Registration No. 333-111688

                           811-07837

As Filed with the Securities and Exchange Commission on April 24, 2008

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-6

REGISTRATION UNDER THE SECURITIES ACT OF 1933                [ X ]

Pre-Effective Amendment No. ____          [  ]

Post-Effective Amendment No._7___         [  ]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940          [ X ]

Amendment No.__26__          [ X ]

Sun Life of Canada (U.S.) Variable Account G

Registrant

Sun Life Assurance Company of Canada (U.S.)

Depositor

One Sun Life Executive Park

Wellesley Hills, Massachusetts 02481

Depositor's Address

1-888-594-2654

Depositor's Telephone Number

Sandra DaDalt

Assistant Vice President and Senior Counsel

Sun Life Assurance Company of Canada (U.S.)

One Sun Life Executive Park

Wellesley Hills, Massachusetts 02481

Name and Address of Agent For Service

It is proposed that this filing will become effective (check appropriate box)

[  ]  immediately upon filing pursuant to paragraph (b) of Rule 485.

[ X ]  on May 1, 2008 pursuant to paragraph (b) of Rule 485.

[  ]  60 days after filing pursuant to paragraph (a)(1) of Rule 485.

[  ]  on May 1, 2008 pursuant to paragraph (a)(1) of Rule 485.

[  ]  This post-effective amendment designates a new effective date for a previously filed post-effective amendment.

PART A

Sun Life Large Case VUL

Sun Life of Canada (U.S.) Variable Account G

A Flexible Premium Variable Universal Life Insurance Policy

Prospectus

May 1, 2008

This prospectus describes the variable universal life insurance policy (the "Policy") issued by Sun Life Assurance Company of Canada (U.S.) ("we", "us" or "Company"), a member of the Sun Life Financial group of companies, through Sun Life of Canada (U.S.) Variable Account G (the “Variable Account”), one of our separate accounts.  The Policy is being offered as an individual policy.  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.  You may choose among a number of Sub-Accounts and a Fixed Account Option.  The Sub-Accounts in the Variable Account invest in shares of the following Funds:

ASSET ALLOCATION	LARGE CAP EQUITY
MFS Total Return Portfolio (Initial Class)	AIM V.I. Basic Value Fund (Series I Shares)
EMERGING MARKETS BOND	Columbia Marsico Growth Fund Variable Series – Class A
PIMCO VIT Emerging Markets Bond Portfolio (Administrative Class)	Dreyfus Stock Index Fund, Inc. (Initial Shares)
EMERGING MARKETS EQUITY	Dreyfus VIF Appreciation Portfolio (Initial Shares)
MFS Emerging Markets Equity Portfolio (Initial Class)	DWS Dreman High Return Equity VIP (Class A)
HIGH YIELD BOND	Fidelity VIP Contrafund® Portfolio (Initial Shares)
Fidelity VIP High Income Portfolio (Initial Class)	Fidelity VIP Equity-Income Portfolio (Initial Class)
PIMCO VIT High Yield Portfolio (Administrative Class)	Fidelity VIP Growth Portfolio (Initial Class)
SCSM PIMCO High Yield Fund (Initial Class)	Fidelity VIP Growth & Income Portfolio (Initial Class)
INFLATION-PROTECTED BOND	Lord Abbett Series Fund – Growth and Income Portfolio (Class VC)
PIMCO VIT Real Return Portfolio (Administrative Class)	MFS Value Portfolio (Initial Class)
INTERMEDIATE TERM BOND	Mutual Shares Securities Fund (Class 1)
Fidelity VIP Investment Grade Bond Portfolio (Initial Class)	Oppenheimer Capital Appreciation Fund/VA (Non-Service Shares)
MFS Government Securities Portfolio (Initial Class)	SCSM Davis Venture Value Fund (Initial Class)
PIMCO VIT Total Return Portfolio (Administrative Class)	SCSM Lord Abbett Growth & Income Fund (Initial Class)
INTERNATIONAL/GLOBAL EQUITY	T. Rowe Price Blue Chip Growth Portfolio
AllianceBernstein VPS International Value Portfolio (Class A)	T. Rowe Price Equity Income Portfolio
Columbia Marsico International Opportunities Fund, Variable Series – Class B	Van Kampen LIT Comstock Portfolio (Class 1 Shares)
Fidelity VIP Overseas Portfolio (Initial Class)	Van Kampen LIT Growth and Income Portfolio (Class 1 Shares)
MFS Global Growth Portfolio (Initial Class)	REAL ESTATE EQUITY
MFS International Growth Portfolio (Initial Class)	Delaware VIP REIT Series (Standard Class)
MFS International Value Portfolio (Initial Class)	Franklin Global Real Estate Securities Fund (Class 1)#
MFS Research International Portfolio (Initial Class)	Sun Capital Global Real Estate Fund® (Initial Class)**
Oppenheimer Global Securities Fund/VA (Non-Service Shares)	SHORT TERM BOND
Templeton Foreign Securities Fund (Class 1)	PIMCO VIT Low Duration Portfolio (Administrative Class)
Templeton Growth Securities Fund (Class 1)	SCSM Goldman Sachs Short Duration Fund (Initial Class)
MID CAP EQUITY	SMALL CAP EQUITY
AIM V.I. Mid Cap Core Equity Fund (Series I Shares)	Alger American SmallCap Growth Portfolio (Class O)*
Alger American MidCap Growth Portfolio (Class O)	BlackRock Value Opportunities V.I. Fund (Class I)
AllianceBernstein VPS Small/Mid Cap Value Portfolio (Class A)	Delaware VIP Small Cap Value Series (Standard Class)
Delaware VIP Growth Opportunities Series (Standard Class)	DWS Small Cap Index VIP (Class A)
Dreyfus IP MidCap Stock Portfolio (Initial Shares)	DWS Dreman Small Mid Cap Value VIP (Class A)
Fidelity VIP Mid Cap Portfolio (Initial Class)	Franklin Small-Mid Cap Growth Securities Fund (Class 1)
Janus Aspen Series Mid Cap Value Portfolio (Institutional Shares)	MFS New Discovery Portfolio (Initial Class)#
Lord Abbett Series Fund – Mid-Cap Value Portfolio (Class VC)	Oppenheimer Main Street Small Cap Fund®/VA (Non-Service Shares)
SCSM Blue Chip Mid Cap Fund (Initial Class)	Royce Capital Fund – Small-Cap Portfolio
SCSM Goldman Sachs Mid Cap Value Fund (Initial Class)	Wanger USA***
Van Kampen UIF Mid Cap Growth Portfolio (Class 1 Shares)	SPECIALTY/SECTOR EQUITY
MONEY MARKET	Dreyfus IP Technology Growth Portfolio (Initial Shares)
Fidelity VIP Money Market Portfolio (Service Class)	MFS  Utilities Portfolio (Initial Class)
TARGET DATE	SPECIALTY/SECTOR COMMODITY
Fidelity VIP Freedom 2015 Portfolio (Initial Class)	PIMCO VIT Commodity RealReturn Strategy Portfolio (Administrative Class)
Fidelity VIP Freedom 2020 Portfolio (Initial Class)
Fidelity VIP Freedom 2030 Portfolio (Initial Class)

Invesco Aim Advisors, Inc. advises the AIM Funds and advisory entities affiliated with Invesco Aim Advisors, Inc. subadvise the AIM Funds.  Fred Alger Management, Inc. advises the Alger Portfolios.  Alliance Capital Management L.P. advises the AllianceBernstein VPS Portfolios.  BlackRock Advisers LLC advises the BlackRock Value Opportunities V.I. Fund.  Columbia Management Advisors, LLC advises the Columbia Funds and Marsico Capital Management, LLC is the subadviser.  Delaware Management Company advises the Delaware Series.  Dreyfus Corporation advises the Dreyfus Portfolios and the Dreyfus Stock Index Fund, Inc.  Deutsche Asset Management, Inc. advises the DWS Small Cap Index VIP.  Deutsche Investment Management Americas Inc. advises the DWS Dreman VIPs.  Fidelity Management & Research Company advises the Fidelity Portfolios.  Franklin Advisers, Inc. advises the Franklin Small Cap Fund and the Franklin Global Real Estate Securities Fund.  Franklin Mutual Advisers, LLC advises the Franklin Mutual Shares Securities Fund.  Templeton Investment Counsel, LLC advises the Templeton Foreign Securities Fund.  Templeton Global Advisors Limited advises the Templeton Growth Securities Fund. Goldman Sachs Asset Management, L.P. subadvises SCSM Goldman Sachs Mid Cap Value Fund and SCSM Goldman Sachs Short Duration Fund.  Janus Capital Management LLC advises the Janus Aspen Series Mid Cap Value Portfolio.  Lord, Abbett & Co. LLC advises the Lord Abbett Portfolios and subadvises SCSM Lord Abbett Growth & Income Fund.  Massachusetts Financial Services Company, our affiliate, advises the MFS Portfolios.  OppenheimerFunds, Inc. advises the Oppenheimer Fund/VAs.  Pacific Investment Management Company advises the PIMCO Portfolios and SCSM PIMCO High Yield Fund.  Royce & Associates, LLC advises the Royce Capital Fund – Small-Cap Portfolio.  Sun Capital Advisers, LLC, our affiliate, advises the Sun Capital Real Estate Fund.  T. Rowe Price Associates, Inc. advises the T. Rowe Portfolios.  Morgan Stanley Investment Management Inc. advises the Van Kampen UIF Mid Cap Growth Portfolio.  Van Kampen Asset Management advises the Van Kampen LIT Portfolios.  Columbia Wanger Asset Management, LLP advises Wanger USA.  Wellington Management Company, LLP subadvises SCSM Blue Chip Mid Cap Fund.

*On May 1, 2008, Alger American Small Capitalization Portfolio changed its name to Alger American SmallCap Growth Portfolio.

**On May 1, 2008, Sun Capital Real Estate Fund changed its name to Sun Capital Global Real Estate Fund.

***On June 1, 2008, Wanger U.S. Smaller Companies changed its name to Wanger USA.

#On July 1, 2008, MFS New Discovery Portfolio and Franklin Global Real Estate Securities Fund are closed to new premium and transfers.

Sun Life Assurance Company of Canada (U.S.)

One Sun Life Executive Park

Wellesley Hills, Massachusetts 02481

(888) 594-2654

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.

Table of Contents

Topic                                                                                                                                   Page

Risk/Benefit Summary of Policy [INSERT PAGE NUMBER]

About Who We Are [INSERT PAGE NUMBER]

The Variable Account [INSERT PAGE NUMBER]

The Funds [INSERT PAGE NUMBER]

Fees and Expenses of the Funds [INSERT PAGE NUMBER]

Potential Conflicts [INSERT PAGE NUMBER]

Our General Account [INSERT PAGE NUMBER]

About the Policy [INSERT PAGE NUMBER]

Application and Issuance[INSERT PAGE NUMBER]

Death Benefit Compliance Test[INSERT PAGE NUMBER]

Initial Premium Payment[INSERT PAGE NUMBER]

Insurable Interest Requirement[INSERT PAGE NUMBER]

Right to Return Policy Period[INSERT PAGE NUMBER]

Premium Payments [INSERT PAGE NUMBER]

General Limitations [INSERT PAGE NUMBER]

Planned Periodic Premiums [INSERT PAGE NUMBER]

Allocation of Net Premium [INSERT PAGE NUMBER]

Modified Endowment Contract [INSERT PAGE NUMBER]

Additional Protection Benefit Rider (APB Rider) [INSERT PAGE NUMBER]

Death Benefit [INSERT PAGE NUMBER]

Policy Proceeds [INSERT PAGE NUMBER]

Death Benefit Options [INSERT PAGE NUMBER]

Changes in the Death Benefit Option [INSERT PAGE NUMBER]

APB Rider Death Benefit [INSERT PAGE NUMBER]

Minimum Face Amount [INSERT PAGE NUMBER]

Changes in Face Amount [INSERT PAGE NUMBER]

Increases in Face Amount [INSERT PAGE NUMBER]

Decreases in Face Amount [INSERT PAGE NUMBER]

Account Value [INSERT PAGE NUMBER]

Account Value for Investment Options [INSERT PAGE NUMBER]

Net Investment Factor [INSERT PAGE NUMBER]

Account Value in the Loan Account [INSERT PAGE NUMBER]

Insufficient Value. [INSERT PAGE NUMBER]

Grace Period [INSERT PAGE NUMBER]

Insured's Attained Age 100 [INSERT PAGE NUMBER]

Enhancement Benefit [INSERT PAGE NUMBER]

Splitting Units [INSERT PAGE NUMBER]

Transfer Privileges [INSERT PAGE NUMBER]

Short-Term Trading [INSERT PAGE NUMBER]

The Funds’ Harmful Trading Policies [INSERT PAGE NUMBER]

Accessing Your Account Value [INSERT PAGE NUMBER]

Surrender [INSERT PAGE NUMBER]

Partial Surrenders [INSERT PAGE NUMBER]

Policy Loans [INSERT PAGE NUMBER]

Deferral of Payment [INSERT PAGE NUMBER]

Charges, Deductions and Refunds [INSERT PAGE NUMBER]

Premium Expense Load[INSERT PAGE NUMBER]

Mortality and Expense Risk Charge.[INSERT PAGE NUMBER]

Monthly Expense Charge[INSERT PAGE NUMBER]

Monthly Cost of Insurance[INSERT PAGE NUMBER]

Deferred Expense Load on Policy Year 1 Premium[INSERT PAGE NUMBER]

Other Charges and Expenses[INSERT PAGE NUMBER]

Directed Deductions[INSERT PAGE NUMBER]

APB Rider Charge[INSERT PAGE NUMBER]

Reduction of Charges [INSERT PAGE NUMBER]

Termination of Policy [INSERT PAGE NUMBER]

Other Policy Provisions [INSERT PAGE NUMBER]

Alteration [INSERT PAGE NUMBER]

Assignments [INSERT PAGE NUMBER]

Owner and Beneficiary [INSERT PAGE NUMBER]

Reports to Owners [INSERT PAGE NUMBER]

Illustrations [INSERT PAGE NUMBER]

Misstatement of Age or Sex [INSERT PAGE NUMBER]

Suicide [INSERT PAGE NUMBER]

Incontestability [INSERT PAGE NUMBER]

Addition, Deletion or Substitution of Investments [INSERT PAGE NUMBER]

Nonparticipating [INSERT PAGE NUMBER]

Modification [INSERT PAGE NUMBER]

Entire Contract [INSERT PAGE NUMBER]

Performance Information [INSERT PAGE NUMBER]

Voting Rights [INSERT PAGE NUMBER]

Distribution of Policy [INSERT PAGE NUMBER]

Federal Income Tax Considerations [INSERT PAGE NUMBER]

Our Tax Status [INSERT PAGE NUMBER]

Taxation of Policy Proceeds [INSERT PAGE NUMBER]

Withholding [INSERT PAGE NUMBER]

Tax Return Disclosure [INSERT PAGE NUMBER]

Other Information [INSERT PAGE NUMBER]

State Regulation [INSERT PAGE NUMBER]

Legal Proceedings [INSERT PAGE NUMBER]

Experts [INSERT PAGE NUMBER]

Registration Statements [INSERT PAGE NUMBER]

Financial Statements [INSERT PAGE NUMBER]

Appendix A - Glossary of Policy Terms [INSERT PAGE NUMBER]

Appendix B - Privacy Policy [INSERT PAGE NUMBER]

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 underlying mutual funds.  We have not authorized anyone to provide You with information that is different.

Risk/Benefit Summary of Policy

Use of Policy

The Policy provides corporations and other entities life insurance coverage on employees or other persons in whose lives they have an insurable interest.  It may be used in connection with various types of non-tax-qualified executive benefit plans.

Premium Payments

Generally, You must make an initial minimum premium payment that will sustain the Policy for three months from its Issue Date.

- You choose the amount and timing of subsequent premium payments, within certain limits.

- We allocate your net premium payments among the Policy's Sub-Accounts and the Fixed Account according to your instructions.

CONTRACT BENEFITS

Account Value

- The Account Value equals

- premiums, plus

- investment performance of the Sub-Accounts, the Fixed Account and the Loan Account; less

- any partial surrenders and Policy charges.

Accessing Your Account Value

Cash Surrender Value is

- Account Value, less

- Policy Debt, plus

- any Enhancement Benefit.

- You may borrow from us using the Account Value as collateral.  Taking Policy loans may increase the risk of Policy lapse.

- You may surrender the Policy for its Cash Surrender Value.  Surrender of this Policy is discouraged in the early Policy Years because the Premium Expense Loads are higher in those years.

- You may make a partial surrender of only a portion of the Cash Surrender Value once per year after the Policy has been in force for one year.  Reducing the Cash Surrender Value with a partial surrender may increase the risk of Policy lapse.

A partial surrender may cause a decrease in Total Face Amount of your Policy if the Net Amount at Risk after the partial surrender exceeds the Net Amount at Risk before the partial surrender.  The Net Amount at Risk equals the Death Benefit minus your Account Value.

Death Benefit Compliance Test

- For favorable federal tax treatment, the Policy must meet the standards of the Cash Value Accumulation Test.

- Please see the Death Benefit Compliance Test paragraph in the About the Policy section of the prospectus for the Cash Value Accumulation Test definition.

Death Benefit

Specified Face Amount is the amount of life insurance coverage You request.

- You have a choice of three death benefit options-

- the Specified Face Amount (Option A); or

- the Specified Face Amount plus your Gross Cash Surrender Value (Option B); or

- the Specified Face Amount plus cumulative premiums paid (Option C).

- You may change your death benefit option on any Policy Anniversary, subject to our underwriting rules then in effect.

- At any time, You may-

- increase the Specified Face Amount, subject to satisfactory evidence of the Insured’s insurability; or

- decrease the Specified Face Amount to a level not less than the minimum specified in the Policy.

Investment Options

- You may allocate your net premium payments among the Sub-Accounts and the Fixed Account.

- You may transfer amounts from one Sub-Account to another or to the Fixed Account, subject to any limits that we or the Funds may impose.

- You may transfer amounts from the Fixed Account, subject to our transfer rules in effect at time of transfer.

CONTRACT RISKS

The Variable Account

- We have established a separate account ( the "Variable Account") to fund the variable insurance benefits under your Policy.

- The assets of the Variable Account are free from our general creditor's claims.

- The Variable Account is divided into Sub-Accounts.

- Each Sub-Account invests exclusively in shares of a corresponding mutual fund.

- When You choose Sub-Accounts in the Variable Account, your benefits will fluctuate because the benefits reflect the impact of certain economic conditions on the mutual funds underlying the Sub-Accounts You have elected.  These conditions include, but are not limited to

- inflationary forces,

- changes in rates of return available from different types of investments,

- changes in employment rates and

- the presence of international conflict.

- With such Sub-Accounts, You assume all investment risk.  Investment risk is the risk of poor investment performance.

- Poor investment performance can result in a loss of all or some of your investment.

- A comprehensive discussion of the risks of such Sub-Accounts may be found in the underlying Fund's prospectus.

- This Policy is unsuitable if You plan to surrender it to meet short-term needs because the Premium Expense Load is higher in the early Policy Years.  The “Premium Expense Load” is a charge imposed on the premium at the time the Company receives it.  The Charge consists of an element to cover State and Federal tax obligations and an element to cover costs of issuing and selling the Policy.  See the Fee Tables following the Risk/Benefit Summary for the Charges and also a detailed description in the Charges, Deductions and Refunds section within the prospectus.

Right to Return Period

You may return the Policy and receive a refund within 10 days (or a longer period if required by applicable state law) beginning when You receive the Policy.

What if Charges and Deductions Exceed Account Value?

Your Policy may terminate if your Account Value at the beginning of any Policy Month is insufficient to pay all charges and deductions then due.  If this occurs, we will send You written notice and allow You a 61 day grace period.  If You do not make a premium payment within the grace period sufficient to cover all charges and deductions due, the Policy will terminate at the end of the grace period.

Federal Tax Considerations

Purchase of, and transactions under, the Policy may have adverse or unfavorable tax consequences that You should consider.  You may wish to consult a qualified tax professional prior to purchase regarding tax treatment of death benefits and surrenders.

The following tables describe the fees and expenses that You will pay when buying, owning and surrendering the Policy.  The first table describes the expenses that You will pay at the time that You buy the Policy and at the time of each subsequent premium payment.

TRANSACTION FEES
Charge	When Charge is Deducted	Amount Deducted
Premium Expense Load1 On Premium up to and Including Target Premium Maximum Charge in all states except KY: Maximum Charge in KY: Minimum Charge in all states except KY: Minimum Charge in KY: On Premium in Excess of Target Premium Maximum Charge in all states except KY: Maximum Charge in KY: Minimum Charge in all states except KY: Minimum Charge in KY:	Upon premium receipt Upon premium receipt	(as a % of premium) 12.5% 17.5% 7.5% 9.0% 5.5% 10.5% 2.50% 4.0%
Illustration Charge	Upon fulfillment of illustration request in any Policy Year	$25.00 per illustration

The next table describes the fees and expenses that You will pay periodically during the time You own the Policy, not including Fund fees and expenses.

PERIODIC CHARGES OTHER THAN FUND OPERATING EXPENSES
Charge	When Charge is Deducted	Amount Deducted
Deferred Expense Load on Policy Year 1 Premium2 Maximum Charge: Minimum Charge:	On the Policy Anniversary	(as a % of premium up to and including Target Premium)
		1.0% 0.40%
Cost of Insurance3	At the end of each Policy Month	(per $1000 of Policy Net Amount at Risk)
Maximum Charge: Minimum Charge: Representative Owner Charge4: (male, preferred, non-tobacco, Issue Age 45, Policy Year 1)		$83.33 $0.07 $0.23
Mortality and Expense Risk Charge5 Maximum Charge: Current Charge:	Daily	(on the assets allocated to the investment options in the Variable Accounts)
		0.90%  0.50%
Monthly Expense Charge Maximum Charge: Current Charge:	At the beginning of each Policy Month	$15.00 $5.00
Loan Interest6	At the end of each Policy Year	(as a % of Policy Debt) 5.0%
Flat Extra Charge Maximum Charge:	At the beginning of each Policy Month	(per $1000 of Specified Face Amount and APB Rider Face Amount) $20.00

OPTIONAL CHARGE (FOR ADDITIONAL PROTECTION BENEFIT RIDER):
Charge	When Charge is Deducted	Amount Deducted
Additional Protection Benefit Rider3 Maximum Charge: Minimum Charge: Representative Owner Charge4: (male, preferred, non-tobacco, Issue Age 45, Policy Year 1)	At the end of each Policy Month	(per $1000 of APB Rider Net Amount at Risk) $83.33 $0.07 $0.23

The next table describes the Fund fees and expenses that You will pay periodically during the time that You own the Policy.  The table shows the minimum and maximum fees and expenses charged by any of the Funds and deducted from Fund assets.  More detail concerning each Fund's fees and expenses is contained in the prospectus for each Fund.

ANNUAL FUND OPERATING EXPENSES (deducted by each Fund on the average daily net asset value of each Fund)
Total Annual Fund Expenses (reflects management fees, distribution [and/or service](12b-1) fees and other expenses)	Minimum	Maximum
	0.27%	1.55%

1The elements making up the Premium Expense Load are discussed on pages 22-23.  The Load is deduced from premium received and will not exceed 12.5% in Policy Years 2-7 and 3.25% thereafter.

2The elements making up the Deferred Expense Load on Policy Year 1 Premium are discussed on page 24.  The Load is deducted from the assets allocated to the investment options, is deducted in Policy Years 2-7 and will not exceed 1.0%.

3The charge varies based on the length of time the Policy has been in force and the Insured's Issue Age, sex and rating class.  The charges shown may not be representative of the charge You may pay.  Please contact your financial adviser for the particular charge applicable to You.  The maximum charge possible is for an Insured male, standard, tobacco, Issue Age 85, Policy Year 15.  The minimum charge possible is for an Insured female, preferred, non-tobacco, Issue Age 20, Policy Year 1.  

4It is assumed the owner and the Insured are the same person. .

5The Mortality and Expense Risk charge is deducted in all Policy Years.

6Loan Interest is charged as a percentage of Policy Debt and is added to Policy Debt.  It is 5.0% in Policy Years 1-10 and 4.25% thereafter.

About Who We Are

We are a stock life insurance company incorporated under the laws of Delaware on January 12, 1970.  We do business in 49 states, the District of Columbia and the Virgin Islands.  We have an insurance company subsidiary that does business in New York.  Our executive office mailing address is One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481.

We are ultimately controlled by Sun Life Financial Inc. ("Sun Life Financial").  Sun Life Financial, a corporation organized in Canada, is a reporting company under the Securities Exchange Act of 1934 with common shares listed on the Toronto, New York and Philippine stock exchanges.

The Variable Account

Sun Life of Canada (U.S.) Variable Account G is one of our separate accounts established in accordance with Delaware law on July 25, 1996.  The Variable Account may also be used to fund benefits payable under other life insurance policies issued by us.  We are obligated to pay all benefits payable under the Policy.

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.

We will at all times maintain assets in the Variable Account with a total market value at least equal to the reserves and other liabilities relating to the variable benefits under all policies participating in the Variable Account and the Variable Account is fully funded for the purpose of Federal securities laws.  The assets of the Variable Account are insulated from our general liabilities and may not be charged with our liabilities from our other business.  Our obligations for the fixed account allocations and death benefits payable under the Policies are, however, our general corporate obligations.

The Variable Account is registered with the Securities and Exchange Commission (the "SEC") under the Investment Company Act of 1940 ("1940 Act") as a unit investment trust.  That registration does not involve any supervision by the SEC of the management or investment practices or policies of the Variable Account.

The Variable Account may be deregistered if registration is no longer required under applicable Federal securities laws. We may continue, at our election, to operate the Variable Account as a unit investment trust or other form of investment company.  All determinations will be made by our Board of Directors.  In the event of any change in the registration status of the Variable Account, we will notify all policyholders and any regulatory authorities requiring notice of such change.  We may amend the Policy to reflect the change and take such other action as may be necessary and appropriate to effect the change.

The Variable Account is divided into Sub-Accounts.  Each Sub-Account invests exclusively in shares of a corresponding investment portfolio of a registered investment company (commonly known as a mutual fund).  We may in the future add new or delete existing Sub-Accounts.  The income, gains or losses, realized or unrealized, from assets allocated to each Sub-Account are credited to or charged against that Sub-Account without regard to the other income, gains or losses of the other Sub-Accounts.

The Funds

The Policy offers several mutual fund options shown on page 1.  Each Fund is a mutual fund registered under the Investment Company Act of 1940, or a separate series of shares of such a mutual fund.  More comprehensive information, including a discussion of potential risks, is found in the current prospectuses for the Funds (the “Fund Prospectuses”).  The Fund Prospectuses should be read in connection with this prospectus.  A copy of each Fund Prospectus may be obtained by calling 888-594-2654, or writing to Sun Life Assurance Company of Canada (U.S.), One Sun Life Executive Park, Wellesley Hills, MA 02481.

Although the investment objectives and policies of the Funds may be similar to those of other mutual funds managed by the Funds’ investment advisers, the investment results of the Funds can differ significantly from those of such other mutual funds.  Some of the Funds’ investment advisers may compensate us for administering the Funds as investment options under the Policy. Such compensation is paid from advisers’ assets.

Fees and Expenses of the Funds.  Fund shares are purchased at net asset value, which reflects the deduction of investment management fees and other expenses.  The management fees are charged by each Fund's investment adviser for managing the Fund and selecting its portfolio of securities.  Other 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, and actual expenses may vary.

Because they are assessed at the Fund level, You will indirectly bear the fees and expenses of the Funds You select.  The table presented earlier in this prospectus shows the range of fees and expenses paid by the Funds as a percentage on average net asset value of each Fund.  These fees and expenses are more fully described in the Fund Prospectuses.  The information relating to the Fund expenses was provided by the Fund and was not independently verified by us.

Potential Conflicts.  We, as well as other affiliated and unaffiliated insurance companies, may also purchase shares of the Funds on behalf of other separate accounts used to fund variable benefits payable under other variable life insurance and variable annuity contracts.  As a result, it is possible, though we do not anticipate, that a material conflict may arise between the interests of our policyowners with respect to the Variable Account and those of other variable contractowners with respect to the other separate accounts that participate in the Funds.  The Funds have agreed to monitor themselves for the existence of any material conflict between the interests of variable contractowners.  In the event of such a conflict involving a Fund, we will take any steps necessary to remedy the conflict including withdrawing the assets of the Variable Account from the Fund.  If the Variable Account or another separate account withdraws its assets from a Fund for this reason, the Fund may be forced to sell its portfolio securities at disadvantageous prices which would negatively affect the investment performance of the corresponding Sub-Account.

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.

Interests in our general account offered through the Fixed Account investment option have not been registered under the Securities Act of 1933 and our general account has not been registered as an investment company under the Investment Company Act of 1940.

An allocation of premium to the Fixed Account does not entitle You to share in the investment experience of our general account.  Instead, we guarantee that your Fixed Account allocation will accrue interest daily at an effective annual rate of at least 2%, without regard to the actual investment experience of our general account.  Interest in excess of the guaranteed rate may be applied to the amount in the Fixed Account at such increased rates and in such a manner as we may determine, based on our expectations of future experience with respect to interest, mortality costs, persistency, expense, taxes, as well as the size, timing and frequency of deposits.

About the Policy

This prospectus describes the standard features of the Policy.  The Policy, as issued, may differ in some respects due to the legal requirements of the state where the Policy is issued.

Application and Issuance.  To apply for a Policy, You must submit an application to our Principal Office.  We will then follow underwriting procedures designed to determine the insurability of the proposed Insured.  We offer the Policy on a regular (or medical) underwriting, simplified underwriting, expanded guaranteed issue or guaranteed issue basis.  The proposed Insured generally must be less than 81 years old for a Policy to be issued.  For Policies underwritten on a medical or simplified basis, we may require that the proposed Insured undergo one or more medical examinations and that You provide us with such additional information as we may deem necessary, before an application is approved.

We will issue Policies on an expanded guaranteed issue or guaranteed issue basis with respect to certain groups of Insureds.  Policies issued on such basis must be pre-approved based on information You provide to us on a master application and on certain other underwriting requirements which all members of a proposed group of Insureds must meet.  Proposed Insureds must be acceptable risks based on our underwriting limits and standards.  We will not issue a Policy until the underwriting process has been completed to our satisfaction.  In addition, we reserve the right to reject an application that does not meet our underwriting requirements or to increase by no more than 500% the cost of insurance charges applicable to an Insured to cover the cost of the increased mortality risk borne by the Company.

Death Benefit Compliance Test.  The Policy must, at all times, satisfy the legal standard of the Cash Value Accumulation Test for it to qualify as life insurance and thus be entitled to receive favorable tax treatment under applicable federal tax law.  The Death Benefit must effectively always equal or exceed your gross cash surrender value multiplied by a certain percentage (the “Death Benefit Percentage”).  The Death Benefit Percentages for the Cash Value Accumulation Test vary by Attained Age and sex.

Initial Premium Payment.  A Minimum Premium will be due and payable as of the Issue Date.  The Minimum Premium is generally that which will sustain the Policy for three months from its Issue Date.  The amount of Minimum Premium is determined by the Specified Face Amount, APB Rider Face Amount, death benefit option election and risk and underwriting classification of the Insured.  Pending approval of your application, we will allocate any premium payments You make to our general account.  If your application is not approved, we will promptly return your premium payments.

Upon approval of your application, we will issue to You a Policy on the life of the Insured which will set forth your rights and our obligations.  The Issue Date is the date specified as such in the Policy, from which Policy Anniversaries, Policy Years and Policy Months are measured.  The Investment Start Date is the date the first premium is applied which will be the latest of-

- the Issue Date, or

- the date we approve the application for the Policy, or

- the date You pay a premium equal to or in excess of the Minimum Premium.

Insurable Interest Requirement.  You must have an insurable interest in the life of the Insured up to the full amount of insurance coverage.  Otherwise, the Policy will not qualify as life insurance under applicable state insurance and federal tax law.  You should consult with a qualified adviser when determining the amount of coverage and before taking any action to increase the amount of existing coverage to ensure that You have an insurable interest for the full amount of coverage.

Right to Return Policy Period.  If You are not satisfied with the Policy, You may return it by delivering or postmarking it to our Principal Office or to the sales representative through whom You purchased the Policy within 10 days from the date of receipt (unless a different period is applicable under state law) (the “Right to Return Policy Period”).

If You return the Policy during the Right to Return Policy Period, the Policy will be deemed void and You will receive a refund equal to the sum of-

- the difference between any premium payments made, including fees and charges, and the amounts allocated to the Investment Options;

- the value of the amounts allocated to the Investment Options on the date the cancellation request is received by us or the sales representative through whom You purchased the Policy; and

- any fees or charges imposed on amounts allocated to the Investment Options.

If required by applicable state insurance law, however, You will receive instead a refund equal to the greater of  premium payments made and premium payments made plus money market return.  Unless You are entitled to receive a full refund of premium, You bear all of the investment risks with respect to the amount of any net premiums allocated to the Variable Account during the Right to Return Policy Period with respect to the Policy.

If You are entitled under applicable state law to receive a full refund during the Right to Return Policy Period, we will allocate the net premium payments to the Fidelity VIP Money Market Portfolio Sub-Account during that period beginning on the Investment Start Date.  Upon expiration of the Right to Return Policy Period, we will reallocate your Account Value and allocate future net premium payments in accordance with your instructions.

Premium Payments

In general, You may choose the frequency and amount of any additional premium payments subject to the limits described below.  All premium payments should be made payable to Sun Life Assurance Company of Canada (U.S.) and mailed to our Principal Office.

General Limitations.  We reserve the right to limit the number of premium payments we accept on an annual basis.  No premium payment may be less than $100 without our consent, although we will accept a smaller premium payment if it is necessary to keep the Policy in force.  We reserve the right to reject a premium payment that, if accepted, would cause the Policy, at its current Death Benefit, to no longer meet the definition of “life insurance” under the Internal Revenue Code.  If You provide satisfactory evidence of insurability, we can retain the premium and increase the Death Benefit while maintaining the Policy’s “life insurance” status under the Internal Revenue Code.

Planned Periodic Premiums.  While You are not required to make premium payments according to a fixed schedule, You may select a planned periodic premium schedule and corresponding billing period, subject to our premium limits.  In general, the billing period must be annual or semiannual.  We will send reminder notices for the planned periodic premium at the beginning of each billing period unless reminder notices have been suspended as described below.  You are not required, however, to pay the planned periodic premium; You may increase or decrease premium payments, subject to our limits, and You may skip a planned payment or make unscheduled payments.  You may change your planned payment schedule or the billing period, subject to our approval.  Depending on the investment performance of the Sub-Accounts You select, the planned periodic premium may not be sufficient to keep the Policy in force, and You may need to change your planned payment schedule or make additional payments in order to prevent termination of the Policy.  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.  We will also suspend reminder notices at your written request.

Allocation of Net Premium.  Net Premium is the amount You pay as premium minus the Premium Expense Load.  The Premium Expense Load covers State and Federal tax liabilities related to premium.  We will allocate Net Premium among the Investment Options in accordance with your allocation instructions, except during the Right to Return Policy Period as described above.  You will be required to specify initial allocation percentages at the time of application.  While there are no limitations concerning the number of Investment Options to which Net Premium may be allocated, we reserve the right to impose minimum allocation amounts, as determined by the Fund, for any or all Investment Options.

You may change the allocation of future Net Premium at any time by submitting an acceptable request to us.  An allocation change will be effective as of the date we receive your request for that change, provided that it is received on a Valuation Date before the close of the New York Stock Exchange.  If a request is received on a day that is not a Valuation Date or after the close of the New York Stock Exchange on a Valuation Date, it will become effective on the next Valuation Date.

Modified Endowment Contract.  Less favorable federal tax rules apply to life insurance policies that are defined as “Modified Endowment Contracts.”  One way the Policy could become a Modified Endowment Contract is if You pay premiums in excess of applicable tax law limitations.

We will notify You or your sales representative within one business day if we receive a premium that would, in our opinion, cause the Policy to become a Modified Endowment Contract.  We will not credit the premium unless we receive specific instructions from You to do so.  Any such premium will be held, for a period not to exceed 90 days, in a non-interest bearing account.  This premium will be refunded at the end of the 90 day period if we have not received specific instruction from You concerning the premium.

Additional Protection Benefit Rider (APB Rider)

The Policy may be issued with an APB Rider.  This rider provides life insurance coverage, annually renewable to Insured's Attained Age 100, on the life of the Insured equal to the amount of the APB Rider Death Benefit.  You will be required to specify the initial APB Rider Face Amount in the policy application.

The cost of the APB Rider will be included in the Monthly Cost of Insurance deduction.  This deduction will cease when the APB Rider is terminated.  The applicable guaranteed maximum Monthly Cost of Insurance Rates for the APB Rider Death Benefit do not exceed those for the Base Death Benefit.

Target Premium is the amount of premium specified as such in the Policy, used to determine the Premium Expense Load and Deferred Expense Load on Policy Year 1 Premium. Target Premium is equal to (the Specified Face Amount divided by 1000) multiplied by the Target Premium Factor.  Total Face Amount is the sum of the Specified Face Amount and the APB Rider Face Amount.

Two otherwise identical Policies with the same Total Face Amount will have different Target Premiums depending on how much of the Total Face Amount is attributable to the Specified Face Amount versus the APB Rider Face Amount.  Target Premium will be lower for the Policy which has the greater APB Rider Face Amount because the Target Premium calculation uses the Specified Face Amount not the Total Face Amount.  Lower Target Premium results in lower Premium Expense Loads and Deferred Expense Loads on Policy Year 1 Premium.

If You convert the Policy to a flexible premium universal life insurance policy, any related APB Rider will terminate automatically.  An APB Rider will also terminate on the earliest of-

- our receipt of your written request for termination,

- the lapse of the Policy because of insufficient value,

- the Insured’s Attained Age 100, or

- the termination of the Policy.

Death Benefit

Policy Proceeds.  If the Policy is in force at the time of the Insured’s death, the Insured has not Attained Age 100 and we have received Due Proof of the Insured’s death, we will pay your designated beneficiary a lump sum amount equal to-

- the amount of the Base Death Benefit, minus

- the amount of any outstanding Policy Debt, plus

- the amount of any APB Rider Death Benefit, plus

- the amount of any other supplemental benefits.

The amount of the Base Death Benefit depends upon the death benefit option in effect at the time of the Insured’s death.

For Insureds who have Attained Age 100 at death, Policy Proceeds equal the Gross Cash Surrender Value minus outstanding Policy Debt.

Death Benefit Options.  The Policy has three death benefit options.  You will be required to select one of them in the policy application.

 Option A-Specified Face Amount.  Under this option, the Base Death Benefit is the greater of-

- the Policy’s Specified Face Amount, or

- the Gross Cash Surrender Value multiplied by the applicable Death Benefit Percentage.

 Option B-Specified Face Amount Plus Gross Cash Surrender Value.  Under this option, the Base Death Benefit is the greater of-

- the Specified Face Amount plus the Gross Cash Surrender Value, or

- the Gross Cash Surrender value multiplied by the applicable Death Benefit Percentage.

 Option C-Specified Face Amount Plus Cumulative Premiums Paid.  Under this option, the Base Death Benefit is the greater of-

- the Specified Face Amount plus the sum of all premiums paid less any partial surrenders, or

- the Gross Cash Surrender Value multiplied by the applicable Death Benefit Percentage.

If the Insured dies while the Policy is in force, we will make a lump sum payment when we receive due proof of that death.  Through the Insured’s Attained Age 100, the Death Benefit used to determine Policy Proceeds is based on the death benefit option, the Specified Face Amount and Gross Cash Surrender Value in effect on the Insured’s date of death.  After the Insured’s Attained Age 100, any death benefit provided by rider terminates and the Death Benefit will be equal to the Gross Cash Surrender Value.

You should note that the Policy may not qualify as life insurance after the Insured’s Attained Age 100, which may result in adverse tax consequences.  You should consult your tax advisor prior to continuing the Policy beyond the Insured’s Attained Age 100.

Changes in the Death Benefit Option.  You may change the death benefit option, subject to our underwriting rules in effect at the time of the change.  Requests for a change must be made in writing to us at our Principal Office.  The effective date of the change will be the Policy Anniversary on or next following the date of receipt of your request.

APB Rider Death Benefit.  The APB Rider Death Benefit is the Total Death Benefit minus the Base Death Benefit.  For Option A, the Total Death Benefit is the greater of a) the Total Face Amount and b) the Gross Cash Surrender Value multiplied by the applicable Death Benefit Percentage.  For Option B, the Total Death Benefit is the greater of a) the Total Face Amount plus the Gross Cash Surrender Value and b) the Gross Cash Surrender Value multiplied by the applicable Death Benefit Percentage.  For Option C, the Total Death Benefit is the greater of a) the Total Face Amount plus the sum of all premiums paid less any partial surrenders and b) the Gross Cash Surrender Value multiplied by the applicable Death Benefit Percentage.  The Total Face Amount is equal to the Specified Face Amount plus the APB Rider Face Amount.

Minimum Face Amount.  Total Face Amount is the sum of the Specified Face Amount and the APB Rider Face Amount.  In general, the Total Face Amount must be at least $50,000, of which the Specified Face Amount must be at least $5,000.  We reserve the right to waive these minimums.

Changes in Face Amount.  You may change the Specified Face Amount and, if applicable, the APB Rider Face Amount, subject to our underwriting rules in effect at the time of the change.  Unless You specify otherwise, we will first apply a change to the APB Rider Face Amount to the extent possible.  You must send your request for a change to us in writing.  The effective date for changes will be-

- for any increase in coverage, the Monthly Anniversary Day that falls on or next follows the date we approve the supplemental application for the increase; and

- for any decrease in coverage, the Monthly Anniversary Day that falls on or next follows the date we receive your request.

Increases in Face Amount.  An increase in the Specified Face Amount and, if applicable, the APB Rider Face Amount, is subject to our underwriting rules in effect at the time of the increase.  You may be required to submit satisfactory evidence of the Insured’s insurability.  The cost of insurance charges applicable to an increase in Specified Face Amount and APB Rider Face Amount may be higher or lower than those charged on the original sums if the Insured’s health has changed to a degree that qualifies the Insured for a different risk classification.  Additional policy specification pages will be provided to show the applicable guaranteed maximum cost of insurance charges applicable to any increase.

Decreases in Face Amount.  The Specified Face Amount may not decrease to less than the Minimum Specified Face Amount specified in the Policy.  Similarly, a decrease in Specified Face Amount or APB Rider Face Amount may not decrease the Total Face Amount to an amount less than the Minimum Total Face Amount specified in the Policy.  A decrease in face amount will be applied-

- first, to the most recent increase;

- second, to the next most recent increases, in reverse chronological order; and

- finally, to the initial face amount.

Account Value

Your Account Value is the sum of the amounts in each Investment Option plus the amount of the Loan Account.

We measure the amounts in the Sub-Accounts in terms of Units and Unit Values.  On any given day, the amount You have in a Sub-Account is equal to the Unit Value multiplied by the number of Units credited to You in that Sub-Account.  The Units for each Sub-Account will have different Unit Values.

Amounts allocated to a Sub-Account will be used to purchase Units of that Sub-Account.  Units are redeemed when You make partial surrenders, undertake policy loans or transfer amounts from a Sub-Account, and for payment of the Mortality and Expense Risk Charge, the Monthly Expense Charge, the Deferred Expense Load on Policy Year 1 Premium and the Monthly Cost of Insurance Charge.  The number of Units of each Sub-Account purchased or redeemed is determined by dividing the dollar amount of the transaction by the Unit Value for the Sub-Account.  A Valuation Date is any day on which the New York Stock Exchange is open for business and valuation will occur at the close of the New York Stock Exchange.  The New York Stock Exchange historically closes on weekends and the following holidays:  New Year’s Day, Martin Luther King, Jr. Day, Washington’s Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas.

For the first Valuation Date of each Sub-Account, the Unit Value is established by us.  The Unit Value for any subsequent Valuation Date is equal to the Unit Value for the preceding Valuation Date multiplied by the Net Investment Factor.  The Unit Value of a Sub-Account for any Valuation Date is determined as of the close of the Valuation Period ending on that Valuation Date.  TheValuation Period is the period of time from one determination of Unit Values to the next.

If accompanied by proper allocation instructions, a premium received at our Principal Office is credited to the Policy on the same date it is received unless that date is not a Valuation Date or receipt is after the close of the New York Stock Exchange on a Valuation Date.  In those instances, the premium will be credited on the next Valuation Date.

The Investment Start Date is the date we apply your first premium payment, which will be the later of the Issue Date, the Business Day we approve the policy application or the Business Day we receive a premium equal to or in excess of the Minimum Premium.

Account Value for Investment Options.  The Account Value on the Investment Start Date equals-

- that portion of Net Premium received and allocated to the Investment Options, minus

- the Monthly Expense Charges due on the Issue Date and subsequent Monthly Anniversary Days through the Investment Start Date, minus

- the Monthly Cost of Insurance deductions due from the Issue Date through the Investment Start Date.

The Account Value for Investment Options on subsequent Valuation Dates is equal to-

- the Account Value attributable to each Sub-Account on the preceding Valuation Date multiplied by that Sub-Account’s Net Investment Factor, minus

- the Daily Risk Percentage multiplied by the number of days in the Valuation Period multiplied by the Account Value in the Sub-Account, plus

- the value of the Fixed Account on the preceding Valuation Date, accrued at interest, plus

- that portion of Net Premium received and allocated to each Investment Option during the current Valuation Period, plus

- that portion of any loan repayment, including repayment of loan interest, allocated to an Investment Option during the current Valuation Period, minus

- that portion of any partial surrenders deducted from each Investment Option during the current Valuation Period, minus

- that portion of any Policy loan transferred from each Investment Option to the Loan Account during the current Valuation Period, minus

- any illustration charge assessed during the current Valuation Period, minus

- if a Policy Anniversary occurs during the current Valuation Period, that portion of the Deferred Expense Load on Policy Year 1 Premium charged to each Investment Option, minus

- if a Monthly Anniversary Day occurs during the current Valuation Period, that portion of the Monthly Expense Charge for the Policy Month just beginning charged to each Investment Option, minus

- if a Monthly Anniversary Day occurs during the current Valuation Period, that portion of the Monthly Cost of Insurance for the Policy Month just ending charged to each Investment Option, minus

- if You surrender during the current Valuation Period, that portion of the pro-rata Monthly Cost of Insurance for the Policy Month charged to each Investment Option.

Net Investment Factor.  The Net Investment Factor is used to measure the Sub-Account’s investment performance from one Valuation Period to the next.  This factor will be greater or less than or equal to one, corresponding to a positive or negative or to a lack of change in the Sub-Account’s investment performance for the preceding Valuation Period.  Although we do not currently take any federal, state or local taxes into account when determining the Net Investment Factor, we reserve the right to do so.  The Net Investment Factor for each Sub-Account for any Valuation Period is determined by dividing 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 amount of any dividend or other distribution declared on amounts held in the Sub-Account if the “ex-dividend date” occurs during the Valuation Period, which for some assets will not be credited with investment experience until the dividend is paid, plus or minus

- a 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,

- by the net asset value of a Fund share held in the Sub-Account determined as of the end of the preceding Valuation Period.

The “ex-dividend date” is the date after which a Fund share begins trading without the dividend.

Account Value in the Loan Account.  The Account Value in the Loan Account is zero on the Investment Start Date.

The Account Value in the Loan Account on any day after the Investment Start Date equals-

- the Account Value in the Loan Account on the preceding day credited with interest at the rate specified in the Policy as the “interest credited on Loan Account rate” of 4%, plus

- any amount transferred from any Investment Option to the Loan Account for Policy loans requested on that day; minus

- any loan repayments made on that day.

Policy loans, with interest charged at the applicable rate, is “Policy Debt”. Policy Debt is not part of the Loan Account. Policy Debt increases by unpaid loan interest and reduces the Policy Proceeds and the Cash Surrender Value.

Insufficient Value.  If the Account Value minus the outstanding Policy Debt is less than or equal to zero on a Valuation Date, then the Policy will terminate for no value, subject to the grace period described below.

Grace Period.  If, on a Valuation Date, the Policy will terminate by reason of insufficient value, we will allow a grace period.  This grace period will allow 61 calendar days from that Valuation Date for the payment of a Net Premium sufficient to cover the daily, monthly and annual deductions due for charges under the Policy from the Account Value.  Notice of premium due will be mailed to your last known address or the last known address of any assignee of record.  We will assume that your last known address is the address shown on the policy application (or notice of assignment), unless we have received satisfactory notice of a change in address.  If the premium due is not paid during the grace period, then the Policy will terminate without value at the end of the 61 day period without further notice.  The Policy will continue to remain in force during this grace period.  If the Policy Proceeds become payable during the grace period, they will be reduced by any overdue deductions.  If the Policy terminates by reason of insufficient value, there is no right to reinstate the coverage.

Insured's Attained Age 100.  At the Insured’s Attained Age 100, no further premium will be accepted.  The Account Value will be determined in the same manner as it was prior to the Insured's Attained Age 100, except that no further deduction for Monthly Cost of Insurance will be made.

The Policy may not qualify as life insurance beyond the Insured’s Attained Age 100, which may result in adverse tax consequences.  We recommend that You receive counsel from your tax advisor.

Enhancement Benefit.  An Enhancement Benefit may be provided if You surrender the Policy and such surrender is not made pursuant to an exchange under Section 1035 of the Internal Revenue Code (or any successor provision).  The amount available for Policy loan or partial surrender will not increase by any Enhancement Benefit.

The Enhancement Benefit represents a return of a portion of the charges paid under the Policy.

When a charge is based on the Account Value, the Account Value will not include the Enhancement Benefit.  When a charge is based on the Gross Cash Surrender Value, the Gross Cash Surrender Value, as defined, includes the Enhancement Benefit.

On a current basis, an Enhancement Benefit is available during the Enhancement Period (the first twelve Policy Years) and is calculated as follows:

- Prior to the payment of the initial Premium, the Enhancement Benefit is zero.

- Whenever a Premium Expense Load, a Deferred Expense Load on Policy Year 1 Premium or a Monthly Expense Charge is deducted during the Enhancement Period, the Enhancement Benefit is increased by 100% of each such load or charge and is then decreased each subsequent month during the Enhancement Period.

- Whenever a Monthly Cost of Insurance charge is deducted during years 1-7 of the Enhancement Period, the Enhancement Benefit is increased by a percentage, which decreases over time, determined in accordance with the following formula:

- [(84 – M) divided by 84] multiplied by 100 where M equals the number of months elapsed since the beginning of the Enhancement Period.

- The Enhancement Benefit is zero after the end of the Enhancement Period.

The Enhancement Benefit is payable with respect to each Policy owned by the policyowner, and is not contingent upon surrender of all such Policies.

Splitting Units.  We reserve the right to split or combine the value of Units.  In effecting any such change, strict equity will be preserved and no change will have a material effect on the benefits or other provisions of the Policy.

Transfer Privileges

You normally may transfer all or a portion of your Account Value among Sub-Accounts and into the Fixed Account.  Transfers from the Fixed Account may not exceed the greater of the transfer percentage multiplied by the highest Fixed Account value over the transfer period and the transfer minimum.  The transfer percentage, transfer period and transfer minimum are shown in the Policy.  We will make transfers pursuant to an acceptable request to our Principal Office.  An “acceptable request” is one that is authorized by a person with proper authority, provides clear instruction to the Company, as administrator of the Variable Account, and is for a transaction that is not restricted by policies and procedures of the Variable Account or the Fund.

An acceptable transfer request will be executed as of the date our Principal Office receives your request provided that it is received on a Valuation Date before the close of the New York Stock Exchange.  If an acceptable transfer request is received on a day that is not a Valuation Date or after the close of the New York Stock Exchange on a Valuation Date, it will be processed effective on the next Valuation Date.  The Unit Value of Sub-Accounts affected by a transfer request will be that next determined after receipt of such transfer request.

You may transfer a specified dollar amount or a specified percentage of the Investment Option’s value.

All transfers are subject to our consent.  We reserve the right to impose limitations on transfers, including, but not limited to-

- the minimum amount that may be transferred;

- the frequency of transfers; and

- the minimum amount that may remain in a Sub-Account following a transfer from that Sub-Account.

We will notify You in writing of the imposition of a transfer limitation.  We do not reserve any right to impose charges for transfers.  Any restrictions on transfers will apply to all policyowners in a non-discriminatory fashion.

Short-Term Trading

The Policy is not designed for short-term trading.  If You wish to employ such strategies, do not purchase a Policy.  Transfer limits and other restrictions, described below, are subject to our ability to monitor transfer activity.  Some Owners and their third party intermediaries engaging in short-term trading may employ a variety of strategies to avoid detection.  Despite our efforts to prevent short-term trading, there is no assurance that we will be able to identify such Owners or intermediaries or curtail their trading.  A failure to detect and curtail short-term trading could result in adverse consequences to Owners.  Short-term trading can increase costs for all Owners as a result of excessive portfolio transaction fees.  In addition, short-term trading can adversely affect a Fund's performance.  If large amounts of money are suddenly transferred out of a Fund, the Fund's investment adviser cannot effectively invest in accordance with the Fund's investment objectives and policies.

The Variable Account has policies and procedures to discourage frequent transfers of Account Value.  As described above under "Transfer Privileges," the Policy includes the right to limit the frequency of transfers.

Short-term trading activities whether by an individual, a firm or a third party authorized to initiate transfer requests on behalf of Owner(s) may be subject to other restrictions as well (including transfers to and from the Fixed Account Option).  For example, we reserve the right to take actions against short-term trading which restrict your transfer privileges more narrowly than the policies described under "Transfer Privileges", such as requiring transfer requests to be submitted in writing through regular first-class U.S., mail (e.g., no overnight, priority or courier delivery allowed), and refusing any and all transfer instructions into a Fund.

If we determine that a third party acting on your behalf is engaging (alone or in combination with transfers effected by You directly) in a pattern of short-term trading, we may refuse to process certain transfers requested by such a third party.  We may also impose special restrictions on third parties that engage in reallocations of Policy values.  We may limit the frequency of the transfer and prohibit exchanges into a Fund.

Should transfer instructions provide for a redemption out of a Fund with purchase into a Fund that is restricted, the policyowner’s transfer instructions will be considered a request that is not in good order.  Therefore, neither side of the requested transaction will be honored.  We will provide You notice that the transfer instructions were not executed.  

We reserve the right to waive short-term trading restrictions, where permitted by law and not adverse to the interest of the relevant underlying Fund and other of the Company’s contract owners and Owners, in certain instances such as:

- when a new broker of record is designated for the Policy;

- when necessary in our view to avoid hardship to an Owner;

- when underlying Funds are dissolved, merged or substituted.

If short-term trading results as a consequence of waiving the restrictions against short-term trading, it could expose Owners to certain risks.  The short-term trading could increase costs for all Owners as a result of excessive portfolio transaction fees.  In addition, the short-term trading could adversely affect a Fund's performance.  If large amounts of money are suddenly transferred out of a Fund, the Fund's investment adviser cannot effectively invest in accordance with the Fund's investment objectives and policies.  Unless the short-term trading policy and the permitted waivers of that policy are applied uniformly, some Owners may experience a different application of the policy and therefore may experience some of these risks.  Too much discretion on our part in allowing the waivers of short-term trading policy could result in an unequal treatment of short-term traders by permitting some short-term traders to engage in short-term trading while prohibiting others from doing the same.

The Funds’ Harmful Trading Policies.  In addition to the restrictions that we impose (as described above under Short-Term Trading and under Transfer Privileges), most of the Funds have adopted restrictions or other policies about transfers or other purchases and sales of the Funds’ shares.  These policies (the “Funds’ Harmful Trading Policies”) are intended to protect the Fund from short-term trading or other trading practices that are potentially harmful to the Fund.  The Funds’ Harmful Trading Policies may be more restrictive in some respects than the restrictions that we otherwise would impose, and the Funds may modify their Harmful Trading Policies from time to time.

We are legally obligated to provide (at the Funds’ request) information about each amount You cause to be deposited into a Fund (including by way of premium payments and transfers under your Policy) or removed from the Fund (including by way of withdrawals and transfers).  If a Fund identifies You as having violated the Fund’s Harmful Trading Policies, we are obligated, if the Fund requests, to restrict or prohibit any further deposits or exchanges by You (or a third party acting on your behalf) into that Fund.  Any such restriction or prohibition may remain in place indefinitely.

Accordingly, if You do not comply with any Fund’s Harmful Trading Policies, You (or a third party acting on your behalf) may be prohibited from directing any additional amounts into that Fund or directing any transfers or other exchanges involving that Fund.  You should review and comply with each Fund’s Harmful Trading Policies, which are disclosed in the Funds’ current prospectuses.

Funds may differ significantly as to such matters as:  (a) the amount, format and frequency of information that the Funds request from us about transactions that our customers make; and (b) the extent and nature of any limits or restrictions that the Funds request us to impose upon such transactions.  As a result of these differences, the costs borne by us and (directly or indirectly) by our customers may be significantly increased.   Any such additional costs may outweigh any additional protection that would be provided to our customers, particularly in view of the protections already afforded by the trading restrictions that we impose as described above under Short-Term Trading and under Transfer Privileges.  Also, if a Fund imposes more strict trading restrictions than are reasonably necessary under the circumstances, You could be deprived of potentially valuable flexibility to make transactions with respect to that Fund.  For these and other reasons, we may disagree with the timing or substance of a Fund’s requests for information from us or with any transaction limits or restrictions that the Fund requests us to impose upon our customers.  If any such disagreement with respect to a Fund cannot be satisfactorily resolved, the Fund might be restricted or, subject to obtaining any required regulatory approval, replaced as an investment option.

Accessing Your Account Value

Surrender.  By written request, You may surrender the Policy for its Cash Surrender Value at any time.  The date the surrender is processed, the insurance coverage and all other benefits under the Policy will terminate.  The Cash Surrender Value is-

- the Account Value, minus

- the outstanding balance of any outstanding Policy Debt; plus

- any Enhancement Benefit

Partial Surrenders.  You may make a partial surrender of the Policy once each Policy Year after the first Policy Year by request to our Principal Office in a form satisfactory to us.  The amount of any partial surrender may not exceed the Account Value minus any outstanding Policy Debt.  It will be payable in a lump sum.  Partial surrenders may have tax consequences.  The Total Face Amount may be reduced in connection with a partial surrender depending on the then current risk status of the Insured.  The Insured may provide evidence of insurability.  The Total Face Amount will not be reduced if the Insured remains an acceptable risk under our then current underwriting standards.  If evidence is not provided or the Insured is not an acceptable risk, the Total Face Amount will be reduced to the extent necessary so that the Net Amount at Risk after the partial surrender does not exceed the Net Amount at Risk before the surrender.

You may allocate a partial surrender among the Investment Options.  If You do not specify the allocation, then we will allocate the partial surrender among the Investment Options in the same proportion that the Account Value attributable to each Investment Option bears to the total Account Value less the Loan Account immediately prior to the partial surrender.

Policy Loans.  Using the Policy as collateral, You may request a policy loan of your Account Value, decreased by the balance of any outstanding Policy Debt on the date the policy loan is made and by the projected deductions due to the next Policy Anniversary.  We will transfer Account Value equal to the amount of the policy loan from the Investment Options to the Loan Account on the date the policy loan is made.  Amounts in the Loan Account accrue interest daily at an effective annual rate of 4%.

You may allocate the policy loan among the Investment Options.  If You do not specify the allocation, then we will allocate the policy loan among the Investment Options in the same proportion that the Account Value attributable to each Investment Option bears to the total Account Value less the Loan Account immediately prior to the policy loan.

Interest on the policy loan will accrue daily at an annual rate of 5% in Policy Years 1 through 10 and 4.25% 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.

The Cash Surrender Value and the Policy Proceeds are reduced by the amount of any outstanding Policy Debt.

All amounts paid by You that we receive will be credited to the Policy as premium unless we have received acceptable notice that the funds are to be applied to repay a policy loan.  It is generally advantageous to repay a loan rather than to make a premium payment, because premium payments incur expense charges but 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 while the Policy is in force.  The amount of the loan repayment up to the outstanding balance of the policy loan will be transferred from the Loan Account to the Investment Options.  You may allocate the loan repayment among the Investment Options.  If You do not specify the allocation, then we will allocate the loan repayment among the Investment Options in the same proportion that the Account Value attributable to each Investment Option bears to the total Account Value minus the Loan Account immediately prior to the loan repayment.  We reserve the right to require that loan repayments, up to the amount of the loan allocated to the Fixed Account, first be allocated back to the Fixed Account.

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 notice for 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 that exchange is otherwise restricted;

- the SEC, or other regulatory agency with jurisdiction, by order, permits postponement for the protection of policyowners; or

- an emergency exists as determined by the SEC, 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.

We reserve the right to defer payment of any portion of the Cash Surrender Value, policy loan or partial surrender payable from the Fixed Account for a period not exceeding six months from the date we receive your surrender or loan request.

Charges, Deductions and Refunds

Premium Expense Load.  We deduct a load from each premium payment which includes two elements. One element covers State and Federal tax obligations.  The second element covers costs of issuing and selling the Policy, including sales commission, marketing allowance to broker-dealers, cost of printing the prospectuses and marketing materials and advertising expenses.  The costs of issuing the Policy are those that are not covered by other explicit charges, including the review of applications, processing the applications and establishing policyowner records.  To the extent the costs exceed the Premium Expense Load, the Company will use general account assets, including any profits realized from the Mortality and Expense Risk Charges and Cost of Insurance charges.  The tax element is an average of anticipated taxes and the policyowner may pay more or less than the actual tax obligations applicable to the Policy.

Currently, the Premium Expense Load for Policy Years 1 through 7 is 7.5% on each premium payment up to and including Target Premium for all states except Kentucky.  For Kentucky, the current Premium Expense Load is 9.0%.  For premium paid in excess of Target Premium for all Policy Years, the current Premium Expense Load is 2.5% on premium paid in excess of Target Premium for all states except Kentucky.  For Kentucky, the current Premium Expense Load is 4.0%.

The Premium Expense Load for Policy Years 1 through 7 is guaranteed not to exceed 12.5% (Kentucky: 17.5%) on each premium payment up to and including Target Premium and 5.5% (Kentucky: 10.5%) on premium paid in excess of Target Premium.  The Premium Expense Load for Policy Year 8 and thereafter is guaranteed not to exceed 3.25% on all premium payments (Kentucky: 8.25%).

Target Premium varies based on the Specified Face Amount and the Insured’s Issue Age and sex.  We may reduce or waive the Premium Expense Load for certain group or sponsored arrangements and corporate purchasers.

Mortality and Expense Risk Charge.  We deduct a daily charge from the assets of the Variable Account for the mortality and expense risks we assume with respect to the Policy.  We may realize a profit from this charge.  This charge is based on the applicable Daily Risk Percentage, which we will from time to time determine based on our expectations of future interest, mortality experience, persistency, expenses, profit and taxes.  Expressed as an equivalent annual rate, the Daily Risk Percentage is guaranteed not to exceed 0.90% of assets.  The current Daily Risk Percentage will be no greater than 0.50% of assets for Policy Years 1-9 and 0.10% thereafter.

The mortality risk we assume is that the group of lives insured under the Policies may, on average, live for shorter periods of time than we estimated.  The expense risk we assume is that our costs of issuing and administering Policies may be more than we estimated.

Monthly Expense Charge.  We deduct a flat charge at the beginning of each month to cover administrative and other expenses actually incurred.  We will from time to time determine the applicable Monthly Expense Charge based on our expectations of future experience with respect to interest, mortality experience, persistency, expenses, profit and taxes, which will not exceed $15.00 in any Policy Month.  Currently, the Monthly Expense Charge is $5.00 per month.

Monthly Cost of Insurance.  We deduct a Monthly Cost of Insurance charge from your Account Value to cover anticipated costs of providing insurance coverage.  This charge is made, in arrears, at the end of each Policy Month.  We may realize a profit from this charge.  If You surrender the Policy on any day other than a Monthly Anniversary Day, we will deduct a cost of insurance charge on a pro-rata basis.

The Monthly Cost of Insurance equals the sum of (1), (2) and (3) where

(1)	is the Specified Face Amount Monthly Cost of Insurance Rate (described below) multiplied by the net amount at risk divided by 1000.  The net amount at risk equals the Base Death Benefit at the end of the Policy Month before the deduction of the Monthly Cost of Insurance less the Gross Cash Surrender Value at the end of the Policy Month before the deduction of the Monthly Cost of Insurance;
(2)	is the APB Rider Face Amount Monthly Cost of Insurance Rate (described below) multiplied by the net amount at risk divided by 1000.  The net amount at risk equals the APB Rider Death Benefit, which is the Total Death Benefit minus the Base Death Benefit, at the end of the Policy Month before the deduction of the Monthly Cost of Insurance; and
(3)	is any Flat Extra specified in Section 1of the Policy, times the Total Face Amount divided by 1000.

The Account Value deduction occurs first to the initial Total Face Amount and second to successive increases.

The cost of insurance deductions described above are determined separately for the initial Specified Face Amount and the APB Rider Face Amount and each increase in Specified Face Amount or APB Rider Face Amount.

The Net Amount at Risk is affected by the performance of the Sub-Accounts to which premium is allocated, the cumulative premium paid, any Policy Debt, any partial surrenders, transaction fees and periodic charges.  Monthly Cost of Insurance rates are based on the length of time the Policy has been in force and on the Insured's sex (except for unisex Policies), Issue Age, Class and table rating, if any.  We will from time to time determine the applicable rates based on our expectations of future experience with respect to interest, mortality experience, persistency, expenses, profit and taxes.  The expenses we consider will include, but not be limited to, any additional commissions we are required to pay as a result of any additional services that a corporate purchaser specifically requests or authorizes to be provided by our agent.  Any variations will be based on uniformly applied criteria that do not discriminate unfairly against any owner.  We anticipate the cost of insurance rates for coverage under the Policy to be less than the guaranteed maximum monthly rates shown in the Policy, unless the Insured has been rated a substandard risk.  The cost of insurance rates shown in the Policy are based on the 1980 Commissioner's Standard Ordinary Mortality Table A (for males), Table B (for unisex) or Table G (for females).  Monthly cost of insurance rates for classes of Insureds with substandard risk ratings are based on multiples of the CSO Mortality Tables described above.

Deferred Expense Load on Policy Year 1 Premium.  A deduction for this expense load, which is assessed in Policy Years 2 through 7 and deducted on the Policy Anniversary, is based on premium payments in Policy Year 1 up to and including Target Premium.  This Load is deducted from assets allocated to the Investment Options.  The Premium Expense Load would be higher if the Deferred Expense Load on Policy Year 1 Premium was not imposed.  It is comprised of the same elements as the Premium Expense Load.  The load is guaranteed not to exceed 1.0%.  Currently, the load will be no greater than 0.40%.

Other Charges and Expenses.  We reserve the right to impose a charge for in-force illustrations, as more fully described at page 25.  We currently do not impose a charge and guarantee any charge will not exceed $25.00.  In addition, the interest charged for outstanding loans as well as the interest credited to the Loan Account is more fully described at pages 21-22.  Lastly, a flat extra charge may apply if an Insured is a substandard risk.  A flat extra charge will not exceed $20.00 per $1000 of Specified Face Amount and APB Rider Face Amount. It is deducted from the Account Value on a monthly basis and covers the additional mortality risks of the Insured borne by the Company.  A definition of “flat extra” is provided in the Glossary.

Directed Deductions.  You have the ability to direct from which Investment Options the Mortality and Expense Risk Charge, Monthly Expense Charge, Deferred Expense Load on Policy Year 1 Premium and Monthly Cost of Insurance Charge deductions are taken.  The deductions will be allocated among the selected Investment Options in the same proportion that the Account Value attributable to each Investment Option bears to the total Account Value in all Investment Options selected.  If You do not specify the allocation, or to the extent the total Account Value in all Investment Options selected is less than the deduction, deductions will be allocated among Investment Options in the same proportion that the Account Value attributable to each Investment Option bears to the total Account Value less the Loan Account immediately prior to the deduction.

APB Rider Charge.  The Account Value will be reduced monthly by the cost of this rider, if attached to the Policy.  We anticipate the rider's cost of insurance to be less than the guaranteed maximum monthly rates shown in the Policy for this rider.  The rates are based on the 1980 CSO Mortality Table A (for males), Table B (for unisex) or Table G (for females), unless the Insured has been rated a substandard risk.  Monthly rider cost of insurance rates for classes of Insured with substandard risk ratings are based on multiples of the CSO Mortality Tables described above.

Reduction of Charges.  We reserve the right to reduce any of our charges and deductions in connection with the sale of the Policy if we expect that the sale may result in cost savings, subject to any requirements we may from time to time impose.  We may change our requirements based on experience.  We will determine the propriety and amount of any reduction.  No reduction will be unfairly discriminatory against the interests of any owner.

Termination of Policy

The Policy will terminate on the earliest of-

- the date we receive your request to surrender,

- the expiration date of the grace period due to insufficient value, or

- the date of Insured’s death.

Other Policy Provisions

Alteration.  Our sales representatives do not have the authority to either alter or modify the Policy or to waive any of its provisions.  The only persons with this authority are our president, actuary, secretary or one of our vice presidents.

Assignments.  During the lifetime of the Insured, You may assign all or some of your rights under the Policy.  All assignments must be filed at our Principal Office and must be in a 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 recorded by us at our Principal Office.  We are not responsible for the validity or legal effect of any assignment.  Neither the Policy nor any of your rights or those of a beneficiary may be assigned or transferred without our permission.

Owner and Beneficiary.  The owner has the sole and absolute power to exercise all rights and privileges under the Policy without the consent of any other person unless You provide otherwise by written notice.  The beneficiary has no rights under the Policy until the death of the Insured.  A beneficiary is any person or entity, named in our records as the proper recipient of the Policy Proceeds.  You may change beneficiary by sending notice in a form satisfactory to us.  If there is no beneficiary living when the Insured dies, we will pay the Policy Proceeds under the Policy to You.  If You are also the Insured, the Policy Proceeds will be paid to your estate.

Reports to Owners.  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 Policy Debt.  Additionally, confirmations of individual transactions (e.g. premium payments, allocations, transfers) in the Policy will be sent at the time of the transaction.

Illustrations.  Upon request, we will provide You with a hypothetical illustration of future Account Value and Death Benefits.  Currently, we do not charge for the illustration but reserve the right to do so.  Any fee will not exceed $25.00.

Misstatement of Age or Sex.  If the age or sex (unless a unisex Policy) of the Insured is stated incorrectly in the Policy application, the amounts payable by us will be adjusted.

     Misstatement discovered at death-The Death Benefit will be recalculated to that which would be purchased by the most recently charged Monthly Cost of Insurance rate for the correct age or sex (unless a unisex Policy).

     Misstatement discovered prior to death-The Account Value will be recalculated from the Issue Date using the Monthly Cost of Insurance rates based on the correct age or sex (unless a unisex Policy).

Suicide.  Unless state law otherwise requires, if the Insured, whether sane or insane, commits suicide within two years after the Issue Date, we will not pay any part of the Policy Proceeds.  We will refund to You the greater of (a) or (b) where:  (a) is the Cash Surrender Value and (b) is the premiums paid, minus the amount of any Policy Debt and minus any partial surrenders.

Incontestability.  All statements made in the application or in a supplemental application are representations and not warranties.  We will rely on these statements when approving the issuance, increase in total face amount, increase in Base Death Benefit over premium paid, or change in death benefit option of the Policy.  No statement can be used by us in defense of a claim unless the statement was made in the application or in a supplemental application.  In the absence of fraud, after a 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 Total Face Amount which is effective after the Issue Date will be incontestable only after the increase has been in force during the lifetime of the Insured for two years from the effective date of the increase.  Any increase in Base Death Benefit over premium paid or increase in Base Death Benefit due to a death benefit option change will be incontestable only after such increase has been in force during the lifetime of the Insured for two years from the date of the increase.

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 SEC.  In addition, the investment policies of the Variable Account will not be changed without the approval of the Insurance Commissioner of the State of Delaware.  We also reserve the right to eliminate or combine existing Sub-Accounts or to transfer assets between Sub-Accounts, subject to the approval of the Securities and Exchange Commission.  In the event of any substitution or other act described above, we may make appropriate amendment to the Policy to reflect the substitution.

Nonparticipating.  The Policy does not pay dividends.  The Policy does not share in our profits or surplus earnings.

Modification.  Upon notice to You, we may modify the Policy if that modification-

- is necessary to make the Policy, the Variable Account or the Fixed Account comply with any law or regulation issued by a governmental agency to which we are 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 Investment Options.

When required, approval of the Securities and Exchange Commission will be obtained.

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 the modification.

Entire Contract.  Your entire contract with us consists of the Policy, the application(s), any riders, any endorsements and any other attachments.  Any hypothetical illustrations prepared in connection with the Policy do not form a part of our contract with You and are intended solely to provide information about possible future performance, based solely upon data available at the time such illustrations are prepared.

Performance Information

From time to time, we may advertise total return and average annual total returnof the Funds.  This performance information, presented in sales literature, is based on historical earnings and is not intended to indicate future performance. Total return for a Portfolio refers to the total of the income generated by the Fund net of total operating expenses plus capital gains and losses, realized or unrealized, for the Fund.  Total return of the Portfolio, net of Mortality & Expense Risk Charges, refers to the total of the income generated by the Fund net of total operating expenses plus capital gains and losses, realized or unrealized, for the Fund and net of the mortality and expense risk charge.  Other charges, fees and expenses payable under the Policy are not deducted from the performance information.  Average annual total return reflects the hypothetical annually compounded return that would have produced the same cumulative return if the Fund’s or Sub-Account’s performance had been constant over the entire period.  Because average annual total returns tend to smooth out variations in the return of the Fund or Sub-Account, they are not the same as actual year-by-year results.  We may compare performance information 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 separate accounts or other investment products tracked by Lipper Analytical Services, a widely used independent research firm which ranks mutual funds and other investment products by overall performance, investment objectives, and assets, or tracked by other services, companies, publications, or persons, such as Morningstar, Inc., who rank such investment products on overall performance or other criteria; or

- 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 costs and expenses.

We may provide in advertising, sales literature, periodic publications or other materials information on various topics of interest to owners and prospective owners.  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, short-term trading, dollar cost averaging, constant ratio transfer and account rebalancing);

- the advantages and disadvantages of investing in tax-deferred and taxable investments;

- customer profiles and hypothetical purchase and investment scenarios;

- financial management and tax and retirement planning; and

- investment alternatives to certificates of deposit and other financial instruments, including comparisons between the Policy and the characteristics of and market for such financial instruments.

The Policy was first offered to the public in 2004.  We may, however, advertise return data based on the period of time that the Funds have been in existence.  The results for any period prior to the time the Policy was first publicly offered will be calculated as if the Policy had been offered during that period of time.

Voting Rights

We will vote shares of the Funds held in the Variable Account in accordance with instructions received from policyowners having interests in the corresponding Sub-Accounts, to the extent required by law.  We will provide each policyowner who has interests in a Sub-Account with the proxy materials of the corresponding Fund, together with an appropriate form for the policyowner to submit its voting instructions to us.  We will vote shares for which we receive no timely instructions, together with shares not attributable to any Policy, in the same proportion as those shares held by the Sub-Account for which we receive instructions.  As a result of proportional voting, the instructions of a small number of policyowners could determine the outcome of a proposal subject to shareholder vote.

We will determine the number of shares for which You are entitled to provide voting instructions as of the record date established for the applicable Fund.  This number is determined by dividing your Account Value in the Sub-Account, if any, by the net asset value of one share in the corresponding Fund.

We may, if required by state insurance regulators, disregard voting instructions if the instructions require shares to be voted to cause a change in the subclassification or investment objective of one or more of the Funds, or to approve or disapprove an investment advisory contract for a Fund.  In addition, we may disregard voting instructions in favor of any change in the investment policies or in any investment adviser or principal underwriter of a Fund.

Our disapproval of any such change must be reasonable and, in the case of change in investment policies or investment adviser, based on a good faith determination that the change would be contrary to state law or otherwise inappropriate in light of the objectives and purposes of the Fund.  If we disregard voting instructions, we will include a summary of and the reasons for that action in our next periodic report to policyowners.

We reserve the right to vote shares held in the Variable Account in our own right, if permitted by applicable law.

Distribution of Policy

The Policy is offered on a continuous basis.  The Policy is sold by licensed insurance agents ("Selling Agents") in those states where the Policy may be lawfully sold.  Such Selling Agents will be registered representatives of affiliated and unaffiliated broker-dealer firms ("Selling Broker-Dealers") registered under the Securities Exchange Act of 1934 who are members of the Financial Industry Regulatory Authority (“FINRA”) and who have entered into selling agreements with the Company 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 the Company, is registered with the SEC under the Securities Exchange Act of 1934 and is a member of FINRA.

The Company (or its affiliates, for the purposes of this section only, collectively, "the Company"), pays the Selling Broker-Dealers compensation for sale of the Policy.  The Selling Agents who solicit sales of the Policy typically receive a portion of the compensation paid by the Company to the Selling Broker-Dealers in the form of commissions or other compensation, depending on the agreement between the Selling Broker-Dealer and their Selling Agent.  This compensation is not paid directly by the Policy Owner or the Variable Account.  The Company intends to recoup this compensation through fees and charges imposed under the Policy, and from profits on payments received by the Company for providing administrative, marketing, and other support and services to the Funds.  The amount and timing of commissions the Company may pay to Selling Broker-Dealers is not expected to be more than 40% of premium paid in the first Policy Year and 15% per annum of premium paid in Policy Years two through seven.  We may also pay a commission of-

- up to 0.15% per annum of Account Value for Policy Years one through twenty; and

- up to 0.10% per annum of Account Value thereafter.

We may also pay up to an additional 0.15% per annum of Account Value to broker-dealers who provide additional services specifically requested or authorized by corporate purchasers.  The Company may pay or allow other promotional incentives or payments in the form of cash or other compensation to the extent permitted by FINRA rules and other applicable laws and regulations and this compensation may be significant in amount.

The Company also pays compensation to wholesaling broker-dealers or other firms or intermediaries, including, in some cases, payments to affiliates of the Company such as Sun Life Financial Distributors, Inc., in return for wholesaling services such as providing marketing and sales support, product training and administrative services to the Selling Agents of the Selling Broker-Dealers.  This compensation may be significant and may be based on a percentage of premium, a percentage of Account Value and/or may be a fixed dollar amount.

In addition to the compensation described above, the Company may make additional cash payments (in certain circumstances referred to as “override” compensation) or reimbursements to Selling Broker-Dealers in recognition of their marketing and distribution, transaction processing and/or administrative services support.  These payments are not offered to all Selling Broker-Dealers, and the terms of any particular agreement governing the payments may vary among Selling Broker-Dealers depending on, among other things, the level of and type of marketing and distribution support provided.  Marketing and distribution support services may include, among other services, placement of the Company's products on the Selling Broker-Dealer's preferred or recommended list, access to the Selling Broker-Dealer's registered representatives for purposes of promoting sales of the Company's products, assistance in training and education for the Selling Agents, and opportunities for the Company to participate in sales conferences and educational seminars. The payments or reimbursements may be calculated as a percentage of the particular Selling Broker-Dealers actual or expected aggregate sales of our variable policies (including the Policy) or assets held within those policies and/or may be a fixed dollar amount.  Broker-dealers receiving these additional

payments may pass on some or all of the payments to the Selling Agent.  The prospect of receiving, or the receipt of additional compensation as described above may provide Selling Broker-Dealers with an incentive to favor sales of the Policies over other variable life policies (or other investments) with respect to which the Selling Broker-Dealer does not receive additional compensation, or lower levels of additional compensation.  You should take such payment arrangements into account when considering and evaluating any recommendation relating to the Policies.

In addition to selling our variable policies (including the Policy), some Selling Broker-Dealers or their affiliates may have other business relationships with the Company.  Those other business relationships may include, for example, reinsurance agreements pursuant to which an affiliate of the Selling Broker-Dealer provides reinsurance to the Company relative to some or all of the Policies or other variable policies issued by the Company or its affiliates.  The potential profits for a Selling Broker-Dealer or its affiliates (including its registered representatives) associated with such reinsurance arrangements could be significant in amount and could indirectly provide incentives to the Selling Broker-Dealer and its Selling Agents to recommend products for which they provide reinsurance over similar products which do not result in potential reinsurance profits to the Selling Broker-Dealer or its affiliate.  The operation of an individual policy is not impacted by whether the policy is subject to a reinsurance arrangement between the Company and an affiliate of the Selling Broker-Dealer.

As discussed in the preceding paragraphs, the Selling Broker-Dealer may receive numerous forms of payments that, directly or indirectly, provide incentives to, and otherwise facilitate and encourage the offer and sale of the Policies by Selling Broker-Dealers and their registered representatives.  Such payments may be significantly greater or less in connection with the Policies than in connection with other products offered and sold by the Company or by others.  Accordingly, the payments described above may create a potential conflict of interest, as they may influence your Selling Broker-Dealer or registered representative to present a Policy to You instead of (or more favorably than) another product or products that might be preferable to You.

You should ask your Selling Agent for further information about what commissions or other compensation he or she, or the Selling Broker-Dealer for which he or she works, may receive in connection with your purchase of the Policy.

During 2005, 2006 and 2007, Clarendon retained no commissions in connection with the distribution of the Policies.

Federal Income Tax Considerations

The following is a summary of our understanding of current federal income tax laws and is not intended as tax advice.  You should be aware that Congress has the power to enact legislation affecting the tax treatment of life insurance contracts which could be applied retroactively.  New judicial or administrative interpretation of federal income tax law may also affect the tax treatment of life insurance contracts.  The Internal Revenue Code of 1986, as amended (the “Code”), is not in force in the Commonwealth of Puerto Rico.  Accordingly, some references in this summary will not apply to Policies issued in Puerto Rico.  However, due to IRS Rev. Rul. 2004-75, as amplified by Rev. Rul. 2004-97, we will treat Puerto Rico Policy distributions and withdrawals occurring on and after January 1, 2005 as U.S.-source income that is subject to U.S. income tax withholding and reporting. Any person contemplating the purchase of a Policy or any transaction involving a Policy should consult a qualified tax adviser.  We do not make any representation or provide any guarantee regarding the federal, state or local tax treatment of any Policy or any transaction involving a Policy.

Our Tax Status

We are taxed as a life insurance company under Subchapter L of the Code.  Although we account for the operations of the Variable Account separately from our other operations for purposes of federal income taxation, the Variable Account currently is not separately taxable as a regulated investment company or other taxable entity.

Taxes we pay, or reserve for, that are attributable to the earnings of the Variable Account could affect the Net Investment Factor, which in turn affects your Account Value.  Under existing federal income tax law, however, the

income (consisting primarily of interest, dividends and net capital gains) of the Variable Account, to the extent applied to increase reserves under the Policy, is not taxable to us.  Similarly, no state or local income taxes are currently attributable to the earnings of the Variable Account.  Therefore, we do not take any federal, state or local taxes into account when determining the Net Investment Factor.  We may take taxes into account when determining the Net Investment Factor in future years if, due to a change in law, our tax status or otherwise, such taxes are attributable to the earnings of the Variable Account.

In calculating our corporate income tax liability, we derive certain corporate income tax benefits associated with the investment of company assets, including separate account assets that are treated as company assets under applicable income tax law.  These benefits, which reduce our overall corporate income tax liability, may include dividends received deductions and foreign tax credits which can be material.  We do not pass these benefits through to the Variable Account, principally because:  (i) the great bulk of the benefits results from the dividends received deduction, which involves no reduction in the dollar amount of dividends that the Variable Account receives and (ii) under applicable income tax law, policyowners are not the owners of the assets generating the benefits.

Taxation of Policy Proceeds

Section 7702 of the Code provides certain tests for whether a policy will be treated as a “life insurance contract” for tax purposes.  Provided that the policyowner of the Policy has an insurable interest in the Insured, we believe that the Policy meets these tests, and thus should receive the same federal income tax treatment as a fixed life insurance contract.  As such, the Death Benefit under the Policy will generally be eligible for exclusion from the gross income of the beneficiary under Section 101 of the Code, and the policyowner will not be deemed to be in constructive receipt of the increases in Cash Surrender Values, including additions attributable to interest, dividends, appreciation or gains realized upon transfers among the Sub-Accounts and the Fixed Account, until actual receipt thereof.

However, You may be taxed on all of the accumulated income under the Policy on its maturity date and there can be no assurance that an election to extend the maturity date of the Policy will avoid that result.  In addition, a corporate owner may be subject to alternative minimum tax on the annual increases in Cash Surrender Values and on the portion of the Death Benefit under the Policy that exceeds its Cash Surrender Value.

To qualify as a life insurance contract under Section 7702, the Policy must satisfy certain actuarial requirements.  Section 7702 requires that actuarial calculations be based on mortality charges that meet the “reasonable mortality charge” requirements set forth in the Code, and other charges reasonably expected to be actually paid that are specified in the Policy.  The law relating to reasonableness standards for mortality and other charges is based on statutory language and certain IRS pronouncements that do not address all relevant issues.  Accordingly, although we believe that the mortality and other charges that are used in the calculations (including those used with respect to Policies issued to so-called “sub-standard risks”) meet the applicable requirements, we cannot be certain.  It is possible that future regulations will contain standards that would require us to modify the mortality and other charges used in the calculations, and we reserve the right to make any such modifications.

For a variable contract like the Policy to qualify as life insurance for federal income tax purposes, it also must comply with the investment diversification rules found in Section 817 of the Code.  We believe that the Variable Account complies with the diversification requirements prescribed by Section 1.817-5 of the Treasury Regulations.

The IRS has stated that satisfaction of the diversification requirements described above by itself does not prevent a contract owner from being treated as the owner of separate account assets under an "owner control" test.  If a contract owner is treated as the owner of separate account assets for tax purposes, the contract owner would be subject to taxation on the income and gains from the separate account assets.  In published revenue rulings through 1982 and then again in 2003, the IRS has stated that a variable contract owner will be considered the owner of separate account assets if the owner possesses incidents of ownership in those assets, such as the ability to exercise control over the investment of the assets.  In Rev. Rul. 2003-91, the IRS considered certain variable annuity and variable life insurance contracts and concluded that the owners of the variable contracts would not be considered the owners of the contracts underlying assets for federal income tax purposes.

Rev. Rul. 2003-91 states that the determination of whether the owner of a variable contract possesses sufficient incidents of ownership over the assets underlying the variable contract so as to be deemed the owner of those assets for federal income tax purposes will depend on all the facts and circumstances.  We do not believe that the differences between the Policy and the contracts described in Rev. Rul. 2003-91 with respect to the number of investment choices and the ability to transfer among investment choices should prevent the holding in Rev. Rul. 2003-91 from applying.  Nevertheless, You should consult with a competent tax adviser on the potential impact of the investor control rules of the IRS as they relate to the investment decisions and activities You may undertake with respect to the Policy.

The guidelines in Rev. Rul. 2003-91 do not address the treatment of a policyholder which is, or which is affiliated with, an investment manager.  Any investment manager or affiliate who purchases a Policy assumes the risk that it may be treated as the owner of the investments underlying the Policy under the "owner control" rules because of the investment manager's control over assets held under the Policy.  However, because the diversification rules would permit an investment manager (or its affiliate) to hold a direct investment in an investment option under the Policy, we do not believe that the application of the "owner control" rules to an investment manager (or its affiliate) should affect You.

In the future, the IRS and/or the Treasury Department may issue new rulings, interpretations or regulations on this subject.  Accordingly, we reserve the right to modify the Policy as necessary to attempt to prevent You from being considered the owner, for tax purposes, of the underlying assets.  We also reserve the right to notify You if we determine that it is no longer practicable to maintain the Policy in a manner that was designed to prevent You from being considered the owner of the assets of the Variable Account.  You bear the risk that You may be treated as the owner of Variable Account assets and taxed accordingly.

The tax consequences of distributions from, and loans taken from or secured by, a Policy depend on whether the Policy is classified as a Modified Endowment Contract under Section 7702A of the Code.  Due to the flexibility of the payment of premiums and other rights You have under the Policy, classification of the Policy as a Modified Endowment Contract will depend upon the individual operation of each Policy.  A Policy is a Modified Endowment Contract if the aggregate amount paid under the Policy at any time during the first seven Policy Years exceeds the sum of the net level premiums that would have been paid on or before such time if the Policy provided for paid up future benefits after the payment of seven level annual premiums.  If there is a reduction in benefits during the first seven Policy Years, the foregoing computation is made as if the Policy originally had been issued at the reduced benefit level.  If there is a “material change” to the Policy, the seven year testing period for Modified Endowment Contract status is restarted.  A life insurance contract received in exchange for a Modified Endowment Contract also will be treated as a Modified Endowment Contract.  We have undertaken measures to prevent payment of a premium from inadvertently causing the Policy to become a Modified Endowment Contract.  In general, You should consult a qualified tax adviser before undertaking any transaction involving the Policy to determine whether such a transaction would cause the Policy to become a Modified Endowment Contract.

If a Policy is not a Modified Endowment Contract, cash distributions from the Policy are treated first as a nontaxable return of the owner’s “Investment in the Policy” and then as a distribution of the income earned under the Policy, which is subject to ordinary income tax.  (An exception to this general rule occurs when a cash distribution is made in connection with certain reductions in the death benefit under the Policy in the first fifteen contract years.  Such a cash distribution is taxed in whole or in part as ordinary income.)  Loans from, or secured by, a Policy that is not a Modified Endowment Contract generally are treated as bona fide indebtedness, and thus are not included in the owner’s gross income.

If a Policy is a Modified Endowment Contract, distributions from the Policy are treated as ordinary income subject to ordinary income tax up to the amount equal to the excess of the Account Value (which includes unpaid policy loans) immediately before the distribution over the Investment in the Policy (as defined below).  Loans taken from, or secured by, such a Policy, as well as due but unpaid interest thereon, are taxed in the same manner as distributions from the Policy.  A 10 percent additional tax is imposed on the portion of any distribution from, or loan taken from or secured by, a Modified Endowment Contract that is included in income except when the distribution or loan is made on or after the owner attains age 59 1/2, is attributable to the policyowner’s becoming disabled, or is part of a series of substantially equal periodic payments for the life (or life expectancy) of the policyowner or the joint lives (or joint life expectancies ) of the policyowner and the policyowner’s Beneficiary.  These exceptions are not likely to apply where the Policy is not owned by an individual (or held in trust for an individual).  For purposes of the computations described in this paragraph, all Modified Endowment Contracts issued by us to the same policyowner during any calendar year are treated as one Modified Endowment Contract.

There are substantial limits on the deductibility of policy loan interest.  You should consult a qualified tax adviser regarding such deductions.

Upon the complete maturity, surrender or lapse of the Policy, the amount by which the sum of the Policy’s Cash Surrender Value and any unpaid Policy Debt exceeds the policyowner’s “Investment in the Policy” (as defined below) is treated as ordinary income subject to tax and the 10% additional tax discussed above may apply also.  Any loss incurred upon surrender generally is not deductible.  Any corporation that is subject to the alternative minimum tax will also have to make a separate computation of the Investment in the Policy and the gain resulting from the maturity of the Policy, or a surrender or lapse of the Policy for purposes of that tax.

The term “Investment in the Policy” means-

- the aggregate amount of any premiums or other consideration paid for a Policy, minus

- the aggregate amount received under the Policy which is excluded from the owner’s gross income (other than loan amounts), plus

- the amount of any loan from, or secured by, the Policy that is a Modified Endowment Contract (as defined above) to the extent that such amount is included in the policyowner’s gross income.

The “Investment in the Policy” is increased by any unpaid Policy Debt on a Policy that is a Modified Endowment Contract in order to prevent double taxation of income.  Since the Policy Debt was treated as a taxable distribution at the time the Policy Debt was incurred, the failure to increase the “Investment in the Policy” by the Policy Debt would cause such amount to be taxed again upon a Policy surrender or lapse.

The amount realized that is taken into account in computing the gain on the complete surrender or lapse of a Policy will include any unpaid Policy Debt on a Policy that is a Modified Endowment Contract even though that amount has already been treated as a taxable distribution.

If a Policy is not a Modified Endowment Contract, then the Investment in the Policy is not affected by the receipt of a loan from, or secured by a Policy.

Whether or not the Policy is a Modified Endowment Contract, however, no payment of the principal of, or the interest due under, any loan from or secured by a Policy will affect the amount of the Investment in the Policy.

A policyowner generally will not recognize gain upon the exchange of the Policy for another life insurance policy issued by us or another insurance company, except to the extent that the policyowner receives cash in the exchange or is relieved of policy indebtedness as a result of the exchange.  In no event will the gain recognized exceed the amount by which the Policy’s Account Value (which includes unpaid policy loans) exceeds the policyowner’s Investment in the Policy.

A transfer of the Policy, a change in the policyowner, a change in the beneficiary, certain other changes to the Policy and particular uses of the Policy (including use in a so called “split-dollar” arrangement) may have tax consequences depending upon the particular circumstances and should not be undertaken prior to consulting with a qualified tax adviser.  For instance, if You transfer the Policy or designate a new policyowner in return for valuable consideration (or, in some cases, if the transferor is relieved of a liability as a result of the transfer), then the Death Benefit payable upon the death of the Insured may in certain circumstances be includible in your taxable income to the extent that the Death Benefit exceeds the prior consideration paid for the transfer and any premiums and other amounts paid later by the transferee.  Further, in such a case, if the consideration received exceeds your Investment in the Policy, the difference will be taxed to You as ordinary income.

The Pension Protection Act of 2006 added a new section to the Code that denies the tax-free treatment of death benefits payable under an employer-owned life insurance contract unless certain notice and consent requirements are met and either (1) certain rules relating to the insured employee’s status are satisfied or (2) certain rules relating to the payment of the “amount received under the contract” to, or for the benefit of, certain beneficiaries or successors of the insured employee are satisfied.  The new rules apply to life insurance contracts owned by corporations (including S corporations), individual sole proprietors, estates and trusts and partnerships that are engaged in a trade or business.  Any business contemplating the purchase of a Policy on the life of an employee should consult with its legal and tax advisors regarding the applicability of the new legislation to the proposed purchase.

A tax adviser should also be consulted with respect to the 2003 split dollar regulations if You have purchased or are considering the purchase of a Policy for a split dollar insurance plan.  Any business contemplating the purchase of a new life insurance contract or a change in an existing contract should consult a tax adviser.  There may also be an indirect tax upon the income in the Policy or the proceeds of a Policy under the federal corporate alternative minimum tax, if the policyowner is subject to that tax.

Federal, as well as state and local, estate, inheritance and other tax consequences of ownership or receipt of Policy Proceeds will depend on your individual circumstances and those of the beneficiary.

Withholding

We will withhold and remit to the U.S. Government a part of the taxable portion of each distribution unless, prior to the distribution, the Owner provides us his or her taxpayer identification number and instructs us (in the manner prescribed) not to withhold.  The Owner may credit against his or her federal income tax liability for the year of distribution any amounts that we withhold.

Tax Return Disclosure

We believe that the purchase of a Policy is not currently subject to the tax return disclosure requirements of IRC Section 6011 and Treasury Regulation Section 1.6011-4.  However, it is your responsibility, in consultation with your tax and legal counsel and advisers, to make your own determination as to the applicability of the disclosure requirements of IRC Section 6011 and Treasury Regulation Section 1.6011-4 to your federal tax return.

Under IRC Section 6111 and Temporary Treasury Regulation Section 301.6111-1T, we are required to register with the IRS any offerings or sales of Policies that are considered tax shelters.  We believe that registration would not be required under current regulations with respect to sales of the offering or sale of a Policy.

We believe that the customer list requirements of IRC Section 6112 and Treasury Regulation Section 301.6112-1 are not currently applicable to such offerings and sales.

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 a material adverse effect on the Variable Account.  We are engaged in various kinds of routine litigation which, in our judgment, is not material to the Variable Account.

Experts

Actuarial matters concerning the Policy have been examined by Philip Johnson, FSA, MAAA, Assistant Vice President for Corporate Markets of Sun Life Assurance Company of Canada (U.S.).

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, as amended, 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 may refer to the registration statement for additional information about us, the Variable Account, the underlying Funds and the Policy.

Financial Statements

Our financial statements, provided in the Statement of Additional Information, 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 Variable Account or shares of any Fund held in the Variable Account.  Instructions on how to obtain the Statement of Additional Information are provided on the last page of this prospectus.

Appendix A

Glossary of Policy Terms

Account Value-The sum of the amounts in each Sub-Account of the Variable Account, the Fixed Account and the amount of the Loan Account.  Account Value does not include Policy Debt.  Policy Debt, which includes the amount of loans and interest charged, is not deducted from Account Value.  It is reflected in the amounts received upon surrender or payment of Policy Proceeds.  It is also reflected in the amount of total Account Value that may be borrowed against.

Anniversary-The same day in each succeeding year as the day of the year corresponding to the Issue Date.

APB Rider-An Additional Protection Benefit Rider (APB Rider) with which the Policy may be issued to provide additional life insurance coverage under the Policy.

APB Rider Death Benefit-The death benefit under the APB Rider.

APB Rider Face Amount-The amount of APB Rider coverage You request, as specified in your application, used in determining the Death Benefit.

APB Rider Net Amount at Risk-The APB Rider Net Amount at Risk is based on the insurance coverage provided by the APB Rider.

Attained Age-The Insured's Issue Age plus the number of completed Policy Years.

Base Death Benefit-The death benefit under the Policy, exclusive of any APB Rider Death Benefit or any other supplemental benefits.

Business Day-Any day that we are open for business.

Cash Surrender Value-The Gross Cash Surrender Value less 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 applicable daily rate for deduction of the mortality and expense risk charge.

Death Benefit-The sum of the Base Death Benefit and any APB Rider Death Benefit.  For purposes of calculating the Death Benefit, the Account Value will be increased by the value provided by the Enhancement Benefit.

Death Benefit Percentage-A percentage prescribed by the Internal Revenue Code to insure the death benefit provided under the Policy meets the definition of “life insurance” under the Internal Revenue Code.

Deferred Expense Load on Policy Year 1 Premium-An expense charge, assessed in the second and subsequent Policy Years, up to and including Policy Year 7, based on premium paid during Policy Year 1.

Due Proof-Such evidence as we may reasonably require in order to establish that Policy Proceeds are due and payable.  Generally, evidence will consist of the Insured’s death certificate.

Fixed Account-The portion of the Account Value funded by assets invested in our General Account.

Flat Extra-An additional charge imposed if the Insured is a substandard risk.  It is a flat dollar charge per $1000 of Specified Face Amount and any APB Rider Face Amount.

Fund-A mutual fund in which a Sub-Account invests.

General Account-The assets held by us other than those allocated to the Sub-Accounts of the Variable Account or any of our other separate accounts.

Gross Cash Surrender Value-The Account Value increased by any Enhancement Benefit.

Insured-The person on whose life the Policy is issued.

Investment Option-The Fixed Account and any of the Sub-Accounts of the Variable Account.

Investment Start Date-The date the first premium is applied, which will be the later of

- the Issue Date,

- the Business Day we approve the application for a Policy, or

- the Business Day we receive a premium equal to or in excess of the Minimum Premium.

Issue Age-The Insured's age as of the Insured's birthday nearest the Issue Date.

Issue Date-The date specified in the Policy, from which Policy Anniversaries, Policy Years and Policy Months are measured.

Loan Account-An account established for the Policy, the value of which is the principal amount of any outstanding loan against the Policy, plus credited interest thereon.

Minimum Premium-The premium amount due and payable as of the Issue Date, as specified in the Policy.  The Minimum Premium varies based on the Class, Issue Age, and sex of the Insured and the Total Face Amount of the Policy.

Monthly Anniversary Day-The same day in each succeeding month as the day of the month corresponding to the Issue Date.

Monthly Cost of Insurance-A deduction made on a monthly basis for the Specified Face Amount and APB Rider Face Amount provided by the Policy and Rider.

Monthly Expense Charge-A per Policy deduction made on a monthly basis for administration and other expenses.

Net Premium-The amount You pay as the premium minus the Premium Expense Load.

Policy-The form issued by Sun Life Assurance Company of Canada (U.S.) which evidences the insurance coverage provided and is a contract between the policyowner and the Company.

Policy Debt-The principal amount of any outstanding loans against the Policy, plus accrued but unpaid interest on such loans.

Policy Month-A one-month period commencing on the Issue Date or any Monthly Anniversary Day and ending on the next Monthly Anniversary Day.

Policy Net Amount at Risk-The Policy Net Amount at Risk is based on the insurance coverage provided by the base Policy and does not include any insurance coverage provided by rider.

Policy Proceeds-The amount determined in accordance with the terms of the Policy that is payable at the death of the Insured.

Policy Year-A one-year period commencing on the Issue Date or any Anniversary and ending on the next Anniversary.

Premium Expense Load - The percentage charge applied to premium.  It includes two elements.  One element is for State and Federal tax obligations and the other element is a sales load to cover costs related to policy issuance.

Principal Office-Sun Life Assurance Company of Canada (U.S.)(Attn: Corporate Markets), One Sun Life Executive Park, Wellesley Hills, Massachusetts  02481, or such other address as we may specify to You by written notice.

SEC-Securities and Exchange Commission.

Specified Face Amount-The amount of life insurance coverage You request, as specified in the Policy, exclusive of any APB Rider coverage, used in determining the Death Benefit.

Sub-Accounts-Sub-Accounts into which the assets of the Variable Account are divided, each of which corresponds to an investment choice available to You.

Target Premium-An amount of premium specified as such in the Policy, used to determine our Premium Expense Load and Deferred Expense Load on Policy Year 1 Premium deductions.

Target Premium Factor-Factors that are approximately equal to the Seven Pay Premium factors referenced in the Internal Revenue Code.

Total Face Amount-The sum of the Specified Face Amount and the APB Rider Face Amount.

Unit-A unit of measurement that we use to calculate the value of each Sub-Account.

Unit Value-The value of each Unit of assets in a Sub-Account.

Valuation Date-A day that the New York Stock Exchange is open for business.  We will determine Unit Values for each Valuation Date as of the close of the New York Stock Exchange on that Valuation Date.

Valuation Period-The period of time from one Valuation Date to the next Valuation Date.

Variable Account-Sun Life of Canada (U.S.) Variable Account G, one of our separate accounts, established for the purpose of funding variable insurance benefits payable under the Policy.

You-is the owner of the Policy.

Appendix B

PRIVACY POLICY

Introduction

At the Sun Life Financial group of companies,1 protecting your privacy is important to us.  Whether you are an existing customer or considering a relationship with us, we recognize that you have an interest in how we may collect, use and share information about you.

Sun Life Financial has a long tradition of safeguarding the privacy of its customers’ information. We understand and appreciate the trust and confidence you place in us, and we take seriously our obligation to maintain the confidentiality and security of your personal information.

We invite you to review this Privacy Policy which outlines how we use and protect that information.

Collection of Nonpublic Personal Information by Sun Life Financial

Collecting personal information from you is essential to our ability to offer you high-quality investment, retirement and insurance products.  When you apply for a product or service from us, we need to obtain information from you to determine whether we can provide it to you.  As part of that process, we may collect information about you, known as nonpublic personal information, from the following sources:

·  Information we receive from you on applications or other forms, such as your name, address, social security number and date of birth;

·  Information about your transactions with us, our affiliates or others, such as other life insurance policies or annuities that you may own; and

·  Information we receive from a consumer reporting agency, such as a credit report.

Limited Use and Sharing of Nonpublic Personal Information by Sun Life Financial

We use the nonpublic personal information we collect to help us provide the products and services you have requested and to maintain and service your accounts.  Once we obtain nonpublic personal information from you, we do not disclose it to any third party except as permitted or required by law.

We may share your nonpublic personal information within Sun Life Financial to help us develop innovative financial products and services and to allow our member companies to inform you about them.  The Sun Life Financial group of companies provides a wide variety of financial products and services including individual life insurance, individual fixed and variable annuities and group life, disability, and medical stop-loss insurance.

We also may disclose your nonpublic personal information to companies that help in conducting our business or perform services on our behalf, or to other financial institutions with which we have joint marketing agreements.  Sun Life Financial is highly selective in choosing these companies, and we require them to comply with strict standards regarding the security and confidentiality of our customers’ nonpublic personal information.  These companies may use and disclose the information provided to them only for the purpose for which it is provided, as permitted by law.

There also may be times when Sun Life Financial is required to disclose its customers’ nonpublic personal information, such as when complying with federal, state or local laws, when responding to a subpoena, or when complying with an inquiry by a governmental agency or regulator.

 

1 For a complete list of the Sun Life Financial member companies that have adopted this Privacy Policy, please see the reverse side of this Notice.

Our Treatment of Information About Former Customers

Our protection of your nonpublic personal information extends beyond the period of your customer relationship with us.  If your customer relationship with us ends, we will not disclose your information to nonaffiliated third parties other than as permitted or required by law.

Security of Your Nonpublic Personal Information

We maintain physical, electronic and procedural safeguards that comply with federal and state regulations to safeguard your nonpublic personal information from unauthorized use or improper access.

Employee Access to Your Nonpublic Personal Information

We restrict access to your nonpublic personal information to those employees who have a business need to know that information in order to provide products or services to you or to maintain your accounts.  Our employees are governed by a strict code of conduct and are required to maintain the confidentiality of customer information.

The following Sun Life Financial companies have adopted this Notice.  Other Sun Life Financial affiliated companies have adopted their own privacy policies.  Please check their websites for details.

Insurance Companies	Distributors/Broker-Dealers/Underwriters
Sun Life Assurance Company of Canada (U.S. operations)	Clarendon Insurance Agency, Inc.
Sun Life Assurance Company of Canada (U.S.)	Sun Life Financial Distributors, Inc.
Sun Life Insurance and Annuity Company of New York
Independence Life and Annuity Company

The SAI includes additional information about Sun Life of Canada (U.S.) Variable Account G and is incorporated herein by reference.  The SAI and personalized illustrations of death benefits, cash surrender values and cash values are available upon request.  There is no charge for the SAI.  We currently do not charge for personalized illustrations but reserve the right to do so.  You may make inquiries about the Policy, request an SAI and request a personalized illustration by calling 1-888-594-2654.

You can review and copy the complete registration statement (including the SAI) which contains additional information about us, the Policy and the Variable Account at the SEC's Public Reference Room in Washington, D.C.  To find out more about this public service, call the Securities and Exchange Commission at 202-551-8090.  Reports and other information about the Policy and its mutual fund investment options are also available on the SEC's website (www.sec.gov), or You can receive copies of this information, for a duplication fee, by writing the Public Reference Section, Securities and Exchange Commission, 901 E Street, NE, Washington, D.C.  20549.

Securities Act of 1933 File No. 333-111688

Investment Company Act File No. 811-07837

PART B

STATEMENT OF ADDITIONAL INFORMATION

SUN LIFE LARGE CASE VUL

VARIABLE UNIVERSAL LIFE POLICY

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G

May 1, 2008

This Statement of Additional Information (SAI) is not a prospectus but it relates to, and should be read in conjunction with, the Sun Life Large Case VUL prospectus, dated May 1, 2008.  The prospectus is available, at no charge, by writing Sun Life Assurance Company of Canada (U.S.) ("the Company") at One Sun Life Executive Park, Wellesley Hills, MA  02481 or calling 1-888-594-2654.

TABLE OF CONTENTS

THE COMPANY AND THE VARIABLE ACCOUNT	2
CUSTODIAN	2
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	2
DISTRIBUTION AND UNDERWRITING OF POLICY	2
THE POLICY	3
FINANCIAL STATEMENTS OF SEPARATE ACCOUNT G	5
FINANCIAL STATEMENTS OF THE COMPANY	71

THE COMPANY AND THE VARIABLE ACCOUNT

Sun Life Financial Inc. ("Sun Life Financial"), a reporting company under the Securities Exchange Act of 1934 with common shares listed on the Toronto, New York and Philippine stock exchanges, is the ultimate corporate parent of Sun Life Assurance Company of Canada (U.S.). Sun Life Financial ultimately controls Sun Life Assurance Company of Canada (U.S.) through the following intervening holding company subsidiaries: Sun Life of Canada (U.S.) Holdings, Inc., Sun Life Financial (U.S.) Investments LLC, Sun Life Financial (U.S.) Holdings, Inc., Sun Life Assurance Company of Canada - U.S. Operations Holdings, Inc., and Sun Life Financial Corp.  Sun Life of Canada (U.S.) Variable Account G was established in accordance with Delaware law on July 25, 1996 and is registered as a unit investment trust.

CUSTODIAN

We are the Custodian of the assets of the Variable Account.  We will purchase Fund shares at net asset value in connection with amounts allocated to the Sub-Accounts in accordance with your instructions, and we will redeem Fund shares at net asset value for the purpose of meeting the contractual obligations of the Variable Account and paying charges relative to the Variable Account.  The Variable Account will be fully funded at all times for the purposes of Federal securities laws.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The consolidated financial statements of Sun Life Assurance Company of Canada (U.S.) included in this Statement of Additional Information have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein (which report, dated March 27, 2008, accompanying such financial statements expresses an unqualified opinion and includes an explanatory paragraph, referring to the adoption of the provisions of the Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No.109”), and has been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.  Their office is located at 200 Berkeley Street, Boston, Massachusetts.

The financial statements of Sun Life of Canada (U.S.) Variable Account G that are included in this Statement of Additional Information have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein (which report, dated April 18, 2008, accompanying the financial statements expresses an unqualified opinion) and has been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

DISTRIBUTION AND UNDERWRITING OF THE POLICY

The Policy is offered on a continuous basis.  The Policy is sold by licensed insurance agents ("Selling Agents") in those states where the Policy may be lawfully sold.  Such Selling Agents will be registered representatives of affiliated and unaffiliated broker-dealer firms ("Selling Broker-Dealers") registered under the Securities Exchange Act of 1934 who are members of the Financial Industry Regulatory Authority (“FINRA”) and who have entered into selling agreements with the Company 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 the Company, is registered with the SEC under the Securities Exchange Act of 1934 and is a member of FINRA.

The Company (or its affiliates, for the purposes of this section only, collectively, "the Company"), pays the Selling Broker-Dealers compensation for sale of the Policy.  The Selling Agents who solicit sales of the Policy typically receive a portion of the compensation paid by the Company to the Selling Broker-Dealers in the form of commissions or other compensation, depending on the agreement between the Selling Broker-Dealer and their Selling Agent.  This compensation is not paid directly by the Policy Owner or the Variable Account.  The Company intends to recoup this compensation through fees and charges imposed under the Policy, and from profits on payments received by the Company for providing administrative, marketing, and other support and services to the Funds.  The amount and timing of commissions the Company may pay to Selling Broker-Dealers is not expected to be more than 40% of premium paid in the first Policy Year and 15% per annum of premium paid in Policy Years two through seven.  We may also pay a commission of-

o up to 0.15% per annum of Account Value for Policy Years one through twenty; and

o up to 0.10% per annum of Account Value thereafter.

We may also pay up to an additional 0.15% per annum to broker-dealers who provide additional services specifically requested or authorized by corporate purchasers.  The Company may pay or allow other promotional incentives or payments in the form of cash or other compensation to the extent permitted by FINRA rules and other applicable laws and regulations and this compensation may be significant in amount.

The Company also pays compensation to wholesaling broker-dealers or other firms or intermediaries, including, in some cases, payments to affiliates of the Company such as Sun Life Financial Distributors, Inc., in return for wholesaling services such as providing marketing and sales support, product training and administrative services to the Selling Agents of the Selling Broker-Dealers.  This compensation may be significant and may be based on a percentage of premium, a percentage of Account Value and/or may be a fixed dollar amount.

In addition to the compensation described above, the Company may make additional cash payments (in certain circumstances referred to as “override” compensation) or reimbursements to Selling Broker-Dealers in recognition of their marketing and distribution, transaction processing and/or administrative services support.  These payments are not offered to all Selling Broker-Dealers, and the terms of any particular agreement governing the payments may vary among Selling Broker-Dealers depending on, among other things, the level of and type of marketing and distribution support provided.  Marketing and distribution support services may include, among other services, placement of the Company's products on the Selling Broker-Dealer's preferred or recommended list, access to the Selling Broker-Dealer's registered representatives for purposes of promoting sales of the Company's products, assistance in training and education for the Selling Agents, and opportunities for the Company to participate in sales conferences and educational seminars. The payments or reimbursements may be calculated as a percentage of the particular Selling Broker-Dealers actual or expected aggregate sales of our variable policies (including the Policy) or assets held within those policies and/or may be a fixed dollar amount.  Broker-dealers receiving these additional payments may pass on some or all of the payments to the Selling Agent.  The prospect of receiving, or the receipt of additional compensation as described above may provide Selling Broker-Dealers with an incentive to favor sales of the Policies over other variable life policies (or other investments) with respect to which the Selling Broker-Dealer does not receive additional compensation, or lower levels of additional compensation.  You should take such payment arrangements into account when considering and evaluating any recommendation relating to the Policies.

In addition to selling our variable policies (including the Policy), some Selling Broker-Dealers or their affiliates may have other business relationships with the Company.  Those other business relationships may include, for example, reinsurance agreements pursuant to which an affiliate of the Selling Broker-Dealer provides reinsurance to the Company relative to some or all of the Policies or other variable policies issued by the Company or its affiliates.  The potential profits for a Selling Broker-Dealer or its affiliates (including its registered representatives) associated with such reinsurance arrangements could be significant in amount and could indirectly provide incentives to the Selling Broker-Dealer and its Selling Agents to recommend products for which they provide reinsurance over similar products which do not result in potential reinsurance profits to the Selling Broker-Dealer or its affiliate.  The operation of an individual policy is not impacted by whether the policy is subject to a reinsurance arrangement between the Company and an affiliate of the Selling Broker-Dealer.

As discussed in the preceding paragraphs, the Selling Broker-Dealer may receive numerous forms of payments that, directly or indirectly, provide incentives to, and otherwise facilitate and encourage the offer and sale of the Policies by Selling Broker-Dealers and their registered representatives.  Such payments may be significantly greater or less in connection with the Policies than in connection with other products offered and sold by the Company or by others.  Accordingly, the payments described above may create a potential conflict of interest, as they may influence your Selling Broker-Dealer or registered representative to present a Policy to You instead of (or more favorably than) another product or products that might be preferable to You.

You should ask your Selling Agent for further information about what commissions or other compensation he or she, or the Selling Broker-Dealer for which he or she works, may receive in connection with your purchase of the Policy.

During 2005, 2006 and 2007, Clarendon retained no commissions in connection with the distribution of the Policies.

THE POLICY

To apply for a Policy, you must submit an application to our Principal Office.  We will then follow underwriting procedures designed to determine the insurability of the proposed Insured.  We offer the Policy on a regular (or medical) underwriting, simplified underwriting, expanded guaranteed issue or guaranteed issue basis.  The proposed

Insured generally must be less than 81 years old for a Policy to be issued.  For Policies underwritten on a medical or simplified basis, we may require that the proposed Insured undergo one or more medical examinations and that you provide us with such additional information as we may deem necessary, before an application is approved.  We will issue Policies on an expanded guaranteed issue or guaranteed issue basis with respect to certain groups of Insureds.  Policies issued on such basis must be pre-approved based on information you provide to us on a master application and on certain other underwriting requirements which all members of a proposed group of Insureds must meet.  Proposed Insureds must be acceptable risks based on our underwriting limits and standards.  We will not issue a Policy until the underwriting process has been completed to our satisfaction.  In addition, we reserve the right to reject an application that does not meet our underwriting requirements or to increase by no more than 500% the cost of insurance charges applicable an Insured to cover the cost of the increased mortality risk borne by the Company.  The cost of insurance charges are based on the 1980 Commissioner's Standard Ordinary Mortality Table A (for males), Table B (for unisex) or Table G (for females).

Premium Expense Load.  We deduct a load from each premium payment for state and federal tax obligations and as a sales load.

For Policy Years 1 through 7, the current Premium Expense Load will be no less than 0.0% and no greater than 9.0% on each premium payment up to and including Target Premium and will be no less than 0.0% and no greater than 3.25% on premium paid in excess of Target Premium.  For Policy Year 8 and thereafter, the current Premium Expense Load will be no less than 0.0% and no greater than 3.25% on all premium paid.

The Premium Expense Load for Policy Years 1 through 7 is guaranteed not to exceed 12.5% on each premium payment up to and including Target Premium and 5.5% on premium paid in excess of Target Premium.  The Premium Expense Load for Policy Year 8 and thereafter is guaranteed not to exceed 3.25% on all premium payments.

Target Premium varies based on the Total Face Amount and the Insured’s Issue Age and sex.  We may reduce or waive the Premium Expense Load for certain group or sponsored arrangements and corporate purchasers.

Reduction of Charges.  We reserve the right to reduce any of our charges and deductions in connection with the sale of the Policy if we expect that the sale may result in cost savings, subject to any requirements we may from time to time impose.  We may change our requirements based on experience.  We will determine the propriety and amount of any reduction.  No reduction will be unfairly discriminatory against the interests of any class of policyowner.  Additional information may be obtained by calling the Company at 1-888-594-2654.

Increase in Face Amount.  You may request an increase in the Specified Face Amount.  You must provide satisfactory evidence of the Insured's insurability.  Once requested, an increase will become effective at the next monthly anniversary day following our approval of your request.  The Policy does not allow for an increase if the Insured's Attained Age is greater than 80 on the effective date of the increase.

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 is determined separately for the initial Specified Face Amount and each increase in the Specified Face Amount.  The cost of insurance charges applicable to an increase in Specified Face Amount and APB Rider Face Amount may be higher or lower than those charged on the original sums if the Insured’s health has changed to a degree that qualifies the Insured for a different risk classification.  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.

FINANCIAL STATEMENTS

The financial statements of the Variable Account and Sun Life Assurance Company of Canada (U.S.) are included in this Statement of Additional Information.  The consolidated financial statements of Sun Life Assurance Company of Canada (U.S.) are provided as relevant to its ability to meet its financial obligations under the Policies and should not be considered as bearing on the investment performance of the assets held in the Variable Account.

Sun Life of Canada (U.S.) Variable Account G

Statement of Condition - December 31, 2007

Assets:
Investments in:	Shares	Cost		Value
AIM V.I. Basic Value Fund Sub-Account (AI6)	3,022	$	40,491	$	38,467
AIM V.I. Capital Appreciation Fund Sub-Account (AI1)	93,187		2,028,285		2,736,890
AIM V.I. Core Equity Fund Sub-Account (AI3)	1,414		36,048		41,173
AIM V.I. Dynamics Fund Sub-Account (IV1)	900		16,665		17,324
AIM V.I. Mid Cap Core Equity Fund Sub-Account (A22)	14,019		209,031		204,259
AIM V.I. Small Cap Equity Fund Sub-Account (ASC)	5,348		85,713		83,048
AIM V.I. Small Company Growth Fund Sub-Account (IV2) (1)	-		-		-
AIM V.I. International Growth Fund Sub-Account (AI4)	40,072		1,124,213		1,347,613
Alger American MidCap Growth Portfolio Sub-Account (AL4)	76,875		1,705,497		1,815,796
AllianceBernstein VP Global Technology Fund Sub-Account (AN2)	1,432		24,702		29,080
AllianceBernstein VP Growth and Income Fund Sub-Account (AN3)	5,467		144,773		145,160
AllianceBernstein VP International Growth Portfolio Sub-Account (AN4)	77,725		2,046,044		1,922,134
AllianceBernstein VP Small Cap Growth Portfolio Sub-Account (AN5)	10,389		145,741		157,803
AllianceBernstein VPS International Value Portolio Sub-Account (IVP)	793,826		19,323,082		19,956,794
Delaware VIP Growth Opportunities Series Sub-Account (DGO)	4,248		92,482		90,741
Delaware VIP REIT Series Sub-Account (DRS)	21,319		370,812		337,485
Delaware VIP Small Cap Value Series Sub-Account (DSV)	68,878		2,177,880		1,973,364
Delaware VIP Trend Series: SC Sub-Account (DTS)	4,300		155,331		165,542
Dreyfus Emerging Leaders Portfolio Sub-Account (DEL) (2)	-		-		-
Dreyfus MidCap Stock Portfolio Sub-Account (DMC)	3,275		54,165		50,826
Dreyfus VIF Appreciation Portfolio Sub-Account (DCA)	9,907		418,048		444,412
Dreyfus VIF Developing Leaders Portfolio Sub-Account (DSC)	81,550		3,398,177		2,637,313
Dreyfus VIF Growth and Income Portfolio Sub-Account (DGI)	635		14,409		16,140
Dreyfus VIF Quality Bond Portfolio Sub-Account (DQB)	591,750		6,657,629		6,556,594
Dreyfus Stock Index Fund Sub-Account (DSI)	1,859,546		61,857,815		69,547,016
DWS Dreman High Return Equity VIP: Class A Sub-Account (SHR)	6,638		100,365		95,581
DWS Small Cap Index VIP: Class A Sub-Account (SSI)	245,137		3,707,661		3,605,970
DWS Small Cap Index VIP: Class B Sub-Account (SSC)	132,217		1,965,156		1,943,596
DWS Dreman Small Cap Value VIP: Class A Sub-Account (SCV)	19,719		410,196		396,741
Fidelity VIP Asset Manager: Growth Portfolio Sub-Account (AMG)	2,246		29,295		34,833
Fidelity VIP Contrafund ® Portfolio Sub-Account (FCN)	522,633		16,563,145		14,581,461
Fidelity VIP Contrafund ® Portfolio SC 2 Sub-Account (FL1)	99,659		3,068,878		2,736,627
Fidelity VIP Equity Income Portfolio Sub-Account (FEI)	126,818		3,205,203		3,032,220
Fidelity VIP Equity Income Portfolio Sub-Account (FE2)	19,034		496,087		455,114
Fidelity VIP Growth & Income Portfolio Sub-Account (FVG)	4,628		73,128		78,715
Fidelity VIP Growth Portfolio Sub-Account (FGP)	5,890		217,796		265,752
Fidelity VIP Growth Portfolio SC 2 Sub-Account (FL3)	19,953		715,811		890,922
Fidelity VIP High Income Portfolio Sub-Account (FHI)	163,582		1,058,909		978,220
Fidelity VIP Index 500 Portfolio Sub-Account (FIP)	231		29,956		37,954
Fidelity VIP Investment Grade Bond Portfolio Sub-Account (FIG)	1,422,065		17,875,422		18,145,545
Fidelity VIP Mid Cap Portfolio Sub-Account (FMC)	3,436		116,558		124,244
Fidelity VIP Money Market Portfolio Sub-Account (FMM)	153,872		153,872		153,872
Fidelity VIP Money Market Portfolio SC Sub-Account (FL5)	40,873,039		40,873,039		40,873,039
Fidelity VIP Overseas Portfolio Sub-Account (FOF)	7,582		181,706		191,978
Fidelity VIP Overseas Portfolio SC 2 Sub-Account (FL2)	45,840		996,496		1,151,509
Franklin Global Real Estate Securities Fund Sub-Account (FRE)	11,381		346,635		289,296
Franklin Small-Mid Cap Growth Securities Fund Sub-Account (FSC)	27,488		601,448		642,949
GSAM VIT Structured U.S. Equity Fund Sub-Account (GS3)	12,346		166,589		162,473
GSAM VIT Capital Growth Fund Sub-Account (GS7)	8,360		95,732		106,427
Janus Aspen Series Mid Cap Value Portfolio Sub-Account (MVP)	202,282		3,520,032		3,396,316
J.P. Morgan Bond Portfolio Sub-Account (JBP)	1,203,281		14,022,736		13,452,686
J.P. Morgan Small Company Portfolio Sub-Account (JP3)	38,053		586,214		611,128
J.P. Morgan U.S. Large Cap Core Equity Portfolio Sub-Account (JP1)	8,518		114,434		134,507
Lord Abbett Series Fund Growth & Income Portfolio Sub-Account (LA1)	108,912		3,104,694		3,039,739
Lord Abbett Series Fund International Portfolio Sub-Account (LA3)	27,168		330,248		294,232
Lord Abbett Series Fund Mid Cap Value Portfolio Sub-Account (LA2)	280,270		6,069,346		5,297,108
Mercury Value Opportunities V.I. Fund Sub-Account (MLV)	137,088		3,344,119		2,619,745
MFS/Sun Life Bond Series SC Sub-Account (MF7)	18,338		196,064		198,232
MFS/Sun Life Capital Opportunities Series SC Sub-Account (CO1) (3)	-		-		-

(1) Fund closed on April 30, 2007

(2) Fund closed on March 9, 2007

(3) Fund closed on June 22, 2007

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statement of Condition - December 31, 2007 - continued

Assets:
Investments in (continued):	Shares	Cost		Value
MFS/Sun Life Capital Appreciation Series Sub-Account (MF1)	2,890	$	52,708	$	65,730
MFS/Sun Life Capital Appreciation Series SC Sub-Account (MFD)	87		1,638		1,967
MFS/Sun Life Core Equity Series SC Sub-Account (RG1)	8,581		141,484		140,902
MFS/Sun Life Emerging Growth Series Sub-Account (MF2)	7,322		123,808		163,794
MFS/Sun Life Emerging Growth Series SC Sub-Account (MFF)	9,188		167,118		202,233
MFS/Sun Life Global Growth Series Sub-Account (GGR)	15,116		211,102		265,136
MFS/Sun Life Government Securities Series Sub-Account (MF6)	277,312		3,407,604		3,574,552
MFS/Sun Life Government Securities Series SC Sub-Account (MFK)	4,841		60,801		62,012
MFS/Sun Life High Yield Series SC Sub-Account (MFC)	11,892		79,454		77,301
MFS/Sun Life International Growth Series SC Sub-Account (IG1)	114,510		1,766,297		2,007,360
MFS/Sun Life International Growth Series Sub-Account (IGS)	703,090		11,758,300		12,395,473
MFS/Sun Life Massachusetts Investors Growth Stock Series Sub-Account (M11)	12,133		107,172		141,830
MFS/Sun Life Massachusetts Investors Growth Stock Series SC Sub-Account (M1B)	88,402		977,242		1,024,578
MFS/Sun Life Massachusetts Investors Trust Series Sub-Account (MF9)	563		18,852		19,980
MFS/Sun Life Massachusetts Investors Trust Series SC Sub-Account (MFL)	8,000		270,786		281,850
MFS/Sun Life Money Market Series Sub-Account (MMS)	118,117,869		118,117,869		118,117,869
MFS/Sun Life New Discovery Series Sub-Account (M10)	1,309		22,016		21,257
MFS/Sun Life New Discovery Series SC Sub-Account (M1A)	81,249		1,105,526		1,297,543
MFS/Sun Life Research International Series Sub-Account (RIS)	414,777		7,813,690		8,262,354
MFS/Sun Life Research Series Sub-Account (RES)	342		6,345		7,197
MFS/Sun Life Research Series SC Sub-Account (RE1)	26,617		435,188		556,021
MFS/Sun Life Strategic Growth Series Sub-Account (SG1) (1)	-		-		-
MFS/Sun Life Strategic Income SC Sub-Account (SI1)	10,776		115,562		111,313
MFS/Sun Life Total Return Series Sub-Account (TRS)	209,560		4,080,010		4,086,425
MFS/Sun Life Total Return Series SC Sub-Account (MFJ)	208,177		4,000,888		4,024,060
MFS/Sun Life Utilities Series Sub-Account (MF5)	19,936		545,168		588,516
MFS/Sun Life Utilities Series SC Sub-Account (MFE)	13,916		347,951		407,593
MFS/Sun Life Value Series Sub-Account (EIS)	9,515		187,753		178,683
MFS/Sun Life Value Series SC Sub-Account (MV1)	51,565		867,828		962,197
MFS/Sun Life Mid Cap Growth Series SC Sub-Account (MC1)	129,226		699,606		856,765
Mutual Shares Securities Fund Sub-Account (FSS)	22,119		452,132		451,678
Neuberger Berman AMT Limited Maturity Bond Portfolio Sub-Account (NLM)	43,512		559,363		565,660
Neuberger Berman AMT Mid-Cap Growth Portfolio Sub-Account (NMC)	6,271		148,275		178,734
Neuberger Berman AMT Partners Portfolio Sub-Account (NPP)	1,482		33,472		30,788
Neuberger Berman AMT Regency Portfolio Sub-Account (NAR)	157,256		2,561,174		2,552,261
Oppenheimer Capital Appreciation Fund/VA Sub-Account (OCF)	202,101		8,156,709		9,535,104
Oppenheimer Global Securities Fund/VA Sub-Account (OGS)	109,681		3,955,605		4,014,308
Oppenheimer Main Street Small Cap Fund®/VA Sub-Account (OSC)	133,617		2,476,722		2,431,836
PIMCO VIT Emerging Markets Bond Portfolio Sub-Account (PMB)	5,634		77,095		77,011
PIMCO VIT High Yield Portfolio Sub-Account (PHY)	433,913		3,598,413		3,493,003
PIMCO VIT Low Duration Portfolio Sub-Account (PLD)	10,473		105,104		107,869
PIMCO VIT Real Return Portfolio Sub-Account (PRR)	903,305		10,814,756		11,354,545
PIMCO VIT Total Return Portfolio Sub-Account (PTR)	3,206,608		32,333,492		33,637,316
Royce Capital Fund - Small Cap Portfolio Sub-Account (SCP)	115,772		1,251,486		1,153,085
Rydex VT Nova Fund Sub-Account (RX1)	2,478		25,875		24,932
Rydex VT OTC Fund Sub-Account (RX2)	10		154		184
Sun CapitalSM All Cap Fund Sub-Account (SCM)	40,266		474,816		433,665
Sun Capital Investment Grade Bond Fund ® Sub-Account (SC2)	323,037		3,161,013		3,062,394
Sun CapitalSM Money Market Fund Sub-Account (SC1)	45,530,914		45,530,914		45,530,914
Sun Capital Real Estate Fund ® Sub-Account (SC3)	526,270		11,003,530		9,599,171
SCSM Blue Chip Mid Cap Fund Sub-Account (SC5)	336,978		6,695,280		6,048,757
SCSM Davis Venture Value Fund Sub-Account (SC7)	7,989		105,524		109,046
SCSM Oppenheimer Main Street Small Cap Fund Sub-Account (SCB)	62,385		875,308		809,754
Templeton Foreign Securities Fund: Class 1 Sub-Account (TFS)	193,378		3,202,549		3,979,713
Templeton Foreign Securities Fund: Class 2 Sub-Account (FTI)	43,316		762,393		877,148
Templeton Growth Securities Fund: Class 1 Sub-Account (TSF)	545,465		7,703,565		8,552,896
Templeton Growth Securities Fund: Class 2 Sub-Account (FTG)	5,376		76,472		83,003
T. Rowe Price Blue Chip Growth Portfolio Sub-Account (TBC)	100,974		1,124,556		1,192,498

(1) Fund closed on June 22, 2007

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statement of Condition - December 31, 2007 - continued

Assets:
Investments in (continued):	Shares	Cost		Value
T. Rowe Price Equity Income Portfolio Sub-Account (REI)	1,118,849	$	26,784,874	$	26,505,521
T. Rowe Price New America Growth Portfolio Sub-Account (RNA)	4,827		103,120		106,578
Van Kampen UIF Mid Cap Growth Portfolio Sub-Account (VMG)	460,695		5,650,307		6,716,931
Van Kampen LIT Comstock Portfolio Sub-Account (VCP)	48,129		678,280		667,063
Van Kampen LIT Growth and Income Portfolio Sub-Account (VGI)	25,858		554,805		552,328
Wanger U.S. Smaller Companies (USC)	14,719	526,698		533,711
Total Assets:		$	565,517,600	$	575,205,602

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statement of Condition - December 31, 2007 - continued

Net Assets Applicable to Contract Owners:
Investments in:	Units	Net Asset Value
AI6	2,932	$	38,467
AI1	212,397		2,736,890
AI3	2,288		41,173
IV1	860		17,324
A22	14,365		204,259
ASC	8,322		83,048
IV2(1)	-		-
AI4	54,765		1,347,613
AL4	105,767		1,815,796
AN2	1,794		29,080
AN3	8,911		145,160
AN4	56,357		1,922,134
AN5	8,114		157,803
IVP	1,459,441		19,956,794
DGO	5,948		90,741
DRS	20,548		337,485
DSV	138,008		1,973,364
DTS	12,237		165,542
DEL(2)	-		-
DMC	4,038		50,826
DCA	28,995		444,412
DSC	202,961		2,637,313
DGI	1,186		16,140
DQB	417,322		6,556,594
DSI	5,698,584		69,547,016
SHR	6,772		95,581
SSI	259,084		3,605,970
SSC	101,087		1,943,596
SCV	26,622		396,741
AMG	2,908		34,833
FCN	483,601		14,581,461
FL1	125,764		2,736,627
FEI	145,662		3,032,220
FE2	42,111		455,114
FVG	5,485		78,715
FGP	13,398		265,752
FL3	57,043		890,922
FHI	76,674		978,220
FIP	1,858		37,954
FIG	1,057,995		18,145,545
FMC	10,016		124,244
FL5	3,578,472		40,873,039
FOF	10,433		191,978
FL2	49,399		1,151,509
FRE	26,332		289,296
FSC	45,929		642,949
GS3	10,710		162,473
GS7	7,663		106,427
MVP	282,357		3,396,316
JBP	786,014		13,452,686
JP3	33,061		611,128
JP1	9,038		134,507
LA1	175,710		3,039,739
LA3	15,410		294,232
LA2	296,991		5,297,108
MLV	186,062		2,619,745
MF7	16,775		198,232
CO1(3)	-		-

(1) Fund closed on April 30, 2007

(2) Fund closed on March 9, 2007

(3) Fund closed on June 22, 2007

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statement of Condition - December 31, 2007 - continued

Net Assets Applicable to Contract Owners (continued):
Investments in:	Units	Net Asset Value
MF1	5,090	$	65,730
MFD	145		1,967
RG1	14,150		140,902
MF2	8,527		163,794
MFF	11,835		202,233
GGR	10,151		265,136
MF6	198,912		3,574,552
MFK	4,740		62,012
MFC	4,709		77,301
IG1	93,853		2,007,360
IGS	894,978		12,395,473
M11	12,895		141,830
M1B	73,950		1,024,578
MF9	1,474		19,980
MFL	18,849		281,850
MMS	8,992,159		118,117,869
M10	1,625		21,257
M1A	85,903		1,297,543
RIS	421,019		8,262,354
RES	498		7,197
RE1	34,081		556,021
SG1(1)	-		-
SI1	9,020		111,313
TRS	194,810		4,086,425
MFJ	258,706		4,024,060
MF5	19,488		588,516
MFE	15,137		407,593
EIS	11,409		178,683
MV1	56,186		962,197
MC1	64,613		856,765
FSS	29,960		451,678
NLM	36,871		565,660
NMC	8,760		178,734
NPP	1,504		30,788
NAR	168,615		2,552,261
OCF	685,121		9,535,104
OGS	240,716		4,014,308
OSC	164,649		2,431,836
PMB	3,490		77,011
PHY	202,954		3,493,003
PLD	9,423		107,869
PRR	832,007		11,354,545
PTR	2,573,931		33,637,316
SCP	106,276		1,153,085
RX1	2,325		24,932
RX2	20		184
SCM	27,764		433,665
SC2	200,400		3,062,394
SC1	3,925,378		45,530,914
SC3	280,852		9,599,171
SC5	247,349		6,048,757
SC7	6,077		109,046
SCB	43,665		809,754
TFS	219,581		3,979,713
FTI	34,546		877,148
TSF	371,089		8,552,896
FTG	3,754		83,003
TBC	84,164		1,192,498

(1) Fund closed on June 22, 2007

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statement of Condition - December 31, 2007 - continued

Net Assets Applicable to Contract Owners (continued):
Investments in:	Units	Net Asset Value
REI	1,409,689	$	26,505,521
RNA	8,510		106,578
VMG	369,862		6,716,931
VCP	49,246		667,063
VGI	37,133		552,328
USC	48,748		533,711
Net Assets Applicable to Contract Owners			575,051,730
Net Assets Applicable to Sponsor (1)	10,000		153,872
Total Net Assets		$	575,205,602

(1) All net assets applicable to the Sponsor are held in Fidelity VIP Money Market Portfolio ("FMM")

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statement of Operations - Year Ended December 31, 2007

	AI6			AI1		AI3		IV1(1)		A22			ASC(2)
	Sub-Account			Sub-Account		Sub-Account		Sub-Account		Sub-Account			Sub-Account
Income:
Dividends	$	239		$	-	$	464	$	-	$	451		$	35
Net investment income		239			-		464		-		451			35
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment transactions:
Realized gain (loss) on sale of fund shares		415			10,634		2,308		35		(8,726	)		3,037
Realized gain distributions		2,230			-		-		-		2,945			2,334
Net realized gains (losses)		2,645			10,634		2,308		35		(5,781	)		5,371
Net unrealized appreciation (depreciation) on investments:
End of year		(2,024	)		708,605		5,125		659		(4,772	)		(2,665	)
Beginning of year		1,087			423,002		4,572		-		(8,537	)		-
Change in unrealized appreciation (depreciation)		(3,111	)		285,603		553		659		3,765			(2,665	)
Realized and unrealized gains (losses)		(466	)		296,237		2,861		694		(2,016	)		2,706
Increase (Decrease) in net assets from operations	$	(227	)	$	296,237	$	3,325	$	694	$	(1,565	)	$	2,741

	IV2(3)			AI4		AL4			AN2		AN3			AN4
	Sub-Account			Sub-Account		Sub-Account			Sub-Account		Sub-Account			Sub-Account
Income:
Dividends	$	-		$	5,439	$	-		$	-	$	6,368		$	24,009
Net investment income		-			5,439		-			-		6,368			24,009
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment transactions:
Realized gain (loss) on sale of fund shares		(8,171	)		5,654		5,481			1,464		51,344			130,164
Realized gain distributions		35,600			-		190,001			-		26,193			594,242
Net realized gains (losses)		27,429			5,654		195,482			1,464		77,537			724,406
Net unrealized appreciation (depreciation) on investments:
End of year		-			223,400		110,299			4,378		387			(123,910	)
Beginning of year		13,355			98,078		(6,431	)		1,359		60,709			333,796
Change in unrealized appreciation (depreciation)		(13,355	)		125,322		116,730			3,019		(60,322	)		(457,706	)
Realized and unrealized gains (losses)		14,074			130,976		312,212			4,483		17,215			266,700
Increase (Decrease) in net assets from operations	$	14,074		$	136,415	$	312,212		$	4,483	$	23,583		$	290,709

(1) For the period of April 17, 2007 (commencement of operations of Sub-Account) through December 31, 2007.

(2) For the period of May 4, 2007 (commencement of operations of Sub-Account) through December 31, 2007.

(3) For the period of January 1, 2007 through April 30, 2007  (closing date of Sub-Account).

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statement of Operations - Year Ended December 31, 2007 - continued

	AN5			IVP			DGO			DRS			DSV			DTS
	Sub-Account			Sub-Account			Sub-Account			Sub-Account			Sub-Account			Sub-Account
Income:
Dividends	$	-		$	205,156		$	-		$	11,150		$	7,998		$	-
Net investment income		-			205,156			-			11,150			7,998			-
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment
transactions:
Realized gain (loss) on sale of fund shares		2,189			606,467			1,962			(110,030	)		(3,506	)		1,828
Realized gain distributions		-			678,491			-			166,871			127,062			1,128
Net realized gains (losses)		2,189			1,284,958			1,962			56,841			123,556			2,956
Net unrealized appreciation (depreciation) on
investments:
End of year		12,062			633,712			(1,741	)		(33,327	)		(204,516	)		10,211
Beginning of year		856			1,470,243			1,985			104,696			36,282			(3,264	)
Change in unrealized appreciation
(depreciation)		11,206			(836,531	)		(3,726	)		(138,023	)		(240,798	)		13,475
Realized and unrealized gains (losses)		13,395			448,427			(1,764	)		(81,182	)		(117,242	)		16,431
Increase (Decrease) in net assets from
operations	$	13,395		$	653,583		$	(1,764	)	$	(70,032	)	$	(109,244	)	$	16,431
	DEL(1)			DMC			DCA			DSC			DGI			DQB
	Sub-Account			Sub-Account			Sub-Account			Sub-Account			Sub-Account			Sub-Account
Income:
Dividends	$	-		$	102		$	368		$	21,815		$	124		$	317,806
Net investment income		-			102			368			21,815			124			317,806
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment
transactions:
Realized gain (loss) on sale of fund shares		(53,133	)		(3,255	)		3,727			158,331			960			(17,707	)
Realized gain distributions		62,009			2,889			-			381,401			738			-
Net realized gains (losses)		8,876			(366	)		3,727			539,732			1,698			(17,707	)
Net unrealized appreciation (depreciation) on
investments:
End of year		-			(3,339	)		26,364			(760,864	)		1,731			(101,035	)
Beginning of year		2,576			(1,658	)		3,524			110,582			2,315			(39,498	)
Change in unrealized appreciation
(depreciation)		(2,576	)		(1,681	)		22,840			(871,446	)		(584	)		(61,537	)
Realized and unrealized gains (losses)		6,300			(2,047	)		26,567			(331,714	)		1,114			(79,244	)
Increase (Decrease) in net assets from
operations	$	6,300		$	(1,945	)	$	26,935		$	(309,899	)	$	1,238		$	238,562

      (1) For the period of January 1, 2007 through March 9, 2007  (closing date of Sub-Account).

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statement of Operations - Year Ended December 31, 2007 - continued

	DSI			SHR(1)			SSI			SSC			SCV			AMG
	Sub- Account			Sub-Account			Sub-Account			Sub-Account			Sub-Account			Sub-Account
Income:
Dividends	$	1,139,968		$	1,034		$	28,542		$	12,533		$	1,093		$	-
Net investment income		1,139,968			1,034			28,542			12,533			1,093			-
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment
transactions:
Realized gain (loss) on sale of fund shares		3,112,746			(2,975	)		19,817			58,495			285			438
Realized gain distributions		-			599			209,170			131,136			15,793			-
Net realized gains (losses)		3,112,746			(2,376	)		228,987			189,631			16,078			438
Net unrealized appreciation (depreciation) on
investments:
End of year		7,689,201			(4,784	)		(101,691	)		(21,560)			(13,455	)		5,538
Beginning of year		9,149,916			-			281,291			233,123			5,915			1,696
Change in unrealized appreciation
(depreciation)		(1,460,715	)		(4,784	)		(382,982	)		(254,683	)		(19,370	)		3,842
Realized and unrealized gains (losses)		1,652,031			(7,160	)		(153,995	)		(65,052	)		(3,292	)		4,280
Increase (Decrease) in net assets from
operations	$	2,791,999		$	(6,126	)	$	(125,453	)	$	(52,519	)	$	(2,199	)	$	4,280
	FCN			FL1			FEI			FE2(2)			FVG			FGP
	Sub- Account			Sub-Account			Sub-Account			Sub-Account			Sub-Account			Sub-Account
Income:
Dividends	$	129,986		$	19,717		$	57,493		$	8,452		$	1,183		$	1,755
Net investment income		129,986			19,717			57,493			8,452			1,183			1,755
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment
transactions:
Realized gain (loss) on sale of fund shares		1,034,571			104,652			8,023			358			1,980			2,208
Realized gain distributions		3,455,491			673,796			253,576			37,348			2,078			217
Net realized gains (losses)		4,490,062			778,448			261,599			37,706			4,058			2,425
Net unrealized appreciation (depreciation) on
investments:
End of year		(1,981,684	)		(332,251	)		(172,983	)		(40,973	)		5,587			47,956
Beginning of year		290,424			41,465			98,923			-			3,562			(1,402	)
Change in unrealized appreciation
(depreciation)		(2,272,108	)		(373,716	)		(271,906	)		(40,973	)		2,025			49,358
Realized and unrealized gains (losses)		2,217,954			404,732			(10,307	)		(3,267	)		6,083			51,783
Increase (Decrease) in net assets from
operations	$	2,347,940		$	424,449		$	47,186		$	5,185		$	7,266		$	53,538

(1) For the period of February 26, 2007 (commencement of operations of Sub-Account) through December 31, 2007.

(2) For the period of August 1, 2007 (commencement of operations of Sub-Account) through December 31, 2007.

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statement of Operations - Year Ended December 31, 2007 - continued

	FL3		FHI			FIP			FIG			FMC(1)				FMM
	Sub- Account		Sub-Account			Sub-Account			Sub-Account			Sub-Account				Sub-Account
Income:
Dividends	$	3,830	$	81,759		$	1,365		$	262,680		$		546		$	8,198
Net investment income		3,830		81,759			1,365			262,680				546			8,198
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment
transactions:
Realized gain (loss) on sale of fund shares		134,915		41,278			(42	)		636				821			-
Realized gain distributions		583		-			-			-				-			-
Net realized gains (losses)		135,498		41,278			(42	)		636				821			-
Net unrealized appreciation (depreciation) on
investments:
End of year		175,111		(80,689	)		7,998			270,123				7,686			-
Beginning of year		73,239		(7,439	)		7,321			103,738				-			-
Change in unrealized appreciation
(depreciation)		101,872		(73,250	)		677			166,385				7,686			-
Realized and unrealized gains (losses)		237,370		(31,972	)		635			167,021				8,507			-
Increase (Decrease) in net assets from
operations	$	241,200	$	49,787		$	2,000		$	429,701		$		9,053		$	8,198
	FL5		FOF			FL2			FRE			FSC				GS3
	Sub- Account		Sub-Account			Sub-Account			Sub-Account			Sub-Account				Sub-Account
Income:
Dividends	$	1,569,569	$	5,980		$	31,861		$	7,940			$	-		$		1,813
Net investment income		1,569,569		5,980			31,861			7,940				-				1,813
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment
transactions:
Realized gain (loss) on sale of fund shares		-		433			18,199			(9,343	)			64,939				2,169
Realized gain distributions		-		11,234			69,627			22,003				30,742				12,719
Net realized gains (losses)		-		11,667			87,826			12,660				95,681				14,888
Net unrealized appreciation (depreciation) on
investments:
End of year		-		10,236			155,013			(57,339	)			41,501				(4,116	)
Beginning of year		-		582			104,439			33,094				89,141				15,996
Change in unrealized appreciation
(depreciation)		-		9,654			50,574			(90,433	)			(47,640	)			(20,112	)
Realized and unrealized gains (losses)		-		21,321			138,400			(77,773	)			48,041				(5,224	)
Increase (Decrease) in net assets from
operations	$	1,569,569	$	27,301		$	170,261		$	(69,833	)		$	48,041		$		(3,411	)

(1) For the period of February 26, 2007 (commencement of operations of Sub-Account) through December 31, 2007.

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statement of Operations - Year Ended December 31, 2007 - continued

	GS7			MVP			JBP			JP3			JP1			LA1
	Sub- Account			Sub-Account			Sub-Account			Sub-Account			Sub-Account			Sub-Account
Income:
Dividends	$	196		$	49,617		$	936,671		$	62		$	1,481		$	37,840
Net investment income		196			49,617			936,671			62			1,481			37,840
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment
transactions:
Realized gain (loss) on sale of fund shares		3,030			108,730			(5,853	)		42,394			423			129,595
Realized gain distributions		-			137,029			-			33,175			-			208,668
Net realized gains (losses)		3,030			245,759			(5,853	)		75,569			423			338,263
Net unrealized appreciation (depreciation) on
investments:
End of year		10,695			(123,716	)		(570,050	)		24,914			20,073			(64,929	)
Beginning of year		3,724			80,192			181,442			132,727			19,717			225,239
Change in unrealized appreciation
(depreciation)		6,971			(203,908	)		(751,492	)		(107,813	)		356			(290,168	)
Realized and unrealized gains (losses)		10,001			41,851			(757,345	)		(32,244	)		779			48,095
Increase (Decrease) in net assets from
operations	$	10,197		$	91,468		$	179,326		$	(32,182	)	$	2,260		$	85,935
	LA3			LA2			MLV			MF7			CO1(1)			MF1
	Sub- Account			Sub-Account			Sub-Account			Sub-Account			Sub-Account			Sub-Account
Income:
Dividends	$	2,593		$	24,112		$	8,327		$	7,686		$	477		$	122
Net investment income		2,593			24,112			8,327			7,686			477			122
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment
transactions:
Realized gain (loss) on sale of fund shares		21,865			53,568			(29,286	)		2,805			42,704			474
Realized gain distributions		34,697			708,833			455,490			-			-			-
Net realized gains (losses)		56,562			762,401			426,204			2,805			42,704			474
Net unrealized appreciation (depreciation) on
investments:
End of year		(36,016	)		(772,238	)		(724,374	)		2,168			-			13,022
Beginning of year		3,349			20,877			(278,304	)		5,492			26,488			6,922
Change in unrealized appreciation
(depreciation)		(39,365	)		(793,115	)		(446,070	)		(3,324	)		(26,488	)		6,100
Realized and unrealized gains (losses)		17,197			(30,714	)		(19,866	)		(519	)		16,216			6,574
Increase (Decrease) in net assets from
operations	$	19,790		$	(6,602	)	$	(11,539	)	$	7,167		$	16,693		$	6,696

(1) For the period of January 1, 2007 through June 22, 2007  (closing date of Sub-Account).

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statement of Operations - Year Ended December 31, 2007 - continued

	MFD		RG1(1)			MF2			MFF			GGR		MF6
	Sub-Account		Sub-Account			Sub- Account			Sub- Account			Sub-Account		Sub-Account
Income:
Dividends	$	-	$	-		$	-		$	-		$	4,558	$	622,892
Net investment income		-		-			-			-			4,558		622,892
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment
transactions:
Realized gain (loss) on sale of fund shares		32		5			16,102			19,488			16,146		152,425
Realized gain distributions		-		-			-			-			-		-
Net realized gains (losses)		32		5			16,102			19,488			16,146		152,425
Net unrealized appreciation (depreciation) on
investments:
End of year		329		(582	)		39,986			35,115			54,034		166,948
Beginning of year		154		-			26,285			23,659			40,501		187,847
Change in unrealized appreciation
(depreciation)		175		(582	)		13,701			11,456			13,533		(20,899	)
Realized and unrealized gains (losses)		207		(577	)		29,803			30,944			29,679		131,526
Increase (Decrease) in net assets from
operations	$	207	$	(577	)	$	29,803		$	30,944		$	34,237	$	754,418
	MFK		MFC			IG1			IGS			M11		M1B
	Sub-Account		Sub-Account			Sub- Account			Sub- Account			Sub-Account		Sub-Account
Income:
Dividends	$	3,543	$	5,832		$	21,280		$	161,064		$	502	$	235
Net investment income		3,543		5,832			21,280			161,064			502		235
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment
transactions:
Realized gain (loss) on sale of fund shares		219		(35	)		122,322			321,779			6,269		20,526
Realized gain distributions		-		-			267,339			1,698,034			-		-
Net realized gains (losses)		219		(35	)		389,661			2,019,813			6,269		20,526
Net unrealized appreciation (depreciation) on
investments:
End of year		1,211		(2,153	)		241,063			637,173			34,658		47,336
Beginning of year		202		2,145			352,628			1,193,130			26,475		13,024
Change in unrealized appreciation
(depreciation)		1,009		(4,298	)		(111,565	)		(555,957	)		8,183		34,312
Realized and unrealized gains (losses)		1,228		(4,333	)		278,096			1,463,856			14,452		54,838
Increase (Decrease) in net assets from
operations	$	4,771	$	1,499		$	299,376		$	1,624,920		$	14,954	$	55,073

(1) For the period of June 22, 2007 (commencement of operations of Sub-Account) through December 31, 2007.

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statement of Operations - Year Ended December 31, 2007 - continued

		MF9		MFL		MMS		M10(1)		M1A		RIS
	Sub-Account			Sub-Account		Sub- Account		Sub- Account		Sub-Account		Sub-Account
Income:
Dividends	$	226	$	2,415	$	4,765,539	$	-	$	-	$	85,622
Net investment income		226		2,415		4,765,539		-		-		85,622
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment
transactions:
Realized gain (loss) on sale of fund shares		18,168		9,857		-		(2,512)		79,000		347,666
Realized gain distributions		-		-		-		1,097		38,882		841,083
Net realized gains (losses)		18,168		9,857		-		(1,415)		117,882		1,188,749
Net unrealized appreciation (depreciation) on
investments:
End of year		1,128		11,064		-		(759)		192,017		448,664
Beginning of year		8,863		12,000		-		-		264,009		824,978
Change in unrealized appreciation
(depreciation)		(7,735)		(936)		-		(759)		(71,992)		(376,314)
Realized and unrealized gains (losses)		10,433		8,921		-		(2,174)		45,890		812,435
Increase (Decrease) in net assets from
operations	$	10,659	$	11,336	$	4,765,539	$	(2,174)	$	45,890	$	898,057
		RES		RE1		SG1(2)		SI1		TRS		MFJ
	Sub-Account			Sub-Account		Sub- Account		Sub- Account		Sub-Account		Sub-Account
Income:
Dividends	$	55	$	3,531	$	-	$	5,891	$	123,046	$	106,483
Net investment income		55		3,531		-		5,891		123,046		106,483
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment
transactions:
Realized gain (loss) on sale of fund shares		5,115		56,004		159,081		(226)		4,447		15,992
Realized gain distributions		-		-		-		-		165,866		155,030
Net realized gains (losses)		5,115		56,004		159,081		(226)		170,313		171,022
Net unrealized appreciation (depreciation) on
investments:
End of year		852		120,833		-		(4,249)		6,415		23,172
Beginning of year		4,665		99,192		89,136		(408)		147,090		168,952
Change in unrealized appreciation
(depreciation)		(3,813)		21,641		(89,136)		(3,841)		(140,675)		(145,780)
Realized and unrealized gains (losses)		1,302		77,645		69,945		(4,067)		29,638		25,242
Increase (Decrease) in net assets from
operations	$	1,357	$	81,176	$	69,945	$	1,824	$	152,684	$	131,725

(1) For the period of December 10, 2007 (commencement of operations of Sub-Account) through December 31, 2007.

(2) For the period of January 1, 2007 through June 22, 2007  (closing date of Sub-Account).

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statement of Operations - Year Ended December 31, 2007 - continued

		MF5		MFE		EIS		MV1		MC1		FSS
		Sub-Account		Sub-Account		Sub-Account		Sub-Account		Sub-Account		Sub-Account
Income:
Dividends	$	5,695	$	1,815	$	2,784	$	11,430	$	-	$	6,821
Net investment income		5,695		1,815		2,784		11,430		-		6,821
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment
transactions:
Realized gain (loss) on sale of fund shares		71,161		2,693		(4,130)		5,591		25,039		3,387
Realized gain distributions		-		-		10,113		48,483		-		14,832
Net realized gains (losses)		71,161		2,693		5,983		54,074		25,039		18,219
Net unrealized appreciation (depreciation) on
investments:
End of year		43,348		59,642		(9,070)		94,369		157,159		(454)
Beginning of year		13,832		10,835		462		105,262		99,609		9,090
Change in unrealized appreciation
(depreciation)		29,516		48,807		(9,532)		(10,893)		57,550		(9,544)
Realized and unrealized gains (losses)		100,677		51,500		(3,549)		43,181		82,589		8,675
Increase (Decrease) in net assets from
operations	$	106,372	$	53,315	$	(765)	$	54,611	$	82,589	$	15,496
		NLM		NMC		NPP		NAR		OCF		OGS
		Sub-Account		Sub-Account		Sub-Account		Sub-Account		Sub-Account		Sub-Account
Income:
Dividends	$	12,838	$	-	$	191	$	11,580	$	24,641	$	27,782
Net investment income		12,838		-		191		11,580		24,641		27,782
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment
transactions:
Realized gain (loss) on sale of fund shares		2,535		1,221,361		(81)		24,344		1,063,666		17,279
Realized gain distributions		-		-		2,992		69,584		-		100,989
Net realized gains (losses)		2,535		1,221,361		2,911		93,928		1,063,666		118,268
Net unrealized appreciation (depreciation) on
investments:
End of year		6,297		30,459		(2,684)		(8,913)		1,378,395		58,703
Beginning of year		(3,983)		369,983		(2,183)		41,895		1,119,257		111,032
Change in unrealized appreciation
(depreciation)		10,280		(339,524)		(501)		(50,808)		259,138		(52,329)
Realized and unrealized gains (losses)		12,815		881,837		2,410		43,120		1,322,804		65,939
Increase (Decrease) in net assets from
operations	$	25,653	$	881,837	$	2,601	$	54,700	$	1,347,445	$	93,721

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statement of Operations - Year Ended December 31, 2007 - continued

		OSC		PMB		PHY		PLD		PRR			PTR
		Sub-Account		Sub-Account		Sub-Account	Sub-Account			Sub- Account			Sub- Account
Income:
Dividends	$	6,811	$	4,320	$	310,311	$	4,384	$	337,899		$	1,291,910
Net investment income		6,811		4,320		310,311		4,384		337,899			1,291,910
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment
transactions:
Realized gain (loss) on sale of fund shares		27,634		71		114,850		951		(50,825)			(124,531)
Realized gain distributions		72,632		1,514		-		-		25,314			-
Net realized gains (losses)		100,266		1,585		114,850		951		(25,511)			(124,531)
Net unrealized appreciation (depreciation) on
investments:
End of year		(44,886)		(84)		(105,410)		2,765		539,789			1,303,824
Beginning of year		106,227		1,571		172,208		17		(132,927)			(103,366)
Change in unrealized appreciation
(depreciation)		(151,113)		(1,655)		(277,618)		2,748		672,716			1,407,190
Realized and unrealized gains (losses)		(50,847)		(70)		(162,768)		3,699		647,205			1,282,659
Increase (Decrease) in net assets from
operations	$	(44,036)	$	4,250	$	147,543	$	8,083	$	985,104		$	2,574,569
		SCP		RX1		RX2		SCM		SC2			SC1
		Sub-Account		Sub-Account		Sub-Account	Sub-Account			Sub- Account			Sub- Account
Income:
Dividends	$	3,128	$	335	$	-	$	3,907	$		145,661	$	2,114,828
Net investment income		3,128		335		-		3,907			145,661		2,114,828
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment
transactions:
Realized gain (loss) on sale of fund shares		2,824		189		19		1,054			(18,173)		-
Realized gain distributions		51,888		-		-		28,967			-		-
Net realized gains (losses)		54,712		189		19		30,021			(18,173)		-
Net unrealized appreciation (depreciation) on
investments:
End of year		(98,401)		(943)		30		(41,151)			(98,619)		-
Beginning of year		2,442		139		30		20,711			(71,473)		-
Change in unrealized appreciation
(depreciation)		(100,843)		(1,082)		-		(61,862)			(27,146)		-
Realized and unrealized gains (losses)		(46,131)		(893)		19		(31,841)			(45,319)		-
Increase (Decrease) in net assets from
operations	$	(43,003)	$	(558)	$	19	$	(27,934)	$		100,342	$	2,114,828

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statement of Operations - Year Ended December 31, 2007 - continued

		SC3		SC5		SC7		SCB		TFS		FTI
		Sub- Account		Sub-Account		Sub-Account		Sub-Account		Sub-Account		Sub-Account
Income:
Dividends	$	168,479	$	73,302	$	570	$	-	$	75,170	$	22,490
Net investment income		168,479		73,302		570		-		75,170		22,490
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment
transactions:
Realized gain (loss) on sale of fund shares		542,888		(59,506)		15,896		(9,550)		417,283		166,015
Realized gain distributions		1,403,040		1,108,921		-		131,148		155,649		51,298
Net realized gains (losses)		1,945,928		1,049,415		15,896		121,598		572,932		217,313
Net unrealized appreciation (depreciation) on
investments:
End of year		(1,404,359)		(646,523)		3,522		(65,554)		777,164		114,755
Beginning of year		2,285,825		(241,486)		12,670		75,540		889,639		194,419
Change in unrealized appreciation
(depreciation)		(3,690,184)		(405,037)		(9,148)		(141,094)		(112,475)		(79,664)
Realized and unrealized gains (losses)		(1,744,256)		644,378		6,748		(19,496)		460,457		137,649
Increase (Decrease) in net assets from
operations	$	(1,575,777)	$	717,680	$	7,318	$	(19,496)	$	535,627	$	160,139
		TSF		FTG		TBC		REI		RNA		VMG
		Sub- Account		Sub-Account		Sub-Account		Sub-Account		Sub-Account		Sub- Account
Income:
Dividends	$	116,580	$	2,044	$	5,034	$	504,568	$	-	$	-
Net investment income		116,580		2,044		5,034		504,568		-		-
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment
transactions:
Realized gain (loss) on sale of fund shares		53,859		9,370		47,483		2,130,136		5,245		1,190,512
Realized gain distributions		328,139		6,522		-		1,650,420		10,471		360,233
Net realized gains (losses)		381,998		15,892		47,483		3,780,556		15,716		1,550,745
Net unrealized appreciation (depreciation) on
investments:
End of year		849,331		6,531		67,942		(279,353)		3,458		1,066,624
Beginning of year		1,147,830		22,072		26,839		2,789,981		6,854		1,022,104
Change in unrealized appreciation
(depreciation)		(298,499)		(15,541)		41,103		(3,069,334)		(3,396)		44,520
Realized and unrealized gains (losses)		83,499		351		88,586		711,222		12,320		1,595,265
Increase (Decrease) in net assets from
operations	$	200,079	$	2,395	$	93,620	$	1,215,790	$	12,320	$	1,595,265

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statement of Operations - Year Ended December 31, 2007 - continued

		VCP		VGI		USC(1)
		Sub-Account		Sub- Account		Sub-Account
Income:
Dividends	$	8,450	$	10,504	$	-
Net investment income		8,450		10,504		-
Realized and Unrealized Gains (Losses):
Realized gains (losses) on investment
transactions:
Realized gain (loss) on sale of fund shares		948		23,783		7,296
Realized gain distributions		10,410		24,560		3,234
Net realized gains (losses)		11,358		48,343		10,530
Net unrealized appreciation (depreciation) on
investments:
End of year		(11,217)		(2,477)		7,013
Beginning of year		24,958		40,541		-
Change in unrealized appreciation
(depreciation)		(36,175)		(43,018)		7,013
Realized and unrealized gains (losses)		(24,817)		5,325		17,543
Increase (Decrease) in net assets from
operations	$	(16,367)	$	15,829	$	17,543

(1) For the period of February 23, 2007 (commencement of operations of Sub-Account) through December 31, 2007.

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets

	AI6				AI1				AI3				IV1(1)				A22
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,
		2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income (loss)	$	239	$	89	$	-	$	1,411	$	464	$	257	$	-	$	-	$	451	$	3,033
Net realized gains (losses)		2,645		1,624		10,634		4,334		2,308		(958)		35		-		(5,781)		69,321
Change in unrealized gains (losses)		(3,111)		854		285,603		124,823		553		3,725		659		-		3,765		(33,086)
Increase (Decrease) in net assets from operations		(227)		2,567		296,237		130,568		3,325		3,024		694		-		(1,565)		39,268
Contract Owner Transactions:
Purchase payments received		20,514		14,484		1,742		323,881		8,886		35,272		4,042		-		3,957		3,301
Net transfers between Sub-Accounts		(1)		(74)		(12,542)		8,680		-		6,517		13,260		-		200,096		(383,907)
Withdrawals and surrenders		-		-		(377)		-		(14,406)		-		-		-		(324,040)		-
Mortality and expense risk, cost of
insurance and contract charges		(5,354)		(3,881)		(32,860)		(26,474)		(6,742)		(5,987)		(672)		-		(4,224)		(21,434)
Increase (Decrease) in net assets from
contract owner transactions		15,159		10,529		(44,037)		306,087		(12,262)		35,802		16,630		-		(124,211)		(402,040)
Increase (Decrease) in net assets		14,932		13,096		252,200		436,655		(8,937)		38,826		17,324		-		(125,776)		(362,772)
Net Assets:
Beginning of year		23,535		10,439		2,484,690		2,048,035		50,110		11,284		-		-		330,035		692,807
End of year	$	38,467	$	23,535	$	2,736,890	$	2,484,690	$	41,173	$	50,110	$	17,324	$	-	$	204,259	$	330,035
Unit Activity from Participant Transactions:
Beginning of Year		1,821		915		215,990		189,249		3,033		818		-		-		25,427		59,376
Units purchased		1,510		1,234		138		28,379		529		2,438		201		-		278		271
Units transferred between Sub-Accounts		-		-		(1,052)		755		-		181		692		-		13,976		(32,447)
Units withdrawn, surrendered or canceled		(399)		(328)		(2,679)		(2,393)		(1,274)		(404)		(33)		-		(25,316)		(1,773)
End of Year		2,932		1,821		212,397		215,990		2,288		3,033		860		-		14,365		25,427

(1) For the period of April 17, 2007 (commencement of operations of Sub-Account) through December 31, 2007.

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets - continued

	ASC(1)				IV2(2)				AI4				AL4				AN2
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,
		2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income (loss)	$	35	$	-	$	-	$	-	$	5,439	$	6,321	$	-	$	-	$	-	$	-
Net realized gains (losses)		5,371		-		27,429		147,495		5,654		87,470		195,482		10,927		1,464		2,928
Change in unrealized gains (losses)		(2,665)		-		(13,355)		(105,936)		125,322		41,004		116,730		(6,443)		3,019		(594)
Increase (Decrease) in net assets from operations		2,741		-		14,074		41,559		136,415		134,795		312,212		4,484		4,483		2,334
Contract Owner Transactions:
Purchase payments received		7,501		-		24,591		32,048		208,160		148,937		129,616		102,501		18,010		8,662
Net transfers between Sub-Accounts		74,365		-		(206,857)		(290,020)		336,538		(1,534)		1,167,319		127,887		(9,945)		(13,786)
Withdrawals and surrenders		-		-		-		(720,430)		-		-		-		-		-		(3,781)
Mortality and expense risk, cost of
insurance and contract charges		(1,559)		-		(1,297)		(3,953)		(17,256)		(8,587)		(27,409)		(1,520)		(616)		(420)
Increase (Decrease) in net assets from
contract owner transactions		80,307		-		(183,563)		(982,355)		527,442		138,816		1,269,526		228,868		7,449		(9,325)
Increase (Decrease) in net assets		83,048		-		(169,490)		(940,796)		663,857		273,611		1,581,738		233,352		11,932		(6,991)
Net Assets:
Beginning of year		-		-		169,490		1,110,286		683,756		410,145		234,058		706		17,148		24,139
End of year	$	83,048	$	-	$	-	$	169,490	$	1,347,613	$	683,756	$	1,815,796	$	234,058	$	29,080	$	17,148
Unit Activity from Participant Transactions:
Beginning of Year		-		-		10,541		78,833		31,874		24,516		17,936		61		1,270		1,935
Units purchased		738		-		1,479		2,095		8,959		7,931		8,153		7,855		1,265		679
Units transferred between Sub-Accounts		7,736		-		(11,946)		(20,024)		14,653		(114)		81,444		10,143		(699)		(1,016)
Units withdrawn, surrendered or canceled		(152)		-		(74)		(50,363)		(721)		(459)		(1,766)		(123)		(42)		(328)
End of Year		8,322		-		-		10,541		54,765		31,874		105,767		17,936		1,794		1,270

(1) For the period of May 4, 2007 (commencement of operations of Sub-Account) through December 31, 2007.

(2) For the period of January 1, 2007 through April 30, 2007  (closing date of Sub-Account).

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets

	AN3				AN4				AN5				IVP				DGO
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,
		2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income (loss)	$	6,368	$	7,719	$	24,009	$	8,222	$	-	$	-	$	205,156	$	5,401	$	-	$	-
Net realized gains (losses)		77,537		70,201		724,406		141,898		2,189		101		1,284,958		48,915		1,962		3,995
Change in unrealized gains (losses)		(60,322)		10,430		(457,706)		148,165		11,206		856		(836,531)		1,470,243		(3,726)		(2,251)
Increase (Decrease) in net assets from operations		23,583		88,350		290,709		298,285		13,395		957		653,583		1,524,559		(1,764)		1,744
Contract Owner Transactions:
Purchase payments received		40,192		136,731		271,288		359,222		78,094		52,025		693,421		2,046,291		-		-
Net transfers between Sub-Accounts		(165,242)		(315,824)		(121,357)		366,892		17,785		3,084		11,040,637		4,397,577		95,781		(23,142)
Withdrawals and surrenders		(246,534)		(9,196)		(47,797)		(295,678)		-		-		(38,498)		-		(57,053)		-
Mortality and expense risk, cost of
insurance and contract charges		(13,227)		(16,426)		(47,724)		(30,614)		(5,989)		(1,548)		(319,575)		(41,201)		(3,625)		(3,424)
Increase (Decrease) in net assets from
contract owner transactions		(384,811)		(204,715)		54,410		399,822		89,890		53,561		11,375,985		6,402,667		35,103		(26,566)
Increase (Decrease) in net assets		(361,228)		(116,365)		345,119		698,107		103,285		54,518		12,029,568		7,927,226		33,339		(24,822)
Net Assets:
Beginning of year		506,388		622,753		1,577,015		878,908		54,518		-		7,927,226		-		57,402		82,224
End of year	$	145,160	$	506,388	$	1,922,134	$	1,577,015	$	157,803	$	54,518	$	19,956,794	$	7,927,226	$	90,741	$	57,402
Unit Activity from Participant Transactions:
Beginning of Year		32,609		46,915		54,460		38,455		3,187		-		613,578		-		4,250		6,474
Units purchased		2,485		9,865		8,709		14,550		4,266		3,060		53,954		195,138		-		-
Units transferred between Sub-Accounts		(10,113)		(22,364)		(3,746)		14,849		979		219		817,869		421,967		6,160		(1,964)
Units withdrawn, surrendered or canceled		(16,070)		(1,807)		(3,066)		(13,394)		(318)		(92)		(25,960)		(3,527)		(4,462)		(260)
End of Year		8,911		32,609		56,357		54,460		8,114		3,187		1,459,441		613,578		5,948		4,250

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets – continued

	DRS				DSV				DTS				DEL(1)				DMC
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,
		2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income (loss)	$	11,150	$	2,674	$	7,998	$	2,056	$	-	$	-	$	-	$	-	$	102	$	73
Net realized gains (losses)		56,841		45,362		123,556		87,930		2,956		(336)		8,876		-		(366)		3,051
Change in unrealized gains (losses)		(138,023)		88,264		(240,798)		8,850		13,475		(3,264)		(2,576)		2,576		(1,681)		(1,596)
Increase (Decrease) in net assets from operations		(70,032)		136,300		(109,244)		98,836		16,431		(3,600)		6,300		2,576		(1,945)		1,528
Contract Owner Transactions:
Purchase payments received		-		693,491		833,272		748,707		-		-		2,272		330,029		8,547		3,624
Net transfers between Sub-Accounts		(318,622)		(363,525)		4,342		455,613		48,315		118,802		(331,527)		40		23,441		-
Withdrawals and surrenders		(5,440)		-		(293,866)		-		(2,593)		-		-		-		-		-
Mortality and expense risk, cost of
insurance and contract charges		(9,631)		(5,442)		(77,092)		(40,685)		(7,516)		(4,297)		(8,020)		(1,670)		(1,577)		(770)
Increase (Decrease) in net assets from
contract owner transactions		(333,693)		324,524		466,656		1,163,635		38,206		114,505		(337,275)		328,399		30,411		2,854
Increase (Decrease) in net assets		(403,725)		460,824		357,412		1,262,471		54,637		110,905		(330,975)		330,975		28,466		4,382
Net Assets:
Beginning of year		741,210		280,386		1,615,952		353,481		110,905		-		330,975		-		22,360		17,978
End of year	$	337,485	$	741,210	$	1,973,364	$	1,615,952	$	165,542	$	110,905	$	-	$	330,975	$	50,826	$	22,360
Unit Activity from Participant Transactions:
Beginning of Year		38,838		19,485		105,531		26,821		9,079		-		25,785		-		1,803		1,562
Units purchased		-		44,594		56,098		49,218		-		-		181		25,916		654		305
Units transferred between Sub-Accounts		(17,480)		(24,905)		549		32,296		3,919		9,447		(25,343)		-		1,701		-
Units withdrawn, surrendered or canceled		(810)		(336)		(24,170)		(2,804)		(761)		(368)		(623)		(131)		(120)		(64)
End of Year		20,548		38,838		138,008		105,531		12,237		9,079		-		25,785		4,038		1,803

(1) For the period of January 1, 2007 through March 9, 2007  (closing date of Sub-Account).

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets

	DCA				DSC				DGI				DQB				DSI
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,
		2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income (loss)	$	368	$	325	$	21,815	$	26,462	$	124	$	77	$	317,806	$	318,722	$	1,139,968	$	799,096
Net realized gains (losses)		3,727		420		539,732		710,035		1,698		853		(17,707)		(70,581)		3,112,746		1,342,504
Change in unrealized gains (losses)		22,840		2,537		(871,446)		(757,168)		(584)		902		(61,537)		20,066		(1,460,715)		4,551,396
Increase (Decrease) in net assets from operations		26,935		3,282		(309,899)		(20,671)		1,238		1,832		238,562		268,207		2,791,999		6,692,996
Contract Owner Transactions:
Purchase payments received		417,080		6,666		19,597		290,530		3,333		5,025		296,512		320,286		7,856,953		15,793,841
Net transfers between Sub-Accounts		(1,477)		-		(2,066,357)		(1,778,079)		(1,407)		(545)		(526,147)		325,376		5,504,217		3,191,534
Withdrawals and surrenders		(11,000)		-		(35,702)		-		(718)		-		(325,503)		-		(1,653,468)		(4,647,088)
Mortality and expense risk, cost of
insurance and contract charges		(11,559)		(4,367)		(56,394)		(110,866)		(2,793)		(2,867)		(94,380)		(98,983)		(1,331,306)		(843,809)
Increase (Decrease) in net assets
from contract owner transactions		393,044		2,299		(2,138,856)		(1,598,415)		(1,585)		1,613		(649,518)		546,679		10,376,396		13,494,478
Increase (Decrease) in net assets		419,979		5,581		(2,448,755)		(1,619,086)		(347)		3,445		(410,956)		814,886		13,168,395		20,187,474
Net Assets:
Beginning of year		24,433		18,852		5,086,068		6,705,154		16,487		13,042		6,967,550		6,152,664		56,378,621		36,191,147
End of year	$	444,412	$	24,433	$	2,637,313	$	5,086,068	$	16,140	$	16,487	$	6,556,594	$	6,967,550	$	69,547,016	$	56,378,621
Unit Activity from Participant Transactions:
Beginning of Year		1,708		1,535		348,103		476,208		1,315		1,188		459,173		422,644		4,860,856		3,603,696
Units purchased		28,880		511		1,301		19,992		250		424		19,446		21,979		633,795		1,478,984
Units transferred between Sub-Accounts		(98)		-		(140,055)		(140,320)		(112)		(46)		(34,032)		21,285		449,128		277,023
Units withdrawn, surrendered or canceled		(1,495)		(338)		(6,388)		(7,777)		(267)		(251)		(27,265)		(6,735)		(245,195)		(498,847)
End of Year		28,995		1,708		202,961		348,103		1,186		1,315		417,322		459,173		5,698,584		4,860,856

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets - continued

	SHR(1)				SSI				SSC				SCV				AMG
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,
		2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income (loss)	$	1,034	$	-	$	28,542	$	11,611	$	12,533	$	7,199	$	1,093	$	317	$	-	$	-
Net realized gains (losses)		(2,376)		-		228,987		136,074		189,631		167,990		16,078		3,248		438		169
Change in unrealized gains (losses)		(4,784)		-		(382,982)		169,054		(254,683)		99,027		(19,370)		5,658		3,842		992
Increase (Decrease) in net assets from operations		(6,126)		-		(125,453)		316,739		(52,519)		274,216		(2,199)		9,223		4,280		1,161
Contract Owner Transactions:
Purchase payments received		136,341		-		118,913		314,680		185,629		439,913		35,719		33,223		2,831		16,087
Net transfers between Sub-Accounts		(29,328)		-		1,493,109		513,175		56,743		90,073		258,486		61,641		-		198
Withdrawals and surrenders		-		-		(15,817)		(428,909)		(208,937)		(136,946)		-		-		-		(1,309)
Mortality and expense risk, cost of insurance and contract charges		(5,306)		-		(72,339)		(35,677)		(39,110)		(35,454)		(3,230)		(1,765)		(3,199)		(2,542)
Increase (Decrease) in net assets from contract owner transactions		101,707		-		1,523,866		363,269		(5,675)		357,586		290,975		93,099		(368)		12,434
Increase (Decrease) in net assets		95,581		-		1,398,413		680,008		(58,194)		631,802		288,776		102,322		3,912		13,595
Net Assets:
Beginning of year		-		-		2,207,557		1,527,549		2,001,790		1,369,988		107,965		5,643		30,921		17,326
End of year	$	95,581	$	-	$	3,605,970	$	2,207,557	$	1,943,596	$	2,001,790	$	396,741	$	107,965	$	34,833	$	30,921
Unit Activity from Participant Transactions:
Beginning of Year		-		-		155,599		126,501		101,506		81,411		7,466		488		2,940		1,848
Units purchased		9,456		-		8,407		22,907		9,318		24,577		2,379		2,298		213		1,413
Units transferred between Sub-Accounts		(2,322)		-		101,202		39,112		2,726		5,478		16,991		4,813		-		17
Units withdrawn, surrendered or canceled		(362)		-		(6,124)		(32,921)		(12,463)		(9,960)		(214)		(133)		(245)		(338)
End of Year		6,772		-		259,084		155,599		101,087		101,506		26,622		7,466		2,908		2,940

(1) For the period of February 26, 2007 (commencement of operations of Sub-Account) through December 31, 2007.

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets

	FCN				FL1				FEI				FE2(2)				FVG
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,
		2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income (loss)	$	129,986	$	92,533	$	19,717	$	28,068	$	57,493	$	233,795	$	8,452	$	-	$	1,183	$	471
Net realized gains (losses)		4,490,061		849,508		778,448		1,324,794		261,599		2,513,302		37,706		-		4,058		1,815
Change in unrealized gains (losses)		(2,272,108)		(311,736)		(373,716)		(995,549)		(271,906)		(1,487,565)		(40,973)		-		2,025		3,277
Increase (Decrease) in net assets from operations		2,347,939		630,305		424,449		357,313		47,186		1,259,532		5,185		-		7,266		5,563
Contract Owner Transactions:
Purchase payments received		2,394,397		1,875,252		505,739		683,056		8,547		1,221,800		458,800		-		25,474		24,610
Net transfers between Sub-Accounts		1,612,708		3,432,324		53,649		(136,757)		347		(9,498,900)		-		-		2,558		(112)
Withdrawals and surrenders		(111,580)		-		(496,824)		(3,652,604)		(19,798)		-		-		-		-		-
Mortality and expense risk, cost of insurance and contract charges		(345,578)		(153,405)		(83,833)		(85,887)		(42,123)		(182,940)		(8,871)		-		(6,631)		(5,273)
Increase (Decrease) in net assets from contract owner transactions		3,549,947		5,154,171		(21,269)		(3,192,192)		(53,027)		(8,460,040)		449,929		-		21,401		19,225
Increase (Decrease) in net assets		5,897,886		5,784,476		403,180		(2,834,879)		(5,841)		(7,200,508)		455,114		-		28,667		24,788
Net Assets:
Beginning of year		8,683,575		2,899,099		2,333,447		5,168,326		3,038,061		10,238,569		-		-		50,048		25,260
End of year	$	14,581,461	$	8,683,575	$	2,736,627	$	2,333,447	$	3,032,220	$	3,038,061	$	455,114	$	-	$	78,715	$	50,048
Unit Activity from Participant Transactions:
Beginning of Year		338,660		126,315		125,144		308,911		148,177		600,228		-		-		3,910		2,234
Units purchased		86,679		74,743		25,457		39,227		388		66,599		42,906		-		1,858		2,121
Units transferred between Sub-Accounts		74,814		143,938		2,256		(8,209)		16		(508,492)		-		-		199		-
Units withdrawn, surrendered or canceled		(16,552)		(6,336)		(27,093)		(214,785)		(2,919)		(10,158)		(795)		-		(482)		(445)
End of Year		483,601		338,660		125,764		125,144		145,662		148,177		42,111		-		5,485		3,910

(1) For the period of August 1, 2007 (commencement of operations of Sub-Account) through December 31, 2007.

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets - continued

	FGP				FL3				FHI					FIP			FIG
	Sub-Account				Sub-Account				Sub-Account					Sub-Account			Sub-Account
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,					Year Ended December 31,			Year Ended December 31,
		2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income (loss)	$	1,755	$	12,283	$	3,830	$	2,315	$	81,759	$	28,017	$	1,365	$	997	$	262,680	$	173,717
Net realized gains (losses)		2,425		494,199		135,498		189,723		41,278		2,677		(42)		7,046		636		8,091
Change in unrealized gains (losses)		49,358		(464,617)		101,872		(100,650)		(73,250)		8,949		677		(1,598)		166,385		66,953
Increase (Decrease) in net assets from operations		53,538		41,865		241,200		91,388		49,787		39,643		2,000		6,445		429,701		248,761
Contract Owner Transactions:
Purchase payments received		4,221		343,589		165,707		369,711		50,548		28,448		-		-		1,571,294		1,468,085
Net transfers between Sub-Accounts		39,085		(3,127,704)		(53,974)		(1,035,482)		533,058		(67,005)		-		(25,857)		10,134,074		418,403
Withdrawals and surrenders		-		-		(386,471)		(847,466)		(8,283)		-		-		-		(82,562)		-
Mortality and expense risk, cost of insurance and contract charges		(15,685)		(56,202)		(31,152)		(38,595)		(21,508)		(11,787)		(683)		(923)		(172,654)		(136,849)
Increase (Decrease) in net assets from contract owner transactions		27,621		(2,840,317)		(305,890)		(1,551,832)		553,815		(50,344)		(683)		(26,780)		11,450,152		1,749,639
Increase (Decrease) in net assets		81,159		(2,798,452)		(64,690)		(1,460,444)		603,602		(10,701)		1,317		(20,335)		11,879,853		1,998,400
Net Assets:
Beginning of year		184,593		2,983,045		955,612		2,416,056		374,618		385,319		36,637		56,972		6,265,692		4,267,292
End of year	$	265,752	$	184,593	$	890,922	$	955,612	$	978,220	$	374,618	$	37,954	$	36,637	$	18,145,545	$	6,265,692
Unit Activity from Participant Transactions:
Beginning of Year		11,815		204,148		76,148		205,186		30,176		34,527		1,892		3,432		381,208		270,915
Units purchased		246		23,152		11,919		31,173		3,955		2,480		-		-		93,776		92,397
Units transferred between Sub-Accounts		2,217		(211,705)		(4,857)		(86,317)		44,889		(5,816)		-		(1,486)		598,139		26,492
Units withdrawn, surrendered or canceled		(880)		(3,780)		(26,167)		(73,894)		(2,346)		(1,015)		(34)		(54)		(15,128)		(8,596)
End of Year		13,398		11,815		57,043		76,148		76,674		30,176		1,858		1,892		1,057,995		381,208

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets

	FMC(1)				FMM				FL5				FOF				FL2
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,
		2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income (loss)	$	546	$	-	$	8,198	$	6,770	$	1,569,569	$	464,169	$	5,980	$	-	$	31,861	$	6,199
Net realized gains (losses)		821		-		-		-		-		-		11,667		12		87,826		530,678
Change in unrealized gains (losses)		7,686		-		-		-		-		-		9,654		583		50,574		(334,668)
Increase (Decrease) in net assets from operations		9,053		-		8,198		6,770		1,569,569		464,169		27,301		595		170,261		202,209
Contract Owner Transactions:
Purchase payments received		92,717		-		-		-		26,771,061		79,506,823		3,655		-		77,030		115,185
Net transfers between Sub-Accounts		27,751		-		-		-		(31,247,057)		(39,418,289)		159,192		4,525		61,795		(14,970)
Withdrawals and surrenders		-		-		-		-		(383,396)		(274,359)		-		-		(8,296)		(1,775,309)
Mortality and expense risk, cost of insurance and contract charges		(5,277)		-		-		-		(912,659)		(399,392)		(2,552)		(738)		(38,780)		(30,615)
Increase (Decrease) in net assets from contract owner transactions		115,191		-		-		-		(5,772,051)		39,414,783		160,295		3,787		91,749		(1,705,709)
Increase (Decrease) in net assets		124,244		-		8,198		6,770		(4,202,482)		39,878,952		187,596		4,382		262,010		(1,503,500)
Net Assets:
Beginning of year		-		-		145,674		138,904		45,075,521		5,196,569		4,382		-		889,499		2,392,999
End of year	$	124,244	$	-	$	153,872	$	145,674	$	40,873,039	$	45,075,521	$	191,978	$	4,382	$	1,151,509	$	889,499
Unit Activity from Participant Transactions:
Beginning of Year		-		-		10,000		10,000		4,147,381		500,774		280		-		44,665		141,542
Units purchased		8,184		-		-		-		2,392,607		7,450,167		209		-		3,545		6,591
Units transferred between Sub-Accounts		2,270		-		-		-		(2,845,687)		(3,739,658)		10,092		331		3,341		(1,293)
Units withdrawn, surrendered or canceled		(438)		-		-		-		(115,829)		(63,902)		(148)		(51)		(2,152)		(102,175)
End of Year		10,016		-		10,000		10,000		3,578,472		4,147,381		10,433		280		49,399		44,665

(1) For the period of February 26, 2007 (commencement of operations of Sub-Account) through December 31, 2007.

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets - continued

	FRE				FSC				GS3				GS7				MVP
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,
		2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income (loss)	$	7,940	$	11,050	$	-	$	-	$	1,813	$	1,434	$	196	$	91	$	49,617	$	12,942
Net realized gains (losses)		12,660		36,720		95,681		19,341		14,888		5,385		3,030		7,351		245,759		30,947
Change in unrealized gains (losses)		(90,433)		33,017		(47,640)		58,280		(20,112)		7,347		6,971		(2,473)		(203,908)		80,193
Increase (Decrease) in net assets from operations		(69,833)		80,787		48,041		77,621		(3,411)		14,166		10,197		4,969		91,468		124,082
Contract Owner Transactions:
Purchase payments received		35,049		78,732		214,597		153,263		36,109		4,360		22,056		62,290		85,100		1,042,536
Net transfers between Sub-Accounts		(177,596)		153,649		(16)		209,607		-		47,830		3,862		(74,717)		2,345,375		(151,236)
Withdrawals and surrenders		-		-		(618,905)		-		(388)		(2,261)		-		(2,147)		(66,393)		-
Mortality and expense risk, cost of insurance and contract charges		(13,513)		(16,764)		(17,409)		(32,107)		(8,879)		(4,239)		(3,552)		(5,193)		(68,585)		(6,031)
Increase (Decrease) in net assets from contract owner transactions		(156,060)		215,617		(421,733)		330,763		26,842		45,690		22,366		(19,767)		2,295,497		885,269
Increase (Decrease) in net assets		(225,893)		296,404		(373,692)		408,384		23,431		59,856		32,563		(14,798)		2,386,965		1,009,351
Net Assets:
Beginning of year		515,189		218,785		1,016,641		608,257		139,042		79,186		73,864		88,662		1,009,351		-
End of year	$	289,296	$	515,189	$	642,949	$	1,016,641	$	162,473	$	139,042	$	106,427	$	73,864	$	3,396,316	$	1,009,351
Unit Activity from Participant Transactions:
Beginning of Year		37,207		19,099		80,979		52,788		9,016		5,797		5,857		7,633		90,251		-
Units purchased		2,652		6,526		15,672		12,271		2,285		304		1,743		5,203		6,835		105,589
Units transferred between Sub-Accounts		(12,480)		12,953		-		18,588		-		3,358		327		(6,366)		196,429		(14,768)
Units withdrawn, surrendered or canceled		(1,047)		(1,371)		(50,722)		(2,668)		(591)		(443)		(264)		(613)		(11,158)		(570)
End of Year		26,332		37,207		45,929		80,979		10,710		9,016		7,663		5,857		282,357		90,251

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets

	JBP				JP3				JP1				LA1				LA3
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,
		2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income (loss)	$	936,671	$	504,699	$	62	$	-	$	1,481	$	1,189	$	37,840	$	40,426	$	2,593	$	905
Net realized gains (losses)		(5,853)		24,139		75,569		36,998		423		133		338,263		761,651		56,562		30,865
Change in unrealized gains (losses)		(751,492)		7,542		(107,813)		57,254		356		17,720		(290,168)		76,457		(39,365)		(4,225)
Increase (Decrease) in net assets from operations		179,326		536,380		(32,182)		94,252		2,260		19,042		85,935		878,534		19,790		27,545
Contract Owner Transactions:
Purchase payments received		283,035		294,917		3,311		4,564		483		1,144		600,077		1,566,376		2,483		3,504
Net transfers between Sub-Accounts		(170)		17,676		(83,834)		10,596		-		1,365		637,569		(4,545,405)		39,958		171,375
Withdrawals and surrenders		(261,742)		(3,686)		-		-		(734)		-		(1,621,173)		(1,761,694)		-		-
Mortality and expense risk, cost of insurance and contract charges		(206,944)		(198,018)		(14,099)		(13,660)		(1,822)		(2,067)		(79,930)		(164,845)		(6,427)		(3,722)
Increase (Decrease) in net assets from contract owner transactions		(185,821)		110,889		(94,622)		1,500		(2,073)		442		(463,457)		(4,905,568)		36,014		171,157
Increase (Decrease) in net assets		(6,495)		647,269		(126,804)		95,752		187		19,484		(377,522)		(4,027,034)		55,804		198,702
Net Assets:
Beginning of year		13,459,181		12,811,912		737,932		642,180		134,320		114,836		3,417,261		7,444,295		238,428		39,726
End of year	$	13,452,686	$	13,459,181	$	611,128	$	737,932	$	134,507	$	134,320	$	3,039,739	$	3,417,261	$	294,232	$	238,428
Unit Activity from Participant Transactions:
Beginning of Year		796,833		789,914		37,663		37,694		9,175		9,144		204,334		522,122		13,078		2,812
Units purchased		16,722		18,134		160		241		32		83		34,912		103,715		122		216
Units transferred between Sub-Accounts		6		1,084		(4,058)		465		-		103		37,988		(292,197)		2,538		10,282
Units withdrawn, surrendered or canceled		(27,547)		(12,299)		(704)		(737)		(169)		(155)		(101,524)		(129,306)		(328)		(232)
End of Year		786,014		796,833		33,061		37,663		9,038		9,175		175,710		204,334		15,410		13,078

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets - continued

	LA2						MLV						MF7						CO1(1)						MF1
	Sub-Account						Sub-Account						Sub-Account						Sub-Account						Sub-Account
	Year Ended December 31,						Year Ended December 31,						Year Ended December 31,						Year Ended December 31,						Year Ended December 31,
		2007			2006			2007			2006			2007			2006			2007			2006			2007			2006
Operations:
Net investment income (loss)	$	24,112		$	20,208		$	8,327		$	6,831		$	7,686		$	1,598		$	477		$	375		$	122		$	15,736
Net realized gains (losses)		762,401			580,819			426,204			426,255			2,805			(8,434	)		42,704			1,490			474			806,623
Change in unrealized gains (losses)		(793,115	)		(153,572	)		(446,070	)		(177,238	)		(3,324	)		14,093			(26,488	)		18,917			6,100			(936,362	)
Increase (Decrease) in net assets from operations		(6,602	)		447,455			(11,539	)		255,848			7,167			7,257			16,693			20,782			6,696			(114,003	)
Contract Owner Transactions:
Purchase payments received		824,961			937,576			479,970			443,509			48,321			6,852			-			4,062			1,134			910,227
Net transfers between Sub-Accounts		462,173			1,233,933			(219,075	)		(42,568	)		(49,087	)		12,472			(181,208	)		(8,808	)		-			(7,774,599	)
Withdrawals and surrenders		(261,461	)		(1,323,062	)		(46,002	)		-			(366)			-			-			-			-			-
Mortality and expense risk, cost of insurance and contract charges		(160,112	)		(126,784	)		(54,282	)		(52,384	)		(9,555	)		(3,889	)		(1,862	)		(3,764	)		(3,097	)		(132,880	)
Increase (Decrease) in net assets from contract owner transactions		865,561			721,663			160,611			348,557			(10,687	)		15,435			(183,070	)		(8,510	)		(1,963	)		(6,997,252	)
Increase (Decrease) in net assets		858,959			1,169,118			149,072			604,405			(3,520	)		22,692			(166,377	)		12,272			4,733			(7,111,255	)
Net Assets:
Beginning of year		4,438,149			3,269,031			2,470,673			1,866,268			201,752			179,060			166,377			154,105			60,997			7,172,252
End of year	$	5,297,108		$	4,438,149		$	2,619,745		$	2,470,673		$	198,232		$	201,752		$	-		$	166,377		$	65,730		$	60,997
Unit Activity from Participant Transactions:
Beginning of Year		249,898			206,568			173,904			148,198			17,634			16,412			12,204			12,888			5,248			656,239
Units purchased		44,942			55,862			33,179			32,897			4,193			618			-			330			91			82,793
Units transferred between Sub-Accounts		24,917			76,996			(14,051	)		(3,306	)		(4,199	)		951			(12,073	)		(712	)		-			(721,638	)
Units withdrawn, surrendered or canceled		(22,766	)		(89,528	)		(6,970	)		(3,885	)		(853	)		(347	)		(131	)		(302	)		(249	)		(12,146	)
End of Year		296,991			249,898			186,062			173,904			16,775			17,634			-			12,204			5,090			5,248

(1) For the period of January 1, 2007 through June 22, 2007  (closing date of Sub-Account).

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets

	MFD						RG1(1)					MF2						MFF						GGR
	Sub-Account						Sub-Account					Sub-Account						Sub-Account						Sub-Account
	Year Ended December 31,						Year Ended December 31,					Year Ended December 31,						Year Ended December 31,						Year Ended December 31,
		2007			2006			2007			2006		2007			2006			2007			2006			2007			2006
Operations:
Net investment income (loss)	$	-		$	-		$	-		$	-	$	-		$	-		$	-		$	-		$	4,558		$	885
Net realized gains (losses)		32			84,193			5			-		16,102			2,438			19,488			1,945			16,146			1,419
Change in unrealized gains (losses)		175			(96,251	)		(582	)		-		13,701			12,101			11,456			9,189			13,533			29,447
Increase (Decrease) in net assets from operations		207			(12,058	)		(577	)		-		29,803			14,539			30,944			11,134			34,237			31,751
Contract Owner Transactions:
Purchase payments received		973			439,221			-			-		3,840			38,971			4,838			18,873			1,471			4,930
Net transfers between Sub-Accounts		-			(1,517,189	)		143,456			-		(28,837	)		25,040			(28,264	)		47,021			(4,358	)		82,712
Withdrawals and surrenders		-			-			-			-		(18,615	)		-			-			-			(903	)		-
Mortality and expense risk, cost of insurance and contract charges		(410	)		(21,757	)		(1,977	)		-		(5,208	)		(8,509	)		(4,209	)		(4,337	)		(7,896	)		(8,231	)
Increase (Decrease) in net assets from contract owner transactions		563			(1,099,725	)		141,479			-		(48,820	)		55,502			(27,635	)		61,557			(11,686	)		79,411
Increase (Decrease) in net assets		770			(1,111,783	)		140,902			-		(19,017	)		70,041			3,309			72,691			22,551			111,162
Net Assets:
Beginning of year		1,197			1,112,980			-			-		182,811			112,770			198,924			126,233			242,585			131,423
End of year	$	1,967		$	1,197		$	140,902		$	-	$	163,794		$	182,811		$	202,233		$	198,924		$	265,136		$	242,585
Unit Activity from Participant Transactions:
Beginning of Year		98			97,961			-			-		11,539			7,689			14,086			9,627			10,520			6,688
Units purchased		80			39,789			-			-		210			2,694			315			1,366			58			240
Units transferred between Sub-Accounts		-			(135,737	)		14,347			-		(1,778	)		1,724			(2,295	)		3,418			(73	)		3,984
Units withdrawn, surrendered or canceled		(33	)		(1,915	)		(197	)		-		(1,444	)		(568	)		(271	)		(325	)		(354	)		(392	)
End of Year		145			98			14,150			-		8,527			11,539			11,835			14,086			10,151			10,520

(1) For the period of June 22, 2007 (commencement of operations of Sub-Account) through December 31, 2007.)

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets - continued

	MF6				MFK				MFC				IG1				IGS
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,
		2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income (loss)	$	622,892	$	924,683	$	3,543	$	84,141	$	5,832	$	4,725	$	21,280	$	7,266	$	161,064	$	-
Net realized gains (losses)		152,425		(822,279)		219		(73,083)		(35)		(6,408)		389,661		156,091		2,019,813		5,756
Change in unrealized gains (losses)		(20,899)		663,724		1,009		14,061		(4,298)		10,211		(111,565)		187,863		(555,957)		1,193,131
Increase (Decrease) in net assets from operations		754,418		766,128		4,771		25,119		1,499		8,528		299,376		351,220		1,624,920		1,198,887
Contract Owner Transactions:
Purchase payments received		251,225		1,452,111		43,201		475,953		2,021		4,178		94,517		69,496		-		1,943,761
Net transfers between Sub-Accounts		(11,409,635)		(3,670,362)		(29,314)		(1,187,433)		(10,170)		(95,453)		(271,099)		580,024		4,117,289		3,754,933
Withdrawals and surrenders		(24,383)		-		(18,222)		(1,112,041)		-		-		-		(2,241)		(38,645)		-
Mortality and expense risk, cost of insurance and contract charges		(154,743)		(304,781)		(3,576)		(30,681)		(2,354)		(2,152)		(51,702)		(39,555)		(176,402)		(29,270)
Increase (Decrease) in net assets from contract owner transactions		(11,337,536)		(2,523,032)		(7,911)		(1,854,202)		(10,503)		(93,427)		(228,284)		607,724		3,902,242		5,669,424
Increase (Decrease) in net assets		(10,583,118)		(1,756,904)		(3,140)		(1,829,083)		(9,004)		(84,899)		71,092		958,944		5,527,162		6,868,311
Net Assets:
Beginning of year		14,157,670		15,914,574		65,152		1,894,235		86,305		171,204		1,936,268		977,324		6,868,311		-
End of year	$	3,574,552	$	14,157,670	$	62,012	$	65,152	$	77,301	$	86,305	$	2,007,360	$	1,936,268	$	12,395,473	$	6,868,311
Unit Activity from Participant Transactions:
Beginning of Year		844,369		984,125		5,329		161,616		5,339		11,655		105,254		66,809		578,150		-
Units purchased		14,640		89,677		3,540		40,848		122		282		4,707		4,402		-		197,688
Units transferred between Sub-Accounts		(649,630)		(210,650)		(2,379)		(99,886)		(610)		(6,455)		(13,546)		36,590		333,209		383,144
Units withdrawn, surrendered or canceled		(10,467)		(18,783)		(1,750)		(97,249)		(142)		(143)		(2,562)		(2,547)		(16,381)		(2,682)
End of Year		198,912		844,369		4,740		5,329		4,709		5,339		93,853		105,254		894,978		578,150

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets

	M11				M1B				MF9				MFL				MMS
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,
		2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income (loss)	$	502	$	96	$	235	$	-	$	226	$	160	$	2,415	$	1,223	$	4,765,539	$	2,355,767
Net realized gains (losses)		6,269		529		20,526		11,693		18,168		7,794		9,857		2,092		-		-
Change in unrealized gains (losses)		8,183		8,931		34,312		1,851		(7,735)		4,211		(936)		9,775		-		-
Increase (Decrease) in net assets from operations		14,954		9,556		55,073		13,544		10,659		12,165		11,336		13,090		4,765,539		2,355,767
Contract Owner Transactions:
Purchase payments received		17,569		21,419		1,070		21,089		963		3,290		61,681		115,421		309,183		29,648
Net transfers between Sub-Accounts		-		-		846,866		(116,820)		(504,484)		487,848		106,639		51,465		29,636,370		54,227,545
Withdrawals and surrenders		(17,078)		-		-		-		(4,061)		-		(93,250)		-		(975,691)		(1,434,168)
Mortality and expense risk, cost of insurance and contract charges		(3,409)		(3,364)		(17,546)		(4,554)		(2,732)		(2,633)		(8,460)		(4,661)		(3,102,867)		(1,796,786)
Increase (Decrease) in net assets from contract owner transactions		(2,918)		18,055		830,390		(100,285)		(510,314)		488,505		66,610		162,225		25,866,995		51,026,239
Increase (Decrease) in net assets		12,036		27,611		885,463		(86,741)		(499,655)		500,670		77,946		175,315		30,632,534		53,382,006
Net Assets:
Beginning of year		129,794		102,183		139,115		225,856		519,635		18,965		203,904		28,589		87,485,335		34,103,329
End of year	$	141,830	$	129,794	$	1,024,578	$	139,115	$	19,980	$	519,635	$	281,850	$	203,904	$	118,117,869	$	87,485,335
Unit Activity from Participant Transactions:
Beginning of Year		13,160		11,155		11,172		19,482		40,634		1,679		14,412		2,288		6,981,655		2,848,202
Units purchased		1,670		2,366		85		1,774		70		267		4,248		8,630		24,370		2,426
Units transferred between Sub-Accounts		-		-		63,982		(9,699)		(38,709)		38,905		7,150		3,843		2,303,918		4,396,803
Units withdrawn, surrendered or canceled		(1,935)		(361)		(1,289)		(385)		(521)		(217)		(6,961)		(349)		(317,784)		(265,776)
End of Year		12,895		13,160		73,950		11,172		1,474		40,634		18,849		14,412		8,992,159		6,981,655

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets - continued

	M10(1)				M1A				RIS				RES				REI
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,
		2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income (loss)	$	-	$	-	$	-	$	-	$	85,622	$	63,800	$	55	$	134	$	3,531	$	2,625
Net realized gains (losses)		(1,415)		-		117,882		26,305		1,188,749		674,418		5,115		832		56,004		2,366
Change in unrealized gains (losses)		(759)		-		(71,992)		157,624		(376,314)		498,932		(3,813)		1,096		21,641		57,143
Increase (Decrease) in net assets from operations		(2,174)		-		45,890		183,929		898,057		1,237,150		1,357		2,062		81,176		62,134
Contract Owner Transactions:
Purchase payments received		42,550		-		56,498		169,074		1,145,323		1,259,000		852		6,909		-		28,150
Net transfers between Sub-Accounts		(16,723)		-		(353,989)		5,937		43,112		2,446,106		-		-		(205,047)		145,435
Withdrawals and surrenders		-		-		(927)		(122,470)		(43,736)		(919,026)		(19,710)		-		-		-
Mortality and expense risk, cost of insurance and contract charges		(2,396)		-		(38,090)		(36,022)		(148,084)		(100,517)		(937)		(2,227)		(16,421)		(15,407)
Increase (Decrease) in net assets from contract owner transactions		23,431		-		(336,508)		16,519		996,615		2,685,563		(19,795)		4,682		(221,468)		158,178
Increase (Decrease) in net assets		21,257		-		(290,618)		200,448		1,894,672		3,922,713		(18,438)		6,744		(140,292)		220,312
Net Assets:
Beginning of year		-		-		1,588,161		1,387,713		6,367,682		2,444,969		25,635		18,891		696,313		476,001
End of year	$	21,257	$	-	$	1,297,543	$	1,588,161	$	8,262,354	$	6,367,682	$	7,197	$	25,635	$	556,021	$	696,313
Unit Activity from Participant Transactions:
Beginning of Year		-		-		107,543		106,088		367,149		179,699		2,005		1,633		48,215		36,361
Units purchased		3,142		-		3,569		12,117		60,900		78,885		61		559		-		2,082
Units transferred between Sub-Accounts		(1,341)		-		(22,711)		634		3,439		168,036		-		-		(13,079)		10,916
Units withdrawn, surrendered or canceled		(176)		-		(2,498)		(11,296)		(10,469)		(59,471)		(1,568)		(187)		(1,055)		(1,144)
End of Year		1,625		-		85,903		107,543		421,019		367,149		498		2,005		34,081		48,215

(1) For the period of December 10, 2007 (commencement of operations of Sub-Account) through December 31, 2007.

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets

	SG1(1)				SI1				TRS				MFJ				MF5
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,
		2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income (loss)	$	-	$	-	$	5,891	$	2,013	$	123,046	$	357,975	$	106,483	$	98,447	$	5,695	$	1,308
Net realized gains (losses)		159,081		7,362		(226)		353		170,313		923,957		171,022		268,774		71,161		2,649
Change in unrealized gains (losses)		(89,136)		42,923		(3,841)		(414)		(140,675)		(498,466)		(145,780)		41,301		29,516		7,435
Increase (Decrease) in net assets from operations		69,945		50,285		1,824		1,952		152,684		783,466		131,725		408,522		106,372		11,392
Contract Owner Transactions:
Purchase payments received		-		75,499		-		17,086		631,251		1,622,601		395,978		867,155		375,408		215,777
Net transfers between Sub-Accounts		(1,027,799)		15,511		75,225		17,539		96,812		(9,235,588)		578,863		(1,883,630)		(81,900)		550
Withdrawals and surrenders		(184)		-		-		-		(2,098)		-		(187,210)		(937,889)		(26,009)		-
Mortality and expense risk, cost of insurance and contract charges		(11,069)		(22,718)		(2,307)		(655)		(75,189)		(210,686)		(85,608)		(86,062)		(33,355)		(8,606)
Increase (Decrease) in net assets from contract owner transactions		(1,039,052)		68,292		72,918		33,970		650,776		(7,823,673)		702,023		(2,040,426)		234,144		207,721
Increase (Decrease) in net assets		(969,107)		118,577		74,742		35,922		803,460		(7,040,207)		833,748		(1,631,904)		340,516		219,113
Net Assets:
Beginning of year		969,107		850,530		36,571		649		3,282,965		10,323,172		3,190,312		4,822,216		248,000		28,887
End of year	$	-	$	969,107	$	111,313	$	36,571	$	4,086,425	$	3,282,965	$	4,024,060	$	3,190,312	$	588,516	$	248,000
Unit Activity from Participant Transactions:
Beginning of Year		82,241		76,777		3,059		58		163,267		576,178		213,459		361,075		10,559		1,628
Units purchased		-		6,545		-		1,507		30,768		87,988		25,685		63,279		12,642		9,332
Units transferred between Sub-Accounts		(81,312)		942		6,149		1,551		4,470		(489,453)		37,206		(135,502)		(1,414)		27
Units withdrawn, surrendered or canceled		(929)		(2,023)		(188)		(57)		(3,695)		(11,446)		(17,644)		(75,393)		(2,299)		(428)
End of Year		-		82,241		9,020		3,059		194,810		163,267		258,706		213,459		19,488		10,559

(1) For the period of January 1, 2007 through June 22, 2007  (closing date of Sub-Account).

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets - continued

	MFE				EIS				MV1				MC1				FSS
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,
		2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income (loss)	$	1,815	$	759	$	2,784	$	60	$	11,430	$	8,014	$	-	$	-	$	6,821	$	-
Net realized gains (losses)		2,693		1,211		5,983		141		54,074		41,629		25,039		31,277		18,219		5
Change in unrealized gains (losses)		48,807		10,432		(9,532)		462		(10,893)		65,396		57,550		(7,268)		(9,544)		9,091
Increase (Decrease) in net assets from operations		53,315		12,402		(765)		663		54,611		115,039		82,589		24,009		15,496		9,096
Contract Owner Transactions:
Purchase payments received		253,478		30,893		-		-		4,042		41,098		-		38,418		67,156		255,927
Net transfers between Sub-Accounts		4,893		50,808		176,917		3,789		243,131		44,709		(82,202)		(81,010)		(2,361)		138,339
Withdrawals and surrenders		-		-		(667)		-		-		-		-		-		-		-
Mortality and expense risk, cost of insurance and contract charges		(6,020)		(2,260)		(1,213)		(41)		(21,660)		(15,102)		(22,916)		(21,363)		(28,793)		(3,182)
Increase (Decrease) in net assets from contract owner transactions		252,351		79,441		175,037		3,748		225,513		70,705		(105,118)		(63,955)		36,002		391,084
Increase (Decrease) in net assets		305,666		91,843		174,272		4,411		280,124		185,744		(22,529)		(39,946)		51,498		400,180
Net Assets:
Beginning of year		101,927		10,084		4,411		-		682,073		496,329		879,294		919,240		400,180		-
End of year	$	407,593	$	101,927	$	178,683	$	4,411	$	962,197	$	682,073	$	856,765	$	879,294	$	451,678	$	400,180
Unit Activity from Participant Transactions:
Beginning of Year		4,856		634		304		-		42,884		37,653		72,669		77,639		27,532		-
Units purchased		10,333		1,759		-		-		236		2,993		-		3,099		4,431		17,993
Units transferred between Sub-Accounts		191		2,588		11,229		308		14,347		3,298		(6,305)		(6,263)		(119)		9,763
Units withdrawn, surrendered or canceled		(243)		(125)		(124)		(4)		(1,281)		(1,060)		(1,751)		(1,806)		(1,884)		(224)
End of Year		15,137		4,856		11,409		304		56,186		42,884		64,613		72,669		29,960		27,532

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets

	NLM				NMC				NPP				NAR				OCF
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,
		2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income (loss)	$	12,838	$	19,847	$	-	$	-	$	191	$	189	$	11,580	$	8,505	$	24,641	$	9,293
Net realized gains (losses)		2,535		(3,189)		1,221,361		681,180		2,911		2,914		93,928		347,667		1,063,666		78,347
Change in unrealized gains (losses)		10,280		9,586		(339,524)		(216,687)		(501)		(2,201)		(50,808)		(181,151)		259,138		1,087,896
Increase (Decrease) in net assets from operations		25,653		26,244		881,837		464,493		2,601		902		54,700		175,021		1,347,445		1,175,536
Contract Owner Transactions:
Purchase payments received		797		13,143		1,633		52,455		1,843		1,871		686,163		497,343		356,972		7,990,806
Net transfers between Sub-Accounts		(99,295)		(6,623)		(5,780,834)		(145,407)		(621)		25,574		(384,939)		1,134,440		(2,863,173)		1,212,649
Withdrawals and surrenders		-		-		(4,294)		-		-		-		-		(1,402,593)		(95,240)		(375,526)
Mortality and expense risk, cost of insurance and contract charges		(8,595)		(12,218)		(33,946)		(61,187)		(1,066)		(614)		(33,459)		(34,033)		(194,602)		(89,457)
Increase (Decrease) in net assets from contract owner transactions		(107,093)		(5,698)		(5,817,441)		(154,139)		156		26,831		267,765		195,157		(2,796,043)		8,738,472
Increase (Decrease) in net assets		(81,440)		20,546		(4,935,604)		310,354		2,757		27,733		322,465		370,178		(1,448,598)		9,914,008
Net Assets:
Beginning of year		647,100		626,554		5,114,338		4,803,984		28,031		298		2,229,796		1,859,618		10,983,702		1,069,694
End of year	$	565,660	$	647,100	$	178,734	$	5,114,338	$	30,788	$	28,031	$	2,552,261	$	2,229,796	$	9,535,104	$	10,983,702
Unit Activity from Participant Transactions:
Beginning of Year		44,193		44,587		306,449		330,149		1,497		20		152,176		141,084		900,873		94,709
Units purchased		53		924		82		3,494		91		105		43,933		37,057		27,750		738,239
Units transferred between Sub-Accounts		(6,801)		(463)		(295,655)		(23,263)		(31)		1,408		(25,316)		80,800		(221,984)		106,554
Units withdrawn, surrendered or canceled		(574)		(855)		(2,116)		(3,931)		(53)		(36)		(2,178)		(106,765)		(21,518)		(38,629)
End of Year		36,871		44,193		8,760		306,449		1,504		1,497		168,615		152,176		685,121		900,873

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets - continued

	OGS				OSC				PMB				PHY				PLD
	Sub-Account				Sub-Account				Sub-Account				Sub-Account				Sub-Account
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,				Year Ended December 31,
		2007		2006		2007		2006		2007		2006		2007		2006		2007		2006
Operations:
Net investment income (loss)	$	27,782	$	4,439	$	6,811	$	2,755	$	4,320	$	1,716	$	310,311	$	175,830	$	4,384	$	164
Net realized gains (losses)		118,268		37,679		100,266		158,743		1,585		1,016		114,850		(6,706)		951		(26)
Change in unrealized gains (losses)		(52,329)		110,688		(151,113)		63,221		(1,655)		581		(277,618)		171,343		2,748		25
Increase (Decrease) in net assets from operations		93,721		152,806		(44,036)		224,719		4,250		3,313		147,543		340,467		8,083		163
Contract Owner Transactions:
Purchase payments received		103,060		40,504		272,030		359,144		-		148		209,381		2,241,640		1,940		1,927
Net transfers between Sub-Accounts		2,508,743		1,235,892		348,391		1,167,396		-		43,661		(2,294,351)		2,762,788		94,460		3,678
Withdrawals and surrenders		(46,494)		-		-		(377,718)		(375)		-		(123,077)		(3,412)		-		-
Mortality and expense risk, cost of insurance and contract charges		(71,051)		(21,181)		(43,000)		(38,867)		(934)		(395)		(92,159)		(46,121)		(2,875)		(316)
Increase (Decrease) in net assets from contract owner transactions		2,494,258		1,255,215		577,421		1,109,955		(1,309)		43,414		(2,300,206)		4,954,895		93,525		5,289
Increase (Decrease) in net assets		2,587,979		1,408,021		533,385		1,334,674		2,941		46,727		(2,152,663)		5,295,362		101,608		5,452
Net Assets:
Beginning of year		1,426,329		18,308		1,898,451		563,777		74,070		27,343		5,645,666		350,304		6,261		809
End of year	$	4,014,308	$	1,426,329	$	2,431,836	$	1,898,451	$	77,011	$	74,070	$	3,493,003	$	5,645,666	$	107,869	$	6,261
Unit Activity from Participant Transactions:
Beginning of Year		90,934		1,374		126,981		43,365		3,552		1,433		339,475		22,982		588		79
Units purchased		6,317		2,891		17,170		24,974		-		8		12,248		143,525		179		188
Units transferred between Sub-Accounts		150,476		88,143		23,252		86,657		-		2,131		(136,085)		176,070		8,916		351
Units withdrawn, surrendered or canceled		(7,011)		(1,474)		(2,754)		(28,015)		(62)		(20)		(12,684)		(3,102)		(260)		(30)
End of Year		240,716		90,934		164,649		126,981		3,490		3,552		202,954		339,475		9,423		588

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets

	PRR						PTR						SCP						RX1						RX2
	Sub-Account						Sub-Account						Sub-Account						Sub-Account						Sub-Account
	Year Ended December 31,						Year Ended December 31,						Year Ended December 31,						Year Ended December 31,						Year Ended December 31,
		2007			2006			2007			2006			2007			2006			2007			2006			2007			2006
Operations:
Net investment income (loss)	$	337,899		$	107,959		$	1,291,910		$	571,269		$	3,128		$	-		$	335		$	7		$	-		$	-
Net realized gains (losses)		(25,511	)		20,037			(124,531	)		34,449			54,712			259			189			11			19			3
Change in unrealized gains (losses)		672,716			(111,891	)		1,407,190			(7,527	)		(100,843	)		2,441			(1,082	)		77			-			15
Increase (Decrease) in net assets from operations		985,104			16,105			2,574,569			598,191			(43,003	)		2,700			(558	)		95			19			18
Contract Owner Transactions:
Purchase payments received		342,868			538,981			1,455,198			11,111,836			92,717			-			6,063			48			76			126
Net transfers between Sub-Accounts		7,138,115			2,131,806			11,215,670			4,316,946			1,111,443			51,778			19,890			-			-			-
Withdrawals and surrenders		(157,013	)		(770,907	)		(614,225	)		(849,753	)		(28,711	)		-			-			-			-			-
Mortality and expense risk, cost of insurance and contract charges		(194,823	)		(105,284	)		(531,901	)		(268,130	)		(33,019	)		(820	)		(1,047	)		(71	)		(73	)		(55	)
Increase (Decrease) in net assets from contract owner transactions		7,129,147			1,794,596			11,524,742			14,310,899			1,142,430			50,958			24,906			(23	)		3			71
Increase (Decrease) in net assets		8,114,251			1,810,701			14,099,311			14,909,090			1,099,427			53,658			24,348			72			22			89
Net Assets:
Beginning of year		3,240,294			1,429,593			19,538,005			4,628,915			53,658			-			584			512			162			73
End of year	$	11,354,545		$	3,240,294		$	33,637,316		$	19,538,005		$	1,153,085		$	53,658		$	24,932		$	584		$	184		$	162
Unit Activity from Participant Transactions:
Beginning of Year		262,724			116,738			1,625,791			399,997			5,068			-			55			58			20			11
Units purchased		25,714			43,242			117,867			955,080			8,010			-			541			5			8			15
Units transferred between Sub-Accounts		570,956			174,567			922,283			366,778			98,734			5,148			1,822			-			-			-
Units withdrawn, surrendered or canceled		(27,387	)		(71,823	)		(92,010	)		(96,064	)		(5,536	)		(80	)		(93	)		(8	)		(8	)		(6	)
End of Year		832,007			262,724			2,573,931			1,625,791			106,276			5,068			2,325			55			20			20

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets - continued

	SCM						SC2						SC1						SC3						SC5
	Sub-Account						Sub-Account						Sub-Account						Sub-Account						Sub-Account
	Year Ended December 31,						Year Ended December 31,						Year Ended December 31,						Year Ended December 31,						Year Ended December 31,
		2007			2006			2007			2006			2007			2006			2007			2006			2007			2006
Operations:
Net investment income (loss)	$	3,907		$	3,959		$	145,661		$	128,811		$	2,114,828		$	1,520,786		$	168,479		$	145,108		$	73,302		$	-
Net realized gains (losses)		30,021			(16,366	)		(18,173	)		6,465			-			-			1,945,928			1,113,938			1,049,415			1,505,723
Change in unrealized gains (losses)		(61,862	)		62,114			(27,146	)		1,568			-			-			(3,690,184	)		1,585,904			(405,037	)		(999,160	)
Increase (Decrease) in net assets from operations		(27,934	)		49,707			100,342			136,844			2,114,828			1,520,786			(1,575,777	)		2,844,950			717,680			506,563
Contract Owner Transactions:
Purchase payments received		63,384			80,427			394,663			361,819			11,458,289			15,372,130			1,372,867			1,214,375			1,097,708			1,102,442
Net transfers between Sub-Accounts		104,661			(153,450	)		(24,409	)		(444,766	)		(1,802,173	)		4,953,454			(394,191	)		1,442,459			506,515			1,117,841
Withdrawals and surrenders		-			-			(37,768	)		(1,124,909	)		(3,122,239	)		(4,204,033	)		(322,675	)		(1,696,350	)		(722,942	)		(2,469,509	)
Mortality and expense risk, cost of insurance and contract charges		(5,916	)		(3,603	)		(151,063	)		(121,289	)		(1,559,468	)		(1,116,813	)		(218,679	)		(144,530	)		(107,959	)		(99,788	)
Increase (Decrease) in net assets from contract owner transactions		162,129			(76,626	)		181,423			(1,329,145	)		4,974,409			15,004,738			437,322			815,954			773,322			(349,014	)
Increase (Decrease) in net assets		134,195			(26,919	)		281,765			(1,192,301	)		7,089,237			16,525,524			(1,138,455	)		3,660,904			1,491,002			157,549
Net Assets:
Beginning of year		299,470			326,389			2,780,629			3,972,930			38,441,677			21,916,153			10,737,626			7,076,722			4,557,755			4,400,206
End of year	$	433,665		$	299,470		$	3,062,394		$	2,780,629		$	45,530,914		$	38,441,677		$	9,599,171		$	10,737,626		$	6,048,757		$	4,557,755
Unit Activity from Participant Transactions:
Beginning of Year		18,059			23,634			188,798			284,245			3,475,542			2,072,605			272,905			249,940			214,216			230,173
Units purchased		3,813			5,360			25,849			24,849			1,027,679			1,446,040			35,964			35,661			46,389			55,239
Units transferred between Sub-Accounts		6,246			(10,692	)		(1,655	)		(31,588	)		(162,064	)		452,998			(12,975	)		48,745			20,345			56,866
Units withdrawn, surrendered or canceled		(354	)		(243	)		(12,592	)		(88,708	)		(415,779	)		(496,101	)		(15,042	)		(61,441	)		(33,601	)		(128,062	)
End of Year		27,764			18,059			200,400			188,798			3,925,378			3,475,542			280,852			272,905			247,349			214,216

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets

	SC7						SCB						TFS						FTI						TSF
	Sub-Account						Sub-Account						Sub-Account						Sub-Account						Sub-Account
	Year Ended December 31,						Year Ended December 31,						Year Ended December 31,						Year Ended December 31,						Year Ended December 31,
		2007			2006			2007			2006			2007			2006			2007			2006			2007			2006
Operations:
Net investment income (loss)	$	570		$	657		$	-		$	-		$	75,170		$	53,828		$	22,490		$	9,405		$	116,580		$	205,121
Net realized gains (losses)		15,896			1,728			121,598			128,955			572,932			62,922			217,313			77,962			381,998			2,102,731
Change in unrealized gains (losses)		(9,148	)		9,559			(141,094	)		106,450			(112,475	)		628,059			(79,664	)		78,590			(298,499	)		(321,424	)
Increase (Decrease) in net assets from operations		7,318			11,944			(19,496	)		235,405			535,627			744,809			160,139			165,957			200,079			1,986,428
Contract Owner Transactions:
Purchase payments received		78,687			57,229			132,928			351,092			717,828			612,101			140,421			207,735			749,075			1,476,276
Net transfers between Sub-Accounts		(83,413	)		14,447			2,375			(557,259	)		48,912			(36,254	)		68,672			(154,461	)		415,935			(7,850,442	)
Withdrawals and surrenders		(1,817	)		-			(323,761	)		(1,041,249	)		(1,705,165	)		-			(440,383	)		(6,483	)		(29,426	)		-
Mortality and expense risk, cost of insurance and contract charges		(6,172	)		(5,889	)		(21,689	)		(34,890	)		(83,674	)		(125,135	)		(29,602	)		(23,689	)		(137,129	)		(223,208	)
Increase (Decrease) in net assets from contract owner transactions		(12,715	)		65,787	)		(210,147			(1,282,306	)		(1,022,099			450,712			(260,892	)		23,102			998,455			(6,597,374	)
Increase (Decrease) in net assets		(5,397	)		77,731			(229,643	)		(1,046,901	)		(486,472			1,195,521			(100,753	)		189,059			1,198,534			(4,610,946	)
Net Assets:
Beginning of year		114,443			36,712			1,039,397			2,086,298			4,466,185			3,270,664			977,901			788,842			7,354,362			11,965,308
End of year	$	109,046		$	114,443		$	809,754		$	1,039,397		$	3,979,713		$	4,466,185		$	877,148		$	977,901		$	8,552,896		$	7,354,362
Unit Activity from Participant Transactions:
Beginning of Year		6,647			2,448			54,552			124,420			285,327			254,286			44,466			43,562			327,236			650,615
Units purchased		4,463			3,638			6,758			19,881			44,540			43,491			6,200			10,620			33,326			72,589
Units transferred between Sub-Accounts		(4,582	)		936			156			(32,160	)		2,970			(3,482	)		3,099			(8,202	)		17,669			(384,647	)
Units withdrawn, surrendered or canceled		(451	)		(375	)		(17,801	)		(57,589	)		(113,256	)		(8,968	)		(19,219	)		(1,514	)		(7,142	)		(11,321	)
End of Year		6,077			6,647			43,665			54,552			219,581			285,327			34,546			44,466			371,089			327,236

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets - continued

	FTG						TBC						REI						RNA						VMG
	Sub-Account						Sub-Account						Sub-Account						Sub-Account						Sub-Account
	Year Ended December 31,						Year Ended December 31,						Year Ended December 31,						Year Ended December 31,						Year Ended December 31,
		2007			2006			2007			2006			2007			2006			2007			2006			2007			2006
Operations:
Net investment income (loss)	$	2,044		$	1,584		$	5,034		$	1,046		$	504,568		$	356,850		$	-		$	47		$	-		$	-
Net realized gains (losses)		15,892			40,511			47,483			5,510			3,780,556			1,553,153			15,716			1,802			1,550,745			9,409
Change in unrealized gains (losses)		(15,541	)		(4,567	)		41,103			23,714			(3,069,334	)		2,116,328			(3,396	)		4,290			44,520			1,022,826
Increase (Decrease) in net assets from operations		2,395			37,528			93,620			30,270			1,215,790			4,026,331			12,320			6,139			1,595,265			1,032,235
Contract Owner Transactions:
Purchase payments received		7,993			26,999			548,370			283,731			2,475,392			8,131,293			3,294			5,542			60,873			2,639,687
Net transfers between Sub-Accounts		(240	)		(95,354	)		(41,010	)		50,629			(3,307,549	)		1,614,514			(7,216	)		20,506			(3,234,762	)		4,845,625
Withdrawals and surrenders		(66,148	)		(246,900	)		-			-			(623,065	)		(771,796	)		-			-			(131,812	)		-
Mortality and expense risk, cost of insurance and contract charges		(8,350	)		(8,787	)		(38,204	)		(14,496	)		(301,687	)		(190,037	)		(3,598	)		(3,057	)		(129,419	)		(46,073	)
Increase (Decrease) in net assets from contract owner transactions		(66,745	)		(324,042	)		469,156			319,864			(1,756,909	)		8,783,974			(7,520	)		22,991			(3,435,120	)		7,439,239
Increase (Decrease) in net assets		(64,350	)		(286,514	)		562,776			350,134			(541,119	)		12,810,305			4,800			29,130			(1,839,855	)		8,471,474
Net Assets:
Beginning of year		147,353			433,867			629,722			279,588			27,046,640			14,236,335			101,778			72,648			8,556,786			85,312
End of year	$	83,003		$	147,353		$	1,192,498		$	629,722		$	26,505,521		$	27,046,640		$	106,578		$	101,778		$	6,716,931		$	8,556,786
Unit Activity from Participant Transactions:
Beginning of Year		6,820			24,456			50,108			24,398			1,485,420			930,172			9,247			7,084			577,966			6,297
Units purchased		357			1,417			39,070			22,758			129,740			508,415			271			517			3,375			201,033
Units transferred between Sub-Accounts		-			(5,192	)		(2,211	)		4,185			(156,534	)		103,166			(707	)		1,941			(196,395	)		373,944
Units withdrawn, surrendered or canceled		(3,423	)		(13,861	)		(2,803	)		(1,233	)		(48,937	)		(56,333	)		(301	)		(295	)		(15,084	)		(3,308	)
End of Year		3,754			6,820			84,164			50,108			1,409,689			1,485,420			8,510			9,247			369,862			577,966

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Statements of Changes in Net Assets

	VCP						VGI						USC(1)
	Sub-Account						Sub-Account						Sub-Account
	Year Ended December 31,						Year Ended December 31,						Year Ended December 31,
		2007			2006			2007			2006			2007			2006
Operations:
Net investment income (loss)	$	8,450		$	3,310		$	10,504		$	262		$	-		$	-
Net realized gains (losses)		11,358			13,551			48,343			1,354			10,530			-
Change in unrealized gains (losses)		(36,175	)		24,903			(43,018	)		40,608			7,013			-
Increase (Decrease) in net assets from operations		(16,367	)		41,764			15,829			42,224			17,543			-
Contract Owner Transactions:
Purchase payments received		224,589			224,568			5,408			4,817			-			-
Net transfers between Sub-Accounts		-			218,138			134,212			344,300			540,979			-
Withdrawals and surrenders		-			-			-			-			-			-
Mortality and expense risk, cost of insurance and contract charges		(14,833	)		(12,144	)		(11,297	)		(3,500	)		(24,811)	)		-
Increase (Decrease) in net assets from contract owner transactions		209,756			430,562			128,323			345,617			516,168			-
Increase (Decrease) in net assets		193,389			472,326			144,152			387,841			533,711			-
Net Assets:
Beginning of year		473,674			1,348			408,176			20,335			-			-
End of year	$	667,063		$	473,674		$	552,328		$	408,176		$	533,711		$	-
Unit Activity from Participant Transactions:
Beginning of Year		34,255			114			28,210			1,633			-			-
Units purchased		16,035			16,757			362			372			-			-
Units transferred between Sub-Accounts		-			18,343			9,315			26,465			50,962			-
Units withdrawn, surrendered or canceled		(1,044	)		(959	)		(754	)		(260	)		(2,214	)		-
End of Year		49,246			34,255			37,133			28,210			48,748			-

(1) For the period of February 23, 2007 (commencement of operations of Sub-Account) through December 31, 2007.

See notes to financial statements

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements

(1) Organization

Sun Life of Canada (U.S.) Variable Account G (the "Variable Account"), a separate account of Sun Life Assurance Company of Canada (U.S.) (the "Sponsor"), was established on July 25, 1996 as a funding vehicle for the variable portion of certain individual variable life insurance contracts. The Variable Account is registered with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940, as amended.

There are three universal life insurance products in the Variable Accounts as follows: Sun Life Corporate VUL, FuturitySM Corporate VUL and Sun Life Large Case VUL.

The assets of the Variable Account are divided into Sub-Accounts. Each Sub-Account is invested in shares of a single corresponding investment portfolio of one of the following mutual funds:

AIM V.I. Basic Value Fund, AIM V.I. Capital Appreciation Fund, AIM V.I. Core Equity Fund, AIM V.I. Dynamics Fund, AIM V.I. Mid Cap Core Equity Fund, AIM V.I. Small Cap Equity Fund, AIM V.I. Small Company Growth Fund, AIM V.I. International Growth Fund, Alger American MidCap Growth Portfolio, AllianceBernstein VP Global Technology Fund, AllianceBernstein VP Growth and Income Fund, AllianceBernstein VP International Growth Portfolio, AllianceBernstein VP Small Cap Growth Portfolio, AllianceBernstein VPS International Value Portolio, Delaware VIP Growth Opportunities Series, Delaware VIP REIT Series, Delaware VIP Small Cap Value Series, Delaware VIP Trend Series (SC), Dreyfus Emerging Leaders Portfolio, Dreyfus MidCap Stock Portfolio, Dreyfus VIF Appreciation Portfolio, Dreyfus VIF Developing Leaders Portfolio, Dreyfus VIF Growth and Income Portfolio, Dreyfus VIF Quality Bond Portfolio, Dreyfus Stock Index Fund, DWS Dreman High Return Equity VIP (Class A), DWS Small Cap Index VIP (Class A), DWS Small Cap Index VIP (Class B), DWS Dreman Small Cap Value VIP (Class A), Fidelity VIP Asset Manager: Growth Portfolio, Fidelity VIP Contrafund Portfolio, Fidelity VIP Contrafund Portfolio SC 2, Fidelity VIP Equity Income Portfolio, Fidelity VIP Growth & Income Portfolio, Fidelity VIP Growth Portfolio, Fidelity VIP Growth Portfolio SC 2, Fidelity VIP High Income Portfolio, Fidelity VIP Index 500 Portfolio, Fidelity VIP Investment Grade Bond Portfolio, Fidelity VIP Mid Cap Portfolio, Fidelity VIP Money Market Portfolio, Fidelity VIP Money Market Portfolio SC, Fidelity VIP Overseas Portfolio, Fidelity VIP Overseas Portfolio SC 2, Franklin Global Real Estate Securities Fund, Franklin Small-Mid Cap Growth Securities Fund, GSAM VIT Structured U.S. Equity Fund, GSAM VIT Capital Growth Fund, Janus Aspen Series Mid Cap Value Portfolio, J.P. Morgan Bond Portfolio, J.P. Morgan Small Company Portfolio, J.P. Morgan U.S. Large Cap Core Equity Portfolio, Lord Abbett Series Fund Growth & Income Portfolio, Lord Abbett Series Fund International Portfolio, Lord Abbett Series Fund Mid Cap Value Portfolio, Mercury Value Opportunities V.I. Fund, MFS/Sun Life Bond Series SC, MFS/Sun Life Capial Opportunities Series SC, MFS/Sun Life Capital Appreciation Series, MFS/Sun Life Capital Appreciation Series SC, MFS/Sun Life Core Equity series SC, MFS/Sun Life Emerging Growth Series, MFS/Sun Life Emerging Growth Series SC, MFS/Sun Life Global Growth Series, MFS/Sun Life Government Securities Series, MFS/Sun Life Government Securities Series SC, MFS/Sun Life High Yield Series SC, MFS/Sun Life International Growth SC, MFS/Sun Life International Growth Series, MFS/Sun Life Massachusetts Investors Growth Stock Series, MFS/Sun Life Massachusetts Investors Growth Stock Series SC, MFS/Sun Life Massachusetts Investors Trust Series, MFS/Sun Life Massachusetts Investors Trust Series SC, MFS/Sun Life Money Market Series, , MFS/Sun Life New Discovery Series, MFS/Sun Life New Discovery Series SC, MFS/Sun Life Research International Series, MFS/Sun Life Research Series, MFS/Sun Life Research Series SC, MFS/Sun Life Strategic Growth Series, MFS/Sun Life Strategic Income Series SC, MFS/Sun Life Total Return Series, MFS/Sun Life Total Return Series SC, MFS/Sun Life Utilities Series, MFS/Sun Life Utilities Series SC, MFS/Sun Life Value Series, MFS/Sun Life Value Series SC, MFS/Sun Life Mid Cap Growth Series SC, Mutual Shares Securities Fund, Neuberger Berman AMT Limited Maturity Bond Portfolio, Neuberger Berman AMT Mid-Cap Growth Portfolio, Neuberger Berman AMT Partners Portfolio, Neuberger Berman AMT Regency Portfolio, Oppenheimer Capital Appreciation Fund/VA, Oppenheimer Global Securities Fund/VA, Oppenheimer Main Street Small Cap Fund®/VA, PIMCO VIT Emerging Markets Bond Portfolio, PIMCO VIT High Yield Portfolio, PIMCO VIT Low Duration Portfolio, PIMCO VIT Real Return Portfolio, PIMCO VIT Total Return Portfolio, Royce Capital Fund - Small Cap Portfolio, Rydex VT Nova Fund, Rydex VT OTC Fund®, Sun CapitalSM All Cap Fund, Sun Capital Investment Grade Bond Fund, Sun CapitalSM Money Market Fund, Sun Capital Real Estate Fund, SCSM Blue Chip Mid Cap Fund, SCSM Davis Venture Value Fund, SCSM Oppenheimer Main Street Small Cap Fund, Templeton Foreign Securities Fund (Class 1), Templeton Foreign Securities Fund (Class 2), Templeton Growth Securities Fund (Class 1), Templeton Growth Securities Fund (Class 2), T. Rowe Price Blue Chip Growth Portfolio, T. Rowe Price Equity Income Portfolio, T. Rowe Price New America Growth Portfolio, Van Kampen UIF Mid Cap Growth Portfolio, Van Kampen LIT Comstock Portfolio, Van Kampen LIT Growth and Income Portfolio, Wagner U.S Smaller Companies.

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements

(1) Organization - continued

Massachusetts Financial Services Company, an affiliate of the Sponsor, is the investment adviser to MFS/Sun Life Series Trust.  Sun Capital Advisers, Inc., an affiliate of the Sponsor, is the investment adviser to Sun Capital Advisers Trust.

The Variable Account exists in accordance with the regulations of the Delaware Insurance Department.  Under applicable insurance laws, the assets and liabilities of the Variable Account are clearly identified and distinguished from the Sponsor's other assets and liabilities.  Assets applicable to the Variable Account are not chargeable with liabilities arising out of any other business the Sponsor may conduct.

(2) Significant Accounting Policies

General

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Sponsor's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of investment income and realized and unrealized gains or losses.  Actual results could differ from those estimates.

Investment Valuations

Investments in shares of an investment portfolio of the Funds are recorded at their net asset value.  The Funds value their investment securities at fair value.  Transactions are recorded on a trade date basis.  Realized gains and losses on sales of shares of the Funds are computed on the basis of the identified cost of the investment sold.  Dividend income and realized gain distributions received by the Sub-Accounts are reinvested in additional Fund shares and are recognized on the ex-dividend date.

Federal Income Tax Status

The operations of the Variable Account are part of the operations of the Sponsor and are not taxed separately.  The Sponsor qualifies for the federal income tax treatment granted to life insurance companies under Subchapter L of the Internal Revenue Code.  Under existing federal income tax law, investment income and capital gains earned by the Variable Account on contract owner reserves are not currently subject to tax by the contract owner.

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements - continued

(3) Contract Charges and Related Party Transactions

Sales Load Charges – Charges are deducted from the premium before being allocated by Sub-Account.  For the Sun Life Corporate VUL and FuturitySM Corporate VUL products, the expense charges consist of premium tax, federal Deferred Acquisition Cost ("DAC") tax and the sales load.  The premium tax ranges from 2% to 4% of the premium in most states (Kentucky charges 7%).  The DAC tax charge is 1.25% of the premium. The sales load is 8.75% of the premium up to target premium and 2.25% of the premium in excess of the target premium.  For the Sun Life Large Case VUL product, the expense charges consist of only premium expense load.  The premium expense load ranges from 0% to 9% of the premium up to target premium and from 0% to 3.25% of the premium in excess of the target premium.

Mortality and Expense Risk Charges – A mortality and expense risk charge based on the contract value is deducted from Sub-Account, through a reduction of units, for the mortality and expense risk assumed by the Sponsor. Daily deductions are made from each Sub-Account at an effective annual rate ranging from 0.15% to 0.60% for policy years 1 through 10, 0.10% to 0.25% for policy years 11 through 20, and 0.10% to 0.20% for policy years 21 and beyond.

Cost of Insurance – A monthly cost of insurance is deducted from each Sub-Account to cover anticipated costs of providing insurance coverage through a reduction of units. This charge is based on the length of time a policy has been in force and other factors, including age, sex and rating class of each insured and will not exceed the guaranteed maximum monthly cost of insurance rates based on the 1980 Commissioner’s Standard Ordinary smoker and non-smoker mortality tables.

Other Contract Charges – A monthly administration charge is deducted from the value of each contract at the beginning of each month, through the reduction of units, to cover certain administration expenses. For the Sun Life Corporate VUL Corporate VUL and the FuturitySM Corporate VUL products, the monthly charge is $13.75 per policy for the first policy year and $7.50 for months thereafter. For the Sun Life Large Case VUL products, a monthly charge is $5.00 per policy for each policy month. The Sun Life Large Case VUL products also charges a deferred expense load applied to premium. The maximum charge will not exceed 0.50% of premium.

Massachusetts Financial Services Company is the investment adviser to the MFS/Sun Life Series Trust.  Sun Capital Advisers LLC is the investment adviser to Sun Capital Advisers Trust. Both are affiliates of the Sponsor and charge management fees at an effective annual rate ranging from 0.50% to 0.90% and 0.50% to 0.95% of average net assets value, respectively.

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements – continued

(4) Investment Purchases and Sales

The following table shows the aggregate cost of fund shares purchased and proceeds from the sales of fund shares for each Sub-Account for the year ended December 31, 2006:

	Purchases		Sales
AIM V.I. Basic Value Fund Sub-Account (AI6)	$	22,879	$	5,251
AIM V.I. Capital Appreciation Fund Sub-Account (AI1)		534		44,571
AIM V.I. Core Equity Fund Sub-Account (AI3)		8,832		20,630
AIM V.I. Dynamics Fund Sub-Account (IV1)		17,301		671
AIM V.I. Mid Cap Core Equity Fund Sub-Account (A22)		210,496		331,312
AIM V.I. Small Cap Equity Fund Sub-Account (ASC)		225,815		143,138
AIM V.I. Small Company Growth Fund Sub-Account (IV2)		68,892		216,856
AIM V.I. International Growth Fund Sub-Account (AI4)		554,164		21,282
Alger American MidCap Growth Portfolio Sub-Account (AL4)		1,650,555		191,028
AllianceBernstein VP Global Technology Fund Sub-Account (AN2)		17,973		10,522
AllianceBernstein VP Growth and Income Fund Sub-Account (AN3)		95,517		447,766
AllianceBernstein VP International Growth Portfolio Sub-Account (AN4)		1,017,256		344,595
AllianceBernstein VP Small Cap Growth Portfolio Sub-Account (AN5)		112,150		22,261
AllianceBernstein VPS International Value Portolio Sub-Account (IVP)		15,044,033		2,784,400
Delaware VIP Growth Opportunities Series Sub-Account (DGO)		95,781		60,679
Delaware VIP REIT Series Sub-Account (DRS)		629,520		785,191
Delaware VIP Small Cap Value Series Sub-Account (DSV)		1,223,001		621,285
Delaware VIP Trend Series: SC Sub-Account (DTS)		59,894		20,560
Dreyfus Emerging Leaders Portfolio Sub-Account (DEL)		64,225		339,491
Dreyfus MidCap Stock Portfolio Sub-Account (DMC)		53,554		20,153
Dreyfus VIF Appreciation Portfolio Sub-Account (DCA)		417,213		23,801
Dreyfus VIF Developing Leaders Portfolio Sub-Account (DSC)		421,327		2,156,967
Dreyfus VIF Growth and Income Portfolio Sub-Account (DGI)		3,992		4,715
Dreyfus VIF Quality Bond Portfolio Sub-Account (DQB)		612,613		944,324
Dreyfus Stock Index Fund Sub-Account (DSI)		23,653,877		12,137,511
DWS Dreman High Return Equity VIP: Class A Sub-Account (SHR)		175,868		72,529
DWS Small Cap Index VIP: Class A Sub-Account (SSI)		1,940,388		178,810
DWS Small Cap Index VIP: Class B Sub-Account (SSC)		531,328		393,334
DWS Dreman Small Cap Value VIP: Class A Sub-Account (SCV)		310,893		3,032
Fidelity VIP Asset Manager: Growth Portfolio Sub-Account (AMG)		2,601		2,969
Fidelity VIP Contrafund ® Portfolio Sub-Account (FCN)		13,147,930		6,012,508
Fidelity VIP Contrafund ® Portfolio SC 2 Sub-Account (FL1)		1,361,824		689,581
Fidelity VIP Equity Income Portfolio Sub-Account (FEI)		317,492		59,449
Fidelity VIP Equity Income Portfolio Sub-Account (FE2)		504,572		8,843
Fidelity VIP Growth & Income Portfolio Sub-Account (FVG)		43,380		18,718
Fidelity VIP Growth Portfolio Sub-Account (FGP)		76,556		46,962
Fidelity VIP Growth Portfolio SC 2 Sub-Account (FL3)		253,670		555,146
Fidelity VIP High Income Portfolio Sub-Account (FHI)		3,354,774		2,719,200
Fidelity VIP Index 500 Portfolio Sub-Account (FIP)		1,365		683
Fidelity VIP Investment Grade Bond Portfolio Sub-Account (FIG)		12,105,970		393,136
Fidelity VIP Mid Cap Portfolio Sub-Account (FMC)		136,919		21,182
Fidelity VIP Money Market Portfolio Sub-Account (FMM)		8,198		-
Fidelity VIP Money Market Portfolio SC Sub-Account (FL5)		49,180,131		53,382,611
Fidelity VIP Overseas Portfolio Sub-Account (FOF)		180,237		2,763
Fidelity VIP Overseas Portfolio SC 2 Sub-Account (FL2)		282,665		89,430
Franklin Global Real Estate Securities Fund Sub-Account (FRE)		201,885		328,002
Franklin Small-Mid Cap Growth Securities Fund Sub-Account (FSC)		244,436		635,427
GSAM VIT Structured U.S. Equity Fund Sub-Account (GS3)		50,555		9,181
GSAM VIT Capital Growth Fund Sub-Account (GS7)		52,501		29,939
Janus Aspen Series Mid Cap Value Portfolio Sub-Account (MVP)		3,666,065		1,183,921
J.P. Morgan Bond Portfolio Sub-Account (JBP)		1,215,389		464,539
J.P. Morgan Small Company Portfolio Sub-Account (JP3)		66,342		127,727

Sun Life of Canada Sub-Account (U.S.) Variable Account G

Notes to Financial Statements – continued

(4) Investment Purchases and Sales - continued

	Purchases		Sales
J.P. Morgan U.S. Large Cap Core Equity Portfolio Sub-Account (JP1)	$	1,863	$	2,457
Lord Abbett Series Fund Growth & Income Portfolio Sub-Account (LA1)		1,125,178		1,342,101
Lord Abbett Series Fund International Portfolio Sub-Account (LA3)		217,536		144,233
Lord Abbett Series Fund Mid Cap Value Portfolio Sub-Account (LA2)		2,637,282		1,038,775
Mercury Value Opportunities V.I. Fund Sub-Account (MLV)		1,002,407		377,978
MFS/Sun Life Bond Series SC Sub-Account (MF7)		77,449		80,450
MFS/Sun Life Capial Opportunities Series SC Sub-Account (CO1)		477		183,070
MFS/Sun Life Capital Appreciation Series Sub-Account (MF1)		1,022		2,861
MFS/Sun Life Capital Appreciation Series SC Sub-Account (MFD)		973		411
MFS/Sun Life Core Equity Series SC Sub-Account (RG1)		143,448		1,969
MFS/Sun Life Emerging Growth Series Sub-Account (MF2)		17,198		66,018
MFS/Sun Life Emerging Growth Series SC Sub-Account (MFF)		59,950		87,585
MFS/Sun Life Global Growth Series Sub-Account (GGR)		53,442		60,570
MFS/Sun Life Government Securities Series Sub-Account (MF6)		893,611		11,608,254
MFS/Sun Life Government Securities Series SC Sub-Account (MFK)		45,783		50,152
MFS/Sun Life High Yield Series SC Sub-Account (MFC)		14,420		19,091
MFS/Sun Life International Growth Series SC Sub-Account (IG1)		389,549		329,214
MFS/Sun Life International Growth Series Sub-Account (IGS)		8,302,088		2,540,748
MFS/Sun Life Massachusetts Investors Growth Stock Series Sub-Account (M11)		17,850		20,266
MFS/Sun Life Massachusetts Investors Growth Stock Series SC Sub-Account (M1B)		935,294		104,669
MFS/Sun Life Massachusetts Investors Trust Series Sub-Account (MF9)		1,092		511,180
MFS/Sun Life Massachusetts Investors Trust Series SC Sub-Account (MFL)		169,198		100,173
MFS/Sun Life Money Market Series Sub-Account (MMS)		34,814,496		4,181,962
MFS/Sun Life New Discovery Series Sub-Account (M10)		86,985		62,456
MFS/Sun Life New Discovery Series SC Sub-Account (M1A)		95,293		392,918
MFS/Sun Life Research International Series Sub-Account (RIS)		3,169,321		1,246,000
MFS/Sun Life Research Series Sub-Account (RES)		850		20,591
MFS/Sun Life Research Series SC Sub-Account (RE1)		3,531		221,468
MFS/Sun Life Strategic Growth Series Sub-Account (SG1)		-		1,039,052
MFS/Sun Life Strategic Income SC Sub-Account (SI1)		84,868		6,059
MFS/Sun Life Total Return Series Sub-Account (TRS)		1,960,483		1,020,796
MFS/Sun Life Total Return Series SC Sub-Account (MFJ)		1,316,421		352,884
MFS/Sun Life Utilities Series Sub-Account (MF5)		554,074		314,234
MFS/Sun Life Utilities Series SC Sub-Account (MFE)		262,143		7,975
MFS/Sun Life Value Series Sub-Account (EIS)		253,901		65,967
MFS/Sun Life Value Series SC Sub-Account (MV1)		306,990		21,565
MFS/Sun Life Mid Cap Growth Series SC Sub-Account (MC1)		-		105,117
Mutual Shares Securities Fund Sub-Account (FSS)		129,780		72,123
Neuberger Berman AMT Limited Maturity Bond Portfolio Sub-Account (NLM)		157,883		252,139
Neuberger Berman AMT Mid-Cap Growth Portfolio Sub-Account (NMC)		26,703		5,844,144
Neuberger Berman AMT Partners Portfolio Sub-Account (NPP)		4,947		1,607
Neuberger Berman AMT Regency Portfolio Sub-Account (NAR)		910,750		561,819
Oppenheimer Capital Appreciation Fund/VA Sub-Account (OCF)		4,331,969		7,103,373
Oppenheimer Global Securities Fund/VA Sub-Account (OGS)		2,826,275		203,246
Oppenheimer Main Street Small Cap Fund®/VA Sub-Account (OSC)		932,009		275,145
PIMCO VIT Emerging Markets Bond Portfolio Sub-Account (PMB)		5,834		1,309
PIMCO VIT High Yield Portfolio Sub-Account (PHY)		2,665,348		4,655,245
PIMCO VIT Low Duration Portfolio Sub-Account (PLD)		249,772		151,862
PIMCO VIT Real Return Portfolio Sub-Account (PRR)		9,340,344		1,847,983
PIMCO VIT Total Return Portfolio Sub-Account (PTR)		28,384,477		15,567,825
Royce Capital Fund - Small Cap Portfolio Sub-Account (SCP)		1,395,337		197,892

Sun Life of Canada Sub-Account (U.S.) Variable Account G

Notes to Financial Statements – continued

(4) Investment Purchases and Sales - continued

	Purchases		Sales
Rydex VT Nova Fund Sub-Account (RX1)	$	26,286	$	1,048
Rydex VT OTC Fund Sub-Account (RX2)		73		70
Sun CapitalSM All Cap Fund Sub-Account (SCM)		214,796		19,791
Sun Capital Investment Grade Bond Fund ® Sub-Account (SC2)		636,726		309,641
Sun CapitalSM Money Market Fund Sub-Account (SC1)		14,681,207		7,591,968
Sun Capital Real Estate Fund ® Sub-Account (SC3)		4,920,463		2,911,623
SCSM Blue Chip Mid Cap Fund Sub-Account (SC5)		3,403,937		1,448,392
SCSM Davis Venture Value Fund Sub-Account (SC7)		79,175		91,319
SCSM Oppenheimer Main Street Small Cap Fund Sub-Account (SCB)		289,955		368,955
Templeton Foreign Securities Fund: Class 1 Sub-Account (TFS)		941,704		1,732,984
Templeton Foreign Securities Fund: Class 2 Sub-Account (FTI)		388,673		575,777
Templeton Growth Securities Fund: Class 1 Sub-Account (TSF)		1,746,241		303,067
Templeton Growth Securities Fund: Class 2 Sub-Account (FTG)		15,205		73,385
T. Rowe Price Blue Chip Growth Portfolio Sub-Account (TBC)		762,399		288,210
T. Rowe Price Equity Income Portfolio Sub-Account (REI)		13,832,784		13,434,705
T. Rowe Price New America Growth Portfolio Sub-Account (RNA)		38,512		35,560
Van Kampen UIF Mid Cap Growth Portfolio Sub-Account (VMG)		2,930,603		6,005,488
Van Kampen LIT Comstock Portfolio Sub-Account (VCP)		242,505		13,888
Van Kampen LIT Growth and Income Portfolio Sub-Account (VGI)		431,511		268,124
Wanger U.S. Smaller Companies (USC)		871,905		352,502
Total	$	292,527,882	$	189,422,060

52

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements – continued

(5) Financial Highlights

A summary of unit values and units outstanding for variable life insurance contracts, investment income and total return for each of the years in the period ended December 31, 2007 is shown below. No expense ratio is shown as there are no expenses that result in a direct reduction to unit values. Charges made directly to Policyholder accounts through the redemption of units and expenses of the underlying funds are excluded from the expense ratio calculation.

								Investment
				Net Assets				Income as a
		Units		Unit				% of Average			Total
Sub-Accounts		Outstanding		Value		(000s)		Net Assets(1)			Return(2)
AI6	December 31, 2007		2,932	$	13.1185	$	38		0.68	%		1.54	%
	December 31, 2006		1,821		12.9191		24		0.42			0.13
	December 31, 2005		915		11.4122		10		0.00			0.06
AI1	December 31, 2007		212,397		12.8856		2,737		-			12.01
	December 31, 2006		215,990		11.5036		2,485		0.07			6.30
	December 31, 2005		189,249		10.8218		2,048		0.06			8.84
	December 31, 2004		174,503		9.9433		1,735		-			6.63
	December 31, 2003		146,985		9.3254		1,371		-			29.52
AI3	December 31, 2007		2,288		17.4338		41		1.13			8.12
	December 31, 2006		3,033		16.1250		50		0.56			16.70
	December 31, 2005		818		13.8173		11		1.60			5.31
	December 31, 2004		617		13.1203		8		1.30			8.97
	December 31, 2003		353		12.0405		4		1.40			24.42
IV1(3)	December 31, 2007		860		20.15		17		-			12.19
A22	December 31, 2007		14,365		14.2192		204		0.30			9.55
	December 31, 2006		25,427		12.9798		330		0.70			11.24
	December 31, 2005		59,376		11.6681		693		0.52			7.62
ASC(4)	December 31, 2007		8,322		9.98		83		0.05			(0.20)
IV2	December 31, 2007		-		-		-		-			-
	December 31, 2006		10,541		16.07		169		-			14.13
	December 31, 2005		78,833		14.08		1,110		-			5.19
	December 31, 2004		43,896		13.3883		588		-			13.90
	December 31, 2003		17,990		11.7600		212		-			33.43
AI4	December 31, 2007		54,765		24.6047		1,348		0.49			14.72
	December 31, 2006		31,874		21.4477		684		1.17			28.23
	December 31, 2005		24,516		16.7255		410		0.87			17.93
	December 31, 2004		13,682		14.1829		194		0.83			24.00
	December 31, 2003		5,825		11.4374		67		1.55			29.06
AL4	December 31, 2007		105,767		17.1679		1,816		-			31.56
	December 31, 2006		17,936		13.0498		234		-			10.14
	December 31, 2005		61		11.8482		1		-			18.48

(1) These amounts represent the dividends, excluding distributions of capital gains, received by the Sub-Account from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying fund in which the Sub-Account invests.

(2) These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period.

(3) Commenced on April 15, 2007.

(4) Commenced on May 4, 2007.

53

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements – continued

(5) Financial Highlights - continued

A summary of unit values and units outstanding for variable life insurance contracts, investment income and total return for each of the years in the period ended December 31, 2007 is shown below. No expense ratio is shown as there are no expenses that result in a direct reduction to unit values. Charges made directly to Policyholder accounts through the redemption of units and expenses of the underlying funds are excluded from the expense ratio calculation.

								Investment
				Net Assets				Income as a
		Units		Unit				% of Average			Total
Sub-Accounts		Outstanding		Value		(000s)		Net Assets(1)			Return(2)
AN2	December 31, 2007		1,794	$	16.2610	$	29		0.00	%		19.89	%
	December 31, 2006		1,270		13.5628		17		-			8.38
	December 31, 2005		1,935		12.5140		24		-			3.65
	December 31, 2004		1,986		12.0736		24		-			5.09
	December 31, 2003		370		11.4892		4		-			43.79
AN3	December 31, 2007		8,911		16.2818		145		1.30			4.86
	December 31, 2006		32,609		15.5272		506		1.29			16.98
	December 31, 2005		46,915		13.2730		623		1.29			4.60
	December 31, 2004		30,073		12.6898		382		0.75			11.22
	December 31, 2003		4,511		11.4095		52		0.90			32.18
AN4	December 31, 2007		56,357		34.1062		1,922		1.36			17.78
	December 31, 2006		54,460		28.9576		1,577		0.66			26.70
	December 31, 2005		38,455		22.8557		879		0.36			20.55
	December 31, 2004		15,219		18.9594		289		0.18			23.97
	December 31, 2003		8		15.2932		-		-			52.93
AN5	December 31, 2007		8,114		19.4494		158		-			13.70
	December 31, 2006		3,187		17.1063		55		-			10.50
IVP	December 31, 2007		1,459,441		13.6743		19,957		1.25			5.84
	December 31, 2006		613,578		12.9197		7,927		0.14			29.20
DGO	December 31, 2007		5,948		15.2571		91		-			12.96
	December 31, 2006		4,250		13.5072		57		-			6.36
	December 31, 2005		6,474		12.7000		82		-			11.40
DRS	December 31, 2007		20,548		16.4247		337		1.46			(13.94)
	December 31, 2006		38,838		19.0849		741		0.77			32.63
	December 31, 2005		19,485		14.3899		280		-			7.17
DSV	December 31, 2007		138,008		14.2990		1,973		0.48			(6.62)
	December 31, 2006		105,531		15.3127		1,616		0.24			16.19
	December 31, 2005		26,821		13.1793		353		-			9.42
DTS	December 31, 2007		12,237		13.5295		166		-			10.75
	December 31, 2006		9,079		12.2164		111		-			7.59

(1) These amounts represent the dividends, excluding distributions of capital gains, received by the Sub-Account from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying fund in which the Sub-Account invests.

(2) These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period.

54

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements – continued

(5) Financial Highlights - continued

A summary of unit values and units outstanding for variable life insurance contracts, investment income and total return for each of the years in the period ended December 31, 2007 is shown below. No expense ratio is shown as there are no expenses that result in a direct reduction to unit values. Charges made directly to Policyholder accounts through the redemption of units and expenses of the underlying funds are excluded from the expense ratio calculation.

								Investment
				Net Assets				Income as a
		Units		Unit				% of Average			Total
Sub-Accounts		Outstanding		Value		(000s)		Net Assets(1)			Return(2)
DEL	December 31, 2007		-	$	-	$	-		0.00	%		0.00	%
	December 31, 2006		25,785		12.8359		331		-			8.24
DMC	December 31, 2007		4,038		12.5859		51		0.23			1.50
	December 31, 2006		1,803		12.4002		22		0.36			7.75
	December 31, 2005		1,562		11.5084		18		-			15.08
DCA	December 31, 2007		28,995		15.3285		444		0.19			7.13
	December 31, 2006		1,708		14.3079		24		1.54			16.48
	December 31, 2005		1,535		12.2839		19		0.04			4.38
	December 31, 2004		24,514		11.7687		289		2.78			5.05
	December 31, 2003		45,304		11.2034		501		0.02			21.17
DSC	December 31, 2007		202,961		12.9962		2,637		0.64			(11.06	)
	December 31, 2006		348,103		14.6122		5,086		0.42			3.77
	December 31, 2005		476,208		14.0812		6,705		-			5.80
	December 31, 2004		352,886		13.3093		4,696		0.00			0.11
	December 31, 2003		291,499		11.9537		3,484		0.02			31.69
DGI	December 31, 2007		1,186		13.6048		16		0.76			8.45
	December 31, 2006		1,315		12.5453		16		0.54			14.23
	December 31, 2005		1,188		10.9822		13		1.36			3.35
	December 31, 2004		1,094		10.6260		12		1.29			7.47
	December 31, 2003		953		9.8876		9		0.11			26.57
DQB	December 31, 2007		417,322		15.7163		6,557		4.81			3.54
	December 31, 2006		459,173		15.1787		6,968		4.59			4.23
	December 31, 2005		422,644		14.5623		6,153		3.62			2.48
	December 31, 2004		395,218		14.2101		5,614		4.06			3.37
	December 31, 2003		416,146		13.7471		5,722		3.92			4.94
DSI	December 31, 2007		5,698,584		12.2060		69,547		1.75			5.26
	December 31, 2006		4,860,856		11.5965		56,379		1.80			15.50
	December 31, 2005		3,603,696		10.0405		36,191		1.71			4.69
	December 31, 2004		2,152,440		9.5906		20,651		1.86			10.64
	December 31, 2003		1,994,466		8.6683		17,288		1.54			28.36
SHR(3)	December 31, 2007		6,772		14.1148		96		1.24			(1.86	)
SSI	December 31, 2007		259,084		13.9182		3,606		0.86			(1.90	)
	December 31, 2006		155,599		14.1875		2,208		0.58			17.49
	December 31, 2005		126,501		12.0754		1,528		0.83			4.26

(1) These amounts represent the dividends, excluding distributions of capital gains, received by the Sub-Account from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying fund in which the Sub-Account invests.

(2) These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period.

(3) Commenced on February 26, 2007.

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements – continued

(5) Financial Highlights - continued

A summary of unit values and units outstanding for variable life insurance contracts, investment income and total return for each of the years in the period ended December 31, 2007 is shown below. No expense ratio is shown as there are no expenses that result in a direct reduction to unit values. Charges made directly to Policyholder accounts through the redemption of units and expenses of the underlying funds are excluded from the expense ratio calculation.

								Investment
				Net Assets				Income as a
		Units		Unit				% of Average			Total
Sub-Accounts		Outstanding		Value		(000s)		Net Assets(1)			Return(2)
SSC	December 31, 2007		101,087	$	19.2954	$	1,944		0.59	%		-2.16	%
	December 31, 2006		101,506		19.7211		2,002		0.40			17.19
	December 31, 2005		81,411		16.8283		1,370		0.37			3.99
	December 31, 2004		46,571		16.1824		754		0.12			17.48
	December 31, 2003		7,000		13.7747		96		-			37.75
SCV	December 31, 2007		26,622		14.9024		397		0.80			3.06
	December 31, 2006		7,466		14.4603		108		0.54			25.06
	December 31, 2005		488		11.5625		6		-			15.63
AMG	December 31, 2007		2,908		14.1857		35		-			18.97
	December 31, 2006		2,940		11.9241		31		-			6.99
	December 31, 2005		1,848		11.1454		17		-			3.89
	December 31, 2004		21,978		10.7281		236		1.65			5.98
	December 31, 2003		14,671		10.1225		149		2.16			23.34
FCN	December 31, 2007		483,601		30.1521		14,581		0.92			17.59
	December 31, 2006		338,660		25.6413		8,684		1.39			11.72
	December 31, 2005		126,315		22.9521		2,899		0.24			16.94
	December 31, 2004		83,724		19.6278		1,643		0.21			15.48
	December 31, 2003		42,586		16.9973		724		0.38			28.46
FL1	December 31, 2007		125,764		21.8671		2,737		0.74			17.30
	December 31, 2006		125,144		18.6416		2,333		1.06			11.43
	December 31, 2005		308,911		16.7292		5,168		0.09			16.65
	December 31, 2004		189,838		14.3418		2,723		0.09			15.16
	December 31, 2003		48,020		12.4539		598		0.11			28.20
FEI	December 31, 2007		145,662		20.8160		3,032		1.83			1.53
	December 31, 2006		148,177		20.5021		3,038		2.73			20.19
	December 31, 2005		600,228		17.0576		10,239		1.38			5.87
	December 31, 2004		1,056,327		16.1126		17,020		1.48			11.53
	December 31, 2003		912,163		14.4470		13,178		1.49			30.33
FE2(3)	December 31, 2007		42,111		10.8075		455		4.29			8.07
FVG	December 31, 2007		5,485		14.3499		79		1.68			12.12
	December 31, 2006		3,910		12.7981		50		1.07			13.18
	December 31, 2005		2,234		11.3080		25		-			7.63
FGP	December 31, 2007		13,398		19.8222		266		0.78			26.96
	December 31, 2006		11,815		15.6124		185		0.55			6.85
	December 31, 2005		204,148		14.6115		2,983		0.48			5.80
	December 31, 2004		177,274		13.8107		2,448		0.25			3.38
	December 31, 2003		155,827		13.3594		2,082		0.24			32.85

(1) These amounts represent the dividends, excluding distributions of capital gains, received by the Sub-Account from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying fund in which the Sub-Account invests.

(2) These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period.

(3) Commenced on August 1, 2007.

5

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements – continued

(5) Financial Highlights - continued

A summary of unit values and units outstanding for variable life insurance contracts, investment income and total return for each of the years in the period ended December 31, 2007 is shown below. No expense ratio is shown as there are no expenses that result in a direct reduction to unit values. Charges made directly to Policyholder accounts through the redemption of units and expenses of the underlying funds are excluded from the expense ratio calculation.

									Investment
				Net Assets					Income as a
		Units		Unit					% of Average			Total
Sub-Accounts		Outstanding		Value		(000s)			Net Assets(1)			Return(2)
FL3	December 31, 2007		57,043	$	15.8941	$	891			0.37	%		26.66	%
	December 31, 2006		76,148		12.5487		956			0.17			6.57
	December 31, 2005		205,186		11.7748		2,416			0.22			5.50
	December 31, 2004		133,887		11.1607		1,494			0.06			3.12
	December 31, 2003		45,436		10.8228		492			0.03			32.54
FHI	December 31, 2007		76,674		12.7567		978			6.94			2.79
	December 31, 2006		30,176		12.4110		375			7.80			11.24
	December 31, 2005		34,527		11.1573		385			15.17			2.70
	December 31, 2004		26,937		10.8638		293			7.07			9.59
	December 31, 2003		20,702		9.9129		205			6.40			27.26
FIP	December 31, 2007		1,858		20.1183		38			3.59			5.44
	December 31, 2006		1,892		19.0805		37			2.39			15.73
	December 31, 2005		3,432		16.4872		57			1.74			4.82
	December 31, 2004		3,516		15.7286		56			1.39			10.61
	December 31, 2003		1,378		14.2193		20			9.28			28.41
FIG	December 31, 2007		1,057,995		17.1509		18,146			2.92			4.35
	December 31, 2006		381,208		16.4364		6,266			3.12			4.35
	December 31, 2005		270,915		15.7514		4,267			-			2.19
FMC(3)	December 31, 2007		10,016		12.4047		124			0.59			24.05
FMM	December 31, 2007		10,000		15.3298		154	(4)		5.33			5.22
	December 31, 2006		10,000		14.5693		146	(4)		4.65			4.88
	December 31, 2005		10,000		13.8910		139	(4)		2.94			3.04
	December 31, 2004		10,000		13.4818		135	(4)		15.79			1.21
	December 31, 2003		10,000		13.3206		133	(4)		2.44			1.00
FL5	December 31, 2007		3,578,472		11.4278		40,873			4.81			5.11
	December 31, 2006		4,147,381		10.8723		45,076			3.79			4.77
	December 31, 2005		500,774		10.3773		5,197			2.76			2.93
	December 31, 2004		2,242		10.0824		23			2.39			0.82
FOF	December 31, 2007		10,433		18.4020		192			3.54			17.31
	December 31, 2006		280		15.6864		4			-			18.08

(1) These amounts represent the dividends, excluding distributions of capital gains, received by the Sub-Account from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying fund in which the Sub-Account invests.

(2) These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period.

(3) Commenced on February 26, 2007.

(4) This amount represents the total of the Fidelity VIP Money Market Portfolio Net Assets Applicable to Contract Owners and the Net Assets Applicable to the Sponsor.

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements – continued

(5) Financial Highlights - continued

A summary of unit values and units outstanding for variable life insurance contracts, investment income and total return for each of the years in the period ended December 31, 2007 is shown below. No expense ratio is shown as there are no expenses that result in a direct reduction to unit values. Charges made directly to Policyholder accounts through the redemption of units and expenses of the underlying funds are excluded from the expense ratio calculation.

								Investment
				Net Assets				Income as a
		Units		Unit				% of Average			Total
Sub-Accounts		Outstanding		Value		(000s)		Net Assets(1)			Return(2)
FL2	December 31, 2007		49,399	$	23.3050	$	1,152		2.92	%		17.05	%
	December 31, 2006		44,665		19.9098		890		0.60			17.77
	December 31, 2005		141,542		16.9053		2,393		0.52			18.78
	December 31, 2004		115,242		14.2322		1,640		0.65			13.31
	December 31, 2003		31,025		12.5601		390		0.26			43.04
FRE	December 31, 2007		26,332		10.9870		289		2.02			(20.65	)
	December 31, 2006		37,207		13.8470		515		2.55			20.87
	December 31, 2005		19,099		11.4557		219		-			14.56
FSC	December 31, 2007		45,929		13.9989		643		-			11.51
	December 31, 2006		80,979		12.5544		1,017		-			8.95
	December 31, 2005		52,788		11.5226		608		-			5.09
	December 31, 2004		7,962		10.9649		87		-			9.65
GS3	December 31, 2007		10,710		15.1703		162		1.18			(1.63	)
	December 31, 2006		9,016		15.4213		139		1.47			12.89
	December 31, 2005		5,797		13.6604		79		0.63			6.51
	December 31, 2004		5,987		12.8254		77		1.88			14.94
	December 31, 2003		53		11.1583		1		1.11			29.47
GS7	December 31, 2007		7,663		13.8892		106		0.21			10.13
	December 31, 2006		5,857		12.6115		74		0.09			8.56
	December 31, 2005		7,633		11.6171		89		0.16			2.94
	December 31, 2004		4,915		11.2851		55		1.34			12.85
MVP	December 31, 2007		282,357		12.0284		3,396		1.78			7.55
	December 31, 2006		90,251		11.1838		1,009		2.91			11.84
JBP	December 31, 2007		786,014		17.1186		13,453		6.94			1.33
	December 31, 2006		796,833		16.8943		13,459		3.87			4.14
	December 31, 2005		789,914		16.2227		12,812		3.18			2.81
	December 31, 2004		713,031		15.7792		11,249		3.43			4.29
	December 31, 2003		707,104		15.1300		10,699		2.83			3.72
JP3	December 31, 2007		33,061		18.4654		611		0.01			(5.67	)
	December 31, 2006		37,663		19.5750		738		-			15.01
	December 31, 2005		37,694		17.0208		642		-			3.42
	December 31, 2004		30,363		16.4587		500		-			27.17
	December 31, 2003		30,306		12.9424		392		-			35.98

(1) These amounts represent the dividends, excluding distributions of capital gains, received by the Sub-Account from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying fund in which the Sub-Account invests.

(2) These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period.

58

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements – continued

(5) Financial Highlights - continued

A summary of unit values and units outstanding for variable life insurance contracts, investment income and total return for each of the years in the period ended December 31, 2007 is shown below. No expense ratio is shown as there are no expenses that result in a direct reduction to unit values. Charges made directly to Policyholder accounts through the redemption of units and expenses of the underlying funds are excluded from the expense ratio calculation.

								Investment
				Net Assets				Income as a
		Units		Unit				% of Average			Total
Sub-Accounts		Outstanding		Value		(000s)		Net Assets(1)			Return(2)
JP1	December 31, 2007		9,038	$	14.8833	$	135		1.08	%		1.66	%
	December 31, 2006		9,175		14.6402		134		0.97			16.57
	December 31, 2005		9,144		12.5588		115		1.10			1.35
	December 31, 2004		23,681		12.3915		293		1.58			9.49
	December 31, 2003		70,487		11.3177		798		0.72			28.14
LA1	December 31, 2007		175,710		17.2931		3,040		1.32			3.44
	December 31, 2006		204,334		16.7183		3,417		0.75			17.27
	December 31, 2005		522,122		14.2559		7,444		1.12			3.25
	December 31, 2004		319,388		13.8076		4,411		1.12			12.65
	December 31, 2003		128,258		12.2568		1,573		0.95			31.01
LA3	December 31, 2007		15,410		19.0939		294		0.86			4.73
	December 31, 2006		13,078		18.2315		238		0.56			29.08
	December 31, 2005		2,812		14.1247		40		-			26.63
	December 31, 2004		561		11.1543		6		0.14			20.71
	December 31, 2003		457		9.2409		4		2.01			41.25
LA2	December 31, 2007		296,991		17.8571		5,297		0.46			0.58
	December 31, 2006		249,898		17.7540		4,438		0.56			12.23
	December 31, 2005		206,568		15.8192		3,269		0.68			8.22
	December 31, 2004		80,667		14.6174		1,180		0.43			24.04
	December 31, 2003		38,062		11.7842		449		0.61			24.75
MLV	December 31, 2007		186,062		14.0801		2,620		0.30			(0.89	)
	December 31, 2006		173,904		14.2072		2,471		0.30			12.82
	December 31, 2005		148,198		12.5931		1,866		0.56			10.38
MF7	December 31, 2007		16,775		11.8170		198		4.11			3.28
	December 31, 2006		17,634		11.4415		202		1.37			4.87
	December 31, 2005		16,412		10.9101		179		5.95			1.59
	December 31, 2004		15,113		10.7391		162		0.21			7.39
CO1	December 31, 2007		-		-		-		0.63			-
	December 31, 2006		12,204		13.6324		166		0.25			14.02
	December 31, 2005		12,888		11.9566		154		0.75			1.31
	December 31, 2004		14,286		11.8019		169		0.24			12.52
	December 31, 2003		1,596		10.4885		17		-			4.88
MF1	December 31, 2007		5,090		12.9206		66		0.19			11.14
	December 31, 2006		5,248		11.6257		61		0.30			6.37
	December 31, 2005		656,239		10.9294		7,172		0.57			0.92
	December 31, 2004		579,514		10.8301		6,276		0.06			11.02
	December 31, 2003		476,632		9.7600		4,650		-			28.71

(1) These amounts represent the dividends, excluding distributions of capital gains, received by the Sub-Account from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying fund in which the Sub-Account invests.

(2) These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund.  The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period.

59

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements – continued

(5) Financial Highlights - continued

A summary of unit values and units outstanding for variable life insurance contracts, investment income and total return for each of the years in the period ended December 31, 2007 is shown below.  No expense ratio is shown as there are no expenses that result in a direct reduction to unit values.  Charges made directly to Policyholder accounts through the redemption of units and expenses of the underlying funds are excluded from the expense ratio calculation.

								Investment
				Net Assets				Income as a
		Unit		Unit				% of Average
Sub-Accounts		Outstanding		Value		(000s)		Net Assets(1)			Return(2)
MFD	December 31, 2007		145	$	13.3655	$	2		0.00	%		10.93	%
	December 31, 2006		98		12.0491		1		-			6.05
	December 31, 2005		97,961		11.3613		1,113		-			0.63
	December 31, 2004		60,888		11.2897		687		-			10.78
	December 31, 2003		22,075		10.1909		225		-			28.35
RG1(3)	December 31, 2007		14,150		9.9576		141		-			(0.42	)
MF2	December 31, 2007		8,527		19.2116		164		-			21.25
	December 31, 2006		11,539		15.8451		183		-			8.02
	December 31, 2005		7,689		14.6685		113		-			9.14
	December 31, 2004		6,880		13.4404		92		-			13.24
	December 31, 2003		6,920		11.8688		82		-			31.49
MFF	December 31, 2007		11,835		17.0885		202		-			21.00
	December 31, 2006		14,086		14.1227		199		-			7.70
	December 31, 2005		9,627		13.1134		126		-			8.90
	December 31, 2004		70,196		12.0419		845		-			12.96
	December 31, 2003		63,948		10.6599		682		-			31.14
GGR	December 31, 2007		10,151		26.1084		265		1.75			13.27
	December 31, 2006		10,520		23.0491		243		0.47			17.37
	December 31, 2005		6,688		19.6372		131		0.69			10.03
	December 31, 2004		7,037		17.8466		126		0.38			15.61
	December 31, 2003		13,847		15.4368		214		0.50			35.44
MF6	December 31, 2007		198,912		17.9708		3,575		5.34			7.18
	December 31, 2006		844,369		16.7672		14,158		5.30			3.68
	December 31, 2005		984,125		16.1714		15,915		4.73			2.30
	December 31, 2004		579,747		15.8073		9,164		5.94			3.76
	December 31, 2003		572,822		15.2344		8,727		4.30			2.15
MFK	December 31, 2007		4,740		12.9618		62		4.76			6.91
	December 31, 2006		5,329		12.1243		65		6.96			3.47
	December 31, 2005		161,616		11.7174		1,894		4.29			2.01
	December 31, 2004		115,002		11.4869		1,322		4.91			3.55
	December 31, 2003		109,937		11.0931		1,220		4.31			1.87
MFC	December 31, 2007		4,709		16.4167		77		7.02			1.56
	December 31, 2006		5,339		16.1642		86		5.57			10.04
	December 31, 2005		11,655		14.6890		171		9.04			1.93
	December 31, 2004		11,959		14.4102		172		1.34			9.37
	December 31, 2003		29,070		13.1757		383		-			31.76

(1) These amounts represent the dividends, excluding distributions of capital gains, received by the Sub-Account from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying fund in which the Sub-Account invests.

(2) These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund.  The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period.

(3) Commenced on June 22, 2007.

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements - continued

(5) Financial Highlights - continued

A summary of unit values and units outstanding for variable life insurance contracts, investment income and total return for each of the years in the period ended December 31, 2007 is shown below.  No expense ratio is shown as there are no expenses that result in a direct reduction to unit values.  Charges made directly to Policyholder accounts through the redemption of units and expenses of the underlying funds are excluded from the expense ratio calculation.

									Investment
				Net Assets					Income as a
		Unit			Unit				% of Average			Total
Sub-Accounts		Outstanding			Value		(000s)		Net Assets(1)			Return(2)
IG1	December 31, 2007		93,853		$	21.3883	$	2,007		1.08	%		16.26	%
	December 31, 2006		105,254			18.3962		1,936		0.46			25.75
	December 31, 2005		66,809			14.6287		977		0.67			14.62
	December 31, 2004		51,512			12.7624		657		0.37			18.58
	December 31, 2003		6,517			10.7627		70		-			7.63
IGS	December 31, 2007		894,978			13.8500		12,395		1.47			16.58
	December 31, 2006		578,150			11.8798		6,868		-			18.80
M11	December 31, 2007		12,895			10.9957		142		0.36			11.53
	December 31, 2006		13,160			9.8591		130		0.08			7.67
	December 31, 2005		11,155			9.1571		102		0.47			4.37
	December 31, 2004		12,059			8.7735		106		0.06			9.61
	December 31, 2003		10,088			8.0044		81		-			23.39
M1B	December 31, 2007		73,950			13.8551		1,025		0.04			11.26
	December 31, 2006		11,172			12.4524		139		-			7.42
	December 31, 2005		19,482			11.5928		226		0.15			4.15
	December 31, 2004		6,214			11.1303		69		-			9.36
	December 31, 2003		1,517			10.1780		15		-			1.78
MF9	December 31, 2007		1,474			13.5484		20		0.17			5.95
	December 31, 2006		40,634			12.7876		520		0.11			13.30
	December 31, 2005		1,679			11.2862		19		0.94			7.70
	December 31, 2004		1,649			10.4789		17		1.00			11.99
	December 31, 2003		1,624			9.3573		15		1.43			22.83
MFL	December 31, 2007		18,849			14.9525		282		1.05			5.69
	December 31, 2006		14,412			14.1475		204		0.84			13.04
	December 31, 2005		2,288			12.5156		29		0.94			7.42
	December 31, 2004		698			11.6512		8		1.15			16.51
MMS	December 31, 2007		8,992,159			13.1304		118,118		4.74			4.85
	December 31, 2006		6,981,655			12.5231		87,485		4.66			4.59
	December 31, 2005		2,848,202			11.9731		34,103		2.68			2.72
	December 31, 2004		2,995,635			11.6561		34,914		0.74			0.83
	December 31, 2003		5,869,001			11.5606		67,847		0.63			0.63
M10	December 31, 2007		1,625			13.0734		21		-			2.56

(1) These amounts represent the dividends, excluding distributions of capital gains, received by the Sub-Account from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying fund in which the Sub-Account invests.

(2) These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund.  The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period.

1

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements - continued

(5) Financial Highlights - continued

A summary of unit values and units outstanding for variable life insurance contracts, investment income and total return for each of the years in the period ended December 31, 2007 is shown below.  No expense ratio is shown as there are no expenses that result in a direct reduction to unit values.  Charges made directly to Policyholder accounts through the redemption of units and expenses of the underlying funds are excluded from the expense ratio calculation.

										Investment
					Net Assets					Income as a
		Unit		Unit						% of Average			Total
Sub-Accounts		Outstanding		Value				(000s)		Net Assets(1)			Return(2)
M1A	December 31, 2007		85,903			$	15.1013	$	1,298		0.00	%	2.28	%
	December 31, 2006		107,543				14.7650		1,588		-		12.90
	December 31, 2005		106,088				13.0783		1,388		-		4.96
	December 31, 2004		132,904				12.4608		1,656		-		7.22
	December 31, 2003		68,306				11.6221		794		-		35.01
RIS	December 31, 2007		421,019				19.6247		8,262		1.15		13.15
	December 31, 2006		367,149				17.3436		6,368		1.17		27.47
	December 31, 2005		179,699				13.6059		2,445		0.97		16.56
RES	December 31, 2007		498				14.4766		7		0.65		13.24
	December 31, 2006		2,005				12.7842		26		0.64		10.56
	December 31, 2005		1,633				11.5636		19		0.55		8.01
	December 31, 2004		1,331				10.7063		14		0.90		15.83
	December 31, 2003		1,058				9.2433		10		0.72		25.32
RE1	December 31, 2007		34,081				16.3146		556		0.56		12.97
	December 31, 2006		48,215				14.4418		696		0.42		10.32
	December 31, 2005		36,361				13.0909		476		0.38		7.71
	December 31, 2004		25,183				12.1540		306		0.07		21.54
SG1	December 31, 2007		-				-		-		-		-
	December 31, 2006		82,241				11.7838		969		-		6.37
	December 31, 2005		76,777				11.0779		851		0.12		1.17
	December 31, 2004		74,624				10.9496		817		-		6.58
	December 31, 2003		39,766				10.2734		409		-		2.73
SI1	December 31, 2007		9,020				12.3416		111		6.50		3.24
	December 31, 2006		3,059				11.9548		37		6.78		6.45
	December 31, 2005		58				11.2304		1		9.57		1.61
	December 31, 2004		987				11.0527		11		4.56		7.83
	December 31, 2003		936				10.2502		10		-		2.50
TRS	December 31, 2007		194,810				20.9744		4,086		3.10		4.32
	December 31, 2006		163,267				20.1056		3,283		3.75		12.22
	December 31, 2005		576,178				17.9160		10,323		2.54		3.02
	December 31, 2004		476,896				17.3903		8,294		2.30		11.47
	December 31, 2003		367,218				15.6009		5,729		3.41		17.15

(1) These amounts represent the dividends, excluding distributions of capital gains, received by the Sub-Account from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying fund in which the Sub-Account invests.

(2) These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund.  The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period.

2

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements - continued

(5) Financial Highlights - continued

A summary of unit values and units outstanding for variable life insurance contracts, investment income and total return for each of the years in the period ended December 31, 2007 is shown below.  No expense ratio is shown as there are no expenses that result in a direct reduction to unit values.  Charges made directly to Policyholder accounts through the redemption of units and expenses of the underlying funds are excluded from the expense ratio calculation.

								Investment
				Net Assets				Income as a
		Units		Unit				% of Average			Total
Sub-Accounts		Outstanding		Value		(000s)		Net Assets(1)			Return(2)
MFJ	December 31, 2007		258,706	$	15.5539	$	4,024		2.79	%	4.07	%
	December 31, 2006		213,459		14.9450		3,190		2.70		11.91
	December 31, 2005		361,075		13.3548		4,822		2.24		2.81
	December 31, 2004		237,715		12.9895		3,088		2.50		11.14
	December 31, 2003		63,289		11.6871		740		2.59		16.83
MF5	December 31, 2007		19,488		30.1971		589		1.28		28.58
	December 31, 2006		10,559		23.4853		248		2.26		32.28
	December 31, 2005		1,628		17.7541		29		0.91		17.29
	December 31, 2004		1,151		15.1367		17		1.94		30.37
	December 31, 2003		906		11.6104		11		3.64		36.26
MFE	December 31, 2007		15,137		26.9266		408		0.72		28.28
	December 31, 2006		4,856		20.9901		102		1.90		31.96
	December 31, 2005		634		15.9064		10		0.26		16.97
	December 31, 2004		69		13.5985		1		1.74		30.01
	December 31, 2003		50		10.4593		1		2.65		36.03
EIS	December 31, 2007		11,409		15.6609		179		2.28		7.92
	December 31, 2006		304		14.5109		4		1.77		20.96
	December 31, 2005		-		11.9969		-		0.54		6.60
MV1	December 31, 2007		56,186		17.1252		962		1.39		7.67
	December 31, 2006		42,884		15.9049		682		1.31		20.66
	December 31, 2005		37,653		13.1817		496		1.20		6.34
	December 31, 2004		39,927		12.3957		495		0.97		15.18
	December 31, 2003		13,598		10.7619		146		-		7.62
MC1	December 31, 2007		64,613		13.2600		857		-		9.59
	December 31, 2006		72,669		12.1000		879		-		2.20
	December 31, 2005		77,639		11.8400		919		-		2.78
	December 31, 2004		75,199		11.5200		866		-		14.29
	December 31, 2003		59,452		10.0800		599		-		0.80
FSS	December 31, 2007		29,960		15.0760		452		1.60		3.72
	December 31, 2006		27,532		14.5350		400		-		18.66
NLM	December 31, 2007		36,871		15.3396		566		2.36		4.77
	December 31, 2006		44,193		14.6410		647		3.13		4.20
	December 31, 2005		44,587		14.0507		627		3.66		1.44
	December 31, 2004		6,730		13.8508		93		3.68		0.78
	December 31, 2003		7,982		13.7437		110		0.04		2.42

(1) These amounts represent the dividends, excluding distributions of capital gains, received by the Sub-Account from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying fund in which the Sub-Account invests.

(2) These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund.  The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period.

63

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements - continued

(5) Financial Highlights - continued

A summary of unit values and units outstanding for variable life insurance contracts, investment income and total return for each of the years in the period ended December 31, 2007 is shown below.  No expense ratio is shown as there are no expenses that result in a direct reduction to unit values.  Charges made directly to Policyholder accounts through the redemption of units and expenses of the underlying funds are excluded from the expense ratio calculation.

											Investment
				Net Assets							Income as a
		Units			Unit						% of Average			Total
Sub-Accounts		Outstanding			Value			(000s)			Net Assets(1)			Return(2)
NMC	December 31, 2007		8,760			$	20.4501		$	179		0.00	%	22.53	%
	December 31, 2006		306,449				16.6901			5,114		-		14.69
	December 31, 2005		330,149				14.5519			4,804		-		13.74
	December 31, 2004		156,542				12.7939			2,003		-		16.31
	December 31, 2003		81,333				11.0000			894		-		28.07
NPP	December 31, 2007		1,504				20.5022			31		0.65		9.34
	December 31, 2006		1,497				18.7515			28		1.07		12.24
	December 31, 2005		20				16.7065			-		0.00		18.05
	December 31, 2004		7,734				14.1526			109		0.00		0.19
	December 31, 2003		7,553				11.8955			90		-		35.09
NAR	December 31, 2007		168,615				15.1366			2,552		0.45		3.30
	December 31, 2006		152,176				14.6527			2,230		0.41		11.17
	December 31, 2005		141,084				13.1809			1,860		0.09		12.00
	December 31, 2004		96,138				11.7688			1,131		0.06		17.69
OCF	December 31, 2007		685,121				13.9174			9,535		0.25		14.15
	December 31, 2006		900,873				12.1923			10,984		0.15		7.95
	December 31, 2005		94,709				11.2946			1,070		0.86		5.10
OGS	December 31, 2007		240,716				16.6766			4,014		0.89		6.32
	December 31, 2006		90,934				15.6854			1,426		0.54		17.69
	December 31, 2005		1,374				13.3276			18		-		14.31
OSC	December 31, 2007		164,649				14.7699			2,432		0.29		(1.21	)
	December 31, 2006		126,981				14.9507			1,898		0.14		15.00
	December 31, 2005		43,365				13.0009			564		-		9.92
PMB	December 31, 2007		3,490				22.0744			77		5.75		5.82
	December 31, 2006		3,552				20.8600			74		4.92		9.28
	December 31, 2005		1,433				19.0893			27		5.50		10.78
	December 31, 2004		7				17.2312			-		2.80		12.12
	December 31, 2003		35				15.3682			1		4.89		53.68
PHY	December 31, 2007		202,954				17.2179			3,493		6.81		3.51
	December 31, 2006		339,475				16.6338			5,646		6.42		9.10
	December 31, 2005		22,982				15.2457			350		6.51		4.13
	December 31, 2004		12,344				14.6416			181		6.54		9.56
	December 31, 2003		307				13.3636			4		7.47		33.64
PLD	December 31, 2007		9,423				11.4502			108		4.87		7.38
	December 31, 2006		588				10.6637			6		4.40		3.98
	December 31, 2005		79				10.2557			1		3.81		1.01

(1) These amounts represent the dividends, excluding distributions of capital gains, received by the Sub-Account from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying fund in which the Sub-Account invests.

(2) These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund.  The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period.

64

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements - continued

(5) Financial Highlights - continued

A summary of unit values and units outstanding for variable life insurance contracts, investment income and total return for each of the years in the period ended December 31, 2007 is shown below.  No expense ratio is shown as there are no expenses that result in a direct reduction to unit values.  Charges made directly to Policyholder accounts through the redemption of units and expenses of the underlying funds are excluded from the expense ratio calculation.

								Investment
				Net Assets				Income as a
		Units		Unit				% of Average			Total
Sub-Accounts		Outstanding		Value		(000s)		Net Assets(1)			Return(2)
PRR	December 31, 2007		832,007	$	13.6509	$	11,355		4.52	%		10.67	%
	December 31, 2006		262,724		12.3350		3,240		4.39			0.72
	December 31, 2005		116,738		12.2474		1,430		2.79			2.10
	December 31, 2004		83,689		11.9957		1,004		1.11			8.92
	December 31, 2003		19,082		11.0135		210		1.26			10.13
PTR	December 31, 2007		2,573,931		13.0720		33,637		4.77			8.76
	December 31, 2006		1,625,791		12.0190		19,538		4.57			3.85
	December 31, 2005		399,997		11.5732		4,629		3.51			2.45
	December 31, 2004		229,165		11.2961		2,589		1.98			4.89
	December 31, 2003		36,149		10.7693		389		2.58			7.69
SCP	December 31, 2007		106,276		10.8499		1,153		0.33			(2.14	)
	December 31, 2006		5,068		11.0867		54		-			10.87
RX1	December 31, 2007		2,325		10.7228		25		1.99			1.13
	December 31, 2006		55		10.6034		1		1.23			19.27
	December 31, 2005		58		8.8899		1		0.43			3.96
	December 31, 2004		67		8.5509		1		-			14.62
	December 31, 2003		35		7.4601		-		-			39.19
RX2	December 31, 2007		20		9.8175		-		-			17.82
	December 31, 2006		20		8.3324		-		-			5.77
	December 31, 2005		11		7.8776		-		-			1.11
	December 31, 2004		7		7.7910		-		-			9.35
	December 31, 2003		1		7.1251		-		-			(28.75)
SCM	December 31, 2007		27,764		15.6196		434		0.96			(5.81)
	December 31, 2006		18,059		16.5827		299		1.48			20.07
	December 31, 2005		23,634		13.8105		326		0.13			(0.71)
	December 31, 2004		18,179		13.9100		253		0.31			20.39
	December 31, 2003		9,785		11.5543		113		2.94			52.89
SC2	December 31, 2007		200,400		15.2923		3,062		5.16			3.76
	December 31, 2006		188,798		14.7381		2,781		5.00			5.41
	December 31, 2005		284,245		13.9822		3,973		4.68			1.96
	December 31, 2004		248,388		13.7129		3,405		4.75			6.42
	December 31, 2003		255,079		12.8855		3,286		5.36			9.65
SC1	December 31, 2007		3,925,378		11.6021		45,531		4.76			4.88
	December 31, 2006		3,475,542		11.0627		38,442		4.56			4.60
	December 31, 2005		2,072,605		10.5761		21,916		2.79			2.76
	December 31, 2004		1,504,073		10.2924		15,477		0.73			0.74
	December 31, 2003		1,228,069		10.2170		12,544		0.55			0.55

(1) These amounts represent the dividends, excluding distributions of capital gains, received by the Sub-Account from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying fund in which the Sub-Account invests.

(2) These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund.  The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period.

65

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements - continued

(5) Financial Highlights - continued

A summary of unit values and units outstanding for variable life insurance contracts, investment income and total return for each of the years in the period ended December 31, 2007 is shown below.  No expense ratio is shown as there are no expenses that result in a direct reduction to unit values.  Charges made directly to Policyholder accounts through the redemption of units and expenses of the underlying funds are excluded from the expense ratio calculation.

								Investment
				Net Assets				Income as a
		Units		Unit				% of Average			Total
Sub-Accounts		Outstanding		Value		(000s)		Net Assets(1)			Return(2)
SC3	December 31, 2007		280,852	$	34.1801	$	9,599		1.48	%		-13.13	%
	December 31, 2006		272,905		39.3473		10,738		1.66			38.96
	December 31, 2005		249,940		28.3149		7,077		1.77			9.67
	December 31, 2004		155,069		25.8182		4,003		2.09			33.32
	December 31, 2003		42,775		19.3658		828		-			35.95
SC5	December 31, 2007		247,349		24.5516		6,049		1.27			15.41
	December 31, 2006		214,216		21.2742		4,558		-			11.30
	December 31, 2005		230,173		19.1149		4,400		0.10			16.61
	December 31, 2004		137,998		16.3924		2,263		-			16.14
	December 31, 2003		45,795		14.1139		647		-			36.09
SC7	December 31, 2007		6,077		17.9451		109		0.50			4.23
	December 31, 2006		6,647		17.2162		114		0.92			14.77
	December 31, 2005		2,448		15.0011		37		0.83			9.73
	December 31, 2004		714		13.6714		10		0.67			12.45
	December 31, 2003		397		12.1575		5		1.13			21.57
SCB	December 31, 2007		43,665		18.7697		810		-			(1.44	)
	December 31, 2006		54,552		19.0442		1,039		-			13.60
	December 31, 2005		124,420		16.7646		2,086		-			4.33
	December 31, 2004		120,273		16.0688		1,933		-			18.43
	December 31, 2003		23,890		13.5682		324		0.06			41.62
TFS	December 31, 2007		219,581		18.1242		3,980		2.09			15.79
	December 31, 2006		285,327		15.6529		4,466		1.41			21.70
	December 31, 2005		254,286		12.8622		3,271		0.92			10.48
	December 31, 2004		4,519		11.6425		53		-			16.43
FTI	December 31, 2007		34,546		25.3936		877		1.97			15.46
	December 31, 2006		44,466		21.9940		978		1.15			21.44
	December 31, 2005		43,562		18.1103		789		1.42			10.17
	December 31, 2004		24,034		16.4387		395		1.17			18.53
	December 31, 2003		430		13.8690		6		1.94			38.69
TSF	December 31, 2007		371,089		23.0482		8,553		1.46			2.55
	December 31, 2006		327,236		22.4743		7,354		1.83			22.20
	December 31, 2005		650,615		18.3908		11,965		1.36			9.06
	December 31, 2004		243,051		16.8633		4,099		1.24			16.25
	December 31, 2003		223,841		14.5066		3,247		1.73			32.62

(1) These amounts represent the dividends, excluding distributions of capital gains, received by the Sub-Account from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying fund in which the Sub-Account invests.

(2) These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund.  The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period.

66

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements - continued

(5) Financial Highlights - continued

A summary of unit values and units outstanding for variable life insurance contracts, investment income and total return for each of the years in the period ended December 31, 2007 is shown below.  No expense ratio is shown as there are no expenses that result in a direct reduction to unit values.  Charges made directly to Policyholder accounts through the redemption of units and expenses of the underlying funds are excluded from the expense ratio calculation.

								Investment
				Net Assets				Income as a
		Units		Unit				% of Average			Total
Sub-Accounts		Outstanding		Value		(000s)		Net Assets(1)			Return(2)
FTG	December 31, 2007		3,754	$	22.1185	$	83		1.61	%		2.35	%
	December 31, 2006		6,820		21.6112		147		0.85			21.81
	December 31, 2005		24,456		17.7420		434		0.76			8.86
	December 31, 2004		3,950		16.2976		64		1.31			16.03
	December 31, 2003		1,504		14.0465		21		1.95			40.46
TBC	December 31, 2007		84,164		14.1686		1,192		0.60			12.74
	December 31, 2006		50,108		12.5672		630		0.31			9.67
	December 31, 2005		24,398		11.4595		280		0.21			5.94
	December 31, 2004		7,729		10.8171		84		-			8.17
REI	December 31, 2007		1,409,689		18.8022		26,506		1.74			3.26
	December 31, 2006		1,485,420		18.2079		27,047		1.70			18.97
	December 31, 2005		930,172		15.3048		14,236		1.62			3.92
	December 31, 2004		790,941		14.7272		11,649		2.46			15.45
	December 31, 2003		194,604		12.7564		2,482		0.84			24.92
RNA	December 31, 2007		8,510		12.5246		107		-			13.78
	December 31, 2006		9,247		11.0077		102		0.05			7.33
	December 31, 2005		7,084		10.2558		73		-			4.47
	December 31, 2004		1,023		9.8167		10		0.06			10.88
	December 31, 2003		889		8.8531		8		-			35.10
VMG	December 31, 2007		369,862		18.1607		6,717		-			22.67
	December 31, 2006		577,966		14.8050		8,557		-			9.27
	December 31, 2005		6,297		13.5484		85		-			17.57
VCP	December 31, 2007		49,246		13.5456		667		1.70			(2.04	)
	December 31, 2006		34,255		13.8281		474		1.43			16.28
	December 31, 2005		114		11.8920		1		-			4.37
VGI	December 31, 2007		37,133		14.8744		552		1.65			2.80
	December 31, 2006		28,210		14.4693		408		0.11			16.23
	December 31, 2005		1,633		12.4484		20		-			9.99
USC(3)	December 31, 2007		48,748		10.9484		534		-			5.39

(1) These amounts represent the dividends, excluding distributions of capital gains, received by the Sub-Account from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying fund in which the Sub-Account invests.

(2) These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund.  The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period.

(3) Commenced on February 23, 2007.

67

Sun Life of Canada (U.S.) Variable Account G

Notes to Financial Statements - continued

(6) Diversification Requirements

Under the provision of Section 817(h) of the Internal Revenue Code (the “Code”), a variable annuity contract, other than a contract issued in connection with certain types of employee benefit plans, is not be treated as a life insurance contract for federal tax purposes for any period for which the investments of the segregated asset account on which the contract is based are not adequately diversified.  The Code provides that the “adequately diversified” requirement may be met if the underlying investments satisfy either a statutory safe harbor test or diversification requirements set forth in regulations issued by the Secretary of Treasury.

The Internal Revenue Service has issued regulations under Section 817(h) of the Code which allows the contract owner to avoid current taxation of both current and built-up earnings of the contract.  The Sponsor believes that the Sub-Account satisfies the current requirements of the regulations, and it intends that the Sub-Account will continue to meet such requirements.

(7) Recently Issued Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48 (FIN 48) “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109”.  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement No. 109, “Accounting for Income Taxes.”  This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  It also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  FIN 48 is effective during the first required financial reporting period for fiscal years beginning after December 15, 2006.  The Sub-Accounts adopted FIN 48 on January 1, 2007.  The Sub-Accounts are not responsible for the payment or recording of income taxes and therefore the adoption of FIN 48 did not have a material impact on the financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements, but does not change existing guidance as to whether or not an instrument is carried at fair value.

SFAS No. 157 clarifies that fair value is an exit price, representing the amount that would be exchanged to sell an asset or transfer a liability in an orderly transaction between market participants.  The statement establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels (“Level 1, 2 and 3”).  Level 1 inputs are observable inputs that reflect quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date.  Level 2 inputs are observable inputs, other than quoted prices included in Level 1, for the asset or liability or prices for similar assets and liabilities.  Level 3 inputs are unobservable inputs reflecting the reporting entity’s estimates of the assumptions that market participants would use in pricing the asset or liability.  SFAS No. 157 requires that a fair value measurement technique include an adjustment for risks inherent in a particular valuation technique (such as a pricing model) and/or the risks inherent in the inputs to the model, if market participants would also include such an adjustment.  Quantitative and qualitative disclosures will focus on the inputs used to measure fair value for both recurring and non-recurring fair value measurements and the effects of the measurements in the financial statements.

The provisions of SFAS No. 157 are effective for fiscal years beginning after November 15, 2007, and are to be applied prospectively, except for changes in fair value measurements that result from the initial application of SFAS No. 157, which are to be recorded as an adjustment to opening retained earnings in the year of adoption.  Sponsor of the Sub-Accounts will adopt SFAS No. 157 effective January 1, 2008.  The adoption of SFAS No. 157 is not expected to have a material impact on the Sub-Account's financial position or results of operations.

68

Report of Independent Registered Public Accounting Firm

To the Participants in Sun Life of Canada (U.S.) Variable Account G and the Board of Directors of Sun Life Assurance Company of Canada (U.S.) (the “Sponsor”):

We have audited the accompanying statements of condition of AIM V.I. Basic Value Fund Sub-Account, AIM V.I. Capital Appreciation Fund Sub-Account, AIM V.I. Core Equity Fund Sub-Account, AIM V.I. Dynamics Fund Sub-Account, AIM V.I. Mid Cap Core Equity Fund Sub-Account, AIM V.I. Small Cap Equity Fund Sub-Account, AIM V.I. Small Company Growth Fund Sub-Account, AIM V.I. International Growth Fund Sub-Account, Alger American MidCap Growth Portfolio Sub-Account, AllianceBernstein VP Global Technology Fund Sub-Account, AllianceBernstein VP Growth and Income Fund Sub-Account, AllianceBernstein VP International Growth Portfolio Sub-Account, AllianceBernstein VP Small Cap Growth Portfolio Sub-Account, AllianceBernstein VPS International Value Portfolio Sub-Account, Delaware VIP Growth Opportunities Series Sub-Account, Delaware VIP REIT Series Sub-Account, Delaware VIP Small Cap Value Series Sub-Account, Delaware VIP Trend Series: SC Sub-Account, Dreyfus Emerging Leaders Portfolio Sub-Account, Dreyfus MidCap Stock Portfolio Sub-Account, Dreyfus VIF Appreciation Portfolio Sub-Account, Dreyfus VIF Developing Leaders Portfolio Sub-Account, Dreyfus VIF Growth and Income Portfolio Sub-Account, Dreyfus VIF Quality Bond Portfolio Sub-Account, Dreyfus Stock Index Fund Sub-Account, DWS Dreman High Return Equity VIP: Class A Sub-Account, DWS Small Cap Index VIP: Class A Sub-Account, DWS Small Cap Index VIP: Class B Sub-Account, DWS Dreman Small Cap Value VIP: Class A Sub-Account, Fidelity VIP Asset Manager: Growth Portfolio Sub-Account, Fidelity VIP Contrafund Portofolio Sub-Account, Fidelity VIP Contrafund Portfolio SC 2 Sub-Account, Fidelity VIP Equity Income Portfolio Sub-Account, Fidelity VIP Growth & Income Portfolio Sub-Account, Fidelity VIP Growth Portfolio Sub-Account, Fidelity VIP Growth Portfolio SC2 Sub-Account, Fidelity VIP High Income Portfolio Sub-Account, Fidelity VIP Index 500 Portfolio Sub-Account, Fidelity VIP Investment Grade Bond Portfolio Sub-Account, Fidelity VIP Mid Cap Portfolio Sub-Account, Fidelity VIP Money Market Portfolio Sub-Account, Fidelity VIP Money Market Portfolio SC Sub-Account, Fidelity VIP Overseas Portfolio Sub-Account, Fidelity VIP Overseas Portfolio SC 2 Sub-Account, Franklin Global Real Estate Securities Fund Sub-Account, Franklin Small-Mid Cap Growth Securities Fund Sub-Account, GSAM VIT Structured U.S. Equity Fund Sub-Account, GSAM VIT Capital Growth Fund Sub-Account, Janus Aspen Series Mid Cap Value Portfolio Sub-Account, J.P. Morgan Bond Portfolio Sub-Account, J.P. Morgan Small Company Portfolio Sub-Account, J.P. Morgan U.S. Large Cap Core Equity Portfolio Sub-Account, Lord Abbett Series Fund Growth & Income Portfolio Sub-Account, Lord Abbett Series Fund International Portfolio Sub-Account, Lord Abbett Series Fund Mid Cap Value Portfolio Sub-Account, Mercury Value Opportunities V.I. Fund Sub-Account, MFS/Sun Life Bond Series SC Sub-Account, MFS/Sun Life Capital Opportunities Series SC Sub-Account, MFS/Sun Life Capital Appreciation Series Sub-Account, MFS/Sun Life Capital Appreciation Series SC Sub-account, MFS/Sun Life Core Equity Series SC Sub-Account, MFS/Sun Life Emerging Growth Series Sub-Account, MFS/Sun Life Emerging Growth Series SC Sub-Account, MFS/Sun Life Global Growth Series Sub-Account, MFS/Sun Life Government Securities Series Sub-Account, MFS/Sun Life Government Securities Series SC Sub-Account, MFS/Sun Life High Yield Series SC Sub-Account, MFS/Sun Life International Growth Series SC Sub-Account, MFS/Sun Life International Growth Series Sub-Account, MFS/Sun Life Massachusetts Investors Growth Stock Series Sub-Account, MFS/Sun Life Massachusetts Investors Growth Stock Series SC Sub-Account, MFS/Sun Life Massachusetts Investors Trust Series Sub-Account, MFS/Sun Life Massachusetts Investors Trust Series SC Sub-Account, MFS/Sun Life Money Market Series Sub-Account, MFS/Sun Life New Discovery Series Sub-Account, MFS/Sun Life New Discovery Series SC Sub-Account, MFS/Sun Life Research International Series Sub-Account, MFS/Sun Life Research Series Sub-Account, MFS/Sun Life Research Series SC Sub-Account, MFS/Sun Life Strategic Growth Series Sub-Account, MFS/Sun Life Strategic Income SC Sub-Account, MFS/Sun Life Total Return Series Sub-Account, MFS/Sun Life Total Return Series SC Sub-Account, MFS/Sun Life Utilities Series Sub-Account, MFS/Sun Life Utilities Series SC Sub-Account, MFS/Sun Life Value Series Sub-Account, MFS/Sun Life Value Series SC Sub-Account, MFS/Sun Life Mid Cap Growth Series SC Sub-Account, Mutual Shares Securities Fund Sub-Account, Neuberger Berman AMT Limited Maturity Bond Portfolio Sub-Account, Neuberger Berman AMT Mid-Cap Growth Portfolio Sub-Account, Neuberger Berman AMT Partners Portfolio Sub-Account, Neuberger Berman AMT Regency Portfolio Sub-Account, Oppenheimer Capital Appreciation Fund/VA Sub-Account, Oppenheimer Global Securities Fund/VA Sub-Account, Oppenheimer Main Street Small Cap Fund/VA Sub Account, PIMCO VIT Emerging Markets Bond Portfolio Sub-Account, PIMCO VIT High Yield Portfolio Sub-Account, PIMCO VIT Low Duration Portfolio Sub-Account, PIMCO VIT Real Return Portfolio Sub-Account, PIMCO VIT Total Return Portfolio Sub-Account, Royce Capital Fund – Small Cap Portfolio Sub-Account, Rydex VT Nova Fund Sub-Account, Rydex VT OTC Fund Sub-Account, Sun CapitalSM All Cap Fund Sub-Account, Sun Capital Investment Grade Bond Fund, Sun CapitalSM Money Market Fund Sub-Account, Sun Capital Real Estate Fund Sub-Account, SCSM Blue Chip Mid Cap Fund Sub-Account, SCSM Davis Venture Value Fund Sub-Account, SCSM Oppenheimer Main Street Small Cap Fund Sub-Account, Templeton Foreign Securities Fund: Class 1 Sub-Account, Templeton Foreign Securities Fund: Class 2 Sub-Account, Templeton Growth Securities Fund: Class 1 Sub-Account, Templeton Growth Securities Fund: Class 2 Sub-Account, T. Rowe Price Blue Chip Growth Portfolio Sub-Account, T. Rowe Price Equity Income Portfolio Sub-Account, T. Rowe Price New America Growth Portfolio Sub-Account, Van Kampen UIF Mid Cap Growth Portfolio Sub-Account, Van Kampen LIT Comstock Portfolio Sub-Account, Van Kampen LIT Growth and Income Portfolio Sub-Account, and Wanger U.S. Smaller Companies Sub-Account of Sun Life of Canada (U.S.) Variable Account G (collectively the “Sub-Accounts”), as of December 31, 2007, and the related statements of operations for the year then ended and the statements of changes in net assets for each of the two years in the period then ended.  These financial statements are the responsibility of the Sponsor’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

69

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Sub-Accounts are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Sub-Accounts’ internal control over financial reporting.  Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  Our procedures included confirmation of securities owned as of December 31, 2007, by correspondence with the custodian.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the Sub-Accounts as of December 31, 2007, the results of their operations for the year then ended and the changes in their net assets for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Boston, Massachusetts

April 18, 2008

70

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

CONSOLIDATED STATEMENTS OF INCOME

(in thousands)

For the years ended December 31,

		2007		2006		2005
Revenues:
Premiums and annuity considerations	$	110,616	$	59,192	$	51,982
Net investment income		1,098,592		1,206,081		1,112,529
Net derivative (loss) income		(193,124)		9,089		16,474
Net realized investment (losses) gains		(61,048)		(44,511)		16,925
Fee and other income		479,904		398,622		362,275
Subordinated notes early redemption premium		25,578		-		-
Total revenues		1,460,518		1,628,473		1,560,185
Benefits and expenses:
Interest credited		629,823		633,405		637,502
Interest expense		101,532		130,802		123,279
Policyowner benefits		229,485		156,970		187,013
Amortization of deferred acquisition costs and value of business acquired		189,121		399,182		243,821
Other operating expenses		283,815		231,434		196,543
Partnership capital securities early redemption payment		25,578		-		-
Total benefits and expenses		1,459,354		1,551,793		1,388,158
Income before income tax (benefit) expense, and minority interest		1,164		76,680		172,027
Income tax (benefit) expense:
Federal		(24,289)		(1,717)		40,091
State		431		105		(2)
Income tax (benefit) expense		(23,858)		(1,612)		40,089
Income before minority interest		25,022		78,292		131,938
Minority interest share of loss		-		-		(1,214)
Net income	$	25,022	$	78,292	$	133,152

The accompanying notes are an integral part of the consolidated financial statements.

71

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

CONSOLIDATED BALANCE SHEETS

(in thousands except per share data)

ASSETS	December 31, 2007		December 31, 2006
Investments
Available-for-sale fixed maturities at fair value (amortized cost of $11,848,397 and $13,623,450 in 2007 and 2006, respectively); fair value option elected for $16,584  in 2007	$	11,503,230	$	13,637,973
Trading fixed maturities at fair value (amortized cost of $3,938,088 and $3,838,732 in 2007 and 2006, respectively)		3,867,011		3,856,053
Subordinated note from affiliate held-to-maturity (fair value of $630,751 in 2006)		-		600,000
Mortgage loans		2,318,341		2,273,176
Derivative instruments – receivable		609,261		653,854
Limited partnerships		164,464		193,728
Real estate		201,777		186,891
Policy loans		712,633		709,626
Other invested assets		568,676		950,226
Cash and cash equivalents		1,169,701		578,080
Total investments and cash		21,115,094		23,639,607
Accrued investment income		290,363		291,218
Deferred policy acquisition costs		1,603,397		1,234,206
Value of business and customer renewals acquired		51,806		47,744
Net deferred tax asset		15,945		3,597
Goodwill		708,829		701,451
Receivable for investments sold		3,482		33,241
Reinsurance receivable		2,709,249		1,817,999
Other assets		311,999		153,230
Separate account assets		24,996,603		21,060,255
Total assets	$	51,806,767	$	48,982,548
LIABILITIES
Contractholder deposit funds and other policy liabilities	$	18,262,569	$	19,428,625
Future contract and policy benefits		823,588		750,112
Payable for investments purchased		199,210		218,465
Accrued expenses and taxes		123,065		144,695
Debt payable to affiliates		1,945,000		1,325,000
Partnership capital securities		-		607,826
Reinsurance payable to affiliate		1,691,884		1,605,626
Derivative instruments – payable		446,640		160,504
Other liabilities		888,061		1,178,086
Separate account liabilities		24,996,603		21,060,255
Total liabilities		49,376,620		46,479,194
Commitments and contingencies – Note 20
STOCKHOLDER’S EQUITY
Common stock, $1,000 par value – 10,000 shares authorized; 6,437 shares issued and outstanding in 2007 and 2006		6,437		6,437
Additional paid-in capital		2,146,436		2,143,408
Accumulated other comprehensive (loss) income		(92,403)		14,030
Retained earnings		369,677		339,479
Total stockholder’s equity		2,430,147		2,503,354
Total liabilities and stockholder’s equity	$	51,806,767	$	48,982,548

The accompanying notes are an integral part of the consolidated financial statements.

72

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

For the years ended December 31,

		2007		2006		2005
Net income	$	25,022	$	78,292	$	133,152
Other comprehensive loss:
Change in unrealized holding (losses) gains on available- for-sale securities, net of tax and policyholder amounts (1)		(119,775)		(46,229)		(79,814)
Change in pension and other postretirement plan adjustments, net of tax (2)		11,197		1,842		(1,842)
Reclassification adjustments of realized investment losses (gains) into net income (3)		2,145		40,673		(79,722)
Other comprehensive loss		(106,433)		(3,714)		(161,378)
Comprehensive (loss) income	$	(81,411)	$	74,578	$	(28,226)

(1)   Net of tax benefit of $64.7 million, $25.5 million and $43.0 million for the years ended December 31, 2007, 2006 and 2005, respectively.

(2)   Net of tax (expense) benefit of $(6.0) million, $(0.2) million and $1.0 million for the years ended December 31, 2007, 2006 and 2005, respectively.

(3)   Net of tax (expense) benefit of $(1.2) million, $(21.9) million and $42.9 million for the years ended December 31, 2007, 2006 and 2005, respectively.

The accompanying notes are an integral part of the consolidated financial statements.

73

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

(in thousands)

For the years ended December 31,

	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholder’s Equity
Balance at December 31, 2004	$	6,437	$	2,131,888	$	180,638	$	628,035	$	2,946,998
Net income		-		-		-		133,152		133,152
Dividends		-		-		-		(200,000)		(200,000)
Tax benefit from stock options		-		6,992		-		-		6,992
Other comprehensive loss		-		-		(161,378)		-		(161,378)
Balance at December 31, 2005		6,437		2,138,880		19,260		561,187		2,725,764
Adjustment to initially apply FASB Statement No. 158, net of tax						(1,516)				(1,516)
Net income		-		-		-		78,292		78,292
Dividends		-		-		-		(300,000)		(300,000)
Tax benefit from stock options		-		4,528		-		-		4,528
Other comprehensive loss		-		-		(3,714)		-		(3,714)
Balance at December 31, 2006		6,437		2,143,408		14,030		339,479		2,503,354
Cumulative effect of accounting changes, net of tax								5,176		5,176
Net income		-		-		-		25,022		25,022
Tax benefit from stock options		-		3,028						3,028
Other comprehensive loss		-		-		(106,433)		-		(106,433)
Balance at December 31, 2007	$	6,437	$	2,146,436	$	(92,403)	$	369,677	$	2,430,147

The accompanying notes are an integral part of the consolidated financial statements.

74

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

For the years ended December 31,

		2007		2006		2005
Cash Flows From Operating Activities:
Net income from operations	$	25,022	$	78,292	$	133,152
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Minority interest share of loss		-		-		(1,214)
Net amortization of premiums on investments		40,668		58,752		71,357
Amortization of deferred acquisition costs and value of business and customer renewals acquired		189,121		399,182		243,821
Depreciation and amortization		7,460		4,608		3,985
Net losses (gains) on derivatives		131,503		(11,853)		(77,025)
Net realized losses (gains) on available-for-sale investments		61,048		44,511		(16,925)
Changes in fair value of trading investments		88,398		(15,235)		80,324
Net realized gains on trading investments		(4,655)		(373)		(11,162)
Net change in unrealized and undistributed gains in private equity limited partnerships		(23,027)		(29,120)		(48,244)
Interest credited to contractholder deposits		629,823		633,405		637,502
Deferred federal income taxes		43,366		4,180		22,047
Changes in assets and liabilities:
Additions to deferred acquisition costs, value of business and customer renewals acquired		(379,941)		(262,895)		(261,917)
Accrued investment income		855		(29,711)		17,916
Net reinsurance receivable/payable		33,161		77,063		85,876
Future contract and policy benefits		66,550		(6,619)		25,123
Other, net		(134,356)		14,268		53,536
Purchases of trading fixed maturities, net of sales		(100,836)		(1,866,153)		(651,921)
Net cash provided by (used in) operating activities		674,160		(907,698)		306,231
Cash Flows From Investing Activities:
Sales, maturities and repayments of:
Available-for-sale fixed maturities		4,252,780		5,872,190		5,685,008
Mortgage loans		355,146		248,264		117,438
Real estate		-		-		947
Net cash from disposition of subsidiary		-		-		17,040
Other invested assets		667,683		184,646		483,700
Redemption of subordinated note from affiliates		600,000		-		-
Purchases of:
Available-for-sale fixed maturities		(2,557,841)		(4,002,244)		(5,269,211)
Mortgage loans		(399,566)		(780,592)		(390,376)
Real estate		(19,439)		(20,619)		(6,648)
Other invested assets		(57,864)		(489,493)		(171,539)
Net change in other investments		(361,781)		399,514		(239,910)
Net change in policy loans		(3,007)		(7,857)		(5,464)
Net change in short-term investments		-		-		(4,576)
Early redemption premium		25,578		-		-
Net cash provided by investing activities	$	2,501,689	$	1,403,809	$	216,409

The accompanying notes are an integral part of the consolidated financial statements.

75

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

For the years ended December 31,

		2007		2006		2005
Cash Flows From Financing Activities:
Additions to contractholder deposit funds	$	1,924,784	$	3,520,138	$	2,720,141
Withdrawals from contractholder deposit funds		(4,533,405)		(3,690,351)		(3,404,468)
Repayments of debt		(980,000)		-		-
Debt proceeds		1,000,000		200,000		100,000
Dividends paid to stockholder		-		(300,000)		(150,600)
Early redemption payment		(25,578)		-		-
Other, net		29,971		4,528		6,992
Net cash used in financing activities		(2,584,228)		(265,685)		(727,935)
Net change in cash and cash equivalents		591,621		230,426		(205,295)
Cash and cash equivalents, beginning of year		578,080		347,654		552,949
Cash and cash equivalents, end of year	$	1,169,701	$	578,080	$	347,654
Supplemental Cash Flow Information
Interest paid	$	73,116	$	130,686	$	122,474
Income taxes paid	$	43,287	$	82,250	$	16,857

Supplemental Schedule of non-cash investing and financing activities

Effective November 8, 2007, the Company’s subsidiary, Sun Life Financial (U.S.) Reinsurance Company (“Sun Life Vermont”), entered into a reinsurance agreement with Sun Life Assurance Company of Canada (“SLOC”), the Company’s affiliate, under which Sun Life Vermont assumed the risks of certain individual universal life insurance contracts issued and to be issued by SLOC.  This agreement is described more fully in Note 1 and Note 8.  As part of the transaction, the Sun Life Vermont assumed $553.7 million of contractholder deposits, future contract and policy benefits of $ 20.4 million, a funds withheld asset of $551.8 million, and a deferred loss of $22.3 million, all of which are considered non-cash items for purposes of the Company’s consolidated statement of cash flows.

The Company declared and paid to its direct parent, Sun Life of Canada (U.S.) Holdings, Inc., cash dividends of $300.0 million in 2006.  In 2005, the Company declared and paid a $200.0 million dividend to its direct parent, consisting of $150.6 million in cash and $49.4 million in notes. The Company did not pay any dividends to its direct parent in 2007.

On April 19, 2005, the Company sold its interest in a consolidated variable interest entity (“VIE”). As a result of the sale, bonds decreased by $42.5 million, short-term investments decreased by $28.5 million, investment income due and accrued decreased by $0.3 million, other invested assets decreased by $3.2 million, other liabilities decreased by $26.1 million, deferred tax liability decreased by $3.9 million, and notes payable decreased by $33.5 million.

The accompanying notes are an integral part of the consolidated financial statements.

76

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GENERAL

Sun Life Assurance Company of Canada (U.S.) (the “Company”) and its subsidiaries are engaged in the sale of individual and group variable life insurance, individual universal life insurance, individual and group fixed and variable annuities, funding agreements, group life, group disability, group dental and group stop loss insurance.  These products are distributed through individual insurance agents, financial planners, insurance brokers and broker-dealers to both the tax-qualified and non-tax-qualified markets.  The Company is authorized to transact business in 49 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.  In addition, the Company’s wholly-owned subsidiary, Sun Life Insurance and Annuity Company of New York (“SLNY”), is authorized to transact business in the State of New York.

The Company is a stock life insurance company incorporated under the laws of Delaware.  The Company is a direct wholly-owned subsidiary of Sun Life of Canada (U.S.) Holdings, Inc. (the "Parent").  The Company is an indirect wholly-owned subsidiary of Sun Life Assurance Company of Canada - U.S. Operations Holdings, Inc. ("SLC - U.S. Ops Holdings") and is an indirect wholly-owned subsidiary of Sun Life Financial Inc. ("SLF"), a reporting company under the Securities Exchange Act of 1934.  SLF and its subsidiaries are collectively referred to herein as "Sun Life Financial."

BASIS OF PRESENTATION

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for stock life insurance companies.

The consolidated financial statements include the accounts of the Company and its subsidiaries.  As of December 31, 2007, the Company directly or indirectly owned all of the outstanding shares or members interest of SLNY, which issues individual fixed and variable annuity contracts, group life, group disability, group dental and stop loss insurance, and individual life insurance in New York; Independence Life and Annuity Company (“INDY”), a Rhode Island life insurance company that sold variable and whole life insurance products; Sun Life Vermont, a Vermont special purpose financial captive insurance company; Clarendon Insurance Agency, Inc., a registered broker-dealer; Sun Life of Canada (U.S.) SPE 97-I, Inc., organized for the purpose of engaging in activities incidental to securitizing mortgage loans; SLF Private Placement Investment Company I, LLC; Sun Parkaire Landing LLC; 7101 France Avenue Manager, LLC; Sun MetroNorth, LLC; and SLNY Private Placement Investment Company I, LLC.

On October 31, 2007, the Company subscribed for $250,000 worth of shares of, and contributed $150 million of paid-in capital to, a newly formed wholly-owned subsidiary, Sun Life Vermont.  Effective November 8, 2007, Sun Life Vermont entered into a reinsurance agreement with Sun Life Assurance Company of Canada (“SLOC”), an affiliate of the Company, under which the Sun Life Vermont has assumed the risks of certain individual universal life insurance (“UL”) policies issued, and to be issued, by SLOC.  This agreement is described more fully in Note 8.  A long-term financing arrangement has been established with a financial institution (the "Lender") that will enable Sun Life Vermont to fund a portion of its obligations under the reinsurance agreement with SLOC.  Under this arrangement, Sun Life Vermont issued a $1 billion variable principal, floating rate surplus note (the “Surplus Note”) to a special-purpose entity, Structured Asset Repackage Company, 2007-SUNAXXX LLC (“SUNAXXX”) affiliated with the Lender.  Pursuant to an agreement between the Lender and SLC – U.S. Ops Holdings, SLC – U.S. Ops Holdings bears the ultimate obligation to repay the Lender and, as such, has consolidated SUNAXXX in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 46, "Consolidation of Variable Interest Entities, an interpretation of ARB No. 51 (Revised December 2003)" (“FIN 46(R)”).

77

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

BASIS OF PRESENTATION (continued)

Effective September 27, 2007, the Company dissolved Sun life of Canada (U.S.) Holdings General Partner, LLC (the “General Partner”).  The General Partner was the sole general partner in Sun Life of Canada (U.S.) Limited Partnership (the “Partnership”) and, as a result, the Partnership had been consolidated with the results of the Company.  The Partnership was organized to purchase subordinated debentures issued by the Parent and to issue partnership capital securities to an affiliated business trust, Sun Life of Canada (U.S.) Capital Trust I (the “Capital Trust”).  Effective May 6, 2007, the Parent redeemed $600 million of 8.526% subordinated debentures issued to the Partnership and paid the Partnership an early redemption premium of $25.6 million.  Also effective May 6, 2007, the Partnership redeemed $600 million of the 8.526% partnership capital securities issued to the Capital Trust and paid a premium of $25.6 million to the Capital Trust.  The redemption had no impact on the Company’s net income.  The Partnership was cancelled effective September 27, 2007.

Effective May 31, 2007, Sun Life Financial completed its acquisition of Genworth Financial, Inc.'s (“Genworth’s”) Employee Benefits Group business ("EBG").  Also effective May 31, 2007, SLNY entered into a series of agreements with Sun Life and Health Insurance Company (U.S.) (“SLHIC”), one of the acquired companies (formerly named Genworth Life and Health Insurance Company), through which the New York issued business of SLHIC was transferred to SLNY.  These agreements include a 100% coinsurance agreement for all existing and future new business issued in New York, a renewal rights agreement under which SLNY has exclusive rights to renew in-force business assumed under the reinsurance agreement and an administrative service agreement under which SLNY has agreed to assume direct responsibility for all sales and administration of existing and new business issued in New York (collectively, “the SLHIC to SLNY asset transfer”).  These agreements, in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations,” were treated as a transfer of net assets between entities under common control. SLNY paid $40 million of total consideration to SLHIC.  SLHIC transferred assets at carrying value of approximately $72 million, including $38.9 million of goodwill and other intangibles, as well as policyholder and other liabilities of approximately $32 million to SLNY.  The Group Protection Segment of the Company reflects a significant increase in business as a result of these agreements. These agreements have allowed the Company to expand its product offerings to include group dental insurance.

On September 6, 2006, the Company entered into an agreement with Credit and Repackaged Securities Limited Series 2006-10 Trust (the "CARS Trust"), whereby the Company is the sole beneficiary of the CARS Trust.  As of December 31, 2007, total assets and liabilities of the CARS Trust were $57.7 million and $7.9 million, respectively. As the sole beneficiary of the CARS Trust, the Company is required to consolidate this trust under the requirements of FIN 46(R).  Accordingly, the assets and liabilities of the CARS Trust are included in the Company’s consolidated financial statements.  As of December 31, 2007, the Company recorded in its consolidated balance sheets $53.8 million of trading fixed maturities, $2.9 million of deferred tax, $1.0 million of accrued investment income and $7.9 million of liabilities relating to a total return swap.  As of December 31, 2006, the Company recorded in its consolidated balance sheets $55.3 million of trading fixed maturities, $1.2 million of accrued investment income and $1.7 million of liabilities.

On April 19, 2005, the Company sold its interest in a consolidated variable interest entity (“VIE”) and recognized a gain of $6.1 million.  The Company received net cash proceeds of $17.0 million and reduced consolidated assets and liabilities by $74.5 million and $63.6 million, respectively. The Company’s net income for the year ended December 31, 2005 included a net loss of $0.8 million related to this VIE.

The Company had a greater than or equal to 20%, but less than 50%, interest in fourteen VIEs at December 31, 2007.  The Company is a creditor in seven trusts, three limited liability companies, two limited partnership and two special-purpose entities that were used to finance commercial mortgages, and franchise receivables and equipment used in utility generation.  The Company’s maximum exposure to loss related to all of these VIEs is the investments’ carrying value, which was $88.4 million and $30.1 million at December 31, 2007 and 2006, respectively.  The investments in these VIEs mature between March 2007 and September 2029.  As the Company will not absorb a majority of the VIEs’ expected losses or receive a majority of the expected returns, the Company is not required to consolidate these VIEs, in accordance with FIN 46.  See Note 4 for additional information with respect to leveraged leases which is not included above.

All intercompany transactions have been eliminated in consolidation.

78

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

USE OF ESTIMATES

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  The most significant estimates are those used in determining the fair value of financial instruments, goodwill, DAC, VOBA, the liabilities for future contract and policyholder benefits and other-than-temporary impairments of investments.  Actual results could differ from those estimates.

FINANCIAL INSTRUMENTS

In the normal course of business, the Company enters into transactions involving various types of financial instruments, including cash equivalents, fixed maturity investments, mortgage loans, equity securities, derivative financial instruments, debt, loan commitments and financial guarantees.  These instruments involve credit risk and also may be subject to risk of loss due to interest rate fluctuation.  The Company evaluates and monitors each financial instrument individually and, when appropriate, obtains collateral or other security to minimize losses.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents primarily include cash, commercial paper, money market investments and short-term bank participations.  All such investments have maturities of three months or less when purchased and are considered cash equivalents for purposes of reporting cash flows.

INVESTMENTS

The Company accounts for its investments in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities."  At the time of purchase, fixed maturity securities are classified based on the Company's intent as either held-to-maturity, trading or available-for-sale.  In order for a security to be classified as held-to-maturity, the Company must have positive intent and ability to hold the security to maturity.  Securities held-to-maturity are stated at cost, adjusted for amortization of premiums and accretion of discounts.  Securities that are bought and held principally for the purpose of selling them in the near term are classified as trading.  Trading securities are carried at aggregate fair value with changes in market value reported as a component of net investment income.  Securities that do not meet the held-to-maturity or trading criterion are classified as available-for-sale.  Included with available-for-sale fixed maturities are mortgage backed securities in the To Be Announced ("TBA") form.  The Company records TBA purchases on the trade date and the corresponding payable is recorded as an outstanding liability in payable for investments purchased until the settlement date of the transaction.  Available-for-sale securities are carried at fair value with the unrealized gains or losses reported in other comprehensive income.

The Company determines the fair value of its publicly traded fixed maturities using four primary pricing methods: third-party pricing services, independent dealer quotes, pricing matrices, and pricing models.  Prices are first sought from third party pricing services; the remaining unpriced securities are priced using one of the remaining three methods.  Third-party pricing services derive the security prices through recently reported trades for identical or similar securities with adjustments for trading volumes and market observable information through the reporting date.  In the event that there are no recent market trades, pricing services and brokers may use pricing matrices and models to develop a security price based on future expected cash flows discounted at an estimated market rate using collateral performance and vintages.

79

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVESTMENTS (continued)

Structured securities, such as collateralized mortgage obligations (“CMO”), commercial mortgage-backed securities (“CMBS”), and asset-backed securities (“ABS”), are priced using a matrix, fair value model or independent broker quotations.  CMBS securities, which are a subset of the Company's CMO holdings, are priced using the last sale price of the day or a broker quote, if no sales were transacted that day.  Other CMOs and ABS are priced using matrices, models or independent broker quotations.  Typical inputs used by these three pricing methods include, but are not limited to, reported trades, benchmark yields, issuer spreads, bids and/or estimated cash flows and prepayment speeds.  In addition, estimates of expected future prepayments are factors in determining the price of ABS, mortgage-backed securities (“MBS”), CMBS, and CMOs.  These estimates are based on the underlying collateral and structure of the security, as well as prepayment speeds previously experienced in the market at interest rate levels projected for the underlying collateral.  Actual prepayment experience may vary from these estimates.

For privately placed fixed maturities, fair values are estimated using matrices, which take into account credit spreads for publicly traded securities of similar credit risk, maturity, prepayment and liquidity characteristics.  A portion of privately placed fixed maturities are also priced using market prices or dealer quotes.  The fair values of mortgages are estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

The Company’s ability to liquidate positions in privately placed fixed securities and mortgages could be impacted to a significant degree by the lack of an actively traded market.  Although the Company believes that its estimates reasonably reflect the fair value of those instruments, its key assumptions about risk-free interest rates, risk premiums, performance of underlying collateral (if any) and other factors may not reflect those of an active market.

The Company performs a monthly analysis on the prices received from third parties to assess if the prices represent a reasonable estimate of the fair value.  The process is both quantitative and qualitative and includes back testing of recent trades, review of key assumptions such as spreads, duration, credit rating, and on-going review of third-party pricing services methodologies.  In the event that a more appropriate fair value is justified, the price received from a third-party pricing services is adjusted accordingly.  The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between knowledgeable, unrelated willing parties using inputs, including estimates and assumptions, a market participant would utilize.

The Company's accounting policy for impairment requires recognition of an other-than-temporary impairment write-down on a security if it is determined that the Company anticipates that it will be unable to recover all amounts due under the contractual obligations of the security.  Additionally, in the event that securities that are expected to be sold before the fair value of the security recovers to amortized cost, an other-than-temporary impairment charge is also taken.

Some structured securities, typically those rated single A or below, are subject to Emerging Issues Task Force Issue No.  99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continued to Be Held by a Transferor in Securitized Financial Assets” (“EITF 99-20”).  EITF 99-20 requires the Company to periodically update its best estimate of cash flows over the life of the security.  In the event that the present value of the estimated cash flows is less than amortized cost, an other-than-temporary impairment charge is recorded.  Estimating future cash flows is a quantitative and qualitative process that incorporates information received from third parties, along with assumptions and judgments about the future performance of the underlying collateral.

80

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVESTMENTS (continued)

Impairments are classified as either credit-related or interest-related.  The Company categorizes impairments as credit-related if it anticipates the issuers will be unable to pay all principal and interest amounts due, according to the contractual terms of the security or if the decline in fair value of the security is driven by issuer-specific credit events.  The Company characterizes impairments as interest-related if the depression in fair value of the security was due to changes in interest or general credit spread widening and for which the Company has determined it no longer has the intent or ability to hold a security until recovery to amortized cost.  Once an other than temporary impairment charge has been recorded, the Company continues to review the other-than-temporarily impaired securities for additional impairment.  The net realized loss is recorded in the income statement as the difference between the fair value and the amortized cost of the security.

The Company incurred realized losses totaling $68.1 million, $6.3 million and 29.7, for the years ended December 31, 2007, 2006 and 2005, respectively, for other-than-temporary impairments.  Of the $68.1 million in realized losses for other-than-temporary impairments for the year ended December 31, 2007, $16.1 million was due to a change in the Company’s intent to hold the securities to recovery of fair value, up to amortized cost.  The remaining $52 million of realized losses were credit-related.

The Company discontinues the accrual of income on its holdings for issuers that are in default.  Investment income would not have materially increased for the year ended December 31, 2007 and 2006 if these holdings were performing.

81

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVESTMENTS (CONTINUED)

Mortgage loans are stated at unpaid principal balances, net of provisions for estimated losses.  Mortgage loans acquired at a premium or discount are carried at amortized values net of provisions for estimated losses.  Mortgage loans, which include primarily commercial first mortgages, are diversified by property type and geographic area throughout the United States.  Mortgage loans are collateralized by the related properties and generally are no more than 75% of the property’s value at the time that the original loan is made.

A loan is recognized as impaired when it is probable that the principal or interest is not collectible in accordance with the contractual terms of the loan.  Measurement of impairment is based on the lower of the present value of expected future cash flows discounted at the loan's effective interest rate, or on the loan's observable market price.  A specific valuation allowance is established if the fair value of the impaired loan is less than the recorded amount.  Loans are also charged against the allowance when determined to be uncollectible.  The allowance is based on a continuing review of the loan portfolio, past loss experience, and current economic conditions, which may affect the borrower's ability to pay.  While management believes that it uses the best information available to establish the allowance, future adjustments to the allowance may become necessary if economic conditions differ from the assumptions used in making the evaluation.

Real estate investments are held for the production of income or are held for sale.  Real estate investments held for the production of income are carried at the lower of cost adjusted for accumulated depreciation or fair value.  Depreciation of buildings and improvements is calculated using the straight line method over the estimated useful life of the property, generally 40 to 50 years.  Real estate investments held for sale are primarily acquired through foreclosure of mortgage loans.  The cost of real estate that has been acquired through foreclosure is the estimated fair value less estimated costs to dispose at the time of foreclosure.  Real estate investments are diversified by property type and geographic area throughout the United States.

Policy loans are carried at the amount of outstanding principal balance.  Policy loans are collateralized by the related insurance policy and do not exceed the net cash surrender value of such policy.

Investments in private equity limited partnerships are accounted for by the equity method of accounting.

The Company uses derivative financial instruments including swaps, options, and futures as a means of hedging exposure to interest rate, currency and equity price risk.  Derivatives are carried at fair value and changes in fair value are recorded as a component of derivative income.

Realized gains and losses on the sales of investments are recognized in operations at the date of sale and are determined using the average cost method.  When an impairment of a specific available-for-sale investment is determined to be other-than-temporary, a realized investment loss is recorded.  Changes in the provision for estimated losses on mortgage loans and real estate are included in net realized investment gains and losses.

Interest income is recorded on the accrual basis. Investments are placed in a non-accrual status when management believes that the borrower's financial condition, after giving consideration to economic and business conditions and collection efforts, is such that collection of principal and interest is doubtful.  When an investment is placed in non-accrual status, all interest accrued is reversed against current period interest income.  Interest accruals are resumed on such investments only when the investments have performed on a sustained basis for a reasonable period of time and when, in the judgment of management, the investments are estimated to be fully collectible as to both principal and interest.

82

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

DEFERRED POLICY ACQUISITION COSTS

Acquisition costs consist of commissions, underwriting and other costs, which vary with and are primarily related to the production of new business.  Acquisition costs related to investment-type contracts, primarily deferred annuity and guaranteed investment contracts (“GICs”), and universal and variable life products are deferred and amortized with interest in proportion to the present value of estimated gross profits to be realized over the estimated lives of the contracts.  Estimated gross profits are composed of net investment income, net realized investment gains and losses, life and variable annuity fees, surrender charges, interest credited, policyholder benefits and direct variable administrative expenses.  DAC amortization is reviewed regularly and adjusted, as appropriate, retrospectively when the Company records actual profits and revises its estimate of future gross profits to be realized from this group of products, including realized gains and losses from investments.

Although recovery of DAC is not assured, the Company believes it is more likely than not that all of these costs will be recovered from future profits.  The amount of DAC considered recoverable, however, could be reduced in the near term if the future estimates of gross profits are reduced.

DAC is also adjusted for amounts relating to unrealized investment gains and losses.  This adjustment, net of tax, is included with unrealized investment gains or losses that are recorded in accumulated other comprehensive (loss) income. DAC was increased by $189.8 million and $6.9 million at December 31, 2007 and 2006, respectively, to reflect unrealized losses.

VALUE OF BUSINESS AND CUSTOMER RENEWALS ACQUIRED

Value of business acquired (“VOBA”) represents the actuarially-determined present value of projected future gross profits from policies in force at the date of their acquisition.  This amount is amortized in proportion to the projected emergence of profits or premium income over the estimated life of the purchased block of business.

VOBA is also adjusted for amounts relating to unrealized investment gains and losses.  This adjustment, net of tax, is included with unrealized investment gains or losses that are recorded in accumulated other comprehensive (loss) income.  The Company’s VOBA was not adjusted for amounts relating to unrealized investment gains and losses for the year ended December 31, 2007.  VOBA was increased by $0.5 million at December 31, 2006 to account for unrealized investment losses.

The value of customer renewals acquired represents the actuarially determined present value of projected future profits arising from the existing in-force business at the date of acquisition to the next policy renewal date.  This amount is amortized in proportion to the projected premium income over the period from the first renewal date to the end of the projected life of the policies and, as such, is not adjusted for amounts relating to unrealized investment gains and losses.

83

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

GOODWILL

Goodwill represents the difference between the purchase price paid and the fair value of the net assets acquired in connection with the Company’s acquisitions of Keyport on November 1, 2001 and the allocation of goodwill to SLNY, based on a reinsurance agreement with SLHIC, effective May 31, 2007.  Goodwill obtained in connection with the purchase of Keyport is allocated to the Wealth Management Segment.  Goodwill obtained through the reinsurance agreement with SLHIC is allocated to the Group Segment in the Company’s subsidiary, SLNY.  In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill is tested for impairment on an annual basis.  The Company completed the required impairment tests of goodwill and indefinite-lived intangible assets during the second quarter of 2007 and concluded that these assets were not impaired.

OTHER ASSETS

Property, equipment, leasehold improvements and capitalized software costs that are included in other assets are stated at cost, less accumulated depreciation and amortization.  Depreciation and amortization are calculated using the straight-line or accelerated method over the estimated useful lives of the related assets, which generally range from 3 to 10 years.

Amortization of leasehold improvements is calculated using the straight-line method over the lesser of the term of the leases or the estimated useful life of the improvements.  Intangible assets are also included in other assets.

Intangible assets, which are recorded in other assets, consist of state insurance licenses that are not subject to amortization, product rights that have a weighted-average useful life of 7 years, and the value of distribution, which was transferred to SLNY from SLHIC.  The value of distribution represents the present value of projected future profits arising from sales of new business by brokers with whom SLHIC had an existing distribution relationship contract.  This amount is amortized on a straight-line basis over 25 years, representing the period over which the Company expects to earn premiums from new sales stemming from the added distribution capacity.

POLICY LIABILITIES AND ACCRUALS

Future contract and policy benefit liabilities include amounts reserved for future policy benefits payable upon contingent events as well as liabilities for unpaid claims due as of the statement date.  Such liabilities are established in amounts adequate to meet the estimated future obligations of policies in force.

Policy reserves for annuity contracts include liabilities held for group pension and payout annuity payments and liabilities held for product guarantees on variable annuity products, such as guaranteed minimum death benefits.  Reserves for pension and payout annuity contracts are calculated using the best-estimate interest and decrement assumptions that were set at the time that loss recognition testing resulted in additional reserves.  The Company periodically reviews its policies for loss recognition based upon management’s best estimates.  From time to time the Company may recognize a loss on certain lines of business.  For the year ended December 31, 2007 additional reserves of $31.4 million were recorded as a reduction to income and additional reserves of $7.5 million were recorded as a component of other comprehensive loss.  Reserves for guaranteed minimum death benefits and guaranteed minimum income benefits are calculated according to the methodology of AICPA Statement of Position 03-1, "Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts" ("SOP 03-1"), whereby the expected benefits provided by the guarantees are spread over the duration of the contract in proportion to the benefit assessments.

84

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

POLICY LIABILITIES AND ACCRUALS (continued)

Policy reserves for universal life contracts are held for benefit coverages that are not fully provided for in the policy account value.  These include rider coverages, conversions from group policies, and benefits provided under market conduct settlements.

Policy reserves for group life and health contracts are calculated using standard actuarial methods recognized by the American Academy of Actuaries. For the tabular reserves, discount rates are based on the Company’s earned investment yield and the morbidity and mortality tables used are standard industry tables modified to reflect the Company’s actual experience when appropriate.  In particular, for the Company’s group known claim reserves, the mortality and morbidity tables for the early durations of claims are based exclusively on the Company’s experience, incorporating factors such as age at disability, sex and elimination period.  These reserves are computed at amounts that, with interest compounded annually at assumed rates, are expected to meet the Company’s future obligations.

Liabilities for unpaid claims consist of the estimated amount payable for claims reported but not yet settled and an estimate of claims incurred but not reported.  The amount reported is based upon historical experience, adjusted for trends and current circumstances.  Management believes that the recorded liability is sufficient to provide for the associated claims adjustment expenses.  Revisions of these estimates are included in operations in the year such refinements are made.

Contractholder deposit funds consist of policy values that accrue to the holders of universal life-type contracts and investment-related products such as deferred annuities, single premium whole life policies ("SPWL"), GICs and funding agreements.  The liabilities consist of deposits received plus interest credited, less accumulated policyholder charges, assessments, partial withdrawals and surrenders.  The liabilities are not reduced by surrender charges.

REVENUE AND EXPENSES

Premiums for traditional individual life products are considered earned revenue when due. Premiums related to group life, group stop loss, group dental and group disability insurance are recognized as earned revenue pro-rata over the contract period. The unexpired portion of these premiums is recorded as unearned premiums. Revenue from universal life-type products and investment-related products includes charges for the cost of insurance (mortality), initiation and administration of the policy and surrender charges. Revenue is recognized when the charges are assessed except that any portion of an assessment that relates to services to be provided in future years is deferred and recognized over the period during which the services are provided.

Benefits and expenses related to traditional life, annuity and disability contracts, including group policies, are recognized when incurred in a manner designed to match them with related premium revenue and to spread income recognition over the expected life of the policy.  For universal life-type and investment-type contracts, expenses include interest credited to policyholders’ accounts and death benefits in excess of account values, which are recognized as incurred.

Fees from investment advisory services are recognized as revenues when the services are provided.

INCOME TAXES

For the years ended December 31, 2007, 2006 and 2005, the Company participated in a consolidated federal income tax return with SLC – U.S. Ops Holdings and other affiliates.  For the years ended December 31, 2006 and 2005, the Company’s subsidiaries INDY and SLNY filed stand-alone federal income tax returns.  INDY, SLNY and Sun Life Vermont, a new subsidiary, will be included as part of the consolidated federal income tax return for the year ended December 31, 2007.

Deferred income taxes are recognized when assets and liabilities have different values for financial statement and tax reporting purposes, and for other temporary taxable and deductible differences as defined by SFAS No. 109, “Accounting for Income Taxes.”  These differences primarily result from policy reserves, policy acquisition expenses and unrealized gains or losses on investments.

85

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SEPARATE ACCOUNTS

The Company has established separate accounts applicable to various classes of contracts providing variable benefits.  Contracts for which funds are invested in separate accounts include variable life insurance and individual and group qualified and non-qualified variable annuity contracts.  Investment income and changes in mutual fund asset values are allocated to policyholders and therefore do not affect the operating results of the Company.  Assets held in the separate accounts are carried at fair value and the investment risk of such securities is retained by the contractholder.  The Company earns separate account fees for providing administrative services and bearing the mortality risks related to these contracts.  The activity of the separate accounts is not reflected in the consolidated financial statements except for:  (1) the fees the Company receives, which are assessed periodically and recognized as revenue when assessed; and (2) the activity related to the guaranteed minimum death benefit ("GMDB"), guaranteed minimum income benefit ("GMIB"), guaranteed minimum accumulation benefit ("GMAB") and guaranteed minimum withdrawal benefit ("GMWB") which is reflected in the Company’s consolidated financial statements and accompanying notes.

ACCOUNTING PRONOUNCEMENTS

New and Adopted Accounting Pronouncements

In June 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109" ("FIN 48"), which became effective for fiscal years beginning after December 15, 2006.  FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.  The Company adopted FIN 48 on January 1, 2007, and recognized a decrease of $5.2 million in the liability for unrecognized tax benefits (“UTBs”) and related net interest, and an offsetting increase in its January 1, 2007 balance of retained earnings.

In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets," an amendment to SFAS No. 140.  SFAS No. 156 requires all separately recognized servicing assets and liabilities to be initially measured at fair value and permits entities to choose to either subsequently measure servicing rights at fair value and report changes in fair value in earnings, or amortize servicing rights in proportion to, and over the estimated net servicing income or loss, and assess the rights for impairment or the need for an increased obligation.  The option to subsequently measure servicing rights at fair value allows entities which utilize derivative instruments to hedge their servicing rights to account for such hedging relationships at fair value and avoid the complications of hedge accounting under SFAS No. 133.  SFAS No. 156 was effective for fiscal years beginning after September 15, 2006.  The adoption of this statement did not have a material impact on the Company’s financial position or results of operations.

In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments - an amendment of FASB Statements No. 133 and 140.”  This statement amended SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," and SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," and resolved issues addressed in SFAS No. 133 Implementation Issue No. D1, "Application of Statement 133 to Beneficial Interests in Securitized Financial Assets."  The Company began applying SFAS No. 155 to all financial instruments acquired, issued or subject to a remeasurement event beginning January 1, 2007.  The Company elected the fair value option for $16.6 million of available-for-sale securities during the year ended December 31, 2007.  The election did not have a material impact on the Company’s results of operations.

86

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

ACCOUNTING PRONOUNCEMENTS (CONTINUED)

New and Adopted Accounting Pronouncements (continued)

In September 2005, the American Institute of Certified Public Accountants (the "AICPA") issued Statement of Position 05-1, "Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts" ("SOP 05-1").  SOP 05-1 provides guidance on accounting by insurance enterprises for DAC on internal replacements of insurance and investment contracts.  The adoption of SOP 05-1 on January 1, 2007 did not have a material impact on the Company’s consolidated financial condition and results of operations.

Accounting Standards Not Yet Adopted

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” which permits entities to choose to measure many financial instruments and certain other items at fair value (“FV option”).  The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reporting earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.  SFAS No. 159 is effective for fiscal years beginning after November 15, 2007 and all interim periods within those fiscal years.

As of January 1, 2008, the Company has adopted the FV option for all available-for-sale fixed maturity securities attributable to certain life, health and annuity products.  At December 31, 2007 such available-for-sale securities had a market value of $10.7 billion and an amortized cost of $11.1 billion.  The adoption of the FV option does not relieve the Company from its obligation to monitor those available-for-sale securities that are in an unrealized loss position at December 31, 2007, which the Company will do through its current portfolio monitoring process.

The FV option adoption will result in a cumulative-effect adjustment to the opening balance of retained earnings, accumulated other comprehensive income, DAC, VOBA, deferred tax asset and certain other liabilities.  The Company is currently assessing the impact of the effects of this adoption.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements, but does not change existing guidance as to whether or not an instrument is carried at fair value.

SFAS No. 157 clarifies that fair value is an exit price, representing the amount that would be exchanged to sell an asset or transfer a liability in an orderly transaction between market participants.  The statement establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels (i.e., Level 1, 2 and 3).  Level 1 inputs are observable inputs that reflect quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date.  Level 2 inputs are observable inputs, other than quoted prices included in Level 1, for the asset or liability or prices for similar assets and liabilities.  Level 3 inputs are unobservable inputs reflecting the reporting entity’s estimates of the assumptions that market participants would use in pricing the asset or liability.  SFAS No. 157 requires that a fair value measurement technique include an adjustment for risks inherent in a particular valuation technique (such as a pricing model) and/or the risks inherent in the inputs to the model, if market participants would also include such an adjustment.  Quantitative and qualitative disclosures will focus on the inputs used to measure fair value for both recurring and non-recurring fair value measurements and the effects of the measurements in the financial statements.

87

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

ACCOUNTING PRONOUNCEMENTS (CONTINUED)

Accounting Standards Not Yet Adopted (continued)

The provisions of SFAS No. 157 are effective for fiscal years beginning after November 15, 2007, and are to be applied prospectively, except for changes in fair value measurements that result from the initial application of SFAS No. 157, which are to be recorded as an adjustment to opening retained earnings in the year of adoption.  Effective January 1, 2008, the Company adopted SFAS No. 157 and applied the provisions of the statement prospectively to assets and liabilities measured and disclosed at fair value. In addition to new disclosure requirements, the adoption of SFAS No. 157 changes the valuation of embedded derivatives associated with annuity contracts. The change in valuation of embedded derivatives associated with annuity contracts results from the incorporation of risk margins and the Company’s own credit standing in their valuation and changes to assumptions regarding policyholder lapses.  The Company is currently assessing the impact of SFAS No. 157 on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141(R)”). This statement replaces SFAS No. 141 and establishes the principles and requirements for how the acquirer in a business combination: (a) measures and recognizes the identifiable assets acquired, liabilities assumed, and any noncontrolling interests in the acquired entity, (b) measures and recognizes positive goodwill acquired or a gain from bargain purchase (negative goodwill), and (c) determines the disclosure information that is useful to users of financial statements in evaluating the nature and financial effects of the business combination. Some of the significant changes to the existing accounting guidance on business combinations made by SFAS No. 141(R) include the following:

• Most of the identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquired entity shall be measured at their acquisition-date fair values rather than SFAS No. 141’s requirement to allocate the cost of an acquisition to individual assets acquired and liabilities assumed based on their estimated fair values;

• Acquisition-related costs incurred by the acquirer shall be expensed in the periods in which the costs are incurred rather than included in the cost of the acquired entity;

• Goodwill shall be measured as the excess of the consideration transferred, including the fair value of any contingent consideration, plus the fair value of any noncontrolling interest in the acquired entity, over the fair values of the acquired identifiable net assets, rather than measured as the excess of the cost of the acquired entity over the estimated fair values of the acquired identifiable net assets;

• Contractual pre-acquisition contingencies are to be recognized at their acquisition date fair values and noncontractual pre-acquisition contingencies are to be recognized at their acquisition date fair values only if it is more likely than not that the contingency gives rise to an asset or liability, whereas SFAS No. 141 generally permits the deferred recognition of pre-acquisition contingencies until the recognition criteria of SFAS No. 5, “Accounting for Contingencies” are met; and

• Contingent consideration shall be recognized at the acquisition date rather than when the contingency is resolved and consideration is issued or becomes issuable.

88

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

ACCOUNTING PRONOUNCEMENTS (CONTINUED)

Accounting Standards Not Yet Adopted

SFAS No. 141(R) is effective for and shall be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, with earlier adoption prohibited. Assets and liabilities that arose from business combinations with acquisition dates prior to the SFAS No. 141(R) effective date shall not be adjusted upon adoption of SFAS No. 141(R) with certain exceptions for acquired deferred tax assets and acquired income tax positions. The Company expects to adopt SFAS No. 141(R) on January 1, 2009, and has not yet determined the effect of SFAS No. 141(R) on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements.”  This statement amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements” (“ARB 51”). Noncontrolling interest refers to the minority interest portion of the equity of a subsidiary that is not attributable directly or indirectly to a parent. SFAS No. 160 establishes accounting and reporting standards that require for-profit entities that prepare consolidated financial statements to: (a) present noncontrolling interests as a component of equity, separate from the parent’s equity, (b) separately present the amount of consolidated net income attributable to noncontrolling interests in the income statement, (c) consistently account for changes in a parent’s ownership interests in a subsidiary in which the parent entity has a controlling financial interest as equity transactions, (d) require an entity to measure at fair value its remaining interest in a subsidiary that is deconsolidated, (e) require an entity to provide sufficient disclosures that identify and clearly distinguish between interests of the parent and interests of noncontrolling owners. SFAS No. 160 applies to all for-profit entities that prepare consolidated financial statements, and affects those for-profit entities that have outstanding noncontrolling interests in one or more subsidiaries or that deconsolidate a subsidiary. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 with earlier adoption prohibited. The Company expects to adopt SFAS No. 160 on January 1, 2009 and has not yet determined the effect of SFAS No. 160 on its consolidated financial statements.

In June 2007, the AICPA issued Statement of Position 07-1, “Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies” (“SOP 07-1”).  SOP 07-1 provides guidance for determining whether an entity is within the scope of the AICPA Audit and Accounting Guide Investment Companies (“the Guide”).  This statement also addresses whether the specialized industry accounting principles of the Guide should be retained by a parent company in consolidation or by an investor that has the ability to exercise significant influence over the investment company and applies the equity method of accounting to its investment in the entity.  In addition, SOP 07-1 includes certain disclosure requirements for parent companies and equity method investors in investment companies that retain investment company accounting in the parent company’s consolidated financial statements or the financial statements of an equity method investor.  SOP 07-1 is effective for fiscal years beginning on or after December 15, 2007, with earlier application encouraged; however, in November 2007, the FASB decided to (1) delay indefinitely the effective date and (2) prohibit adoption by an entity that has not early adopted SOP 07-1.  The Company did not early adopt SOP 07-1.  SOP 07-1 as currently issued is not expected to have an impact on the Company’s consolidated financial condition or results of operations.

89

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

2. MERGERS, ACQUISITIONS AND DISPOSITIONS

Effective September 27, 2007, the Company dissolved the General Partner.  The General Partner was the sole general partner in the Partnership and, as a result, the Partnership had been consolidated with the results of the Company.  The Partnership was organized to purchase subordinated debentures issued by the Parent and to issue partnership capital securities to an affiliated business trust, the Capital Trust.  Effective May 6, 2007, the Parent redeemed $600 million of 8.526% subordinated debentures issued to the Partnership and paid the Partnership an early redemption premium of $25.6 million.  Also effective May 6, 2007, the Partnership redeemed $600 million of the 8.526% partnership capital securities issued to the Capital Trust and paid a premium of $25.6 million to the Capital Trust.  The redemption had no impact on the Company’s net income.  The Partnership was cancelled effective September 27, 2007.

On September 6, 2006 the Company entered into an agreement with the CARS Trust, whereby the Company is the sole beneficiary of the trust.  As of December 31, 2007 and 2006, total assets of the CARS Trust were $57.7 million and $56.6 million, respectively.  As the sole beneficiary of the CARS Trust, the Company is required to consolidate this trust under the requirements of FIN 46.  Accordingly, the assets and liabilities of the CARS Trust are included in the Company’s consolidated financial statements.  As of December 31, 2007, the Company recorded in its consolidated balance sheets $53.8 million of trading fixed maturities, $2.9 million of deferred tax, $1.0 million of accrued investment income and $7.9 million of liabilities relating to a total return swap.  As of December 31, 2006, the Company recorded in its consolidated balance sheets $55.3 million of trading fixed maturities, $1.2 million of accrued investment income and $1.7 million of liabilities.

On April 19, 2005, the Company sold its interest in a consolidated VIE and recognized a gain of $6.1 million.  The Company received net cash proceeds of $17.0 million and reduced consolidated assets and liabilities by $74.5 million and $63.6 million, respectively. The Company’s net income for the year ended December 31, 2005 includes a net loss of $0.8 million related to this VIE.

90

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

3. SIGNIFICANT TRANSACTIONS WITH AFFILIATES

Below is a summary of affiliated transactions for those affiliates that are not consolidated with the Company.

The Company and its subsidiaries have administrative services agreements with SLOC which provides that SLOC will furnish, as requested, certain services and facilities on a cost-reimbursement basis. Expenses under these agreements amounted to approximately $14.2 million, $9.4 million and $11.3 million for the years ended December 31, 2007, 2006 and 2005, respectively.

In accordance with an administrative service agreement between the Company and SLOC, the Company provides personnel and certain services to SLOC, as requested.  Reimbursements under this agreement, which are recorded as a reduction of other operating expenses, were approximately $301.0 million, $212.4 million and $170.4 million for the years ended December 31, 2007, 2006 and 2005, respectively.

The Company has an administrative service agreement with Sun Life Information Services Canada, Inc. ("SLISC"), under which SLISC provides administrative and support services to the Company in connection with the Company’s insurance and annuity business.  Expenses under this agreement amounted to approximately $16.9 million, $10.7 million and $5.8 million for the years ended December 31, 2007, 2006 and 2005, respectively.

The Company has a service agreement with Sun Life Information Services Ireland Limited ("SLISIL"), under which SLISIL provides various insurance related and information systems services to the Company.  Expenses under this agreement amounted to approximately $26.0 million, $19.6 million and $13.9 million for the years ended December 31, 2007, 2006 and 2005, respectively.

The Company has an administrative services agreement with SLC - U.S. Ops Holdings, under which the Company provides administrative and investor services with respect to certain open-end management investment companies for which an affiliate, Massachusetts Financial Services Company (“MFS”), serves as the investment adviser, and which are offered to certain of the Company’s separate accounts established in connection with the variable annuity contracts issued by the Company.  Amounts received under this agreement amounted to approximately $22.3 million, $22.6 million and $23.4 million for the years ended December 31, 2007, 2006 and 2005, respectively.

The Company has an administrative service agreement with SLHIC, whereby the Company provides personnel and certain services to SLHIC, as requested.  Reimbursements under this agreement, which are recorded as a reduction of other operating expenses, were $0.1 million for the year ended December 31, 2007.

The Company has an administrative service agreement with California Benefits Dental Plan (“CalBen”) whereby the Company provides personnel and certain services to CalBen, as requested.  Reimbursements under this agreement, which are recorded as a reduction of other operating expenses, were $1.1 million for the year ended December 31, 2007.

91

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

3. SIGNIFICANT TRANSACTIONS WITH AFFILIATES (CONTINUED)

The Company has an administrative service agreement with Professional Insurance Company (“PIC”), whereby the Company provides personnel and certain services to PIC, as requested.  Reimbursements under this agreement, which are recorded as a reduction of other operating expenses, were $0.8 million for the year ended December 31, 2007.

The Company leases office space to SLOC under lease agreements with terms expiring in December 31, 2009 and options to extend the terms for each of twelve successive five-year terms at fair market rental value, not to exceed 125% of the fixed rent for the term, which is then ending.  Rent received by the Company under the leases amounted to approximately $10.6 million for each of the years ended December 31, 2007, 2006 and 2005, respectively.  Rental income is reported as a component of net investment income.

As more fully described in Note 8, the Company is party to several reinsurance transactions with SLOC and other affiliates.

Effective May 31, 2007, Sun Life Financial completed its acquisition of EBG.  Also effective May 31, 2007, SLNY entered into a series of agreements with SLHIC, one of the acquired companies, through which the New York-issued business of SLHIC was transferred to SLNY.  These agreements include a 100% coinsurance agreement for all existing and future new business issued in New York, a renewal rights agreement under which SLNY has exclusive rights to renew in-force business assumed under the reinsurance agreement and an administrative service agreement under which SLNY has agreed to assume direct responsibility for all sales and administration of existing and new business issued in New York.  These agreements, in accordance with SFAS No. 141 were treated as a transfer of net assets between entities under common control. SLNY paid $40 million of total consideration to SLHIC.  SLHIC transferred assets at carrying value of approximately $72 million, including $38.9 million of goodwill and other intangibles, as well as policyholder and other liabilities of approximately $32 million to SLNY.  The Group Protection Segment of the Company reflects a significant increase in business as a result of these agreements. These agreements have allowed the Company to expand its product offerings to include group dental insurance.

As part of the SLHIC to SLNY asset transfer, SLNY received certain intangible assets totaling $31.3 million.  These include the value of distribution, the value of business, and the value of customer renewals acquired.  The value of distribution acquired of $7.5 million is subject to amortization on a straight line basis over its projected economic life of 25 years.  The value of business acquired of $7.6 million is subject to amortization based up on expected premium income over the period from acquisition to the first customer renewal, generally not more than two years.  The value of customer renewals acquired of $16.2 million is subject to amortization based upon expected premium income over the projected life of the inforce business acquired, which is 20 years.  For the year ended December 31, 2007, the Company recorded $0.1 million, $5.9 million, and $1.9 million for amortization of the value of distribution, the value of business, and the value of customer renewals acquired, respectively.

In 2007, the Company recorded a tax benefit of $3.0 million through paid-in-capital for SLF stock options issued to employees of the Company.  In 2006, the Company recorded a tax benefit of $4.5 million through paid-in-capital for SLF stock options issued to employees of the Company.  In 2005, the Company recorded a tax benefit of $7.0 million through paid-in-capital for stock options issued to employees of the Company during 2001 through 2005.  The $7.0 million tax benefit is comprised of a $2.5 million tax benefit on expenses accrued at its indirect parent, SLF, and a $4.5 million adjustment to record the excess tax benefit over the recorded book expense for stock options exercised.

In 2006, the Company declared and paid $300.0 million in a cash dividend to the Parent.  In 2005, the Company declared and paid a $200.0 million dividend to the Parent, consisting of $150.6 million in cash and $49.4 million in notes.  The Company did not declare or pay a dividend to the Parent in 2007.

92

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

3. SIGNIFICANT TRANSACTIONS WITH AFFILIATES (CONTINUED)

In 2004, the employees of the Company became participants in a restricted share unit (“RSU”) plan with its indirect parent, SLF.  Under the RSU plan, participants are granted units that are equivalent to one common share of SLF stock and have a fair market value of a common share of SLF stock on the date of grant.  RSUs earn dividend equivalents in the form of additional RSUs at the same rate as the dividends on common shares of SLF stock.  The redemption value, upon vesting, is the fair market value of an equal number of common shares of SLF stock.  The Company incurred expenses of $4.4 million, $7.3 million and $7.0 million relating to RSUs for the years ended December 31, 2007, 2006 and 2005, respectively.

In 2002, the Company issued two promissory notes with a combined total of $460 million to Sun Life (Hungary) Group Financing Limited Company ("Sun Life (Hungary) LLC").  The proceeds of the notes were used to purchase fixed rate government and corporate bonds.  On May 24, 2007, the Company redeemed one of the notes with a principal balance of $380 million and paid $388.7 million to Sun Life (Hungary) LLC, including $8.7 million in accrued interest.  At December 31, 2007 and 2006, the Company had $80.0 million and $460.0 million, respectively, in promissory notes issued to Sun Life (Hungary) LLC.  The Company pays interest semi-annually to Sun Life (Hungary) LLC.  Related to these promissory notes, the Company incurred interest expense of $13.3 million, $26.5 million and $26.5 million for the years ended December 31, 2007, 2006 and 2005, respectively.

At December 31, 2007 and 2006, the Company had $565.0 million of surplus notes issued to Sun Life Financial (U.S.) Finance, Inc.  The Company expensed $42.6 million for interest on these surplus notes for each of the years ended December 31, 2007, 2006 and 2005.

Effective September 27, 2007, the Company dissolved the General Partner.  The General Partner was the sole general partner in the Partnership and, as a result, the Partnership had been consolidated with the results of the Company.  The Partnership was organized to purchase subordinated debentures issued by the Parent and to issue partnership capital securities to an affiliated business trust, the Capital Trust.  The Partnership was cancelled effective September 27, 2007.

Effective May 6, 2007, the Parent redeemed $600 million of 8.526% subordinated debentures issued to the Partnership and paid the Partnership an early redemption premium of $25.6 million.  Also effective May 6, 2007, the Partnership redeemed $600 million of the 8.526% partnership capital securities issued to the Capital Trust and paid a premium of $25.6 million to the Capital Trust.  The redemption had no impact on the Company’s net income.  Related to these partnership capital securities, the Company incurred interest expense of $17.8 million, $51.2 million and $51.2 million for the years ended December 31, 2007, 2006 and 2005, respectively.  The Company also earned, through the Partnership, $17.8 million, $51.2 million and $51.2 million for the years ended December 31, 2007, 2006 and 2005, respectively.

The Company purchased a total of $140.0 million in promissory notes from Massachusetts Financial Services Company in 2004 and 2003.  Interest earned for the year ended December 31, 2005 was $4.2 million.  As of December 31, 2005, the Company sold and transferred these notes to other affiliates.  On December 31, 2005, the Company sold notes with a par value of $90.0 million to Sun Life (Hungary) LLC and recognized a loss of $3.3 million.  On September 23, 2005, the Company transferred notes with a par value of $50.0 million to the Parent as a dividend.  The Company recognized a loss of $0.6 million on the transfer of the notes to the Parent.

During the years ended December 31, 2007, 2006 and 2005, the Company paid $31.3 million, $24.3 million and $23.2 million, respectively, in commission fees to Sun Life Financial Distributors, Inc. (“SLFD”).  The Company also has an agreement with SLFD and the Parent whereby the Parent provides expense reimbursements to the Company for administrative services provided by the Company to SLFD.  Related to this agreement, the Company received reimbursement of $0.6 million and $3.2 million for the years ended December 31, 2007 and 2006, respectively.  This agreement was terminated on March 2, 2007.  In addition, the Company received fee income for administrative services provided to SLFD of $7.1 million for the year ended December 31, 2005.

Effective November 7, 2007, Independent Financial Marketing Group, Inc. (“IFMG”) was sold by the Parent and is no longer an affiliate of the Company.  IFMG will continue to distribute the Company’s products.  For that period of time in 2007 during which it was still affiliated, the Company paid $22.6 million in commission fees to IFMG.  During the years ended December 31, 2006 and 2005, the Company paid $20.1 million and $25.1 million, respectively, in commission fees to IFMG.

93

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

3. SIGNIFICANT TRANSACTIONS WITH AFFILIATES (CONTINUED)

The Company has an administrative services agreement with Sun Capital Advisers (“SCA”), a registered investment adviser, under which the Company provides administrative services with respect to certain open-end management investment companies for which SCA serves as the investment adviser, and which are offered to certain of the Company’s separate accounts established in connection with the variable contracts issued by the Company.  Amounts received under this agreement amounted to approximately $1.9 million, $1.5 million and $2.4 million for the years ended December 31, 2007, 2006 and 2005, respectively.

The Company paid $15.9 million, $14.9 million and $16.4 million for the years ended December 31, 2007, 2006 and 2005, respectively, in investment management services fees to SCA.

Effective December 31, 2007, SLNY entered into a reinsurance agreement with SLOC under which SLOC will fund AXXX reserves, attributable to certain UL policies sold by SLNY.  Under this agreement SLNY ceded, and SLOC assumed, on a funds withheld 90% coinsurance basis certain inforce policies at December 31, 2007.  Future new business also will be reinsured under this agreement.  Under the agreement, SLNY ceded $63.1 million of policyholder balances, received a ceding commission of $54.2 million, recorded a funds withheld payable to SLOC of $71.6 million, and recorded a deferred gain of $45.7 million.

On October 31, 2007, the Company subscribed to $250,000 worth of shares of, and contributed $150 million of paid-in capital to, a newly formed wholly-owned subsidiary, Sun Life Vermont.  Sun Life Vermont is a Vermont-domiciled captive special purpose financial insurance company which, effective November 8, 2007, has entered into a reinsurance agreement with SLOC, the Company’s affiliate, under which the Sun Life Vermont assumed, and will assume, the risks of certain UL policies issued, and to be issued, by SLOC.  This agreement is described more fully in Note 8.  A long-term financing arrangement has been established with the Lender that will enable Sun Life Vermont to fund a portion of its obligations under the reinsurance agreement with SLOC.  Under this arrangement, on November 8, 2007, Sun Life Vermont issued a Surplus Note to a special-purpose entity, SUNAXXX, affiliated with the Lender.  Pursuant to an agreement between the Lender and SLC – U.S. Ops Holdings, SLC – U.S. Ops Holdings bears the ultimate obligation to repay the Lender and, as such, will consolidate SUNAXXX in accordance with FIN 46.  Sun Life Vermont has agreed to reimburse SLC – U.S. Ops Holdings for certain costs incurred in connection with the issuance of the Surplus Note.  For the year ended December 31, 2007, the amount of interest expense incurred by Sun Life Vermont was $8.6 million.

On September 12, 2006, the Company entered into a Terms Agreement (the "2006-B Terms Agreement") with its affiliates Sun Life Financial Global Funding III, L.P. (the "Issuer III"), Sun Life Financial Global Funding III, U.L.C. (the "ULC III") and Sun Life Financial Global Funding III, L.L.C. (the "LLC III"), and with Citigroup Global Markets, Inc., Deutsche Bank Securities Inc., Morgan Stanley & Co. Incorporated, Banc of America Securities LLC, Credit Suisse Securities (USA) LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, RBC Capital Markets Corporation and Wachovia Capital Markets (each, an "Initial Purchaser" and collectively, the "2006-B Initial Purchasers"), in connection with the offer and sale by the Issuer III of $750 million of Series 2006-1 Floating Rate Notes due 2013 ("2006-B Notes").  On September 21, 2006, the Company entered into another Terms Agreement (together with the original 2006-B Terms Agreement, the "2006-B Terms Agreements") with the same parties as the original 2006-B Terms Agreement in connection with the offer and sale by the Issuer III of a second tranche of $150 million of 2006-B Notes.  The payment obligations of the Issuer III for the full $900 million of 2006-B Notes are unconditionally guaranteed by the LLC III pursuant to a guarantee (the "2006-B Secured Guarantee") dated as of September 19, 2006, and the obligations of the LLC III under the 2006-B Secured Guarantee are secured by two floating rate funding agreements issued by the Company to the LLC III, one for $750 million issued on September 19, 2006 and another for $150 million issued on September 29, 2006.  Total interest credited for the funding agreements was $51.6 million and $14.9 million for the years ended December 31, 2007 and 2006, respectively.

The 2006-B Terms Agreements incorporate by reference the provisions of a Purchase Agreement dated as of September 5, 2006 by and among the Issuer III, the ULC III, the LLC III, the Company and all of the 2006-B Initial Purchasers.  Pursuant to these incorporated provisions, the Company has agreed, among other things, to indemnify each 2006 Initial Purchaser against certain securities law liabilities related to the offering of the 2006-B Notes.  In addition, the Company issued a $100 million floating rate demand note payable to the LLC III on September 19, 2006.  The Company expensed $5.8 million and $1.7 million for interest on this demand note for the years ended December 31, 2007 and 2006, respectively.

94

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

3. SIGNIFICANT TRANSACTIONS WITH AFFILIATES (CONTINUED)

The Company has entered into an interest rate swap agreement with the LLC III with an aggregate notional amount of $900 million that effectively converts the floating rate payment obligations under the funding agreements to fixed rate obligations.  The net interest payable under this swap agreement was $0.2 million at December 31, 2007.

On May 17, 2006, the Company entered into a Terms Agreement (the "2006-A Terms Agreement") with its affiliates Sun Life Financial Global Funding II, L.P. (the "Issuer II"), Sun Life Financial Global Funding II, U.L.C. (the "ULC II") and Sun Life Financial Global Funding II, L.L.C. (the "LLC II"), and with Citigroup Global Markets, Inc. ("Citigroup"), Morgan Stanley & Co. Incorporated ("Morgan Stanley"), Banc of America Securities LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and RBC Capital Markets Corporation (collectively, with Citigroup and Morgan Stanley, the "2006-A Initial Purchasers"), in connection with the offer and sale by the Issuer II of $900 million of Series 2006-1 Floating Rate Notes due 2011 (the "2006-A Notes").  The payment obligations of the Issuer II are unconditionally guaranteed by the LLC II pursuant to a guarantee (the "2006-A Secured Guarantee"), and the obligations of the LLC II under the 2006-A Secured Guarantee are secured by a $900 million floating rate funding agreement issued by the Company to the LLC II.  The 2006-A Terms Agreement incorporates by reference the provisions of a Purchase Agreement dated as of May 15, 2006 by and among the Issuer II, the ULC II, the LLC II, the Company and the 2006-A Initial Purchasers.  Pursuant to these incorporated provisions, the Company has agreed, among other things, to indemnify each 2006 Initial Purchaser against certain securities law liabilities related to the offering of the 2006-A Notes.  Total interest credited for the funding agreement was $50.8 million and $30.7 million for the years ended December 31, 2007 and 2006, respectively.

On May 24, 2006, the Company also issued a $100 million floating rate demand note payable to the LLC II.  The Company expensed $5.7 million and $3.4 million for interest on this demand note for the years ended December 31, 2007 and 2006, respectively.

The Company has entered into an interest rate swap agreement with the LLC II with an aggregate notional amount of $900 million that effectively converts the floating rate payment obligations under the funding agreement to fixed rate obligations.

On June 3, 2005, the Company entered into a Terms Agreement (the "2005 Terms Agreement") with its affiliates, Sun Life Financial Global Funding, L.P. (the "Issuer"), Sun Life Financial Global Funding, U.L.C. (the "ULC") and Sun Life Financial Global Funding, L.L.C. (the "LLC"), and with Citigroup, Morgan Stanley, Banc of America Securities LLC, Credit Suisse First Boston LLC, J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and RBC Capital Markets Corporation (collectively, the "2005 Initial Purchasers"), in connection with the offer and sale by the Issuer of $600 million of Series 2005-1 Floating Rate Notes due 2010 (the "First Tranche Notes").

On June 29, 2005, the Company entered into a Second Terms Agreement (the "Second 2005 Terms Agreement") with the Issuer, the ULC and the LLC, and with Citigroup and Morgan Stanley, in connection with the offer and sale by the Issuer of $300 million of Series 2005-1 Floating Rate Notes due 2010 (the "Second Tranche Notes").

The payment obligations of the Issuer under the First Tranche Notes and the Second Tranche Notes are unconditionally guaranteed by the LLC pursuant to a guarantee (the "2005 Secured Guarantee") dated as of June 10, 2005, and the obligations of the LLC under the 2005 Secured Guarantee are secured by two floating rate funding agreements issued by the Company to the LLC, one for $600 million issued on June 10, 2005 and one for $300 million issued on July 5, 2005.  The Company issued a total of $900 million funding agreements to the LLC in connection with the First Tranche Notes and Second Tranche Notes.  The Terms Agreement and the Second Terms Agreement incorporate by reference the provisions of a Purchase Agreement dated as of November 11, 2004 by and among the Issuer, the ULC, the LLC, the Company, and the 2005 Initial Purchasers. Pursuant to these incorporated provisions, the Company has agreed, among other things, to indemnify each 2005 Initial Purchaser against certain securities law liabilities related to the offering of the First Tranche Notes and the Second Tranche Notes.

95

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

3. SIGNIFICANT TRANSACTIONS WITH AFFILIATES (CONTINUED)

Total interest credited for the funding agreements associated with the First Tranche Notes and Second Tranche Notes was $51.6 million, $49.5 million and $20.7 million for the years ended December 31, 2007, 2006 and 2005, respectively.

On June 10, 2005, the Company issued a $100 million floating rate demand note payable to the LLC.  The Company expensed $5.8 million, $5.5 million and $2.3 million for interest on the demand note for the years ended December 31, 2007, 2006 and 2005, respectively.

The Company has entered into two interest rate swap agreements with the LLC with an aggregate notional amount of $900 million that effectively convert the floating rate payment obligations under the funding agreements to fixed rate obligations.

The following table lists the details of notes due to affiliates at December 31, 2007 (in 000’s):

Payees	Type	Rate	Maturity	Principal	Interest  Expense
Sun Life Financial (U.S.) Finance, Inc.	Surplus	8.625%	11/06/2027	$     250,000	$        21,563
Sun Life Financial (U.S.) Finance, Inc.	Surplus	6.150%	12/15/2027	150,000	9,225
Sun Life Financial (U.S.) Finance, Inc.	Surplus	7.250%	12/15/2015	150,000	10,875
Sun Life Financial (U.S.) Finance, Inc.	Surplus	6.125%	12/15/2015	7,500	459
Sun Life Financial (U.S.) Finance, Inc.	Surplus	6.150%	12/15/2027	7,500	461
Structured Asset Repackage Company, 2007-SUNAXXX LLC	Surplus	LIBOR + 0.89%	11/8/2037	1,000,000	8,642
Sun Life (Hungary) Group Financing Limited Company	Promissory	5.710%	06/30/2012	80,000	4,568
Sun Life Financial Global Funding I, L.L.C.	Demand	LIBOR + 0.35%	07/6/2010	100,000	5,754
Sun Life Financial Global Funding II, L.L.C.	Demand	LIBOR + 0.26%	07/6/2011	100,000	5,663
Sun Life Financial Global Funding III, L.L.C.	Demand	LIBOR + 0.35%	10/6/2013	100,000	5,754
				$  1,945,000	$        72,964

The Company has significant transactions with affiliates.  Management believes inter-company revenues and expenses are calculated on a reasonable basis; however, these amounts may not necessarily be indicative of the costs that would be incurred if the Company operated on a stand-alone basis and these transactions were with unrelated parties.

96

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

4. INVESTMENTS – Fixed Maturities

The amortized cost and fair value of fixed maturities at December 31, 2007, was as follows:

		Gross	Gross
	Amortized	Unrealized	Unrealized	Fair
Available-for-sale fixed maturities:	Cost	Gains	Losses	Value
Asset Backed Securities	$             827,129	$      11,436	$         (71,706)	$          766,859
Collateralized Mortgage Obligations	2,594,637	22,204	(185,362)	2,431,479
Mortgage Backed Securities	447,720	2,723	(2,244)	448,199
Foreign Government & Agency Securities	74,287	2,766	-	77,053
States & Political Subdivisions	493	6	-	499
U.S. Treasury & Agency Securities	284,811	11,462	(40)	296,233
Total non-corporate	4,229,077	50,597	(259,352)	4,020,322
Corporate securities:
Basic Industry	195,959	3,146	(3,424)	195,681
Capital Goods	424,393	8,143	(7,698)	424,838
Communications	811,426	18,403	(13,190)	816,639
Consumer Cyclical	845,981	6,415	(45,142)	807,254
Consumer Noncyclical	312,647	6,708	(2,438)	316,917
Energy	314,822	5,705	(3,292)	317,235
Finance	2,944,203	19,895	(152,604)	2,811,494
Industrial Other	272,493	6,225	(7,219)	271,499
Technology	77,817	786	(821)	77,782
Transportation	241,983	8,598	(5,061)	245,520
Utilities	1,177,596	32,001	(11,548)	1,198,049
Total Corporate	7,619,320	116,025	(252,437)	7,482,908
Total available-for-sale fixed maturities	$        11,848,397	$    166,622	$       (511,789)	$     11,503,230
	Amortized	Gross	Gross	Fair
Trading fixed maturities:	Cost	Gains	Losses	Value
Asset Backed Securities	$             105,719	$           287	$           (8,255)	$            97,751
Collateralized Mortgage Obligations	276,753	2,584	(3,519)	275,818
Mortgage Backed Securities	3,304	2	(38)	3,268
Foreign Government & Agency Securities	39,589	1,182	-	40,771
U.S. Treasury & Agency Securities	94,813	713	-	95,526
Total non-corporate	520,178	4,768	(11,812)	513,134
Corporate securities:
Basic Industry	7,417	270	(40)	7,647
Capital Goods	71,894	590	(338)	72,146
Communications	683,714	10,849	(4,105)	690,458
Consumer Cyclical	248,206	1,932	(13,458)	236,680
Consumer Noncyclical	131,746	2,199	(464)	133,481
Energy	23,609	1,745	(17)	25,337
Finance	1,886,983	15,992	(83,662)	1,819,313
Industrial Other	67,322	880	(705)	67,497
Technology	1,989	-	(21)	1,968
Transportation	40,965	1,887	(501)	42,351
Utilities	254,065	4,434	(1,500)	256,999
Total Corporate	3,417,910	40,778	(104,811)	3,353,877
Total trading fixed maturities	$          3,938,088	$      45,546	$       (116,623)	$       3,867,011

97

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (CONTINUED)

The amortized cost and fair value of fixed maturities at December 31, 2006, was as follows:

		Gross	Gross
	Amortized	Unrealized	Unrealized	Fair
Available-for-sale fixed maturities:	Cost	Gains	Losses	Value
Asset Backed Securities	$              915,669	$       12,660	$            (9,020)	$          919,309
Collateralized Mortgage Obligations	2,950,906	24,838	(42,598)	2,933,146
Mortgage Backed Securities	549,137	892	(7,362)	542,667
Foreign Government & Agency Securities	79,319	3,512	(283)	82,548
States & Political Subdivisions	495	32	-	527
U.S. Treasury & Agency Securities	307,580	2,637	(4,027)	306,190
Total non-corporate	4,803,106	44,571	(63,290)	4,784,387
Corporate securities:
Basic Industry	204,355	4,217	(3,182)	205,390
Capital Goods	520,338	11,507	(3,973)	527,872
Communications	1,163,026	20,149	(24,077)	1,159,098
Consumer Cyclical	1,051,633	10,127	(28,599)	1,033,161
Consumer Noncyclical	364,459	7,847	(2,302)	370,004
Energy	350,930	6,226	(3,547)	353,609
Finance	3,201,774	43,217	(33,235)	3,211,756
Industrial Other	228,442	7,446	(629)	235,259
Technology	22,779	357	(852)	22,284
Transportation	307,542	10,418	(5,458)	312,502
Utilities	1,405,066	35,310	(17,725)	1,422,651
Total Corporate	8,820,344	156,821	(123,579)	8,853,586
Total available-for-sale fixed maturities	$         13,623,450	$     201,392	$        (186,869)	$      13,637,973
Held-to-maturity fixed maturities:
Sun Life of Canada (U.S.) Holdings, Inc., 8.526%
subordinated debt, due 2027, called in 2007	$              600,000	$       30,751	$                    -	$           630,751
	Amortized	Gross	Gross	Fair
Trading fixed maturities:	Cost	Gains	Losses	Value
Asset Backed Securities	$              109,684	$         1,460	$               (316)	$           110,828
Collateralized Mortgage Obligations	239,970	2,390	(3,074)	239,286
Mortgage Backed Securities	3,917	1	(89)	3,829
Foreign Government & Agency Securities	40,274	710	(152)	40,832
U.S. Treasury & Agency Securities	796	10	-	806
Total non-corporate	394,641	4,571	(3,631)	395,581
Corporate securities:
Basic Industry	8,237	596	-	8,833
Capital Goods	71,060	540	-	71,600
Communications	735,753	5,378	(5,077)	736,054
Consumer Cyclical	279,856	2,628	(3,550)	278,934
Consumer Noncyclical	159,221	633	(901)	158,953
Energy	20,620	2,388	-	23,008
Finance	1,742,731	14,625	(7,385)	1,749,971
Industrial Other	55,950	405	(839)	55,516
Transportation	48,887	1,873	(672)	50,088
Utilities	321,776	7,476	(1,737)	327,515
Total Corporate	3,444,091	36,542	(20,161)	3,460,472
Total trading fixed maturities	$            3,838,732	$       41,113	$          (23,792)	$        3,856,053

98

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (CONTINUED)

The amortized cost and estimated fair value by maturity periods for fixed maturity investments are shown below.  Actual maturities may differ from contractual maturities on asset-backed and mortgage-backed securities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

		December 31, 2007
		Amortized Cost	Fair Value
Maturities of available-for-sale fixed securities:
	Due in one year or less	$                688,385	$                   688,444
	Due after one year through five years	2,051,688	2,047,417
	Due after five years through ten years	3,201,896	3,121,793
	Due after ten years	2,036,942	1,999,039
Subtotal – Maturities available-for-sale		7,978,911	7,856,693
ABS, CMO and MBS securities		3,869,486	3,646,537
Total Available-for-sale		$          11,848,397	$              11,503,230
Maturities of trading fixed securities:
	Due in one year or less	$                61,145	$                     59,773
	Due after one year through five years	2,311,208	2,264,299
	Due after five years through ten years	991,112	977,102
	Due after ten years	188,847	189,000
	Subtotal – Maturities  of trading	3,552,312	3,490,174
ABS, CMO and MBS securities		385,776	376,837
	Total Trading	$           3,938,088	$               3,867,011

Gross gains of $52.8 million, $39.2 million and $61.0 million and gross losses of $52.3 million, $92.3 million and $38.9 million were realized on the sale of fixed maturities for the years ended December 31, 2007, 2006 and 2005, respectively.

Fixed maturities with an amortized cost of approximately $12.0 million and $12.0 million at December 31, 2007 and 2006, respectively, were on deposit with federal and state governmental authorities as required by law.

As of December 31, 2007 and 2006, 96.0% and 96.5%, respectively, of the Company's fixed maturities were investment grade.  Investment grade securities are those that are rated "BBB" or better by nationally recognized rating organizations.  During 2007, 2006 and 2005, the Company incurred realized losses totaling $68.1 million, $6.3 million and $29.7 million, respectively, for other-than-temporary impairment of value of some of its fixed maturities.

The Company has made funding commitments of private placement bonds into the future.  The outstanding funding commitments for these private placement bonds amounted to $4.1 million at December 31, 2006.  There was not any outstanding commitment for these private placement bonds at December 31, 2007.

The Company had outstanding commitments with respect to funding of limited partnerships of approximately $34.9 million and $53.3 million at December 31, 2007 and 2006, respectively.

99

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (CONTINUED)

OVERVIEW OF THE COMPANY’S INVESTMENT HOLDINGS AND PORTFOLIO MONITORING PROCESSES

At December 31, 2007, the Company held $21.1 billion in invested assets and cash.  Of this balance, $15.4 billion was invested in fixed-maturity securities designated as either available-for-sale ($11.5 billion) or trading ($3.9 billion).  Of the $11.5 billion of available-for-sale fixed maturities, securities with a fair value of $7.0 billion were in an unrealized loss position totaling $511.8 million.  At December 31, 2007, 77% of securities in an unrealized loss position, based on fair value, were securities with fair value to amortized cost percentages of greater than or equal to 90%.  The total unrealized loss position for such securities was $193.8 million.

In the available-for-sale fixed maturity portfolio, securities with a fair value of $511.1 million, representing 2.4% of the total invested asset balance, were comprised of below-investment-grade or not-rated securities.  Of the total of the securities that were below-investment-grade or not-rated at December 31, 2007, securities with a fair value of $286.5 million, representing 1.4% of the total invested asset balance, were in an unrealized loss position that totaled $42.3 million.  At December 31, 2007, 53.8% of these securities in an unrealized loss position, based on fair value, were securities with fair value to amortized cost percentages of greater than or equal to 90%.

The Company’s portfolio monitoring process is designed to identify securities that may be other-than-temporarily impaired.  The Company has a Credit Committee comprised of professionals from the investment and accounting functions that meets at least quarterly to review individual issues or issuers that may be of concern.  The process involves a quarterly screening of all impaired securities, with particular attention paid to identify those securities whose fair value to amortized cost percentages have been less than 80% for an extended period of time.  Additionally, the Company screens all sales transactions which generated realized losses in excess of $1.5 million and 10% of amortized cost in order to identify identical securities or issuers which the Company continues to hold.  Discrete credit events, such as a ratings downgrade, are also used to identify securities that may be other-than-temporarily impaired.  The securities identified are then evaluated based on issuer-specific facts and circumstances, such as the issuer’s ability to meet current and future interest and principal payments, an evaluation of the issuer’s financial condition and its near term recovery prospects, difficulties being experienced by an issuer’s parent or affiliate, and management’s assessment of the outlook for the issuer’s sector.  Based on this evaluation, issues or issuers are considered for inclusion on one of the Company’s following credit lists:

“Monitor List”- Management has concluded that the fair value will increase enough to recover the Company’s amortized cost but that changes in issuer-specific facts and circumstances require monitoring on a quarterly basis.  As of December 31, 2007, securities with an amortized cost of $37.3 million and a fair value of $27.2 million were included on the Company’s Monitor List.

“Watch List”- Management has concluded that the fair value will increase enough to recover the Company’s amortized cost but that changes in issuer-specific facts and circumstances require continued monitoring during the quarter.  As of December 31, 2007, securities with an amortized cost of $65.5 million and a fair value of $56.4 million were included on the Company’s Watch List.  A security is moved from the Monitor List to the Watch List when changes in issuer-specific facts and circumstances increase the possibility that a security may become impaired within the next 24 months.

“Impaired List”- Management has concluded that the fair value will not increase enough to recover the Company’s amortized cost and an other-than-temporary-impairment charge is recorded to income or the security is sold and a realized loss is recorded as a charge to income.  Impairments are classified as either credit-related or interest-related.  The Company categorizes impairments as credit-related if there are current concerns regarding the issuers’ ability to pay all principal and interest amounts due, according to the contractual terms of the security or if the decline in fair value of the security is driven by issuer-specific credit events.  The Company characterizes impairments as interest-related if the depression in fair value of the security was due to changes in interest or general credit spread widening and for which the Company has determined it no longer has the intent or ability to hold a security until recovery to amortized cost.  For the year ended December 31, 2007, other-than-temporary impairments of $68.1 million were recorded as a charge to income.  Of this balance, $52 million was credit-related and $16.1 million was interest-related.

100

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (CONTINUED)

OVERVIEW OF THE COMPANY’S INVESTMENT HOLDINGS AND PORTFOLIO MONITORING PROCESSES (continued)

At each balance sheet date, management also evaluates securities in an unrealized loss position and determines if the Company has the intent and ability to hold the securities until recovery.  If events or circumstances change, such as unexpected changes in the creditworthiness of the issuer, unanticipated changes in interest rates and/or credit spreads, changes in tax laws or accounting rules, changes in statutory capital requirements, or greater than expected liquidity needs, management will reconsider whether the Company has the intent and ability to hold a security until recovery.  If subsequent to the balance sheet date and due to an unexpected change in circumstances, the Company determines that it no longer intends to hold a security until recovery, a loss is recognized in net income in the period in which the intent to hold to recovery no longer exists.

There are inherent risks and uncertainties in management’s evaluation of securities for other-than-temporary impairment.  These risks and uncertainties include factors both external and internal to the Company, such as general economic conditions, an issuer’s financial condition or near-term recovery prospects, market interest rates, unforeseen events which affect one or more issuers or industry sectors, and portfolio management parameters, including asset mix, interest rate risk, portfolio diversification, duration matching, and greater than expected liquidity needs.  All of these factors could impact management’s evaluation of securities for other-than-temporary impairment.

The Company discontinues accruing income on all of its holdings for issuers that are in default.  Accrued income was not materially impacted by the termination of accrual accounting on these holdings for the year ended December 31, 2007.  The termination of accrual accounting on these holdings reduced previously accrued income by $0.6 million and $1.7 million for the years ended December 31, 2006 and 2005, respectively.  As of December 31, 2007 and 2006, the Company did not have any holding for issuers that were in default.  As of December 31, 2005, the fair market value of holdings for issuers in default was $24.4 million.

101

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (CONTINUED)

OVERVIEW OF THE COMPANY’S INVESTMENT HOLDINGS AND PORTFOLIO MONITORING PROCESSES (continued)

Unrealized Losses

The following table shows the fair value and gross unrealized losses of the Company’s available-for-sale fixed maturity investments, which were deemed to be temporarily impaired, aggregated by investment category, industry sector and length of time that the individual securities had been in an unrealized loss position at December 31, 2007.

	Less Than Twelve Months		Twelve Months Or More		Total
Corporate Securities	Fair Value	Gross Unrealized Losses	Fair Value	Gross Unrealized Losses	Fair Value	Gross Unrealized Losses
Basic Industry	$       86,180	$     (1,459)	$         23,229	$       (1,965)	$     109,409	$      (3,424)
Capital Goods	179,854	(5,651)	36,728	(2,047)	216,582	(7,698)
Communications	213,084	(5,172)	165,027	(8,018)	378,111	(13,190)
Consumer Cyclical	349,363	(26,136)	185,094	(19,006)	534,457	(45,142)
Consumer Noncyclical	90,795	(1,114)	22,910	(1,324)	113,705	(2,438)
Energy	100,815	(1,682)	44,034	(1,610)	144,849	(3,292)
Finance	1,539,054	(106,524)	515,945	(46,080)	2,054,999	(152,604)
Industrial Other	50,543	(7,059)	12,981	(160)	63,524	(7,219)
Technology	41,379	(100)	13,278	(721)	54,657	(821)
Transportation	102,549	(2,883)	41,601	(2,178)	144,150	(5,061)
Utilities	225,892	(4,894)	235,342	(6,654)	461,234	(11,548)
Total Corporate	2,979,508	(162,674)	1,296,169	(89,763)	4,275,677	(252,437)
Non-Corporate
Asset Backed Securities	232,353	(29,887)	267,080	(41,819)	499,433	(71,706)
Collateralized Mortgage Obligations	1,027,142	(95,499)	934,327	(89,863)	1,961,469	(185,362)
Mortgage Backed Securities	25,960	(64)	190,905	(2,180)	216,865	(2,244)
U.S. Treasury & Agency Securities	6,517	(40)	-	-	6,517	(40)
Total Non-Corporate	1,291,972	(125,490)	1,392,312	(133,862)	2,684,284	(259,352)
Grand Total	$  4,271,480	$ (288,164)	$    2,688,481	$   (223,625)	$  6,959,961	$   (511,789)

102

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (CONTINUED)

OVERVIEW OF THE COMPANY’S INVESTMENT HOLDINGS AND PORTFOLIO MONITORING PROCESSES (continued)

Unrealized Losses (continued)

The following table provides the fair value and gross unrealized losses of the Company’s available-for-sale fixed maturities investments, which were deemed to be temporarily impaired, aggregated by investment category, industry sector and length of time that individual securities have been in an unrealized loss position, at December 31, 2006:

	Less Than Twelve Months		Twelve Months Or More		Total
Corporate Securities	Fair Value	Gross Unrealized Losses	Fair Value	Gross Unrealized Losses	Fair Value	Gross Unrealized Losses
Basic Industry	$       7,750	$    (109)	$  43,426	$    (3,073)	$     51,176	$     (3,182)
Capital Goods	50,624	(399)	108,017	(3,574)	158,641	(3,973)
Communications	228,260	(4,389)	292,442	(19,688)	520,702	(24,077)
Consumer Cyclical	175,557	(3,380)	514,067	(25,219)	689,624	(28,599)
Consumer Noncyclical	138,379	(942)	33,801	(1,360)	172,180	(2,302)
Energy	75,777	(1,357)	43,064	(2,190)	118,841	(3,547)
Finance	482,642	(5,525)	874,370	(27,710)	1,357,012	(33,235)
Industrial Other	14,092	(15)	11,214	(614)	25,306	(629)
Technology	-	-	13,938	(852)	13,938	(852)
Transportation	30,905	(207)	111,423	(5,251)	142,328	(5,458)
Utilities	252,419	(3,303)	429,194	(14,422)	681,613	(17,725)
Total Corporate	1,456,405	(19,626)	2,474,956	(103,953)	3,931,361	(123,579)
Non-Corporate
Asset Backed Securities	139,558	(608)	388,329	(8,412)	527,887	(9,020)
Collateralized Mortgage Obligations	620,790	(4,296)	1,286,663	(38,303)	1,907,453	(42,599)
Mortgage Backed Securities	152,527	(661)	303,444	(6,700)	455,971	(7,361)
Foreign Government & Agency Securities	-	-	13,865	(283)	13,865	(283)
U.S. Treasury & Agency Securities	147,386	(2,026)	86,591	(2,001)	233,977	(4,027)
Total Non-Corporate	1,060,261	(7,591)	2,078,892	(55,699)	3,139,153	(63,290)
Grand Total	$2,516,666	$(27,217)	$ 4,553,848	$(159,652)	$7,070,514	$ (186,869)

103

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (CONTINUED)

OVERVIEW OF THE COMPANY’S INVESTMENT HOLDINGS AND PORTFOLIO MONITORING PROCESSES (continued)

Unrealized Losses (continued)

The following table provides the number of securities with gross unrealized losses, which were deemed to be temporarily impaired, at December 31, 2007 (not in thousands):

	Number of Securities Less Than Twelve Months	Number of Securities Twelve Months Or More	Total Number of Securities
Corporate Securities
Basic Industry	23	7	30
Capital Goods	41	15	56
Communications	63	55	118
Consumer Cyclical	93	54	147
Consumer Noncyclical	28	9	37
Energy	24	21	45
Finance	426	178	604
Industrial Other	14	3	17
Technology	7	2	9
Transportation	44	21	65
Utilities	69	66	135
Total Corporate	832	431	1,263
Non-Corporate
Asset Backed Securities	79	115	194
Collateralized Mortgage Obligations	383	351	734
Mortgage Backed Securities	14	202	216
U.S. Treasury & Agency Securities	2	-	2
Total Non-Corporate	478	668	1,146
Grand Total	1,310	1,099	2,409

104

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (CONTINUED)

OVERVIEW OF THE COMPANY’S INVESTMENT HOLDINGS AND PORTFOLIO MONITORING PROCESSES (continued)

Unrealized Losses (continued)

The following table provides the number of securities with gross unrealized losses, which were deemed to be temporarily impaired, at December 31, 2006 (not in thousands):

	Number of Securities Less Than Twelve Months	Number of Securities Twelve Months Or More	Total Number of Securities
Corporate Securities
Basic Industry	2	12	14
Capital Goods	9	15	24
Communications	22	64	86
Consumer Cyclical	28	57	85
Consumer Noncyclical	14	10	24
Energy	13	15	28
Finance	80	137	217
Industrial Other	3	2	5
Technology	-	3	3
Transportation	8	47	55
Utilities	39	55	94
Total Corporate	218	417	635
Non-Corporate
Asset Backed Securities	29	125	154
Collateralized Mortgage Obligations	139	328	467
Mortgage Backed Securities	200	288	488
Foreign Government & Agency Securities	-	3	3
U.S. Treasury & Agency Securities	10	25	35
Total Non-Corporate	378	769	1,147
Grand Total	596	1,186	1,782

The Company’s available-for-sale fixed maturity gross unrealized loss position as of December 31, 2007 was $324.9 million greater than at December 31, 2006.  The increase in unrealized losses was primarily due to general credit spread widening, partially offset by a decrease in interest rates.  Credit spreads widened primarily due to the deterioration of the sub-prime mortgage market and other liquidity disruptions, impacting the overall credit market.

Deterioration in the U.S. housing market, combined with tightened lending conditions and the market’s flight to quality securities, as well as the increased likelihood of a U.S. recession, also caused credit spreads to widen considerably.  The sectors and industries most significantly impacted include mortgage originators, home builders, financial lenders, residential and commercial mortgage backed investments, and other structured products, including consumer loan backed investments.

The sectors in the Company’s portfolio that recognized the largest unrealized losses were financial services, asset-backed and mortgage-backed securities.  As of December 31, 2007, there were 604 securities accounting for unrealized losses of $152.6 million in the Finance sector.   Of these unrealized losses, 83.4% were related to investment grade issues (rated AAA through BBB-).  As of December 31, 2007, there were 1,144 collateralized mortgage obligations, asset-backed and mortgage-backed securities accounting for unrealized losses of $259.4 million. Of the losses, 99.7% were related to investment grade issues (rated AAA through BBB-).  All securities held at December 31, 2007 were subject to the Company’s portfolio monitoring process.

105

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (CONTINUED)

OVERVIEW OF THE COMPANY’S INVESTMENT HOLDINGS AND PORTFOLIO MONITORING PROCESSES (continued)

Unrealized Losses (continued)

The Company has exposure to sub-prime and Alt-a residential mortgage-backed securities.  Sub-prime mortgage lending is the origination of residential mortgage loans to customers with weak credit profiles.  Alt-A mortgage lending is the origination of residential mortgage loans to customers who have credit ratings above sub-prime, but do not conform to government sponsored standards.  The combination of these two categories of securities is considered below prime.  The Company is not an originator of residential mortgages.  The slowing U.S. housing market and relaxed underwriting standards of some originators of below-prime loans has recently led to higher delinquency and loss rates especially within the 2006 and 2007 vintage years.  Ninety-seven percent of the Company’s below-prime mortgage-backed securities, based upon fair value, were related to mortgages either issued before 2006 or having an AAA rating.  At December 31, 2007, the Company had exposure to residential sub-prime and Alt-a mortgages of $332.8 million and $176.2 million, respectively, representing approximately 2.4% of the Company's total invested assets.

Because securities issued by the same issuer with different CUSIP numbers typically have different investment characteristics, such as secured or unsecured, shorter or longer maturities, or different interest rates, management’s analyses of unrealized and realized losses are performed at the CUSIP number level.  The Company also considers the credit condition of issuers at the entity level and considers various issues affecting an issuer collectively as facts and circumstances warrant.

106

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (CONTINUED)

OVERVIEW OF THE COMPANY’S INVESTMENT HOLDINGS AND PORTFOLIO MONITORING PROCESSES (continued)

Realized Losses

The sales of securities in the year ended December 31, 2007, which were in an unrealized loss position at the time of sale were primarily due to actual liquidity needs that were different from anticipated liquidity needs.  Management responded by selling certain securities that were in an unrealized gain position and by reconsidering the Company’s intent to hold certain securities that were in an unrealized loss position until recovery and selling them at a loss.  The objective of these sales was to keep the portfolio optimally balanced and diversified with respect to asset mix, interest rate risk, yield, duration, and credit quality.

During the year ended December 31, 2007, the Company recorded realized losses totaling $52.3 million on sales of securities with an aggregate fair value of $1.8 billion.  The average percentage of selling price to amortized cost was 97%.  The largest single trading loss during the year ended December 31, 2007, was $1.5 million.  $33.8 million of the realized losses were generated by individual losses of $0.5 million or less.

MORTGAGE LOANS AND REAL ESTATE

The Company invests in commercial first mortgage loans and real estate throughout the United States.  Investments are diversified by property type and geographic area.  Mortgage loans are collateralized by the related properties and generally are no more than 75% of the property’s value at the time that the original loan is made.

107

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (CONTINUED)

MORTGAGE LOANS AND REAL ESTATE (continued)

The carrying value of mortgage loans and real estate investments, net of applicable reserves and accumulated depreciation, was as follows:

		December 31,
		2007	2006
Total mortgage loans		$     2,318,341	$     2,273,176
Real estate:
	Held for production of income	201,777	186,891
Total real estate		$        201,777	$        186,891
Total mortgage loans and real estate		$     2,520,118	$     2,460,067

Accumulated depreciation on real estate was $31.8 million and $27.2 million at December 31, 2007 and 2006, respectively.

The Company monitors the condition of the mortgage loans in its portfolio.  In those cases where mortgages have been restructured, values are impaired or values are impaired but mortgages are performing, appropriate allowances for losses have been made.  The Company has impaired and impaired-but-performing mortgage loans totaling $3.3 million and $3.9 million at December 31, 2007 and 2006, respectively.

Activity for the investment valuation allowances was as follows:

	Balance at			Balance at
	January 1,	Additions	Subtractions	December 31,
2007
Mortgage loans	$           3,928	$                   -	$        (640)	$           3,288
2006
Mortgage loans	$           6,272	$               400	$       (2,744)	$           3,928

Mortgage loans and real estate investments comprise the following property types and geographic regions at December 31:

	2007	2006
Property Type:
Office building	$       820,803	$      864,486
Residential	369	115,822
Retail	1,067,483	998,291
Industrial/warehouse	306,769	310,346
Apartment	109,919	-
Other	218,063	175,050
Valuation allowances	(3,288)	(3,928)
Total	$    2,520,118	$    2,460,067

108

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (CONTINUED)

MORTGAGE LOANS AND REAL ESTATE (continued

	2007	2006
Geographic region:
Alabama	$           9,387	$           7,824
Alaska	6,000	3,041
Arizona	449	56,964
Arkansas	59,024	474
California	132,829	179,502
Colorado	39,276	32,294
Connecticut	13,133	15,016
Delaware	7,188	20,445
Florida	269,254	264,316
Georgia	68,371	86,510
Idaho	3,885	2,635
Illinois	47,521	47,777
Indiana	32,584	23,471
Iowa	325	364
Kansas	7,853	6,089
Kentucky	29,396	32,000
Louisiana	38,470	38,314
Maine	13,425	12,508
Maryland	72,659	58,318
Massachusetts	139,203	141,485
Michigan	20,649	15,522
Minnesota	41,909	40,259
Mississippi	3,959	770
Missouri	64,624	88,348
Montana	30,843	483
Nebraska	13,457	12,615
Nevada	5,987	7,304
New Hampshire	762	961
New Jersey	37,952	44,003
New Mexico	13,787	10,097
New York	345,887	313,204
North Carolina	39,453	44,866
North Dakota	1,920	2,150
Ohio	148,743	145,692
Oklahoma	8,811	4,900
Oregon	33,852	23,910
Pennsylvania	132,665	136,091
South Carolina	33,334	31,688
South Dakota	949	977
Tennessee	39,405	41,161
Texas	348,817	295,284
Utah	27,088	30,710
Virginia	14,070	16,825
Washington	76,767	77,525
West Virginia	4,730	4,874
Wisconsin	17,785	18,663
All other	24,969	25,766
Valuation allowances	(3,288)	(3,928)
Total	$     2,520,118	$     2,460,067

109

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (CONTINUED)

MORTGAGE LOANS AND REAL ESTATE (continued

At December 31, 2007, scheduled mortgage loan maturities were as follows:

2008	$             32,168
2009	33,457
2010	38,630
2011	123,728
2012	84,449
Thereafter	2,005,909
Total	$         2,318,341

Actual maturities could differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties and loans may be refinanced.

The Company has made funding commitments of mortgage loans on real estate and other loans into the future. The outstanding funding commitments for these mortgages amount to $17.8 million and $99.0 million at December 31, 2007 and 2006, respectively.

110

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (CONTINUED)

SECURITIES LENDING

The Company is engaged in certain securities lending transactions, which require the borrower to provide collateral on a daily basis, in amounts in excess of 102% of the fair value of the applicable securities loaned.  The Company retains effective control over all loaned securities and, therefore, continues to report such loaned securities as fixed maturities in its consolidated balance sheet.

Cash collateral received on securities lending transactions is reflected in other invested assets with an offsetting liability recognized in other liabilities for the obligation to return the collateral.  The fair value of collateral held and included in other invested assets was $533.5 million and $895.3 million at December 31, 2007 and 2006, respectively.  Fees earned on securities lending transactions were $2.2 million, $2.3 million and $1.9 million for the years ended December 31, 2007, 2006 and 2005, respectively.

LEVERAGED LEASES

The Company is an owner participant in a trust that is a lessor in a leveraged lease agreement entered into on October 21, 1994, under which equipment having an estimated economic life of 25-40 years was originally leased through a VIE for a term of 9.78 years.  During 2001, the lease term was extended until 2010.  The Company's equity investment in this VIE represented 8.33% of the partnership that provided 22.9% of the purchase price of the equipment.  The balance of the purchase price was furnished by third-party long-term debt financing, collateralized by the equipment, and is non-recourse to the Company.  At the end of the lease term, the master lessee may exercise a fixed price purchase option to purchase the equipment.  The leveraged lease is included as a part of other invested assets.

The Company's net investment in the leveraged lease is composed of the following elements:

	Year ended December 31,
	2007	2006
Lease contract receivable	$         12,836	$       18,631
Less: non-recourse debt	-	-
Net Receivable	12,836	18,631
Estimated value of leased assets	20,795	20,795
Less: unearned and deferred income	(4,304)	(6,506)
Investment in leveraged leases	29,327	32,920
Less: fees	(87)	(113)
Net investment in leveraged leases	$         29,240	$       32,807

111

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (CONTINUED)

DERIVATIVES

The Company uses derivative financial instruments for risk management purposes to hedge against specific interest rate risk, to alter investment rate exposures arising from mismatches between assets and liabilities, and to minimize the Company's exposure to fluctuations in interest rates, foreign currency exchange rates and general market conditions. The Company does not hold or issue any derivative instruments for trading purposes.

As a component of its investment strategy and to reduce its exposure to interest rate risk, the Company utilizes interest rate swap agreements.  Interest rate swap agreements are agreements to exchange with a counter-party interest rate payments of differing character (e.g., fixed-rate payments exchanged for variable-rate payments) based on an underlying principal balance (notional principal) as an economic hedge against interest rate changes. No cash is exchanged at the outset of the contract and no principal payments are made by either party.  A single net payment is usually made by one counter-party at each interest payment date. The net payment is recorded as a component of derivative income (loss). Because the underlying principal is not exchanged, the Company's maximum exposure to counter-party credit risk is the difference in payments exchanged.  The fair value of swap agreements is included with derivative instruments - receivable (positive position) or derivative instruments - payable (negative position) in the accompanying balance sheet.

The Company utilizes payer swaptions to hedge exposure to interest rate risk.  Swaptions give the buyer the option to enter into an interest rate swap per the terms of the original swaption agreement.  A premium is paid on settlement date and no further cash transactions occur until the positions expire.  At expiration, the swaption either cash settles for value, settles into an interest rate swap, or expires worthless per the terms of the original swaption agreement. Swaptions are carried at fair value which is included in derivative instruments - receivable (positive position) in the accompanying balance sheet and the change in value is offset to derivative income.

The Company utilizes over-the-counter (“OTC”) put options and exchange traded futures on the Standard & Poor’s 500 Composite Stock Price Index (“S&P 500 Index”) ("S&P", "S&P 500", and "Standard & Poor's" are trademarks of The McGraw Hill Companies, Inc. and have been licensed for use by the Company) and other indexes to hedge against stock market exposure inherent in the GMDB and living benefit features of the Company's variable annuities.  The Company also purchases OTC call options on the S&P 500 Index to economically hedge its obligation under certain fixed annuity contracts.  Options are carried at fair value and are included with derivative instruments - receivable in the Company’s balance sheet.

Standard & Poor’s indexed futures contracts are entered into for purposes of hedging fixed index products.  The interest credited on these 1-, 5-, 7- and 10-year term products is based on the changes in the S&P 500 Index.  On the trade date, an initial cash margin is exchanged.  Daily cash is exchanged to settle the daily variation margin and the offset is recorded in derivative income.

The Company issues annuity contracts that contain a derivative instrument that is embedded in the contract.  Upon issuing the contract, the embedded derivative is separated from the host contract (annuity contract) and is carried at fair value.

112

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (CONTINUED)

DERIVATIVES (continued)

From 2000 through 2002, the Company marketed GICs to unrelated third parties.  Each transaction is highly-individualized but typically involves the issuance of foreign currency denominated contracts backed by cross currency swaps or equity-linked cross currency swaps.  The combination of the currency swaps with interest rate swaps allows the Company to lock in U.S. dollar fixed rate payments for the life of the contract.

Included in derivative gains (losses) are gains (losses) on the translation of foreign currency denominated GIC liabilities of $45.5 million, $(90.2) million and $197.1 million for the years ended December 31, 2007, 2006 and 2005, respectively.

Beginning in 2005, the Company marketed GICs to unrelated third parties and entered into funding agreements and interest rate swaps as part of this guaranteed investment program.  The interest rate swaps allow the Company to lock in U.S. dollar fixed rate payments for the life of the contracts.

The Company does not employ hedge accounting.  The Company believes that its derivatives provide economic hedges and the cost of formally documenting hedge effectiveness in accordance with the provisions of SFAS No.133, “Accounting for Derivative Instruments,” is not justified.  As a result, all changes in the fair value of derivatives are recorded in the current period operations as a component of derivative income.

Net derivative (loss) income for the years ended December 31 consisted of the following:

		2007		2006		2005
Net expense on swap agreements	$	6,943	$	(7,749)	$	(64,915)
Change in fair value of swap agreements (interest rate, currency, and equity)		(255,727)		8,392		101,320
Change in fair value of options, futures and embedded derivatives		55,660		8,446		(19,931)
Total derivative (losses) income	$	(193,124)	$	9,089	$	16,474

The Company is required to pledge and receive collateral for open derivative contracts.  The amount of collateral required is determined by agreed upon thresholds with the counter-parties.  The Company currently pledges cash and U.S. Treasury bonds to satisfy this collateral requirement.  At December 31, 2007 and 2006, $132.9 million and $43.0 million, respectively, of fixed maturities were pledged as collateral and are included with fixed maturities.

The Company’s underlying notional or principal amounts associated with open derivatives positions were as follows for the years ended December 31:

	2007
	Notional		Fair Value
	Principal		Asset
	Amounts		(Liability)
Interest rate swaps	$	11,423,788	$	(310,616)
Currency swaps		452,533		174,311
Credit Default Swaps		55,000		(6,915)
Equity swaps		71,656		19,361
Currency forwards		45		-
Futures		2,099,368		608
Swaptions		500,000		14
S&P 500 index call options		2,619,948		250,311
S&P 500 index put options		646,640		35,547
Total	$	17,868,978	$	162,621

113

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

4. INVESTMENTS (CONTINUED)

DERIVATIVES (continued)

	2006
	Notional		Fair Value
	Principal		Asset
	Amounts		(Liability)
Interest rate swaps	$	10,759,984	$	(84,860)
Currency swaps		488,377		169,618
Equity swaps		172,329		52,664
Currency forwards		3,570		2,493
Futures		1,008,792		(2,313)
Swaptions		1,500,000		1,428
S&P 500 index call options		4,166,184		337,441
S&P 500 index put options		1,103,502		16,879
Total	$	19,202,738	$	493,350

5. NET REALIZED INVESTMENT LOSSES AND GAINS

Net realized investment (losses) gains consisted of the following for the years ended December 31:

		2007		2006	2005
Fixed maturities			$          (4,107)	$          (53,120)	$           21,873
Equity securities		395		519	(6)
Mortgage and other loans		780		1,543	614
Real estate				-	318
Other invested assets			(32)	(19)	12,741
Other than temporary impairments			(68,092)	(6,329)	(29,707)
Sales of previously impaired assets			10,008	12,895	11,092
	Total	$          (61,048)		$          (44,511)	$           16,925

6. NET INVESTMENT INCOME

Net investment income consisted of the following for the years ended December 31:

		2007	2006	2005
Fixed maturities		$          863,779	$           991,738	$           921,803
Mortgages and other loans		153,228	135,515	103,253
Real estate		9,347	10,460	11,047
Policy loans		43,708	44,516	37,595
Other		44,426	38,858	55,245
	Gross investment income	1,114,488	1,221,087	1,128,943
Less: Investment expenses		15,896	15,006	16,414
	Net investment income	$       1,098,592	$        1,206,081	$        1,112,529

114

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

7.  FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosure about Fair Value of Financial Instruments," excludes certain insurance liabilities and other non-financial instruments from its disclosure requirements.  The fair value amounts presented herein do not include the expected interest margin (interest earnings over interest credited) to be earned in the future on investment-type products or other intangible items.  Accordingly, the aggregate fair value amounts presented herein do not necessarily represent the underlying value to the Company.  Likewise, care should be exercised in deriving conclusions about the Company's business or financial condition based on the fair value information presented herein.

The following table presents the carrying amounts and estimated fair values of the Company's financial instruments at December 31:

		2007		2006
		Carrying	Estimated	Carrying	Estimated
		Amount	Fair Value	Amount	Fair Value
Financial assets:
	Cash and cash equivalents	$              1,169,701	$             1,169,701	$                578,080	$                578,080
	Fixed maturities	15,370,241	15,370,241	18,094,026	18,124,777
	Equity securities	-	-	15,895	15,895
	Mortgages	2,318,341	2,324,351	2,273,176	2,267,327
	Derivative instruments -receivables	609,261	605,058	653,854	653,854
	Policy loans	712,633	712,633	709,626	709,626
	Separate accounts	24,996,603	24,996,603	21,060,255	21,060,255
Financial liabilities:
	Contractholder deposit funds and other policy liabilities	15,716,209	14,060,467	19,428,625	18,051,332
	Derivative instruments - payables	446,640	442,437	160,504	160,504
	Long-term debt to affiliates	1,945,000	2,045,867	1,325,000	1,370,223
	Partnership capital securities	-	-	607,826	630,751
	Separate accounts	24,996,603	24,996,603	21,060,255	21,060,255

The following methods and assumptions were used by the Company in determining the estimated fair value of its financial instruments:

Interest receivable on the above financial instruments is stated at carrying value which approximates fair value.

Cash and cash equivalents: The fair values of cash and cash equivalents are estimated to be cost plus accrued interest.

Fixed maturities, short term investments, and equity securities: The Company determines the fair value of its publicly traded fixed maturities using four primary pricing methods: third-party pricing services, independent dealer quotes, pricing matrices, and pricing models.  Prices are first sought from third-party pricing services; the remaining unpriced securities are priced using one of the remaining three methods.  Third-party pricing services derive the security prices through recently reported trades for identical or similar securities with adjustments for trading volumes and market observable information through the reporting date.  In the event that there are no recent market trades, pricing services and brokers may use pricing matrices and models to develop a security price based on future expected cash flows discounted at an estimated market rate using collateral performance and vintages.

115

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

7. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

Investments (continued):  Structured securities, such as CMOs, CMBS, and ABS, are priced using a matrix, fair value model or independent broker quotations.  CMBS securities, which are a subset of the Company's CMO holdings, are priced using the last sale price of the day or a broker quote, if no sales were transacted that day.  Other CMOs and ABS are priced using matrices, models and independent broker quotations.  Typical inputs used by these three pricing methods include, but are not limited to, reported trades, benchmark yields, issuer spreads, bids and/or estimated cash flows and prepayment speeds.  In addition, estimates of expected future prepayments are factors in determining the price of ABS, MBS, CMBS, and CMOs.  These estimates are based on the underlying collateral and structure of the security, as well as prepayment speeds previously experienced in the market at interest rate levels projected for the underlying collateral.  Actual prepayment experience may vary from these estimates.

For privately placed fixed maturities, fair values are estimated using matrices, which take into account credit spreads for publicly traded securities of similar credit risk, maturity, prepayment and liquidity characteristics.  A portion of privately placed fixed maturities are also priced using market prices or dealer quotes.  The fair values of mortgages are estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

The fair value of equity securities are based on quoted market prices.  Equity securities are included as a component of other invested assets.

Mortgages: The fair values of mortgage and other loans are estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Derivative instruments, receivables and payables: The fair values of swaps are based on current settlement values.  The current settlement values are based on dealer quotes and market prices.  Fair values for options and futures are based on dealer quotes and market prices.

Policy loans: Policy loans are stated at unpaid principal balances, which approximate fair value.

116

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

7. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

Separate accounts, assets and liabilities: The estimated fair value of assets held in separate accounts is based on quoted market prices.  The fair value of liabilities related to separate accounts is the amount payable on demand, which excludes surrender charges.

Contractholder deposit funds and other policy liabilities: The fair values of the Company's general account insurance reserves and contractholder deposits under investment-type contracts (insurance, annuity and pension contracts that do not involve mortality or morbidity risks) are estimated using discounted cash flow analyses or surrender values based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for all contracts being valued. Those contracts that are deemed to have short-term guarantees have a carrying amount equal to the estimated market value.  The fair values of other deposits with future maturity dates are estimated using discounted cash flows.  The fair values of S&P 500 Index and other equity linked embedded derivatives are produced using standard derivative valuation techniques.  GMABs or GMWBs are considered to be derivatives under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and are included in contractholder deposit funds.  The fair value of the embedded derivatives is calculated stochastically using risk neutral scenarios over a fifty-year projection.  Policyholder assumptions are based on experience studies and industry standards.

Long term debt: The fair value of notes payable and other borrowings are estimated using discounted cash flow analyses based upon the Company's current incremental borrowing rates for similar types of borrowings.

8. REINSURANCE

Reinsurance ceded contracts do not relieve the Company from its obligations to policyholders.  The Company remains liable to its policyholders for the portion reinsured to the extent that any reinsurer does not meet the obligations assumed under the reinsurance agreement.  To minimize its exposure to significant losses from reinsurer insolvencies, the Company regularly evaluates the financial condition of its reinsurers and monitors concentrations of credit risk.  Management believes that any liability from this contingency is unlikely.  A brief discussion of the Company’s reinsurance agreements by business segment follows.  (Also, see Note 16 for additional information on the Company's business segments.)

Wealth Management Segment

The Wealth Management Segment manages a closed block of single premium whole life (“SPWL”) insurance policies, a retirement-oriented tax-advantaged life insurance product.  The Company discontinued sales of SPWL’s in response to certain tax law changes in the 1980s.  The Company had SPWL policyholder balances of approximately $1.6 billion and $1.6 billion as of December 31, 2007 and 2006, respectively.  On December 31, 2003, this entire block of business was reinsured on a funds withheld basis with SLOC, an affiliate.

By reinsuring the SPWL policies, the Company reduced net investment income by $78.2 million, $97.0 million and $82.7 million for the years ended December 31, 2007, 2006 and 2005, respectively.  The reduction of net investment income resulting from interest paid on funds withheld includes the impact from net investment income, net derivative (loss) income and net realized investment gains.  The Company also reduced interest credited by $73.0 million, $76.0 million and $57.5 million for the years ended December 31, 2007, 2006 and 2005, respectively.  In addition, the Company increased net investment income, relating to an experience rating refund under the reinsurance agreement with SLOC, by $8.9 million, $13.0 and $13.1 million for the years ended December 31, 2007, 2006 and 2005, respectively.  The liability for the SPWL policies is included in contractholder deposit funds and other policy liabilities.

Individual Protection Segment

The Company has agreements with SLOC and several unrelated companies, which provide for reinsurance of portions of the net-amount-at-risk under certain individual variable universal life, individual private placement variable universal life, bank owned life insurance (“BOLI”), and corporate owned life insurance (“COLI”) policies. These amounts are reinsured on either a monthly renewable or a yearly renewable term basis.  Fee income was reduced by $21.6 million, $37.8 million and $33.3 million for the years ended December 31, 2007, 2006 and 2005, respectively, to account for these agreements.

117

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

8. REINSURANCE (CONTINUED)

Pursuant to a reinsurance agreement with SLOC that was effective November 8, 2007, Sun Life Vermont will fund AXXX reserves, attributable to certain UL policies sold by SLOC through its United States branch (the "Branch").  Sun Life Vermont is reinsuring, on a coinsurance basis, a 100% quota share of SLOC's risk on the UL policies covered under the reinsurance agreement.  New UL business will also be reinsured under this agreement.  Sun Life Vermont's obligations will be secured in part through a reinsurance trust and in part on a funds-withheld basis.  On November 8, 2007 pursuant to reinsurance agreement, the Company recorded total assets of $576.9 million, including a funds withheld reinsurance receivable of $551.8 million, deferred costs of $22.4 million, and other assets of $2.8 million.  Total liabilities assumed on November 8, 2007 of $576.9 million consisted of $553.7 million in contractholder deposit account value, $20.4 million in future contract and policy benefits, and other liabilities of $2.8 million.  As of December 31, 2007, Sun Life Vermont held assumed liabilities of $577.5 million of contractholder deposits and future contract and policy benefits of $23.7 million under the reinsurance agreement and a reinsurance payable to an affiliate of $33.1 million.  At December 31, 2007, Sun Life Vermont held assets consisting of a reinsurance receivable for funds withheld of $626.6 million, a reinsurance receivable for deferred costs of $22.3 million.  In addition, the reinsurance agreement has increased revenues by approximately $29.7 million, and increased expenses by $14.4 million for the year ended December 31, 2007.

Funds withheld assets comprised of trading bonds, mortgages and derivatives, amounting to $626.6 million are being held in a separate trust account for the protection of policyholders and claimants of the Branch.  The assets of the trust are managed by SLOC with all of the investment returns, net of expenses, inuring to the Company.  The funds withheld asset is reported in reinsurance receivable.  The coinsurance treaty with funds withheld gives rise to an embedded derivative requiring that it be separated from the host reinsurance contract.  The fair value of the embedded derivative at December 31, 2007 was a $3.1 million liability.  The $3.1 million loss is included in net derivative income.

Effective December 31, 2007, SLNY entered into a reinsurance agreement with SLOC under which SLOC will fund AXXX reserves, attributable to certain UL policies sold by SLNY.  Under this agreement SLNY ceded, and SLOC assumed, on a funds withheld 90% coinsurance basis certain inforce policies at December 31, 2007.  Future new business will also be reinsured under this agreement.  Under the agreement, SLNY ceded $63.1 million of policyholder balances, received a ceding commission of $54.2 million, recorded a funds withheld payable to SLOC of $71.6 million, and recorded a deferred gain of $45.7 million.

Group Protection Segment

The Company, through its subsidiary, SLNY, has an agreement with an unrelated company whereby the unrelated company reinsures the mortality risks of the Company’s group life contracts.  Under this agreement, certain group life mortality benefits are reinsured on a yearly renewable term basis. The agreement provides that the unrelated company will reinsure amounts above $0.7 million per claim for group life contracts ceded by the Company.

The Company, through its subsidiary, SLNY, has an agreement with an unrelated company whereby the unrelated company reinsures the morbidity risks of SLNY’s group stop loss contracts.  Under this agreement, certain stop loss benefits are reinsured on a yearly renewable term basis. The agreement provides that the unrelated company will reinsure specific claims for amounts above $1.0 million per claim for stop loss contracts ceded by SLNY.  The retention limit was raised to $1.5 million for policies sold or renewed on or after January 1, 2006.

The Company, through its subsidiary, SLNY, has an agreement with an unrelated company whereby the unrelated company reinsures the morbidity risks of SLNY’s group long-term disability contracts.  Under this agreement, certain long-term disability benefits are reinsured on a yearly renewable term basis.  The agreement provides that the unrelated company will reinsure amounts in excess of $4,000 per claim per month for long-term disability contracts ceded by SLNY.  The retention limit was raised to $9,000 per claim per month for claims incurred or after January 1, 2006.

The Company, through its subsidiary, SLNY, has an agreement with an unrelated company whereby the unrelated company reinsures 100% of the risks on a quota share basis for certain specific group life and disability policies.

The Company, through its subsidiary, SLNY, has an agreement, effective May 31, 2007, to assume the net risks of SLHIC’s New York issued contracts.

118

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

8. REINSURANCE (CONTINUED)

The effects of reinsurance were as follows:

			For the Years Ended December 31,
		2007		2006	2005
Premiums and annuity considerations:
	Direct	$             62,645		$              61,713	$              54,915
	Assumed - Affiliated	50,986		-	-
	Ceded - Affiliated	(25)		(7)	-
	Ceded - Non affiliated	(2,990)		(2,514)	(2,933)
Net premiums and annuity considerations:		$           110,616		$              59,192	$              51,982
Policyowner benefits:
	Direct	$          260,008		$            197,872	$            225,936
	Assumed - Affiliated	30,430		-	-
	Ceded - Affiliated	(27,620)		(34,524)	(34,061)
	Ceded - Non-affiliated	(33,333)		(6,378)	(4,862)
Net policyowner benefits:		$           229,485		$            156,970	$            187,013
Commission and expense:
	Direct	5,617		25,175	12,149
	Assumed – Affiliated	7,521		-	-
	Ceded - Affiliated	(502)		(200)	(602)
Net commission and expense		12,636		24,975	11,547

119

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

9.  RETIREMENT PLANS

The Company sponsors three non-contributory defined benefit pension plans for its employees and certain affiliated employees.  These plans are the staff qualified pension plan (“retirement plan”), the agents’ qualified pension plan (“agents’ pension plan”) and the staff nonqualified pension plan (“UBF plan”). Expenses are allocated to participating companies based in a manner consistent with the allocation of employee compensation expenses.  The Company's funding policies for the two qualified pension plans are to contribute amounts which at least satisfy the minimum amount required by the Employee Retirement Income Security Act of 1974 ("ERISA").  Most pension plan assets consist of separate accounts of SLOC or other insurance company contracts.

Prior to 2006 the Company participated in the UBF plan which was sponsored by SLOC and expensed the portion of the plan cost that was allocated to the Company.  Effective January 1, 2006 the plan was divided, with the Company taking over the benefit obligation and the associated unrecognized gain/loss and prior service cost/credit.  The Company has included the allocated projected benefit obligation (“PBO”) in a separate line in the PBO reconciliation, and accounted for the plan as the Company’s own from that point forward.

The Company uses a measurement date of September 30 for its pension and other post retirement benefit plans.

On September 21, 2005, the Board of Directors of the Company approved amendments pertaining to the retirement plan including the following:

(a) To provide that no one shall become a participant in the plan after December 31, 2005;

(b) To freeze accruals under the plan as of December 31, 2005 for all participants except (i) those participants (x) who are at least age 50 and whose age plus service on January 1, 2006 equals or exceeds 60 and (y) who in 2005 chose to continue their participation in the plan (“Grandfathered participants”), (ii) those participants who are receiving severance or termination payments on December 31, 2005 and (iii) those participants who are receiving amounts paid under the Long Term Disability plan sponsored by the Company on December 31, 2005;

Due to the retirement plan changes, a $1.9 million curtailment charge was recognized in 2005.

Other post retirement benefit plans have been amended as follows:

a) To provide retiree medical coverage where the retiree pays the entire cost of coverage equal to the cost paid by active employees unless the participant is a retiree as of December 31, 2005, a "Grandfathered employee," or a “Rule 75 employee.”

A "Grandfathered employee" shall mean an active employee (i) who retires on or after January 1, 2006 and (ii) who as of January 1, 2006 is at least age 55 with 15 or more years or service and whose age plus service is at least 75.

A "Rule 75 employee" shall mean an active employee (i) who is not a Grandfathered employee, ii) who retires on or after January 1, 2006, and (iii) who, when retires, is at least age 55 with 15 or more years of service and whose age plus service is at least 75.

For Grandfathered and Rule 75 employees, retiree medical coverage is provided at a reduced cost.

On September 29, 2006, the FASB issued SFAS No. 158, “Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans,” which amends SFAS No. 87 and SFAS No. 106 to require recognition of the overfunded or underfunded status of pension and other postretirement benefit plans on the balance sheet. Under SFAS No. 158, gains and losses, prior service costs and credits, and any remaining transition amounts under SFAS No. 87 and SFAS No. 106 that have not yet been recognized through net periodic benefit cost will be recognized in accumulated other comprehensive income, net of tax effects, until they are amortized as a component of net periodic cost.  The measurement date – the date at which the benefit obligation and plan assets are measured – is required to be the Company's fiscal year end.  SFAS No. 158 is effective for publicly-held companies for fiscal years ending after December 15, 2006, except for the measurement date provisions, which are effective for fiscal years ending after December 15, 2008.  The Company adopted the balance sheet recognition provisions of SFAS No. 158 at December 31, 2006 and will adopt the year end measurement date in 2008.  As of December 31, 2007, the adoption of SFAS No. 158 as not had a material impact on the Company’s financial condition or results of operations.

120

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

9.  RETIREMENT PLANS (CONTINUED)

Effective January 1, 2007, the agents’ pension plan was amended for a cost of living adjustment for eligible participants.

The following table sets forth the change in the retirement plan, agents’ pension plan and UBF plan projected benefit obligations and assets, as well as the plans’ funded status at December 31:

	2007	2006
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$        261,380	$          229,545
Other (uninsured benefit plan split)	-	28,118
Service cost	4,108	6,024
Interest cost	15,754	15,064
Actuarial gain	(11,210)	(9,862)
Benefits paid	(8,577)	(7,509)
Plan Amendments	1,302	-
Projected benefit obligation at end of year	$          262,757	$         261,380
Change in fair value of plan assets:
Fair value of plan assets at beginning of year	$        269,712	$         252,096
Other	(262)	(496)
Actual return on plan assets	30,951	25,621
Benefits paid	(8,577)	(7,509)
Fair value of plan assets at end of year	$        291,824	$        269,712
Information on the funded status of the plan:
Funded status	$             29,067	$            8,332
4th quarter contribution	(710)	(1,108)
Prepaid benefit cost	$             28,357	$            7,224

121

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

9.  RETIREMENT PLANS (CONTINUED)

The accumulated benefit obligation for the retirement plan, agents’ pension plan and UBF plan at December 31, 2007 and 2006 was $253.6 million and $249.4 million, respectively.

Amounts recognized in the Company’s Consolidated Balance Sheets for the retirement plan, agents’ pension plan and UBF plan consist of the following as of December 31:

	2007	2006
Other assets	$               59,423	$               38,345
Other liabilities	(31,066)	(31,121)
	$               28,357	$                7,224

Amounts recognized in the Company’s Accumulated Other Comprehensive Income (“AOCI”) consist of the following:

	2007	2006
Net actuarial gain	$              (22,103)	$              (1,923)
Prior service cost	4,529	3,564
Transition asset	(6,206)	(8,299)
	$              (23,780)	$              (6,658)

The retirement plan and agent’s pension plan are overfunded at December 31, 2007 and 2006. The funded status of the UBF plan as of December 31, 2007 and 2006 was as follows:

	2007	2006
Plan assets	$                  -	$                  -
Less: Projected benefit obligations	27,277	27,209
Funded status	$     (27,277)	$     (27,209)
Accumulated benefit obligation	$        25,138	$        24,084

122

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

9.  RETIREMENT PLANS (CONTINUED)

The following table sets forth the components of the net periodic benefit cost and the Company’s share of net periodic benefit costs related to the retirement plan, agents’ plan, and UBF plan for the years ended December 31:

	2007	2006	2005
Components of net periodic benefit cost:
Service cost	$                     4,108	$                   6,024	$                  10,948
Interest cost	15,754	15,065	13,839
Expected return on plan assets	(21,874)	(21,672)	(20,092)
Amortization of transition obligation asset	(2,093)	(2,093)	(3,051)
Amortization of prior service cost	337	266	855
Curtailment loss	-	-	1,856
Recognized net actuarial (gain) loss	(107)	437	1,918
Net periodic benefit cost (benefit)	$                  (3,875)	$                (1,973)	$                    6,273
The Company’s share of net periodic benefit cost	$                  (3,875)	$                (1,973)	$                    4,116

Prior to becoming the plan sponsor of the UBF plan the cost allocated to the Company for its participation in the UBF Plan was $2.9 million for the year ended December 31, 2005.

Changes in the Company’s accumulated other comprehensive income related to the retirement plan, agents’ plan, and UBF plan for the following periods:

	2007	2006	2005
Net actuarial gain arising during the year	$               (20,287)	$                 (1,923)	$                            -
Net actuarial gain recognized during the year	107	-	-
Prior service cost arising during the year	1,302	3,564	-
Prior service cost recognized during the year	(337)	-	-
Transition asset recognized during the year	2,093	-	-
Transition asset arising during the year	-	(8,299)
Change in effect of additional minimum liability	-	(2,834)	2,834
Total recognized in AOCI	$               (17,122)	$                 (9,492)	$                    2,834
Total recognized in net periodic benefit cost and other comprehensive income	$              (20,997)	$               (11,465)	$                    9,107

123

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

9. RETIREMENT PLANS (CONTINUED)

The estimated amounts that will be amortized from accumulated other comprehensive income into net periodic benefit costs in 2008 are as follows:

Actuarial gain	$           (792)
Prior service cost	337
Transition asset	(2,093)
Total	$      (2,548)

Assumptions

Weighted average assumptions used to determine benefit obligations for the retirement plan, agents’ pension plan, and UBF plan were as follows:

	Pension Benefits
	2007	2006	2005
Discount rate	6.35%	6.0%	5.8%
Rate of compensation increase	4.0%	4.0%	4.0%

Weighted average assumptions used to determine net benefit cost for the retirement plan, agents’ pension plan, and UBF plan were as follows:

	Pension Benefits
	2007	2006	2005
Discount rate	6.0%	5.8%	6.2%
Expected long term return on plan assets	8.25%	8.75%	8.75%
Rate of compensation increase	4.0%	4.0%	4.0%

Plan Assets

The asset allocation for the Company’s retirement plan and agents’ plan assets for 2007 and 2006 measurement, and the target allocation for 2008, by asset category, are as follows:

	Target Allocation	Percentage of Plan Assets
Asset Category	2008	2007	2006
Equity Securities	60%	65%	63%
Debt Securities	25	26	27
Commercial Mortgages	15	9	10
Total	100%	100%	100%

124

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

9. RETIREMENT PLANS (CONTINUED)

The target allocations were established to reflect the Company’s investment risk posture and to achieve the desired level of return commensurate with the needs of the fund.  The target ranges are based upon a three to five year time horizon and may be changed as circumstances warrant.

The portfolio of investments should, over a period of time, earn a gross annualized rate of return that:

1)	exceeds the assumed actuarial rate;
2)	exceeds the return of customized index created by combining benchmark returns in appropriate weightings based on an average asset mix of funds; and
3)	generates a real rate of return of at least 3% after inflation, and sufficient income or liquidity to pay retirement benefits on a timely basis.

Cash Flow

Due to the over funded status of the retirement plan and the agent’s pension plan, the Company will not be making contributions to those plans in 2008. The Company will be making a contribution of $1.3 million to the UBF plan in 2008.

The Company has estimated the following future benefit payments for the years 2008 through 2017:

	Pension Benefits
2008	9,320
2009	9,991
2010	10,629
2011	11,531
2012	12,495
2013 to 2017	76,413

Savings and Investment Plan

The Company sponsors and participates in a savings account that qualifies under Section 401(k) of the Internal Revenue Code (“the 401(k) Plan”) for which substantially all employees of at least age 21 are eligible to participate at date of hire. Under the 401(k) Plan, the Company matches, up to specified amounts, the employees’ contributions to the plan.

125

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

9. RETIREMENT PLANS (CONTINUED)

On September 21, 2005, the Board of Directors of the Company approved amendments pertaining to the 401(k) Plan including the following.

Effective January 1, 2006, the Savings and Investment Plan also includes a retirement investment account that qualifies under Section 401(a) of the Internal Revenue Code (“the RIA”).  The Company contributes a percentage of the participant’s eligible compensation determined under the following chart based on the sum of the participant’s age and service on January 1 of the applicable plan year.

Age Plus Service	Company Contribution
Less than 40	3%
At least 40 but less than 55	5%
At least 55	7%

For RIA participants who are at least age 40 on January 1, 2006 and whose age plus service on January 1, 2006 equals or exceeds 45, the Company also contributes to the RIA from January 1, 2006 through December 31, 2015, a percentage of the participant’s eligible compensation determined under the following chart based on the participant’s age and service on January 1, 2006.

	Service
Age	Less than 5 years	5 or more years
At least 40 but less than 43	3.0%	5.0%
At least 43 but less than 45	3.5%	5.5%
At least 45	4.5%	6.5%

For RIA participants who did not become participants in the retirement plan before January 1, 2006, the Company made a one-time RIA contribution in January 2006 based on their applicable percentage from the first chart above as of January 1, 2006 and their eligible compensation paid during the period beginning on their hire date and ending on December 31, 2005.

The amount of the 2007 employer contributions under the 401(k) Plan sponsorship for the Company and its affiliates was $21.8 million.  Amounts are allocated to affiliates based on their respective employees’ contributions.  The Company’s portion of the expense was $ 16.1 million, $10.8 million and $4.6 million for the years ended December 31, 2007, 2006 and 2005, respectively.  The Company’s 2005 contribution includes a $1.6 million accrued retroactive adjustment related to the January 1, 2006 amendments to the 401(k) Plan.  This retroactive adjustment was funded in 2006.

Other Post-Retirement Benefit Plans

The Company sponsors a post-retirement benefit plan for its employees and certain affiliates employees providing certain health, dental and life insurance benefits (“post-retirement benefits”) for retired employees and dependents (the “Retirement Plan”).  Expenses are allocated to participating companies based on the number of participants.  Substantially all employees of the participating companies may become eligible for these benefits if they reach normal retirement age while working for the Company, or retire early upon satisfying an alternate age plus service condition.  Life insurance benefits are generally set at a fixed amount.

126

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

9. RETIREMENT PLANS (CONTINUED)

On May 31, 2007, as part of Sun Life Financial’s acquisition of EBG, the Company provided prior service credit under its retiree medical plan to the transferred EBG employees not currently eligible for those benefits under the corresponding Genworth plan.  Additionally, as part of the acquisition, the fair value of the liabilities assumed by the Company included the unfunded accumulated postretirement benefit obligation (“APBO”) attributable to the prior service cost associated with the transferred EBG employees.  The final purchase price was adjusted at May 31, 2007 to settle the unfunded APBO undertaken by the Company.

The following table sets forth the change in the post-retirement benefit plan’s obligations and assets, as well as the plans' funded status at December 31:

Change in benefit obligation:	2007	2006
Benefit obligation at beginning of year	$             45,852	$              51,300
Service cost	1,234	1,311
Interest cost	2,915	2,967
Actuarial loss (gain)	213	(7,220)
Benefits paid	(2,979)	(2,756)
Federal Subsidy	194	250
Unfunded APBO as a result of EBG acquisition	4,800	-
Benefit obligation at end of year	$            52,229	$              45,852
Change in fair value of plan assets:
Fair value of plan assets at beginning of year	$                        -	$                        -
Employer contributions	2,979	2,756
Benefits paid	(2,979)	(2,756)
Fair value of plan assets at end of year	$                        -	$                        -
Information on the funded status of the plan:
Funded Status	$          (52,229)	$            (45,852)
4th quarter contribution	532	600
Unrecognized prior service cost	-	-
Accrued benefit cost	$          (51,697)	$             (45,252)

Amounts recognized in the Company’s Consolidated Balance Sheets for the post-retirement benefit plan consist of the following:

	2007	2006
Other liabilities	$               (51,697)	$             (45,252)

127

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

9. RETIREMENT PLANS (CONTINUED)

Amounts recognized in the Company’ AOCI consist of the following:

	2007	2006
Net actuarial loss	$           13,437	$           14,070
Prior service credit	(4,551)	(5,080)
	$             8,886	$             8,990

The following table sets forth the components of the net periodic post-retirement benefit costs and the Company’s allocated share for the year ended December 31:

	2007	2006	2005
Components of net periodic benefit cost
Service cost	$            1,234	$            1,311	$            1,333
Interest cost	2,915	2,967	2,994
Amortization of prior service cost	(529)	(529)	(241)
Recognized net actuarial loss	912	1,450	1,273
Net periodic benefit cost	$            4,532	$            5,199	$            5,359
The Company’s share of net periodic benefit cost	$            3,910	$            4,501	$            4,947

Changes in the Company’s AOCI for the following periods:

	2007	2006	2005
Net actuarial loss arising during the year	$                   279	$              14,070	$                        -
Net actuarial loss recognized during the year	(912)
Prior service cost arising during the year		(5,080)	-
Prior service cost recognized during the year	529
Total recognized in AOCI	$                 (104)	$                8,990	$                        -
Total recognized in net periodic benefit cost and other comprehensive income	$                3,806	$             13,491	$               4,947

The estimated amounts that will be amortized from accumulated other comprehensive income into net periodic benefit costs in 2008 are as follows:

Actuarial loss	$ 916
Prior service credit	(529)
Transition (asset)/obligation	-
Total	$      387

128

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

9. RETIREMENT PLANS (CONTINUED)

Assumptions

Weighted average assumptions used to determine benefit obligations were as follows:

	Other  Benefits
	2007	2006	2005
Discount rate	6.35%	6.0%	5.8%

Weighted average assumptions used to determine net cost were as follows:

	Other  Benefits
	2007	2006	2005
Discount rate	6.0%	5.8%	6.2%

In order to measure the post-retirement benefit obligation for 2007, the Company assumed a 9% annual rate of increase in the per capita cost of covered health care benefits.  In addition, medical cost inflation is assumed to be 9.5% in 2008 and assumed to decrease gradually to 5.00% for 2013 and remain at that level thereafter.  Assumed healthcare cost trend rates have a significant effect on the amounts reported for the health care plans.  A one-percentage point change in assumed health care cost trend rates would have the following effect:

	1- Percentage-Point	1- Percentage-Point
	Increase	Decrease
Effect on Post retirement benefit obligation	$                   4,570	$                    (4,152)
Effect on total of service and interest cost	$                      397	$                       (372)

The Company has estimated the following future benefit payments for the years 2008 through 2017:

	Other Benefits	Expected Federal Subsidy
2008	$           3,146	$              236
2009	3,309	246
2010	3,474	252
2011	3,638	258
2012	3,768	260
2013 to 2017	$         20,479	$          1,226

129

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

10. FEDERAL INCOME TAXES

The Company adopted FIN 48 on January 1, 2007.  FIN 48 establishes a comprehensive reporting model which addresses how a business entity should recognize, measure, present and disclose uncertain tax positions that the entity has taken or plans to take on a tax return.

As a result of the implementation of FIN 48, the Company recognized a decrease of $5.2 million in the liability for UTBs and related net interest, which was accounted for as an increase to its January 1, 2007 balance of retained earnings.  The liability for UTBs related to permanent and temporary tax adjustments, exclusive of interest, was $63.0 million and $54.1 million at December 31, 2007 and January 1, 2007, respectively.  Of the $63.0 million, $6.4 million represents the amount of UTBs that, if recognized, would favorably affect the Company’s effective income tax rate in future periods, exclusive of any related interest.  In addition, consistent with the provisions of FIN 48, the Company reclassified $56.6 million of income taxes from deferred tax liabilities to accrued expenses and taxes at December 31, 2007.

The net increase in the tax liability for UTBs of $8.9 million since the date of adoption resulted from the following:

Balance at January 1, 2007	$	54,086
Gross increases related to tax positions in prior years		20,717
Gross decreases related to tax positions in prior years		(11,760)
Gross increases related to tax positions in current year		-
Settlements		-
Close of tax examinations/statutes of limitations		-
Balance at December 31, 2007	$	63,043

The Company has elected on a prospective basis, with the adoption of FIN 48, to recognize interest and penalties accrued related to UTBs in interest expense.  The Company had accrued $10.8 million of gross interest as of January 1, 2007.  During the year ended December 31, 2007, the Company recognized an additional $2.0 million in gross interest related to UTBs.  The Company has not accrued any penalties.

While the Company expects the amount of unrecognized tax liabilities to change in the next twelve months, it does not expect the change to have a significant impact on its results of operations or financial position.

The Company files federal income tax returns and income tax returns in various state and local jurisdictions.  With few exceptions, the Company is no longer subject to examinations by the tax authorities in these jurisdictions for tax years before 2001.  In August 2006, the IRS issued a Revenue Agent’s Report for the Company’s tax years 2001 and 2002.  The Company is currently at the Appeals Division of the IRS ("Appeals") with respect to the tax years 2001 and 2002.  In the first quarter of 2007, the IRS commenced an examination of the Company’s U.S. federal income tax returns for the tax years 2003 and 2004.  This examination is anticipated to be completed by August 1, 2008. While the final outcome of the appeal and ongoing tax examinations is not determinable, the Company does not believe that any adjustments would be material to its financial position.

130

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

10. FEDERAL INCOME TAXES (CONTINUED)

The Company will file a consolidated return with SLC -U.S. Ops Holdings for the year ended December 31, 2007 as the Company did for the years ended December 31, 2006 and 2005. The Company’s subsidiaries, INDY and SLNY, will be included as part of the consolidation for the year ended December 31, 2007.  For the years ended December 31, 2006 and 2005, INDY and SLNY filed stand-alone federal income tax returns.  Sun Life Vermont, a new subsidiary in 2007, will also be included as part of the consolidated return for the year ended December 31, 2007.  A summary of the components of income tax expense (benefit) in the consolidated statements of income for the years ended December 31 is as follows:

		2007		2006		2005
Income tax (benefit) expense:
Current	$	(108,526)	$	(5,792)	$	11,237
Deferred		84,668		4,180		28,852
Total income tax (benefit) expense	$	(23,858)	$	(1,612)	$	40,089

Federal income taxes attributable to the Company’s consolidated operations are different from the amounts determined by multiplying income before federal income taxes by the expected federal income tax rate at 35%. The Company's effective rate differed from the federal income tax rate as follows:

		2007		2006		2005
Expected federal income tax expense	$	407	$	26,838	$	60,210
Low income housing credit		(5,490)		(6,225)		(5,947)
Separate account dividend received deduction		(11,988)		(13,090)		(10,150)
Prior year adjustments/settlements		932		(8,396)		(2,802)
FIN 48 adjustments/settlements		(6,375)		-		-
Other items		(1,775)		(844)		(1,220)
Federal income tax (benefit) expense		(24,289)		(1,717)		40,091
State income tax expense (benefit)		431		105		(2)
Total income tax (benefit) expense	$	(23,858)	$	(1,612)	$	40,089

The deferred income tax asset (liability) represents the tax effects of temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and the amounts used for income tax purposes. The components of the Company's deferred tax assets and (liabilities) as of December 31 were as follows:

		2007		2006
Deferred tax assets:
Actuarial liabilities	$	110,617	$	128,848
Net operating loss		-		7,954
Investments, net		230,416		146,116
Total deferred tax assets		341,033		282,918
Deferred tax liabilities:
Deferred policy acquisition costs		(322,461)		(250,469)
Other		(2,627)		(28,852)
Total deferred tax liabilities		(325,088)		(279,321)
Net deferred tax asset	$	15,945	$	3,597

131

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

10. FEDERAL INCOME TAXES (CONTINUED)

The Company makes or receives payments under certain tax sharing agreements with SLC – U.S. Ops Holdings.  Under these agreements, such payments are determined based on the Company’s stand-alone taxable income (as if it were filing as a separate company) and based upon the SLC - U.S. Ops Holdings’ consolidated group’s overall taxable position.  Sun Life Vermont is subject to an adjustment in the amount payable or receivable under its Tax Allocation Agreement to the extent of a subsequent change in its stand-alone taxable income.  Sun Life Vermont is not required to pay SLC – U.S. Ops Holdings for changes in the consolidated federal tax liability that may result from changes in the timing of the utilization of Sun Life Vermont’s losses in the consolidated federal tax return.  The Company received income tax refunds of $16.2 million and $32.0 million in 2007 and 2005, respectively, and made income tax payments of $22.7 million in 2006.

11.  LIABILITY FOR UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSES

Activity in the liability for unpaid claims and claims adjustment expenses, which is related to the Company’s group life, group disability insurance, group dental and stop loss products is summarized below:

		2007	2006
Balance at January 1		$         36,689	$         33,141
Less reinsurance recoverable		(5,906)	(5,886)
Net balance at January 1		30,783	27,255
Incurred related to:
	Current year	96,377	26,644
	Prior years	(1,805)	(1,294)
Total incurred		94,572	25,350
Paid losses related to:
	Current year	(47,531)	(14,881)
	Prior years	(8,867)	(6,941)
Total paid		(56,398)	(21,822)
Balance at December 31		74,878	36,689
Less reinsurance recoverable		(5,921)	(5,906)
Net balance at December 31		$        68,957	$         30,783

The Company regularly updates its estimates of liabilities for unpaid claims and claims adjustment expenses as new information becomes available and events occur which may impact the resolution of unsettled claims.   Changes in prior estimates are recorded in results of operations in the year such changes are made.

As a result of changes in estimates of insured events in prior years, the liability for unpaid claims and claims adjustment expense decreased by $1.8 million and $1.3 million in 2007 and 2006, respectively.  The favorable development experienced in both years was driven mainly by better than expected loss experience in group life.

132

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

12.  LIABILITIES FOR CONTRACT GUARANTEES

The major provisions of AICPA SOP 03-1 that affect the Company require:

o Establishment of reserves primarily related to death benefit and income benefit guarantees provided under variable annuity contracts;

o Deferral of sales inducements that meet certain criteria, and amortization using the same method used for DAC; and,

o Reporting and measuring the Company’s interest in its separate accounts as investments.

The Company offers various guarantees to certain policyholders including a return of no less than (a) total deposits made on the contract adjusted for any customer withdrawals, (b) total deposits made on the contract adjusted for any customer withdrawals plus a minimum return, or (c) the highest contract value on a specified anniversary date minus any customer withdrawals following the contract anniversary.  These guarantees include benefits that are payable in the event of death, upon annuitization, or at specified dates during the accumulation period of an annuity.

The table below represents information regarding the Company’s variable annuity contracts with guarantees at December 31, 2007:

Benefit Type	Account Balance	Net Amount at Risk 1	Average Attained Age
Minimum Death	$          17,771,546	$         1,318,150	66.4
Minimum Income	$               343,853	$              43,233	60.3
Minimum Accumulation or Withdrawal	$            5,321,780	$                4,204	62.4

The table below represents information regarding the Company’s variable annuity contracts with guarantees at December 31, 2006:

Benefit Type	Account Balance	Net Amount at Risk 1	Average Attained Age
Minimum Death	$       16,848,818	$       1,612,783	66.4
Minimum Income	$            387,699	$            56,526	60.0
Minimum Accumulation or Withdrawal	$         3,068,060	$                   41	61.9

1Net amount at risk represents the difference between guaranteed benefits and account balance.

133

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

12.  LIABILITIES FOR CONTRACT GUARANTEES (CONTINUED)

The following roll-forward summarizes the change in reserve for the GMDBs and GMIBs for the year ended December 31, 2007:

	Guaranteed Minimum Death Benefit	Guaranteed Minimum Income Benefit	Total
Balance at January 1, 2007	$             39,923	$           1,448	$          41,371
Benefit Ratio Change / Assumption Changes	3,016	9,206	12,222
Incurred guaranteed benefits	24,841	704	25,545
Paid guaranteed benefits	(30,158)	(6,613)	(36,771)
Interest	2,051	72	2,123
Balance at December 31, 2007	$             39,673	$             4,817	$            44,490

The following roll-forward summarizes the change in reserve for the GMDBs and GMIBs for the year ended December 31, 2006:

	Guaranteed Minimum Death Benefit	Guaranteed Minimum Income Benefit	Total
Balance at January 1, 2006	$             41,749	$            3,000	$         44,749
Benefit Ratio Change / Assumption Changes	(6,594)	(925)	(7,519)
Incurred guaranteed benefits	51,255	383	51,638
Paid guaranteed benefits	(49,242)	(1,153)	(50,395)
Interest	2,755	143	2,898
Balance at December 31, 2006	$             39,923	$           1,448	$          41,371

134

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

12.  LIABILITIES FOR CONTRACT GUARANTEES (CONTINUED)

The liability for death and income benefit guarantees is established equal to a benefit ratio multiplied by the cumulative contract charges earned, plus accrued interest less contract benefit payments.  The benefit ratio is calculated as the estimated present value of all expected contract benefits divided by the present value of all expected contract charges.  The benefit ratio may be in excess of 100%.  For guarantees in the event of death, benefits represent the current guaranteed minimum death payments in excess of the current account balance.  For guarantees at annuitization, benefits represent the present value of the minimum guaranteed annuity benefits in excess of the current account balance.

Projected benefits and assessments used in determining the liability for contract guarantees are developed using models and stochastic scenarios that are also used in the development of estimated expected future gross profits.  Underlying assumptions for the liability related to income benefits include assumed future annuitization elections based upon factors such as eligibility conditions and the annuitant’s attained age.

The liability for guarantees is re-evaluated regularly, and adjustments are made to the liability balance through a charge or credit to policyholder benefits.

Guaranteed minimum accumulation benefits (“GMABs”) and withdrawal benefits (“GMWBs”) are considered to be derivatives under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," and are recorded at fair value through earnings.  The fair value of the embedded derivatives is calculated stochastically using risk neutral scenarios over a fifty-year projection.  Policyholder assumptions are based on experience studies and industry standards.  The net balance of GMABs and GMWBs constituted (a liability) an asset in the amount of $(37.4) million and $8.4 million at December 31, 2007 and 2006, respectively.

135

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

13. DEFERRED POLICY ACQUISITION COSTS (DAC)

The changes in DAC for the years ended December 31 were as follows:

	2007		2006
Balance at January 1	$	1,234,206	$	1,341,377
Acquisition costs deferred		356,087		264,648
Amortized to expense during the year		(169,799)		(391,585)
Adjustment for unrealized investment losses during the year		182,903		19,766
Balance at December 31	$	1,603,397	$	1,234,206

14. VALUE OF BUSINESS AND CUSTOMER RENEWALS ACQUIRED

The changes in VOBA and customer renewals acquired for the years ended December 31 were as follows:

	2007		2006
Balance at January 1	$	47,744	$	53,670
Amount capitalized due to acquisition of new business		23,854		-
Amortized to expense during the year		(19,322)		(7,597)
Adjustment for unrealized investment (gains) losses during the year		(470)		1,671
Balance at December 31	$	51,806	$	47,744

Additions to VOBA and customer renewals acquired were a result of the SLHIC to SLNY asset transfer, as described in Footnote 1.  VOBA transferred was $7.6 million and the value of customer renewals transferred was $16.2 million.

15. CONSOLIDATING FINANCIAL INFORMATION

The following consolidating financial statements are provided in compliance with Regulation S-X of the U.S. Securities and Exchange Commission (the “SEC”) and in accordance with SEC Rule 12h-5.

The Company’s wholly-owned subsidiary, SLNY, sells, among other products, combination fixed and variable annuity contracts (the “contracts”) in the State of New York.  These contracts contain a fixed investment option, where interest is paid at a guaranteed rate for a specified period of time, and withdrawals made before the end of the specified period may be subject to a market value adjustment that can increase or decrease the amount of the withdrawal proceeds (the “fixed investment option period”).  Effective September 27, 2007, the Company provided a full and unconditional guarantee (the “guarantee”) of SLNY’s obligation related to SLNY contracts’ fixed investment option period related to policies currently in-force or sold on or after September 30, 2007.  The guarantee relieves SLNY of its obligation to file annual, quarterly, and current reports with the SEC on Form 10-K, Form 10-Q and Form 8-K.

In the following presentation of consolidating financial statements, the term "SLUS as Parent" is used to denote the Company as a stand-alone entity, isolated from its subsidiaries and the term "Other Subs" is used to denote the Company's other subsidiaries, with the exception of SLNY.  All consolidating financial statements are presented in thousands.

136

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

15. CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

Consolidating Statements of Income

For the year ended December 31, 2007

	SLUS as Parent		SLNY		Other Subs		Elimination		Consolidated Company
Revenues
Premiums and annuity considerations	$	15,330	$	95,286	$	-	$	-	$	110,616
Net investment income		941,185		94,309		63,098		-		1,098,592
Net derivative loss		(185,682)		(3,967)		(3,475)		-		(193,124)
Net realized investment losses		(57,547)		(3,487)		(14)		-		(61,048)
Fee and other income		445,248		26,648		8,008		-		479,904
Subordinated notes early redemption premium		-		-		25,578		-		25,578
Total revenues		1,158,534		208,789		93,195		-		1,460,518
Benefits and Expenses
Interest credited		571,309		51,390		7,124		-		629,823
Interest expense		75,052		74		26,406		-		101,532
Policyowner benefits		155,903		69,309		4,273		-		229,485
Amortization of DAC and VOBA		165,666		19,921		3,534		-		189,121
Other operating expenses		238,810		37,061		7,944		-		283,815
Partnership capital securities early redemption payment		-		-		25,578		-		25,578
Total benefits and expenses		1,206,740		177,755		74,859		-		1,459,354
(Loss) income before income tax (benefit) expense		(48,206)		31,034		18,336		-		1,164
Income tax (benefit) expense		(40,222)		10,231		6,133		-		(23,858)
Equity in the net income of subsidiaries		33,006		-		1,811		(34,817)		-
Net income	$	25,022	$	20,803	$	14,014	$	(34,817)	$	25,022

137

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

15. CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

Consolidating Statements of Income

For the year ended December 31, 2006

	SLUS as Parent		SLNY		Other Subs		Elimination		Consolidated Company
Revenues
Premiums and annuity considerations	$	20,870	$	38,322	$	-	$	-	$	59,192
Net investment income		1,049,425		97,365		59,784		(493)		1,206,081
Net derivative income		8,596		-		-		493		9,089
Net realized investment losses		(38,327)		(6,081)		(103)		-		(44,511)
Fee and other income		375,144		21,083		2,395		-		398,622
Total revenues		1,415,708		150,689		62,076		-		1,628,473
Benefits and Expenses
Interest credited		573,178		56,379		3,848		-		633,405
Interest expense		79,637		-		51,157		8		130,802
Policyowner benefits		126,393		29,257		1,320		-		156,970
Amortization of DAC and VOBA		380,760		18,422		-		-		399,182
Other operating expenses		207,903		22,988		551		(8)		231,434
Total benefits and expenses		1,367,871		127,046		56,876		-		1,551,793
Income before income tax expense		47,837		23,643		5,200		-		76,680
Income tax (benefit) expense		(10,495)		7,410		1,473		-		(1,612)
Equity in the net income of subsidiaries		19,960		-		3,096		(23,056)		-
Net income	$	78,292	$	16,233	$	6,823	$	(23,056)	$	78,292

138

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

15. CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

Consolidating Statements of Income

For the year ended December 31, 2005

	SLUS as Parent		SLNY		Other Subs		Elimination		Consolidated Company
Revenues
Premiums and annuity considerations	$	19,735	$	32,247	$	-	$	-	$	51,982
Net investment income		958,397		94,264		59,599		269		1,112,529
Net derivative income		16,743		-		-		(269)		16,474
Net realized investment gains (losses)		20,924		(4,086)		87		-		16,925
Fee and other income		346,449		13,578		2,248		-		362,275
Total revenues		1,362,248		136,003		61,934		-		1,560,185
Benefits and Expenses
Interest credited		567,028		69,641		833		-		637,502
Interest expense		72,122		-		51,157		-		123,279
Policyowner benefits		161,350		25,663		-		-		187,013
Amortization of DAC and VOBA		234,330		9,491		-		-		243,821
Other operating expenses		172,753		23,489		301		-		196,543
Total benefits and expenses		1,207,583		128,284		52,291		-		1,388,158
Income before income tax expense, and minority interest share of loss		154,665		7,719		9,643		-		172,027
Income tax expense		34,757		2,278		3,054		-		40,089
Equity in the net income of subsidiaries		12,030		-		3,074		(15,104)		-
Minority interest share of loss		(1,214)		-		-		-		(1,214)
Net income	$	133,152	$	5,441	$	9,663	$	(15,104)	$	133,152

139

 SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

15. CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

Consolidating Balance Sheets at December 31, 2007

	SLUS as Parent		SLNY		Other Subs		Elimination		Consolidated Company
ASSETS
Investments
Available-for-sale fixed maturities at fair value	$	10,157,376	$	1,288,568	$	57,286	$	-	$	11,503,230
Trading fixed maturities at fair value		3,288,671		-		578,340		-		3,867,011
Investment in subsidiaries		559,851		-		-		(559,851)		-
Mortgage loans		2,146,286		170,205		1,850		-		2,318,341
Derivative instruments – receivable		609,261		-		-		-		609,261
Limited partnerships		164,464		-		-		-		164,464
Real estate		157,147		-		44,630		-		201,777
Policy loans		686,099		118		26,416		-		712,633
Other invested assets		499,538		69,138		-		-		568,676
Cash and cash equivalents		415,494		65,901		688,306		-		1,169,701
Total investments and cash		18,684,187		1,593,930		1,396,828		(559,851)		21,115,094
Accrued investment income		268,732		15,245		6,386		-		290,363
Deferred policy acquisition costs		1,469,976		118,126		15,295		-		1,603,397
Value of business and customer renewals acquired		35,735		16,071		-		-		51,806
Net deferred tax asset		171,899		-		-		(155,954)		15,945
Goodwill		658,051		45,167		5,611		-		708,829
Receivable for investments sold		2,796		615		71		-		3,482
Reinsurance receivable		1,937,814		123,214		648,221		-		2,709,249
Other assets		278,573		32,877		155,221		(154,672)		311,999
Separate account assets		23,996,463		929,008		71,132		-		24,996,603
Total assets	$	47,504,226	$	2,874,253	$	2,298,765	$	(870,477)	$	51,806,767
LIABILITIES
Contractholder deposit funds and other policy liabilities	$	16,361,329	$	1,285,259	$	615,981	$	-	$	18,262,569
Future contract and policy benefits		706,657		93,001		23,930		-		823,588
Payable for investments purchased		169,606		635		28,969		-		199,210
Accrued expenses and taxes		169,532		22,915		85,290		(154,672)		123,065
Deferred tax liability		-		1,045		154,909		(155,954)		-
Debt payable to affiliates		945,000		-		1,000,000		-		1,945,000
Reinsurance payable to affiliate		1,574,517		117,367		-		-		1,691,884
Derivative instruments – payable		446,508		-		132		-		446,640
Other liabilities		704,467		107,458		76,136		-		888,061
Separate account liabilities		23,996,463		929,008		71,132		-		24,996,603
Total liabilities		45,074,079		2,556,688		2,056,479		(310,626)		49,376,620
STOCKHOLDER’S EQUITY
Common stock	$	6,437	$	2,100	$	2,542	$	(4,642)	$	6,437
Additional paid-in capital		2,146,436		239,963		274,555		(514,518)		2,146,436
Accumulated other comprehensive loss		(92,403)		(11,924)		(1,333)		13,257		(92,403)
Retained earnings		369,677		87,426		(33,478)		(53,948)		369,677
Total stockholder’s equity		2,430,147		317,565		242,286		(559,851)		2,430,147
Total liabilities and stockholder’s equity	$	47,504,226	$	2,874,253	$	2,298,765	$	(870,477)	$	51,806,767

140

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

15. CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

Consolidating Balance Sheets at December 31, 2006

	SLUS as Parent		SLNY		Other Subs		Elimination		Consolidated Company
ASSETS
Investments
Available-for-sale fixed maturities at fair value	$	12,061,211	$	1,463,043	$	113,719	$	-	$	13,637,973
Trading fixed maturities at fair value		3,856,053		-		-		-		3,856,053
Subordinated note from affiliate held-to-maturity		-		-		600,000		-		600,000
Investment in subsidiaries		449,307		-		63,952		(513,259)		-
Mortgage loans		2,111,884		161,292		-		-		2,273,176
Derivative instruments – receivable		653,854		-		-		-		653,854
Limited partnerships		193,728		-		-		-		193,728
Real estate		157,281		-		29,610		-		186,891
Policy loans		672,553		139		36,934		-		709,626
Other invested assets		884,304		65,922		-		-		950,226
Cash and cash equivalents		513,190		54,231		10,659		-		578,080
Total investments and cash		21,553,365		1,744,627		854,874		(513,259)		23,639,607
Accrued investment income		266,141		15,125		9,952		-		291,218
Deferred policy acquisition costs		1,149,185		85,021		-		-		1,234,206
Value of business acquired		47,744		-		-		-		47,744
Net deferred tax asset		8,587		-		1,963		(6,953)		3,597
Goodwill		658,052		37,788		5,611		-		701,451
Receivable for investments sold		30,146		1,244		1,851		-		33,241
Reinsurance receivable		1,812,093		5,906		-		-		1,817,999
Other assets		136,406		15,146		1,678		-		153,230
Separate account assets		20,190,709		796,827		72,719		-		21,060,255
Total assets	$	45,852,428	$	2,701,684	$	948,648	$	(520,212)	$	48,982,548
LIABILITIES
Contractholder deposit funds and other policy liabilities	$	17,945,270	$	1,437,396	$	45,959	$	-	$	19,428,625
Future contract and policy benefits		696,012		54,100		-		-		750,112
Payable for investments purchased		210,668		5,735		2,062		-		218,465
Accrued expenses and taxes		141,607		-		213		2,875		144,695
Deferred tax liability		-		6,953		-		(6,953)		-
Debt payable to affiliates		1,325,000		-		-		-		1,325,000
Partnership capital securities		-		-		607,826		-		607,826
Reinsurance payable to affiliate		1,605,626		-		-		-		1,605,626
Derivative instruments – payable		160,504		-		-		-		160,504
Other liabilities		1,073,678		90,517		16,766		(2,875)		1,178,086
Separate account liabilities		20,190,709		796,827		72,719		-		21,060,255
Total liabilities		43,349,074		2,391,528		745,545		(6,953)		46,479,194
STOCKHOLDER’S EQUITY
Common stock	$	6,437	$	2,100	$	2,542	$	(4,642)	$	6,437
Additional paid-in capital		2,143,408		239,963		185,529		(425,492)		2,143,408
Accumulated other comprehensive  income		14,030		1,432		1,369		(2,801)		14,030
Retained earnings		339,479		66,661		13,663		(80,324)		339,479
Total stockholder’s equity		2,503,354		310,156		203,103		(513,259)		2,503,354
Total liabilities and stockholder’s equity	$	45,852,428	$	2,701,684	$	948,648	$	(520,212)	$	48,982,548

141

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

15. CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

Consolidating Statements of Cash Flow

For the year ended December 31, 2007

	SLUS as Parent		SLNY		Other Subs		Elimination		Consolidated Company
Cash Flows From Operating Activities:
Net income from operations	$	25,022	$	20,803	$	14,014	$	(34,817)	$	25,022
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of discount and premiums		38,661		1,782		225		-		40,668
Amortization of DAC, VOBA and SIA		165,666		19,921		3,534		-		189,121
Depreciation and amortization		6,467		164		829		-		7,460
Net loss on derivatives		124,290		3,970		3,243		-		131,503
Net realized losses on available-for-sale investments		57,547		3,487		14		-		61,048
Changes in fair value of trading investments		89,159		-		(761)		-		88,398
Net realized gains on trading investments		(3,438)		-		(1,217)		-		(4,655)
Net change in unrealized and undistributed gains in private equity limited partnerships		(23,027)		-		-		-		(23,027)
Interest credited to contractholder deposits		571,309		51,390		7,124		-		629,823
Deferred federal income taxes		(114,110)		290		157,186		-		43,366
Equity in net income of subsidiaries		(33,006)		-		(1,811)		34,817		-
Changes in assets and liabilities:
DAC and VOBA additions		(304,466)		(56,650)		(18,825)		-		(379,941)
Accrued investment income		(2,591)		(120)		3,566		-		855
Net reinsurance receivable/payable		127,619		59		(94,517)		-		33,161
Future contract and policy benefits		3,184		39,436		23,930		-		66,550
Dividends received from subsidiaries		63,995		-		-		(63,995)		-
Other, net		(122,356)		4,931		(16,931)		-		(134,356)
Purchases of trading fixed maturities, net of sales		475,340		-		(576,176)		-		(100,836)
Net cash provided by operating activities		1,145,265		89,463		(496,573)		(63,995)		674,160
Cash Flows From Investing Activities:
Sales, maturities and repayments of:
Available-for-sale fixed maturities		3,847,569		337,825		67,386		-		4,252,780
Mortgage loans		314,620		40,526		-		-		355,146
Other invested assets		669,930		24		960		(3,231)		667,683
Redemption of subordinated note from affiliate		-		-		600,000		-		600,000
Purchases of:
Available-for-sale fixed maturities		(2,366,255)		(205,932)		14,346		-		(2,557,841)
Mortgage loans		(348,256)		(49,460)		(1,850)		-		(399,566)
Real estate		(3,590)		-		(15,849)		-		(19,439)
Other invested assets		(57,864)		(3,231)		-		3,231		(57,864)
Net change in other investing activities		(365,012)		3,231		-		-		(361,781)
Net change in policy loans		(13,546)		21		10,518		-		(3,007)
Early redemption premium		-		-		25,578		-		25,578
Net cash provided by investing activities	$	1,677,596	$	123,004	$	701,089	$	-	$	2,501,689

Continued on next page

142

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

15. CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

Consolidating Statements of Cash Flow (continued)

For the year ended December 31, 2007

	SLUS as Parent		SLNY		Other Subs		Elimination		Consolidated Company
Cash Flows From Financing Activities:
Additions to contractholder deposit funds	$	1,725,614	$	180,702	$	18,468	$	-	$	1,924,784
Withdrawals from contractholder deposit funds		(4,132,822)		(388,199)		(12,384)		-		(4,533,405)
Repayments of debt		(380,000)		-		(600,000)		-		(980,000)
Issuance of debt		-		-		1,000,000		-		1,000,000
Dividends paid to parent		-		-		(63,995)		63,995		-
Early redemption payment		-		-		(25,578)		-		(25,578)
Additional capital contributed to subsidiaries		(156,620)		-		156,620		-		-
Other, net		23,271		6,700		-		-		29,971
Net cash used in financing activities		(2,920,557)		(200,797)		473,131		63,995		(2,584,228)
Net change in cash and cash equivalents		(97,696)		11,670		677,647		-		591,621
Cash and cash equivalents, beginning of period		513,190		54,231		10,659		-		578,080
Cash and cash equivalents, end of period	$	415,494	$	65,901	$	688,306	$	-	$	1,169,701

143

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

15. CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

Consolidating Statements of Cash Flow

For the year ended December 31, 2006

	SLUS as Parent		SLNY		Other Subs		Elimination		Consolidated Company
Cash Flows From Operating Activities:
Net income from operations	$	78,292	$	16,233	$	6,823	$	(23,056)	$	78,292
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Amortization of discount and premiums		53,995		3,956		801		-		58,752
Amortization of DAC and VOBA		380,760		18,422		-		-		399,182
Depreciation and amortization		4,008		-		600		-		4,608
Net gains on derivatives		(11,360)		-		-		(493)		(11,853)
Net realized losses on available-for-sale investments		38,328		6,081		102		-		44,511
Changes in fair value of trading investments		(15,235)		-		-		-		(15,235)
Net realized gains on trading investments		(373)		-		-		-		(373)
Net change in unrealized and undistributed gains in private equity limited partnerships		(29,120)		-		-		-		(29,120)
Interest credited to contractholder deposits		573,178		56,379		3,848		-		633,405
Deferred federal income taxes		(6,146)		10,193		133		-		4,180
Equity in net income of subsidiaries		(19,960)		-		(3,096)		23,056		-
Changes in assets and liabilities:
Deferred acquisition cost additions		(238,986)		(23,909)		-		-		(262,895)
Accrued investment income		(32,925)		3,275		(61)		-		(29,711)
Net reinsurance receivable/payable		77,083		(20)		-		-		77,063
Future contract and policy benefits		(9,725)		3,106		-		-		(6,619)
Dividends received from subsidiaries		8,000		-		-		(8,000)		-
Other, net		39,943		(24,855)		(1,313)		493		14,268
Purchases of trading fixed maturities, net of sales		(1,866,153)		-		-		-		(1,866,153)
Net cash (used in) provided by operating activities		(976,396)		68,861		7,837		(8,000)		(907,698)
Cash Flows From Investing Activities:
Sales, maturities and repayments of:
Available-for-sale fixed maturities		5,041,508		757,662		73,020		-		5,872,190
Mortgage loans		218,849		29,415		-		-		248,264
Other invested assets		184,646		-		-		-		184,646
Purchases of:
Available-for-sale fixed maturities		(3,380,467)		(549,218)		(72,559)		-		(4,002,244)
Mortgage loans		(734,307)		(46,285)		-		-		(780,592)
Real estate		(20,464)		-		(155)		-		(20,619)
Other invested assets		(423,635)		(65,858)		-		-		(489,493)
Net change in other investing activities		333,669		65,845		-		-		399,514
Net change in policy loans		(9,979)		49		2,073		-		(7,857)
Net cash provided by investing activities	$	1,209,820	$	191,610	$	2,379	$	-	$	1,403,809

Continued on next page

144

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

15. CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

Consolidating Statements of Cash Flow (continued)

For the year ended December 31, 2006

	SLUS as Parent		SLNY		Other Subs		Elimination		Consolidated Company
Cash Flows From Financing Activities:
Additions to contractholder deposit funds	$	3,395,794	$	121,837	$	-	$	2,507	$	3,520,138
Withdrawals from contractholder deposit funds		(3,301,631)		(382,617)		(3,596)		(2,507)		(3,690,351)
Issuance of debt		200,000		-		-		-		200,000
Dividends paid to parent		(300,000)		-		(8,000)		8,000		(300,000)
Additional capital contributed to subsidiaries		(265)		-		265		-		-
Other, net		4,528		-		-		-		4,528
Net cash provided by (used in) financing activities		(1,574)		(260,780)		(11,331)		8,000		(265,685)
Net change in cash and cash equivalents		231,850		(309)		(1,115)		-		230,426
Cash and cash equivalents, beginning of period		281,340		54,540		11,774		-		347,654
Cash and cash equivalents, end of period	$	513,190	$	54,231	$	10,659	$	-	$	578,080

145

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

15. CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

Consolidating Statements of Cash Flow

For the year ended December 31, 2005

	SLUS as Parent		SLNY		Other Subs		Elimination		Consolidated Company
Cash Flows From Operating Activities:
Net income from operations	$	133,152	$	5,441	$	9,663	$	(15,104)	$	133,152
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Minority interest in loss		(1,214)		-		-		-		(1,214)
Amortization of discount and premiums		63,251		7,224		882		-		71,357
Amortization of DAC and VOBA		234,330		9,491		-		-		243,821
Depreciation and amortization		3,338		-		647		-		3,985
Net (gains) losses on derivatives		(77,294)		-		-		269		(77,025)
Net realized (gain) loss on available-for-sale investments		(20,924)		4,086		(87)		-		(16,925)
Changes in fair value of trading investments		80,324		-		-		-		80,324
Net realized gains on trading		(11,162))		-		-		-		(11,162)
Net change in unrealized and undistributed gains in private equity limited partnerships		(48,244)		-		-		-		(48,244)
Interest credited to contractholder deposits		567,028		69,641		833		-		637,502
Deferred federal income taxes		22,860		(947)		134		-		22,047
Equity in net income of subsidiaries		(12,030)		-		(3,074)		15,104		-
Changes in assets and liabilities:
Deferred acquisition cost additions		(252,271)		(9,646)		-		-		(261,917)
Accrued investment income		17,191		844		(119)		-		17,916
Net reinsurance receivable/payable		85,381		495		-		-		85,876
Future contract and policy benefits		24,387		736		-		-		25,123
Other, net		25,350		29,109		(654)		(269)		53,536
Purchases of trading fixed maturities, net of sales		(651,921)		-		-		-		(651,921)
Net cash (used in) provided by operating activities		181,532		116,474		8,225		-		306,231
Cash Flows From Investing Activities:
Sales, maturities and repayments of:
Available-for-sale fixed maturities		4,955,938		673,665		55,405		-		5,685,008
Mortgage loans		109,854		7,584		-		-		117,438
Real estate		947		-		-		-		947
Other invested assets		483,700		-		-		-		483,700
Net cash from sale of subsidiary		17,040		-		-		-		17,040
Purchases of:
Available-for-sale fixed maturities		(4,642,052)		(568,813)		(58,346)		-		(5,269,211)
Mortgage loans		(374,931)		(15,445)		-		-		(390,376)
Real estate		(6,264)		-		(384)		-		(6,648)
Other invested assets		(171,539)		-		-		-		(171,539)
Net change in other investing activities		(239,910)		-		-		-		(239,910)
Net change in policy loans		(5,471)		(35)		42		-		(5,464)
Net change in short-term investments		(4,576)		-		-		-		(4,576)
Net cash provided by investing activities	$	122,736	$	96,956	$	(3,283)	$	-	$	216,409

Continued on next page

146

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

15. CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

Consolidating Statements of Cash Flow (continued)

For the year ended December 31, 2005

	SLUS as Parent		SLNY		Other Subs		Elimination		Consolidated Company
Cash Flows From Financing Activities:
Additions to contractholder deposit funds	$	2,663,596	$	53,495	$	-	$	3050	$	2,720,141
Withdrawals from contractholder deposit funds		(3,142,775)		(255,647)		(2,996)		(3050)		(3,404,468)
Issuance of debt		100,000		-		-		-		100,000
Dividends paid to parent		(150,600)		-		-		-		(150,600)
Additional capital contributed to subsidiaries		(340)		-		340		-		-
Other, net		6,992		-		-		-		6,992
Net cash provided by (used in) financing activities		(523,127)		(202,152)		(2,656)		-		(727,935)
Net change in cash and cash equivalents		(218,859)		11,278		2,286		-		(205,295)
Cash and cash equivalents, beginning of period		500,199		43,262		9,488		-		552,949
Cash and cash equivalents, end of period	$	281,340	$	54,540	$	11,774	$	-	$	347,654

147

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

16. SEGMENT INFORMATION

As described below, the Company conducts business principally in three operating segments and maintains a Corporate Segment to provide for the capital needs of the three operating segments and to engage in other financing related activities. Each segment is defined consistently with the way results are evaluated by the chief operating decision-maker.

Net investment income is allocated based on segmented assets by line of business.  Allocations of operating expenses among segments are made using both standard rates and actual expenses incurred.  Management evaluates the results of the operating segments on an after-tax basis.  The Company does not depend on one or a few customers, brokers or agents for a significant portion of its operations.

Effective January 1, 2006, the Company adopted a new capital allocation methodology for measurement of segment operating results to more closely align with rating agency standards.  The changes impact the amount of capital and income on capital that is allocated to the Wealth Management, Individual Protection and Group Protection Segments from the Corporate Segment.

Wealth Management

The Wealth Management Segment markets, sells and administers funding agreements, individual and group variable annuity products, individual and group fixed annuity products and other retirement benefit products.  These contracts may contain any of a number of features including variable or fixed interest rates and equity index options and may be denominated in foreign currencies.  The Company uses derivative instruments to manage the risks inherent in the contract options.  Additionally, the Company consolidates the CARS Trust as a component of the Wealth Management Segment.

Individual Protection

The Individual Protection Segment markets, sells and administers a variety of life insurance products sold to individuals and corporate owners of life insurance. The products include whole life, universal life and variable life products.

Group Protection

The Group Protection Segment markets, sells and administers group life, long-term disability, short-term disability, dental and stop loss insurance to small and mid-size employers in the State of New York, through the Company's subsidiary, SLNY.

Corporate

The Corporate Segment includes the unallocated capital of the Company, its debt financing, certain consolidated investments in VIEs, and items not otherwise attributable to the other segments.

148

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

16. SEGMENT INFORMATION (CONTINUED)

The following amounts pertain to the various business segments:

	Year ended December 31, 2007
	Wealth	Individual	Group
	Management	Protection	Protection	Corporate	Totals
Total revenues	$        1,087,817	$        184,315	$        97,657	$     90,729	$    1,460,518
Total expenditures	1,139,538	148,122	93,950	77,744	1,459,354
(Loss) income before income tax (benefit) expense	(51,721)	36,193	3,707	12,985	1,164
Net (loss) income	(19,734)	23,665	2,409	18,682	25,022
Total assets	$      39,855,777	$   10,767,117	$      121,096	$1,062,777	$  51,806,767
	Year ended December 31, 2006
	Wealth	Individual	Group
	Management	Protection	Protection	Corporate	Totals
Total revenues	$        1,386,626	$         101,447	$       39,833	$   100,567	$    1,628,473
Total expenditures	1,354,554	95,815	35,356	66,068	1,551,793
Income before income tax expense	32,072	5,632	4,477	34,499	76,680
Net income	39,857	3,801	2,910	31,724	78,292
Total assets	$      41,485,295	$     5,784,705	$       78,838	$1,633,710	$  48,982,548
	Year ended December 31, 2005
	Wealth	Individual	Group
	Management	Protection	Protection	Corporate	Totals
Total revenues	$        1,342,509	$           74,535	$         32,604	$   110,537	$    1,560,185
Total expenditures	1,220,198	70,991	32,333	64,636	1,388,158
Income before income tax expense and minority interest	122,311	3,544	271	45,901	172,027
Net income	93,570	2,443	176	36,963	133,152
Total assets	$      38,631,963	$      6,005,424	$         55,319	$1,314,140	$  46,006,846

149

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

17.  REGULATORY FINANCIAL INFORMATION

The Company and its insurance subsidiaries are required to file annual statements with state regulatory authorities prepared on a statutory accounting basis prescribed or permitted by such authorities.  For the years ended December 31, 2007, 2006 and 2005, there were no permitted practices followed.  Statutory surplus differs from stockholder's equity reported in accordance with GAAP primarily because policy acquisition costs are expensed when incurred, policy liabilities are based on different assumptions, investments are valued differently, post-retirement benefit costs are based on different assumptions, and deferred income taxes are calculated differently.  The Company’s statutory financials are not prepared on a consolidated basis.

At December 31, the Company and its insurance subsidiaries combined statutory capital and surplus and net income were as follows:

	Unaudited for the Years ended December 31,
	2007	2006	2005
Statutory capital and surplus	$       1,790,457	$       1,610,425	$       1,778,241
Statutory net (loss) income	(913,114)	123,305	140,827

150

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

18. DIVIDEND RESTRICTIONS

The Company’s and its insurance company subsidiaries’ ability to pay dividends is subject to certain statutory restrictions.  Delaware, New York, Rhode Island, and Vermont have enacted laws governing the payment of dividends to stockholders by domestic insurers.

Pursuant to Delaware's statute, the maximum amount of dividends and other distributions that a domestic insurer may pay in any twelve-month period without prior approval of the Delaware Commissioner of Insurance is limited to the greater of (i) ten percent of its statutory surplus as of the preceding December 31, or (ii) the individual company's statutory net gain from operations for the preceding calendar year.  Any dividends to be paid by an insurer from a source other than statutory surplus, whether or not in excess of the aforementioned threshold, would also require the prior approval of the Delaware Commissioner of Insurance.  The Company is permitted to pay dividends up to a maximum of $179.0 million in 2008 without prior approval from the Delaware Commissioner of Insurance.

In 2007, the Company did not pay any dividends to the Parent.  In 2006, the Company’s board of directors approved and the Company paid a $300.0 million dividend to the Parent.  In 2005, the Company’s board of directors approved and the Company paid a $200.0 million dividend to the Parent, consisting of $150.6 million in cash and $49.4 million in notes.

New York law permits a domestic stock life insurance company to distribute a dividend to its shareholders without prior notice to the New York Superintendent of Insurance, where the aggregate amount of such dividends in any calendar year does not exceed the lesser of: (i) ten percent of its surplus to policyholders as of the immediately preceding calendar year; or (ii) its net gain from operations for the immediately preceding calendar year, not including realized capital gains.  SLNY is permitted to pay dividends up to a maximum of $20.7 million in 2008 without prior approval from the New York Commissioner of Insurance.  No dividends were paid by SLNY during 2007, 2006 or 2005.

Rhode Island law requires prior regulatory approval for any dividend where the amount of such dividend paid during the preceding twelve-month period would exceed the lesser of (i) ten percent of the insurance company’s surplus as of the December 31 next preceding, or (ii) its net gain from operations, not including realized capital gains, for the immediately preceding calendar year, excluding pro rata distributions of any class of the insurance company’s own securities.  INDY is permitted to pay dividends up to a maximum of $2.3 million in 2008 without prior approval from the Rhode Island Commissioner of Insurance.  .No dividends were paid by INDY during 2007, 2006 or 2005.

The Company’s new Vermont domestic insurance company subsidiary, Sun Life Vermont, is permitted to pay dividends only to the extent that its surplus and capital exceeds specified risk-based capital levels.  Sun Life Vermont may declare and pay dividends or distributions with respect to its common stock from its capital and surplus, subject to the following: (i) its total adjusted capital will equal or exceed 200% of its company action level risk-based capital after giving effect to the dividend or distribution and (ii) notice of each dividend or distribution is provided to the Vermont regulator within five days following the payment of the dividend or distribution.  No dividends were paid by Sun Life Vermont during 2007.

151

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

19. COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The components of accumulated other comprehensive (loss) income as of December 31 were as follows:

	2007	2006	2005
Unrealized (losses) gains on available-for-sale securities	$     (317,402)	$         38,400	$          56,493
Changes in reserves due to unrealized (losses) gains on available-for-sale securities	(26,702)	(9,346)	(22,039)
Unrealized gains (losses) on pension and other postretirement plan adjustments	14,894	(2,332)	(2,834)
Changes in DAC due to unrealized (losses) gains on available-for-sale securities	189,687	(2,719)	(12,842)
Changes in VOBA due to unrealized (losses) gains on available-for-sale securities	-	470	(1,201)
Tax effect and other	47,120	(10,443)	1,683
Accumulated Other Comprehensive (Loss) Income	$     (92,403)	$          14,030	$         19,260

20. COMMITMENTS AND CONTINGENCIES

Regulation and Regulatory Developments

Under insurance guaranty fund laws in each state, the District of Columbia and Puerto Rico, insurers licensed to do business can be assessed by state insurance guaranty associations for certain obligations of insolvent insurance companies to policyholders and claimants.  Most of these laws do provide, however, that an assessment may be excused or deferred if it would threaten an insurer's solvency and further provide annual limits on such assessments.  Part of the assessments paid by the Company pursuant to these laws may be used as credits for a portion of the associated premium taxes.

Litigation, Income Taxes and Other Matters

In Revenue Ruling 2007-61, issued on September 25, 2007, the IRS announced its intention to issue regulations with respect to certain computational aspects of the dividends-received-deduction (the “DRD”) on separate account assets held in connection with variable annuity contracts.  Revenue Ruling 2006-61 suspended Revenue Ruling 2007-54, issued on August 16, 2007, that purported to change accepted industry and IRS interpretations of the statutes governing computational questions impacting the DRD.  New DRD regulations that the IRS proposes for issuance on this matter will be subject to public comment, at which time the insurance industry and other interested parties will have the opportunity to raise comments and questions about the content, scope, and application of new regulations.  The timing, substance, and effective date of the new regulations are unknown, but they could result in the elimination of some or all of the separate account DRD tax benefit that the Company ultimately receives.  For the year ended December 31, 2007, the Company recorded a benefit of $12.0 million related to the separate account DRD.

The Company is not aware of any contingent liabilities arising from litigation or other matters that could have a material effect upon the financial condition, results of operations or cash flows of the Company.

152

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(A Wholly-Owned Subsidiary of Sun Life of Canada (U.S.) Holdings, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

For the years ended December 31, 2007, 2006 and 2005

20. COMMITMENTS AND CONTINGENCIES (CONTINUED)

Indemnities

In the normal course of its business, the Company has entered into agreements that include indemnities in favor of third parties, such as contracts with advisors and consultants, outsourcing agreements, underwriting and agency agreements, information technology agreements, distribution agreements, and service agreements.  The Company has also agreed to indemnify its directors and certain of its officers and employees in accordance with the Company’s by-laws.  The Company believes any potential liability under these agreements is neither probable nor estimatable. Therefore, the Company has not recorded any associated liability.

Lease Commitments

The Company leases various facilities and equipment under operating leases with terms of up to six years. As of December 31, 2007, minimum future lease payments under such leases were as follows:

2008	$             1,377
2009	283
2010	45
Total	$             1,705

Total rental expense for the years ended December 31, 2007, 2006 and 2005 was $9.4 million, $7.6 million and $8.5 million, respectively.

The Company has four noncancelable sublease agreements that expire on March 31, 2008.  As of December 31, 2007, the minimum future lease payments under the sublease agreements was $0.3 million.

153

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholder of

Sun Life Assurance Company of Canada (U.S.)

Wellesley Hills, Massachusetts

We have audited the accompanying consolidated balance sheets of Sun Life Assurance Company of Canada (U.S.) and subsidiaries (the "Company") as of December 31, 2007 and 2006, and the related consolidated statements of income, comprehensive income, stockholder’s equity, and cash flows for each of the three years in the period ended December 31, 2007.  Our audits also included the financial statement schedules listed in the Index at Item 15.  These financial statements and financial statement schedules are the responsibility of the Company's management.  Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Sun Life Assurance Company of Canada (U.S.) and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, effective January 1, 2007, the Company adopted the provisions of the Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No.109”.

DELOITTE & TOUCHE LLP

/s/ Deloitte & Touche LLP

Boston, Massachusetts

March 27, 2008

154

PART C

ITEM 26.  EXHIBITS

A. Resolution of the Board of Directors of Sun Life Assurance Company of Canada (U.S.), dated December 3, 1985, authorizing the establishment of Sun Life of Canada (U.S.) Variable Account G (Incorporated herein by reference to the Registration Statement of Sun Life of Canada (U.S.) Variable Account F on Form N-4, File No. 333-37907, filed with the Securities and Exchange Commission on October 14, 1997.)

B. None.

C. Principal Underwriting Agreement (Incorporated herein by reference to Post-Effective Amendment No. 2 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form S-6, File No. 333-94359, filed with the Securities and Exchange Commission on March 31, 2000.)

D. (1)  Flexible Premium Variable Universal Life Insurance Policy (Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form N-6, File No. 333-111688, filed with the Securities and Exchange Commission on April 5, 2004.)

(2)  Additional Protection Benefit Rider (APB Rider) (Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form S-6, File No. 333-13087, filed with the Securities and Exchange Commission on January 22, 1997.)

E. (1)  Application for Flexible Premium Variable Universal Life Insurance Policy (Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form S-6, File No. 333-13087, filed with the Securities and Exchange Commission on January 22, 1997.)

(2)  Application for Flexible Premium Variable Universal Life Insurance Policy (Master Application) (Incorporated herein by reference to Post-Effective Amendment No. 7 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form S-6, File No. 333-13087, filed with the Securities and Exchange Commission on April 30, 2001.)

(3)  Application for Flexible Premium Variable Universal Life Insurance Policy (GI Application) (Incorporated herein by reference to Post-Effective Amendment No. 7 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form S-6, File No. 333-13087, filed with the Securities and Exchange Commission on April 30, 2001.)

(4)  Application for Flexible Premium Variable Universal Life Insurance Policy (Medical Application) (Incorporated herein by reference to Post-Effective Amendment No. 7 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form S-6, File No. 333-13087, filed with the Securities and Exchange Commission on April 30, 2001.)

(5)  Consent Form (Incorporated herein by reference to Post-Effective Amendment No. 7 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form S-6, File No. 333-13087, filed with the Securities and Exchange Commission on April 30, 2001.)

(6)  Application for Flexible Premium Variable Universal Life Insurance Policy (Expanded GI Application) (Incorporated herein by reference to Post-Effective Amendment No. 4 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form N-6, File No. 333-65048, filed with the Securities and Exchange Commission on October 1, 2002.)

F. (1)  Certificate of Incorporation of Sun Life Assurance Company of Canada (U.S.) (Incorporated herein by reference to the Depositor's Form 10-K, File No. 333-82824, filed with the Securities and Exchange Commission on March 29, 2004.)

(2)  Bylaws of the Depositor, as amended March 19, 2004 (Incorporated herein by reference to the Depositor's Form 10-K, File No. 333-82824, filed with the Securities and Exchange Commission on March 29, 2004.)

G. Specimen Reinsurance Contract. (Incorporated herein by reference to Post-Effective Amendment No. 4 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form N-6, File No. 333-65048, filed with the Securities and Exchange Commission on October 1, 2002.)

H.           (1)      Participation Agreement, dated February 17, 1998, by and among AIM Variable Insurance Funds, Inc., AIM Distributors, Inc., Sun Life Assurance Company of Canada (U.S.), and Clarendon Insurance Agency, Inc. (Incorporated herein by reference to Post-Effective Amendment No. 1 to the Registration Statement of Sun Life (N.Y.) Variable Account C on Form N-4, File No. 333-119151, filed with the Securities and Exchange Commission on February 3, 2000.)

(2)      Amended and Restated Participation Agreement, dated December 13, 2004, by and among Sun Capital Advisers Trust, Sun Capital Advisers, Inc., Sun Life Insurance and Annuity Company of New York and Sun Life Assurance Company of Canada (U.S.) (Incorporated herein by reference to Post-Effective Amendment No. 1 to the Registration Statement of Sun Life (N.Y.) Variable Account C on Form N-4, File No. 333-119151, filed with the Securities and Exchange Commission on April 28, 2005.)

(3)      Amended and Restated Participation Agreement, dated September 1, 2004, by and among Sun Life Assurance Company of Canada (U.S.), Variable Insurance Products Fund and Fidelity Distributors Corporation (Incorporated herein by reference to Post-Effective Amendment No. 1 to the Registration Statement of Sun Life (N.Y.) Variable Account C on Form N-4, File No. 333-119151, filed with the Securities and Exchange Commission on April 28, 2005.)

(4)      Participation Agreement, dated September 16, 2002, by and among the Franklin Templeton Variable Insurance Products Trust, Franklin Templeton Distributors, Inc., Sun Life Insurance and Annuity Company of New York and Sun Life Assurance Company of Canada (U.S.) (Incorporated herein by reference to the Registration Statement of KBL Variable Account A on Form N-4, File No. 333-102278, filed with the Securities and Exchange Commission on December 31, 2002.)

(5)      Participation Agreement, dated February 17, 1998, by and among Sun Life Assurance Company of Canada (U.S.) and Lord, Abbett & Co. (Incorporated herein by reference to Post-Effective Amendment No. 8 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form S-6, File No. 333-13087, filed with the Securities and Exchange Commission on April 26, 2002.)

(6)       Amended and Restated Participation Agreement, dated November 6, 2002, by and among MFS/Sun Life Series Trust, Sun Life Insurance and Annuity Company of New York, Sun Life Assurance Company of Canada (U.S.), and Massachusetts Financial Services Company (Incorporated herein by reference to Post-Effective Amendment No. 3 to the Registration Statement of Sun Life (N.Y.) Variable Account C on Form N-4, File No. 333-107983, filed with the Securities and Exchange Commission on May 28, 2004.)

(7)      Amended and Restated Participation Agreement, dated May 1, 2004, by and among Sun Life Assurance Company of Canada (U.S.), Sun Life Insurance and Annuity Company of New York, Dreyfus Variable Investment Fund, The Dreyfus Socially Responsible Growth Fund, Inc. and Dreyfus Life and Annuity Index Fund, Inc. (Incorporated herein by reference to Post-Effective Amendment No. 4 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-100831, filed with the Securities and Exchange Commission on April 29, 2005.)

(8)      Participation Agreement, dated July 15, 2002, by and among Sun Life Assurance Company of Canada (U.S.), Deutsche Asset Management VIT Funds and Deutsche Asset Management, Inc. (Incorporated herein by reference to Post-Effective Amendment No. 2 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form S-6, File No. 333-65048, filed with the Securities and Exchange Commission on July 3, 2002.)

(9) Participation Agreement, dated September 12, 2002, by and among Sun Life Assurance Company of Canada (U.S.), Sun Life Insurance and Annuity Company of New York, PIMCO Variable Insurance Trust and PIMCO Funds Distributors LLC. (Incorporated herein by reference to Post-Effective Amendment No. 3 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-59662, filed with the Securities and Exchange Commission on February 26, 2003.)

(10) Amended and Restated Participation Agreement, dated August 1, 2004, by and among Sun Life Assurance Company of Canada (U.S.), Sun Life Insurance and Annuity Company of New York, T. Rowe Price Equity Series, Inc. and T. Rowe Price Investment Services, Inc. (Incorporated herein by reference to Post-Effective Amendment No. 5 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form S-6, File No. 333-13087, filed with the Securities and Exchange Commission on April 29, 1999.)

(11) Participation Agreement, dated August 6, 2004, by and among Sun Life Assurance Company of Canada (U.S.), Sun Life Insurance and Annuity Company of New York, Delaware VIP Trust, Delaware Management Company and Delaware Distributors, LP. (Incorporated herein by reference to Post-Effective Amendment No. 4 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-100831, filed with the Securities and Exchange Commission on April 29, 2005.)

(12) Participation Agreement, dated August 6, 2004, by and among Sun Life Insurance and Annuity Company of New York, Van Kampen Life Investments Trust, Van Kampen Funds Inc., Van Kampen Asset Management. (Incorporated herein by reference to Post-Effective Amendment No. 4 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-100831, filed with the Securities and Exchange Commission on April 29, 2005).

(13) Participation Agreement, dated December 31, 2002, by and among Oppenheimer Variable Account Funds, OppenheimerFunds, Inc. and Sun Life Assurance Company of Canada (U.S.) (Incorporated herein by reference to Post-Effective Amendment No. 4 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-100831, filed with the Securities and Exchange Commission on April 29, 2005).

(14) Participation Agreement, dated February 17, 1998, by and among Sun Life Assurance Company of Canada (U.S.), The Alger American Fund and Fred Alger and Company, Incorporated. (Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form S-6, File No. 333-68601, filed with the Securities and Exchange Commission on April 27, 1999.)

(15)    Participation Agreement, dated May 1, 2004, by and among Sun Life Assurance Company of Canada (U.S.), Scudder Variable Series II, Scudder Distributors, Inc. and Deutsche Investment Management Americas Inc. (Incorporated herein by reference to Post-Effective Amendment No. 4 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account I on Form N-6, File No. 333-100831, filed with the Securities and Exchange Commission on April 29, 2005).

(16)   Participation Agreement, dated May 13, 2004, by and among Sun Life Assurance Company of Canada (U.S.), Merrill Lynch Variable Series Funds, Inc., Merrill Lynch Investment Managers, L.P. and FAM Distributors, Inc. (Incorporated herein by reference to Post-Effective Amendment No. 2 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form N-6, File No. 333-111688, filed with the Securities and Exchange Commission on December 30, 2005.)

(17)    Participation Agreement, dated December 1, 2004, by and among Wanger Advisors Trust, Columbia Funds Distributor, Inc., Sun Life Assurance Company of Canada (U.S.) and Sun Life Insurance and Annuity Company of New York.  (Incorporated herein by reference to the Registration Statement of Sun Life (N.Y.) Variable Account J on Form N-6, File No.333-136435, filed with the Securities and Exchange Commission on August 9, 2006.)

(18)    Participation Agreement, dated November 16, 2005, by and among Janus Aspen Series, Janus Distributors LLC and Sun Life Assurance Company of Canada (U.S.). (Incorporated herein by reference to the Registration Statement of Sun Life (N.Y.) Variable Account J on Form N-6, File No. 333-136435, filed with the Securities and Exchange Commission on

August 9, 2006.)

(19)    Participation Agreement, dated September 1, 2005, by and among Sun Life Assurance Company of Canada (U.S.), Royce Capital Fund and Royce & Associates, LLC. (Incorporated herein by reference to the Registration Statement of Sun Life (N.Y.) Variable Account J on Form N-6, File No. 333-136433, filed with the Securities and Exchange Commission on August 9, 2006.)

(20)   Participation Agreement, dated September 1, 2002, by and among Sun Life Assurance Company of Canada (U.S.), Clarendon Insurance Agency, Inc., Alliance Capital Management L.P. and Alliance Fund Distributors, Inc. (Incorporated herein by reference to Post-Effective Amendment No. 7 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account F on Form N-4, File No. 333-82957, filed with the Securities and Exchange Commission on July 27, 2001.)

(21)   Participation Agreement, dated May 1, 2004, by and among Sun Life Assurance Company of Canada (U.S.), The Universal Institutional Funds, Inc., Morgan Stanley & Co. Incorporated and Morgan Stanley Investment Management Inc. (Incorporated herein by reference to Post-Effective Amendment 5 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form N-6, File No. 333-111688, filed with the Securities and Exchange Commission on April 27, 2007.)

(22)   Participation Agreement, dated April 1, 2007, by and among Sun Life Assurance Company of Canada (U.S.), Sun Life Insurance and Annuity Company of New York, Independence Life and Annuity Company, Columbia Funds Variable Insurance Trust I, Columbia Management Advisors, LLC and Columbia Management Distributors, Inc. (Incorporated herein by reference to Post-Effective Amendment 5 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form N-6, File No. 333-111688, filed with the Securities and Exchange Commission on April 27, 2007.)

I. Third Party Administration Agreement between Andesa TPA, Inc. and Sun Life Assurance Company of Canada. (Incorporated herein by reference to Post-Effective Amendment No. 4 to the Registration Statement of Sun Life of Canada (U.S.) Variable Account G on Form N-6, File No. 333-65048, filed with the Securities and Exchange Commission on October 1, 2002.)

J. (1) Powers of Attorney.

(2) Resolution of the Board of Directors of the Depositor dated July 24, 2003, authorizing the use of Powers of Attorney for Officer signatures. (Incorporated herein by reference to the Registration Statement of Keyport Variable Account A on Form N-4, File No. 333-112506, filed with the Securities and Exchange Commission on February 5, 2004.)

K.           Legal Opinion.

L.           None.

M.           None.

N.           Consent of Independent Registered Public Accounting Firm.

O.           None.

P.           None.

Q.           None.

ITEM 27.  DIRECTORS AND OFFICERS OF THE DEPOSITOR

Name and Principal Business Address Positions and Offices With Depositor

Thomas A. Bogart Sun Life Assurance Company of Canada 150 King Street West Toronto, ON  M5H 1J9	Director and Chairman
Ronald H. Friesen Sun Life Assurance Company of Canada (U.S.) One Sun Life Executive Park Wellesley Hills, MA  02481	Director and Senior Vice President and Chief Financial Officer and Treasurer
Scott M. Davis Sun Life Assurance Company of Canada (U.S.) One Sun Life Executive Park Wellesley Hills, MA  02481	Director and Senior Vice President and General Counsel
Richard P. McKenney Sun Life Assurance Company of Canada 150 King Street West Toronto, Ontario Canada M5H 1J9	Director
Mary M. Fay Sun Life Assurance Company of Canada (U.S.) One Sun Life Executive Park Wellesley Hills, MA  02481	Director and Senior Vice President and General Manager, Annuities
Robert C. Salipante Sun Life Assurance Company of Canada (U.S.) One Sun Life Executive Park Wellesley Hills, MA 02481	Director and President
Michele G. Van Leer Sun Life Assurance Company of Canada (U.S.) One Sun Life Executive Park Wellesley Hills, MA 02481	Senior Vice President and General Manager, Individual Insurance
James M.A. Anderson Sun Life Assurance Company of Canada 150 King Street West Toronto Ontario Canada  M5H 1J9	Executive Vice President and Chief Investment Officer
Keith Gubbay Sun Life Assurance Company of Canada  (U.S.) One Sun Life Executive Park Wellesley Hills, MA  02481	Senior Vice President and Chief Actuary
Michael S. Bloom Sun Life Assurance Company of Canada (U.S.) One Sun Life Executive Park Wellesley Hills, MA 02481	Assistant Vice President and Senior Counsel and Secretary
Michael K. Moran Sun Life Assurance Company of Canada (U.S.) One Sun Life Executive Park Wellesley Hills, MA 02481	Vice President and Chief Accounting Officer
John R. Wright Sun Life Assurance Company of Canada (U.S.) One Sun Life Executive Park Wellesley Hills, MA 02481	Executive Vice President, Sun Life Financial U.S. Operations
Michael E. Shunney Sun Life Assurance Company of Canada (U.S.) One Sun Life Executive Park Wellesley Hills, MA 02481	Senior Vice President and General Manager, Sun Life Financial Distribution Group

ITEM 28.  PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR THE REGISTRANT

No person is directly or indirectly controlled by the Registrant.  The Registrant is a separate account of Sun Life Assurance Company of Canada (U.S.), which is ultimately controlled by Sun Life Financial..

The organization chart of Sun Life Financial is incorporated by reference to Post-Effective Amendment No. 25 to the Registration Statement on Form N-6 of Sun Life of Canada (U.S.) Variable Account F, File No. 333-83516, filed February 12, 2008.

None of the companies listed in such organization chart is a subsidiary of the Registrant; therefore, the only financial statements being filed are those of Sun Life Assurance Company of Canada (U.S.).

ITEM 29.  INDEMNIFICATION

Pursuant to Section 145 of the Delaware Corporation Law, Article 8 of the By-laws of Sun Life Assurance Company of Canada (U.S.) provides for the indemnification of directors, officers and employees of Sun Life Assurance Company of Canada (U.S.).  Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Sun Life Assurance Company of Canada (U.S.) pursuant to the certificate of incorporation, by-laws, or otherwise, Sun Life (U.S.) 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 Sun Life (U.S.) of expenses incurred or paid by a director, officer, controlling person of Sun Life (U.S.) 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, Sun Life (U.S.) will submit to a court of appropriate jurisdiction the question whether such indemnification by them is against public policy as expressed in the Act, unless in the opinion of their counsel the matter has been settled by controlling precedent, and will be governed by the final adjudication of such issue.

ITEM 30.  PRINCIPAL UNDERWRITERS

Clarendon Insurance Agency, Inc., which is a wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.), acts as general distributor for the Registrant, Sun Life of Canada (U.S.) Variable Accounts C, D, E, F, I and K, Keyport Variable Account A, KMA Variable Account, Keyport Variable Account I, KBL Variable Account A, KBL Variable Annuity Account, Sun Life (N.Y.) Variable Accounts A, B, C, D, J and N, and Money Market Variable Account, High Yield Variable Account, Capital Appreciation Variable Account, Government Securities Variable Account, World Governments Variable Account and Total Return Variable Account.

Name and Principal	Position and Offices
Business Address*	with Underwriter
James J. Cahill	President
Scott M. Davis	Director
Michele G. Van Leer	Director
Mary M. Fay	Director
Ann B. Teixeira	Assistant Vice President, Compliance
Michael S. Bloom	Secretary
Kathleen T. Baron	Chief Compliance Officer
Michael L. Gentile	Vice President
William T. Evers	Assistant Vice President and Senior Counsel
Jane F. Jette	Financial/Operations Principal and Treasurer
Alyssa M. Gair	Assistant Secretary
Michelle D’Albero	Counsel

* The principal business address of all directors and officers of the principal underwriter is One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481.

ITEM 31.  LOCATION OF ACCOUNTS AND RECORDS

Accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder are maintained, in whole or in part, by Sun Life Assurance Company of Canada (U.S.) at its offices at One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481 or at the offices of Clarendon Insurance Agency, Inc., at One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481.

ITEM 32.  MANAGEMENT SERVICES

Not applicable.

ITEM 33.  FEE REPRESENTATION

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.).

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SIGNATURES

As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements of Securities Act Rule 485(b) for effectiveness of this Post-Effective Amendment to the Registration Statement and has caused this Post-Effective Amendment to the Registration Statement to be signed on its behalf, in the Town of Wellesley Hills, and Commonwealth of Massachusetts on this 24th day of April, 2008.

SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT G

(Registrant)

SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)

(Depositor)

By: /s/ Robert C. Salipante*

Robert C. Salipante

President

*By:	/s/ Sandra M. DaDalt
	Sandra M. DaDalt
	Assistant Vice President & Senior Counsel

As required by the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities with the Depositor, Sun Life Assurance Company of Canada (U.S.), and on the dates indicated.

SIGNATURE	TITLE	DATE
/s/ Robert C. Salipante*	Director and President	April 24, 2008
Robert C. Salipante	(Principal Executive Officer)
/s/ Ronald H. Friesen*	Director and Senior Vice President and Chief Financial Officer and Treasurer	April 24, 2008
Ronald H. Friesen	(Principal Financial Officer)
/s/ Michael K. Moran*	Vice President and Chief Accounting Officer	April 24, 2008
Michael K. Moran
	(Principal Accounting Officer)
*By: /s/ Sandra M. DaDalt	Attorney-in-Fact for:	April 24, 2008
Sandra M. DaDalt
	Richard P. McKenney, Director
	Thomas A. Bogart, Director
	Scott M. Davis, Director
	Mary M. Fay, Director

*Sandra M. DaDalt has signed this document on the indicated date on behalf of the above Directors and Officers for the Depositor pursuant to powers or attorney duly executed by such persons and a resolution of the Board of Directors authorizing use of powers of attorney for Officer signatures. Resolution of the Board of Directors is incorporated herein by reference to the Registration Statement of Keyport Variable Account A on Form N-4, File No. 333-112506, filed with the Securities and Exchange Commission on February 5, 2004.)  Powers of attorney are enclosed herein.

154

EXHIBIT INDEX

J1	Powers of Attorney
K	Legal Opinion
N	Consent of Independent Registered Public Accounting Firm
	Representation of Counsel Pursuant to Rule 485(b)

154