<PAGE>
PERFORMANCE SUMMARY
These performance results do not reflect any applicable surrender charges or
contract charges. Past performance is no guarantee of future results.
<TABLE>
<CAPTION>
Unit Value
------------------------------------
Beginning of Percent Change
Year December 31, 1998 in Unit Value
---------------- ----------------- --------------
<S> <C> <C> <C>
MFS/Sun Life Series Trust
Capital Appreciation Series........... $11.5953* $12.7776 10.20%
Emerging Growth Series................ 10.0026 14.7307 47.27%
Government Securities Series.......... 10.5688 11.4882 8.70%
Total Return Series................... 10.6974* 11.6974 9.35%
World Growth Series................... 10.5640 12.1073 14.61%
Fidelity Variable Insurance Products
Fund
Equity Income Portfolio............... 10.9124 12.1812 11.63%
Growth Portfolio...................... 10.2373 14.2799 39.49%
High Income Portfolio................. 10.9505* 10.1740 (7.09)%
Money Market Portfolio................ 10.5701 11.1396 5.39%
Fidelity Variable Insurance Products
Fund II
Contrafund Portfolio.................. 11.0288 14.3350 29.98%
Index 500 Portfolio................... 11.5522 14.8244 28.33%
Neuberger & Berman Advisers Management
Trust
Limited Maturity Bond Portfolio....... 10.3519 10.8064 4.39%
Partners Portfolio.................... 10.6022 11.0484 4.21%
J.P. Morgan Series Trust II
J.P. Morgan Bond Portfolio............ 10.6129 11.4626 8.01%
J.P. Morgan Equity Portfolio.......... 10.7443* 12.6050 17.32%
J.P. Morgan Small Company Portfolio... 11.2924* 10.3154 (8.65)%
Templeton Variable Products Series Fund
Templeton Stock Fund: Class 1......... 9.6304 9.7515 1.26%
</TABLE>
*Unit value on the date of commencement of operations of the Sub-Account.
1
<PAGE>
SUN LIFE (U.S.) VARIABLE ACCOUNT G
STATEMENT OF CONDITION-- December 31, 1998
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C> <C>
Investments in Mutual Funds: Shares Cost Value
---------- ------------ ------------
Investments in MFS/Sun Life Series
Trust:
Capital Appreciation Series
("CAS")............................ 2,966 $ 121,129 $ 136,214
Emerging Growth Series ("EGS")...... 1,796 35,064 41,811
Government Securities Series
("GSS")............................ 24,574 322,312 329,048
Total Return Series ("TRS")......... 30,777 660,537 654,313
World Growth Series ("WGO")......... 49,867 752,961 780,914
Investments in Fidelity Variable
Insurance Products Fund:
Equity Income Portfolio ("FEI")..... 68,879 1,626,864 1,750,918
Growth Portfolio ("FGP")............ 56,568 2,007,509 2,538,235
High Income Portfolio ("FHI")....... 14,522 165,860 167,436
Money Market Portfolio ("FMM")...... 431,101 431,101 431,101
Investments in Fidelity Variable
Insurance Products Fund II:
Contrafund Portfolio ("FCN")........ 21,234 421,289 518,962
Index 500 Portfolio ("FIP")......... 30,984 3,678,230 4,376,542
Investments in Neuberger & Berman
Advisers Management Trust:
Limited Maturity Bond Portfolio
("NLM")............................ 2,300 31,292 31,781
Partners Portfolio ("NPP").......... 52,831 1,048,824 1,000,092
Investments in J.P. Morgan Series
Trust II
J.P. Morgan Bond Portfolio
("JBP")............................ 67,951 786,433 792,983
J.P. Morgan Equity Portfolio
("JEP")............................ 12,875 198,952 203,942
J.P. Morgan Small Company Portfolio
("JSC")............................ 27,534 337,760 326,548
Investments in Templeton Variable
Products Series Fund:
Templeton Stock Fund: Class 1
("TSF")............................ 23,045 508,245 485,561
------------ ------------
NET ASSETS.................................... $ 13,134,362 $ 14,566,401
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Units Unit Value Value
--------- ---------- ------------
<S> <C> <C> <C>
NET ASSETS:
CAS............................................................................. 10,660 $ 12.7776 $ 136,214
EGS............................................................................. 2,838 14.7307 41,811
GSS............................................................................. 28,642 11.4882 329,048
TRS............................................................................. 55,937 11.6974 654,313
WGO............................................................................. 64,502 12.1073 780,914
FEI............................................................................. 143,740 12.1812 1,750,918
FGP............................................................................. 177,748 14.2799 2,538,235
FHI............................................................................. 16,457 10.1740 167,436
FMM............................................................................. 28,692 11.1396 319,705
FCN............................................................................. 36,202 14.3350 518,962
FIP............................................................................. 295,225 14.8244 4,376,542
NLM............................................................................. 2,941 10.8064 31,781
NPP............................................................................. 90,519 11.0484 1,000,092
JBP............................................................................. 69,180 11.4626 792,983
JEP............................................................................. 16,179 12.6050 203,942
JSC............................................................................. 31,656 10.3154 326,548
TSF............................................................................. 49,794 9.7515 485,561
------------
Net Assets Applicable to Contract Owners...................................... 14,455,005
------------
Net Assets Applicable to Sponsor.............................................. 10,000 11.1396 111,396
------------
Total Net Assets................................................................................... $ 14,566,401
------------
------------
</TABLE>
See notes to financial statements
2
<PAGE>
SUN LIFE (U.S.) VARIABLE ACCOUNT G
STATEMENTS OF OPERATIONS-- Year Ended December 31, 1998
<TABLE>
<CAPTION>
CAS EGS GSS TRS WGO FEI
Sub-Account* Sub-Account Sub-Account Sub-Account** Sub-Account Sub-Account
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Dividend income and capital gain
distributions received............... $ 7,994 $ 598 $ 8,657 $ 64,091 $39,888 $ 821
----------- ----------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales................. $25,721 $1,809 $ 7,242 $254,933 $26,229 $196,092
Cost of investments sold............ 27,756 1,447 7,056 250,290 24,763 201,125
----------- ----------- ----------- ----------- ----------- -----------
Net realized gains (loss)........... $(2,035) $ 362 $ 186 $ 4,643 $ 1,466 $ (5,033)
----------- ----------- ----------- ----------- ----------- -----------
Net unrealized appreciation
(depreciation) on investments:
End of year......................... $15,085 $6,747 $ 6,736 $ (6,224) $27,953 $124,054
Beginning of year................... -- 257 499 -- 10,955 1,079
----------- ----------- ----------- ----------- ----------- -----------
Change in unrealized appreciation
(depreciation)................... $15,085 $6,490 $ 6,237 $ (6,224) $16,998 $122,975
----------- ----------- ----------- ----------- ----------- -----------
Realized and unrealized gains
(losses)........................... $13,050 $6,852 $ 6,423 $ (1,581) $18,464 $117,942
----------- ----------- ----------- ----------- ----------- -----------
INCREASE IN NET ASSETS FROM
OPERATIONS............................. $21,044 $7,450 $15,080 $ 62,510 $58,352 $118,763
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
FHI
FGP Sub- FMM FCN FIP NLM
Sub-Account Account** Sub-Account Sub-Account Sub-Account Sub-Account
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Dividend income and capital gain
distributions received............... $ 34,173 $-- $ 32,102 $ 382 $ 48,449 $ 167
----------- ----------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAINS:
Realized gains (losses) on investment
transactions:
Proceeds from sales................. $131,813 $3,615 $4,370,327 $ 7,774 $549,801 $40,211
Cost of investments sold............ 130,441 3,869 4,370,327 6,607 437,848 39,705
----------- ----------- ----------- ----------- ----------- -----------
Net realized gains (losses)....... $ 1,372 $ (254) $ -- 1,167 $111,953 $ 506
----------- ----------- ----------- ----------- ----------- -----------
Net unrealized appreciation on
investments:
End of year......................... $530,726 $1,576 $ -- $ 97,673 $698,312 $ 489
Beginning of year................... 1,530 -- -- 609 102,939 90
----------- ----------- ----------- ----------- ----------- -----------
Change in unrealized
appreciation..................... $529,196 $1,576 $ -- 97,064 $595,373 $ 399
----------- ----------- ----------- ----------- ----------- -----------
Realized and unrealized gains....... $530,568 $1,322 $ -- $ 98,231 $707,326 $ 905
----------- ----------- ----------- ----------- ----------- -----------
INCREASE IN NET ASSETS FROM
OPERATIONS............................. $564,741 $1,322 $ 32,102 $ 98,613 $755,775 $ 1,072
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
* For the period April 23, 1998 (commencement of operations of Sub-Account)
through December 31, 1998.
** For the period February 11, 1998 (commencement of operations of Sub-Account)
through December 31, 1998.
See notes to financial statements
3
<PAGE>
SUN LIFE (U.S.) VARIABLE ACCOUNT G
STATEMENTS OF OPERATIONS-- Year Ended December 31, 1998 -- continued
<TABLE>
<CAPTION>
JEP
NPP JBP Sub- JSC TSF
Sub-Account Sub-Account Account** Sub-Account** Sub-Account Total
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Dividend income and capital gain
distributions received............... $ 97,246 $ 32,711 $ 19,117 $ 12,274 $ 22,221 $ 420,891
----------- ----------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales................. $253,851 $353,484 $156,221 $ 97,943 $ 84,787 $6,561,853
Cost of investments sold............ 294,613 346,482 143,195 126,054 109,596 6,521,174
----------- ----------- ----------- ----------- ----------- -----------
Net realized gains (losses)......... $(40,762) $ 7,002 $ 13,026 $(28,111) $(24,809) $ 40,679
----------- ----------- ----------- ----------- ----------- -----------
Net unrealized appreciation
(depreciation) on investments:
End of year......................... $(48,732) $ 6,550 $ 4,990 $(11,212) $(22,684) $1,432,039
Beginning of year................... 960 (95) -- -- (766) 118,057
----------- ----------- ----------- ----------- ----------- -----------
Change in unrealized appreciation
(depreciation)................... $(49,692) $ 6,645 $ 4,990 $(11,212) $(21,918) $1,313,982
----------- ----------- ----------- ----------- ----------- -----------
Realized and unrealized gains
(losses)........................... $(90,454) $ 13,647 $ 18,016 $(39,323) $(46,727) $1,354,661
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets
from operations.................... $ 6,792 $ 46,358 $ 37,133 $(27,049) $(24,506) $1,775,552
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
** For the period February 11, 1998 (commencement of operations of Sub-Account)
through December 31, 1998.
See notes to financial statements
4
<PAGE>
SUN LIFE (U.S.) VARIABLE ACCOUNT G
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CAS EGS GSS
Sub-Account Sub-Account Sub-Account
------------ ---------------------------- --------------------------
Year Ended Year Ended Period Ended Year Ended Period Ended
December 31, December 31, December 31, December 31, December 31,
------------ ------------- ------------- ------------ ------------
1998* 1998 1997 1998 1997
------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................................... $ 7,994 $ 598 $ -- $ 8,657 $ --
Net realized gains (losses)............................. (2,035) 362 6 186 2
Net unrealized gains.................................... 15,085 6,490 257 6,237 499
------------ ------------- ------ ------------ ------------
Increase in net assets from operations.............. $ 21,044 $ 7,450 $ 263 $ 15,080 $ 501
------------ ------------- ------ ------------ ------------
CONTRACT OWNER TRANSACTIONS:
Purchase payments received............................ $ 69,165 $ 18,930 $ 2,617 $ 165,413 $ 2,618
Net transfers between Sub-Accounts.................... 49,909 13,669 -- -- 153,244
Withdrawals, surrenders, annuitizations and contract
charges.............................................. (3,904) (1,061) (57) (7,748) (60)
------------ ------------- ------ ------------ ------------
Increase in net assets from contract owner
transactions........................................... $ 115,170 $ 31,538 $ 2,560 $ 157,665 $ 155,802
------------ ------------- ------ ------------ ------------
Increase in net assets................................ $ 136,214 $ 38,988 $ 2,823 $ 172,745 $ 156,303
NET ASSETS:
Beginning of year....................................... -- 2,823 -- 156,303 --
------------ ------------- ------ ------------ ------------
End of year............................................. $ 136,214 $ 41,811 $ 2,823 $ 329,048 $ 156,303
------------ ------------- ------ ------------ ------------
------------ ------------- ------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
TRS WGO FEI
Sub-Account Sub-Account Sub-Account
------------ -------------------------- ---------------------------
Year Ended Year Ended Period Ended Year Ended Period Ended
December 31, December 31, December 31, December 31, December 31,
------------ ------------ ------------ ------------ -------------
1998** 1998 1997 1998 1997
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................................... $ 64,091 $ 39,888 $ -- $ 821 $ --
Net realized gains (losses)............................. 4,643 1,466 303 (5,033) 12
Net unrealized gains (losses)........................... (6,224) 16,998 10,956 122,975 1,079
------------ ------------ ------------ ------------ -------------
Increase in net assets from operations.............. $ 62,510 $ 58,352 $ 11,259 $ 118,763 $ 1,091
------------ ------------ ------------ ------------ -------------
CONTRACT OWNER TRANSACTIONS:
Purchase payments received............................ $ 742,106 $ 540,355 $ 200,129 $1,756,032 $ 12,040
Net transfers between Sub-Accounts.................... (115,350) 2,700 -- (58,426) --
Withdrawals, surrenders, annuitizations and contract
charges.............................................. (34,953) (26,751) (5,130) (78,355) (227)
------------ ------------ ------------ ------------ -------------
Increase in net assets from contract owner
transactions........................................... $ 591,803 $ 516,304 $ 194,999 $1,619,251 $ 11,813
------------ ------------ ------------ ------------ -------------
Increase in net assets................................ $ 654,313 $ 574,656 $ 206,258 $1,738,014 $ 12,904
NET ASSETS:
Beginning of year....................................... -- 206,258 -- 12,904 --
------------ ------------ ------------ ------------ -------------
End of year............................................. $ 654,313 $ 780,914 $ 206,258 $1,750,918 $ 12,904
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
</TABLE>
*For the period April 23, 1998 (commencement of operations of Sub-Account)
through December 31, 1998.
** For the period February 11, 1998 (commencement of operations of Sub-Account)
through December 31, 1998.
See notes to financial statements
5
<PAGE>
SUN LIFE (U.S.) VARIABLE ACCOUNT G
STATEMENTS OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
FGP FHI FMM
Sub-Account Sub-Account Sub-Account
-------------------------- ------------ --------------------------
Year Ended Period Ended Year Ended Year Ended Period Ended
December 31, December 31, December 31, December 31, December 31,
------------ ------------ ------------ ------------ ------------
1998 1997 1998** 1998 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................................... $ 34,173 $ -- $ -- $ 32,102 $ 8,584
Net realized gains (losses)............................. 1,372 -- (254) -- --
Net unrealized gains.................................... 529,196 1,529 1,576 -- --
------------ ------------ ------------ ------------ ------------
Increase in net assets from operations.............. $ 564,741 $ 1,529 $ 1,322 $ 32,102 $ 8,584
------------ ------------ ------------ ------------ ------------
CONTRACT OWNER TRANSACTIONS:
Purchase payments received............................ $1,547,362 $ -- $ 75,590 $1,495,810 $ 612,754
Net transfers between Sub-Accounts.................... 259,472 245,191 94,193 (1,173,716) (612,977)
Withdrawals, surrenders, annuitizations and contract
charges.............................................. (80,050) (10) (3,669) (28,796) (2,776)
------------ ------------ ------------ ------------ ------------
Increase (decrease) in net assets from contract owner
transactions........................................... $1,726,784 $ 245,181 $ 166,114 $ 293,298 ($ (2,999)
------------ ------------ ------------ ------------ ------------
Increase in net assets................................ $2,291,525 $ 246,710 $ 167,436 $ 325,400 $ 5,585
NET ASSETS:
Beginning of year....................................... 246,710 -- -- 105,701 100,116
------------ ------------ ------------ ------------ ------------
End of year............................................. $2,538,235 $ 246,710 $ 167,436 $ 431,101 $ 105,701
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
FCN FIP NLM
Sub-Account Sub-Account Sub-Account
--------------------------- -------------------------- ----------------------------
Year Ended Period Ended Year Ended Period Ended Year Ended Period Ended
December 31, December 31, December 31, December 31, December 31, December 31,
------------ ------------- ------------ ------------ ------------- -------------
1998 1997 1998 1997 1998 1997
------------ ------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income.................... $ 382 $ -- $ 48,449 $ -- $ 167 $ --
Net realized gains....................... 1,167 8 111,953 2,026 506 1
Net unrealized gains..................... 97,064 608 595,373 102,937 399 90
------------ ------ ------------ ------------ ------------- ------
Increase in net assets from
operations.......................... $ 98,613 $ 616 $ 755,775 $ 104,963 $ 1,072 $ 91
------------ ------ ------------ ------------ ------------- ------
CONTRACT OWNER TRANSACTIONS:
Purchase payments received............. $ 153,403 $ 6,022 $2,846,625 $ 897,270 $ 26,898 $ 2,617
Net transfers between Sub-Accounts..... 268,273 -- 320,272 -- 2,696 --
Withdrawals, surrenders, annuitizations
and contract charges.................. (7,846) (119) (524,138) (24,225) (1,541) (52)
------------ ------ ------------ ------------ ------------- ------
Increase in net assets from contract
owner transactions...................... $ 413,830 $ 5,903 $2,642,759 $ 873,045 $ 28,053 $ 2,565
------------ ------ ------------ ------------ ------------- ------
Increase in net assets................. $ 512,443 $ 6,519 $3,398,534 $ 978,008 $ 29,125 $ 2,656
NET ASSETS:
Beginning of year........................ 6,519 -- 978,008 -- 2,656 --
------------ ------ ------------ ------------ ------------- ------
End of year.............................. $ 518,962 $ 6,519 $4,376,542 $ 978,008 $ 31,781 $ 2,656
------------ ------ ------------ ------------ ------------- ------
------------ ------ ------------ ------------ ------------- ------
</TABLE>
** For the period February 11, 1998 (commencement of operations of Sub-Account)
through December 31, 1998.
See notes to financial statements
6
<PAGE>
SUN LIFE (U.S.) VARIABLE ACCOUNT G
STATEMENTS OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
NPP JBP JEP
Sub-Account Sub-Account Sub-Account
-------------------------- --------------------------- ------------
Year Ended Period Ended Year Ended Period Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
------------ ------------ ------------ ------------- ------------
1998 1997 1998 1997 1998**
------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................................... $ 97,246 $ -- $ 32,711 $ 1,837 $ 19,117
Net realized gains (losses)............................. (40,762) -- 7,002 44 13,026
Net unrealized gains (losses)........................... (49,692) 960 6,645 (95) 4,990
------------ ------------ ------------ ------------- ------------
Increase in net assets from operations.............. $ 6,792 $ 960 $ 46,358 $ 1,786 $ 37,133
------------ ------------ ------------ ------------- ------------
CONTRACT OWNER TRANSACTIONS:
Purchase payments received............................ $ 829,194 $ -- $ 971,373 $ 68,356 $ 267,400
Net transfers between Sub-Accounts.................... 80,931 122,595 42,894 30,649 (92,224)
Withdrawals, surrenders, annuitizations and contract
charges.............................................. (40,375) (5) (366,856) (1,577) (8,367)
------------ ------------ ------------ ------------- ------------
Increase in net assets from contract owner
transactions........................................... $ 869,750 $ 122,590 $ 647,411 $ 97,428 $ 166,809
------------ ------------ ------------ ------------- ------------
Increase in net assets................................ $ 876,542 $ 123,550 $ 693,769 $ 99,214 $ 203,942
NET ASSETS:
Beginning of year....................................... 123,550 -- 99,214 -- --
------------ ------------ ------------ ------------- ------------
End of year............................................. $1,000,092 $ 123,550 $ 792,983 $ 99,214 $ 203,942
------------ ------------ ------------ ------------- ------------
------------ ------------ ------------ ------------- ------------
</TABLE>
<TABLE>
<CAPTION>
JSC TSF
Sub-Account Sub-Account Total
------------ --------------------------- --------------------------
Year Ended Year Ended Period Ended Year Ended Period Ended
December 31, December 31, December 31, December 31, December 31,
------------ ------------ ------------- ------------ ------------
1998** 1998 1997 1998 1997
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................................... $ 12,274 $ 22,221 $ -- $ 420,891 $ 10,421
Net realized gains (losses)............................. (28,111) (24,809) (2) 40,679 2,400
Net unrealized gains (losses)........................... (11,212) (21,918) (766) 1,313,982 118,054
------------ ------------ ------------- ------------ ------------
Increase (decrease) in net assets from operations... $ (27,049) $ (24,506) $ (768) $1,775,552 $ 130,875
------------ ------------ ------------- ------------ ------------
CONTRACT OWNER TRANSACTIONS:
Purchase payments received............................ $ 281,469 $ 257,817 $ 19,632 $12,044,942 $1,824,055
Net transfers between Sub-Accounts.................... 87,065 189,442 61,298 (28,200) --
Withdrawals, surrenders, annuitizations and contract
charges.............................................. (14,937) (17,017) (337) (1,246,364) (34,575)
------------ ------------ ------------- ------------ ------------
Increase in net assets from contract owner
transactions........................................... $ 353,597 $ 430,242 $ 80,593 $10,770,378 $1,789,480
------------ ------------ ------------- ------------ ------------
Increase in net assets................................ $ 326,548 $ 405,736 $ 79,825 $12,545,930 $1,920,355
NET ASSETS:
Beginning of year....................................... -- 79,825 -- 2,020,471 100,116
------------ ------------ ------------- ------------ ------------
End of year............................................. $ 326,548 $ 485,561 $ 79,825 $14,566,401 $2,020,471
------------ ------------ ------------- ------------ ------------
------------ ------------ ------------- ------------ ------------
</TABLE>
** For the period February 11, 1998 (commencement of operations of Sub-Account)
through December 31, 1998.
See notes to financial statements
7
<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,
Dreyfus Variable Investment Fund, T. Rowe Price Equity Series, Inc. 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 taxable, and
therefore, no provision has been made for federal income taxes.
(3) CONTRACT CHARGES
The Sponsor deducts expense charges applied to premium consisting of the premium
tax, the federal DAC tax and the sales load. The premium tax varies by state but
in general will range from 2% to 4% of premium
8
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G
NOTES TO FINANCIAL STATEMENTS -- continued
in most states (Kentucky charges 7%). The DAC tax charge 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.
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. Through October of 1998, the
daily deduction was .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 year eleven and beyond. The
daily deduction is currently .0016389% (which is equivalent to an annual rate of
.60%) for policies in their first ten policy years, .0005474% (which is
equivalent to an annual rate of .20%) for the next ten policy years and
.0002738% (which is equivalent to an annual rate of .10%) for policies in policy
years twenty-one and beyond.
9
<PAGE>
SUN LIFE (U.S.) VARIABLE ACCOUNT G
NOTES TO FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Units Withdrawn,
Units Transferred Surrendered and
Between Annuitized and
Units Outstanding Sub-Accounts Canceled for
Beginning of Year Units Purchased and Fixed Account Contract Charges
------------------ ------------------ ----------------- -----------------
Year Period Year Period Year Period Year Period
Ended Ended Ended Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
-------- -------- --------- -------- -------- -------- -------- --------
Sub-Accounts 1998 1997 1998 1997 1998 1997 1998 1997
- ------------------------------------------------- -------- -------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CAS.............................................. -- -- 6,564 -- 4,445 -- (349) --
EGS.............................................. 257 -- 1,599 262 1,067 -- (85) (5)
GSS.............................................. 14,789 -- 14,555 262 -- 14,533 (702) (6)
TRS.............................................. -- -- 69,056 -- (10,148) -- (2,971) --
WGO.............................................. 19,525 -- 46,090 20,007 1,282 -- (2,395) (482)
FEI.............................................. 1,182 -- 155,915 1,204 (6,554) -- (6,803) (22)
FGP.............................................. 24,099 -- 137,491 -- 22,870 24,100 (6,712) (1)
FHI.............................................. -- -- 7,374 -- 9,430 -- (347) --
FMM.............................................. 10,000 10,000 141,043 58,312 (109,762) (58,312) (2,589) --
FCN.............................................. 591 -- 9,406 602 26,828 -- (623) (11)
FIP.............................................. 84,660 -- 225,497 86,851 24,933 -- (39,865) (2,191)
NLM.............................................. 257 -- 2,523 262 305 -- (144) (5)
NPP.............................................. 11,653 -- 76,494 -- 6,112 11,654 (3,740) (1)
JBP.............................................. 9,348 -- 89,677 6,603 3,925 2,896 (33,770) (151)
JEP.............................................. -- -- 24,048 -- (7,212) -- (657) --
JSC.............................................. -- -- 27,699 -- 5,298 -- (1,341) --
TSF.............................................. 8,289 -- 27,080 1,963 16,159 6,360 (1,734) (34)
<CAPTION>
Units Outstanding
End of Year
------------------
Year Period
Ended Ended
Dec. 31, Dec. 31,
--------- --------
Sub-Accounts 1998 1997
- ------------------------------------------------- --------- --------
<S> <C> <C>
CAS.............................................. 10,660 --
EGS.............................................. 2,838 257
GSS.............................................. 28,642 14,789
TRS.............................................. 55,937 --
WGO.............................................. 64,502 19,525
FEI.............................................. 143,740 1,182
FGP.............................................. 177,748 24,099
FHI.............................................. 16,457 --
FMM.............................................. 38,692 10,000
FCN.............................................. 36,202 591
FIP.............................................. 295,225 84,660
NLM.............................................. 2,941 257
NPP.............................................. 90,519 11,653
JBP.............................................. 69,180 9,348
JEP.............................................. 16,179 --
JSC.............................................. 31,656 --
TSF.............................................. 49,794 8,289
</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 Capital Appreciation
Sub-Account, Emerging Growth Sub-Account, Government Securities Sub-Account,
Total Return Sub-Account, World Growth Sub-Account, Equity Income Sub-Account,
Growth Sub-Account, High Income Sub-Account, Money Market Sub-Account,
Contrafund Sub-Account, Index 500 Sub-Account, Limited Maturity Bond
Sub-Account, Partners Sub-Account, Bond Sub-Account, Equity Sub-Account, Small
Company Sub-Account, and Templeton Stock Fund Sub-Account of Sun Life of Canada
(U.S.) Variable Account G (the "Sub-Accounts") as of December 31, 1998, the
related statement of operations for the year then ended and the statements of
changes in net assets for the years ended December 31, 1998 and 1997. These
financial statements are the responsibility of management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities held at December 31, 1998 by correspondence with the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Sub-Accounts at December 31, 1998, the
results of their operations and the changes in their net assets for the
respective stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 4, 1999
11
<PAGE>
DIRECTORS AND OFFICERS OF
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
DONALD A. STEWART, Chairman and Director
C. JAMES PRIEUR, President and Director
S. CAESAR RABOY, Senior Vice President and
Deputy General Manager and Director
RICHARD B. BAILEY, Director
M. COLYER CRUM, Director
DAVID D. HORN, Director
JOHN S. LANE, Director
ANGUS A. MacNAUGHTON, Director
JOHN D. McNEIL, Director
PETER F. DEMUTH, Vice President,
Chief Counsel and Assistant Secretary
ELLEN B. KING, Secretary
ROBERT P. VROLYK, Vice President and Actuary
JAMES M. A. ANDERSON, Vice President Investments
L. BROCK THOMSON, Vice President
and Treasurer
SUN LIFE ASSURANCE COMPANY
OF CANADA (U.S.)
CORPORATE MARKETS:
One Sun Life Executive Park
Wellesley Hills, MA 02481
GENERAL DISTRIBUTOR
Clarendon Insurance Agency, Inc.
One Sun Life Executive Park, Wellesley Hills, MA 02481
AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, Massachusetts 02110-1616
COLI 2/99
SUN LIFE CORPORATE VUL-SM-
ANNUAL REPORT - DECEMBER 31, 1998
PROFESSIONALLY MANAGED LIFE INSURANCE ISSUED BY
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.),
A WHOLLY-OWNED SUBSIDIARY OF
SUN LIFE OF CANADA (U.S.) HOLDINGS, INC.
