<PAGE>
Prospectus
SUN LIFE OF CANADA (U.S.)
Futurity
Variable Universal Life
<PAGE>
[LOGO]
PROSPECTUS
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
(800) 700-6554
FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
A FLEXIBLE PREMIUM COMBINATION FIXED AND VARIABLE UNIVERSAL LIFE INSURANCE
POLICY
This prospectus describes the variable portions of a combination fixed and
variable universal life insurance policy (the "POLICY") issued by Sun Life
Assurance Company of Canada (U.S.) ("WE" or "US"). "The Policy is being offered,
depending on the circumstances, as either an individual policy or as a
certificate under a group policy. The substantive terms of a certificate under a
group policy will be identical to those of an individual policy. In this
Prospectus, unless stated otherwise, the term "Policy" will include individual
policies, group policies, and certificates issued under group policies." The
Policy allows "YOU," the policyowner, within certain limits, to:
- choose the type and amount of insurance coverage you need and
increase or decrease that coverage as your insurance needs
change;
- choose the amount and timing of premium payments;
- allocate net premium payments among 32 investment options
(including 31 variable investment options and one fixed
account investment option) and transfer Account Value among
available investment options as your investment objectives
change; and
- access your Policy's Account Value through loans and partial
or total surrenders.
This prospectus contains important information you should understand before
purchasing a Policy. We use certain special terms which are defined in
Appendix A. You should read this prospectus carefully and keep it for future
reference.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
May 1, 2000
As Supplemented August 14, 2000
and September 22, 2000
<PAGE>
VARIABLE SUB-ACCOUNT INVESTMENT OPTIONS
The assets of Sun Life of Canada (U.S.) Variable Account I (the "Variable
Account") are divided into 31 variable Sub-Accounts. Each Sub-Account uses its
assets to purchase, at their net asset value, shares of the following mutual
funds or series thereof (the "Funds").
<TABLE>
<S> <C>
AIM VARIABLE INSURANCE FUNDS, INC. MFS/SUN LIFE SERIES TRUST
AIM V.I. Capital Appreciation Fund Capital Appreciation Series
AIM V.I. Growth Fund Emerging Growth Series
AIM V.I. Growth and Income Fund Government Securities Series
AIM V.I. International Equity Fund High Yield Series
Massachusetts Investors Growth Stock Series
THE ALGER AMERICAN FUND Massachusetts Investors Trust Series
Alger American Growth Portfolio New Discovery Series
Alger American Income and Growth Portfolio Total Return Series
Alger American Small Capitalization Utilities Series
Portfolio
GOLDMAN SACHS VARIABLE INSURANCE TRUST
Goldman Sachs VIT CORE(SM) Large Cap Growth OCC ACCUMULATION TRUST
Fund Equity Portfolio
Goldman Sachs VIT CORE(SM) Small Cap Equity Managed Portfolio
Fund Mid Cap Portfolio
Goldman Sachs VIT CORE(SM) U.S. Equity Fund Small Cap Portfolio
Goldman Sachs VIT Growth and Income Fund
Goldman Sachs VIT International Equity Fund
SUN CAPITAL ADVISERS TRUST
Sun Capital Blue Chip Mid Cap Fund
Sun Capital Investment Grade Bond Fund
Sun Capital Investors Foundation Fund
Sun Capital Money Market Fund
Sun Capital Real Estate Fund
Sun Capital Select Equity Fund
</TABLE>
FIXED ACCOUNT OPTION
We periodically credit interest on amounts allocated to the fixed account
option at an effective annual rate guaranteed to be at least 3%.
II FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
TOPIC PAGE
----- ----
<S> <C>
Summary of Policy........................................... 1
Sun Life Assurance Company of Canada (U.S.)................. 7
The Variable Account........................................ 8
The Funds................................................... 9
Fees and Expenses of the Funds.............................. 14
Our General Account......................................... 14
Investment Programs......................................... 15
Dollar Cost Averaging................................... 15
Asset Rebalancing....................................... 15
Asset Allocation........................................ 16
About the Policy............................................ 16
Policy Application, Issuance and Minimum Initial
Premium................................................. 16
Right of Return Period.................................... 17
Premium Payments.......................................... 18
Premium................................................. 18
Net Premiums............................................ 18
Allocation of Net Premium............................... 18
Planned Periodic Premiums............................... 19
Death Benefit............................................. 19
Changes in Specified Face Amount.......................... 21
Minimum Changes......................................... 21
Increases............................................... 21
Decreases............................................... 21
Accessing Your Account Value................................ 21
Surrenders and Surrender Charges.......................... 21
Partial Surrenders........................................ 24
Policy Loans.............................................. 24
Transfer Privileges....................................... 25
Account Value............................................. 26
Variable Account Value.................................. 27
Net Investment Factor................................... 28
Fixed Account Value..................................... 29
Insufficient Value...................................... 30
Minimum Premium Test (No-Lapse Guarantee)............... 30
Grace Period............................................ 31
Splitting Units......................................... 31
Charges and Deductions.................................... 31
Expense Charges Applied to Premium...................... 31
Mortality and Expense Risk Charge....................... 31
</TABLE>
III FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
<TABLE>
<CAPTION>
TOPIC PAGE
----- ----
<S> <C>
Monthly Expense Charge.................................. 32
Monthly Cost of Insurance............................... 32
Monthly Cost of Insurance Rates......................... 33
Basis of Computation.................................... 33
Waivers and Reduced Charges;.............................. 33
Maturity.................................................. 33
Maturity Date Extension................................... 33
Supplemental Benefits..................................... 34
Accelerated Benefits Rider.............................. 34
Accidental Death Benefit Rider.......................... 35
Waiver of Monthly Deductions Rider...................... 35
Payment of Stipulated Amount Rider...................... 37
Termination of Policy..................................... 38
Reinstatement............................................. 38
Deferral of Payment....................................... 40
Rights of Owner........................................... 40
Rights of Beneficiary..................................... 41
Other Policy Provisions................................... 41
Addition, Deletion or Substitution of Investments....... 41
Entire Contract......................................... 41
Alteration.............................................. 41
Modification............................................ 41
Assignments............................................. 42
Nonparticipating........................................ 42
Misstatement of Age or Sex (Non-Unisex Policy).......... 42
Suicide................................................. 42
Incontestability........................................ 43
Report to Owner......................................... 43
Illustrations........................................... 43
Performance Information..................................... 43
Portfolio Performance..................................... 43
Adjusted Portfolio Performance............................ 44
Other Information......................................... 44
Federal Income Tax Considerations........................... 45
Tax Status of the Policy.................................. 46
Diversification of Investments............................ 46
Tax Treatment of Policy Benefits.......................... 47
Life Insurance Death Benefit Proceeds................... 47
Tax Deferred Accumulation............................... 47
Distributions........................................... 47
Modified Endowment Contracts............................ 47
Distributions under Modified Endowment Contracts........ 48
</TABLE>
IV FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
<TABLE>
<CAPTION>
TOPIC PAGE
----- ----
<S> <C>
Distributions under a Policy That Is Not a MEC.......... 49
Policy Loan Interest.................................... 49
Multiple Policies....................................... 49
Federal Income Tax Withholding.......................... 50
Our Taxes................................................. 50
Distribution of Policy...................................... 50
Voting Rights............................................... 51
Our Directors and Executive Officers........................ 52
Other Information........................................... 56
State Regulation.......................................... 56
Legal Proceedings......................................... 57
Experts................................................... 57
Accountants............................................... 57
Incorporation of Certain Documents by Reference........... 57
Registration Statements................................... 58
Financial Statements...................................... 58
Appendix A--Glossary of Policy Terms........................ A-1
Appendix B--Table of Death Benefit Percentages.............. B-1
Appendix C--Sample Hypothetical Illustrations............... C-1
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY
JURISDICTION WHERE THE OFFERING WOULD NOT BE LAWFUL. YOU SHOULD RELY
ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR IN THE
PROSPECTUS OR STATEMENT OF ADDITIONAL INFORMATION OF THE FUNDS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT.
V FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUMMARY OF POLICY
RIGHT OF RETURN PERIOD
You may return your Policy to us for any reason and
receive a refund within 10 days from the date of receipt
of your Policy. A longer period may apply in some states.
PREMIUM PAYMENTS
- You must make a minimum initial premium payment, the
amount of which will vary based on various factors,
including your age, sex and rating class.
- Thereafter, you choose the amount and timing of
premium payments, within certain limits.
- You may allocate your net premium payments among the
Policy's available investment options.
DEATH BENEFIT
- You have a choice of two death benefit options--
SPECIFIED FACE - the SPECIFIED FACE AMOUNT; or
AMOUNT is the - the sum of the Specified Face Amount and the
minimum amount of Account Value of your Policy.
life insurance in - For each option, the death benefit may be greater if
your Policy. necessary to satisfy federal tax laws.
- After the first Policy Year, you may:
- change your death benefit option;
- increase the Specified Face Amount,
subject to satisfactory evidence of
insurability; or
- decrease the Specified Face Amount,
provided that the Specified Face
Amount after the decrease is not less
than an amount we specify in your
Policy.
THE VARIABLE ACCOUNT
- We have established a variable separate account to
fund the variable benefits under the Policy.
- The assets of the variable separate account are
insulated from the claims of our general creditors.
FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
INVESTMENT OPTIONS
- You may allocate your net premium payments among the
31 variable Sub-Accounts and the fixed account option
listed on page ii of this prospectus.
- Each Sub-Account invests exclusively in shares of a
mutual fund portfolio.
- You may transfer amounts from one Sub-Account to
another or to the Fixed Account Value, subject to any
limits that may be imposed by the Funds.
- You may transfer amounts from the fixed account
option, subject to our rules as they may exist from
time to time.
SUPPLEMENTAL BENEFITS
- You may supplement your policy with the following
riders where available--
- accelerated benefits;
- accidental death benefit;
- waiver of monthly deductions; and
- payment of stipulated amount.
- We will deduct the cost, if any, of the rider(s) from
your Policy's Account Value on a monthly basis.
ACCESSING YOUR POLICY'S ACCOUNT VALUE
CASH SURRENDER VALUE -
is Account Value You may borrow from us using your Account Value as
minus any surrender collateral. Loans may be taxable events if your Policy
charges and the is a "modified endowment contract" for federal income
amount of any Policy tax purposes and the value of your Policy exceeds its
Debt. cost.
The SURRENDER CHARGE - You may surrender your Policy for its CASH SURRENDER
PERIOD ends 10 years VALUE. If you surrender your Policy during the
after you purchase SURRENDER CHARGE PERIOD, you will incur any applicable
or increase the surrender charges.
Specified Face - You may make a partial surrender of some of your
Amount of your Policy's Cash Surrender Value after the Policy has
Policy. been in force for one year. A partial surrender will
cause a decrease in the Specified Face Amount of your
Policy if your death benefit option is the Specified
Face Amount.
2 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
ACCOUNT VALUE
ACCOUNT VALUE is the -
sum of the amounts Your Policy's ACCOUNT VALUE will reflect--
in each Sub- Account - the premiums you pay;
and the Fixed - the investment performance of the Sub-Accounts
Account Value with you select, and/or the interest credited in the
respect to your fixed account option;
Policy. - any loans or partial surrenders;
- the charges we deduct under the Policy.
POLICY CHARGES AND DEDUCTIONS
- EXPENSE CHARGES APPLIED TO PREMIUMS--We will deduct a
charge from your premium payments not to exceed 7.25%
for sales load and our federal, state and local tax
obligations. The current charge is 5.25%.
- MORTALITY AND EXPENSE RISK CHARGE--We deduct a daily
charge from your Variable Account Value for the
mortality and expense risks we assume with respect to
the Policy. The guaranteed maximum and current daily
rate is equivalent to an annual rate of 0.60% for
Policy Years 1 through 10 and 0.20% thereafter of the
Variable Account Value.
- MONTHLY COST OF INSURANCE CHARGE--We will deduct a
monthly charge from your Account Value for the cost
of insurance. Our guaranteed monthly cost of
insurance rates are based on the 1980 Commissioner's
Standard Ordinary Smoker and Nonsmoker Mortality
Tables. The applicable charge will vary based on the
amount of insurance coverage you request and other
factors, including the insured's age, sex and rating
class.
- MONTHLY EXPENSE CHARGE--We deduct a monthly charge of
$8.00 from your Account Value for the administration
of your Policy.
- MONTHLY COST OF SUPPLEMENTAL BENEFITS--We will deduct
a monthly charge from your Account Value for the
cost, if any, of any supplemental benefit riders
issued with your Policy. The applicable charge will
vary based on various factors which may include,
among others, the amount of coverage and the
insured's age, sex and rating class.
- SURRENDER CHARGES--Within the first 10 Policy Years
or the 10 Policy Years following an increase in
Specified Face Amount, we will deduct a surrender
charge if you surrender your Policy or request a
decrease in the Specified Face Amount. The charge
will be 100% of the base surrender charge in the
first five Policy Years, or the first five Policy
Years after an increase in Specified Face Amount,
scaling down to zero after 10 Policy Years. The base
surrender charge will be an amount based on certain
factors, including the Specified Face Amount and the
insured's age, sex and rating class.
3 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
The following are examples of surrender charges at
representative Issue Ages.
FIRST YEAR SURRENDER CHARGES
PER $1,000 OF SPECIFIED FACE AMOUNT
(Non-tobacco Male)
<TABLE>
<CAPTION>
ISSUE AGE 25 ISSUE AGE 35 ISSUE AGE 45
------------ ------------ ------------
<S> <C> <C>
$ 4.63 $ 5.77 $ 7.74
<CAPTION>
ISSUE AGE 55 ISSUE AGE 65 ISSUE AGE 75
------------ ------------ ------------
$ 11.25 $ 22.38 $ 31.38
<S> <C> <C>
</TABLE>
- INTEREST ON POLICY LOANS--Policy loans accrue
interest daily at 4% annually during Policy Years 1
through 10 and 3% annually thereafter.
FEES AND EXPENSES OF THE FUNDS
You should read the You will indirectly bear the costs of investment
Funds' prospectuses management fees and other expenses paid from the assets
before investing. of the Funds you select. The following table shows the
fees and expenses paid by the Funds as a percentage of
average net assets based on information for the year
ended December 31, 1999. This information was provided
by the Funds and we have not independently verified it.
The Funds' fees and expenses are more fully described in
the current prospectuses for the Funds. You should read
them before investing.
UNDERLYING FUND ANNUAL EXPENSES (1)
(as a percentage of Fund net assets)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER ANNUAL
FEES (AFTER EXPENSES (AFTER EXPENSES (AFTER
REIMBURSEMENT)(2) REIMBURSEMENT)(2) REIMBURSEMENT)(2)
----------------- ----------------- -----------------
<S> <C> <C> <C>
AIM VARIABLE INSURANCE FUNDS
-------------------------------------------------
AIM V.I. Capital Appreciation Fund.............. 0.62% 0.11% 0.73%
AIM V.I. Growth Fund........................... 0.63% 0.10% 0.73%
AIM V.I. Growth and Income Fund................ 0.61% 0.16% 0.76%
AIM V.I. International Equity Fund............. 0.75% 0.22% 0.97%
THE ALGER AMERICAN FUND
-------------------------------------------------
Alger American Growth Portfolio................ 0.75% 0.04% 0.79%
Alger American Income and Growth Portfolio..... 0.62% 0.08% 0.70%
Alger American Small Capitalization
Portfolio.................................... 0.85% 0.05% 0.90%
GOLDMAN SACHS VARIABLE INSURANCE TRUST
-------------------------------------------------
Goldman Sachs VIT CORE-SM- Large Cap Growth
Fund(3)...................................... 0.70% 0.20% 0.90%
Goldman Sachs VIT CORE-SM- Small Cap Equity
Fund(3)...................................... 0.75% 0.25% 1.00%
Goldman Sachs VIT CORE-SM- U.S. Equity
Fund(3)...................................... 0.70% 0.20% 0.90%
Goldman Sachs VIT Growth and Income Fund(3).... 0.75% 0.25% 1.00%
Goldman Sachs VIT International Equity
Fund(3)...................................... 1.00% 0.35% 1.35%
</TABLE>
4 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER ANNUAL
FEES (AFTER EXPENSES (AFTER EXPENSES (AFTER
REIMBURSEMENT)(2) REIMBURSEMENT)(2) REIMBURSEMENT)(2)
----------------- ----------------- -----------------
<S> <C> <C> <C>
MFS/SUN LIFE SERIES TRUST
-------------------------------------------------
MFS/Sun Life Capital Appreciation Series(4).... 0.71% 0.05% 0.76%
MFS/Sun Life Emerging Growth Series............ 0.70% 0.05% 0.75%
MFS/Sun Life Government Securities Series...... 0.55% 0.06% 0.61%
MFS/Sun Life High Yield Series(4).............. 0.75% 0.08% 0.83%
MFS/Sun Life Massachusetts Investors Growth
Stock Series................................. 0.75% 0.08% 0.83%
MFS/Sun Life Massachusetts Investors Trust
Series....................................... 0.55% 0.04% 0.59%
MFS/Sun Life New Discovery Series(4)........... 0.90% 0.16% 1.06%
MFS/Sun Life Total Return Series............... 0.65% 0.04% 0.69%
MFS/Sun Life Utilities Series(4)............... 0.75% 0.06% 0.81%
OCC ACCUMULATION TRUST
-------------------------------------------------
OCC Equity Portfolio(5)........................ 0.80% 0.11% 0.91%
OCC Managed Portfolio(5)....................... 0.77% 0.06% 0.83%
OCC Mid Cap Portfolio(5)....................... 0.10% 0.93% 1.03%
OCC Small Cap Portfolio(5)..................... 0.80% 0.09% 0.89%
SUN CAPITAL ADVISERS TRUST
-------------------------------------------------
Sun Capital Blue Chip Mid Cap Fund(6)(7)....... 0.80% 0.20% 1.00%
Sun Capital Investment Grade Bond Fund(6)...... 0.60% 0.15% 0.75%
Sun Capital Investors Foundation Fund(6)(7).... 0.75% 0.15% 0.90%
Sun Capital Money Market Fund(6)............... 0.50% 0.15% 0.65%
Sun Capital Real Estate Fund(6)................ 0.95% 0.30% 1.25%
Sun Capital Select Equity Fund(6)(7)........... 0.75% 0.15% 0.90%
NOTES
------------------------
</TABLE>
(1) The information relating to Fund expenses was provided by the Funds and
we have not independently verified it. You should consult the Fund
prospectuses for more information about Fund expenses.
(2) For all Funds, the "Management Fees," "Other Expenses" and "Total Fund
Annual Expenses" are based on actual expenses for the fiscal year ended
December 31, 1999, net of any applicable expense reimbursement or
waiver.
(3) The investment advisers for the Goldman Sachs VIT Funds have
voluntarily agreed to waive or reimburse a portion of the management
fees and/or operating expenses, resulting in a reduction of the total
expenses. In particular, the investment advisers to the Goldman Sachs
VIT CORE-SM- Large Capital Growth Fund, the Goldman Sachs VIT CORE-SM-
Small Cap Equity Fund, the Goldman Sachs VIT CORE-SM- U.S. Equity Fund,
the Goldman Sachs VIT Growth and Income Fund and the Goldman Sachs VIT
International Equity Fund have voluntarily agreed to reduce or limit
certain "Other Expenses" of such Funds (excluding management fees,
taxes, interest and brokerage fees, litigation, indemnification and
other extraordinary expenses) to the extent such expenses exceed 0.20%,
0.25%, 0.20%, 0.25%, and 0.35% per annum of such Funds' average daily
net assets, respectively. The expenses of the Goldman Sachs VIT Funds
are estimated for the fiscal year ended December 31, 2000. Absent any
such waiver or reimbursement, estimated "Management Fees," estimated
"Other Expenses," and estimated "Total Fund Annual Expenses" for the
year ended December 31, 2000 will be:
0.70%, 0.42%, and 1.12% for the Goldman Sachs VIT CORE-SM- Large Cap
Growth Fund;
0.75%, 0.75%, and 1.50% for the Goldman Sachs VIT CORE-SM- Small
Cap Equity Fund;
0.70%, 0.20%, and 0.90% for the Goldman Sachs VIT CORE-SM- U.S.
Equity Fund;
0.75%, 0.47%, and 1.22% for the Goldman Sachs VIT Growth and
Income Fund; and
1.00%, 0.77%, and 1.77% for the Goldman Sachs VIT International
Equity Fund.
Fee waivers and expense reimbursements for the Goldman Sachs VIT Funds
may be discontinued at any time.
5 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
(4) The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with
its custodian and dividend disbursing agent, and may enter into such
other arrangements and directed brokerage arrangement (which would also
have the effect of reducing the Fund's expenses). Any such fee
reductions are not reflected in the table. Had these fees been taken
into account, "Total Fund Annual Expenses" would have been: 0.75% for
the MFS/Sun Life Capital Appreciation Series; 0.82% for the MFS/Sun
Life High Yield Series; 1.05% for the MFS/Sun Life New Discovery
Series; and 0.81% for the MFS/Sun Life Utilities Series.
(5) "Total Fund Annual Expenses" for the OCC Equity Portfolio, the OCC
Small Cap Portfolio, the OCC Managed Portfolio and the OCC Mid Cap
Portfolio are limited contractually by OpCap Advisers so that the
Funds' respective annualized operating expenses (net of expense
offsets) do not exceed 1% of average daily net assets. Absent this
limit, "Management Fees", "Other Expenses" and "Total Fund Annual
Expenses" were 0.80%, 0.93%, and 1.73% for the OCC Mid Cap Portfolio.
"Other Expenses" are shown gross of expense offsets afforded the
portfolio, which effectively lowered custody expenses.
(6) The investment adviser for the Sun Capital Funds has voluntarily agreed
to waive or reimburse a portion of the management fees and/or operating
expenses, resulting in a reduction of the total expenses. For the year
ended December 31, 1999, the investment adviser waived all investment
advisory fees. Absent any such waiver or reimbursement, "Management
Fees," "Other Expenses" and "Total Fund Annual Expenses" for the year
ended December 31, 1999 were: 0.80%, 3.31%; and 4.11% for the Sun
Capital Blue Chip Mid Cap Fund; 0.60%, 1.38%; and 1.98% for the Sun
Capital Investment Grade Bond Fund; 0.75%, 4.37%; and 5.12% for the Sun
Capital Investors Foundation Fund; 0.50%, 2.20%, and 2.70% for the Sun
Capital Money Market Fund; 0.95%, 2.44%, and 3.39% for the Sun Capital
Real Estate Fund; and 0.75%, 3.50%, and 4.25% for the Sun Capital
Select Equity Fund. Fee waivers and expense reimbursements for the Sun
Capital Funds may be discontinued at any time after May 1, 2000. To the
extent that the expense ratio of any Fund in the Sun Capital Advisers
Trust falls below the Fund's expense limit, the Fund's adviser reserves
the right to be reimbursed for management fees waived and Fund expenses
paid by it during the prior two years.
(7) The management fee for each of the Sun Capital Blue Chip Mid Cap Fund,
the Sun Capital Investors Foundation Fund, and the Sun Capital Select
Equity Fund decreases to 0.75%, 0.70%, and 0.70%, respectively, as the
daily net assets of each Fund exceed $300 million.
WHAT IF CHARGES AND DEDUCTIONS EXCEED CASH SURRENDER
VALUE?
- Your Policy will terminate if your Cash Surrender
Value at the beginning of any Policy Month is less
than the charges and deductions then due.
- We will send you notice and allow you a 61 day Grace
Period.
- If, within the Grace Period, you do not make a
premium payment sufficient to cover all accrued and
unpaid charges and deductions, your Policy will
terminate at the end of the Grace Period without
further notice.
6 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
MINIMUM PREMIUM TEST (NO-LAPSE GUARANTEE)
Your insurance coverage will remain in force during
the first five Policy Years even if your Policy's Cash
Surrender Value is insufficient to keep the Policy in
force, provided that your Policy meets certain
requirements.
REINSTATEMENT
If your Policy terminates due to insufficient value,
we will reinstate it within five years at your request,
subject to certain conditions.
MATURITY
Your Policy will terminate when the insured reaches
Attained Age 100. If the insured is living and your
Policy is in force on the Maturity date, your Policy's
Cash Surrender Value will be payable to you.
MATURITY EXTENSION
The Maturity date may be extended at your request.
The death benefit will be your Account Value on the date
of the insured's death.
FEDERAL TAX CONSIDERATIONS
Your purchase of, and transactions under, your Policy
may have tax consequences that you should consider before
purchasing a Policy. You may wish to consult a tax
adviser. In general, the beneficiary will receive Policy
Proceeds without there being taxable income. Increases in
Account Value will not be taxable as earned, although
there may be income tax due on a full or partial
surrender of your Policy or on policy loans.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
We are an indirect We are a stock life insurance company
wholly- owned incorporated under the laws of Delaware on January 12,
subsidiary of Sun 1970. Our executive office mailing address is One Sun
Life Assurance Life Executive Park, Wellesley Hills, Massachusetts
Company of Canada. 02481. We do business in 48 states, the District of
Columbia and Puerto Rico and we have an insurance
company subsidiary that does business in New York. We
are an indirect wholly- owned subsidiary of Sun Life
Assurance Company of Canada, ("Sun Life (Canada)").
Sun Life (Canada) completed its demutualization on
March 22, 2000. As a result of the demutualization, a new
holding company, Sun Life Financial Services of
Canada, Inc. ("Sun Life Financial"), is now the ultimate
parent of Sun
7 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
Life (Canada) and the Company. Sun Life Financial, a
corporation organized in Canada, is a reporting company
under the Securities Exchange Act of 1934 with common
shares listed on the Toronto, New York, London and Manila
stock exchanges.
THE VARIABLE ACCOUNT
We established Sun Life of Canada (U.S.) Variable
Account I in accordance with Delaware law on December 1,
1998. The Variable Account may also be used to fund
benefits payable under other life insurance policies
issued by us.
We own the assets of the Variable Account. The
income, gains or losses, realized or unrealized, from
assets allocated to the Variable Account are credited to
or charged against the Variable Account without regard to
our other income, gains or losses.
The assets of the We will at all times maintain assets in the
Variable Account are Variable Account with a total market value at least
insulated from our equal to the reserves and other liabilities relating to
general liabilities. the variable benefits under all policies participating
in the Variable Account. Those assets may not be charged
with our liabilities from our other business. Our
obligations under those policies are, however, our
general corporate obligations.
The Variable Account The Variable Account is registered with the
is registered with Securities and Exchange Commission (the "SEC") under the
the SEC. Investment Company Act of 1940 ("1940 Act") as a unit
investment trust. Registration under the 1940 Act does
not involve any supervision by the SEC of the management
or investment practices or policies of the Variable
Account.
The Variable Account The Variable Account is divided into 31
has 31 Sub-Accounts. Sub-Accounts. Each Sub- Account invests exclusively in
Each Sub- Account shares of a corresponding investment portfolio of a
invests exclusively registered investment company (commonly known as a
in shares of a mutual fund). We may in the future add new or delete
single mutual fund existing Sub-Accounts. The income, gains or losses,
portfolio. realized or unrealized, from assets allocated to each
Sub-Account are credited to or charged against that
Sub-Account without regard to the other income, gains or
losses of the other Sub-Accounts. All amounts allocated
to a Sub-Account will be used to purchase shares of the
corresponding mutual fund. The Sub-Accounts will at all
times be fully invested in mutual fund shares. The
Variable Account may contain certain sub-accounts which
are not available under the Policy.
8 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
THE FUNDS
The Fund The Policy offers a number of Fund options,
Prospectuses have which are briefly discussed below. Each Fund is a mutual
more information fund registered under the Investment Company Act of
about the Funds, and 1940, or a separate series of shares of such a mutual
may be obtained from fund. More comprehensive information, including a
us without charge. discussion of potential risks, is found in the current
prospectuses for the Funds (the "Fund Prospectuses").
The Fund Prospectuses should be read in connection with
this prospectus. A copy of each Fund Prospectus may be
obtained without charge by calling (800) 700-6554, or
writing to Sun Life Assurance Company of Canada (U.S.),
One Sun Life Executive Park, Wellesley Hills,
Massachusetts 02481.
The Funds currently available are:
AIM VARIABLE INSURANCE FUNDS (advised by AIM
Advisors, Inc.)
AIM V.I. CAPITAL APPRECIATION FUND seeks growth of
capital by investing primarily in common stocks or
companies which the Fund's portfolio managers believe are
likely to benefit from new or innovative products,
services or processes, as well as those that have
experienced above-average, long-term growth in earnings
and have excellent prospects for future growth.
AIM V.I. GROWTH FUND seeks to achieve growth of
capital by investing primarily in seasoned and
better-capitalized companies considered to have strong
earnings momentum.
AIM V.I. GROWTH AND INCOME FUND seeks to achieve
growth of capital, with a secondary objective of current
income.
AIM V.I. INTERNATIONAL EQUITY FUND seeks to achieve
long-term growth of capital by investing in a diversified
portfolio of international equity securities, whose
issuers are considered to have strong earnings momentum.
THE ALGER AMERICAN FUND (advised by Fred Alger
Management, Inc.)
ALGER AMERICAN GROWTH PORTFOLIO seeks long-term
capital appreciation by investing primarily in equity
securities of companies with market capitalizations of $1
billion or more.
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO seeks
primarily to provide a high level of dividend income by
investing in dividend paying equity securities. Capital
appreciation is a secondary objective.
9 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO seeks
long-term capital appreciation by investing primarily in
equity securities of companies with market
capitalizations within the range of the Russell 2000
Growth Index or the S&P-Registered Trademark- SmallCap
600 Index.
GOLDMAN SACHS VARIABLE INSURANCE TRUST (advised by
Goldman Sachs Asset Management, an operating division of
Goldman, Sachs & Co., ("Goldman Sachs") except for
Goldman Sachs International Equity Fund, which is advised
by Goldman Sachs Asset Management International, an
operating division of Goldman, Sachs & Co.)
GOLDMAN SACHS VIT CORE(SM) LARGE CAP GROWTH FUND
seeks long-term growth of capital. The Fund seeks this
objective through a broadly diversified portfolio of
equity securities of large cap U.S. issuers that are
expected to have better prospects for earnings growth
than the growth rate of the general domestic economy.
Dividend income is a secondary consideration.
GOLDMAN SACHS VIT CORE(SM) SMALL CAP EQUITY FUND
seeks long-term growth of capital. The Fund seeks this
objective through a broadly diversified portfolio of
equity securities of U.S. issuers which are included in
the Russell 2000 Index at the time of investment.
GOLDMAN SACHS VIT CORE(SM) U.S. EQUITY FUND seeks
long-term growth of capital and dividend income. The Fund
seeks this objective through a broadly diversified
portfolio of large cap and blue chip equity securities
representing all major sectors of the U.S. economy.
GOLDMAN SACHS VIT GROWTH AND INCOME FUND seeks
long-term growth of capital and growth of income. The
Fund invests under normal circumstances at least 65% of
its total assets in equity securities that are considered
to have favorable prospects for capital appreciation
and/or dividend paying ability.
GOLDMAN SACHS VIT INTERNATIONAL EQUITY FUND seeks
long-term capital appreciation through investments in
equity securities of companies that are organized outside
the U.S. or whose securities are principally traded
outside the U.S. The Fund intends to invest in companies
with public stock market capitalizations that are larger
than $1 billion at the time of investment.
MFS/SUN LIFE SERIES TRUST (advised by our affiliate
Massachusetts Financial Services Company)
CAPITAL APPRECIATION SERIES seeks capital
appreciation by investing in securities of all types,
with a major emphasis on common stocks.
10 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
EMERGING GROWTH SERIES seeks to provide long-term
growth of capital by investing primarily (i.e. at least
80% of all its assets under normal circumstances) in
common stocks of emerging growth companies, including
companies that the series' investment adviser 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.
HIGH YIELD SERIES seeks high current income and
capital appreciation by investing primarily in fixed
income securities of U.S. and foreign issuers which may
be in the lower rated categories or unrated (commonly
known as "junk bonds") and which may include equity
features. The series may invest up to 100% of its net
assets in these securities, which generally involve
greater risks, including volatility of price, risk of
principal and income, default risks and less liquidity,
than securities in the higher rated categories.
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES seeks to
provide long-term growth of capital and future income
rather than current income. The series invests, under
normal market conditions, at least 80% of its total
assets in common stocks and related securites, such as
preferred stocks, convertible securities and depositary
receipts for those securities, of companies which the
series' adviser believes offer better than average
prospects for long-term growth.
MASSACHUSETTS INVESTORS TRUST SERIES seeks long-term
growth of capital and future income while providing more
current dividend income than is normally obtainable from
a portfolio of only growth stocks. The series invests,
under normal market conditions, at least 65% of its total
assets in common stock and related securities, such as
preferred stocks, convertible securities and depositary
receipts for those securities. While the series may
invest in companies of any size, the series generally
focuses on companies with larger market capitalizations
that the series' adviser believes have sustainable growth
prospects and attractive valuations based on current and
expected earnings of cash flow. This series was formerly
known as the Conservative Growth Series.
NEW DISCOVERY SERIES seeks capital appreciation. The
series invests, under normal market conditions, at least
65% of its total assets in common stocks and related
securities, such as preferred stocks, convertible
securities and depositary receipts for those securities,
of emerging growth companies. These companies are
companies that the series' adviser believes are either
early in their life cycle
11 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
but have the potential to become major enterprises or are
major enterprises whose rates of earnings growth are
expected to accelerate.
TOTAL RETURN SERIES seeks 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 since many
securities offering a better than average yield may also
possess growth potential. The series is a "balanced
fund," and invests in a combination of equity and fixed
income securities. Under normal market conditions, the
series invests (i) at least 40%, but not more than 75%,
of its net assets in common stocks and related
securities, such as preferred stocks, bonds, warrants or
rights convertible into stock, and depositary receipts
for those securities; and (ii) at least 25% of its net
assets in non-convertible fixed income securities.
UTILITIES SERIES seeks capital growth and current
income (income above that available from a portfolio
invested entirely in equity securities) by investing
under normal market conditions, at least 65% of its
assets in equity and debt securities issued by both
domestic and foreign utility companies.
OCC ACCUMULATION TRUST (advised by OpCap Advisors)
EQUITY PORTFOLIO seeks long-term capital appreciation
through investment in a diversified portfolio of equity
securities selected on the basis of a value oriented
approach to investing.
MANAGED PORTFOLIO seeks to achieve growth of capital
over time through investment in a portfolio consisting of
common stocks, bonds and cash equivalents, the
percentages of which will vary based on the portfolio
manager's assessments of the relative outlook for such
investments.
MID CAP PORTFOLIO seeks long-term capital
appreciation through investment in a diversified
portfolio of equity securities. The portfolio will invest
primarily in companies with market capitalizations of
between $500 million and $5 billion.
SMALL CAP PORTFOLIO seeks capital appreciation
through investment in a diversified portfolio of equity
securities of companies with market capitalizations of
under $1 billion.
SUN CAPITAL ADVISERS TRUST (advised by our affiliate Sun
Capital Advisers, Inc.)
SUN CAPITAL BLUE CHIP MID CAP FUND seeks long-term
capital growth by investing primarily in a diversified
portfolio of common stocks and other equity
12 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
securities of U.S. companies with market capitalizations
within the range represented by the Standard & Poor's
(S&P) Mid Cap 400 Index.
SUN CAPITAL INVESTMENT GRADE BOND FUND seeks high
current income consistent with relative stability of
principal by investing primarily in investment grade
bonds, including those issued by U.S. and foreign
companies (including companies in emerging market
countries), the U.S. Government and its agencies and
instrumentalities (including those which issue
mortgage-backed securities), foreign governments
(including those of emerging market countries), and
multinational organizations such as the World Bank.
SUN CAPITAL INVESTORS FOUNDATION FUND seeks long-term
capital growth by investing primarily in a diversified
portfolio of common stocks and other equity securities of
U.S. companies. The fund will generally hold stocks of
companies with market capitalizations within the range
represented by the S&P 500 Index.
SUN CAPITAL MONEY MARKET FUND seeks to maximize
current income, consistent with maintaining liquidity and
preserving capital, by investing exclusively in high
quality U.S. dollar-denominated money market securities,
including those issued by U.S. and foreign banks,
corporate issuers, the U.S. Government and its agencies
and instrumentalities, foreign governments and
multinational organizations such as the World Bank. The
fund may invest in all types of money market securities,
including commercial paper, certificates of deposit,
bankers' acceptances, mortgage-backed and asset-backed
securities, repurchase agreements and other short-term
debt securities.
SUN CAPITAL REAL ESTATE FUND primarily seeks
long-term capital growth and, secondarily, seeks current
income and growth of income. The fund invests at least
80% of its assets in securities of real estate trusts and
other real estate companies. The fund generally focuses
its investments in equity REITs, which invest most of
their assets directly in U.S. or foreign real property,
receive most of their income from rents and may also
realize gains by selling appreciated properties.
SUN CAPITAL SELECT EQUITY FUND seeks long-term
capital growth. The fund will normally invest in twenty
to forty common stocks and other equity securities of
large capitalization U.S. companies. These investments
are selected primarily from the S&P 500 Index.
Although the investment objectives and policies of
the Funds may be similar to those of other mutual funds
managed by the Funds' investment advisers, the investment
results of the Funds can differ significantly from those
of such other mutual funds.
13 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
Some of the Funds' investment advisers may compensate
us for administering the Funds as investment options
under the Policy. Such compensation is paid from
advisers' assets.
The Funds may also be available to separate accounts
offering variable annuity and variable life products of
other affiliated and unaffiliated insurance companies, as
well as our other separate accounts. Although we do not
anticipate any disadvantages in this, there is a
possibility that a material conflict may arise between
the interests of the Variable Account and one or more of
the other separate accounts participating in the Funds. A
conflict may occur due to a change in law affecting the
operations of variable life and variable annuity separate
accounts, differences in the voting instructions of
policyowners and those of other companies, or some other
reason. In the event of conflict, we will take any steps
necessary to protect policyowners, including withdrawal
of the Variable Account from participation in the Funds
which are involved in the conflict or substitution of
shares of other Funds.
FEES AND EXPENSES OF THE FUNDS
Fund shares are purchased at net asset value, which
reflects the deduction of investment management fees and
certain other expenses. The management fees are charged
by each Fund's investment adviser for managing the Fund
and selecting its portfolio of securities. Other Fund
expenses can include such items as interest expense on
loans and contracts with transfer agents, custodians, and
other companies that provide services to the Fund.
The Fund expenses are assessed at the Fund level and
are not direct charges against Variable Account assets or
reductions from Cash Values. These expenses are taken
into consideration in computing each Fund's net asset
value, which is the share price used to calculate the
Unit Values of the Variable Account. The table contained
in the front part of this prospectus shows annual
expenses paid by the Funds as a percentage of average net
assets.
The management fees and other expenses of the Funds
are more fully described in the Fund Prospectuses. The
information relating to the Fund expenses was provided by
the Fund and was not independently verified by us.
OUR GENERAL ACCOUNT
Our general account consists of all of our assets
other than those in our variable separate accounts.
Subject to applicable law, we have sole discretion over
the investment of our general account assets.
14 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
Fixed account Interests in our general account offered through
investments are not the fixed account investment option have not been
securities and we registered under the Securities Act of 1933 and our
are not an general account has not been registered as an investment
investment company. company under the Investment Company Act of 1940.
You may allocate net premiums to the fixed account
investment option and may transfer any portion of your
investments in the Sub-Accounts to the fixed account. You
may also transfer a portion of your investment in the
fixed account to any of the variable Sub-Accounts.
Transfers may be subject to certain restrictions.
Fixed account An investment in the fixed account option does
investments earn at not entitle you to share in the investment experience of
least 3% interest. our general account. Instead, we guarantee that your
fixed account investment will accrue interest daily at
an effective annual rate of at least 3%, without regard
to the actual investment experience of our general
account. We may, at our sole discretion, credit a higher
rate of interest, but are not obligated to do so.
INVESTMENT PROGRAMS
DOLLAR COST AVERAGING. You may select, at no extra
charge, a dollar cost averaging program by allocating a
minimum of $5,000 to a Sub-Account designated by us. Each
month or quarter, a level amount will be transferred
automatically, at no cost, to one or more Sub-Accounts
chosen by you, up to a maximum of twelve. The program
continues until your Account Value allocated to the
program is depleted or you elect to stop the program.
The main objective of a dollar cost averaging program
is to minimize the impact of short-term price
fluctuations. Since the same dollar amount is transferred
to other available investment options at set intervals,
dollar cost averaging allows you to purchase more Units
(and, indirectly, more Fund shares) when prices are low
and fewer Units (and, indirectly, fewer Fund shares) when
prices are high. Therefore, a lower average cost per Unit
may be achieved over the long-term. A dollar cost
averaging program allows you to take advantage of market
fluctuations. However, it is important to understand that
a dollar cost averaging program does not assure a profit
or protect against loss in a declining market.
ASSET REBALANCING. Once your money has been
allocated among the investment options, the earnings may
cause the percentage invested in each investment option
to differ from your allocation instructions. You can
direct us to automatically rebalance your policy to
return to your allocation percentages
15 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
by selecting our asset rebalancing program. The
rebalancing will be on a calendar quarter, semi-annual or
annual basis, depending on your instructions. The minimum
amount of each rebalancing is $1,000.
There is no charge for asset rebalancing. In
addition, rebalancing will not be counted against any
limit we may place on your number of transfers in a
Policy Year. You may not select dollar cost averaging and
asset rebalancing at the same time. We reserve the right
to modify, suspend or terminate this program at anytime.
We also reserve the right to waive the $1,000 minimum
amount for asset rebalancing.
ASSET ALLOCATION. One or more asset allocation
investment programs may be made available in connection
with your Policy, at no extra charge. An asset allocation
program provides for the allocation of your Account Value
among the available investment options. These programs
will be fully described in a separate brochure. You may
elect to enter into an asset allocation investment
program under the terms and conditions described in the
brochure.
ABOUT THE POLICY
POLICY APPLICATION, ISSUANCE AND INITIAL PREMIUM
To purchase a Policy, you must first submit an
application to our Principal Office. We may then follow
certain underwriting procedures designed to determine the
insurability of the proposed insured. We offer the Policy
on a regular (medical) underwriting basis and may require
medical examinations and further information before the
proposed application is approved. 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. We reserve the right to reject an
application that does not meet our underwriting
requirements or to apply extra charges for the
underwriting classification for an Insured which will
result in increased monthly Cost of Insurance charges.
You must specify certain information in the
application, including the Specified Face Amount, the
death benefit option and supplemental benefits, if any.
The Specified Face Amount generally may not be decreased
below $100,000--the "Minimum Specified Face Amount."
While your application is being reviewed, we may make
available to you temporary life insurance coverage if you
have signed a Policy Application and, at that same time,
submitted a separate signed application for temporary
coverage and made an advance payment. The temporary
coverage, if available, begins on
16 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
the date that separate application for it is signed, has
a maximum amount and is subject to other conditions.
Pending approval of your application, any advance
payments will be held in our general account. Upon
approval of the application, we will issue to you a
Policy on the life of the Insured. A specified minimum
Initial Premium is due and payable as of the date of
issue for the Policy. The Effective Date of Coverage for
your Policy will be the later of--
The ISSUE DATE is - the ISSUE DATE, OR
the date we produce - the date a premium is paid equal to or in excess
your Policy on our of the specified Initial Premium.
system and is
specified in your
Policy.
If an application is not approved, we will promptly
return all advance payments to you.
RIGHT OF RETURN PERIOD
If you are not satisfied with your Policy, it may be
returned by delivering or mailing it to our Principal
Office or to the representative from whom the Policy was
purchased within 10 days from the date of receipt of your
Policy (the "Right of Return Period"). A longer period
may apply in some states.
A Policy returned under this provision will be deemed
void. You will receive a refund equal to the sum of all
premium payments made, if required by applicable state
insurance law; otherwise, your refund will equal the sum
of--
- the difference between any premium
payments made, including fees and
charges, and the amounts allocated to
the Variable Account;
- the value of the amounts allocated to
the Variable Account on the date the
cancellation request is received by us
at our Principal Office; and
- any fees or charges imposed on amounts
allocated to the Variable Account.
Unless you are entitled under applicable law to
receive a full refund of premiums paid, you bear all of
the investment risks with respect to the amount of any
net premiums allocated to the Variable Account during the
Right of Return Period.
During the Right of Return Period, we will allocate
the net premium payments to the Sun Capital Money Market
Sub-Account or to the fixed account investment option,
whichever we specify in your Policy. Upon expiration of
the
17 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
Right of Return Period, the Account Value in that
Sub-Account or in the fixed account option, as
applicable, will be transferred to the Sub-Accounts of
the Variable Account and to the fixed account option in
accordance with your allocation instructions.
POLICIES DELIVERED IN CONNECTICUT ONLY -- During the
first eighteen months this Policy is in force, You may
exchange it for a flexible premium adjustable life
insurance policy issued by Us or an affiliate, the
benefits of which do not vary with the investment
performance of a separate account. The Account Value of
this Policy will be transferred to the new policy. We
will not require evidence of insurability for the
exchange. To effect an exchange, You must give Us written
notice at Our Principal Office within this eighteen-month
period.
PREMIUM PAYMENTS
All premium payments must be made payable to Sun Life
Assurance Company of Canada (U.S.) and mailed to our
Principal Office. The Initial Premium will be due and
payable as of your Policy's Issue Date. Additional
premium payments may be paid to us subject to the
limitations described below.
PREMIUM. We reserve the right to limit the number of
premium payments we accept in a year. No premium payment
may be less than $50 without our consent, although we
will accept a smaller premium payment if necessary to
keep your Policy in force. We reserve the right not to
accept a premium payment that causes the death benefit to
increase by an amount that exceeds the premium received.
Evidence of insurability satisfactory to us may be
required before we accept any such premium.
We will not accept premium payments that would, in
our opinion, cause your Policy to fail to qualify as life
insurance under applicable federal tax law. 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.
NET PREMIUMS. The net premium is the amount you pay
as the premium less the Expense Charges Applied to
Premium.
ALLOCATION OF NET PREMIUM. Except as otherwise
described herein, net premium will be allocated in
accordance with your allocation percentages. You must
allocate at least 5% of net premium to any Sub-Account
you choose. Percentages must be in whole numbers. We
reserve the right to limit the number of Sub-Accounts to
which you may allocate your Account Value to not more
than 20 Sub-Accounts.
18 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
Premiums received prior to the end of the Right of
Return Period will be credited to the Sun Capital Money
Market Sub-Account or to the fixed account investment
option, whichever we specify in your Policy. Your initial
allocation percentages will take effect at the end of the
Right of Return Period.
You may change your allocation percentages at any
time by telephone or written request to our Principal
Office. Telephone requests will be honored only if we
have a properly completed telephone authorization form
for you on file. We, our affiliates and the
representative from whom you purchased your Policy 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. You
will be required to identify yourself by name and a
personal identification number for transactions initiated
by telephone. An allocation change will be effective as
of the date we receive the request for that change.
PLANNED PERIODIC PREMIUMS. While you are not
required to make additional premium payments according to
a fixed schedule, you may select a planned periodic
premium schedule and corresponding billing period,
subject to our limits. We will send you reminder notices
for the planned periodic premium at each billing period
as specified in your Policy, unless reminder notices have
been suspended as described below. You are not required,
however, to pay the planned periodic premium; you may
increase or decrease the planned periodic premium 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). We will
notify you prior to suspending reminder notices.
DEATH BENEFIT
If your Policy is in force at the time of the
Insured's death, we will pay the beneficiary an amount
based on the death benefit option you select once we have
received Due Proof of the Insured's death. The amount
payable will be:
- the amount of the selected death
benefit option, PLUS
- any amounts payable under any
supplemental benefits added to your
Policy, MINUS
19 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
- the value of any Policy Debt on the
date of the Insured's death, MINUS
- any Unpaid Policy Charges.
We will pay this amount to the beneficiary in one
lump sum, unless we and the beneficiary agree on another
form of settlement.
You may select The policy has two death benefit options. You
between two death may change the death benefit option after the first
benefit options. Policy Year.
OPTION A. Under this option, the death benefit is--
- the Policy's Specified Face Amount on
the date of the Insured's death; OR,
IF GREATER,
- the Policy's Account Value on the date
of death multiplied by the applicable
percentage shown in the table set
forth in Appendix B.
This death benefit option should be selected if you
want the death benefit to remain level over time.
OPTION B. Under this option, the death benefit is--
- the sum of the Specified Face Amount
and Account Value of the Policy on the
date of the Insured's death; OR, IF
GREATER,
- the Policy's Account Value on the date
of death multiplied by the applicable
percentage shown in the table set
forth in Appendix B.
This death benefit option should be selected if you
want your death benefit to change with your Policy's
Account Value.
You may change the death benefit option after the
first Policy Year. If you change from Option B to
Option A, the Specified Face Amount will be increased by
an amount equal to the Policy's Account Value on the
effective date of change. If you change from Option A to
Option B, the Specified Face Amount will be decreased by
an amount equal to the Policy's Account Value on the
effective date of the change.
20 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
CHANGES IN SPECIFIED FACE AMOUNT
You may increase or You may increase or decrease the Specified Face
decrease the Amount of your Policy after the first Policy Year within
Specified Face certain limits.
Amount within MINIMUM CHANGES. Each increase in the Specified Face
certain limits. Amount must be at least $20,000. We reserve the right to
change the minimum amount by which you may change the
Specified Face Amount.
INCREASES. To request an increase, you must provide
satisfactory evidence of the Insured's insurability. Once
requested, an increase will become effective at the next
policy anniversary following our approval of your
request. The Policy does not allow for an increase if the
Insured's Attained Age is greater than 80 on the
effective date of the increase.
DECREASES. A decrease will become effective at the
beginning of the next Policy Month following our approval
of your request. The Specified Face Amount after the
decrease must be at least $100,000. Surrender charges
will apply to decreases in the Specified Face Amount
during the surrender charge period except for decreases
in the Specified Face Amount resulting from a change in
the death benefit option or a partial surrender.
For purposes of determining surrender charges and
later cost of insurance charges, we will apply a decrease
in Specified 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 Specified Face
Amount.
ACCESSING YOUR ACCOUNT VALUE
SURRENDERS AND SURRENDER CHARGES
If you surrender You may surrender your Policy for its Cash
your Policy and Surrender Value at any time while the Insured is living.
receive its Cash If you do, the insurance coverage and all other benefits
Surrender Value, you under the Policy will terminate.
may incur surrender CASH SURRENDER VALUE is your Policy's Account
charges, taxes, and Value less the sum of--
tax penalties.
- the outstanding balance of any Policy
Debt; and
- any surrender charges
21 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
We will deduct surrender charges from your Account
Value if you surrender your Policy or request a decrease
in the Specified Face Amount during the surrender charge
period. There are separate surrender charges for the
initial Specified Face Amount and any increase in the
Specified Face Amount you request. The surrender charge
period will start on your Policy's Issue Date and on the
effective date for the increase, respectively.
We will determine your Cash Surrender Value at the
next close of business on the New York Stock Exchange
after we receive your written request for surrender at
our Principal Office.
If you surrender your Policy, we will apply a
surrender charge to the initial Specified Face Amount and
to each increase in the Specified Face Amount other than
an increase resulting from a change in the death benefit
option. The surrender charge will be calculated
separately for the initial Specified Face Amount and each
increase in the Specified Face Amount. The surrender
charge will be an amount based on certain factors,
including the Policy's Specified Face Amount and the
Insured's age, sex and rating class. The following are
examples of surrender charges at representative Issue
Ages.
FIRST YEAR SURRENDER CHARGES
PER $1,000 OF SPECIFIED FACE AMOUNT
(Non-tobacco Male)
<TABLE>
<CAPTION>
ISSUE AGE 25 ISSUE AGE 35 ISSUE AGE 45
------------ ------------ ------------
<S> <C> <C>
$ 4.63 $ 5.77 $ 7.74
<CAPTION>
ISSUE AGE 55 ISSUE AGE 65 ISSUE AGE 75
------------ ------------ ------------
$ 11.25 $ 22.38 $ 31.38
<S> <C> <C>
</TABLE>
22 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
The surrender charge will be calculated based on the
surrender charge percentages for the initial Specified
Face Amount and each increase in the Specified Face
Amount as shown in the table below.
<TABLE>
<CAPTION>
SURRENDER CHARGE
(AS A PERCENTAGE OF THE
FIRST YEAR
YEAR SURRENDER CHARGE)
---- -----------------------
<S> <C>
1 100.000
2 100.000
3 100.000
4 100.000
5 100.000
6 83.333
7 66.667
8 50.000
9 33.333
10 16.667
11 and thereafter 0.000
</TABLE>
For Policies delivered in Pennsylvania, surrender
charges in the first policy year are lower for certain
issue ages.
A surrender charge will be applied for each decrease
in the Specified Face Amount except for decreases in the
Specified Face Amount resulting from a change in death
benefit option or partial surrender. These surrender
charges will be applied in the following order:
- first, to the most recent increase;
- second, to the next most recent
increases, in reverse chronological
order; and
- third, to the initial Specified Face
Amount.
On a decrease in the initial Specified Face Amount,
you will pay a proportion of the full surrender charge
based on the ratio of the Face Amount decrease to the
Initial Face Amount. The surrender charge you pay on a
decrease that is less than the full amount of an increase
in Specified Face Amount will be calculated on the same
basis. Future surrender charges will be reduced by any
applicable surrender charges for a decrease in the
Specified Face Amount.
You may allocate any surrender charges resulting from
a decrease in the Specified Face Amount among the
Sub-Accounts and the Fixed Account Value. If you do not
specify the allocation, then the surrender charges will
be allocated
23 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
proportionally among the Sub-Accounts and the Fixed
Account Value in excess of any Policy Debt.
PARTIAL SURRENDERS
If the applicable You may make a partial surrender of your Policy
death benefit option once each Policy Year after the first Policy Year by
is Option A and you written request to us. Each partial surrender must be
make a partial for at least $200, and no partial surrender may be
surrender of your made--
Policy, the - during the first ten Policy Years for more than 20
Specified Face percent of your Cash Surrender Value at the end of the
Amount will be first Valuation Date after we receive your request or
decreased. - thereafter for more than your Cash Surrender Value.
A partial surrender If the applicable death benefit option is
may result in taxes Option A, the Specified Face Amount will be decreased by
and tax penalties. the amount of the partial surrender. We will apply the
decrease to the initial Specified Face Amount and to
each increase in Specified Face Amount in the following
order --
- first, to the most recent increase;
- second, to the next most recent
increases, in reverse chronological
order; and
- third, to the initial Specified Face
Amount.
We will not accept requests for a partial surrender
if the Specified Face Amount remaining in force after the
partial surrender would be less than the Minimum
Specified Face Amount. We will effect a partial surrender
at the next close of business on the New York Stock
Exchange after we receive your written request for
surrender.
POLICY LOANS
You may borrow from You may request a policy loan of up to 90% of
us using your Policy your Policy's Cash Value, decreased by the amount of any
as collateral. outstanding Policy Debt on the date the policy loan is
made. Your Policy will terminate for no value subject to
a Grace Period if the Policy Debt exceeds the Cash
Value. During the first five Policy Years, however, your
Policy will not terminate if it satisfies the minimum
premium test.
You may allocate the policy loan among the
Sub-Accounts and the Fixed Account Value. If you do not
specify the allocation, then the policy loan will be
allocated proportionally among the Sub-Accounts and the
Fixed Account Value in excess of any Policy Debt. Loan
amounts allocated to the Sub-Accounts will
24 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
be transferred to the Fixed Account Value. We will
periodically credit interest at an effective annual rate
of 3% on the loaned values of the Fixed Account Value.
Interest on the policy loan will accrue daily at 4%
annually during Policy Years 1 through 10 and 3% annually
thereafter. This interest will 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 will be assessed in the same manner as the prior
policy loan.
There is no definitive guidance concerning the tax
treatment of a policy loan when the interest rate
credited to the loan is the same as the interest rate
charged against the loan. You should therefore consult
your tax adviser regarding loan amounts in Policy
Years 11 and thereafter.
All funds we receive from you will be credited to
your Policy as premium unless we have received written
notice, in a form satisfactory to us, that the funds are
for loan repayment. In the event you have a loan against
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.
A policy loan, whether or not repaid, will affect the
Policy Proceeds payable upon the insured's death and the
Account Value because the investment results of the
Sub-Accounts will apply only to the non-loaned portion of
the Account Value. The longer a loan is outstanding, the
greater the effect is likely to be and, depending on the
investment results of the Sub-Accounts or the Fixed
Account Value while the loan is outstanding, the effect
could be favorable or unfavorable.
TRANSFER PRIVILEGES
The Policy is not designed for professional market
timing organizations or other entities using programmed
and frequent transfers. If you wish to employ such
strategies, you should not purchase a Policy.
Accordingly, such transfers may be subject to special
restrictions. Subject, however, to these special
restrictions and to our rules as they may exist from time
to time and to any limits that may be imposed by the
Funds, you may at any time transfer to another Sub-
Account all or a portion of the Account Value allocated
to a Sub-Account or to the Fixed Account Value. We will
make transfers pursuant to an authorized written or
telephone request to us. Telephone requests will be
honored only if we have a properly completed telephone
authorization form for you on file. We, our affiliates
and the representative from whom you purchased your
Policy will
25 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
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. For
transactions initiated by telephone, you will be required
to identify yourself by name and a personal
identification number.
Transfers may be requested by indicating the transfer
of either a specified dollar amount or a specified
percentage of the Fixed Account Value or the Sub-
Account's value from which the transfer will be made. If
you request a transfer based on a specified percentage of
the Fixed Account Value or 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 Fixed
Account Value or the Sub-Account's value at the time the
request is received. We reserve the right to limit the
number of Sub-Accounts to which you may allocate your
Account Value to not more than 20 Sub-Accounts.
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.
We reserve the right to restrict amounts transferred
to the Variable Account from the Fixed Account Value to
20% of that portion of the Account Value attributable to
the Fixed Account Value as of the end of the previous
Policy Year.
We reserve the right to restrict amounts transferred
to the Fixed Account Value from the Variable Account to
20% of that portion of the Account Value attributable to
the Variable Account as of the end of the previous Policy
Year. We further reserve the right to restrict amounts
transferred to the Fixed Account Value from the Variable
Account in the event the portion of the Account Value
attributable to the Fixed Account Value would exceed 30%
of the Account Value.
ACCOUNT VALUE
Your 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 Fixed Account Value. The
Account Value varies depending upon the Premiums paid,
Expense Charges Applied to Premium, Mortality and Expense
Risk Percentage charges, Monthly Expense Charges, Monthly
Cost of Insurance charges, partial surrenders, fees,
policy loans and the net investment factor (described
below) for the Sub-Accounts to which your Account Value
is allocated.
26 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
A VALUATION DATE is VARIABLE ACCOUNT VALUE. We measure the amounts
any day on which we, in the Sub- Accounts in terms of Units and Unit Values.
the applicable Fund, On any given date, the amount you have in a Sub-Account
and the NYSE are is equal to the Unit Value multiplied by the number of
open for business. Units credited to you in that Sub-Account. Amounts
THE VALUATION PERIOD allocated to a Sub-Account will be used to purchase
is the period of Units of that Sub-Account. Units are redeemed when you
time from one make partial surrenders, undertake policy loans or
determination of transfer amounts from a Sub-Account, and for the payment
Unit Values to the of Monthly Expense Charges, and Monthly Cost of
next. Insurance charges and other fees. 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 is established at $10.00 for the first
VALUATION DATE of the Sub- Account. 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 (determined as provided below). 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 our Principal
Office. 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 Valuation Date.
The INVESTMENT START The Account Value attributable to each
DATE is the date we Sub-Account of the Variable Account on the INVESTMENT
apply your first START DATE equals:
premium payment, - that portion of net premium received and allocated to
which will be the the Sub-Account, MINUS
later of the Issue - that portion of the Monthly Expense Charges due on the
Date, the Policy policy date and subsequent Monthly Anniversary Days
Date or the through the Investment Start Date charged to the
Valuation Date we Sub-Account, MINUS
receive a premium
equal to or in
excess of the
initial premium.
- that portion of the Monthly Cost of
Insurance deductions due from the
policy date through the Investment
Start Date charged to the Sub-Account.
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, PLUS
- that portion of net premium received
and allocated to the Sub-Account
during the current Valuation Period,
PLUS
27 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
- any amounts transferred by you to the
Sub-Account from another Sub-Account
or from the Fixed Account Value during
the current Valuation Period, MINUS
- any amounts transferred by you from
the Sub-Account to another Sub-Account
or to the Fixed Account Value during
the current Valuation Period, MINUS
- that portion of any partial surrenders
deducted from the Sub-Account during
the current Valuation Period, MINUS
- that portion of any policy loan or
capitalized loan interest transferred
from the Sub-Account to the Fixed
Account Value during the current
Valuation Period, MINUS
- that portion of any surrender charges
associated with a decrease in the
Specified Face Amount charged to the
Sub-Account during the current
Valuation Period, MINUS
- 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,
MINUS
- 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.
NET INVESTMENT FACTOR. The NET INVESTMENT FACTOR for
each Sub-Account for any Valuation Period is determined
by deducting the Mortality and Expense Risk Charge for
each day in the Valuation Period from the quotient of (1)
and (2) where:
(1) is the net result of --
- the net asset value of a Fund share
held in the Sub-Account determined as
of the end of the Valuation Period,
PLUS
- 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
- a per share credit or charge with
respect to any taxes reserved for by
us, or paid by us if not previously
reserved for, during the Valuation
Period which are determined by us to
be attributable to the operation of
the Sub-Account; and
28 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
(2) is the net asset value of a Fund share held in the
Sub-Account determined as of the end of the preceding
Valuation Period.
The Mortality and Expense Risk Charge for the
Valuation Period is the Daily Risk Charge times the
number of days in the Valuation Period.
The net investment factor may be greater or less than
one.
FIXED ACCOUNT VALUE. The Fixed Account Value on the
Investment Start Date equals:
- that portion of net premium received
and allocated to the Fixed Account
Value accrued at interest, MINUS
- that portion of the Monthly Expense
Charges due on the policy date and
subsequent Monthly Anniversary Days
through the Investment Start Date
charged to the Fixed Account Value
accrued at interest, MINUS
- that portion of the Monthly Cost of
Insurance deductions due from the
policy date through the Investment
Start Date charged to the Fixed
Account Value accrued at interest.
The Fixed Account Value on subsequent Valuation Dates
is equal to:
- the Fixed Account Value on the
preceding Valuation Date accrued at
interest, PLUS
- that portion of net premium received
and allocated to the Fixed Account
Value during the current Valuation
Period accrued at interest, PLUS
- any amounts transferred by you to the
Fixed Account Value from the Variable
Account during the current Valuation
Period accrued at interest, MINUS
- any amounts transferred by you from
the Fixed Account Value to the
Variable Account during the current
Valuation Period accrued at interest,
MINUS
- that portion of any partial surrenders
deducted from the Fixed Account Value
during the current Valuation Period
accrued at interest, PLUS
- any policy loan or capitalized loan
interest transferred from the Variable
Account to the Fixed Account Value
during the current Valuation Period
accrued at interest, MINUS
- that portion of any surrender charges
associated with a decrease in the
Specified Face Amount charged to the
29 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
Fixed Account Value during the current
Valuation Period, MINUS
- 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 Fixed Account
Value accrued at interest, MINUS
- 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 Fixed Account
Value accrued at interest.
The minimum guaranteed interest rate applicable to
the Fixed Account Value is 3% annually. Interest in
excess of the guaranteed rate may be applied in the
calculation of the Fixed Account Value at such increased
rates and in such manner as we may determine, based on
our expectations of future interest, mortality costs,
persistency, expenses and taxes. Interest credited will
be computed on a compound interest basis.
INSUFFICIENT VALUE. Your Policy will terminate for
no value, subject to a Grace Period described below if,
on a Valuation Date, a Monthly Anniversary Day occurred
during the Valuation Period and--
- your Policy's Cash Surrender Value is
equal to or less than zero or
- the Policy Debt exceeds the Cash
Value.
During the first five Policy Years, a policy will not
terminate by reason of insufficient value if it satisfies
the "minimum premium test," described below.
If on a Valuation Date a Monthly Anniversary Day
occurred during the Valuation Period and the Monthly
Expense Charge plus the Monthly Cost of Insurance plus
the Policy Debt exceed your Account Value, any Unpaid
Policy Charges will be increased by the amount in excess
of your Account Value. Except for policies delivered in
the state of Texas, any Unpaid Policy Charges will
accumulate interest at an annual rate of 3%.
MINIMUM PREMIUM TEST (NO-LAPSE GUARANTEE). A Policy
satisfies the minimum premium test if the premiums paid
less any partial surrenders less any Policy Debt exceed
the sum of the "Minimum Monthly Premiums" which applied
to the Policy in each Policy Month from the policy date
to the Valuation Date.
30 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
The applicable Minimum Monthly Premiums are specified
in your Policy. We will revise the Minimum Monthly
Premiums as a result of any of the following changes to a
Policy:
- an increase in the Specified Face
Amount;
- an increase in the cost of any rider;
- when requested by you, the addition of
any rider.
The revised Minimum Monthly Premiums will be
effective as of the effective date of the change to the
Policy and will remain in effect until again revised by
any of the above changes.
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
days from that Valuation Date for the payment of a
premium sufficient to keep the Policy in force. 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 your Policy Application (or notice of assignment),
unless we receive written 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 by us
during the Grace Period, then any Unpaid Policy Charges
will be deducted from the amount payable by us.
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
your Policy.
CHARGES AND DEDUCTIONS
EXPENSE CHARGES APPLIED TO PREMIUM. We will deduct a
charge from each premium payment as a sales load and for
our federal, state and local tax obligations, which we
will determine from time to time. The current charge is
5.25%. The maximum charge is guaranteed not to exceed
7.25%.
MORTALITY AND EXPENSE RISK CHARGE. This charge is
for the mortality and expense risks we assume with
respect to the Policy. It is based on an annual rate that
we apply against the Variable Account on a daily basis.
31 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
The Mortality and Expense Risk Charge will be
determined by us from time to time based on our
expectations of future interest, mortality costs,
persistency, expenses and taxes, but will not exceed
0.60% annually. The current charge is 0.60% for Policy
Years 1 through 10 and 0.20% thereafter.
The mortality risk we assume is that the group of
lives insured under the Policies may, on average, live
for shorter periods of time than we estimated. The
expense risk we assume is that our costs of issuing and
administering Policies may be more than we estimated.
MONTHLY EXPENSE CHARGE. We will deduct a charge of
$8.00 from your Policy's Account Value each Policy Month
to cover our administrative costs. The Monthly Expense
Charge will be deducted proportionally from the Sub-
Accounts and the Fixed Account Value in excess of any
Policy Debt.
MONTHLY COST OF INSURANCE. We deduct a Monthly Cost
of Insurance charge from your Account Value to cover
anticipated costs of providing insurance coverage. The
Monthly Cost of Insurance deduction will be charged
proportionally to the amounts in the Sub-Accounts and the
Fixed Account Value in excess of any Policy Debt.
The Monthly Cost of Insurance equals the sum of (1),
(2) and (3) where:
(1) is the cost of insurance charge equal to the Monthly
Cost of Insurance rate (described below) multiplied
by the net amount at risk divided by 1,000;
(2) is the monthly rider cost for any riders which are a
part of your Policy (with the monthly rider cost, if
any riders are added, as described in the rider
itself); and
(3) is any additional insurance charge calculated as
specified in your Policy, for, among other reasons,
occupational or avocational risks.
The NET AMOUNT AT RISK equals:
- the death benefit divided by 1.00247;
MINUS
- your Account Value on the Valuation
Date prior to assessing the monthly
expense charge and the cost of
insurance charges.
If there are increases in the Specified Face Amount
other than increases caused by changes in the death
benefit option, the cost of insurance charge described
above is determined separately for the initial Specified
Face Amount and each increase in the Specified Face
Amount. In calculating the net amount
32 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
at risk, your Account Value will first be allocated to
the initial death benefit and then to each increase in
the Specified Face Amount in the order in which the
increases were made.
MONTHLY COST OF INSURANCE RATES. The Monthly Cost of
Insurance rates (except for any such rate applicable to
an increase in the Specified Face Amount) are based on
the length of time your Policy has been in force and the
insured's sex (in the case of non-unisex Policies), Issue
Age, and rating class. The Monthly Cost of Insurance
rates applicable to each increase in the Specified Face
Amount are based on the length of time the increase has
been in force and the Insured's sex (in the case of
non-unisex Policies), Issue Age, and rating class. 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 costs, persistency,
interest rates, expenses and taxes, but will not exceed
the Guaranteed Maximum Monthly Cost of Insurance Rates
based on the 1980 Commissioner's Standard Ordinary Smoker
and Nonsmoker Mortality Tables.
BASIS OF COMPUTATION. Guaranteed Maximum Monthly
Cost of Insurance Rates are based on the 1980
Commissioner's Standard Ordinary Smoker and Nonsmoker
Mortality Tables. The Guaranteed Maximum Monthly Cost of
Insurance Rates reflect any underwriting rating
applicable to the Policy. We have filed a detailed
statement of our methods for computing Cash Values with
the insurance department in each jurisdiction where the
Policy was delivered. These values equal or exceed the
minimum required by law.
WAIVERS AND REDUCED CHARGES
We may reduce or waive the sales load or surrender
charge in situations where selling and/or maintenance
costs associated with the Policies are reduced, sales of
large Policies, and certain group or sponsored
arrangements. In addition, we may waive charges in
connection with Policies sold to our or our affiliates'
officers, directors and employees.
MATURITY
Your policy will terminate when the insured reaches
Attained Age 100. If the insured is living and your
Policy is in force on the Maturity date, your policy's
Cash Surrender Value will be payable to you.
MATURITY DATE EXTENSION
The Maturity date of your Policy will be extended
beyond the original Maturity date shown in your Policy,
if you so request in writing at our Principal
33 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
Office prior to the original Maturity date and the Policy
has a Cash Value on the original Maturity date. The new
Maturity date will be the one you request.
After the original Maturity date (if you have
requested a new Maturity date):
- We will not accept any more premium
payments for your Policy.
- No more deductions for the Monthly
Expense Charges or for Monthly Cost of
Insurance charges will be made from
your Account Value.
- The death benefit will be your Account
Value on the date of the insured's
death.
- Your Policy's reinstatement provisions
will not apply.
Except as provided above, an extension of the
Maturity date does not alter your Policy.
If the Maturity date is extended, your Policy may not
qualify as life insurance beyond the original Maturity
date and may be subject to tax consequences. We recommend
that you receive counsel from your tax adviser. We will
not be responsible for any adverse tax consequences
resulting from the extension of the Maturity date of your
Policy.
SUPPLEMENTAL BENEFITS
The following supplemental benefit riders are
available, subject to certain limitations described
below. There is no charge for the accelerated benefits
rider. An additional cost of insurance will be charged
for each of the other riders which is in force as a part
of the Monthly Cost of Insurance charge.
ACCELERATED BENEFITS RIDER. Under this rider, we
will pay you, at your written request in a form
satisfactory to us, an "accelerated benefit" if the
Insured is terminally ill. An Insured is considered
"terminally ill" if the Insured has a life expectancy of
12 months or less due to illness or physical condition.
We will require proof, satisfactory to us, of the
Insured's terminal illness, including, but not limited
to, certification by an independent physician. No
accelerated benefit is payable, however, unless your
Policy has been in force for at least two years following
its Issue Date or the date of its last reinstatement.
The accelerated benefit payment will be equal to that
portion of your Policy's death benefit requested by you,
not to exceed the lesser of (a) 75% of the amount of the
death benefit or (b) $250,000 (the "Accelerated Amount"),
subject to the following adjustments:
34 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
- We will discount the Accelerated
Amount based on an annual interest
rate, not to exceed the greater of:
(a) the yield on 90-day Treasury bills
on the day we receive your request; or
(b) the statutory maximum policy loan
interest rate.
- If you have an outstanding policy loan
on the date we approve your request,
we will reduce the Accelerated Amount
in partial payment of the policy loan
by an amount equal to the amount of
the policy loan multiplied by the
ratio of the Accelerated Amount to the
amount of your Policy's death benefit
(the "Eligible Amount").
- We will reduce the Accelerated Amount
by the amount of any administrative
fee, not to exceed $150, in effect at
the time we receive your request.
You may request only one accelerated benefit payment.
This rider will terminate upon payment of an accelerated
benefit, and the Specified Face Amount and Account Value
of your Policy will be reduced by the ratio of the
Accelerated Amount to the Eligible Amount.
ACCIDENTAL DEATH BENEFIT RIDER. Under this rider, we
will pay the accidental death benefit specified in your
Policy when we receive due proof of the insured's
accidental death and that death occurred while this rider
was in force, on or after the insured's first birthday
and within ninety days after the date of the accident.
"Accidental death" means that the insured died as a
direct result, independent of all other causes, (a) from
an injury sustained solely by external or violent
accident, or (b) by an accidental drowning, excluding
death caused by certain specified risks. If you change
your Policy's Specified Face Amount, the accidental death
benefit will not change unless you specifically request
such a change. This rider will terminate on the earliest
of (a) the nearest policy anniversary to the insured's
70th birthday or (b) the date that this policy terminates
in accordance with its grace period provision.
MONTHLY RIDER COST. The cost of this rider will be
part of the Monthly Cost of Insurance charge described in
this prospectus. The total monthly rider cost will equal
a rate which varies by the Insured's issue age, sex and
rating class multiplied by the amount of the accidental
death benefit.
WAIVER OF MONTHLY DEDUCTIONS RIDER. Under this
rider, we will waive the monthly deductions under your
Policy retroactive to the date of total disability when
the insured suffers a total disability, if the insured's
total disability commences while this rider is in force
and continues for six months. We will continue to waive
the monthly deduction for as long as the disability
continues. We must receive written notice and due proof
before we will waive the monthly
35 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
deductions. We may require from time to time additional
proof that the disability is continuing, but not more
frequently than once per year after the disability has
continued for two years. We will not waive the monthly
deductions--
- for any month before the insured's
fifth birthday;
- for any month which is more than one
year before we receive a notice of the
total disability; or
- if the total disability is caused by
or results from certain specified
risks.
A "total disability" is any incapacity resulting from
bodily injury or disease which--
- during the first 24 months of the
incapacity prevents the insured from
performing substantially all of the
major duties of the insured's
occupation; and
- if the incapacity continues beyond 24
months, prevents the insured from
doing any work for which the insured
is reasonably qualified to perform by
reason of training, education or
experience.
Even if the insured can work, the following
constitutes a total disability:
- total and permanent loss of sight of
both eyes or total and permanent loss
of hearing in both ears;
- severance of both hands, both feet, or
one hand and one foot.
While the insured's total disability is continuing,
you cannot change your Policy's--
- Specified Face Amount, unless
otherwise permitted under the
provisions of another rider to your
policy; or
- your death benefit option.
This rider will terminate on the earliest of:
- the nearest policy anniversary to the
insured's 65th birthday, unless the
insured's total disability is
continuing, and if the total
disability commences before the policy
anniversary nearest to the insured's
60th birthday; or
- the nearest policy anniversary to the
insured's 65th birthday, if the total
disability commenced on or after the
policy anniversary nearest to the
insured's 60th birthday; or
36 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
- the date that the Policy terminates in
accordance with its Grace Period
provision.
If this rider terminates because your Policy lapses,
we will reinstate the rider if certain specified
conditions are met.
MONTHLY RIDER COST. The cost of this rider will be
part of the Monthly Cost of Insurance charge described in
this prospectus. The total monthly rider cost will equal
a rate based on the Insured's Issue Age, sex and rating
class multiplied by the net amount at risk.
PAYMENT OF STIPULATED AMOUNT RIDER. Under this
rider, we will make a monthly payment of the "stipulated
amount" when the insured suffers a total disability, if
the insured's total disability commences while this rider
is in force and continues for six months. We will
continue to make a payment of that amount for as long as
the disability continues. We must receive written notice
and due proof before we will make a payment. We may
require from time to time additional proof that the
disability is continuing, but not more frequently than
once per year after the disability has continued for five
years. We will not make payments under this rider if the
total disability is caused by or results from certain
specified risks. This rider will not apply to any Monthly
Anniversary Day that occurs before the insured's fifth
birthday or that was due more than one year before we
first received notice of the insured's total disability.
A "total disability" is any incapacity resulting from
bodily injury or disease which--
- during the first 60 months of the
incapacity prevents the insured from
performing substantially all of the
major duties of the insured's
occupation; and
- if the incapacity continues beyond 60
months, prevents the insured from
doing any work for which the insured
is reasonably qualified to perform by
reason of training, education or
experience.
Even if the insured can work, the following
constitutes a total disability:
- total and permanent loss of sight of
both eyes or total and permanent loss
of hearing in both ears;
- severance of both hands, both feet, or
one hand and one foot.
You may change the stipulated amount by written
request to our Principal Office. An increase in the
stipulated amount is subject to our underwriting and
administrative rules in effect at the time. If we make a
change to this Policy at
37 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
your request and if that change results in a reduction of
the amount of premium you may pay for this Policy under
applicable tax law, we will reduce the stipulated amount
to conform to that reduction. We will reduce the cost of
insurance for this rider appropriately. We will inform
you in writing of these reductions.
You may not change the frequency of premium payment
for your Policy or increase the stipulated amount while
the insured's total disability is continuing.
This rider will terminate on the earliest of:
- The policy anniversary nearest to the
insured's 65th birthday. However, if
the insured's total disability
commenced before that policy
anniversary, the benefit provided by
this rider will continue until the end
of the benefit period specified in
your policy. No total disability of
the insured's that commences on or
after the policy anniversary nearest
to the insured's 65th birthday is
covered under this rider.
- The date your Policy lapses because of
insufficient value.
- The date your Policy is surrendered
for its Cash Surrender Value.
- The date of death of the insured.
- The date we receive your written
request that it be terminated.
MONTHLY RIDER COST. The monthly cost for this rider
is equal to the stipulated amount times a rate which
varies by factors including the Insured's Issue Age, sex,
and rating class.
TERMINATION OF POLICY
Your Policy will terminate on the earlier of the date
we receive your request to surrender, the expiration date
of the Grace Period due to insufficient value, the date
of death of the insured, or the Maturity date.
REINSTATEMENT
Before the insured's death, we will reinstate your
Policy prior to its Maturity date, provided that the
Policy has not been surrendered and you--
- make a request for reinstatement
within five years from the date of
termination;
- submit satisfactory evidence of
insurability to us; and
38 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
- pay an amount sufficient to put your
Policy in force.
To put your Policy in Force, you must pay an amount
of at least--
- the Unpaid Policy Charges at the date
of termination; plus
- any excess of the Policy Debt over the
Cash Value at the date of termination;
plus
- three times the Monthly Cost of
Insurance charges applicable at the
date of reinstatement; plus
- three times the Monthly Expense
Charge.
During the first five Policy Years, an amount is
sufficient to put your Policy in force if it meets the
minimum premium test.
A reinstated Policy's Specified Face Amount may not
exceed the Specified Face Amount at the time of
termination. Your Account Value on the reinstatement date
will reflect:
- the Account Value at the time of
termination; PLUS
- net premiums attributable to premiums
paid to reinstate the Policy; MINUS
- the Monthly Expense Charge; MINUS
- the Monthly Cost of Insurance charge
applicable on the date of
reinstatement.
The effective date of reinstatement will be the
Monthly Anniversary Day that falls on or next follows the
date we approve your request.
Any Policy Debt at the time of termination must be
repaid upon the reinstatement of the Policy or carried
over to the reinstated Policy.
If your Policy was subject to surrender charges when
it lapsed, the reinstated Policy will be subject to
surrender charges as if it had not terminated.
The incontestability provision of the Policy will
apply to the Policy after reinstatement as regards
statements made in the application for reinstatement. The
suicide provision of the Policy will apply to the policy
after reinstatement. In those provisions of a reinstated
Policy, "Issue Date" means the effective date of
reinstatement.
39 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
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 satisfactory to
us giving rise to such payment or, in the case of death
of the Insured, due proof of such death. Payment is
subject to our rights under the Policy's incontestability
and suicide provisions. 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 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
policyowners; 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.
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, subject to the other
provisions of the Policy;
- change the death benefit option,
subject to the other 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
40 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
a prior beneficiary when you merely transfer ownership,
or change or revoke a contingent owner designation.
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 satisfactory to
us of the requested action. Your request will then,
except as otherwise specified herein, be effective as of
the date you signed the form, subject to any action taken
before we received it.
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.
OTHER POLICY PROVISIONS
ADDITION, DELETION OR SUBSTITUTION OF
INVESTMENTS. We may decide to add new Sub-Accounts at
any time. Also, shares of any or all of the Funds 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 Fund 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 by the Securities and Exchange Commission,
to the extent necessary. In addition, the investment
policies of the Sub-Accounts 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 described in this paragraph, we may make
appropriate amendments to the Policy to reflect the
substitution.
ENTIRE CONTRACT. Your entire contract with us
consists solely of the Policy, including the attached
copy of your Policy Application and any attached copies
of supplemental applications for increases in the
Specified Face Amount.
ALTERATION. Sales representatives do not have any
authority to either alter or modify your 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.
MODIFICATION. Upon notice to you, we may modify the
Policy if such a modification--
41 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
- is necessary to make the Policy or the
Variable Account comply with any law
or regulation issued by a governmental
agency to which we are or the Variable
Account is subject;
- 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;
- 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 amendments to the Policy to reflect such
modification.
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 Principal Office 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 we
received it. We are not responsible for the validity or
legal effect of any assignment.
NONPARTICIPATING. The Policy does not pay dividends.
The Policy does not share in our profits or surplus
earnings.
MISSTATEMENT OF AGE OR SEX (NON-UNISEX POLICY). If
the age or sex (in the case of a non-unisex Policy) of
the insured is stated incorrectly, 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 sex (for a
non-unisex Policy).
Misstatement discovered prior to death--Your Account
Value will be recalculated from the policy date using
the Monthly Cost of Insurance Rates based on the
correct age or sex (for a non-unisex Policy).
SUICIDE. If the insured, whether sane or insane,
commits suicide within two years after your Policy's
Issue Date, we will not pay any part of the Policy
Proceeds. We will refund the premiums paid, less the
amount of any Policy Debt and any partial surrenders.
42 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
If the insured, whether sane or insane, commits
suicide within two years after the effective date of an
increase in the Specified Face Amount, then our liability
as to that increase will be the cost of insurance for
that increase.
INCONTESTABILITY. All statements made in the
application or in a supplemental application are
representations and not warranties. We relied and will
rely on those statements when approving the issuance,
increase in face amount, increase in 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. However, any increase in the 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 death
benefit over premium paid or increase in 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.
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.
ILLUSTRATIONS. After the first Policy Year, we will
provide you with an illustration of future Account Values
and death benefits upon request. We may charge a fee not
to exceed $25 per illustration.
PERFORMANCE INFORMATION
We may present We may sometimes publish performance information
mutual fund related to the Fund, the Variable Account or the Policy
portfolio in advertising, sales literature and other promotional
performance and materials. This information is based on past investment
hypothetical Policy results and is not an indication of future performance.
illustrations in
sales literature.
PORTFOLIO PERFORMANCE
We may publish a mutual fund portfolio's TOTAL RETURN
or AVERAGE ANNUAL TOTAL RETURN. Total return is the
change in value of an investment over a given period,
assuming reinvestment of any dividends and capital gains.
Average annual total return is a hypothetical rate of
return that, if achieved annually, would have produced
the same total return over a stated period if performance
had been
43 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
constant over the entire period. Average annual total
returns smooth variations in performance, and are not the
same as actual year-by-year results.
We may also publish a mutual fund portfolio's yield.
Yield refers to the income generated by an investment in
a portfolio over a given period of time, expressed as an
annual percentage rate. When a yield assumes that income
earned is reinvested, it is called an EFFECTIVE YIELD.
SEVEN-DAY YIELD illustrates the income earned by an
investment in a money market fund over a recent seven-
day period.
TOTAL RETURNS AND YIELDS QUOTED FOR A MUTUAL FUND
PORTFOLIO INCLUDE THE INVESTMENT MANAGEMENT FEES AND
OTHER EXPENSES OF THE PORTFOLIO, BUT DO NOT INCLUDE
CHARGES AND DEDUCTIONS ATTRIBUTABLE TO YOUR POLICY. These
expenses would reduce the performance quoted.
ADJUSTED PORTFOLIO PERFORMANCE
We may publish a mutual fund portfolio's total return
and yields adjusted for charges against the assets of the
Variable Account.
We may publish total return and yield quotations
based on the period of time that a mutual fund portfolio
has been in existence. The results for any period prior
to any Policy being offered will be calculated as if the
Policy had been offered during that period of time, with
all charges assumed to be those applicable to the Policy.
OTHER INFORMATION
Performance information may be compared, in reports
and promotional literature, to:
- 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;
44 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
- other groups of variable life variable
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
- the 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 expenses.
We may provide policy information on various topics
of interest to you and other prospective policyowners.
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 a Policy and the
characteristics of, and market for,
such financial instruments.
FEDERAL INCOME TAX CONSIDERATIONS
We do not make any The following summary provides a general
guarantees about the description of the federal income tax considerations
Policy's tax status. associated with the Policy and does not purport to be
complete or to cover all situations. This discussion is
NOT intended as tax advice. You should consult counsel
or other competent tax advisers for more complete
information. This discussion is based upon our
understanding of the present federal income tax laws as
they are currently interpreted by the Internal
45 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
Revenue Service (the "IRS"). We make no representation as
to the likelihood of continuation of the present federal
income tax laws or of the current interpretations by the
IRS. WE DO NOT MAKE ANY GUARANTEE REGARDING THE TAX
STATUS OF ANY POLICY OR ANY TRANSACTION REGARDING THE
POLICY.
The Policy may be used in various arrangements,
including non-qualified deferred compensation or salary
continuance plans, split dollar insurance plans,
executive bonus plans, retiree medical benefit plans and
others. The tax consequences of such plans may vary
depending on the particular facts and circumstances of
each individual arrangement. Therefore, if the use of the
Policy in any such arrangement is contemplated, you
should consult a qualified tax adviser for advice on the
tax attributes of the particular arrangement.
TAX STATUS OF THE POLICY
We believe the A Policy has certain tax advantages when treated
Policy will be as a life insurance contract within the meaning of
treated as a life Section 7702 of the Internal Revenue Code of 1986, as
insurance contract amended (the "Code"). We believe that the Policy meets
under federal tax the Section 7702 definition of a life insurance contract
laws. and will take whatever steps are appropriate and
reasonable to attempt to cause the Policy to comply with
Section 7702.
DIVERSIFICATION OF INVESTMENTS
Section 817(h) of the Code requires that the Variable
Account's investments be "adequately diversified" in
accordance with certain Treasury regulations. We believe
that the Variable Account will be adequately diversified.
In certain circumstances, the owner of a variable
life insurance policy may be considered, for federal
income tax purposes, the owner of the assets of the
separate account used to support the policy. In those
circumstances, income and gains from the separate account
assets would be includible in the variable policyowner's
gross income. We do not know what standards will be
established, if any, in the regulations or rulings which
the Treasury has stated it expects to issue on this
question. We therefore reserve the right to modify the
Policy as necessary to attempt to prevent a policyowner
from being considered the owner of a pro-rata share of
the assets of the Variable Account.
The following discussion assumes that your Policy
will qualify as a life insurance contract for federal
income tax purposes.
46 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
TAX TREATMENT OF POLICY BENEFITS
Death benefits do LIFE INSURANCE DEATH BENEFIT PROCEEDS. In
not incur federal general, the amount of the death benefit payable under
income tax. your Policy is excludible from your gross income under
the Code.
Investment gains are TAX DEFERRED ACCUMULATION. Any increase in your
normally not taxed Account Value is generally not taxable to you unless you
unless distributed receive or are deemed to receive amounts from the Policy
to you before the before the insured dies.
insured dies. DISTRIBUTIONS. If you surrender your Policy,
the amount you will receive as a result will be subject
to tax as ordinary income to the extent that amount
exceeds the "investment in the contract," which is
generally the total of premiums and other consideration
paid for the Policy, less all amounts previously
received under the Policy to the extent those amounts
were excludible from gross income.
Depending on the circumstances, any of the following
transactions may have federal income tax consequences:
- the exchange of a Policy for a life
insurance, endowment or annuity
contract;
- a change in the death benefit option;
- a policy loan;
- a partial surrender;
- a surrender;
- a change in the ownership of a Policy;
- the addition of an accelerated death
benefit rider; or
- an assignment of a Policy.
In addition, federal, state and local transfer and
other tax consequences of ownership or receipt of Policy
Proceeds will depend on your circumstances and those of
the named beneficiary. Whether partial surrenders (or
other amounts deemed to be distributed) constitute income
subject to federal income tax depends, in part, upon
whether your Policy is considered a "modified endowment
contract."
If you pay more MODIFIED ENDOWMENT CONTRACTS. Section 7702A of
premiums than the Code treats certain life insurance contracts as
permitted under the "modified endowment contracts" ("MECs"). The Code
seven-pay test, your defines MECs as those Policies issued or materially
Policy will be a changed after June 21, 1988 on which the total premiums
MEC. paid during the first seven years exceed the amount that
would have been paid if the Policy provided for paid-up
benefits for seven annual premiums ("seven-pay test").
47 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
We will monitor the Policy to determine whether
additional premium payments would cause the Policy to
become a MEC and will take certain steps in an attempt to
avoid this result.
Further, if a transaction occurs which decreases the
face amount of your Policy during the first seven years,
we will retest your Policy, as of the date of its
purchase, based on the lower face amount to determine
compliance with the seven-pay test. Also, if a decrease
in face amount occurs within seven years of a "material
change," we will retest your Policy for compliance as of
the date of the "material change." Failure to comply in
either case would result in the Policy's classification
as a MEC regardless of our efforts to provide a payment
schedule that would not otherwise violate the seven-pay
test.
The rules relating to whether a Policy will be
treated as a MEC are complex and cannot be fully
described in the limited confines of this summary.
Therefore, you should consult with a competent tax
adviser to determine whether a particular transaction
will cause your Policy to be treated as a MEC.
If your Policy DISTRIBUTIONS UNDER MODIFIED ENDOWMENT
becomes a MEC, CONTRACTS. If treated as a MEC, your Policy will be
partial surrenders, subject to the following tax rules:
loans and surrenders - First, partial surrenders are treated as ordinary
may incur taxes and income subject to tax up to the amount equal to the
tax penalties. excess (if any) of your Account Value immediately
before the distribution over the "investment in the
contract" at the time of the distribution.
- Second, policy loans and loans secured by a Policy
are treated as partial surrenders and taxed
accordingly. Any past-due loan interest that is added
to the amount of the loan is treated as a loan.
- Third, a 10 percent additional income tax is imposed
on that portion of any distribution (including
distributions upon surrender), policy loan, or loan
secured by a Policy, that is included in income,
except where the distribution or loan is:
- made when you are age 59 1/2 or older;
- attributable to your becoming
disabled; or
- is part of a series of substantially
equal periodic payments for the
duration of your life (or life
expectancy) or for the duration of the
longer of your or the beneficiary's
life (or life expectancies).
These exceptions may only apply if the policy is
owned by an individual and, generally do not apply if the
policy is owned by a legal entity such as a trust,
partnership or corporation.
48 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
DISTRIBUTIONS UNDER A POLICY THAT IS NOT A MEC. If
your Policy is not a MEC, a distribution is generally
treated first as a tax-free recovery of the "investment
in the contract," and then as a distribution of taxable
income to the extent the distribution exceeds the
"investment in the contract." An exception is made for
cash distributions that occur in the first 15 Policy
Years as a result of a decrease in the death benefit or
other change which reduces benefits under the Policy
which are made for purposes of maintaining compliance
with Section 7702. Such distributions are taxed in whole
or part as ordinary income (to the extent of any gain in
the Policy) under rules prescribed in Section 7702.
If your Policy is not a MEC, policy loans and loans
secured by the Policy are generally not treated as
distributions. Such loans are instead treated as your
indebtedness.
Finally, if your Policy is not a MEC, distributions
(including distributions upon surrender), policy loans
and loans secured by the Policy are not subject to the 10
percent additional tax.
POLICY LOAN INTEREST. Generally, no tax deduction is
allowed for interest paid or accrued on any indebtedness
under a Policy. In addition, if the policyowner is not a
natural person, or is a direct or indirect beneficiary
under the Policy, Section 264(f) of the Code disallows a
pro-rata portion of the taxpayer's otherwise allowable
interest expense deduction. This rule may not, however,
apply if you are such a policyowner engaged in a trade or
business and the Policy covers an officer, director,
employee, or 20 percent owner of your business, within
the meaning of Section 264(f)(4). You should consult your
tax adviser for further guidance on these issues.
Also, there is no definitive guidance concerning the
tax treatment of a policy loan when the interest rate
credited to the loan is the same as the interest rate
charged against the loan, as is the case for loan amounts
in Policy Years 11 and thereafter. You should consult
your tax adviser regarding loan amounts in those Policy
Years.
MULTIPLE POLICIES. All modified endowment contracts
issued by us (or our affiliates) to you during any
calendar year will be treated as a single MEC for
purposes of determining the amount of a policy
distribution which is taxable to you.
49 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
We may be required FEDERAL INCOME TAX WITHHOLDING. We will
to withhold taxes withhold and remit to the federal government the amount
from certain dis- of any tax due on that portion of a policy distribution
tributions to you. which is taxable if we do not have a valid social
security number for you, unless you direct us otherwise
in writing at or before the time of the distribution. As
the policyowner, however, you will be responsible for
the payment of any taxes and early distribution
penalties that may be due on policy distributions,
regardless of whether those amounts are subject to
withholding.
OUR TAXES
As a result of the Omnibus Budget Reconciliation Act
of 1990, we are currently and are generally required to
capitalize and amortize certain policy acquisition
expenses over a 10-year period rather than currently
deducting such expenses. This so-called "deferred
acquisition cost" tax ("DAC tax") applies to the deferred
acquisition expenses of a Policy and results in a
significantly higher corporate income tax liability for
us.
At present, we do not assess any charge against the
assets of the Variable Account for any federal, state or
local taxes that we incur which may be attributable to
the Variable Account or any Policy. We, however, reserve
the right in the future to assess a charge against the
assets of the Variable Account for any such taxes or
other economic burdens resulting from the application of
any tax laws that we determine to be properly
attributable to the Variable Account or any Policy.
DISTRIBUTION OF POLICY
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. and who have entered into
distribution agreements with us and our general
distributor, Clarendon Insurance Agency, Inc.
("Clarendon"), One Sun Life Executive Park, Wellesley
Hills, Massachusetts 02481. Clarendon is our wholly-owned
subsidiary and is registered with the Securities and
Exchange Commission under the Securities Exchange Act of
1934 as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc. Clarendon also
acts as the general distributor of certain variable
annuity contracts and other variable life insurance
contracts we issue.
Gross first year commissions plus any expense
allowance payments we pay on the sale of the Policy may
vary with the sales agreement with broker-dealers
depending on the particular circumstances, but is not
expected to exceed 90%
50 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
of the target premium, which will vary based on the
Insured's age, sex and rating Class, plus 3% of any
excess premium payments. Gross renewal commissions in
Policy Years 2 through 10 will not exceed 4% of actual
premium payments, and will not exceed 1% in Policy
Years 11 and thereafter. In addition, we may also pay
override payments, expense allowances, bonuses,
wholesaler fees, and training allowances. In Policy
Year 3 and thereafter, 0.10% of the Variable Account
Value per annum will be paid to broker-dealers.
VOTING RIGHTS
We are the legal owner of all shares of the Funds
held in the Sub-Accounts of the Variable Account, and as
such have the right to vote upon matters that are
required by the Investment Company Act of 1940 to be
approved or ratified by the shareholders of the Funds and
to vote upon any other matters that may be voted upon at
a shareholders' meeting. We will, however, vote shares
held in the Sub-Accounts in accordance with instructions
received from policyowners who have an interest in the
respective Sub-Accounts.
We will vote shares held in each Sub-Account for
which no timely instructions from policyowners are
received, together with shares not attributable to a
Policy, in the same proportion as those shares in that
Sub-Account for which instructions are received. Should
the applicable federal securities laws change so as to
permit us to vote shares held in the Variable Account in
our own right, we may elect to do so.
The number of shares in each Sub-Account for which a
policyowner may give instructions is determined by
dividing the portion of the Account Value derived from
participation in that Sub-Account, if any, by the value
of one share of the corresponding Fund. We will determine
the number as of a date we choose, but not more than 90
days before the shareholders' meeting. Fractional votes
are counted. Voting instructions will be solicited in
writing at least 14 days prior to the shareholders'
meeting.
We may, if required by state insurance regulators,
disregard voting instructions if those instructions would
require shares to be voted so as to cause a change in the
sub-classification or investment policies of one or more
of the Funds, or to approve or disapprove an investment
management contract. In addition, we may disregard voting
instructions that would require changes in the investment
policies or investment adviser, provided that we
reasonably disapprove of those changes in accordance with
applicable federal regulations. If we disregard voting
instructions, we will advise you of that action and our
reasons for it in our next communication to policyowners.
51 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
OUR DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers 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, those
directors and officers 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. The asterisks below denote the year
that the indicated director was elected to our board of
directors.
DONALD A. STEWART, 53, Chairman and Director (1996*)
150 King Street West
Toronto, Ontario, Canada M5H 1J9
He is Chairman and Chief Executive Officer and a
Director of Sun Life Financial Services of Canada Inc.
and Sun Life Assurance Company of Canada; Chairman and a
Director of Sun Life Insurance and Annuity Company of New
York; and a Director of Massachusetts Financial Services
Company.
C. JAMES PRIEUR, 48, Vice Chairman and Director (1998*)
150 King Street West
Toronto, Ontario, Canada M5H 1J9
He is President and Chief Operating Officer of Sun
Life Financial Services of Canada Inc. and Sun Life
Assurance Company of Canada; Vice Chairman and a Director
of Sun Life Insurance and Annuity Company of New York;
Chairman and a Director of Sun Capital Advisers, Inc.;
Chairman of the Board and Executive Vice President, Sun
Capital Advisers Trust; President and a Director of Sun
Life of Canada (U.S.) Holdings, Inc., Sun Life of Canada
(U.S.) Financial Services Holdings, Inc., and Sun Life
Assurance Company of Canada - U.S. Operations
Holdings, Inc.; and a Director of Sun Life Information
Services Ireland Limited and Massachusetts Financial
Services Company.
JAMES A. MCNULTY, III, 57, President and
Director (1999*)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
He is Executive Vice President, U.S. Operations for
Sun Life Financial Services of Canada Inc. and Sun Life
Assurance Company of Canada; President and Director of
Sun Life Insurance and Annuity Company of New York; and
Chairman and Director of Sun Life of Canada (U.S.)
Distributors, Inc. He is President and a Director of Sun
Life of Canada (U.S.) SPE 97-I, Inc., Sun Benefit
Services Company, Inc., Sun Life of Canada (U.S.)
Holdings General
52 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
Partner, Inc., Sun Life Financial Services Limited, and
Sun Canada Financial Co.; Senior Vice President and a
Director of Sun Life Assurance Company of Canada -- U.S.
Operations Holdings, Inc., Sun Life of Canada (U.S.)
Holdings, Inc., and Sun Life of Canada (U.S.) Financial
Services Holdings, Inc.; and a Director of Clarendon
Insurance Agency, Inc., Sunesco Insurance Agency, Inc.,
and the Support Committee for Battered Women.
RICHARD B. BAILEY, 73, Director (1983*)
63 Atlantic Avenue 11D
Boston, Massachusetts 02110
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. He is a Director of
Cambridge Bancorp.
GREGORY W. GEE, 51, Director (1999*)
150 King Street West
Toronto, Ontario, Canada M5H 1J9
He is Vice Chairman of Sun Life Financial Services of
Canada Inc. and Sun Life Assurance Company of Canada and
a Director of Sun Life Insurance and Annuity Company of
New York.
DAVID D. HORN, 58, Director (1985*)
Strong Road
P.O. Box 24
New Vineyard, Maine 04956
He was formerly Senior Vice President and General
Manager for the United States of Sun Life Assurance
Company of Canada, retiring in December 1997. He is a
Director of Sun Life Insurance and Annuity Company of New
York; 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, Global Governments Variable Account,
Total Return Variable Account, and Managed Sectors
Variable Account.
ANGUS A. MACNAUGHTON, 68, Director (1985*)
Genstar Investment Corporation
555 California Street
Suite 4850
San Francisco, California 94104
He is President and Director of Genstar Investment
L.L.C. and a Director of Sun Life Financial Services of
Canada Inc., Sun Life Assurance Company of
53 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
Canada, Sun Life Insurance and Annuity Company of New
York, Canadian Pacific, Ltd., Varian Semiconductor
Equipment Associates, Genstar Capital Corporation, San
Francisco Opera, and Diversified Collection
Services, Inc.; Vice Chairman and a Director of Barrick
Gold Corporation; and Trustee of the Board of Governors
(Lakefield College School) and World Affairs Council of
Northern California.
S. CAESAR RABOY, 63, Director (1997*)
220 Boylston Street
Boston, Massachusetts 02110
He is a former Senior Vice President and Deputy
General Manager for the United States of Sun Life
Assurance Company of Canada; a Director of Sun Life
Insurance and Annuity Company of New York; and a Director
of Fleet International Bank.
WILLIAM W. STINSON, 66, Director (2000*)
Canadian Pacific Limited
1800 Bankers Hall, East Tower
855 - 2nd Street S.W.
Calgary, Alberta T2P 4Z5
He is Lead Director of Sun Life Assurance Company of
Canada, and a Director of Sun Life Financial Services of
Canada Inc. and Sun Life Insurance and Annuity Company of
New York. In addition, he is a Director of Pan Canadian
Petroleum, Massachusetts Financial Services Company,
United Dominion Industries, Western Star Trucks, and
Westshore Terminals Income Fund. In May 1996,
Mr. Stinson retired as Chairman and Chief Executive
Officer of Canadian Pacific Limited after a 45-year
career.
JAMES M.A. ANDERSON, 50, Vice President, Investments
(1998)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
He is Vice President, Investments of Sun Life
Assurance Company of Canada and Sun Life Insurance and
Annuity Company of New York; President and Chief
Executive Officer of Sun Capital Advisers Trust;
President and Director of Sun Capital Advisers, Inc.;
Vice President and a Director of Sun Life of Canada
(U.S.) Holdings, Inc., Sun Life of Canada (U.S.)
Financial Services Holdings, Inc., Sun Life Assurance
Company of Canada - U.S. Operations Holdings, Inc., Sun
Life of Canada (U.S.) Holdings General Partner, Inc., and
Sun Canada Financial Co.; Vice President, Investments and
Director of Sun Life of Canada (U.S.)
Distributors, Inc.; and a Director of Clarendon Insurance
54 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
Agency, Inc., Sunesco Insurance Agency, Inc., and Sun
Benefit Services Company, Inc.
DAVEY SCOON, 53, Vice President, Finance and Treasurer
(1999)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
He is Vice President and Chief Financial Officer of
U.S. Operations for Sun Life Assurance Company of Canada;
Vice President, Finance, Controller, and Treasurer of Sun
Life Insurance and Annuity Company of New York; Vice
President and Treasurer and Director of Sun Benefit
Services Company, Inc., Sun Life of Canada (U.S.)
Distributors, Inc., and Sun Life of Canada (U.S.) SPE
97-I, Inc.; Vice President and Director of Sun Life
Assurance Company of Canada -- U.S. Operations
Holdings, Inc., Sun Life of Canada (U.S.)
Holdings, Inc., Sun Life of Canada (U.S.) Financial
Services Holdings, Inc., Sun Life of Canada (U.S.)
Holdings General Partner, Inc., Sun Life Financial
Services Limited, and Sun Canada Financial Co.; Director
and Treasurer of Clarendon Insurance Agency, Inc. and
Sunesco Insurance Agency, Inc.; Regular Trustee of Sun
Life of Canada (U.S.) Capital Trust I; and Chairman and
Director of Tufts Associated Health Plan, Lead Director
of Tufts Associated Health Maintenance Organization, and
Board Chairman of Managed Comp. Prior to October 1999, he
was Executive Vice President and Chief Operating Officer
of Liberty Funds Group.
ROBERT P. VROLYK, 46, Vice President and Actuary (1986)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
He is Vice President and Chief Actuary of Sun Life
Assurance Company of Canada; Vice President and Actuary
of Sun Life Insurance and Annuity Company of New York;
Vice President and Director of Sun Life of Canada -- U.S.
Operations Holdings, Inc., Sun Life of Canada (U.S.)
Holdings, Inc., Sun Life of Canada (U.S.) Financial
Services Holdings, Inc., Sun Canada Financial Co., and
Sun Life of Canada (U.S.) Holdings General
Partner, Inc.; Vice President and Director of Sun Life of
Canada (U.S.) SPE 97-I, Inc.; a Director of Sun Benefit
Services Company, Inc., and Sun Life Information Services
Ireland Limited; and a Regular Trustee of Sun Life of
Canada (U.S.) Capital Trust I.
PETER F. DEMUTH, 41, Vice President and Chief Counsel and
Assistant Secretary (1998)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
He is Vice President and Chief Counsel of U.S.
Operations for Sun Life Assurance Company of Canada; Vice
President and Chief Counsel and Assistant
55 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
Secretary for Sun Life Insurance and Annuity Company of
New York; a Director of Sun Life of Canada (U.S.)
Holdings, Inc., Sun Life of Canada (U.S.) Financial
Services Holdings, Inc., and Sun Life Assurance Company
of Canada - U.S. Operations Holdings, Inc.; Assistant
Secretary for Sun Capital Advisers Trust; and a Regular
Trustee of Sun Life of Canada (U.S.) Capital Trust I.
Prior to February 1998, he was a partner at the firm of
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
ELLEN B. KING, 43, Counsel and Secretary (1998)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
She is Counsel of Sun Life Assurance Company of
Canada; Counsel and Secretary of Sun Life Insurance and
Annuity Company of New York; and Secretary of Sun Life of
Canada (U.S.) Holdings, Inc., Sun Life of Canada (U.S.)
Financial Services Holdings, Inc., Sun Life Assurance
Company of Canada - U.S. Operations Holdings, Inc., Sun
Benefit Services Company, Inc., Sun Life of Canada (U.S.)
SPE 97-I, Inc., Sun Canada Financial Co., and Sun Life of
Canada (U.S.) Holdings General Partner, Inc.
RONALD J. FERNANDES, 42
Vice President, Retirement
Products and Services (1999)
One Copley Place
Boston, Massachusetts 02116
He is Vice President, Retirement Products and
Services of Sun Life Insurance and Annuity Company of New
York. He is also a Director of Clarendon Insurance
Agency, Inc., Sunesco Insurance Agency, Inc., and Sun
Life of Canada (U.S.) Distributors, Inc. Prior to
October 1999, Mr. Fernandes was Senior Vice President and
Director, Retirement Products and Services of Wheat First
Union in Richmond, Virginia.
OTHER INFORMATION
STATE REGULATION
We are subject to the laws of Delaware governing life
insurance companies and to regulation by Delaware's
Commissioner of Insurance, whose agents periodically
conduct an examination of our financial condition and
business operations. We are also subject to the insurance
laws and regulations of the jurisdictions in which we are
authorized to do business.
56 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
We are required to file an annual statement with the
insurance regulatory authority of those jurisdictions
where we are authorized to do business relating to our
business operations and financial condition as of
December 31st of the preceding year.
LEGAL PROCEEDINGS
There are no pending legal proceedings which would
have a material adverse effect on the Variable Account.
We are engaged in various kinds of routine litigation
which, in our judgment, is not material to the Variable
Account.
EXPERTS
Actuarial matters concerning the policy have been
examined by Georges C. Rouhart, FSA, MAAA, Product
Officer.
ACCOUNTANTS
Deloitte & Touche LLP have audited our statutory
statements of admitted assets, liabilities and capital
stock and surplus as of December 31, 1999 and 1998, and
the related statutory statements of operations, change in
capital stock and surplus, and cash flow for each of the
three years in the period ended December 31, 1999
included in this prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year
ended December 31, 1999 filed with the SEC is
incorporated by reference in this Prospectus. Any
statement contained in a document we incorporate by
reference is deemed modified or superceded to the extent
that a later filed document, including this Prospectus,
shall modify or supercede that statement. Any statement
so modified or superceded shall not be deemed, except as
so modified or superceded, to constitute part of this
Prospectus.
The Company will furnish, without charge, to each
person to whom a copy of this Prospectus is delivered,
upon the written or oral request of such person, a copy
of the document referred to above which has been
incorporated by reference in this Prospectus, other than
exhibits to such document (unless such exhibits are
specifically incorporated by reference in this
Prospectus). Requests for such document should be
directed to the Secretary, Sun Life Assurance Company of
Canada (U.S.), One Sun Life Executive Park, Wellesley
Hills, Massachusetts 02481, telephone (800) 225-3950.
57 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
REGISTRATION STATEMENTS
This prospectus is part of a registration statement
that has been filed with the Securities and Exchange
Commission under the Securities Act of 1933 with respect
to the Policy. It does not contain all of the information
set forth in the registration statement and the exhibits
filed as part of the registration statement. You should
refer to the registration statement for further
information concerning the Variable Account, Sun Life of
Canada (U.S.), the mutual fund investment options, and
the Policy.
FINANCIAL STATEMENTS
Our financial statements, which are included in this
prospectus, should be considered only as bearing on our
ability to meet our obligations with respect to the death
benefit and our assumption of the mortality and expense
risks. They should not be considered as bearing on the
investment performance of the Fund shares held in the
Variable Account.
58 FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
STATUTORY STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND CAPITAL STOCK AND
SURPLUS
DECEMBER 31, 1999 AND 1998 (IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
ADMITTED ASSETS
Bonds................................................... $ 1,221,970 $ 1,763,468
Common stocks........................................... 75,283 128,445
Mortgage loans on real estate........................... 528,911 535,003
Properties acquired in satisfaction of debt............. 15,641 17,207
Investment real estate.................................. 79,182 78,021
Policy loans............................................ 40,095 41,944
Cash and short-term investments......................... 316,971 265,226
Other invested assets................................... 67,938 64,177
Investment income due and accrued....................... 25,303 35,706
Federal income tax recoverable and interest thereon..... -- 1,110
Other assets............................................ 5,807 1,928
----------- -----------
General account assets.................................. 2,377,101 2,932,235
Separate account assets
Unitized.............................................. 15,490,328 11,774,745
Non-unitized.......................................... 2,080,726 2,195,641
----------- -----------
Total admitted assets................................... $19,948,155 $16,902,621
=========== ===========
LIABILITIES
Aggregate reserve for life policies and contracts....... $ 1,153,642 $ 1,216,107
Supplementary contracts................................. 3,182 1,885
Policy and contract claims.............................. 962 369
Liability for premium and other deposit funds........... 564,820 1,000,875
Surrender values on cancelled policies.................. 16 5
Interest maintenance reserve............................ 41,771 40,490
Commissions to agents due or accrued.................... 3,253 2,615
General expenses due or accrued......................... 14,055 5,932
Transfers from Separate Accounts due or accrued......... (467,619) (361,863)
Taxes, licenses and fees due or accrued, excluding
FIT................................................... 379 401
Federal income taxes due or accrued..................... 89,031 25,019
Unearned investment income.............................. 22 23
Amounts withheld or retained by company as agent or
trustee............................................... (442) 529
Remittances and items not allocated..................... 1,078 5,176
Asset valuation reserve................................. 44,071 44,392
Payable to parent, subsidiaries, and affiliates......... 26,284 30,381
Payable for securities.................................. -- 428
Other liabilities....................................... 16,674 9,770
----------- -----------
General account liabilities............................. 1,491,179 2,022,534
Separate account liabilities:
Unitized.............................................. 15,489,908 11,774,522
Non-unitized.......................................... 2,080,726 2,195,641
----------- -----------
Total liabilities....................................... 19,061,813 15,992,697
----------- -----------
CAPITAL STOCK AND SURPLUS
Common capital stock.................................... 5,900 5,900
----------- -----------
Surplus notes........................................... 565,000 565,000
Gross paid in and contributed surplus................... 199,355 199,355
Unassigned funds........................................ 116,087 139,669
----------- -----------
Surplus................................................. 880,442 904,024
----------- -----------
Total common capital stock and surplus.................. 886,342 909,924
----------- -----------
Total liabilities, capital stock and surplus............ $19,948,155 $16,902,621
=========== ===========
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
59 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
STATUTORY STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
INCOME:
Premiums and annuity
considerations.................... $ 69,492 $ 210,198 $ 254,066
Deposit-type funds.................. 2,598,265 2,140,604 2,155,297
Considerations for supplementary
contracts without life
contingencies and dividend
accumulations..................... 3,461 2,086 1,615
Net investment income............... 167,035 184,532 270,249
Amortization of interest maintenance
reserve........................... 3,702 2,282 1,166
Income from fees associated with
investment management and
administration and contract
guarantees from Separate
Account........................... 173,417 141,211 109,757
Net gain from operations from
Separate Account.................. 61 -- 5
Other income........................ 24,554 87,364 102,889
---------- ---------- ----------
Total Income........................ 3,039,987 2,768,277 2,895,044
---------- ---------- ----------
BENEFITS AND EXPENSES:
Death benefits...................... 4,386 15,335 17,284
Annuity benefits.................... 155,387 153,636 148,135
Disability benefits and benefits
under accident and health
policies.......................... -- 104 132
Surrender benefits and other fund
withdrawals....................... 2,313,179 1,933,833 1,854,004
Interest on policy or contract
funds............................. 237 (140) 699
Payments on supplementary contracts
without life contingencies and
dividend accumulations............ 2,345 2,528 1,687
Increase (decrease) in aggregate
reserves for life and accident and
health policies and contracts..... (62,465) (972,135) 127,278
Decrease in liability for premium
and other deposit funds........... (436,055) (449,831) (447,603)
Increase (decrease) in reserve for
supplementary contracts without
life contingencies and for
dividend and coupon
accumulations..................... 1,296 (362) 42
---------- ---------- ----------
Total Benefits...................... 1,978,310 682,968 1,701,658
---------- ---------- ----------
Commissions on premiums and annuity
considerations (direct business
only)............................. 155,381 137,718 132,700
Commissions and expense allowances
on reinsurance assumed............ -- 13,032 17,951
General insurance expenses.......... 75,046 58,132 46,624
Insurance taxes, licenses and fees,
excluding federal income taxes.... 8,710 7,388 8,267
Increase (decrease) in loading on
and cost of collection in excess
of loading on deferred and
uncollected premiums.............. -- (1,663) 523
Net transfers to Separate
Accounts.......................... 727,811 722,851 844,130
Reserve and fund adjustments on
reinsurance terminated............ -- 1,017,112 --
---------- ---------- ----------
Total Benefits and Expenses......... $2,945,258 $2,637,538 $2,751,853
---------- ---------- ----------
Net gain from operations before
dividends to policyholders and
federal income tax expense........ 94,729 130,739 143,191
Dividends to policyholders.......... -- (5,981) 33,316
---------- ---------- ----------
Net gain from operations after
dividends to policyholders and
before federal income tax
expense........................... 94,729 136,720 109,875
Federal income tax expense,
(excluding tax on capital
gains)............................ 24,479 11,713 7,339
---------- ---------- ----------
Net gain from operations after
dividends to policyholders and
federal income taxes and before
realized capital gains............ 70,250 125,007 102,536
Net realized capital gains less
capital gains tax and transferred
to the Interest Maintenance
Reserve........................... 20,108 394 26,706
---------- ---------- ----------
NET INCOME.............................. $ 90,358 $ 125,401 $ 129,242
========== ========== ==========
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
60 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
STATUTORY STATEMENTS OF CHANGES IN CAPITAL STOCK AND SURPLUS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Capital and surplus, beginning of year... $909,924 $832,695 $ 567,143
-------- -------- ---------
Net income............................. 90,358 125,401 129,242
Change in net unrealized capital gains
(losses)............................. (36,111) (384) 1,152
Change in non-admitted assets and
related items........................ 1,715 (1,086) (463)
Change in reserve due to change in
valuation basis...................... -- 39,016
Change in asset valuation reserve...... 320 3,213 6,307
Surplus (contributed to) withdrawn from
separate accounts during period...... 136 82 --
Other changes in surplus in separate
accounts statements.................. -- 10 --
Change in surplus notes................ -- -- 250,000
Dividends to stockholders.............. (80,000) (50,000) (159,722)
Aggregate write-ins for gains and
(losses) in surplus.................. -- (7) 20
-------- -------- ---------
Net change in capital and surplus for
the year............................. (23,582) 77,229 265,552
-------- -------- ---------
Capital and surplus, end of year......... $886,342 $909,924 $ 832,695
======== ======== =========
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
61 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
STATUTORY STATEMENTS OF CASH FLOW
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
---------- ----------- -----------
<S> <C> <C> <C>
CASH PROVIDED BY OPERATIONS:
Premiums, annuity considerations and
deposit funds received............... $2,667,756 $ 2,361,669 $ 2,410,919
Considerations for supplementary
contracts and dividend accumulations
received............................. 3,461 2,086 1,615
Net investment income received......... 225,038 236,944 345,279
Fees associated with investment
management, administration, and
contract guarentees from separate
accounts............................. 173,417 141,211 --
Other income received.................. 24,555 111,936 208,223
---------- ----------- -----------
Total receipts........................... 3,094,227 2,853,846 2,966,036
---------- ----------- -----------
Benefits paid (other than dividends)... 2,474,693 2,107,736 2,020,747
Insurance expenses and taxes paid
(other than federal income and
capital gains taxes)................. 230,744 217,023 203,650
Net cash transferred to separate
accounts............................. 833,567 800,636 895,465
Dividends paid to policyholders........ -- 26,519 28,316
Federal income tax payments
(recoveries), (excluding tax on
capital gains)....................... (40,644) 46,965 1,397
Other--net............................. 237 (138) 698
---------- ----------- -----------
Total payments........................... 3,498,597 3,198,741 3,150,273
---------- ----------- -----------
Net cash used in operations.............. (404,370) (344,895) (184,237)
---------- ----------- -----------
Proceeds from long-term investments
sold, matured or repaid (after
deducting taxes on capital gains
(losses) of $(1,768) for 1999, $2,038
for 1998, and $750 for 1997)......... 1,065,307 1,261,396 1,343,803
Issuance of surplus notes.............. -- -- 250,000
Other cash provided (used)............. 13,797 (40,529) 71,095
---------- ----------- -----------
Total cash provided...................... 1,079,104 1,220,867 1,664,898
---------- ----------- -----------
CASH APPLIED:
Cost of long-term investments
acquired............................. (484,417) (967,901) (773,783)
Other cash applied..................... (138,572) (187,263) (310,519)
---------- ----------- -----------
Total cash applied....................... (622,989) (1,155,164) (1,084,302)
Net change in cash and short-term
investments.............................. 51,745 (279,192) 396,359
Cash and short-term investments:
Beginning of year........................ 265,226 544,418 148,059
---------- ----------- -----------
End of year.............................. $ 316,971 $ 265,226 $ 544,418
========== =========== ===========
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
62 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
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
variable life insurance, individual fixed and variable
annuities, group fixed and variable annuities, and group
pension contracts.
Effective May 1, 1997, the Company became a
wholly-owned subsidiary of the newly established Sun Life
of Canada (U.S.) Holdings, Inc. ("Life Holdco"). On
December 18, 1997, Life Holdco became a wholly-owned
subsidiary of Sun Life Assurance Company of Canada--U.S.
Operations Holdings, Inc. ("US Holdco"). US Holdco is a
wholly-owned subsidiary of Sun Life Assurance Company of
Canada ("SLOC"), a mutual 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, which 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, results of operations or cash flow 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
63 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED):
statutory basis of accounting and GAAP, although not
reasonably determinable, are presumed to be material.
INVESTED ASSETS Bonds are carried at cost, adjusted for
amortization of premium or accrual of discount.
Investments in mortgage backed securities are generally
carried at amortized cost. Changes in prepayment
assumptions and resulting cash flows are confirmed
retrospectively. The adjusted yield is used to calculate
investment income in future periods. If current book
value exceeds future undiscounted cash flows, a realized
capital loss is recorded and amortized through the
Interest Maintenance Reserve (IMR). 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 are carried 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 are computed in
accordance with presently accepted actuarial standards,
and are based on actuarial assumptions and methods
(including use of published mortality tables and
prescribed interest rates) which produce reserves at
least as great as those required by law and contract
provisions.
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.
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
64 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED):
general account liabilities, and general account assets
are available to fund liabilities of this account.
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 value as determined by
quoted market prices of the underlying investments.
Gains (losses) from mortality experience and
investment experience of the separate accounts, not
applicable to contract owners, and accrued expense
allowances recognized in reserves are receivable from or
payable to the general account. Accumulated amounts 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
$467,619,000 in 1999 and $361,863,000 in 1998.
CHANGES IN ACCOUNTING PRINCIPLES AND REPORTING As
described more fully in Note 10, during 1997 the Company
changed certain assumptions used in determining actuarial
reserves.
In March 1998, the National Association of Insurance
Commissioners adopted the Codification of Statutory
Accounting Principles ("Codification"). The Codification,
which is intended to standardize regulatory accounting
and reporting for the insurance industry, is proposed to
be effective January 1, 2001. However, statutory
accounting principles will continue to be established by
individual state laws and permitted practices and it is
uncertain when, or if, the state of Delaware will require
adoption of Codification for the preparation of statutory
financial statements. The Company has not finalized the
quantification of the effects of Codification on its
statutory 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.
Certain prior year amounts have been reclassified to
conform to amounts as presented in the current year.
65 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
2. INVESTMENTS IN SUBSIDIARIES
The Company owns all of the outstanding shares of the
following subsidiaries:
Sun Life Insurance and Annuity Company of New York
("Sun Life (N.Y.)") is engaged in the sale of individual
fixed and variable annuity contracts and group life and
group long term disability insurance contracts in the
State of New York;
Sun Life of Canada (U.S.) Distributors, Inc.
(formerly Sun Investment Services Company) ("Sundisco"),
is a registered broker-dealer;
Sun Life Financial Services Limited ("SLFSL"), serves
as the marketing administrator for the distribution of
the offshore products of SLOC (Bermuda branch), an
affiliate;
Sun Benefit Services Company, Inc. ("Sunbesco")
receives renewal commissions on a disability product and
is currently inactive;
Sun Capital Advisers, Inc. ("Sun Capital") is a
registered investment adviser;
Sun Life Finance Corporation ("Sunfinco") is a
finance company and currently inactive;
Sun Life of Canada (U.S.) SPE 97-1, Inc. ("SPE 97-1")
is a special purpose corporation engaging in activities
incidental to securitizing mortgage loans;
Clarendon Insurance Agency, Inc. ("Clarendon") is a
registered broker-dealer that acts as the general
distributor of certain annuity and life insurance
contracts issued by the Company and its affiliates;
Sun Life Information Services Ireland Limited
("SLISL") is an offshore technology services center for
affiliates.
On October 29, 1999, the Company sold New London
Trust F.S.B. ("NLT") to an unaffiliated party for
$30,254,000. The Company realized a post tax gain of
$13,170,000.
66 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
2. INVESTMENTS IN SUBSIDIARIES (CONTINUED):
On February 5, 1999, the Company sold Massachusetts
Casualty Insurance Company ("MCIC"), a disability
insurance company, to an unaffiliated party. The net
proceeds of this sale were $33,965,000. The Company
realized a post tax gain of $4,900,000.
The impact of the sales of NLT and MCIC on continuing
operations of the Company is not expected to be material.
Prior to December 24, 1997, the Company owned 93.6%
of the outstanding shares of Massachusetts Financial
Services Company ("MFS"), a registered investment
adviser. On December 24, 1997, the Company transferred
all of its shares of MFS to Life Holdco in the form of a
dividend valued at $159,722,000. As a result of this
transaction, the Company realized a gain of $21,195,000
of undistributed earnings.
During 1999, 1998, and 1997, the Company contributed
capital in the following amounts to its subsidiaries:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
MCIC........................................................ $ -- $ -- $ 2,000
SLFSL....................................................... 1,000 750 1,000
SPE 97-1.................................................... -- -- 20,377
Sundisco.................................................... 19,000 10,000 --
Sun Capital................................................. -- 500 --
Clarendon................................................... -- 10 --
SLISL....................................................... -- 502 --
</TABLE>
During 1999, 1998, and 1997, the Company received
dividends from the following subsidiaries:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
SUN Life (N.Y.)............................................. $ 6,500 $ 3,000 $ --
NLT......................................................... 19,319 -- 7,500
MFS......................................................... -- -- 33,110
SPE 97-1.................................................... -- 675 --
SUNDISCO.................................................... -- -- 571
</TABLE>
67 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
2. INVESTMENTS IN SUBSIDIARIES (CONTINUED):
Summarized combined financial information of the
Company's subsidiaries as of December 31, 1999, 1998 and
1997 and for the years then ended, follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1999 1998 1997
--------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Assets................................................... $ 877,939 $ 1,315,317 $ 1,190,951
Liabilities.............................................. (802,656) (1,186,872) (1,073,966)
--------- ----------- -----------
Total net assets......................................... $ 75,283 $ 128,445 $ 116,985
========= =========== ===========
Total revenues........................................... $ 82,443 $ 222,853 $ 750,364
Operating expenses....................................... (90,318) (221,933) (646,896)
Income tax expense....................................... 3,249 (1,222) (43,987)
--------- ----------- -----------
Net income (loss)........................................ $ (4,626) $ (302) $ 59,481
========= =========== ===========
</TABLE>
3. BONDS
Investments in debt securities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Long-term bonds:
United States government and government
agencies and authorities................... $ 78,161 $ 2,091 $ (2,454) $ 77,798
States, provinces and political
subdivisions............................... 20,428 69 (57) 20,440
Public utilities............................. 181,466 6,854 (5,907) 182,413
Transportation............................... 188,285 7,689 (2,709) 193,265
Finance...................................... 88,517 4,631 (518) 92,630
All other corporate bonds.................... 665,113 18,353 (17,152) 666,314
---------- ------- -------- ----------
Total long-term bonds.................... 1,221,970 39,687 (28,797) 1,232,860
---------- ------- -------- ----------
Short-term bonds:
U.S. Treasury Bills, bankers acceptances and
commercial paper........................... 312,585 -- -- 312,585
---------- ------- -------- ----------
Total short-term bonds................... 312,585 -- -- 312,585
---------- ------- -------- ----------
Total bonds...................................... $1,534,555 $39,687 $(28,797) $1,545,445
========== ======= ======== ==========
</TABLE>
68 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
3. BONDS (CONTINUED):
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Long-term bonds:
United States government and government
agencies and authorities................... $ 140,417 $ 7,635 $ (177) $ 147,875
States, provinces and political
subdivisions............................... 16,632 2,219 -- 18,851
Public utilities............................. 397,670 38,740 (238) 436,172
Transportation............................... 197,207 22,481 (18) 219,670
Finance...................................... 144,958 12,542 (494) 157,006
All other corporate bonds.................... 866,584 50,814 (6,419) 910,979
---------- -------- ------- ----------
Total long-term bonds.................... 1,763,468 134,431 (7,346) 1,890,553
---------- -------- ------- ----------
Short-term bonds:
U.S. Treasury Bills, bankers acceptances and
commercial paper........................... 43,400 -- -- 43,400
Affiliates................................... 220,000 -- -- 220,000
---------- -------- ------- ----------
Total short-term bonds................... 263,400 -- -- 263,400
---------- -------- ------- ----------
Total bonds...................................... $2,026,868 $134,431 $(7,346) $2,153,953
========== ======== ======= ==========
</TABLE>
The amortized cost and estimated fair value of bonds
at December 31, 1999 are shown below by contractual
maturity. Expected maturities will differ
69 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
3. BONDS (CONTINUED):
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, 1999
-----------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Maturities:
Due in one year or less................................. $ 376,761 $ 376,823
Due after one year through five years................... 184,077 182,788
Due after five years through ten years.................. 259,042 263,321
Due after ten years..................................... 542,678 543,301
---------- ----------
1,362,558 1,366,233
Mortgage-backed securities.............................. 171,997 179,212
---------- ----------
Total bonds................................................. $1,534,555 $1,545,445
========== ==========
</TABLE>
Proceeds from sales and maturities of investments in
debt securities during 1999, 1998, and 1997 were
$740,081,000, $1,016,811,000 and $980,264,000, gross
gains were $7,688,000, $17,025,000, and $10,732,000 and
gross losses were $4,477,000, $866,000, and $2,446,000,
respectively.
Bonds included above with an amortized cost of
approximately $2,604,000, $2,572,000, and $2,578,000 at
December 31, 1999, 1998 and 1997, respectively, were on
deposit with governmental authorities as required by law.
Excluding investments in U.S. government and agencies
securities, the Company is not exposed to significant
concentrations of credit risk in its portfolio.
4. SECURITIES LENDING
The Company has a securities lending program operated
on its behalf by the Company's primary custodian, Chase
Manhattan Bank of New York. The custodian has indemnified
the Company against losses arising from this program.
There were no securities on loan as of December 31, 1999,
1998 or 1997. Income resulting from this program was
$20,000, $94,000, and $200,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.
70 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
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 allowances for losses have been made. In
those cases where, in management's judgment, the mortgage
loans' values are impaired, appropriate losses are
recorded.
The following table shows the geographical
distribution of the mortgage loan portfolio.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
California.................................................. $ 72,693 $ 82,397
Massachusetts............................................... 38,083 53,528
Michigan.................................................... 32,941 34,357
New York.................................................... 22,912 21,190
Ohio........................................................ 31,914 36,171
Pennsylvania................................................ 92,825 93,587
Washington.................................................. 30,265 36,548
All other................................................... 207,278 177,225
-------- --------
$528,911 $535,003
======== ========
</TABLE>
The Company has restructured mortgage loans totaling
$15,644,000 and $30,743,000 and corresponding allowances
for losses of $1,043,000 and $2,120,000 at December 31,
1999 and 1998, respectively.
On December 22, 1999, the Company acquired 28
mortgages from SLOC at a cost of $118,091,637. The
Company in turn sold a 90% participation in these 28 plus
an additional 11 existing mortgage loans to a third party
as part of two mortgage participation agreements, for
which the Company received proceeds of $146,974,851.
The Company has outstanding mortgage loan commitments
on real estate totaling $2,384,000 and $18,005,000 at
December 31, 1999 and 1998, respectively.
71 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
6. INVESTMENT GAINS AND LOSSES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Net realized gains (losses):
Bonds....................................................... $ 70 $ 5,659 $ 2,882
Common stock of affiliates.................................. 15,290 -- 21,195
Common stocks............................................... -- 48 --
Mortgage loans.............................................. 787 2,374 3,837
Real estate................................................. (481) 955 2,912
Other invested assets....................................... -- (3,827) (717)
-------- ------- -------
Subtotal.................................................... 15,666 5,209 30,109
Capital gains tax expense (benefit)......................... (4,442) 4,815 3,403
-------- ------- -------
Total....................................................... $ 20,108 $ 394 $26,706
======== ======= =======
Changes in unrealized gains (losses):
Bonds....................................................... $ (6,689) $ -- $ --
Common stock of affiliates.................................. (30,966) (302) (2,894)
Mortgage loans.............................................. 83 (1,312) 1,524
Real estate................................................. 1,461 403 3,377
Other invested assets....................................... -- 827 (855)
-------- ------- -------
Total....................................................... $(36,111) $ (384) $ 1,152
======== ======= =======
</TABLE>
Realized capital gains and losses on bonds and
mortgages and interest rate swaps 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 net realized capital gains credited to
the interest maintenance reserve were $4,965,000 in 1999,
$8,943,000 in 1998, and $6,321,000 in 1997. All gains and
losses are transferred net of applicable income taxes.
72 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
7. NET INVESTMENT INCOME
Net investment income consisted of:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income from bonds.................................. $128,992 $167,436 $188,924
Income from investment in common stock of affiliates........ 25,819 3,675 41,181
Interest income from mortgage loans......................... 50,327 53,269 76,073
Real estate investment income............................... 15,696 15,932 17,161
Interest income from policy loans........................... 3,118 2,881 3,582
Other investment income (loss).............................. (1,700) (641) (193)
-------- -------- --------
Gross investment income..................................... 222,252 242,552 326,728
-------- -------- --------
Interest on surplus notes and notes payable................. (43,266) (44,903) (42,481)
Investment expenses......................................... (11,951) (13,117) (13,998)
-------- -------- --------
Net investment income....................................... $167,035 $184,532 $270,249
======== ======== ========
</TABLE>
8. DERIVATIVES
The Company uses derivative instruments for interest
rate risk management purposes, including hedges against
specific interest rate risk and to minimize the Company's
exposure to fluctuations in interest rates and foreign
currency exchange rates. The Company's use of derivatives
has included U.S. Treasury futures, conventional interest
rate swaps, and currency and interest rate swap
agreements structured as forward spread lock interest
rate swaps.
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 allocate gains or losses to specific
hedged assets or liabilities, gains or losses are
deferred in IMR and amortized over the remaining life of
the hedged assets. At December 31, 1999 and 1998, 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
73 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
8. DERIVATIVES (CONTINUED):
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.
The Company's open positions are as follows:
<TABLE>
<CAPTION>
SWAPS OUTSTANDING
AT DECEMBER 31, 1999
--------------------------------
NOTIONAL MARKET VALUE
PRINCIPAL AMOUNTS OF POSITIONS
----------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Conventional interest rate swaps............................ $20,000 $249
Foreign currency swap....................................... 648 113
</TABLE>
<TABLE>
<CAPTION>
SWAPS OUTSTANDING
AT DECEMBER 31, 1998
--------------------------------
NOTIONAL MARKET VALUE
PRINCIPAL AMOUNTS OF POSITIONS
----------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Conventional interest rate swaps............................ $45,000 $508
Foreign currency swap....................................... 1,178 263
</TABLE>
The market value of swaps 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 nonperformance 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.
74 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
9. LEVERAGED LEASES (CONTINUED):
The Company's net investment in leveraged leases is
composed of the following elements:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Lease contracts receivable.................................. $ 69,766 $ 78,937
Less non-recourse debt...................................... (69,749) (78,920)
-------- --------
Net receivable.............................................. 17 17
Estimated residual value of leased assets................... 41,150 41,150
Less unearned and deferred income........................... (7,808) (8,932)
-------- --------
Investment in leveraged leases.............................. 33,359 32,235
Less fees................................................... (113) (138)
-------- --------
Net investment in leveraged leases.......................... $ 33,246 $ 32,097
======== ========
</TABLE>
The net investment is included in "Other invested
assets" on the balance sheet.
10. REINSURANCE
The Company has agreements with SLOC which provide
that SLOC 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 $1,527,000, $2,128,000 and $1,381,000 for
the years ended December 31, 1999, 1998 and 1997,
respectively.
Effective January 1, 1991, the Company entered into
an agreement with SLOC under which certain individual
life insurance contracts issued by SLOC were reinsured by
the Company on a 90% coinsurance basis. During 1997, SLOC
changed certain assumptions used in determining the gross
and the ceded reserve balance. The Company reflected the
effect of the changes in assumptions to its assumed
reserves as a direct credit to surplus. The effect of the
change was a $39,016,000 decrease in reserves. Also, the
agreement required SLOC to reinsure the mortality risks
in excess of $500,000 per policy for the individual life
insurance contracts assumed by the Company. Such death
benefits are reinsured on a yearly renewable term basis.
The life reinsurance
75 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
10. REINSURANCE (CONTINUED):
assumed agreement required the reinsurer to withhold
funds in amounts equal to the reserves assumed. These
agreements had the effect of increasing income from
operations by approximately $24,579,000, and $37,050,000
for the years ended December 31, 1998 and 1997,
respectively. The Company terminated this agreement
effective October 1, 1998, resulting in an increase in
income from operations of $65,679,000 which included a
cash settlement.
The following are summarized pro-forma results of
operations of the Company for the years ended
December 31, 1999, 1998 and 1997 before the effect of
reinsurance transactions with SLOC:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Income:
Premiums, annuity deposits and other revenues........ $2,874,513 $2,377,364 $2,340,733
Net investment income and realized gains............. 190,845 187,208 298,120
---------- ---------- ----------
Subtotal............................................. 3,065,358 2,564,572 2,638,853
---------- ---------- ----------
Benefits and Expenses:
Policyholder benefits................................ 2,709,712 2,312,247 2,350,354
Other expenses....................................... 239,282 203,238 187,591
---------- ---------- ----------
Subtotal............................................. 2,948,994 2,515,485 2,537,945
---------- ---------- ----------
Income from operations................................... $ 116,364 $ 49,087 $ 100,908
========== ========== ==========
</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 increasing income from
operations by $193,000 in 1999, $3,008,000 in 1998, and
decreasing income from operations by $2,658,000 in 1997.
During 1999 the Company entered into an agreement
with an unrelated company which provides reinsurance on
certain fixed group annuity contracts. The net effect of
this agreement was to increase income from operations by
approximately $3,400,000. Also during 1999, the Company
entered into three agreements with two unrelated
companies for the purpose of obtaining stop-loss coverage
of guaranteed minimum death benefit exposure with respect
to the
76 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
10. REINSURANCE (CONTINUED):
Company's variable annuity business. The net effect of
these agreements was to increase income from operations
by approximately $157,000.
The Company is contingently liable for the portion of
the policies reinsured under each of its existing
reinsurance agreements in the event the reinsurance
companies are unable to pay their portion of any
reinsured claim. Management believes that any liability
from this contingency is unlikely. However, to limit the
possibility of such losses, the Company evaluates the
financial condition of its reinsurers and monitors
concentration of credit risk.
11. WITHDRAWAL CHARACTERISTICS OF ANNUITY ACTUARIAL RESERVES AND DEPOSIT
LIABILITIES
The withdrawal characteristics of general account and
separate account annuity reserves and deposits are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------
AMOUNT % OF TOTAL
----------- ----------
(IN THOUSANDS)
<S> <C> <C>
Subject to discretionary withdrawal--with adjustment:
With market value adjustment............................ $ 2,346,853 13
At market value......................................... 15,010,696 81
At book value less surrender charges (surrender charge
>5%).................................................. 45,722 --
At book value (minimal or no charge or adjustment)...... 104,539 1
Not subject to discretionary withdrawal provision........... 1,015,108 5
----------- ---
Total annuity actuarial reserves and deposit liabilities.... $18,522,918 100
=========== ===
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------
AMOUNT % OF TOTAL
----------- ----------
(IN THOUSANDS)
<S> <C> <C>
Subject to discretionary withdrawal--with adjustment:
With market value adjustment............................ $ 2,896,529 19
At market value......................................... 11,368,059 73
At book value less surrender charges (surrender charge
>5%).................................................. 62,404 --
At book value (minimal or no charge or adjustment)...... 111,757 1
Not subject to discretionary withdrawal provision........... 1,055,642 7
----------- ---
Total annuity actuarial reserves and deposit liabilities.... $15,494,391 100
=========== ===
</TABLE>
12. SEGMENT INFORMATION
The Company offers financial products and services
such as fixed and variable annuities, retirement plan
services and life insurance on an individual
77 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
12. SEGMENT INFORMATION (CONTINUED):
basis. Within these areas, the Company conducts business
principally in two operating segments and maintains a
corporate segment to provide for the capital needs of the
various operating segments and to engage in other
financing related activities.
The Protection segment markets and administers a
variety of life insurance products sold to individuals
and corporate owners of individual life insurance. The
products include whole life, universal life and variable
life products.The Wealth Management segment markets and
administers individual and group variable annuity
products, individual and group fixed annuity products
which include market value adjusted annuities, and other
retirement benefit products.
The following amounts pertain to the various business
segments:
<TABLE>
<CAPTION>
TOTAL TOTAL PRETAX FEDERAL TOTAL
REVENUES EXPENDITURES* INCOME INCOME TAX ASSETS
---------- ------------- -------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1999
Protection................................ $ 33,236 $ 41,030 $ (7,794) $ (2,661) $ 136,127
Wealth Management......................... 2,979,450 2,898,158 81,292 18,593 19,015,394
Corporate................................. 27,301 6,070 21,231 8,547 796,634
---------- ---------- -------- -------- -----------
Total................................. $3,039,987 $2,945,258 $ 94,729 $ 24,479 $19,948,155
---------- ---------- -------- -------- -----------
1998
Protection................................ $ 229,710 $ 144,800 $ 84,910 $ (4,148) $ 199,683
Wealth Management......................... 2,527,608 2,483,715 43,893 12,486 16,123,905
Corporate................................. 10,959 3,042 7,917 3,375 579,033
---------- ---------- -------- -------- -----------
Total................................. $2,768,277 $2,631,557 $136,720 $ 11,713 $16,902,621
---------- ---------- -------- -------- -----------
1997
Protection................................ $ 304,141 $ 272,333 $ 31,808 $ 13,825 $ 1,143,697
Wealth Management......................... 2,533,006 2,507,592 25,414 10,667 14,043,221
Corporate................................. 57,897 5,244 52,653 (17,153) 738,439
---------- ---------- -------- -------- -----------
Total................................. $2,895,044 $2,785,169 $109,875 $ 7,339 $15,925,357
---------- ---------- -------- -------- -----------
</TABLE>
------------------------
* Total expenditures includes dividends to policyholders of $0 for 1999,
$(5,981) for 1998, and $33,316 for 1997.
78 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
13. RETIREMENT PLANS
The Company participates with SLOC in a
noncontributory 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; currently, the plan is
fully funded. 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
SLOC.
The Company's share of the group's accrued pension
obligation was $1,914,000, and $1,178,000 at
December 31, 1999 and 1998, respectively. The Company's
share of net periodic pension cost was $736,000,
$586,000, and $146,000 for 1999, 1998 and 1997,
respectively.
The Company also participates with SLOC 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
$284,000, $231,000, and $259,000 for the years ended
December 31, 1999, 1998 and 1997, 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.
The Company records an accrual of the estimated cost
of retiree benefit payments during the years the employee
provides services, and amortizes an obligation of
approximately $400,000 over a period of ten years. The
Company's cash flows are not affected by this method,
however the net effect decreased income by $185,000,
$95,000, and $117,000, for the years ended December 31,
1999, 1998, and 1997, respectively. The Company's
post-retirement health, dental and life insurance
benefits currently are not funded.
79 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
13. RETIREMENT PLANS (CONTINUED):
The following table sets forth the change in the
pension and other post-retirement benefit plans' benefit
obligations and assets as well as the plans' funded
status reconciled with the amount shown in the Company's
financial statements at December 31:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year......... $110,792 $ 79,684 $ 10,419 $ 9,845
Service cost.................................... 5,632 4,506 413 240
Interest cost................................... 6,952 6,452 845 673
Actuarial loss (gain)........................... (21,480) 21,975 1,048 308
Benefits paid................................... (2,376) (1,825) (508) (647)
-------- -------- -------- --------
Benefit obligation at end of year................... $ 99,520 $110,792 $ 12,217 $ 10,419
======== ======== ======== ========
The Company's share:
Benefit obligation at beginning of year......... $ 9,125 $ 5,094 $ 416 $ 385
Benefit obligation at end of year............... $ 8,816 $ 9,125 $ 743 $ 416
Change in plan assets:
Fair value of plan assets at beginning of
year.......................................... $151,575 $136,610 $ -- $ --
Actual return on plan assets.................... 9,072 16,790 -- --
Employer contribution........................... -- -- 508 647
Benefits paid................................... (2,376) (1,825) (508) (647)
-------- -------- -------- --------
Fair value of plan assets at end of year............ $158,271 $151,575 $ -- $ --
======== ======== ======== ========
Funded status....................................... $ 58,752 $ 40,783 $(12,217) $(10,419)
Unrecognized net actuarial gain (loss).............. (20,071) (2,113) 1,469 586
Unrecognized transition obligation (asset).......... (22,617) (24,674) 140 185
Unrecognized prior service cost..................... 7,081 7,661 -- --
-------- -------- -------- --------
Prepaid (accrued) benefit cost...................... $ 23,145 $ 21,657 $(10,608) $ (9,648)
======== ======== ======== ========
The Company's share of accrued benefit cost......... $ (1,914) $ (1,178) $ (381) $ (195)
Weighted-average assumptions as of December 31:
Discount rate................................... 7.50% 6.75% 7.50% 6.75%
Expected return on plan assets.................. 8.75% 8.00% N/A N/A
Rate of compensation increase................... 4.50% 4.50% N/A N/A
</TABLE>
For measurement purposes, a 10.9% annual rate of
increase in the per capita cost of covered health care
benefits was assumed for 1999 (5.6% for
80 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
13. RETIREMENT PLANS (CONTINUED):
dental benefits). The rates were assumed to decrease
gradually to 5% for 2005 and remain at that level
thereafter.
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Components of net periodic benefit cost:
Service cost.......................................... $ 5,632 $ 4,506 $ 413 $240
Interest cost......................................... 6,952 6,452 845 673
Expected return on plan assets........................ (12,041) (10,172) -- --
Amortization of transition obligation (asset)......... (2,056) (2,056) 45 45
Amortization of prior service cost.................... 580 580 -- --
Recognized net actuarial (gain) loss.................. (554) (677) 164 (20)
-------- -------- ------ ----
Net periodic benefit cost................................. $ (1,487) $ (1,367) $1,467 $938
======== ======== ====== ====
The Company's share of net periodic benefit cost...... $ 736 $ 586 $ 185 $ 95
======== ======== ====== ====
</TABLE>
Assumed health care cost trend rates have a
significant effect on the amounts reported for the health
care plans. A one-percentage-point change in assumed
health care cost trend rates would have the following
effects:
<TABLE>
<CAPTION>
1-PERCENTAGE-POINT 1-PERCENTAGE-POINT
INCREASE DECREASE
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Effect on total of service and interest cost components..... $ 288 $ (518)
Effect on postretirement benefit obligation................. 2,754 (2,279)
</TABLE>
81 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
14. 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:
<TABLE>
<CAPTION>
1999
-------------------------------------
CARRYING AMOUNT ESTIMATED FAIR VALUE
--------------- --------------------
(IN THOUSANDS)
<S> <C> <C>
Assets:
Bonds (including short-term).............. $ 1,534,555 $1,545,445
Mortgages................................. 528,911 526,608
Derivatives............................... -- 362
Other Invested Assets..................... 67,938 67,938
Policy loans.............................. 40,095 40,095
Liabilities:
Insurance reserves........................ $ 120,536 $ 120,536
Individual annuities...................... 247,619 238,229
Pension products.......................... 661,806 665,830
<CAPTION>
1998
-------------------------------------
CARRYING AMOUNT ESTIMATED FAIR VALUE
--------------- --------------------
(IN THOUSANDS)
Assets:
<S> <C> <C>
Bonds (including short-term).............. $ 2,026,868 $2,153,953
Mortgages................................. 535,003 556,143
Derivatives............................... -- 771
Policy loans.............................. 41,944 41,944
Liabilities:
Insurance reserves........................ $ 121,100 $ 121,100
Individual annuities...................... 274,448 271,849
Pension products.......................... 1,104,489 1,145,351
</TABLE>
The major methods and assumptions used in estimating
the fair values of financial instruments are as follows:
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 by taking into account prices for publicly
traded bonds of similar credit risk and maturity and
repayment and liquidity characteristics.
82 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
14. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED):
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 policy loans approximate carrying
amounts.
The fair values of derivative financial instruments
are estimated using the process described in Note 8.
The fair values of the Company's general account
insurance 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 fair value.
15. 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 and amortized into income over the remaining
contractual life of the security sold.
The table shown below presents changes in the major
elements of the AVR and IMR.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1999 1998
------------------- -------------------
AVR IMR AVR IMR
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance, beginning of year.............................. $44,392 $40,490 $47,605 $33,830
Net realized investment gains, net of tax............... 9,950 4,983 256 8,942
Amortization of net investment gains.................... -- (3,702) -- (2,282)
Unrealized investment losses............................ (9,705) -- (6,550) --
Required by formula..................................... (566) -- 3,081 --
------- ------- ------- -------
Balance, end of year.................................... $44,071 $41,771 $44,392 $40,490
======= ======= ======= =======
</TABLE>
83 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
16. FEDERAL INCOME TAXES
The Company, its subsidiaries and certain other
affiliates 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 $3,000,000,
$48,144,000, and $31,000,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.
The Company is currently undergoing an audit by the
Internal Revenue Service. The Company believes that there
will be no material audit adjustments for the periods
under examination.
17. RELATED PARTY TRANSACTIONS
A. SURPLUS NOTES AND NOTES RECEIVABLE (PAYABLE)
On December 22, 1997, the Company issued a
$250,000,000 surplus note to Life Holdco. This note has
an interest rate of 8.625% and is due on or after
November 6, 2027.
On May 9, 1997, the Company issued a short-term note
of $600,000,000 to Life Holdco at an interest rate of
5.10%, which was extended at various interest rates. This
note was repaid on December 22, 1997.
On December 19, 1995, the Company issued surplus
notes totaling $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 semiannually.
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 with the consent of the Delaware Insurance
Commissioner.
The Company accrued $4,259,000 and $4,259,000 for
interest on surplus notes for the years ended
December 31, 1999 and 1998, respectively.
84 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
17. RELATED PARTY TRANSACTIONS (CONTINUED):
The Company expensed $43,266,000, $44,903,000, and
$42,481,000 for interest on surplus notes and notes
payable for the years ended December 31, 1999, 1998 and
1997, respectively.
On September 28, 1998 a $500,000 note was issued by
SLISL to the Company at a rate of 6.0%, maturing on
September 28, 2002.
A $110,000,000 note was issued to the Company by MFS
on February 11, 1998 at an interest rate of 6.0% due
February 11, 1999. Another $110,000,000 note was issued
to the Company on December 22, 1998 at an interest rate
of 5.55% due February 11, 1999. These two notes and an
additional $10,000,000 were combined into a new note of
$230,000,000 with a floating interest rate based on the
six month LIBOR rate plus 25 basis points. The
$230,000,000 note was repaid to the Company on
December 21, 1999.
On January 14, 2000, the Company purchased
$200,000,000 of notes from MFS.
On December 23, 1997, the Company issued a
$110,000,000 note to US Holdco at an interest rate of
5.80%, which was repaid on March 1, 1998. A $110,000,000
note was also issued to the Company by MFS on
December 23, 1997 at an interest rate of 5.85% and was
repaid on February 11, 1998.
On December 31, 1996, the Company issued a
$58,000,000 note to SLOC at an interest rate of 5.70%
which was repaid on February 10, 1997. Also on December
31, 1996, the Company was issued a $58,000,000 note by
MFS at an interest rate of 5.76%. This note was repaid to
the Company on February 10, 1997.
On December 31, 1998, the Company had an additional
$20,000,000 in notes issued by MFS, scheduled to mature
in 2000. These notes were repaid to the Company on
December 21, 1999.
B. STOCKHOLDER DIVIDENDS
The maximum amount of dividends which can be paid by
the Company without prior approval of the Insurance
Commissioner of the State of Delaware is subject to
restrictions relating to statutory surplus. In 1999, a
dividend in the
85 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
17. RELATED PARTY TRANSACTIONS (CONTINUED):
amount of $80,000,000 was declared and paid by the
Company to its parent, Life Holdco. This dividend was
approved by the Board of Directors, but did not require
approval of the Insurance Commissioner. In 1998, a
dividend in the amount of $50,000,000 was declared and
paid by the Company to its parent, Life Holdco. This
dividend was approved by the Insurance Commissioner and
the Board of Directors. On December 24, 1997 the Company
transferred all of its shares of MFS to Life Holdco in
the form of a dividend valued at $159,722,000. This
dividend was approved by the Insurance Commissioner and
the Board of Directors.
C. SERVICE AGREEMENTS
The Company has an agreement with SLOC which provides
that SLOC will furnish, as requested, personnel as well
as certain services and facilities on a
cost-reimbursement basis. Expenses under this agreement
amounted to approximately $28,700,000 in 1999,
$16,344,000 in 1998, and $15,997,000 in 1997.
The Company leases office space to SLOC under lease
agreements with terms expiring in December, 2004 and
options to extend the terms for each of twelve successive
five-year terms at fair market rental not to exceed 125%
of the fixed rent for the term which is ending. Rent
received by the Company under the leases for 1999
amounted to approximately $6,943,000.
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, 1999, 1998 and 1997.
19. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is involved in pending and threatened
litigation in the normal course of its business in which
claims for monetary and punitive damages have been
asserted. Although there can be no assurances, at the
present time the Company does not anticipate that the
ultimate liability arising from such pending or
threatened litigation, after consideration of provisions
made for
86 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
19. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED):
potential losses and costs of defense, will have a
material adverse effect on the financial condition or
operating results of the Company.
Under insurance guaranty fund laws in each state, the
District of Columbia and Puerto Rico, insurers licensed
to do business can be assessed by state insurance
guaranty associations for certain obligations of
insolvent insurance companies to policyholders and
claimants. Recent regulatory actions against certain
large life insurers encountering financial difficulty
have prompted various state insurance guaranty
associations to begin assessing life insurance companies
for the deemed losses. Most of these laws do provide,
however, that an assessment may be excused or deferred it
it would threaten an insurer's solvency and further
provide annual limits on such assessments. Part of the
assessments paid by the Company and its subsidiaries
pursuant to these laws may be used as credits for a
portion of the associated premium taxes. The Company
incurred guaranty fund assessments of approximately
$3,500,000, $3,500,000, and $3,083,000 in 1999, 1998 and
1997, respectively.
20. 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 Asset Valuation Reserve. Dividends paid by
subsidiaries to the Company are included in the Company's
net investment income.
Other differences between statutory accounting
practices and GAAP include the following items. 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 nonadmitted
87 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
20. ACCOUNTING POLICIES AND PRINCIPLES (CONTINUED):
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
and 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. Investments
in fixed maturity securities classified as
available-for-sale are carried at aggregate fair value
with changes in unrealized gains and losses reported net
of taxes in a separate component of stockholder's equity
for GAAP and generally at amortized cost under statutory
accounting practices.
* * * * * *
88 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
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.)
(the "Company") as of December 31, 1999 and 1998, 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, 1999. 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 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. 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.
As described more fully in Notes 1 and 20 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 is a comprehensive basis of
accounting other than generally accepted accounting
principles. The effects on the financial statements of
the differences between the statutory basis of accounting
and generally accepted accounting principles, although
not reasonably determinable, are presumed to be material.
In our opinion, the statutory 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, 1999 and 1998, and the results
of its operations and its cash flow for each of the three
years in the period ended December 31, 1999 on the basis
of accounting described in Notes 1 and 20.
However, because of the differences between the two
bases of accounting referred to in the second preceding
paragraph, in our opinion, the statutory 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, 1999 and 1998 or
89 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
the results of its operations or its cash flow for each
of the three years in the period ended December 31, 1999.
February 10, 2000
90 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
STATEMENT OF CONDITION -- DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES COST VALUE
ASSETS: ------ ------- -------
<S> <C> <C> <C>
Investments in mutual funds:
AIM Variable Insurance Funds, Inc.
V.I. Capital Appreciation Fund ("AIM1")... 37 $ 1,028 $ 1,330
V.I. Growth Fund ("AIM2")................. 49 1,417 1,585
V.I. Growth and Income Fund ("AIM3")...... 37 1,010 1,182
V.I. International Equity Fund ("AIM4")... 76 1,797 2,235
The Alger American Fund
Growth Portfolio ("AL1").................. 18 1,000 1,179
Income and Growth Portfolio ("AL2")....... 76 1,000 1,340
Small Capitalization Portfolio ("AL3").... 24 1,000 1,340
Goldman Sachs Variable Insurance Trust
CORE Large Cap Growth Fund ("GS1")........ 75 1,001 1,191
CORE Small Cap Equity Fund ("GS2")........ 108 1,003 1,144
CORE US Equity Fund ("GS3")............... 119 1,577 1,665
Growth and Income Fund ("GS4")............ 92 1,011 999
International Equity Fund ("GS5")......... 85 1,091 1,226
MFS/Sun Life Series Trust
Capital Appreciation Series ("CAS")....... 23 1,000 1,266
Massachusetts Investors Trust
Series ("CGS").......................... 27 1,000 1,033
Emerging Growth Series ("EGS")............ 290 9,765 11,676
Government Securities Series ("GGS")...... 125 1,561 1,561
High Yield Series ("HYS")................. 134 1,187 1,210
Massachusetts Investors Growth Stock
Series ("MIS").......................... 652 9,743 10,516
New Discovery Series ("NWD").............. 91 1,000 1,533
Total Return Series ("TRS")............... 259 4,876 4,867
Utilities Series ("UTS").................. 62 1,000 1,220
OCC Accumulation Trust
Equity Portfolio ("OP1").................. 26 1,000 972
Mid Cap Portfolio ("OP2")................. 104 1,028 1,206
Small Cap Portfolio ("OP3")............... 43 1,000 966
Managed Portfolio ("OP4")................. 23 1,000 1,005
Sun Capital Advisers Trust
Sun Capital Money Market Fund ("SCA1").... 1,017 1,017 1,017
Sun Capital Investment Grade Bond Fund
("SCA2")................................ 187 1,771 1,747
Sun Capital Real Estate Fund ("SCA3")..... 109 1,051 972
Sun Capital Select Equity Fund ("SCA
4")..................................... 100 1,000 1,264
Sun Capital Blue Chip Mid-Cap Fund ("SCA
5")..................................... 151 1,600 1,857
Sun Capital Investors Foundation Fund
("SCA 6")............................... 100 1,002 1,122
------- -------
Net Assets:................................... $56,536 $63,426
======= =======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
91 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
STATEMENT OF CONDITION -- CONTINUED
<TABLE>
<CAPTION>
NET ASSETS APPLICABLE TO OWNERS OF UNITS UNIT VALUE VALUE
DEFERRED VARIABLE ANNUITY CONTRACTS: ----- ---------- -------
<S> <C> <C> <C>
AIM Variable Insurance Funds, Inc.
V.I. Capital Appreciation Fund............ -- $13.2630 $ 1,330
V.I. Growth Fund.......................... 32 12.0173 1,585
V.I. Growth and Income Fund............... -- 11.7887 1,182
V.I. International Equity Fund............ 53 14.5631 2,235
The Alger American Fund
Growth Portfolio.......................... -- 11.7559 1,179
Income and Growth Portfolio............... -- 13.3516 1,340
Small Capitalization Portfolio............ -- 13.3581 1,340
Goldman Sachs Variable Insurance Trust
CORE Large Cap Growth Fund................ -- 11.8769 1,191
CORE Small Cap Equity Fund................ -- 11.4055 1,144
CORE US Equity Fund....................... 52 10.9307 1,665
Growth and Income Fund.................... -- 9.9587 999
International Equity Fund................. -- 12.2243 1,226
MFS/Sun Life Series Trust
Capital Appreciation Series............... -- 12.6212 1,266
Massachusetts Investors Trust Series...... -- 10.3059 1,033
Emerging Growth Series.................... 742 15.7395 11,676
Government Securities Series.............. 56 9.9799 1,561
High Yield Series......................... 18 10.1980 1,210
Massachusetts Investors Growth Stock
Series.................................. 851 12.3539 10,516
New Discovery Series...................... -- 15.2928 1,533
Total Return Series....................... 495 9.8304 4,867
Utilities Series.......................... -- 12.1675 1,220
OCC Accumulation Trust
Equity Portfolio.......................... -- 9.6931 972
Mid Cap Portfolio......................... -- 12.0310 1,206
Small Cap Portfolio....................... -- 9.6339 966
Managed Portfolio......................... -- 10.0177 1,005
Sun Capital Advisers Trust
Sun Capital Money Market Fund............. -- 10.1492 1,017
Sun Capital Investment Grade Bond Fund.... 75 9.9711 1,747
Sun Capital Real Estate Fund.............. -- 9.6829 972
Sun Capital Select Equity Fund............ -- 12.6067 1,264
Sun Capital Blue Chip Mid-Cap Fund........ 46 12.6740 1,857
Sun Capital Investors Foundation Fund..... -- 11.1831 1,122
-------
Net Assets:.............................................. $63,426
=======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
92 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
STATEMENT OF OPERATIONS
For the Period from August 25, 1999 (commencement of operations) through
December 31, 1999
<TABLE>
<CAPTION>
AIM1 AIM2 AIM3 AIM4 AL1 AL2
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME:
Dividend income and capital gain
distributions received............... $ 28 $ 42 $ 10 $ 48 $ -- $ --
----- ----- ----- ----- ----- -----
EXPENSES:
Mortality and expense risk charges.... $ -- $ -- $ -- $ -- $ -- $ --
Cost of insurance..................... -- -- -- -- -- --
----- ----- ----- ----- ----- -----
Total expenses........................ $ -- $ -- $ -- $ -- $ -- $ --
----- ----- ----- ----- ----- -----
Net investment income (loss)...... $ 28 $ 42 $ 10 $ 48 $ -- $ --
----- ----- ----- ----- ----- -----
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales................. $ -- $ -- $ -- $ -- $ -- $ --
Cost of investments sold............ -- -- -- -- -- --
----- ----- ----- ----- ----- -----
Net realized gains (losses)....... $ -- $ -- $ -- $ -- $ -- $ --
----- ----- ----- ----- ----- -----
Net unrealized appreciation
(depreciation) on investments:
End of year......................... $ 302 $ 168 $ 172 $ 438 $ 179 $ 340
Beginning of year................... -- -- -- -- -- --
----- ----- ----- ----- ----- -----
Change in unrealized appreciation
(depreciation).................. $ 302 $ 168 $ 172 $ 438 $ 179 $ 340
----- ----- ----- ----- ----- -----
Realized and unrealized gains
(losses).......................... $ 302 $ 168 $ 172 $ 438 $ 179 $ 340
----- ----- ----- ----- ----- -----
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS.......................... $ 330 $ 210 $ 182 $ 486 $ 179 $ 340
===== ===== ===== ===== ===== =====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
93 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
STATEMENT OF OPERATIONS -- continued
For the Period from August 25, 1999 (commencement of operations) through
December 31, 1999
<TABLE>
<CAPTION>
AL3 GS1 GS2 GS3 GS4
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCOME:
Dividend income and capital gain
distributions received............... $ -- $ 1 $ 3 $ 16 $ 11
----- ----- ----- ----- ----
EXPENSES:
Mortality and expense risk charges.... $ -- $ -- $ -- $ -- $ --
Cost of insurance..................... -- -- -- -- --
----- ----- ----- ----- ----
Total expenses........................ $ -- $ -- $ -- $ -- $ --
----- ----- ----- ----- ----
Net investment income (loss)...... $ -- $ 1 $ 3 $ 16 $ 11
----- ----- ----- ----- ----
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales................. $ -- $ -- $ -- $ -- $ --
Cost of investments sold............ -- -- -- -- --
----- ----- ----- ----- ----
Net realized gains (losses)....... $ -- $ -- $ -- $ -- $ --
----- ----- ----- ----- ----
Net unrealized appreciation
(depreciation) on investments:
End of year......................... $ 340 $ 190 $ 141 $ 88 $(12)
Beginning of year................... -- -- -- -- --
----- ----- ----- ----- ----
Change in unrealized appreciation
(depreciation).................. $ 340 $ 190 $ 141 $ 88 $(12)
----- ----- ----- ----- ----
Realized and unrealized gains
(losses).......................... $ 340 $ 190 $ 141 $ 88 $(12)
----- ----- ----- ----- ----
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS.......................... $ 340 $ 191 $ 144 $ 104 $ (1)
===== ===== ===== ===== ====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
94 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
STATEMENT OF OPERATIONS -- CONTINUED
For the Period from August 25, 1999 (commencement of operations) through
December 31, 1999
<TABLE>
<CAPTION>
GS5 CAS CGS EGS GGS HYS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME:
Dividend income and capital gain
distributions received............... $ 91 $ -- $ -- $ -- $ -- $ --
---- ---- ---- ------- ---- ----
EXPENSES:
Mortality and expense risk charges.... $ -- $ -- $ -- $ (6) $ -- $ --
Cost of insurance..................... -- -- -- (181) -- --
---- ---- ---- ------- ---- ----
Total expenses........................ $ -- $ -- $ -- $ (187) $ -- $ --
---- ---- ---- ------- ---- ----
Net investment income (loss)...... $ 91 $ -- $ -- $ (187) $ -- $ --
---- ---- ---- ------- ---- ----
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales................. $ -- $ -- $ -- $ 1,365 $ -- $ --
Cost of investments sold............ -- -- -- (1,000) -- --
---- ---- ---- ------- ---- ----
Net realized gains (losses)....... $ -- $ -- $ -- $ 365 $ -- $ --
---- ---- ---- ------- ---- ----
Net unrealized appreciation
(depreciation) on investments:
End of year......................... $135 $266 $ 33 $ 1,911 $ -- $ 23
Beginning of year................... -- -- -- -- -- --
---- ---- ---- ------- ---- ----
Change in unrealized appreciation
(depreciation).................. $135 $266 $ 33 $ 1,911 $ -- $ 23
---- ---- ---- ------- ---- ----
Realized and unrealized gains
(losses).......................... $135 $266 $ 33 $ 2,276 $ -- $ 23
---- ---- ---- ------- ---- ----
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS.......................... $226 $266 $ 33 $ 2,089 $ -- $ 23
==== ==== ==== ======= ==== ====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
95 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
STATEMENT OF OPERATIONS -- CONTINUED
For the Period from August 25, 1999 (commencement of operations) through
December 31, 1999
<TABLE>
<CAPTION>
MIS NWD TRS UTS OP1
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCOME:
Dividend income and capital gain
distributions received............... $ -- $ -- $ -- $ -- $ --
------- ---- ------- ---- ----
EXPENSES:
Mortality and expense risk charges.... $ (6) $ -- $ (2) $ -- $ --
Cost of insurance..................... (178) -- (85) -- --
------- ---- ------- ---- ----
Total expenses........................ $ (184) $ -- $ (87) $ -- $ --
------- ---- ------- ---- ----
Net investment income (loss)...... $ (184) $ -- $ (87) $ -- $ --
------- ---- ------- ---- ----
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales................. $ 1,171 $ -- $ 997 $ -- $ --
Cost of investments sold............ (1,000) -- (1,000) -- --
------- ---- ------- ---- ----
Net realized gains (losses)....... $ 171 $ -- $ (3) $ -- $ --
------- ---- ------- ---- ----
Net unrealized appreciation
(depreciation) on investments:
End of year......................... $ 773 $533 $ (9) $220 $(28)
Beginning of year................... -- -- -- -- --
------- ---- ------- ---- ----
Change in unrealized appreciation
(depreciation).................. $ 773 $533 $ (9) $220 $(28)
------- ---- ------- ---- ----
Realized and unrealized gains
(losses).......................... $ 944 $533 $ (12) $220 $(28)
------- ---- ------- ---- ----
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS.......................... $ 760 $533 $ (99) $220 $(28)
======= ==== ======= ==== ====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
96 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
STATEMENT OF OPERATIONS -- CONTINUED
For the Period from August 25, 1999 (commencement of operations) through
December 31, 1999
<TABLE>
<CAPTION>
OP2 OP3 OP4 SCA1 SCA2
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCOME:
Dividend income and capital gain
distributions received............... $ 28 $ -- $ -- $ 17 $ 22
---- ---- ---- ---- ----
EXPENSES:
Mortality and expense risk charges.... $ -- $ -- $ -- $ -- $ --
Cost of insurance..................... -- -- -- -- --
---- ---- ---- ---- ----
Total expenses........................ $ -- $ -- $ -- $ -- $ --
---- ---- ---- ---- ----
Net investment income (loss)...... $ 28 $ -- $ -- $ 17 $ 22
---- ---- ---- ---- ----
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales................. $ -- $ -- $ -- $ -- $ --
Cost of investments sold............ -- -- -- -- --
---- ---- ---- ---- ----
Net realized gains (losses)....... $ -- $ -- $ -- $ -- $ --
---- ---- ---- ---- ----
Net unrealized appreciation
(depreciation) on investments:
End of year......................... $178 $(34) $ 5 $ -- $(24)
Beginning of year................... -- -- -- -- --
---- ---- ---- ---- ----
Change in unrealized appreciation
(depreciation).................. $178 $(34) $ 5 $ -- $(24)
---- ---- ---- ---- ----
Realized and unrealized gains
(losses).......................... $178 $(34) $ 5 $ -- $(24)
---- ---- ---- ---- ----
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS.......................... $206 $(34) $ 5 $ 17 $ (2)
==== ==== ==== ==== ====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
97 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
STATEMENT OF OPERATIONS -- CONTINUED
For the Period from August 25, 1999 (commencement of operations) through
December 31, 1999
<TABLE>
<CAPTION>
SCA3 SCA4 SCA5 SCA6
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCOME:
Dividend income and capital gain
distributions received............... $ 51 $ -- $ 38 $ 2
---- ---- ---- ----
EXPENSES:
Mortality and expense risk charges.... $ -- $ -- $ -- $ --
Cost of insurance..................... -- -- -- --
---- ---- ---- ----
Total expenses........................ $ -- $ -- $ -- $ --
---- ---- ---- ----
Net investment income (loss)...... $ 51 $ -- $ 38 $ 2
---- ---- ---- ----
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales................. $ -- $ -- $ -- $ --
Cost of investments sold............ -- -- -- --
---- ---- ---- ----
Net realized gains (losses)....... $ -- $ -- $ -- $ --
---- ---- ---- ----
Net unrealized appreciation
(depreciation) on investments:
End of year......................... $(79) $264 $257 $120
Beginning of year................... -- -- -- --
---- ---- ---- ----
Change in unrealized appreciation
(depreciation).................. $(79) $264 $257 $120
---- ---- ---- ----
Realized and unrealized gains
(losses).......................... $(79) $264 $257 $120
---- ---- ---- ----
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS.......................... $(28) $264 $295 $122
==== ==== ==== ====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
98 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
STATEMENT OF CHANGES IN NET ASSETS
For the Period from August 25, 1999 (commencement of operations) through
December 31, 1999
<TABLE>
<CAPTION>
AIM1 AIM2 AIM3 AIM4 AL1 AL2
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 28 $ 42 $ 10 $ 48 $ -- $ --
Net realized gains (losses)........... -- -- -- -- -- --
Net unrealized gains (losses)......... 302 168 172 438 179 340
------ ------ ------ ------ ------ ------
Increase (Decrease) in net assets
from operations:................ $ 330 $ 210 $ 182 $ 486 $ 179 $ 340
------ ------ ------ ------ ------ ------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
Net transfers between sub-accounts
and fixed accounts................. -- 375 -- 749 -- --
Withdrawals, surrenders and account
fees............................... -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net contract owner activity....... $1,000 $1,375 $1,000 $1,749 $1,000 $1,000
------ ------ ------ ------ ------ ------
Increase (Decrease) in net assets... $1,330 $1,585 $1,182 $2,235 $1,179 $1,340
NET ASSETS:
Beginning of period................... -- -- -- -- -- --
------ ------ ------ ------ ------ ------
End of period......................... $1,330 $1,585 $1,182 $2,235 $1,179 $1,340
====== ====== ====== ====== ====== ======
<CAPTION>
AL3 GS1 GS2 GS3 GS4
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- -----------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss).......... $ -- $ 1 $ 3 $ 16 $ 11
Net realized gains (losses)........... -- -- -- -- --
Net unrealized gains (losses)......... 340 190 141 88 (12)
------ ------ ------ ------ ------
Increase (Decrease) in net assets
from operations:................ $ 340 $ 191 $ 144 $ 104 $ (1)
------ ------ ------ ------ ------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $1,000 $1,000 $1,000 $1,000 $1,000
Net transfers between sub-accounts
and fixed accounts................. -- -- -- 561 --
Withdrawals, surrenders and account
fees............................... -- -- -- -- --
------ ------ ------ ------ ------
Net contract owner activity....... $1,000 $1,000 $1,000 $1,561 $1,000
------ ------ ------ ------ ------
Increase (Decrease) in net assets... $1,340 $1,191 $1,144 $1,665 $ 999
NET ASSETS:
Beginning of period................... -- -- -- -- --
------ ------ ------ ------ ------
End of period......................... $1,340 $1,191 $1,144 $1,665 $ 999
====== ====== ====== ====== ======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
99 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
STATEMENT OF CHANGES IN NET ASSETS -- CONTINUED
For the Period from August 25, 1999 (commencement of operations) through
December 31, 1999
<TABLE>
<CAPTION>
GS5 CAS CGS EGS GGS HYS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 91 $ -- $ -- $ (187) $ -- $ --
Net realized gains (losses)........... -- -- -- 365 -- --
Net unrealized gains (losses)......... 135 266 33 1,911 -- 23
------- ------ ------ ------- ------ ------
Increase (Decrease) in net assets
from operations:................ $ 226 $ 266 $ 33 $ 2,089 $ -- $ 23
------- ------ ------ ------- ------ ------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $ 1,000 $1,000 $1,000 $ 1,000 $1,000 $1,000
Net transfers between sub-accounts
and fixed accounts................. -- -- -- 9,901 561 187
Withdrawals, surrenders and account
fees............................... -- -- -- (1,314) -- --
------- ------ ------ ------- ------ ------
Net contract owner activity....... $ 1,000 $1,000 $1,000 $ 9,587 $1,561 $1,187
------- ------ ------ ------- ------ ------
Increase (Decrease) in net assets... $ 1,226 $1,266 $1,033 $11,676 $1,561 $1,210
NET ASSETS:
Beginning of period................... -- -- -- -- -- --
------- ------ ------ ------- ------ ------
End of period......................... $ 1,226 $1,266 $1,033 $11,676 $1,561 $1,210
======= ====== ====== ======= ====== ======
<CAPTION>
MIS NWD TRS UTS OP1
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- -----------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss).......... $ (184) $ -- $ (87) $ -- $ --
Net realized gains (losses)........... 171 -- (3) -- --
Net unrealized gains (losses)......... 773 533 (9) 220 (28)
------- ------ ------ ------- ------
Increase (Decrease) in net assets
from operations:................ $ 760 $ 533 $ (99) $ 220 $ (28)
------- ------ ------ ------- ------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $ 1,000 $1,000 $1,000 $ 1,000 $1,000
Net transfers between sub-accounts
and fixed accounts................. 9,901 -- 4,951 -- --
Withdrawals, surrenders and account
fees............................... (1,145) -- (985) -- --
------- ------ ------ ------- ------
Net contract owner activity....... $ 9,756 $1,000 $4,966 $ 1,000 $1,000
------- ------ ------ ------- ------
Increase (Decrease) in net assets... $10,516 $1,533 $4,867 $ 1,220 $ 972
NET ASSETS:
Beginning of period................... -- -- -- -- --
------- ------ ------ ------- ------
End of period......................... $10,516 $1,533 $4,867 $1,220 $ 972
======= ====== ====== ======= ======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
100 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
STATEMENT OF CHANGES IN NET ASSETS -- CONTINUED
For the Period from August 25, 1999 (commencement of operations) through
December 31, 1999
<TABLE>
<CAPTION>
OP2 OP3 OP4 SCA1 SCA2
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 28 $ -- $ -- $ 17 $ 22
Net realized gains (losses)........... -- -- -- -- --
Net unrealized gains (losses)......... 178 (34) 5 -- (24)
------ ------ ------ ------ ------
Increase (Decrease) in net assets
from operations:................ $ 206 $ (34) $ 5 $ 17 $ (2)
------ ------ ------ ------ ------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $1,000 $1,000 $1,000 $1,000 $1,000
Net transfers between sub-accounts
and fixed accounts................. -- -- -- -- 749
Withdrawals, surrenders and account
fees............................... -- -- -- -- --
------ ------ ------ ------ ------
Net contract owner activity....... $1,000 $1,000 $1,000 $1,000 $1,749
------ ------ ------ ------ ------
Increase (Decrease) in net assets... $1,206 $ 966 $1,005 $1,017 $1,747
NET ASSETS:
Beginning of period................... -- -- -- -- --
------ ------ ------ ------ ------
End of period......................... $1,206 $ 966 $1,005 $1,017 $1,747
====== ====== ====== ====== ======
<CAPTION>
SCA3 SCA4 SCA5 SCA6
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -----------
OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net investment income (loss).......... $ 51 $ -- $ 38 $ 2
Net realized gains (losses)........... -- -- -- --
Net unrealized gains (losses)......... (79) 264 257 120
------ ------ ------ ------
Increase (Decrease) in net assets
from operations:................ $ (28) $ 264 $ 295 $ 122
------ ------ ------ ------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $1,000 $1,000 $1,000 $1,000
Net transfers between sub-accounts
and fixed accounts................. -- -- 562 --
Withdrawals, surrenders and account
fees............................... -- -- -- --
------ ------ ------ ------
Net contract owner activity....... $1,000 $1,000 $1,562 $1,000
------ ------ ------ ------
Increase (Decrease) in net assets... $ 972 $1,264 $1,857 $1,122
NET ASSETS:
Beginning of period................... -- -- -- --
------ ------ ------ ------
End of period......................... $ 972 $1,264 $1,857 $1,122
====== ====== ====== ======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
101 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
Sun Life (U.S.) Variable Account I (the "Variable
Account"), a separate account of Sun Life Assurance
Company of Canada (U.S.) (the "Sponsor") was established
on August 25, 1999 as a funding vehicle for the variable
portion of certain individual variable universal life
insurance contracts. The Variable Account is registered
with the Securities and Exchange Commission under the
Investment Company Act of 1940 as a unit investment
trust.
The assets of the Variable Account are divided into
Sub-Accounts. Each Sub-Account is invested in shares of a
specific mutual fund or series thereof selected by
contract owners. The funds currently offered are as
follows: AIM Variable Insurance Funds, Inc., the Alger
American Fund, Goldman Sachs Variable Insurance Trust,
MFS/Sun Life Series Trust, OCC Accumulated Trust, and Sun
Capital Advisers Trust (collectively the "Funds"). The
MFS/Sun Life Series Trust and Sun Capital Advisers Trust
are advised by affiliates of the Sponsor.
(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 the Funds are
recorded at their net asset value. Realized gains and
losses on sales of shares of the Funds are determined on
the identified cost basis. Dividend income and capital
gain distributions received by the Sub-Accounts are
reinvested in additional Fund 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.
102 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(3) CONTRACT CHARGES
The Sponsor deducts a sales charge from purchase
payments. The current charge is 5.25% of the amount of
purchase payments. The maximum charge is guaranteed not
to exceed 7.25% of purchase payments.
A mortality and expense risk charge based on the
value of the Variable Account is deducted from the
Variable Account at the end of each valuation period for
the mortality and expense risks assumed by the Sponsor.
The maximum deduction is at an effective annual rate of
0.90%. The current effective annual rate in effect at
December 31, 1999 is equivalent to 0.80% for Policy Years
1 through 10 and 0.50% thereafter.
Each month, a monthly administration charge ("Account
Fee") of $8 is deducted from each contract's account
value to cover administrative expenses relating to the
contract.
Within the first 10 Policy Years or the 10 Policy
Years following an increase in the specified face amount
of the policy, a surrender charge may be deducted to
cover certain expenses relating to the sale of the
contract. The base surrender charge will be an amount
based on certain factors, including the specified face
amount of the policy, the insured's age, sex and rating
class. The charge will be 100% of the base surrender
charge in the first 5 Policy Years, or the first 5 Policy
Years after an increase in the specified face amount,
scaling down to zero after 10 Policy Years.
The Sponsor deducts a monthly cost of insurance from
the account value to cover anticipated costs of providing
insurance coverage. The charge will be based on the
Sponsor's expectation of future mortality, persistency,
interest rates, expenses and taxes, but will not exceed
the Guaranteed Maximum Monthly Cost of Insurance Rates
based on the 1980 Commissioner's Standard Ordinary Smoker
and Nonsmoker Mortality Tables.
103 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(4) UNIT ACTIVITY FROM PARTICIPANT TRANSACTIONS
During the year, the Sponsor deposited $1,000 of
initial "seed" money into each of the Sub-Accounts.
Unlike normal participant transactions, the initial
"seed" money deposited is not issued with corresponding
units.
Transactions in participant units during the period
from August 25, 1999 (commencement of operations) through
December 31, 1999 were as follows:
<TABLE>
<CAPTION>
UNITS TRANSFERRED
UNITS OUTSTANDING UNITS BETWEEN SUB-ACCOUNTS UNITS WITHDRAWN UNITS OUTSTANDING
BEGINNING OF PERIOD PURCHASED AND FIXED ACCOUNT AND SURRENDERED END OF PERIOD
------------------- --------- ------------------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
AIM1................ -- -- -- -- --
AIM2................ -- -- 32 -- 32
AIM3................ -- -- -- -- --
AIM4................ -- -- 53 -- 53
AL1................. -- -- -- -- --
AL2................. -- -- -- -- --
AL3................. -- -- -- -- --
GS1................. -- -- -- -- --
GS2................. -- -- -- -- --
GS3................. -- -- 52 -- 52
GS4................. -- -- -- -- --
GS5................. -- -- -- -- --
CAS................. -- -- -- -- --
CGS................. -- -- -- -- --
EGS................. -- -- 742 -- 742
GGS................. -- -- 56 -- 56
HYS................. -- -- 18 -- 18
MIS................. -- -- 851 -- 851
NWD................. -- -- -- -- --
TRS................. -- -- 495 -- 495
UTS................. -- -- -- -- --
OP1................. -- -- -- -- --
OP2................. -- -- -- -- --
OP3................. -- -- -- -- --
OP4................. -- -- -- -- --
SCA1................ -- -- -- -- --
SCA2................ -- -- 75 -- 75
SCA3................ -- -- -- -- --
SCA4................ -- -- -- -- --
SCA5................ -- -- 46 -- 46
SCA6................ -- -- -- -- --
</TABLE>
104 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE CONTRACT OWNERS PARTICIPATING IN SUN LIFE (U.S.)
VARIABLE ACCOUNT I
AND THE BOARD OF DIRECTORS OF SUN LIFE ASSURANCE COMPANY
OF CANADA (U.S.):
We have audited the accompanying statement of
condition of V.I. Capital Appreciation Sub-Account, V.I.
Growth Sub-Account, V.I. Growth and Income Sub-Account,
V.I. International Equity Sub-Account, Growth
Sub-Account, Income and Growth Sub-Account, Small
Capitalization Sub-Account, CORE Large Cap Growth
Sub-Account, CORE Small Cap Equity Sub-Account, CORE US
Equity Sub-Account, Growth and Income Sub-Account,
International Equity Sub-Account, Capital Appreciation
Sub-Account, Massachusetts Investors Trust Sub-Account,
Emerging Growth Sub-Account, Government Securities Sub-
Account, High Yield Sub-Account, Massachusetts Investors
Growth Stock Sub-Account, New Discovery Sub-Account,
Total Return Sub-Account, Utilities Sub-Account, Equity
Sub-Account, Mid Cap Sub-Account, Small Cap Sub-Account,
Managed Sub-Account, Sun Capital Money Market
Sub-Account, Sun Capital Investment Grade Bond
Sub-Account, Sun Capital Real Estate Sub-Account, Sun
Capital Select Equity Sub-Account, Sun Capital Blue Chip
Mid-Cap Sub-Account, and Sun Capital Investors Foundation
Sub-Account of Sun Life (U.S.) Variable Account I (the
"Sub-Accounts") as of December 31, 1999, and the related
statements of operations and changes in net assets for
the period from August 25, 1999 (the commencement of
operations) through December 31, 1999. 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 of securities held as of December
31, 1999 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 audit provides a reasonable basis for
our opinion.
In our opinion, such financial statements present
fairly, in all material respects, the financial position
of the Sub-Accounts as of December 31, 1999, the results
of their operations and the changes in their net assets
for the period
105 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
from August 25, 1999 (the commencement of operations)
through December 31, 1999 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, MA
February 10, 2000
106 FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE
<PAGE>
APPENDIX A
GLOSSARY OF POLICY TERMS
ACCOUNT VALUE--The sum of the amounts in each Sub-Account of the Variable
Account and the Fixed Account Value with respect to a Policy.
ANNIVERSARY--The same day in each succeeding year as the day of the year
corresponding to the policy date.
ATTAINED AGE--The insured's Issue Age plus the number of completed Policy
Years.
BUSINESS DAY--Any day that we are open for business.
CASH VALUE--Account Value less any surrender charges.
CASH SURRENDER VALUE--The Cash Value decreased by the balance of any
outstanding Policy Debt.
CLASS--The risk and underwriting classification of the insured.
DAILY RISK PERCENTAGE--The daily rate for deduction of the Mortality and
Expense Risk Charge.
DUE PROOF--Such evidence as we may reasonably require in order to establish
that a benefit is due and payable.
EFFECTIVE DATE OF COVERAGE--Initially, the Investment Start Date; with
respect to any increase in the Specified Face Amount, the Anniversary that falls
on or next follows the date we approve the supplemental application for that
increase; with respect to any decrease in the Specified Face Amount, the Monthly
Anniversary Day that falls on or next follows the date we receive your request.
EXPENSE CHARGES APPLIED TO PREMIUM--A percentage charge deducted from each
premium payment.
FIXED ACCOUNT VALUE--The portion of the Account Value funded by the assets
of our general account.
FUND--A mutual fund portfolio in which a Sub-Account invests.
MINIMUM INITIAL PREMIUM--The minimum premium is the amount necessary to put
the coverage in force.
INSURED--The person on whose life a Policy is issued.
INVESTMENT START DATE--The date the first premium is applied, which will be
the later of the Issue Date, the Policy Date or the Valuation Date we receive a
premium equal to or in excess of the minimum initial premium.
ISSUE AGE--The insured's age as of the insured's birthday nearest the policy
date.
ISSUE DATE--The date we produce a Policy from our system as specified in the
Policy.
MATURITY--The Anniversary on which the insured's Attained Age is 100.
MONTHLY ANNIVERSARY DAY--The same day in each succeeding month as the day of
the month corresponding to the policy 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.
<PAGE>
MORTALITY AND EXPENSE RISK CHARGE--The annual rate deducted from the Account
Value in the Sub-Accounts for the mortality and expense risk we assume by
issuing the Policy. This annual rate is converted to a daily rate, the Daily
Risk Percentage, and deducted from the Unit Values of the Sub-Accounts on a
daily basis.
POLICY APPLICATION--The application for a Policy, a copy of which is
attached to and incorporated in the Policy.
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 policy
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 the
Policy which is payable at the death of the insured prior to the Policy Maturity
date. This amount is the death benefit, decreased by the amount of any
outstanding Policy Debt and any Unpaid Policy Charges, and increased by the
amounts payable under any supplemental benefits.
POLICY YEAR--A Policy Year is a one-year period commencing on the policy
date or any Anniversary and ending on the next Anniversary.
PRINCIPAL OFFICE--Sun Life Assurance Company of Canada (U.S.), One Sun Life
Executive Park, Wellesley Hills, Massachusetts, 02481, or such other 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 your Policy.
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.
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.
UNPAID POLICY CHARGES--The amounts by which the Monthly Expense Charges plus
the Monthly Costs of Insurance plus the Policy Debt exceed the Account Value.
VALUATION DATE--Any day that benefits vary and on which we, the applicable
Fund, and the New York Stock Exchange are open for business and any other day as
may be required by the applicable rules and regulations of the Securities and
Exchange Commission.
VALUATION PERIOD--The period of time from one determination of Unit Values
to the next following 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 I.
A-2
<PAGE>
APPENDIX B
TABLE OF DEATH BENEFIT PERCENTAGES
<TABLE>
<CAPTION>
APPLICABLE APPLICABLE
AGE PERCENTAGE AGE PERCENTAGE
--- ---------- -------- ----------
<S> <C> <C> <C>
20 250% 60 130%
21 250% 61 128%
22 250% 62 126%
23 250% 63 124%
24 250% 64 122%
25 250% 65 120%
26 250% 66 119%
27 250% 67 118%
28 250% 68 117%
29 250% 69 116%
30 250% 70 115%
31 250% 71 113%
32 250% 72 111%
33 250% 73 109%
34 250% 74 107%
35 250% 75 105%
36 250% 76 105%
37 250% 77 105%
38 250% 78 105%
39 250% 79 105%
40 250% 80 105%
41 243% 81 105%
42 236% 82 105%
43 229% 83 105%
44 222% 84 105%
45 215% 85 105%
46 209% 86 105%
47 203% 87 105%
48 197% 88 105%
49 191% 89 105%
50 185% 90 105%
51 178% 91 104%
52 171% 92 103%
53 164% 93 102%
54 157% 94 101%
55 150% 95 100%
56 146% 96 100%
57 142% 97 100%
58 138% 98 100%
59 134% 99 100%
</TABLE>
<PAGE>
APPENDIX C
SAMPLE HYPOTHETICAL ILLUSTRATIONS
HYPOTHETICAL ILLUSTRATIONS OF CASH SURRENDER VALUES,
ACCOUNT VALUES AND DEATH BENEFITS
The illustrations in this prospectus have been prepared to help show how
values under the Policy change with investment performance. The illustrations 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. These illustrations assume an effective date of May 1, 2000. 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 Funds (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.
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, if the actual rates of
return averaged 0%, 6% or 12%, but the rates of each Fund 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 below. These include the Expense Charges
Applied to Premium, the Daily Risk Percentage charged against the Variable
Account for mortality and expense risks, the Monthly Expense Charge and the
Monthly Cost of Insurance. The Expense Charges Applied to Premium are equal to a
5.25% charge as a sales load and for our federal, state and local tax
obligations and are guaranteed not to exceed 7.25%. The Daily Risk Percentage
charge is an annual effective rate of 0.60% for the first 10 Policy Years and
0.20% thereafter. The Monthly Expense Charge is $8.00 per month for all Policy
Years.
The amounts shown in the tables also take into account the Funds' advisory
fees and operating expenses, which are assumed to be at an annual rate of 0.86%
of the average daily net assets of each Fund. This is based upon a simple
average of the advisory fees and expenses of all the Funds for the most recent
fiscal year taking into account any applicable expense caps or expense
reimbursement arrangements. Actual fees and expenses of the Funds may be more or
less than 0.86%, will vary from year to year, and will depend upon how Account
Value is allocated among the Sub-Accounts. See the Fund Prospectuses for more
information on Fund expenses. The gross annual rates of investment return of 0%,
6% and 12% correspond to net annual rates of -1.46%, 4.54%, 10.54% respectively
during the first 10 Policy Years and -1.06%, 4.94%, and 10.94% respectively,
thereafter taking into account the current Daily Risk Percentage charge and the
assumed 0.86% charge for the Funds' advisory fees and operating expenses.
The hypothetical returns shown in the tables do not reflect any charges for
income taxes against the Variable 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.
<PAGE>
TABLE 1
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
MALE, PREFERRED, AGE 45, NON TOBACCO
$250,000 SPECIFIED FACE AMOUNT
ANNUAL PREMIUM $3,500.00
DEATH BENEFIT OPTION A
CURRENT POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
NET -1.46% NET 4.54% NET 10.54%
PREMIUMS --------------------------------- ----------------------------- ---------------------------------
PAID PLUS CASH CASH CASH
POLICY INTEREST 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 3,675 614 2,549 250,000 789 2,724 250,000 966 2,901 250,000
2 7,534 3,069 5,004 250,000 3,580 5,515 250,000 4,114 6,049 250,000
3 11,585 5,426 7,361 250,000 6,435 8,370 250,000 7,530 9,465 250,000
4 15,840 7,703 9,638 250,000 9,374 11,309 250,000 11,263 13,198 250,000
5 20,307 9,905 11,840 250,000 12,407 14,342 250,000 15,351 17,286 250,000
6 24,997 12,359 13,971 250,000 15,863 17,475 250,000 20,161 21,773 250,000
7 29,922 14,745 16,035 250,000 19,429 20,719 250,000 25,417 26,707 250,000
8 35,093 17,059 18,026 250,000 23,105 24,073 250,000 31,164 32,131 250,000
9 40,523 19,292 19,937 250,000 26,889 27,534 250,000 37,448 38,093 250,000
10 46,224 21,434 21,757 250,000 30,773 31,096 250,000 44,321 44,643 250,000
11 52,210 23,537 23,537 250,000 34,856 34,856 250,000 51,995 51,995 250,000
12 58,495 25,163 25,163 250,000 38,682 38,682 250,000 60,062 60,062 250,000
13 65,095 26,607 26,607 250,000 42,551 42,551 250,000 68,911 68,911 250,000
14 72,025 27,859 27,859 250,000 46,462 46,462 250,000 78,636 78,636 250,000
15 79,301 28,907 28,907 250,000 50,410 50,410 250,000 89,348 89,348 250,000
16 86,941 30,531 30,531 250,000 55,122 55,122 250,000 101,764 101,764 250,000
17 94,963 32,003 32,003 250,000 59,964 59,964 250,000 115,519 115,519 250,000
18 103,387 33,310 33,310 250,000 64,938 64,938 250,000 130,780 130,780 250,000
19 112,231 34,443 34,443 250,000 70,047 70,047 250,000 147,739 147,739 250,000
20 121,517 35,386 35,386 250,000 75,292 75,292 250,000 166,620 166,620 250,000
Age 60 79,301 28,907 28,907 250,000 50,410 50,410 250,000 89,348 89,348 250,000
Age 65 121,517 35,386 35,386 250,000 75,292 75,292 250,000 166,620 166,620 250,000
Age 70 175,397 36,544 36,544 250,000 103,631 103,631 250,000 298,357 298,357 346,094
Age 75 244,163 29,030 29,030 250,000 135,981 135,981 250,000 518,267 518,267 554,546
</TABLE>
(1) Assumes a $3,500.00 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.
C-2
<PAGE>
TABLE 2
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
MALE, PREFERRED, AGE 55, NON TOBACCO
$250,000 SPECIFIED FACE AMOUNT
ANNUAL PREMIUM $5,675.00
DEATH BENEFIT OPTION A
CURRENT POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
NET -1.46% NET 4.54% NET 10.54%
PREMIUMS --------------------------------- ----------------------------- ---------------------------------
PAID PLUS CASH CASH CASH
POLICY INTEREST 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 5,959 1,203 4,016 250,000 1,485 4,297 250,000 1,767 4,579 250,000
2 12,215 5,078 7,890 250,000 5,894 8,706 250,000 6,746 9,558 250,000
3 18,785 8,810 11,622 250,000 10,419 13,231 250,000 12,167 14,979 250,000
4 25,683 12,386 15,198 250,000 15,051 17,863 250,000 18,066 20,878 250,000
5 32,926 15,802 18,614 250,000 19,791 22,604 250,000 24,493 27,305 250,000
6 40,531 19,527 21,870 250,000 25,115 27,459 250,000 31,980 34,324 250,000
7 48,516 23,072 24,947 250,000 30,541 32,416 250,000 40,111 41,986 250,000
8 56,901 26,429 27,836 250,000 36,068 37,474 250,000 48,954 50,360 250,000
9 65,705 29,581 30,519 250,000 41,686 42,624 250,000 58,586 59,523 250,000
10 74,949 32,485 32,953 250,000 47,363 47,832 250,000 69,070 69,539 250,000
11 84,655 35,224 35,224 250,000 53,256 53,256 250,000 80,767 80,767 250,000
12 94,846 37,284 37,284 250,000 58,818 58,818 250,000 93,205 93,205 250,000
13 105,547 39,076 39,076 250,000 64,483 64,483 250,000 106,983 106,983 250,000
14 116,783 40,559 40,559 250,000 70,232 70,232 250,000 122,277 122,277 250,000
15 128,581 41,680 41,680 250,000 76,039 76,039 250,000 139,298 139,298 250,000
16 140,969 43,113 43,113 250,000 82,503 82,503 250,000 158,680 158,680 250,000
17 153,976 44,199 44,199 250,000 89,107 89,107 250,000 180,393 180,393 250,000
18 167,634 44,913 44,913 250,000 95,864 95,864 250,000 204,815 204,815 250,000
19 181,974 45,218 45,218 250,000 102,785 102,785 250,000 232,392 232,392 253,307
20 197,032 45,068 45,068 250,000 109,881 109,881 250,000 263,245 263,245 281,672
Age 60 32,926 15,802 18,614 250,000 19,791 22,604 250,000 24,493 27,305 250,000
Age 65 74,949 32,485 32,953 250,000 47,363 47,832 250,000 69,070 69,539 250,000
Age 70 128,581 41,680 41,680 250,000 76,039 76,039 250,000 139,298 139,298 250,000
Age 75 197,032 45,068 45,068 250,000 109,881 109,881 250,000 263,245 263,245 281,672
</TABLE>
(1) Assumes a $5,675.00 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.
C-3
<PAGE>
TABLE 3
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
MALE, PREFERRED, AGE 45, NON TOBACCO
$250,000 SPECIFIED FACE AMOUNT
ANNUAL PREMIUM $3,500.00
DEATH BENEFIT OPTION A
GUARANTEED POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
NET -1.46% NET 4.54% NET 10.54%
PREMIUMS --------------------------------- ----------------------------- ---------------------------------
PAID PLUS CASH CASH CASH
POLICY INTEREST 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 3,675 356 2,291 250,000 522 2,457 250,000 688 2,623 250,000
2 7,534 2,556 4,491 250,000 3,031 4,966 250,000 3,527 5,462 250,000
3 11,585 4,662 6,597 250,000 5,592 7,527 250,000 6,603 8,538 250,000
4 15,840 6,671 8,606 250,000 8,204 10,139 250,000 9,939 11,874 250,000
5 20,307 8,577 10,512 250,000 10,861 12,796 250,000 13,555 15,490 250,000
6 24,997 10,698 12,311 250,000 13,884 15,497 250,000 17,803 19,415 250,000
7 29,922 12,700 13,990 250,000 16,940 18,230 250,000 22,380 23,670 250,000
8 35,093 14,568 15,535 250,000 20,016 20,984 250,000 27,311 28,278 250,000
9 40,523 16,291 16,936 250,000 23,102 23,747 250,000 32,627 33,272 250,000
10 46,224 17,851 18,173 250,000 26,181 26,504 250,000 38,356 38,679 250,000
11 52,210 19,315 19,315 250,000 29,354 29,354 250,000 44,701 44,701 250,000
12 58,495 20,269 20,269 250,000 32,188 32,188 250,000 51,262 51,262 250,000
13 65,095 21,026 21,026 250,000 34,998 34,998 250,000 58,428 58,428 250,000
14 72,025 21,572 21,572 250,000 37,772 37,772 250,000 66,270 66,270 250,000
15 79,301 21,882 21,882 250,000 40,488 40,488 250,000 74,864 74,864 250,000
16 86,941 21,927 21,927 250,000 43,121 43,121 250,000 84,297 84,297 250,000
17 94,963 21,677 21,677 250,000 45,646 45,646 250,000 94,674 94,674 250,000
18 103,387 21,091 21,091 250,000 48,025 48,025 250,000 106,115 106,115 250,000
19 112,231 20,118 20,118 250,000 50,213 50,213 250,000 118,760 118,760 250,000
20 121,517 18,699 18,699 250,000 52,159 52,159 250,000 132,780 132,780 250,000
Age 60 79,301 21,882 21,882 250,000 40,488 40,488 250,000 74,864 74,864 250,000
Age 65 121,517 18,699 18,699 250,000 52,159 52,159 250,000 132,780 132,780 250,000
Age 70 175,397 2,920 2,920 250,000 56,442 56,442 250,000 232,745 232,745 265,463
Age 75 244,163 (*) (*) 250,000 42,301 42,301 250,000 404,083 404,083 431,303
</TABLE>
(1) Assumes a $3,500.00 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.
(*) Policy terminates unless additional premiums are paid.
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.
C-4
<PAGE>
TABLE 4
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
MALE, PREFERRED, AGE 55, NON TOBACCO
$250,000 SPECIFIED FACE AMOUNT
ANNUAL PREMIUM $5,675.00
DEATH BENEFIT OPTION A
GUARANTEED POLICY CHARGES
<TABLE>
<CAPTION>
HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
NET -1.46% NET 4.54% NET 10.54%
PREMIUMS ------------------------------- ----------------------------- -----------------------------
PAID PLUS CASH CASH CASH
POLICY INTEREST 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 5,959 375 3,188 250,000 627 3,439 250,000 880 3,692 250,000
2 12,215 3,346 6,158 250,000 4,050 6,862 250,000 4,786 7,599 250,000
3 18,785 6,094 8,906 250,000 7,448 10,261 250,000 8,926 11,738 250,000
4 25,683 8,608 11,421 250,000 10,810 13,623 250,000 13,316 16,128 250,000
5 32,926 10,867 13,680 250,000 14,112 16,924 250,000 17,965 20,777 250,000
6 40,531 13,317 15,661 250,000 17,797 20,141 250,000 23,354 25,698 250,000
7 48,516 15,461 17,336 250,000 21,367 23,242 250,000 29,028 30,903 250,000
8 56,901 17,267 18,673 250,000 24,785 26,192 250,000 34,995 36,401 250,000
9 65,705 18,690 19,627 250,000 28,003 28,941 250,000 41,264 42,201 250,000
10 74,949 19,680 20,148 250,000 30,966 31,435 250,000 47,842 48,311 250,000
11 84,655 20,283 20,283 250,000 33,762 33,762 250,000 54,960 54,960 250,000
12 94,846 19,902 19,902 250,000 35,756 35,756 250,000 62,036 62,036 250,000
13 105,547 18,951 18,951 250,000 37,359 37,359 250,000 69,593 69,593 250,000
14 116,783 17,378 17,378 250,000 38,512 38,512 250,000 77,705 77,705 250,000
15 128,581 15,106 15,106 250,000 39,132 39,132 250,000 86,454 86,454 250,000
16 140,969 12,018 12,018 250,000 39,097 39,097 250,000 95,923 95,923 250,000
17 153,976 7,826 7,826 250,000 38,125 38,125 250,000 106,121 106,121 250,000
18 167,634 2,618 2,618 250,000 36,262 36,262 250,000 117,348 117,348 250,000
19 181,974 (*) (*) 250,000 33,132 33,132 250,000 129,690 129,690 250,000
20 197,032 (*) (*) 250,000 28,440 28,440 250,000 143,386 143,386 250,000
Age 60 32,926 10,867 13,680 250,000 14,112 16,924 250,000 17,965 20,777 250,000
Age 65 74,949 19,680 20,148 250,000 30,966 31,435 250,000 47,842 48,311 250,000
Age 70 128,581 15,106 15,106 250,000 39,132 39,132 250,000 86,454 86,454 250,000
Age 75 197,032 (*) (*) 250,000 28,440 28,440 250,000 143,386 143,386 250,000
</TABLE>
(1) Assumes a $5,675.00 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.
(*) Policy terminates unless additional premiums are paid.
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.
C-5
<PAGE>
You can review and copy the complete registration statement which contains
additional information about us, the Policy and the Variable Account at the
SEC's Public Reference Room in Washington, D.C. To find out more about this
public service, call the SEC at 1-800-SEC-0330. Reports and other information
about the Policy and its mutual fund investment options are also available on
the SEC's website (www.sec.gov), or you can receive copies of this information,
for a fee, by writing the Public Reference Section, Securities and Exchange
Commission, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-9137
<PAGE>
Sun Life
of Canada (U.S.)
