unrealized appreciation (depreciation)...... $ 1,079 $ 1,529 $ -- $ -- $ 608
------ ------ --- ----------- -----------
Realized and unrealized gains (losses).............. $ 1,091 $ 1,529 $ -- $ -- $ 616
------ ------ --- ----------- -----------
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS........... $ 1,091 $ 1,529 $ -- $ 8,584 $ 616
------ ------ --- ----------- -----------
------ ------ --- ----------- -----------
</TABLE>
Continued
2
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
STATEMENT OF OPERATIONS-- continued
<TABLE>
<CAPTION>
FIP NLM NPP JBP JEP
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
----------- --------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Dividend income and capital gain distributions received... $ -- $ -- $ -- $ 1,837 $ --
----------- --- ----------- ------ -----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment transactions:
Proceeds from sales..................................... $ 21,118 $ 51 $ 5 $ 1,138 $ --
Costs of investments sold............................... 19,092 50 5 1,094 --
----------- --- ----------- ------ -----------
Net realized gains (losses)........................... $ 2,026 $ 1 $ -- $ 44 $ --
----------- --- ----------- ------ -----------
Net unrealized appreciation (depreciation) on investments:
End of year............................................. $ 102,937 $ 90 $ 960 $ (95) $ --
Beginning of year....................................... -- -- -- -- --
----------- --- ----------- ------ -----------
Change in unrealized appreciation (depreciation)...... $ 102,937 $ 90 $ 960 $ (95) $ --
----------- --- ----------- ------ -----------
Realized and unrealized gains (losses).............. $ 104,963 $ 91 $ 960 $ (51) $ --
----------- --- ----------- ------ -----------
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS........... $ 104,963 $ 91 $ 960 $ 1,786 $ --
----------- --- ----------- ------ -----------
----------- --- ----------- ------ -----------
</TABLE>
<TABLE>
<CAPTION>
JCS TSF
Sub-Account Sub-Account Total
--------------- ----------- -----------
<S> <C> <C> <C>
NET INVESTMENT INCOME:
Dividend income and capital gain distributions received.......................... $ -- $ -- $ 10,421
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment transactions:
Proceeds from sales............................................................ $ -- $ 321 643,538
Costs of investments sold...................................................... -- 323 641,138
--- ----------- -----------
Net realized gains (losses)................................................ $ -- $ (2) $ 2,400
--- ----------- -----------
Net unrealized appreciation (depreciation) on investments:
End of year.................................................................... $ -- $ (766) 118,054
Beginning of year.............................................................. -- -- --
--- ----------- -----------
Change in unrealized appreciation (depreciation)............................. $ -- $ (766) $ 118,054
--- ----------- -----------
Realized and unrealized gains (losses)..................................... $ -- $ (768) $ 120,454
--- ----------- -----------
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS.................................. $ -- $ (768) $ 130,875
--- ----------- -----------
--- ----------- -----------
</TABLE>
See notes to financial statements
3
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CAS EGS GSS
Sub-Account Sub-Account Sub-Account
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Period Ended Period Ended Period Ended
December 31, December 31, December 31,
-------------------- -------------------- --------------------
<CAPTION>
1997 1996 1997 1996 1997 1996
--- --- --------- --- --------- ---
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income.................................. $ -- $ -- $ -- $ -- $ -- $ --
Net realized gains..................................... -- -- 6 -- 2 --
Net unrealized gains (losses).......................... -- -- 257 -- 499 --
--- --- --------- --- --------- ---
Increase (decrease) in net assets from
operations........................................ $ -- $ -- $ 263 $ -- $ 501 $ --
--- --- --------- --- --------- ---
CONTRACT OWNER TRANSACTIONS:
Premium payments Received.............................. $ -- $ -- $ 2,617 $ -- $ 2,618 $ --
Transfers between Sub-Accounts......................... -- -- -- -- 153,244 --
Policy and contract deductions......................... -- -- (57) -- (60) --
--- --- --------- --- --------- ---
Increase (decrease) in net assets from contract owner
transactions........................................ $ -- $ -- $ 2,560 $ -- $ 155,802 $ --
--- --- --------- --- --------- ---
Increase (decrease) in net assets.................. $ -- $ -- $ 2,823 $ -- $ 156,303 $ --
NET ASSETS:
Beginning of period.................................... -- -- -- -- -- --
--- --- --------- --- --------- ---
End of period.......................................... $ -- $ -- $ 2,823 $ -- $ 156,303 $ --
--- --- --------- --- --------- ---
--- --- --------- --- --------- ---
<CAPTION>
TRS
Sub-Account
--------------------
<S> <C> <C>
Period Ended
December 31,
--------------------
1997 1996
--- ---
<S> <C> <C>
OPERATIONS:
Net investment income.................................. $ -- $ --
Net realized gains..................................... -- --
Net unrealized gains (losses).......................... -- --
--- ---
Increase (decrease) in net assets from
operations........................................ $ -- $ --
--- ---
CONTRACT OWNER TRANSACTIONS:
Premium payments Received.............................. $ -- $ --
Transfers between Sub-Accounts......................... -- --
Policy and contract deductions......................... -- --
--- ---
Increase (decrease) in net assets from contract owner
transactions........................................ $ -- $ --
--- ---
Increase (decrease) in net assets.................. $ -- $ --
NET ASSETS:
Beginning of period.................................... -- --
--- ---
End of period.......................................... $ -- $ --
--- ---
--- ---
</TABLE>
See notes to financial statements
Continued
4
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
STATEMENTS OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
WGO FEI FGP FHI
Sub-Account Sub-Account Sub-Account Sub-Account
-------------------- -------------------- -------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended
Period Ended Period Ended Period Ended December
December 31, December 31, December 31, 31,
-------------------- -------------------- -------------------- ---------
<CAPTION>
1997 1996 1997 1996 1997 1996 1997
--------- --- --------- --- --------- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income............................. $ -- $ -- $ -- $ -- $ -- $ -- $ --
Net realized gains................................ 303 -- 12 -- -- -- --
Net unrealized gains (losses)..................... 10,956 -- 1,079 -- 1,529 -- --
--------- --- --------- --- --------- --- ---
Increase (decrease) in net assets from
operations................................... $ 11,259 $ -- $ 1,091 $ -- $ 1,529 $ -- $ --
--------- --- --------- --- --------- --- ---
CONTRACT OWNER TRANSACTIONS:
Premium payments Received......................... $ 200,129 $ -- $ 12,040 $ -- $ -- $ -- $ --
Transfers between Sub-Accounts.................... -- -- -- -- 245,191 -- --
Policy and contract deductions.................... (5,130) -- (227) -- (10) -- --
--------- --- --------- --- --------- --- ---
Increase (decrease) in net assets from contract
owner transactions............................. $ 194,999 $ -- $ 11,813 $ -- $ 245,181 $ -- $ --
--------- --- --------- --- --------- --- ---
Increase (decrease) in net assets............. $ 206,258 $ -- $ 12,904 $ -- $ 246,710 $ -- $ --
NET ASSETS:
Beginning of period............................... -- -- -- -- -- -- --
--------- --- --------- --- --------- --- ---
End of period..................................... $ 206,258 $ -- $ 12,904 $ -- $ 246,710 $ -- $ --
--------- --- --------- --- --------- --- ---
--------- --- --------- --- --------- --- ---
<CAPTION>
<S> <C>
1996
---
<S> <C>
OPERATIONS:
Net investment income............................. $ --
Net realized gains................................ --
Net unrealized gains (losses)..................... --
---
Increase (decrease) in net assets from
operations................................... $ --
---
CONTRACT OWNER TRANSACTIONS:
Premium payments Received......................... $ --
Transfers between Sub-Accounts.................... --
Policy and contract deductions.................... --
---
Increase (decrease) in net assets from contract
owner transactions............................. $ --
---
Increase (decrease) in net assets............. $ --
NET ASSETS:
Beginning of period............................... --
---
End of period..................................... $ --
---
---
</TABLE>
See notes to financial statements
Continued
5
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
STATEMENTS OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
FMM FCN FIP NLM
Sub-Account Sub-Account Sub-Account Sub-Account
-------------------- -------------------- -------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended
Period Ended Period Ended Period Ended December
December 31, December 31, December 31, 31,
-------------------- -------------------- -------------------- ---------
<CAPTION>
1997 1996 1997 1996 1997 1996 1997
--------- --- --------- --- --------- --- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income............................. $ 8,584 $ -- $ -- $ -- $ -- $ -- $ --
Net realized gains................................ -- -- 8 -- 2,026 -- 1
Net unrealized gains (losses)..................... -- -- 608 -- 102,937 -- 90
--------- --- --------- --- --------- --- ---------
Increase (decrease) in net assets from
operations................................... $ 8,584 $ -- $ 616 $ -- $ 104,963 $ -- $ 91
--------- --- --------- --- --------- --- ---------
CONTRACT OWNER TRANSACTIONS:
Premium payments Received......................... $ 612,754 $ -- $ 6,022 $ -- $ 897,270 $ -- $ 2,617
Transfers between Sub-Accounts.................... (612,977) -- -- -- -- -- --
Policy and contract deductions.................... (2,776) -- (119) -- (24,225) -- (52)
--------- --- --------- --- --------- --- ---------
Increase (decrease) in net assets from contract
owner transactions............................. $ (2,999) $ -- $ 5,903 $ -- $ 873,045 $ -- $ 2,565
--------- --- --------- --- --------- --- ---------
Increase (decrease) in net assets............. $ 5,585 $ -- $ 6,519 $ -- $ 978,008 $ -- $ 2,656
NET ASSETS:
Beginning of period............................... 100,116 -- -- -- -- -- --
--------- --- --------- --- --------- --- ---------
End of period..................................... $ 105,701 $ -- $ 6,519 $ -- $ 978,008 $ -- $ 2,656
--------- --- --------- --- --------- --- ---------
--------- --- --------- --- --------- --- ---------
<CAPTION>
<S> <C>
1996
---
<S> <C>
OPERATIONS:
Net investment income............................. $ --
Net realized gains................................ --
Net unrealized gains (losses)..................... --
---
Increase (decrease) in net assets from
operations................................... --
---
CONTRACT OWNER TRANSACTIONS:
Premium payments Received......................... $ --
Transfers between Sub-Accounts.................... --
Policy and contract deductions.................... --
---
Increase (decrease) in net assets from contract
owner transactions............................. $ --
---
Increase (decrease) in net assets............. $ --
NET ASSETS:
Beginning of period............................... --
---
End of period..................................... $ --
---
---
</TABLE>
See notes to financial statements
Continued
6
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
STATEMENTS OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
NPP JBP JEP
Sub-Account Sub-Account Sub-Account
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Period Ended Period Ended Period Ended
December 31, December 31, December 31,
-------------------- -------------------- --------------------
<CAPTION>
1997 1996 1997 1996 1997 1996
--------- --- --------- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................................. $ -- $ -- $ 1,837 $ -- $ -- $ --
Net realized gains.................................... -- -- 44 -- -- --
Net unrealized gains (losses)......................... 960 -- (95) -- -- --
--------- --- --------- --- --- ---
Increase (decrease) in net assets from
operations....................................... $ 960 $ -- $ 1,786 $ -- $ -- $ --
--------- --- --------- --- --- ---
CONTRACT OWNER TRANSACTIONS:
Premium payments Received............................. $ -- $ -- $ 68,356 $ -- $ -- $ --
Transfers between Sub-Accounts........................ 122,595 -- 30,649 -- -- --
Policy and contract deductions........................ (5) -- (1,577) -- -- --
--------- --- --------- --- --- ---
Increase (decrease) in net assets from contract
owner transactions................................. $ 122,590 $ -- $ 97,428 $ -- $ -- $ --
--------- --- --------- --- --- ---
Increase (decrease) in net assets................. $ 123,550 $ -- $ 99,214 $ -- $ -- $ --
NET ASSETS:
Beginning of period................................... -- -- -- -- -- --
--------- --- --------- --- --- ---
End of period......................................... $ 123,550 $ -- $ 99,214 $ -- $ -- $ --
--------- --- --------- --- --- ---
--------- --- --------- --- --- ---
<CAPTION>
JSC
Sub-Account
--------------------
<S> <C> <C>
Period Ended
December 31,
--------------------
1997 1996
--- ---
<S> <C> <C>
OPERATIONS:
Net investment income................................. $ -- $ --
Net realized gains.................................... -- --
Net unrealized gains (losses)......................... -- --
--- ---
Increase (decrease) in net assets from
operations....................................... $ -- $ --
--- ---
CONTRACT OWNER TRANSACTIONS:
Premium payments Received............................. $ -- $ --
Transfers between Sub-Accounts........................ -- --
Policy and contract deductions........................ -- --
--- ---
Increase (decrease) in net assets from contract
owner transactions................................. $ -- $ --
--- ---
Increase (decrease) in net assets................. $ -- $ --
NET ASSETS:
Beginning of period................................... -- --
--- ---
End of period......................................... $ -- $ --
--- ---
--- ---
</TABLE>
See notes to financial statements
Continued
7
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
STATEMENTS OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
TSF
Sub-Account Total
-------------------- --------------------
<S> <C> <C> <C> <C>
Period Ended Period Ended
December 31, December 31,
-------------------- --------------------
<CAPTION>
1997 1996 1997 1996
--------- --- --------- ---------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income........................................................ $ -- $ -- $ 10,421 $ --
Net realized gains........................................................... (2) -- 2,400 --
Net unrealized gains (losses)................................................ (766) -- 118,054 --
--------- --- --------- ---------
Increase (decrease) in net assets from operations.......................... $ (768) $ -- $ 130,875 --
--------- --- --------- ---------
CONTRACT OWNER TRANSACTIONS:
Premium payments Received.................................................... $ 19,632 $ -- $1,824,055 $ --
Transfers between Sub-Accounts............................................... 61,298 -- -- --
Policy and contract deductions............................................... (337) -- (34,575) --
--------- --- --------- ---------
Increase (decrease) in net assets from contract owner transactions......... $ 80,593 $ -- $1,789,480 $ --
--------- --- --------- ---------
Increase (decrease) in net assets........................................ $ 79,825 $ -- $1,920,355 $ --
NET ASSETS:
Beginning of period.......................................................... -- -- 100,116 --
--------- --- --------- ---------
End of period................................................................ $ 79,825 $ -- $2,020,471 $ 100,116
--------- --- --------- ---------
--------- --- --------- ---------
</TABLE>
See notes to financial statements
8
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
NOTES TO FINANCIAL STATEMENTS
(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.
The assets of the Variable Account are divided into Sub-Accounts. Each
Sub-Account is invested in shares of a single 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, J.P. Morgan Series Trust II and
Templeton Variable Products Series Fund.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENT VALUATIONS
Investments in shares of an investment portfolio of the mutual funds are
recorded at their net asset value. Realized gains and losses on sales of shares
are determined on the identified cost basis. Dividend income and capital gain
distributions received by the Sub-Accounts are reinvested in additional shares
and are recognized on the ex-dividend date.
Exchanges between Sub-Accounts requested by contract owners are recorded in the
new Sub-Account upon receipt of the redemption proceeds.
FEDERAL INCOME TAX STATUS
The operations of the Variable Account are part of the operations of the Sponsor
and are not taxed separately; the Variable Account is not taxed as a regulated
investment company. The Sponsor qualifies for the federal income tax treatment
granted to life insurance companies under Subchapter L of the Internal Revenue
Code. Under existing federal income tax law, investment income and capital gains
earned by the Variable Account on contract owner reserves are not subject to
tax.
(3) CONTRACT CHARGES
The Sponsor deducts expense charges applied to premium consisting of the premium
tax, the DAC tax and the sales load. The premium tax varies by state but in
general will range from 2% to 4% of premium in most states (Kentucky charges
7%). The DAC tax is 1.25% of premium. The sales load is 8.75% of premium up to
target premium and 2.25% of premium in excess of target premium. A portion of
the sales load is refunded for surrenders in the first three policy years.
9
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
NOTES TO FINANCIAL STATEMENTS -- continued
The Sponsor deducts certain charges from the account value of each contract,
through the cancellation of units, on a monthly basis. A monthly expense charge
of $13.75 per policy at the beginning of each month during the first policy year
and $7.50 for months thereafter is deducted to recover certain administration
expenses. The Sponsor also deducts a charge at the end of each policy month for
providing life insurance protection. This charge will be based upon the
Sponsor's expectations of future mortality, persistency, interest rates,
expenses and taxes. However, the maximum rates for the base death benefit for
insureds that are not rated substandard risks will not exceed those based on the
1980 CSO Mortality Tables, and the maximum rates for the APB rider death benefit
for similar insureds will not exceed those based on 125% of the 1980 CSO
Mortality Tables.
The Sponsor deducts certain charges from the account value of each contract,
through the cancellation of units, at the end of each valuation period for the
mortality and expense risks assumed by the Sponsor. The daily deduction is
currently .0020471% (which is equivalent to an annual rate of .75%) for policies
in their first ten policy years and .0009572% (which is equivalent to an annual
rate of .35%) for policies in policy years eleven and beyond.
(4) UNIT ACTIVITY
<TABLE>
<CAPTION>
Units
Units Transferred Outstanding
Between Units Canceled End of
Sub-Accounts for Contract Year
Units Outstanding Units Purchased and Fixed Account Charges ---------
Beginning of Year ---------------- ------------------ ------------------
-------------------- Year
Year Ended Year Ended Year Ended Ended
Year Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
-------------------- ---------------- ------------------ ------------------ ---------
1997 1996 1997 1996 1997 1996 1997 1996 1997
--------- --------- ------- ------- -------- -------- -------- -------- ---------
CAS Sub-Account................... -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EGS Sub-Account................... -- -- 262 -- -- -- (5) -- 257
GSS Sub-Account................... -- -- 262 -- 14,533 -- (6) -- 14,789
TRS Sub-Account................... -- -- -- -- -- -- -- -- --
WGO Sub-Account................... -- -- 20,007 -- -- -- (482) -- 19,525
FEI Sub-Account................... -- -- 1,204 -- -- -- (22) -- 1,182
FGP Sub-Account................... -- -- -- -- 24,100 -- (1) -- 24,099
FHI Sub-Account................... -- -- -- -- -- -- -- -- --
FMM Sub-Account................... -- -- 58,312 -- (58,312) -- -- -- --
FCN Sub-Account................... -- -- 602 -- -- -- (11) -- 591
FIP Sub-Account................... -- -- 86,851 -- -- -- (2,191) -- 84,660
NLM Sub-Account................... -- -- 262 -- -- -- (5) -- 257
NPP Sub-Account................... -- -- -- -- 11,654 -- (1) -- 11,653
JBP Sub-Account................... -- -- 6,603 -- 2,896 -- (151) -- 9,348
JEP Sub-Account................... -- -- -- -- -- -- -- -- --
JSC Sub-Account................... -- -- -- -- -- -- -- -- --
TSF Sub-Account................... -- -- 1,963 -- 6,360 -- (34) -- 8,289
Unit Activity
Applicable to Contract Owners... -- -- 176,328 -- 1,231 -- (2,909) -- 174,650
------------------------------ --------- --------- ------- ------- -------- -------- -------- -------- ---------
Unit Activity from
Sponsor Transactions............ 10,000 -- -- 10,000 -- -- -- -- 10,000
------------------------------ --------- --------- ------- ------- -------- -------- -------- -------- ---------
Total Unit Activity.............. 10,000 -- 176,328 10,000 1,231 -- (2,909) -- 184,650
<CAPTION>
1996
---------
CAS --
<S> <C>
EGS --
GSS --
TRS --
WGO --
FEI --
FGP --
FHI --
FMM --
FCN --
FIP --
NLM --
NPP --
JBP --
JEP --
JSC --
TSF --
U
--
---------
U
10,000
---------
T 10,000
</TABLE>
10
<PAGE>
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 condition of Sun Life of Canada
(U.S.) Variable Account G (the "Variable Account") as of December 31, 1997, the
related statement of operations for the year then ended and the statements of
changes in net assets for the year ended December 31, 1997 and the period from
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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities held at December 31, 1997 by correspondence with the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Sun Life of Canada (U.S.) Variable Account G
at December 31, 1997, the results of its operations and the changes in its net
assets for the respective stated periods in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 6, 1998
11
