-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NWD/tA4XrCQaCWssnM4RNl0KK3UkevjAxNPtDBLr11NQGDqrETzR9tiiWVXSFaX1 31WO2QyNaww6k4Dt2cJ1Ag== 0001047469-98-043457.txt : 19981210 0001047469-98-043457.hdr.sgml : 19981210 ACCESSION NUMBER: 0001047469-98-043457 CONFORMED SUBMISSION TYPE: S-6 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19981209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUN LIFE OF CANADA U S VARIABLE ACCOUNT I CENTRAL INDEX KEY: 0001074760 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 042461439 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-6 SEC ACT: SEC FILE NUMBER: 333-68601 FILM NUMBER: 98766518 BUSINESS ADDRESS: STREET 1: C/O SUN LIFE ASSURANCE CO OF CANADA U S STREET 2: SUN LIFE EXECUTIVE PARK CITY: WELLESLEY HILLS STATE: MA ZIP: 02481 BUSINESS PHONE: 7814461182 S-6 1 S-6 Registration No. 333-_____ As Filed with the Securities and Exchange Commission on December ___, 1998 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-6 FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2 A. Exact name of trust: Sun Life of Canada (U.S.) Variable Account I B. Name of depositor: Sun Life Assurance Company of Canada (U.S.) C. Complete address of depositor's principal executive offices: One Sun Life Executive Park Wellesley Hills, Massachusetts 02481 D. Name and complete address of agent for service: Ellen B. King Secretary Sun Life Assurance Company of Canada (U.S.) One Sun Life Executive Park Wellesley Hills, Massachusetts 02481 Copies to: Michael Berenson, Esq. Jorden Burt Boros Cicchetti Berenson & Johnson LLP Suite 400 East 1025 Thomas Jefferson St. N.W. Washington, D.C. 20007-0805 E. Title and amount of securities being registered: Flexible Premium Combination Fixed and Variable Life Insurance Policies. Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant hereby declares that an indefinite amount of its Flexible Premium Combination Fixed and Variable Life Insurance Policies is being registered under the Securities Act of 1933. F. Approximate date of proposed public offering: As soon as practicable after the effective date of this Registration Statement. The Registrant hereby amends this Registration Statement on such dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. RECONCILIATION AND TIE BETWEEN FORM N-8B-2 AND PROSPECTUS ITEM NO. OF FORM N-8B-2 CAPTION IN PROSPECTUS - ----------- --------------------- 1. Cover page 2. Cover page 3. Not applicable 4. Sun Life Assurance Company of Canada (U.S.); Distribution of Policy 5. Summary of Policy -- The Variable Account 6. The Variable Account 7. Not required by Form S-6 8. Not required by Form S-6 9. Other Information -- Legal Proceedings 10. Summary of Policy; The Funds; About the Policy; Voting Rights 11. Summary of Policy; The Funds 12. Summary of Policy; The Funds 13. About the Policy -- Charges and Deductions; Distribution of Policy; Federal Income Tax Considerations 14. About the Policy -- Policy Application, Issuance and Initial Premium 15. About the Policy -- Premium Payments 16. The Funds; About the Policy -- Premium Payments 17. Summary; About the Policy -- Account Value, -- Surrenders and Surrender Charges, -- Free Look Period 18. The Funds; About the Policy -- Charges and Deductions; Federal Income Tax Considerations 19. Other Policy Provisions -- Reports to Owner 20. Not applicable I-2 21. About the Policy -- Policy Loans 22. Not applicable 23. Our Directors and Executive Officers 24. Other Policy Provisions -- Assignments 25. Sun Life Assurance Company of Canada (U.S.) 26. Not applicable 27. Sun Life Assurance Company of Canada (U.S.) 28. Sun Life Assurance Company of Canada (U.S.); Our Directors and Executive Officers 29. Sun Life Assurance Company of Canada (U.S.) 30. Not applicable 31. Not applicable 32. Not applicable 33. Not applicable 34. Not applicable 35. Distribution of Policy 36. Not required by Form S-6 37. Not applicable 38. Distribution of Policy 39. Sun Life Assurance Company of Canada (U.S.); Distribution of Policy 40. Not applicable 41. Sun Life Assurance Company of Canada (U.S.); Distribution of Policy 42. Not applicable 43. Not applicable 44. About the Policy -- Premium Payments 45. Not applicable 46. About the Policy -- Account Value I-3 47. The Funds 48. Cover page; Sun Life Assurance Company of Canada (U.S.) 49. Not applicable 50. The Variable Account 51. Summary of Policy; Sun Life Assurance Company of Canada (U.S.); About the Policy 52. The Funds 53. Federal Income Tax Considerations 54. Not applicable 55. Not applicable 56. Not required by Form S-6 57. Not required by Form S-6 58. Not required by Form S-6 59. Not required by Form S-6 I-4 PART I [SUN LIFE OF CANADA LOGO] PROSPECTUS 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 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 premium payments among 29 investment options (including 28 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. SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) ONE SUN LIFE EXECUTIVE PARK WELLESLEY HILLS, MASSACHUSETTS 02481 (781) 237-6030 , 1998 VARIABLE SUB-ACCOUNT INVESTMENT OPTIONS The assets of the Variable Account are divided into 28 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"). DREYFUS VARIABLE INVESTMENT FUND Dreyfus Index (S&P 500) Dreyfus Small Cap Portfolio FIDELITY VARIABLE INSURANCE PRODUCTS FUND VIP Growth Portfolio FIDELITY VARIABLE INSURANCE PRODUCTS FUND II VIP II Contrafund Portfolio VIP II Asset Manager: Growth Portfolio GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs CORE Large Cap Growth Fund Goldman Sachs CORE Small Cap Equity Fund Goldman Sachs CORE U.S. Equity Fund Goldman Sachs International Equity Fund J.P. MORGAN SERIES TRUST II International Opportunities Portfolio Small Company Portfolio MFS/SUN LIFE SERIES TRUST Capital Appreciation Series Conservative Growth Series Emerging Growth Series Government Securities Series High Yield Series Research Series Total Return Series NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST Mid Cap Growth Portfolio Partners Portfolio OCC ACCUMULATION TRUST Mid Cap Portfolio Small Cap Portfolio SUN CAPITAL FUNDS Sun Capital Investment Grade Bond Fund Sun Capital Money Market Fund Sun Capital Real Estate Fund WARBURG PINCUS TRUST International Equity Portfolio Post-Venture Capital Portfolio Small Company Growth Portfolio 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 TABLE OF CONTENTS
TOPIC PAGE - ----------------------------------------------------------------------------------------------------------- ----- Summary of Policy.......................................................................................... 1 Sun Life Assurance Company of Canada (U.S.)................................................................ 4 The Variable Account....................................................................................... 4 The Funds.................................................................................................. 5 Expenses of the Funds...................................................................................... 9 Our General Account........................................................................................ 9 About the Policy........................................................................................... 10 Policy Application, Issuance and Initial Premium......................................................... 10 Free Look Period......................................................................................... 11 Premium Payments......................................................................................... 11 Premium................................................................................................ 11 Net Premiums........................................................................................... 12 Allocation of Net Premium.............................................................................. 12 Planned Periodic Premiums.............................................................................. 12 Death Benefit............................................................................................ 13 Changes in Specified Face Amount......................................................................... 14 Minimum Changes........................................................................................ 14 Increases.............................................................................................. 14 Decreases.............................................................................................. 14 Surrenders and Surrender Charges......................................................................... 14 Partial Surrender........................................................................................ 16 Policy Loans............................................................................................. 16 Investment Programs...................................................................................... 17 Dollar Cost Averaging.................................................................................. 17 Asset Allocation....................................................................................... 17 Transfers Between Sub-Accounts........................................................................... 17 Account Value............................................................................................ 18 Variable Account Value................................................................................. 18 Net Investment Factor.................................................................................. 19 Fixed Account Value.................................................................................... 20 Insufficient Value..................................................................................... 21 Minimum Premium Test (No-Lapse Guarantee).............................................................. 21 Grace Period........................................................................................... 21 Splitting Units........................................................................................ 22 Charges and Deductions................................................................................... 22 Expense Charges Applied to Premium..................................................................... 22 Mortality and Expense Risk Charge...................................................................... 22 Monthly Expense Charge................................................................................. 22 Monthly Cost of Insurance.............................................................................. 22 Monthly Cost of Insurance Rates........................................................................ 23 Basis of Computation................................................................................... 23 Waivers; Reduced Charges; Credits; Bonus Guaranteed Interest Rates....................................... 23 Maturity Date Extension.................................................................................. 24 Supplemental Benefits.................................................................................... 24 Accelerated Benefits Rider............................................................................. 24 Accidental Death Benefit Rider......................................................................... 25 Waiver of Monthly Deductions Rider..................................................................... 25 Waiver of Stipulated Premium Amount Rider.............................................................. 27 Termination of Policy.................................................................................... 28 Reinstatement............................................................................................ 28
iii
TOPIC PAGE - ----------------------------------------------------------------------------------------------------------- ----- Deferral of Payment...................................................................................... 29 Rights of Owner.......................................................................................... 29 Rights of Beneficiary.................................................................................... 30 Other Policy Provisions.................................................................................. 30 Addition, Deletion or Substitution of Investments...................................................... 30 Entire Contract........................................................................................ 30 Alteration............................................................................................. 30 Modification........................................................................................... 31 Assignments............................................................................................ 31 Nonparticipating....................................................................................... 31 Misstatement of Age or Sex (Non-Unisex Policy)......................................................... 31 Suicide................................................................................................ 31 Incontestability....................................................................................... 31 Report to Owner........................................................................................ 32 Illustrations.......................................................................................... 32 Performance Information.................................................................................... 32 Portfolio Performance.................................................................................. 32 Adjusted Portfolio Performance......................................................................... 32 Policy Illustrations................................................................................... 33 Other Information...................................................................................... 33 Federal Income Tax Considerations.......................................................................... 34 Tax Status of the Policy................................................................................. 34 Diversification of Investments........................................................................... 34 Tax Treatment of Policy Benefits......................................................................... 35 Life Insurance Death Benefit Proceeds.................................................................. 35 Tax Deferred Accumulation.............................................................................. 35 Distributions.......................................................................................... 35 Modified Endowment Contracts........................................................................... 35 Distributions Under Modified Endowment Contracts....................................................... 36 Distributions Under a Policy That Is Not a MEC......................................................... 36 Policy Loan Interest................................................................................... 37 Multiple Policies...................................................................................... 37 Federal Income Tax Withholding......................................................................... 37 Our Taxes................................................................................................ 37 Distribution of Policy..................................................................................... 37 Voting Rights.............................................................................................. 38 Our Directors and Executive Officers....................................................................... 39 Other Information.......................................................................................... 42 State Regulation......................................................................................... 42 Legal Proceedings........................................................................................ 42 Experts.................................................................................................. 42 Accountants.............................................................................................. 43 Registration Statements.................................................................................. 43 Year 2000 Compliance..................................................................................... 43 Financial Statements....................................................................................... 44 Appendix A--Glossary of Policy Terms....................................................................... 45 Appendix B--Fees and Expenses of the Funds................................................................. 47 Appendix C--Table of Death Benefit Percentages............................................................. 49 Appendix D--Sample Hypothetical Illustrations.............................................................. 50
iv 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 SUMMARY OF POLICY FREE LOOK PERIOD You may return your Policy to us for any reason and receive a refund within the later of 45 days after you sign the Policy Application or the 20-day period, or such longer period as required by applicable state law, beginning when you receive your Policy. PREMIUM PAYMENTS - You must make a minimum initial premium payment whose amount will vary based on various factors, including your age and the death benefit you select. - 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 three death benefit options-- The SPECIFIED FACE - the Specified Face Amount; AMOUNT is the - the sum of the Specified Face Amount and the Account minimum amount of Value of your Policy; or life insurance - the sum of the Specified Face Amount and premiums paid coverage specified under your Policy. in your Policy. - For each option, the death benefit may be greater if 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 may not be 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. 1 INVESTMENT OPTIONS - You may allocate your net premium payments among the 28 variable Sub-Accounts and the fixed account option listed on the front cover 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 - The following riders are available-- - accelerated benefits; - accidental death benefit; - waiver of monthly deductions; and - waiver of stipulated premium 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 - You may borrow from us using your Account Value as collateral. Loans may be taxable events if your Policy is a "modified endowment contract" for federal income tax purposes and you have had positive net investment performance. CASH SURRENDER VALUE - You may surrender your Policy for its Cash Surrender is Account Value Value. If you surrender your Policy during the minus any surrender "surrender charge period," we will deduct any charges, any other applicable surrender charges. accrued and unpaid - You may make a partial surrender of some of your policy charges, and Policy's Cash Surrender Value after the Policy has been the amount of any in force for one year. Policy Debt. The SURRENDER CHARGE - A partial surrender may cause a decrease in the PERIOD ends 10 years Specified Face Amount of your Policy, depending on your after you purchase death benefit option. or increase the - A partial surrender may result in the deduction of Specified Face surrender charges if it occurs during the surrender Amount of your charge period. Policy. 2 ACCOUNT VALUE ACCOUNT VALUE is the - Your Policy's Account Value will reflect-- sum of the amounts - the premiums you pay; in each Sub-Account - the investment performance of the Sub-Accounts you and the Fixed select, or the interest credited in the fixed account Account Value with option; respect to your - any loans or partial surrenders; and Policy. - the charges we deduct under the Policy. POLICY CHARGES AND DEDUCTIONS - CHARGES AGAINST PREMIUMS--We will deduct a 3% charge from your premium payments for sales load and our federal tax obligations. We will also deduct the applicable local and state premium taxes. - MONTHLY DEDUCTIONS--At the beginning of each Policy Month, we will deduct from your Policy's Account Value charges for: - mortality and expense risks we assume by issuing your Policy in an amount not to exceed 0.90% annually of the Variable Account, currently the charge is 0.80% in Policy Years 1 through 10 and 0.50% thereafter; - the cost of insurance; - supplemental benefits you choose to add to your Policy; and - the administration of your Policy: $8.00 each Policy Year. - SURRENDER CHARGES--If you surrender your Policy in full or in part within the first 10 Policy Years or the 10 Policy Years following an increase in Specified Face Amount, we will deduct a surrender charge. FEES AND EXPENSES OF THE FUND PORTFOLIOS You will indirectly bear the costs of investment management fees and expenses paid from the assets of the mutual fund portfolios you select. WHAT IF CHARGES AND DEDUCTIONS EXCEED ACCOUNT VALUE? - Unless the minimum premium test has been met, your Policy will terminate if your Account Value at the beginning of any Policy Month is insufficient to pay all 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. MINIMUM PREMIUM TEST (NO-LAPSE GUARANTEE) Your insurance coverage will remain in force during the first five Policy Years even if your Policy's Account Value is insufficient to keep the Policy in force, provided that you have met certain minimum premium requirements. 3 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. SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) We are an indirect, Sun Life Assurance Company of Canada (US) ("Sun Life of wholly-owned Canada (U.S.)") is a stock life insurance company subsidiary of Sun incorporated under the laws of Delaware on January 12, Life Assurance 1970. We are authorized to do business in forty- eight Company of Canada, a states, the District of Columbia and Puerto Rico, and Canadian mutual life anticipate that we will eventually be authorized to do insurance company. business in all states except New York. We issue individual and group life insurance policies and annuity contracts. Sun Life of Canada (U.S.) is an indirect, wholly-owned subsidiary of Sun Life Assurance Company of Canada, a Canadian mutual life insurance company located at 150 King Street West, Toronto, Ontario, Canada. THE VARIABLE ACCOUNT We established "Sun Life of Canada (U.S.) Variable Account I" (the "Variable Account") 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. 4 The assets of the We will at all times maintain assets in the Variable Variable Account are Account with a total market value at least equal to the insulated from our reserves and other liabilities relating to the variable general liabilities. 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 Securities is registered with and Exchange Commission (the "SEC") under the Investment the SEC. 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 28 Sub-Accounts. has 28 Sub-Accounts. Each Sub- Account invests exclusively in shares of a Each Sub-Account corresponding investment portfolio of a registered invests exclusively investment company (commonly known as a mutual fund). We in shares of a may in the future add new or delete existing single mutual fund Sub-Accounts. The income, gains or losses, realized or portfolio. 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 FUNDS The Fund The Policy offers a number of Fund options, which are Prospectuses have briefly discussed below. Each Fund is a mutual fund more information registered under the 1940 Act, or a separate series of about the Funds, and shares of such a mutual fund. More comprehensive infor- may be obtained from mation, including a discussion of potential risks, is us without charge. 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 [ ], or writing to Sun Life Assurance Company of Canada (U.S.), [ ]. The Funds currently available are: DREYFUS VARIABLE INVESTMENT FUND (advised by The Dreyfus Corporation) DREYFUS INDEX (S&P 500) PORTFOLIO seeks to match the performance of the Standard & Poor's 500 Composite Stock Price Index. DREYFUS SMALL CAP PORTFOLIO seeks to maximize capital appreciation by investing principally in common stocks. Under normal market conditions, the portfolio will invest at least 65% of its total assets in companies with market capitalizations of less than $1.5 billion at the time of purchase which The Dreyfus Corporation believes to be characterized by new or innovative products, services or processes which should enhance prospects for growth in future earnings. 5 FIDELITY VARIABLE INSURANCE PRODUCTS FUND ("VIP FUND") (advised by Fidelity Management & Research Company ("FMR"); affiliates of FMR may assist it in the choosing of investments for the VIP Fund) VIP GROWTH PORTFOLIO seeks capital appreciation. Portfolio purchases normally will be common stocks of both smaller, less-known companies and well-known, established companies although the investments are not restricted to any one type of security. Dividend income will only be considered if it might have an effect on stock values. FIDELITY VARIABLE INSURANCE PRODUCTS FUND II ("VIP FUND II") (advised by FMR; affiliates of FMR may assist it in the choosing of investments for the VIP Fund II) VIP II CONTRAFUND PORTFOLIO seeks long-term capital appreciation. Portfolio purchases will normally be common stock and securities convertible into common stock of companies believed to be undervalued due to an overly pessimistic appraisal by the public. VIP II ASSET MANAGER: GROWTH PORTFOLIO seeks maximum total return over the long-term by allocating assets among stocks, bonds and short-term instruments in the U.S. and abroad. GOLDMAN SACHS VARIABLE INSURANCE TRUST (advised by Goldman Sachs Asset Management, a separate operating division of Goldman, Sachs & Co., except for Goldman Sachs International Equity Fund, which is advised by Goldman Sachs Asset Management International, an affiliate of Goldman, Sachs & Co.) GOLDMAN SACHS CORE LARGE CAP GROWTH FUND seeks long-term growth of capital 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 CORE SMALL CAP EQUITY FUND seeks long-term growth of capital 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 CORE U.S. EQUITY FUND seeks long-term growth of capital and dividend income through a broadly diversified portfolio of large cap and blue chip equity securities representing all major sectors of the U.S. economy. GOLDMAN SACHS 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. J.P. MORGAN SERIES TRUST II (advised by J.P. Morgan Investment Management Inc.) J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO seeks to provide a high total return from a portfolio of equity securities of foreign corporations. 6 J.P. MORGAN SMALL COMPANY PORTFOLIO seeks to provide a high total return from a portfolio of equity securities of small companies. NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST (advised by Neuberger & Berman Management Inc.) MID CAP GROWTH PORTFOLIO seeks capital appreciation by investing in a diversified portfolio of common stocks believed by Neuberger & Berman Management Inc. to have the maximum potential for long-term above-average capital appreciation. Although the portfolio will invest primarily in the common stocks of medium capitalization companies, investments may be made in the securities of larger, widely traded companies as well as smaller, less well-known companies. PARTNERS PORTFOLIO seeks capital growth through an investment approach that is designed to increase capital with reasonable risk. Its investment program seeks securities believed to be undervalued based on strong fundamentals such as low price-to-earning ratios, consistent cash flow, and support from asset values. OCC ACCUMULATION TRUST (advised by OpCap Advisors) 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 FUNDS (advised by Sun Capital Advisers, Inc.) SUN CAPITAL INVESTMENT GRADE BOND FUND seeks high current income consistent with relative stability of principal. It invests primarily in investment grade bonds including those issued by U.S. and foreign companies, the U.S. government and its agencies, foreign governments and multinational organizations. At least 80% of the assets in the portfolio are in investment grade securities. SUN CAPITAL MONEY MARKET FUND seeks to maximize current income, maintain liquidity and preserve capital. It invests exclusively in high quality U.S. dollar-denominated money market securities, with ratings in the two highest short-term rating categories or equivalent quality for unrated securities, and an average dollar weighted portfolio maturity of 90 days or less. SUN CAPITAL REAL ESTATE FUND seeks long-term capital growth as a primary objective, and current income and growth of income as a secondary objective. It invests at least 80% of its assets in securities of real estate investment trusts (REITs) 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 estate property, receive most of their income from rents and may also realize gains by selling appreciated property. 7 MFS/SUN LIFE SERIES TRUST (advised by Massachusetts Financial Services Company, an affiliate of Sun Life of Canada (U.S.)) CAPITAL APPRECIATION SERIES seeks capital appreciation by investing in securities of all types, with a major emphasis on common stocks. CONSERVATIVE GROWTH 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 by investing a substantial proportion of its assets in the common stocks or securities convertible into common stocks of companies believed to possess better than average prospects for long-term growth and a smaller proportion of its assets in securities whose principal characteristic is income production. EMERGING GROWTH SERIES seeks long-term growth of capital by investing primarily (I.E., at least 80% of its assets under normal circumstances) in common stocks of emerging growth companies. Emerging growth companies include companies that MFS believes are early in their life cycle but which have the potential to become major enterprises. Dividend and interest income from portfolio securities, if any, is incidental to its objective of long-term growth of capital. GOVERNMENT SECURITIES SERIES seeks current income and preservation of capital by investing in U.S. Government and U.S. Government-related Securities. HIGH YIELD SERIES seeks high current income and capital appreciation by investing primarily in fixed income securities of United States and foreign issuers which may be in the lower rated categories or unrated (commonly known as "junk bonds") and may include equity features. The series may invest up to 100% of its assets in these securities, which generally involve greater risks, including volatility of price, risk to principal and income, default risks and less liquidity, than securities in the higher rated categories. RESEARCH SERIES seeks to provide long-term growth of capital and future income. TOTAL RETURN SERIES seeks primarily to obtain above-average income (compared to a portfolio entirely invested in equity securities) consistent with prudent employment of capital; its secondary objective is to take advantage of opportunities for growth of capital and income. Assets will be allocated and reallocated from time to time between money market, fixed income and equity securities. Under normal market conditions, at least 25% of the series' assets will be invested in fixed income securities and at least 40% and no more than 75% of its assets will be invested in equity securities. WARBURG PINCUS TRUST (advised by Warburg Pincus Asset Management, Inc. ("Warburg"); with respect to the Post-Venture Capital Portfolio, Warburg has retained Abbott Capital Management, L.P. regarding investments in private limited partnerships or other investment funds.) INTERNATIONAL EQUITY PORTFOLIO seeks long-term capital appreciation by investing in equity securities of non-U.S. issuers. 8 POST-VENTURE CAPITAL PORTFOLIO seeks long-term growth of capital by investing primarily in equity securities of issuers in their post-venture capital stage of development and pursues an aggressive investment strategy. SMALL COMPANY GROWTH PORTFOLIO seeks capital growth by investing in equity securities of small-sized domestic companies. 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 to 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. 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 shown above 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 Fund expenses are shown in Appendix B. The management fees and other expenses of the Funds are more fully described in the prospectuses for each Fund. 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. 9 Fixed account Interests in our general account offered through the investments are not fixed account investment option have not been registered securities and we under the Securities Act of 1933 and our general account are not an invest- has not been registered as an investment company under ment company. the 1940 Act. 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 not investments earn at entitle you to share in the investment experience of our least 3% interest. general account. Instead, we guarantee that your fixed account investment will accrue interest daily at an effective annual rate of at least 3 percent, 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. 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 "rate" an insured as a substandard risk, 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 will make available to you temporary life insurance coverage if you have signed a Policy Application, applied for temporary coverage and made an advance premium payment. The temporary coverage begins on the date the application for it is signed, has a maximum amount and is subject to other conditions. Pending approval of your application, any initial premium 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 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; the date we produce - the date we approve the application for the Policy; your Policy on our - or the date a premium is paid equal to or in excess of system, as speci- the specified initial premium. fied in your Policy. 10 If an application is not approved, we will promptly return all premium payments to you. FREE LOOK 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 20 days from the date of receipt (unless a longer period is required under applicable state insurance law) or within 45 days after the application is signed, whichever period ends later (the "Free Look Period"). 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 differences 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; - any fees or charges imposed on amounts allocated to the Variable Account; and - amounts allocated to the Fixed Account Value. 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 Free Look Period. During the Free Look Period, we will allocate the net premium payments to the Sub-Account of the Variable Account that invests in the Sun Capital Money Market Fund. Upon expiration of the Free-Look Period, the Account Value in that Sub-Account will be transferred to the Sub-Accounts of the Variable Account and to the Fixed Account in accordance with your allocation instructions. PREMIUM PAYMENTS All premium payments must be made payable to "Sun Life Assurance Company of Canada (U.S.)" and mailed to our Principal Office. An 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 on an annual basis. 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. 11 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 any 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 five percent 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. Premiums received prior to the end of the Free Look Period will be credited to the Sun Capital Money Market Fund Sub-Account. Your initial allocation percentages will take effect at the end of the Free Look Period. You may change your allocation percentages at any time by telephone or pursuant to 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. 12 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, LESS - the value of any Policy Debt on the date of the insured's death, LESS - any accrued and 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. We will pay interest on the amount of Policy Proceeds, if payable in one lump sum, from the date of the insured's death to the date of payment. The policy has three death benefit options. You may select among OPTION A. Under this option, the death benefit is-- three death benefit - the Policy's Specified Face Amount on the date of the options. 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 C. This death benefit option should be selected if you want to minimize your cost of insurance. 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 C. This death benefit option should be selected if you want your death benefit to increase with your Policy's Account Value. OPTION C. Under this option, the death benefit is-- - the sum of the Specified Face Amount and premiums paid under the Policy; 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 C. This death benefit option should be selected if you want a specified amount of death benefit plus a return of the premiums you paid. 13 CHANGES IN SPECIFIED FACE AMOUNT You may increase or You may increase or decrease the Specified Face Amount decrease the of your Policy after the first Policy Year within Specified Face certain limits. Amount within cer- MINIMUM CHANGES. Each increase in the Specified Face tain 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 beginning of the next Policy Month following our approval of your request. We reserve the right to deny any request for an increase if the insured's Attained Age is greater than 80 at the time the request is made. 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. 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. SURRENDERS AND SURRENDER CHARGES If you surrender You may surrender your Policy for its Cash Surrender your Policy and Value at any time while the insured is living. If you receive its Cash do, the insurance coverage and all other benefits under Surrender Value, you the Policy will terminate. Also, surrender charges will may incur surrender be deducted if you surrender your Policy during the charges, taxes, and surrender charge period. tax penalties. CASH SURRENDER VALUE is your Policy's Account Value less the sum of: - the outstanding balance of any Policy Debt; - any surrender charges; and - any other accrued and unpaid policy charges. We will determine your Cash Surrender Value at the end of the first Business Day after we receive your written request for surrender at our Principal Office. If you surrender your Policy for its Cash Surrender Value, we will apply a surrender charge. 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 death benefit option and the insured's age, sex and rating Class. The following are examples of surrender charges at representative Issue Ages; 14 FIRST YEAR SURRENDER CHARGES PER $1,000 OF SPECIFIED FACE AMOUNT (NON-TOBACCO MALE) ISSUE AGE 25 ISSUE AGE 35 ISSUE AGE 45 ISSUE AGE 55 $4.63 $5.77 $7.74 $11.25 ISSUE AGE 65 ISSUE AGE 75 ISSUE AGE 85 $22.38 $31.38 $40.38 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.
SURRENDER CHARGE (AS A PERCENTAGE OF THE FIRST YEAR YEAR SURRENDER CHARGE) - -------------------- --------------------------- 1 100 2 100 3 100 4 100 5 100 6 83 7 67 8 50 9 33 10 17 11 and thereafter 0
A surrender charge will be applied if a decrease in the Specified Face Amount reduces the net amount at risk. The amount of the surrender charge will be equal to the surrender charge shown in table above for the Policy Year in which the decrease is made multiplied by (a) over (b), where: (a) is the decrease in the net amount at risk, and (b) is the net amount at risk immediately prior to the decrease in the Specified Face Amount. Future surrender charges will be reduced proportionally by any applicable surrender charges for a decrease in the Specified Face Amount. You may allocate any surrender charges among the Sub-Accounts and the Fixed Account Value. If you do not specify the allocation, then the surrender charges will be allocated among the Sub-Accounts in the proportion the amounts in the Sub-Account and the Fixed Account Value in excess of any policy loan bear to the Account Value in excess of any policy loan. 15 PARTIAL SURRENDER If you withdraw part You may make a partial surrender of your Policy once of the Cash each Policy Year after the first Policy Year by written Surrender Value, request to us. The amount of any partial surrender must your Policy's be at least $200 and may not exceed your Policy's Cash Specified Face Surrender Value. The Specified Face Amount will be Amount will be reduced to the extent necessary so that (1) does not reduced and you may exceed (2) where: incur surrender (1) is the death benefit less the Account Value charges, taxes and immediately after the partial surrender; and tax penalties. (2) is the death benefit less the Account Value immediately before the partial surrender. The Specified Face Amount remaining in force after a partial surrender must be at least $100,000. You may allocate a partial surrender among the Sub-Accounts of the Variable Account and the Fixed Account Value. If you do not specify the allocation, then the partial surrender will be allocated among the Sub- Accounts in the proportion the amounts in the Sub-Account and the Fixed Account Value in excess of any policy loan bear to the Account Value in excess of any policy loan. A partial surrender may have tax consequences. See [ ]. POLICY LOANS You may borrow from You may request a policy loan of up to 90% of your us using your Policy Policy's Account Value, decreased by the amount of any as collateral. outstanding Policy Debt on the date the policy loan is made. 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 shall be allocated among the Sub-Accounts in the proportion the amounts in the Sub-Account and the Fixed Account Value in excess of any policy loans bear to the Account Value in excess of any policy loans. Interest on the policy loan will accrue daily at 4% annually during Policy Years 1 through 10 and 3.25% 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 in the same manner as the prior policy loan. All funds we receive from you will be credited to your Policy as premium unless we have received written notice, in form satisfactory to us, that the funds are for loan repayment. In the event you have a loan against 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 or the Fixed Account Value will apply only 16 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. 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 four. 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 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. TRANSFERS BETWEEN SUB-ACCOUNTS. Subject 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 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 17 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, 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. A VALUATION DATE on VARIABLE ACCOUNT VALUE. We measure the amounts in the which we, the Sub- Accounts in terms of Units and Unit Values. On any applicable Fund, and given date, the amount you have in a Sub-Account is the NYSE are open equal to the Unit Value multiplied by the number of 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 18 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 Sub-Account of DATE is the date we the Variable Account on the Investment Start Date apply your first equals: premium payment, - that portion of net premium received and allocated to which will be the the Sub- Account, LESS later of the Issue - that portion of the Monthly Expense Charges due on the Date or the Business policy effective date and subsequent Monthly Anniversary Day we receive a Days through the Investment Start Date charged to the premium equal to or Sub-Account, LESS in excess of the initial premium. - that portion of the Monthly Cost of Insurance deductions due from the policy effective 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 - any amounts transferred by you to the Sub-Account from another Sub-Account or from the Fixed Account Value during the current Valuation Period, LESS - any amounts transferred by you from the Sub-Account to another Sub-Account or to the Fixed Account Value during the current Valuation Period, LESS - that portion of any partial surrenders deducted from the Sub-Account during the current Valuation Period, LESS - that portion of any policy loan transferred from the Sub-Account to the Fixed Account Value during the current Valuation Period, LESS - 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, LESS - 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, LESS - 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 19 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 (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, LESS - that portion of the Monthly Expense Charges due on the policy effective date and subsequent Monthly Anniversary Days through the Investment Start Date charged to the Fixed Account Value accrued at interest, LESS - that portion of the Monthly Cost of Insurance deductions due from the policy effective 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 Value during the current Valuation Period accrued at interest, LESS - any amounts transferred by you from the Fixed Account Value to the Variable Account Value during the current Valuation Period accrued at interest, LESS - that portion of any partial surrenders deducted from the Fixed Account Value during the current Valuation Period accrued at interest, LESS 20 - any policy loan transferred from the Variable Account to the Fixed Account Value during the current Valuation Period accrued at interest, LESS - that portion of any surrender charges associated with a decrease in the Specified Face Amount charged to the Fixed Account Value during the current Valuation Period, LESS - 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, LESS - 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 experience, persistency, expenses and taxes. Interest credited will be computed on a compound interest basis. INSUFFICIENT VALUE. 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, then your Policy will terminate for no value, subject to a Grace Period described below. 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. MINIMUM PREMIUM TEST (NO-LAPSE GUARANTEE). A Policy satisfies the minimum premium test if the premiums paid less any partial surrenders exceed the sum of the "Minimum Monthly Premiums" which applied to the Policy in each Policy Month from the policy effective date to the Valuation Date. The applicable Minimum Monthly Premium is specified in your Policy. We will revise the Minimum Monthly Premium 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 Premium 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. These deductions include the Monthly 21 Cost of Insurance and the Monthly Expense Charge. Notice of premium due will be mailed to your last known address or the last known address of any assignee of record. We will assume that your last known address is the address shown on 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 overdue Monthly Cost of Insurance and Monthly Expense Charge 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 3% charge from each premium payment as a sales load and for our federal tax obligations, plus a charge for premium taxes. All states and a few cities and municipalities impose taxes on premiums paid for life insurance, which generally range from 2% to 4% of premium but may exceed 4% in some states (for example, Kentucky). The premium tax charge is guaranteed not to exceed 4% for all states except Kentucky, in which case it is guaranteed not to exceed 9%. 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. The Mortality and Expense Risk Charge will be determined by us from time to time based on our expectations of future interest, mortality experience, persistency, expenses and taxes, but will not exceed 0.90% annually. Currently, the charge is 0.80% for Policy Years 1 through 10 and 0.50% 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 its costs of issuing and administering Policies may be more than we estimated. MONTHLY EXPENSE CHARGE. We will deduct $8.00 from your Policy's Account Value each Policy Month to cover our administrative costs. This charge may be increased or decreased by us from time to time based on our expectations of future expenses, but will never exceed $8.00 per Policy Month. The Monthly Expense Charge will be deducted proportionally from the Sub-Accounts and the Fixed Account Value in excess of any policy loan. 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 loan. 22 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 the flat extra specified in your Policy, if applicable, multiplied by the net amount at risk divided by 1,000. The NET AMOUNT AT RISK equals: - the death benefit divided by 1.00247; LESS - your Account Value on the Valuation Date prior to assessing 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 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, Class and table rating, if any. 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, Class and table rating, if any. The Monthly Cost of Insurance rates will be determined by us from time to time based on our expectations of future experience with respect to mortality, persistency, interest rates, expenses and taxes, but will not exceed the Guaranteed Maximum Monthly Cost of Insurance Rates based on the 1980 Commissioner's Standard Ordinary Smoker and Nonsmoker Mortality Table. BASIS OF COMPUTATION. Guaranteed Maximum Monthly Cost of Insurance Rates are based on the 1980 Commissioner's Standard Ordinary Smoker and Nonsmoker Mortality Table. The Guaranteed Maximum Monthly Cost of Insurance Rates reflect any table 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 are equal or exceed the minimum required by law. WAIVERS; REDUCED CHARGES; CREDITS; BONUS GUARANTEED INTEREST RATES We may reduce or waive the sales load or surrender charge, credit additional amounts, or grant bonus interest rates 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 23 may waive charges, credit additional amounts, or grant bonus interest rates in connection with Policies sold to our or our affiliates' officers, directors and employees. 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 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. This rider is available only if you have elected Death Benefit Option A or Death Benefit Option B. 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% 24 of the amount of the death benefit or (b) $250,000 (the "Accelerated Amount"), subject to the following adjustments: - 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) when the policy lapses because of insufficient Cash Value. 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 the applicable rate shown in the table below multiplied by the amount of the accident death benefit. The applicable rate is based on the insured's age at his or her birthday nearest to the effective date of this rider. MONTHLY RIDER COST (PER DOLLAR OF COVERAGE)
AGE COST - --------- --------- 0-45 .00006 46-54 .00007 55-57 .00008 58-59 .00009 60-62 .00010 63-64 .00012 65 .00013
25 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 deductions. We may require from time to time additional proof that the disability is continuing, but not more frequently than one 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 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 - the date that the policy lapses because of insufficient Cash Value. If this rider terminates because your policy lapses, we will reinstate the rider if certain specified conditions are met. 26 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 the applicable rate shown in the table below multiplied by the amount of your Policy's Specified Face Amount. The applicable rate is based on the insured's age at his or her birthday nearest to the effective date of this rider. MONTHLY RIDER COST (PER DOLLAR OF SPECIFIED FACE AMOUNT)
AGE COST AGE COST - --------- --------- --- --------- 0-23 .00001 48 .00009 24-36 .00002 49 .00010 37-39 .00003 50 .00011 40-43 .00004 51 .00012 44 .00005 52 .00013 45 .00006 53 .00014 46 .00007 54 .00015 47 .00008 55 .00016
WAIVER OF STIPULATED PREMIUM AMOUNT RIDER. Under this rider, we will waive payment of a "stipulated premium 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 waive payment of that amount for as long as the disability continues. We must receive written notice and due proof before we will waive 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 waive payment of the stipulated premium amount if the total disability is caused by or results from certain specified risks. This rider will not apply to any premium that was due 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 loss of hearing in both ears; - severance of both hands, both feet, or one hand and one foot. You may change the stipulated premium amount by written request to our Principal Office. An increase in the stipulated premium amount is subject to our underwriting and administrative rules in effect at the time. If we make a 27 change to this policy at 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 payment amount to conform to that reduction. We will reduce the premium 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 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 premium 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 provided further that: - you make your reinstatement request within five years from the date of termination; - you submit satisfactory evidence of insurability to us; - you pay an amount equal to the policy charges which were due and unpaid at the end of the Grace Period; and - you pay a premium equal to three times the Monthly Cost of Insurance applicable on the date of reinstatement. 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 28 - net premiums attributable to premiums paid to reinstate the Policy; LESS - the Monthly Expense Charge; LESS - 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 in the reinstated policy, "Issue Date" means the effective date of reinstatement. 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 giving rise to such payment or, in the case of death of the insured, due proof of such death. Payment of any amount payable from the Variable Account on death, surrender, partial surrender, or policy loan may be postponed whenever: - the New York Stock Exchange 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; 29 - 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 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 it was received by us. 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. 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. 30 MODIFICATION. Upon notice to you, we may modify the Policy if such a modification-- - 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 amendment 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 it was received by us. 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 the profits or surplus earnings of Sun Life of Canada (U.S.). MISSTATEMENT OF AGE OR SEX (NON-UNISEX POLICY). If the age or (in the case of a non-unisex Policy) sex of the insured is stated incorrectly in your Policy Application, the amounts payable by us will be adjusted as follows: Misstatement discovered at death--The death benefit will be recalculated to that which would be purchased by the most recently charged Monthly Cost of Insurance rate for the correct age or (for a non-unisex Policy) sex. Misstatement discovered prior to death--Your Account Value will be recalculated from the policy effective date using the Monthly Cost of Insurance Rates based on the correct age or (for a non-unisex Policy) sex. 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 to you the premiums paid, less the amount of any Policy Debt and any partial surrenders. 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 31 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. Upon request, we will provide you with an illustration of future Account Value and death benefits. This illustration will be furnished to you for a nominal fee not to exceed $25. PERFORMANCE INFORMATION We may present We may sometimes publish performance information related mutual fund to the Fund, the Variable Account or the Policy in portfolio perform- advertising, sales literature and other promotional ance and materials. This information is based on past investment hypothetical Policy results and is not an indication of future performance. illustrations in PORTFOLIO PERFORMANCE. We may publish a mutual fund sales literature. 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 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. 32 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. POLICY ILLUSTRATIONS. Upon request we will provide you with an illustration of future Account Value and death benefits. This illustration will be provided to you for a nominal fee not to exceed $25. 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; - 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. 33 FEDERAL INCOME TAX CONSIDERATIONS We do not make any The following summary provides a general description of guarantees about the the federal income tax considerations associated with Policy's tax status. 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 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 as a Policy will be life insurance contract within the meaning of Section treated as a life 7702 of the Internal Revenue Code of 1986, as amended insurance contract (the "Code"). We believe that the Policy meets the Sec- under federal tax tion 7702 definition of a life insurance contract and laws. 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 variable account used to support the policy. In those circumstances, income and gains from the variable 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. 34 TAX TREATMENT OF POLICY BENEFITS Death benefits do LIFE INSURANCE DEATH BENEFIT PROCEEDS. In general, the not incur federal amount of the death benefit payable under your Policy is income tax. excludible from your gross income under the Code. Investment gains are TAX DEFERRED ACCUMULATION. Any increase in your Account normally not taxed Value is generally not taxable to you unless you receive unless distributed or are deemed to receive amounts from the Policy before to you before the 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 the Code premiums than treats certain life insurance contracts as "modified permitted under the endowment contracts" ("MECs"). The Code defines MECs as seven-pay test, your those Policies issued or materially changed after June Policy will be a 21, 1988 on which the total premiums paid during the MEC. 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"). 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 35 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 CONTRACTS. If becomes a MEC, treated as a MEC, your Policy will be subject to the partial surrenders, 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). 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. 36 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 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. 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. We may be required FEDERAL INCOME TAX WITHHOLDING. We will withhold and to withhold taxes remit to the federal government the amount of any tax from certain due on that portion of a policy distribution which is distributions to taxable, unless you direct us otherwise in writing at or you. 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 making, 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 Sun Life of Canada (U.S.). 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 a wholly-owned subsidiary of Sun Life of Canada (U.S.) and is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 as 37 broker-dealer and is a member of the National Association of Securities Dealers, Inc. Clarendon also acts as the general distributor of certain other annuity contracts issued by us and variable life insurance contracts issued by the Company. Gross first year commissions plus any expense allowance payments paid by the Company on the sale of the Policy provided by Clarendon may vary with the sales agreement with broker-dealers depending on the particular circumstances, but is not expected to exceed 90% 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 paid by us will not exceed 3% of actual premium payment, 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 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 1940 Act 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 instructions may be given by a policyowner 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 chosen by us, 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. 38 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. JOHN D. MCNEIL, 64, Director (1982*) 150 King Street West Toronto, Ontario, Canada M5H 1J9 He is Chairman and a Director of Sun Life Assurance Company of Canada; a Director of Massachusetts Financial Services Company and Sun Life Insurance and Annuity Company of New York; a Trustee of MFS/Sun Life Series Trust; Chairman and a Member of the Boards of Managers of Money Market Variable Account, High Yield Variable Account, Capital Appreciation Variable Account, Government Securities Variable Account, World Governments Variable Account, Total Return Variable Account and Managed Sectors Variable Account; and a Director of Shell (Canada) Limited, Canadian Pacific, Ltd. and Canadian Pacific Securities (Ontario) Limited. DONALD A. STEWART, 52, Chairman and Director (1996*) 150 King Street West Toronto, Ontario, Canada M5H 1J9 He is President, Chief Executive Officer and a Director of 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, Massachusetts Casualty Insurance Company, Sun Life Financial Services Limited, Spectrum United Holdings, Inc. and Sun Life of Canada UK Holdings, plc. DAVID D. HORN, 57, Director (1985*) Strong Road New Vineyard, ME 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, World Governments Variable Account, Total Return Variable Account and Managed Sectors Variable Account. 39 ANGUS A. MACNAUGHTON, 67, Director (1985*) Metro Tower, Suite 1170 950 Tower Lane Foster City, California 94404 He is President of Genstar Investment Corporation and a Director of Sun Life Assurance Company of Canada, Sun Life Insurance and Annuity Company of New York, Canadian Pacific, Ltd., Varian Associates, Inc., Diversified Collection Services, Inc., the San Francisco Opera, Genstar Investment LLC and Genstar Capital Corporation; and Vice Chairman and a Director of Barrick Gold Corporation. JOHN S. LANE, 63, Director (1991*) 150 King Street West Toronto, Ontario, Canada M5H 1J9 He is Senior Vice President, Investments of Sun Life Assurance Company of Canada; and a Director of Sun Life Insurance and Annuity Company of New York. RICHARD B. BAILEY, 72, Director (1983*) 63 Atlantic Ave Boston, Massachusetts 02116 He is a Director of Sun Life Insurance and Annuity Company of New York and a Director/Trustee of certain Funds in the MFS Family of Funds. M. COLYER CRUM, 66, Director (1986*) 104 Westcliff Street Weston, Massachusetts 02193 He is Professor Emeritus of the Harvard Business School; Chairman and a Director of Phaeton International N.V.; a Director of Sun Life Assurance Company of Canada, Sun Life Assurance Company of Canada (U.S.), Sun Life Insurance and Annuity Company of New York, Cambridge Bancorp, Cambridge Trust Company, Merrill Lynch Ready Assets Trust, Merrill Lynch Basic Value Fund, Inc., Merrill Lynch Global Growth Fund, Inc., Merrill Lynch U.S. Treasury Money Fund, Merrill Lynch Special Value Fund, Inc., Merrill Lynch Capital Fund, Inc., Merrill Lynch U.S.A. Government Reserves, MuniVest Florida Fund, MuniVest Michigan Insured Fund, Inc., MuniVest New Jersey Fund, Inc., MuniYield Michigan Insured Fund, Inc., and MuniYield New Jersey Insured Fund, Inc.; and a Trustee of Merrill Lynch Global Resources Trust, Merrill Lynch Ready Assets Trust, MuniYield Florida Insured Fund, and MuniYield Pennsylvania Fund. Prior to July, 1996, he was a Professor at the Harvard Business School. S. CAESAR RABOY, 62, Senior Vice President and Deputy General Manager and Director (1996*) One Sun Life Executive Park Wellesley Hills, Massachusetts 02181 He is Senior Vice President and Deputy General Manager for the United States of Sun Life Assurance Company of Canada; Senior Vice President and a Director of Sun Life Insurance and Annuity Company of New York; Vice President and a Director of Sun Life Financial Services Limited; and a Director of Sun Life of Canada (U.S.) Distributors, Inc. and Clarendon Insurance Agency, Inc. 40 JAMES M.A. ANDERSON, 49, Vice President, Investments (1998) One Sun Life Executive Park Wellesley Hills, Massachusetts 02181 He is Vice President, Investments, of Sun Life Assurance Company of Canada and Sun Life Insurance and Annuity Company of New York; President and a Director of Sun Capital Advisers, Inc.; President and C.E.O. of Sun Capital Advisers Trust; 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., Sun Life of Canada (U.S.) Financial Services Holdings, Inc., and Sun Canada Financial Co.; Vice President, Investments, and a Director of Sun Life of Canada (U.S.) Distributors, Inc; and a Director of Massachusetts Casualty Insurance Company, New London Trust, F.S.B., Sun Benefit Services Company, Inc., Sun Life Information Services Ireland Limited, and Clarendon Insurance Agency, Inc. C. JAMES PRIEUR, 47, President and Director (1998*) One Sun Life Executive Park Wellesley Hills, Massachusetts 02181 He is Senior Vice President and General Manager for the United States of Sun Life Assurance Company of Canada; President and a Director of Sun Life Insurance and Annuity Company of New York; Chairman and a Director of Sun Life of Canada (U.S.) Distributors, Inc. and Sun Capital Advisers, Inc.; Chairman, Sun Capital Advisers Trust, President and a Director of Sun Life of Canada (U.S.) Holdings, Inc., Sun Life Assurance Company of Canada-- U.S. Operations Holdings, Inc., Sun Life of Canada (U.S.) Financial Services Holdings, Inc., Sun Canada Financial Co., Sun Life of Canada (U.S.) SPE 97-1, Inc., and Sun Benefit Services Company; and a Director of Clarendon Insurance Agency, Inc., Massachusetts Casualty Insurance Company, Sun Life Financial Services, Ltd and Sun Life Information Services Ireland Limited. L. BROCK THOMSON, 57, Vice President and Treasurer (1974) One Sun Life Executive Park Wellesley Hills, Massachusetts 02181 He is Vice President, Portfolio Management for the United States of Sun Life Assurance Company of Canada; Vice President and Treasurer of Sun Life of Canada (U.S.) Distributors, Inc., Sun Benefit Services Company, Inc., Sun Life Insurance and Annuity Company of New York, and Clarendon Insurance Agency, Inc.; and Assistant Treasurer of Massachusetts Casualty Insurance Company. ROBERT P. VROLYK, 45, Vice President and Actuary (1986) One Sun Life Executive Park Wellesley Hills, Massachusetts 02181 He is Vice President, Finance of Sun Life Assurance Company of Canada; Vice President, Controller and Actuary of Sun Life Insurance and Annuity Company of New York; Vice President and a Director of Sun Life of Canada (U.S.) Holdings, Inc., Sun Canada Financial Co., Sun Life of Canada (U.S.) Distributors, Inc., Sun Life of Canada (U.S.) Financial Services Holdings, Inc., and Sun Life Assurance Company of Canada--U.S. Operations Holdings, Inc.; Vice President, Treasurer and a Director of Sun Capital Advisers, Inc.; Treasurer and Chief Financial Officer, Sun Capital Advisers Trust; Treasurer and a Director of Sun Life of Canada (U.S.) SPE 97-1, Inc.; and a 41 Director of Clarendon Insurance Agency, Inc., Sun Benefit Services Company, Inc., and Sun Life Information Services Ireland, Limited. PETER F. DEMUTH, 40, Vice President, Chief Counsel and Assistant Secretary (1998) One Sun Life Executive Park Wellesley Hills, Massachusetts 02481 He is Vice President and Chief Counsel for the United States of Sun Life Assurance Company of Canada; and Assistant Secretary of Sun Life Insurance and Annuity Company of New York and Sun Capital Advisers Trust. ELLEN B. KING, 41, Secretary (1998) One Sun Life Executive Park Wellesley Hills, Massachusetts 02481 She is Assistant Counsel of Sun Life Assurance Company of Canada and Secretary of Sun Life Insurance and Annuity Company of New York. Our directors, officers and employees are covered under a commercial blanket bond and a liability policy. The directors, officers and employees of Massachusetts Financial Services Company and Clarendon Insurance Agency, Inc. are covered under a fidelity bond and errors and omissions policy. 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. 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 an adverse material 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 financial statements included in this prospectus. There are no financial statements for the Variable Account because it had not commenced operations as of the date of this prospectus. 42 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. YEAR 2000 COMPLIANCE During the fourth quarter of 1996, we began a comprehensive analysis of our information technology ("IT") and non-IT systems, including our hardware, software, data, data feed products, and internal and external supporting services, to address the ability of these systems to process date calculations through the year 2000 and beyond correctly. We created a full-time year 2000 project team in early 1997 to manage this endeavor on a company-wide basis. Our year 2000 project is periodically reviewed by internal and external auditors. To date, relevant systems have been identified and their components inventoried, needed resolutions have been documented, timelines and project plans have been developed, remediation and testing are in process, and over 70% of our applications have been certified as compliant. Our goal is to complete the majority of the effort by the end of 1998. However, a small number of tasks will be pushed into the first quarter of 1999 to accommodate testing of vendor upgrades not available until late 1998, re-testing interfaces once all systems are certified as compliant, and re-testing of mission critical functions. In mid-1997, the project team contacted all key vendors to obtain either their certification for the products and services provided or their plan to make those products and services compliant. To date, approximately 90% of these vendors have responded, and the project team is in the process of reviewing their responses. In addition, the project team recently has opened communications with critical business partners, such as third-party administrators, investment property managers, investment mortgage correspondents and others, with the goal that these partners will continue to be able to support our objective of assuring year 2000 compliance. Although we expect all critical systems to be year 2000 compliant before the end of 1999, there can be no assurance that this result will be completely achieved. Factors giving rise to this uncertainty include possible loss of technical resources to perform the work, failure to identify all susceptible systems, non-compliance by third-parties whose systems and operations affect our company, and other similar uncertainties. A possible worst-case scenario might include one or more of our significant systems being non-compliant. Such a scenario could result in material disruption to our operations. Consequences of such disruptions could include, among other possibilities, the inability to update customers' accounts; process payment and other financial transactions; and report accurate data to management, customers, regulators and others. Consequences could also include business 43 interruptions or shutdowns, reputational harm, increased scrutiny by regulators, and litigation related to year 2000 issues. Such potential consequences, depending on their nature and duration, could have material impact on our results of operations and financial position. In order to mitigate the risks to our company of material adverse operational or financial impacts from failure to achieve planned year 2000 compliance, we have established contingency planning at the business unit and corporate levels. By year-end 1998, we expect to have expended, cumulatively, approximately $7 million on our year 2000 effort, and we expect to incur a further $4.8 million on this effort in 1999. FINANCIAL STATEMENTS Sun Life of Canada (U.S.)'s 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. 44 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. 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, underwriting and substandard table rating, if any, 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 Policy Proceeds are due and payable. EFFECTIVE DATE OF COVERAGE--Initially, the Investment Start Date; with respect to any increase in the Specified Face Amount, the Monthly Anniversary Day 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. FUND--A mutual fund portfolio in which a Sub-Account invests. FIXED ACCOUNT VALUE--The portion of the Account Value funded by the assets of our general account. INITIAL PREMIUM--The initial premium amount specified in a Policy. 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, or the Business Day we receive a premium equal to or in excess of the initial premium. ISSUE AGE--The insured's age as of the insured's birthday nearest the policy effective date. ISSUE DATE--The date we produce a Policy from our system as specified in the Policy. MATURITY--The policy 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 effective date. MONTHLY COST OF INSURANCE--A deduction made on a monthly basis for the insurance coverage provided by the Policy. MONTHLY EXPENSE CHARGE--A per Policy deduction made on a monthly basis for administration and other expenses. MORTALITY AND EXPENSE RISK 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. 45 OUR 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. POLICY ANNIVERSARY--The same day in each succeeding year as the day of the year corresponding to the policy effective date. 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 effective 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 increased by the amounts payable under any supplemental benefits. POLICY YEAR--A Policy Year is a one-year period commencing on the policy effective date or any Policy Anniversary and ending on the next Policy Anniversary. 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. SUN LIFE OF CANADA (U.S.)--Sun Life Assurance Company of Canada (U.S.). UNIT--A Unit of measurement that we use to calculate the value of each Sub-Account. UNIT VALUE--The value of each Unit of assets in a Sub-Account. VALUATION DATE--Any day that benefits vary and on which 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. 46 APPENDIX B--FEES AND EXPENSES OF THE FUNDS
TOTAL OTHER OPERATING FUND MANAGEMENT FEES EXPENSES 12b-1 FEES EXPENSES - ------------------------------------------------------------- ----------------- ------------- --------------- ------------- DREYFUS VARIABLE INVESTMENT FUND - - DREYFUS INDEX (S&P 500) -- -- -- -- - - DREYFUS SMALL CAP PORTFOLIO -- -- -- -- FIDELITY VARIABLE INSURANCE PRODUCTS FUND - - VIP GROWTH PORTFOLIO -- -- -- -- FIDELITY VARIABLE INSURANCE PRODUCTS FUND II - - VIP II CONTRAFUND PORTFOLIO -- -- -- -- - - VIP II ASSET MANAGER: GROWTH PORTFOLIO -- -- -- -- GOLDMAN SACHS VARIABLE INSURANCE TRUST - - GOLDMAN SACHS CORE LARGE CAP GROWTH FUND -- -- -- -- - - GOLDMAN SACHS CORE SMALL CAP EQUITY FUND -- -- -- -- - - GOLDMAN SACHS CORE U.S. EQUITY FUND -- -- -- -- - - GOLDMAN SACHS INTERNATIONAL EQUITY FUND -- -- -- -- J.P. MORGAN SERIES TRUST II - - INTERNATIONAL OPPORTUNITIES PORTFOLIO -- -- -- -- - - SMALL COMPANY PORTFOLIO -- -- -- -- MFS/SUN LIFE SERIES TRUST - - CAPITAL APPRECIATION SERIES -- -- -- -- - - CONSERVATIVE GROWTH SERIES -- -- -- -- - - EMERGING GROWTH SERIES -- -- -- -- - - GOVERNMENT SECURITIES SERIES -- -- -- -- - - HIGH YIELD SERIES -- -- -- -- - - RESEARCH SERIES -- -- -- -- - - TOTAL RETURN SERIES -- -- -- -- NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST - - MID CAP GROWTH PORTFOLIO -- -- -- -- - - PARTNERS PORTFOLIO -- -- -- -- OCC ACCUMULATION TRUST - - MID CAP PORTFOLIO -- -- -- -- - - SMALL CAP PORTFOLIO -- -- -- --
47
TOTAL OTHER OPERATING FUND MANAGEMENT FEES EXPENSES 12b-1 FEES EXPENSES - ------------------------------------------------------------- ----------------- ------------- --------------- ------------- SUN CAPITAL FUNDS - - SUN CAPITAL INVESTMENT GRADE BOND FUND -- -- -- -- - - SUN CAPITAL MONEY MARKET FUND -- -- -- -- - - SUN CAPITAL REAL ESTATE FUND -- -- -- -- WARBURG PINCUS TRUST - - INTERNATIONAL EQUITY PORTFOLIO -- -- -- -- - - POST-VENTURE CAPITAL PORTFOLIO -- -- -- -- - - SMALL COMPANY GROWTH PORTFOLIO -- -- -- --
The Fund expenses shown above 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 following Funds are subject to the following fee waiver and/or expense reimbursement arrangements. [FUND-- INVESTMENT PORTFOLIO.] The management fees, other expenses and total operating expenses are net of any fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to reimburse a portion of the management fees and/or other expenses resulting in a reduction of total operating expenses. Without such waivers or reimbursement, management fees would have been %, other expenses would have been %, and total operating expenses would have been %. The management fees and other expenses are more fully described in the prospectuses for each Fund. The information relating to the Fund expenses was provided by the Fund and was not independently verified by us. 48 APPENDIX C--TABLE OF DEATH BENEFIT PERCENTAGES
APPLICABLE AGE PERCENTAGE - --------- ------------- 20 250% 21 250% 22 250% 23 250% 24 250% 25 250% 26 250% 27 250% 28 250% 29 250% 30 250% 31 250% 32 250% 33 250% 34 250% 35 250% 36 250% 37 250% 38 250% 39 250% 40 250% 41 243% 42 236% 43 229% 44 222% 45 215% 46 209% 47 203% 48 197% 49 191% 50 185% 51 178% 52 171% 53 164% 54 157% 55 150% 56 146% 57 142% 58 138% 59 134%
APPLICABLE AGE PERCENTAGE - --------- ------------- 60 130% 61 128% 62 126% 63 124% 64 122% 65 120% 66 119% 67 118% 68 117% 69 116% 70 115% 71 113% 72 111% 73 109% 74 107% 75 105% 76 105% 77 105% 78 105% 79 105% 80 105% 81 105% 82 105% 83 105% 84 105% 85 105% 86 105% 87 105% 88 105% 89 105% 90 105% 91 104% 92 103% 93 102% 94 101% 95 100% 96 100% 97 100% 98 100% 99 100%
49 APPENDIX D--SAMPLE HYPOTHETICAL ILLUSTRATIONS ILLUSTRATIONS OF DEATH BENEFITS, SURRENDER VALUES AND ACCUMULATED PREMIUMS 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. 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 of the Variable Account, 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 is equal to a 3% charge for sales load and our federal tax obligations and the applicable local and state premium tax assumed to be 2%. The Daily Risk Percentage charged against the Variable Account for mortality and expense risks is an annual effective rate of 0.80% for the first 10 Policy Years and 0.50% thereafter and is guaranteed not to exceed an annual effective rate of .90%. 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 0.90% 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 0.90%, will vary from year to year, and will depend upon how Account Value is allocated among the Sub-Accounts. See the prospectuses for the Fund for more information on Fund expenses. The gross annual rates of investment return of 0%, 6% and 12% correspond to net annual rates of -1.70%, 4.30%, and 10.30%, respectively, during the first 10 Policy Years and -1.40%, 4.60%, and 10.60%, respectively, thereafter taking into account the current Daily Risk Percentage charge and the assumed 0.90% charge for the Fund's advisory fees and operating expenses; and -1.80%, 4.20% and 10.20%, respectively taking into account the guaranteed Daily Risk Percentage charge. 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. 50 TABLE 1 SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) MALE, PREFERRED, AGE 45 $250,000 SPECIFIED FACE AMOUNT ANNUAL PREMIUM $3,500.00 DEATH BENEFIT OPTION A CURRENT POLICY CHARGES
HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12% PREMIUMS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PAID NET -1.70% NET 4.30% NET 10.30% PLUS ----------------------------- ---------------------------- ---------------------------- INTEREST CASH CASH CASH POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT - ------- -------- --------- ------- ------- --------- ------- ------- --------- ------- ------- 1 3,675 589 2,524 250,000 765 2,700 250,000 940 2,875 250,000 2 7,534 3,014 4,949 250,000 3,523 5,458 250,000 4,053 5,988 250,000 3 11,585 5,338 7,273 250,000 6,339 8,274 250,000 7,425 9,360 250,000 4 15,840 7,574 9,509 250,000 9,229 11,164 250,000 11,099 13,034 250,000 5 20,307 9,731 11,666 250,000 12,203 14,138 250,000 15,114 17,049 250,000 6 24,997 12,142 13,747 250,000 15,599 17,204 250,000 19,840 21,445 250,000 7 29,922 14,462 15,757 250,000 19,074 20,369 250,000 24,971 26,266 250,000 8 35,093 16,724 17,692 250,000 22,667 23,634 250,000 30,590 31,558 250,000 9 40,523 18,905 19,543 250,000 26,358 26,996 250,000 36,722 37,360 250,000 10 46,224 20,968 21,298 250,000 30,115 30,445 250,000 43,388 43,718 250,000 11 52,210 22,981 22,981 250,000 34,038 34,038 250,000 50,787 50,787 250,000 12 58,495 24,504 24,504 250,000 37,675 37,675 250,000 58,514 58,514 250,000 13 65,095 25,840 25,840 250,000 41,333 41,333 250,000 66,957 66,957 250,000 14 72,025 26,979 26,979 250,000 45,006 45,006 250,000 76,198 76,198 250,000 15 79,301 27,908 27,908 250,000 48,687 48,687 250,000 86,334 86,334 250,000 16 86,941 28,557 28,557 250,000 52,315 52,315 250,000 97,431 97,431 250,000 17 94,963 29,022 29,022 250,000 55,981 55,981 250,000 109,698 109,698 250,000 18 103,387 29,287 29,287 250,000 59,679 59,679 250,000 123,282 123,282 250,000 19 112,231 29,336 29,336 250,000 63,401 63,401 250,000 138,355 138,355 250,000 20 121,517 29,147 29,147 250,000 67,139 67,139 250,000 155,118 155,118 250,000 Age 60 79,301 27,908 27,908 250,000 48,687 48,687 250,000 86,334 86,334 250,000 Age 65 121,517 29,147 29,147 250,000 67,139 67,139 250,000 155,118 155,118 250,000 Age 70 175,397 23,600 23,600 250,000 81,978 81,978 250,000 272,468 272,468 316,062 Age 75 244,163 6,223 6,223 250,000 101,818 101,818 250,000 466,151 466,151 498,782
(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 your Policy to lapse due to insufficient Account 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. 51 TABLE 2 SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) MALE, PREFERRED, AGE 55 $250,000 SPECIFIED FACE AMOUNT ANNUAL PREMIUM $5,675.00 DEATH BENEFIT OPTION A CURRENT POLICY CHARGES
HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12% PREMIUMS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PAID NET -1.70% NET 4.30% NET 10.30% PLUS ----------------------------- ----------------------------- ---------------------------- INTEREST CASH CASH CASH POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT - ------- -------- --------- ------- ------- --------- ------- ------- --------- ------- ------- 1 5,959 1,074 3,887 250,000 1,352 4,164 250,000 1,630 4,443 250,000 2 12,215 4,812 7,625 250,000 5,612 8,425 250,000 6,448 9,261 250,000 3 18,785 8,402 11,215 250,000 9,973 12,786 250,000 11,681 14,494 250,000 4 25,683 11,830 14,643 250,000 14,424 17,237 250,000 17,361 20,173 250,000 5 32,926 15,092 17,905 250,000 18,965 21,778 250,000 23,533 26,346 250,000 6 40,531 18,667 21,002 250,000 24,079 26,414 250,000 30,734 33,069 250,000 7 48,516 22,029 23,914 250,000 29,246 31,131 250,000 38,502 40,387 250,000 8 56,901 25,225 26,633 250,000 34,518 35,926 250,000 46,957 48,365 250,000 9 65,705 28,213 29,140 250,000 39,859 40,787 250,000 56,140 57,067 250,000 10 74,949 30,917 31,394 250,000 45,202 45,680 250,000 66,072 66,550 250,000 11 84,655 33,453 33,453 250,000 50,715 50,715 250,000 77,090 77,090 250,000 12 94,846 35,310 35,310 250,000 55,862 55,862 250,000 88,733 88,733 250,000 13 105,547 36,908 36,908 250,000 61,080 61,080 250,000 101,588 101,588 250,000 14 116,783 38,204 38,204 250,000 66,346 66,346 250,000 115,804 115,804 250,000 15 128,581 39,145 39,145 250,000 71,630 71,630 250,000 131,559 131,559 250,000 16 140,969 39,054 39,054 250,000 76,365 76,365 250,000 148,729 148,729 250,000 17 153,976 38,508 38,508 250,000 81,054 81,054 250,000 167,952 167,952 250,000 18 167,634 37,468 37,468 250,000 85,689 85,689 250,000 189,582 189,582 250,000 19 181,974 35,875 35,875 250,000 90,250 90,250 250,000 214,043 214,043 250,000 20 197,032 33,657 33,657 250,000 94,715 94,715 250,000 241,821 241,821 258,748 Age 60 128,581 15,092 17,905 250,000 18,965 21,778 250,000 23,533 26,346 250,000 Age 65 197,032 30,917 31,394 250,000 45,202 45,680 250,000 66,072 66,550 250,000 Age 70 284,394 39,145 39,145 250,000 71,630 71,630 250,000 131,559 131,559 250,000 Age 75 395,892 33,657 33,657 250,000 94,715 94,715 250,000 241,821 241,821 258,748
(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 your Policy to lapse due to insufficient Account 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. 52 TABLE 3 SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) MALE, PREFERRED, AGE 45 $250,000 SPECIFIED FACE AMOUNT ANNUAL PREMIUM $3,500.00 DEATH BENEFIT OPTION A GUARANTEED POLICY CHARGES
HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12% PREMIUMS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PAID NET -1.70% NET 4.30% NET 10.30% PLUS ----------------------------- ----------------------------- ---------------------------- INTEREST CASH CASH CASH POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT - ------- -------- --------- ------- ------- --------- ------- ------- --------- ------- ------- 1 3,675 586 2,521 250,000 762 2,697 250,000 937 2,872 250,000 2 7,534 2,837 4,772 250,000 3,339 5,274 250,000 3,864 5,799 250,000 3 11,585 4,985 6,920 250,000 5,963 7,898 250,000 7,027 8,962 250,000 4 15,840 7,029 8,964 250,000 8,632 10,567 250,000 10,449 12,384 250,000 5 20,307 8,961 10,896 250,000 11,340 13,275 250,000 14,150 16,085 250,000 6 24,997 11,112 12,717 250,000 14,417 16,022 250,000 18,486 20,091 250,000 7 29,922 13,115 14,410 250,000 17,499 18,794 250,000 23,128 24,423 250,000 8 35,093 14,998 15,965 250,000 20,611 21,579 250,000 28,135 29,103 250,000 9 40,523 16,732 17,370 250,000 23,728 24,366 250,000 33,523 34,160 250,000 10 46,224 18,278 18,608 250,000 26,809 27,139 250,000 39,292 39,622 250,000 11 52,210 19,664 19,664 250,000 29,882 29,882 250,000 45,523 45,523 250,000 12 58,495 20,526 20,526 250,000 32,583 32,583 250,000 51,905 51,905 250,000 13 65,095 21,186 21,186 250,000 35,233 35,233 250,000 58,824 58,824 250,000 14 72,025 21,631 21,631 250,000 37,818 37,818 250,000 66,339 66,339 250,000 15 79,301 21,836 21,836 250,000 40,316 40,316 250,000 74,509 74,509 250,000 16 86,941 21,777 21,777 250,000 42,700 42,700 250,000 83,406 83,406 250,000 17 94,963 21,424 21,424 250,000 44,940 44,940 250,000 93,112 93,112 250,000 18 103,387 20,738 20,738 250,000 47,000 47,000 250,000 103,723 103,723 250,000 19 112,231 19,670 19,670 250,000 48,833 48,833 250,000 115,348 115,348 250,000 20 121,517 18,166 18,166 250,000 50,382 50,382 250,000 128,120 128,120 250,000 Age 60 79,301 21,836 21,836 250,000 40,316 40,316 250,000 74,509 74,509 250,000 Age 65 121,517 18,166 18,166 250,000 50,382 50,382 250,000 128,120 128,120 250,000 Age 70 175,397 2,208 2,208 250,000 51,993 51,993 250,000 216,689 216,689 251,359 Age 75 244,163 -- -- 250,000 33,576 33,576 250,000 365,666 365,666 391,263
(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 your Policy to lapse due to insufficient Account 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. 53 TABLE 4 SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) MALE, PREFERRED, AGE 55 $250,000 SPECIFIED FACE AMOUNT ANNUAL PREMIUM $5,675.00 DEATH BENEFIT OPTION A GUARANTEED POLICY CHARGES
HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12% PREMIUMS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PAID NET -1.70% NET 4.30% NET 10.30% PLUS ----------------------------- ----------------------------- ---------------------------- INTEREST CASH CASH CASH POLICY AT 5% SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT - ------- -------- --------- ------- ------- --------- ------- ------- --------- ------- ------- 1 5,959 1,069 3,882 250,000 1,347 4,160 250,000 1,626 4,438 250,000 2 12,215 4,124 6,936 250,000 4,903 7,715 250,000 5,718 8,530 250,000 3 18,785 6,945 9,758 250,000 8,431 11,243 250,000 10,052 12,864 250,000 4 25,683 9,525 12,337 250,000 11,918 14,731 250,000 14,645 17,457 250,000 5 32,926 11,840 14,653 250,000 15,342 18,155 250,000 19,507 22,319 250,000 6 40,531 14,349 16,684 250,000 19,156 21,491 250,000 25,129 27,464 250,000 7 48,516 16,520 18,405 250,000 22,824 24,709 250,000 31,019 32,904 250,000 8 56,901 18,376 19,784 250,000 26,367 27,775 250,000 37,245 38,652 250,000 9 65,705 19,850 20,777 250,000 29,712 30,640 250,000 43,789 44,716 250,000 10 74,949 20,860 21,337 250,000 32,774 33,252 250,000 50,631 51,108 250,000 11 84,655 21,421 21,421 250,000 35,561 35,561 250,000 57,853 57,853 250,000 12 94,846 20,991 20,991 250,000 37,525 37,525 250,000 64,993 64,993 250,000 13 105,547 20,001 20,001 250,000 39,087 39,087 250,000 72,579 72,579 250,000 14 116,783 18,399 18,399 250,000 40,190 40,190 250,000 80,675 80,675 250,000 15 128,581 16,116 16,116 250,000 40,756 40,756 250,000 89,354 89,354 250,000 16 140,969 13,042 13,042 250,000 40,666 40,666 250,000 98,687 98,687 250,000 17 153,976 8,896 8,896 250,000 39,644 39,644 250,000 108,671 108,671 250,000 18 167,634 3,776 3,776 250,000 37,744 37,744 250,000 119,584 119,584 250,000 19 181,974 -- -- -- 34,600 34,600 250,000 131,487 131,487 250,000 20 197,032 -- -- -- 29,930 29,930 250,000 144,590 144,590 250,000 Age 60 128,581 11,840 14,653 250,000 15,342 18,155 250,000 19,507 22,319 250,000 Age 65 197,032 20,860 21,337 250,000 32,774 33,252 250,000 50,631 51,108 250,000 Age 70 284,394 16,116 16,116 250,000 40,756 40,756 250,000 89,354 89,354 250,000 Age 75 395,892 -- -- -- 29,930 29,930 250,000 144,590 144,590 250,000
(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 your Policy to lapse due to insufficient Account 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. 54 [BACK COVER] The Securities and Exchange Commission maintains an Internet Web site (http//www.sec.gov) that contains additional information about Sun Life of Canada (U.S.), the Policy and the variable account which may be of interest to you. The Web site also contains additional information about the Policy's mutual fund investment options. PART II UNDERTAKING TO FILE REPORTS Subject to the terms and conditions of Section 15(d) of the Securities Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with the Securities and Exchange Commission such supplementary and periodic information, documents, and reports as may be prescribed by any rule or regulation of the Commission heretofore or hereafter duly adopted pursuant to authority conferred in that section. REPRESENTATION OF REASONABLENESS OF FEES Sun Life Assurance Company of Canada (U.S.)("Sun Life of Canada (U.S.)") hereby represents that the aggregate fees and charges under the Policy are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by Sun Life (U.S.). UNDERTAKING ON INDEMNIFICATION Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the depositor pursuant to its certificate of incorporation, bylaws, or otherwise, the depositor has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the depositor of expenses incurred or paid by a director, officer or controlling person of the depositor in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the depositor will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the act and will be governed by the final adjudication of such issue. II-1 CONTENTS OF REGISTRATION STATEMENT This Registration Statement comprises the following papers and documents: The facing sheet. The prospectuses consisting of 53 pages. The undertaking to file reports. Representation of reasonableness of fees. The Rule 484 undertaking. The signatures. Written consents of the following persons: Roy P. Creedon, Esq. (Exhibit 2) Georges C. Rouhart, FSA, MAAA (Exhibit 6) The following exhibits: 1. Copies of all exhibits required by paragraph A of instructions for Exhibits to Form N-8B-2: (1)(a) Resolutions of the Board of Directors of Sun Life Assurance Company of Canada (U.S.), dated October 29, 1998, authorizing the establishment of one or more separate accounts (1)(b) Record of Action, dated December 1, 1998, authorizing the establishment of Sun Life of Canada (U.S.) Variable Account I (2) Not applicable (3)(a) Principal Underwriting Agreement* (3)(b) Form of Selling Agreements* (3)(c) Schedule of Sales Commissions* (4) Not Applicable (5)(a) Form of Flexible Premium Combination Fixed and Variable Life Insurance Policy* (5)(b) Form of Accelerated Death Benefit Rider* (5)(c) Form of Accidental Death Benefit Rider* (5)(d) Form of Waiver of Stipulated Premium Rider* II-2 (5)(e) Form of Waiver of Cost of Insurance Rider* (6)(a) Certificate of Incorporation of Sun Life of Canada (U.S.)** (6)(b) Bylaws of Sun Life of Canada (U.S.)** (7) Not Applicable. (8)(a) Form of Participation Agreements* (9) Not Applicable. (10) Form of Application for Flexible Premium Combination Fixed and Variable Life Insurance Policy* (11) Memorandum describing Sun Life of Canada (U.S.)'s Issuance, Transfer and Redemption Procedures* 2. Opinion and Consent of Counsel as to the Legality of the Securities Being Registered* 3. No financial statement will be omitted from the prospectus pursuant to Instruction 1(b) or (c) of Part I 4. Not applicable 5. Not applicable 6. Opinion and Consent of Georges C. Rouhart, FSA, MAAA* 7. Consent of Deloitte & Touche LLP, Independent Public Accountants* 8. Powers of Attorney __________ * To be filed by amendment. ** Incorporated by reference to the Registration Statement of Sun Life of Canada (U.S.) Variable Account F on Form N-4, File No. 333-37907. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned thereunto duly authorized, and attested, all in the city of Wellesley Hills, and the Commonwealth of Massachusetts, on the 9th day of December, 1998. SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT I (Registrant) By: SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) (Depositor) By: C. James Prieur* --------------------------- C. James Prieur, President Attest: /s/ Ellen B. King ------------------------- Ellen B. King, Secretary Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons and in the capacities and on the dates indicated. C. James Prieur* President and Director ----------------------- (Principal Executive Officer) C. James Prieur Robert P. Vrolyk* Vice President and Actuary ----------------------- (Principal Financial & Robert P. Vrolyk Accounting Officer) Donald A. Stewart* Chairman and Director ----------------------- Donald A. Stewart John D. McNeil* Director ----------------------- John D. McNeil M. Colyer Crum* Director ----------------------- M. Colyer Crum Richard B. Bailey* Director ----------------------- Richard B. Bailey Director December __, 1998 ----------------------- David D. Horn John S. Lane* Director ----------------------- John S. Lane Angus A. MacNaughton* Director ----------------------- Angus A. MacNaughton S. Caesar Raboy* Senior Vice President and ----------------------- Deputy General Manager and S. Caesar Raboy Director By: /s/ Ellen B. King December 9, 1998 ------------------------------ Ellen B. King, Attorney-In-Fact * By Ellen B. King pursuant to Powers of Attorney filed with this registration statement. II-4 EXHIBIT INDEX 1.A(1)(a) Resolutions of Board of Directors of Sun Life Assurance Company of Canada (U.S.), dated October 29, 1998, authorizing the establishment of one or more separate accounts 1.A(1)(b) Record of Action, dated December 1, 1998, authorizing the establishment of Sun Life of Canada Variable Account I 8. Powers of Attorney II-5 EX-1.A(1)(A) 2 EXHIBIT 1A(1)(A) [LETTERHEAD] SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) Certified Copy of Resolution of Board of Directors I, Ellen B. King, Secretary of Sun Life Assurance Company of Canada (U.S.), a Delaware corporation, do hereby certify that at a special meeting of the board of directors of the said corporation, duly held and convened at New York, New York on the 29th day of October, 1998, at which a quorum was present and voting throughout, the following resolution was duly adopted, and has not since been modified or rescinded. "RESOLVED, that any two officers of the corporation be and hereby are authorized to establish, from time to time, and maintain one or more separate accounts, some of which may not require registration as investment companies under the Investment Company Act of 1940, and, incidental thereto, to exercise every power and right enumerated or implied under Section 2932 of the Delaware Insurance Code, including without limitation, the power and right to (a) establish different investment policies for different separate accounts, (b) make such rules and regulations as may be necessary or appropriate for the proper administration of such separate accounts in accordance with the applicable laws and regulations governing the establishment of such separate accounts, (c) allocate to such separate accounts such amounts as may be necessary or desirable, (d) provide for special voting rights and procedures for participants in such separate accounts relating to investment policy, investment advisory services, and selection of a certified public accountant, provided that such special voting rights and procedures be established only when deemed necessary by the officers of the corporation, (e) issue appropriate contracts and policies to the participants in such separate accounts providing for life insurance or annuity benefits (and benefits incidental thereto) in fixed or variable amounts, or both, (f) enter into any agreements which are necessary or appropriate to the establishment and maintenance of such separate accounts; and (g) establish for any such separate account, as may be necessary or appropriate, a board of managers to manage the account and the investment of its assets; FURTHER RESOLVED, with respect to such separate accounts as are required to be registered under the Investment Company Act of 1940, as amended, that there be filed with the Securities and Exchange Commission in accordance with that Act, registration statements and any amendments thereto, relating to such separate accounts, and that application be made for such exemptions from that Act as may be necessary or desirable; FURTHER RESOLVED, that there be filed with the Securities and Exchange Commission in accordance with the provisions of the Securities Act of 1933, as amended, registration statements and any amendments thereto, relating to such variable contracts which are to be registered pursuant to the Act, FURTHER RESOLVED, that the officers of the corporation be and they are hereby authorized to take such further action as may in their judgment be necessary or desirable from time to time to implement the foregoing resolutions and as may be appropriate to enable the corporation to transact the business of issuing and selling variable contracts participating in these separate accounts." WITNESS my hand and the seal of the said corporation this 25th day of November, 1998. /s/ Ellen B. King ---------------------------------- Ellen B. King Secretary EX-1.A(1)(B) 3 EXHIBIT 1A(1)(B) RECORD OF ACTION In accordance with the authority granted by a resolution of the Board of Directors of Sun Life Assurance Company of Canada (U.S.) ("Sun Life (U.S.)") on October 29, 1998, which resolution is still in force and effect, the undersigned President and Vice President and Actuary of Sun Life (U.S.) authorize the establishment of a separate account for the purpose of issuing flexible premium variable life insurance contracts. This separate account will be known as Sun Life of Canada (U.S.) Variable Account 1 and is established this 1st day of December, 1998. DATED: December 1, 1998 SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) BY: /s/ C. James Prieur ---------------------------------- C. James Prieur, President BY: /s/ Robert P. Vrolyk ---------------------------------- Robert P. Vrolyk, Vice President and Actuary EX-8 4 EXHIBIT 8 - POWERS OF ATTORNEY SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that Richard B. Bailey, whose signature appears below, constitutes and appoints Ellen B. King, Roy P. Creedon, Edward M. Shea, Peter F. Demuth and C. James Prieur, and each of them, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign Registration Statements on Form S-6 and N-8B-2 of Sun Life of Canada (U.S.) Variable Account I, and any amendments thereto, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or his substitute or substitutes, may do or cause to be done by virtue hereof. /s/ RICHARD B. BAILEY ----------------------------- Richard B. Bailey November 17, 1998 SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that M. Colyer Crum, whose signature appears below, constitutes and appoints Ellen B. King, Roy P. Creedon, Edward M. Shea, Peter F. Demuth and C. James Prieur, and each of them, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign Registration Statements on Form S-6 and N-8B-2 of Sun Life of Canada (U.S.) Variable Account I, and any amendments thereto, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or his substitute or substitutes, may do or cause to be done by virtue hereof. /s/ M. COLYER CRUM ----------------------------- M. Colyer Crum November 17, 1998 SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that David D. Horn, whose signature appears below, constitutes and appoints Ellen B. King, Roy P. Creedon, Edward M. Shea, Peter F. Demuth and C. James Prieur, and each of them, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign Registration Statements on Form S-6 and N-8B-2 of Sun Life of Canada (U.S.) Variable Account I, and any amendments thereto, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or his substitute or substitutes, may do or cause to be done by virtue hereof. ----------------------------- David D. Horn November 17, 1998 SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that Angus A. MacNaughton, whose signature appears below, constitutes and appoints Ellen B. King, Roy P. Creedon, Edward M. Shea, Peter F. Demuth and C. James Prieur, and each of them, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign Registration Statements on Form S-6 and N-8B-2 of Sun Life of Canada (U.S.) Variable Account I, and any amendments thereto, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or his substitute or substitutes, may do or cause to be done by virtue hereof. /s/ ANGUS A. MacNAUGHTON ----------------------------- Angus A. MacNaughton November 17, 1998 SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that C. James Prieur, whose signature appears below, constitutes and appoints Ellen B. King, Roy P. Creedon, Edward M. Shea and Peter F. Demuth and each of them, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign Registration Statements on Form S-6 and N-8B-2 of Sun Life of Canada (U.S.) Variable Account I, and any amendments thereto, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or his substitute or substitutes, may do or cause to be done by virtue hereof. /s/ C. JAMES PRIEUR ----------------------------- C. James Prieur November 17, 1998 SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that John S. Lane, whose signature appears below, constitutes and appoints Ellen B. King, Roy P. Creedon, Edward M. Shea, Peter F. Demuth and C. James Prieur, and each of them, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign Registration Statements on Form S-6 and N-8B-2 of Sun Life of Canada (U.S.) Variable Account I, and any amendments thereto, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or his substitute or substitutes, may do or cause to be done by virtue hereof. /s/ JOHN S. LANE ----------------------------- John S. Lane November 17, 1998 SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that John D. McNeil, whose signature appears below, constitutes and appoints Ellen B. King, Roy P. Creedon, Edward M. Shea, Peter F. Demuth and C. James Prieur, and each of them, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign Registration Statements on Form S-6 and N-8B-2 of Sun Life of Canada (U.S.) Variable Account I, and any amendments thereto, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or his substitute or substitutes, may do or cause to be done by virtue hereof. /s/ JOHN D. McNEIL ----------------------------- John D. McNeil November 17, 1998 SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that Donald A. Stewart, whose signature appears below, constitutes and appoints Ellen B. King, Roy P. Creedon, Edward M. Shea, Peter F. Demuth and C. James Prieur, and each of them, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign Registration Statements on Form S-6 and N-8B-2 of Sun Life of Canada (U.S.) Variable Account I, and any amendments thereto, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or his substitute or substitutes, may do or cause to be done by virtue hereof. /s/ DONALD A. STEWART ----------------------------- Donald A. Stewart November 17, 1998 SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that S. Caesar Raboy, whose signature appears below, constitutes and appoints Ellen B. King, Roy P. Creedon, Edward M. Shea, Peter F. Demuth and C. James Prieur, and each of them, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign Registration Statements on Form S-6 and N-8B-2 of Sun Life of Canada (U.S.) Variable Account I, and any amendments thereto, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or his substitute or substitutes, may do or cause to be done by virtue hereof. /s/ S. CAESAR RABOY ----------------------------- S. Caesar Raboy November 17, 1998 SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that Robert P. Vrolyk, whose signature appears below, constitutes and appoints Ellen B. King, Roy P. Creedon, Edward M. Shea, Peter F. Demuth and C. James Prieur, and each of them, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign Registration Statements on Form S-6 and N-8B-2 of Sun Life of Canada (U.S.) Variable Account I, and any amendments thereto, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or his substitute or substitutes, may do or cause to be done by virtue hereof. /s/ ROBERT P. VROLYK ----------------------------- Robert P. Vrolyk November 17, 1998 -----END PRIVACY-ENHANCED MESSAGE-----