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(SUNLIFE FINANCIAL LOGO)





Sun Life Financial Services of Canada Inc.



Renewal Annual Information Form

For the Year Ended December 31, 2002









May 15, 2003





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Table of Contents

|                                            |  |  |    | 
|------------------------------------------- |  |  | -- | 
|CORPORATE STRUCTURE                         |  |  | 2  | 
|GENERAL DEVELOPMENT OF THE BUSINESS         |  |  | 3  | 
|BUSINESS OF SUN LIFE FINANCIAL              |  |  | 5  | 
|SELECTED CONSOLIDATED FINANCIAL INFORMATION |  |  | 13 | 
|MANAGEMENTS DISCUSSION AND ANALYSIS        |  |  | 13 | 
|MARKET FOR SECURITIES                       |  |  | 13 | 
|DIRECTORS AND EXECUTIVE OFFICERS            |  |  | 14 | 
|REGULATORY MATTERS                          |  |  | 16 | 
|RISK FACTORS                                |  |  | 25 | 
|ADDITIONAL INFORMATION                      |  |  | 30 | 

Presentation of Information

Sun Life Financial Services of Canada Inc. (SLF Inc.) became the
publicly traded holding company of Sun Life Assurance Company of
Canada (Sun Life Assurance) on the conversion of Sun Life Assurance
from a mutual insurance company to an insurance company with share
capital on March 22, 2000. In this Annual Information Form (AIF),
the term Sun Life Financial refers, at all times after the
demutualization, to SLF Inc. and its consolidated subsidiaries and,
at all times prior to the demutualization, to Sun Life Assurance and
its consolidated subsidiaries.

Unless otherwise indicated, all information in this AIF is presented
as at and for the year ended December 31, 2002 and amounts are
expressed in Canadian dollars. Financial information is presented in
accordance with Canadian generally accepted accounting principles
(GAAP) as applied to life insurance companies in Canada, including
the accounting requirements of the Office of the Superintendent of
Financial Institutions.

Documents Incorporated by Reference

The following documents filed with the applicable securities
regulatory authorities in Canada are incorporated by reference into
this AIF: (i) SLF Inc.s 2002 Annual Report (the Annual Report),
excluding the information provided on pages 1 through 14 and the
sections entitled Six Year Summary and Eleven-Year Summary, and
(ii) the information, regarding those directors of SLF Inc. who are
identified in this AIF under Directors and Executive Officers,
located at pages 6 through 10 of SLF Inc.s management information
circular dated April 17, 2003 in connection with the 2003 meeting of
SLF Inc.s shareholders.

Forward-looking Statements

This AIF includes forward-looking statements with respect to Sun Life
Financials objectives, including its strategies and expectations of
financial performance. These statements involve risks and
uncertainties and actual results may differ materially from those
expressed or implied in these forward-looking statements. Factors
that may cause actual results to differ materially from Sun Life
Financials expectations include but are not limited to, general
economic and market conditions including interest rates, legislative
and regulatory changes, industry competition, technological
developments and other factors discussed under Risk Factors. The
reader is therefore cautioned against reliance on these
forward-looking statements.





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CORPORATE STRUCTURE

Incorporation

Sun Life Financial Services of Canada Inc. (SLF Inc.) was incorporated
under the Insurance Companies Act(Canada) (the Insurance Act) on August 5,
1999. On the completion of the demutualization of Sun Life Assurance Company of
Canada (Sun Life Assurance) on March 22, 2000, SLF Inc. became the holding
company which holds directly all the outstanding shares of Sun Life Assurance.

Sun Life Assurance was incorporated as a stock life company by a Special
Act of Parliament of Canada in 1865. Sun Life Assurance was converted into a
mutual company through a process that was completed in 1962 under the
provisions of the Canadian and British Insurance Companies Act, R.S.C 1952, c.
31. The Special Act of Sun Life Assurance, as amended, was replaced in 1992 by
amending letters patent issued under the Insurance Act. Sun Life Assurance was
converted on its demutualization from a mutual insurance company to a stock
insurance company pursuant to letters patent of conversion issued under the
Insurance Act on March 22, 2000. On May 29, 2002, SLF Inc. acquired Clarica
Life Insurance Company (Clarica) which, on December 31, 2002, was amalgamated
with SLF Inc.s wholly-owned subsidiary Sun Life Assurance. The amalgamated
company operates under the legal name of Sun Life Assurance Company of Canada.

Sun Life Financial traces its roots in Canada back to 1865, in the United
States to 1895, in the United Kingdom to 1893 and in Asia to 1892. SLF Inc.s
corporate office is located at Sun Life Tower, 150 King Street West, Toronto,
Ontario, Canada M5H 1J9. Sun Life Financials principal office in Canada is
located at 227 King Street South, Waterloo, Ontario, Canada, N2C 4C5, its
principal office in the United States is located at One Sun Life Executive
Park, Wellesley Hills, Massachusetts, U.S.A. 02481, its principal office in the
United Kingdom is located at Basing View, Basingstoke, United Kingdom RG21 4DZ
and its regional headquarters for Asia are located at Two Pacific Place, 88
Queensway, Hong Kong, China.

Principal Subsidiaries

Sun Life Financial offers wealth management and protection products and
services (as described under Business of Sun Life Financial) through direct
and indirect subsidiaries in Canada, the United States, the United Kingdom,
Hong Kong, the Philippines, India, China and Bermuda. The corporate structure
of SLF Inc., including its principal direct and indirect subsidiaries (with the
jurisdiction of incorporation of each indicated in italics), is shown below.
Unless otherwise indicated, all principal subsidiaries are 100% owned.

(CHART)

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GENERAL DEVELOPMENT OF THE BUSINESS

Overview

Sun Life Financial has experienced significant growth during the period
between 1997 and 2002. Both assets under management and revenue experienced a
compound annual growth rate of 14%. Sun Life Financials growth strategy is to
balance the higher long-term growth prospects of wealth management with the
stability of protection earnings.

The recent growth of Sun Life Financial reflects several trends that have
generally impacted the financial services industry. The first trend is the
maturing of the protection market in North America. In Canada and the United
States, Sun Life Financial has been shifting its focus towards universal life
and other non-participating products as a result of increasing demands for
these products. In Asia, Sun Life Financial has been focusing on emerging
markets offering significant long-term growth opportunities.

The second trend has been the growing need for wealth accumulation
products, including annuities, group pensions and mutual funds, driven by the
increasing concern of individuals outliving their assets. Sun Life Financial
has benefited from this trend towards wealth management by being a strong,
well-established provider of these products in Canada and the United States.
Sun Life Financial is also expanding its wealth management operations in the
emerging markets including the Philippines and India.

Acquisitions and Dispositions

Sun Life Financial maintains an ongoing program of assessing its
businesses and corporate strategies in order to optimize the use of capital and
enhance shareholders value. This program has resulted in several significant
acquisitions and dispositions in 2002. The financial terms of these
transactions are described in detail in Note 4 to SLF Inc.s Consolidated
Financial Statements on pages 71 through 73 of the Annual Report.

On May 29, 2002, SLF Inc. acquired Clarica, which was a leading provider
of insurance and investment products in the Canadian market. With this
acquisition, Sun Life Financial extended its leadership position in most of its
Canadian markets of strategic significance and became one of the largest
publicly traded North American life insurance organizations measured by market
capitalization. The acquisition created a stronger, Canadian-based
international financial services organization with enhanced products, expanded
distribution channels, greater management depth and lower cost structures.

On December 31, 2002, Clarica was amalgamated with SLF Inc.s wholly-owned
subsidiary Sun Life Assurance. The amalgamated company operates under the legal
name of Sun Life Assurance Company of Canada and continues to market retail
insurance and wealth management products under the Clarica brand in Canada. The
amalgamation has significantly simplified business operations and is expected
to reduce operating costs over time.

The Clarica acquisition was completed through an all-share transaction
pursuant to which holders of Clarica common shares received 1.5135 common
shares of SLF Inc. for each Clarica common share held. As a result,
approximately 185 million common shares of SLF Inc. were issued at an ascribed
price of $33.88 per share. Including the Clarica common shares that were owned
by Sun Life Financial at the date of acquisition, the Clarica transaction was
valued at $6.9 billion for accounting purposes.

On July 25, 2002, Sun Life Financial acquired a 30% equity interest in CI
Fund Management Inc. (CI) in exchange for Sun Life Financials Canadian
mutual fund subsidiaries, Spectrum Investment Management Limited (Spectrum)
and Clarica Diversico Ltd. (Diversico). The transaction also included a
strategic distribution agreement giving CI access to Sun Life Financials
Canadian direct sales force of more than 4,200 independent career advisors.

With the CI transaction, Sun Life Financial acquired a strategic stake in
a top tier player with requisite scale in the Canadian mutual fund industry. CI
is a premier Canadian money manager with top-ranked investment expertise and
strong brand recognition. As a result of this transaction, it became the
fourth-largest mutual fund company in Canada based on long-term assets under
management. As at December 31, 2002, CI had $33.8 billion of assets under
management, including approximately $25.6 billion of long-term mutual fund
assets.

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As a result of this transaction, Sun Life Financial acquired approximately
71 million common shares of CI valued at $9.15 per share at closing on July 25,
2002. These common shares, together with those owned by Sun Life Financial at
closing, represent a 31% economic interest in CI.

On March 20, 2003, Sun Life Financial further increased its ownership
interest in CI by issuing approximately 2.1 million common shares of SLF Inc.
in exchange for approximately 5.5 million common shares of CI. As a result of
this transaction, Sun Life Financial now owns approximately 34 per cent of the
outstanding common shares of CI.

When appropriate, Sun Life Financial has also disposed of certain of its
assets that do not fit Sun Life Financials growth objectives. In October 2002,
Sun Life Financial signed a definitive agreement with Midland National Life
Insurance Company to sell its subsidiary, Clarica U.S., Inc. (Clarica U.S.),
acquired as part of the Clarica acquisition. After its review of Clarica U.S.
operations, Sun Life Financial concluded that it was not a strategic fit with
its existing U.S. operations. The sale of Clarica U.S., which closed on January
7, 2003, was consistent with Sun Life Financials focus on businesses that can
maintain or achieve competitive scale or scope.

The proceeds from the sale were approximately $452 million, or US$286
million, in cash, including repayment of approximately $76 million of existing
Clarica U.S. debt. As a result of the sale, Sun Life Financial took an
after-tax charge of $48 million in 2002.

In January 2003, Sun Life Financial, as part of its continuing efforts to
realize the underlying value of its U.K. operations, signed a definitive
agreement to sell its U.K. group insurance business to Unum Limited, a U.K.
subsidiary of UnumProvident Corporation. Under the agreement, Unum Limited
acquired Sun Life Financials U.K. group income protection business together
with the renewal rights to its group life business. The transaction closed on
February 28, 2003.

Other Developments

In March 2002, Sun Life Financial signed agreements with the Marlborough
Stirling group, a U.K.-based software and service provider specializing in
financial services sectors, to outsource the administration of its closed book
of U.K. individual life and pension business. This outsourcing is expected to
reduce Sun Life Financials operating risk and enhance its strategic
flexibility in the U.K market, and represents another step in the
implementation of Sun Life Financials strategic initiative to rationalize its
U.K. operations.

In July 2002, Sun Life Financial signed an outsourcing contract with IBM
Canada Ltd., which will provide Sun Life Financial with a wide range of
technology services over a seven-year period.

Under a normal course issuer bid (the Issuer Bid) filed with The Toronto
Stock Exchange on February 10, 2003, SLF Inc. filed notice of intent to
purchase up to 30,917,085 common shares of SLF Inc., representing approximately
5% of the common shares then issued and outstanding. Under the Issuer Bid,
which covers the period from February 14, 2003 to January 5, 2004, SLF Inc. has
purchased 5,597,000 of its common shares as of the date of this annual
information form. A copy of the Notice of Intention to make the Bid may be
obtained free of charge upon request to the Corporate Secretary of SLF Inc.

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BUSINESS OF SUN LIFE FINANCIAL

Overview

Sun Life Financial is a leading international financial services
organization, providing a wide range of savings, retirement, pension, mutual
funds, investment management, and life and health insurance products and
services to individual and corporate customers. At December 31, 2002, Sun Life
Financial was the largest Canadian life insurance organization, based on total
assets under management of $360.6 billion. Sun Life Financial recorded total
revenue of $23.1 billion for the year ended December 31, 2002. Operating
earnings, excluding special items as described on page 27 of the Annual
Report, were $1,260 million for the year ended December 31, 2002. Sun Life
Assurance is one of the highest rated Canadian-based insurance companies for
financial strength, with an AA+ rating from S&P with a negative outlook and an
Aa2 rating from Moodys. At December 31, 2002, Sun Life Financial had
approximately 14,900 employees worldwide and an extensive global distribution
network consisting of career sales forces in certain countries, independent
insurance agents, investment dealers and financial planners.

Sun Life Financials operations are divided into six business segments
primarily based on geographic location: Sun Life Financial Canada (SLF
Canada), Sun Life Financial United States (SLF U.S.), Massachusetts
Financial Services Company (MFS), Sun Life Financial Asia (SLF Asia), Sun
Life Financial United Kingdom (SLF U.K.), and Other Operations (Other or
Corporate Capital). These reportable segments reflect Sun Life Financials
management and internal financial reporting structures. Each segment has its
own management and is responsible for its financial performance. Generally,
these segments derive their revenues from wealth management and protection
products and services. Other Operations primarily include investments of a
corporate nature for which management responsibility resides in Sun Life
Financials Corporate Office.

Sun Life Financial operates under a strategic business model that balances
growth with earnings stability. While many products and services offered by Sun
Life Financial are increasingly integrated in nature, its overall operations
generally comprise two principal product categories: wealth management and
protection. Revenue and expenses not directly attributable to wealth management
or protection are included in Corporate and Other. Wealth management comprises
Sun Life Financials operations related to equity-linked and fixed income
products and services in the areas of asset management, mutual funds, pensions
and annuities. Protection or insurance comprises Sun Life Financials
individual life and health, group life and health, and reinsurance operations.

The profitability of Sun Life Financials operations in wealth management
and protection depends in large part on (i) external factors, including changes
in equity market performance and changing regulations, (ii) the amount and
composition of assets under management, (iii) the management of product
pricing, (iv) mortality and morbidity rates, (v) expense management, (vi) the
maintenance of spreads between credited rates and investment returns, (vii)
surrender and lapse rates, (viii) the management of market and credit risks,
and (ix) the management of the risks inherent in products with guaranteed
benefits options.

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Sun Life Financials portfolio of products and services by each of the
business segments is summarized in the following table:

Products and Services by Segment

|                  |                                         |  |            |   |      |  |     |   |      |  |      |   |     |  |     |   |  |  |  |   | 
|----------------- | --------------------------------------- |  | ---------- | - | ---- |  | --- | - | ---- |  | ---- | - | --- |  | --- | - |  |  |  | - | 
|                  |                                         |  |            |   |      |  | SLF |   |      |  |      |   | SLF |  | SLF
|                  |                                         |  | SLF Canada |   | U.S. |  | MFS |   | Asia |  | U.K.
|                  |                                         |  |            |   |      |  |     |   |      |  |     
|Wealth Management |                                         |  |            |   |      |  |     |   |      |  |      |   |     |  |     |   |  |  |  |  
|                 
|                 
|                 
|                 
|                 
|                  | Individual annuity and savings products |  |            |  |      |  |     |  |      |  |      |  |     |  |     |   |  |  |  |  | 
|                 
|                 
|                 
|                 
|                 
|                  | Group pensions and retirement products  |  |            |  |      |  |     |   |      |  |      |  |     |  |     |  |  |  |  |   | 
|                 
|                 
|                 
|                 
|                 
|                  | Mutual funds                            |  |            |  |      |  |     |   |      |  |      |  |     |  |     |  |  |  |  |   | 
|                 
|                 
|                 
|                 
|                 
|                  | Asset management services               |  |            |  |      |  |     |  |      |  |      |  |     |  |     |   |  |  |  |   | 
|                 
|                 
|                 
|                 
|                 
|Protection        |                                         |  |            |   |      |  |     |   |      |  |      |   |     |  |     |   |  |  |  |  
|                 
|                 
|                 
|                 
|                 
|                  | Individual life                         |  |            |  |      |  |     |  |      |  |      |   |     |  |     |  |  |  |  |  | 
|                 
|                 
|                 
|                 
|                 
|                  | Individual Health                       |  |            |  |      |  |     |   |      |  |      |   |     |  |     |   |  |  |  |   | 
|                 
|                 
|                 
|                 
|                 
|                  | Group life and health                   |  |            |  |      |  |     |  |      |  |      |   |     |  |     |  |  |  |  |   | 
|                 
|                 
|                 
|                 
|                 
|                  | Reinsurance  life retrocession         |  |            |  |      |  |     |   |      |  |      |   |     |  |     |   |  |  |  |   | 

SLF Asias operations in wealth management primarily comprise mutual fund
operations in the Philippines and mutual fund and group pension operations in
India. SLF Asias operations in protection primarily comprise individual
insurance in the Philippines, Hong Kong, India, China and Indonesia and group
insurance in the Philippines and India.

In addition to the operations in Sun Life Financials principal geographic
areas shown above, Sun Life Financial is involved in the pension management
business in Chile through its 32% ownership interest in Administradora de
Fondos de Pensiones Cuprum, SA, one of Chiles leading pension fund
administrators.

Wealth Management

Sun Life Financials operations in wealth management are conducted
primarily in Canada, the United States, and the United Kingdom. It is also
expanding this business in the Philippines and India. Sun Life Financial
focuses on meeting the savings and retirement needs of its customers and
helping them plan and achieve lifetime financial security. It offers a broad
range of wealth management products with fixed income or equity-linked
investment features. The fixed income products, including primarily fixed
annuities, pensions and group retirement products and services, are less
sensitive to market volatility and generate relatively predictable profits. The
equity-linked products, including mutual funds, variable annuities and asset
management services, are directly driven by market performance and the demand
of these products could be adversely affected by market fluctuations. Sun Life
Financials operations in wealth management are well diversified. In 2002, the
equity-linked products and services represented only 35% of total wealth
management earnings.

Wealth management represents Sun Life Financials higher potential growth
market, with $295.8 billion or 82% of Sun Life Financials total assets under
management as at December 31, 2002. Sun Life Financials operations in wealth
management have achieved a compound annual growth rate of 13% in assets under
management and 16% in fee income over the period from 1997 to 2002. In 2002,
wealth management contributed 52% and 57%, respectively, of the earnings and
total revenue for Sun Life Financials combined wealth management and
protection operations.

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Revenue in wealth management is driven principally by (i)
annuity premiums, (ii) investment advisory fees, (iii) distribution and
servicing fees, (iv) mortality and expense fees, and (v) net investment income
on general fund assets held primarily in the pension and fixed annuity
businesses.

Sun Life Financial believes that the strength of its operations in wealth
management results from the variety and quality of its products and services,
its investment management performance, the effectiveness of Sun Life
Financials multiple channels of distribution and the quality of its customer
service.

Financial Performance  Wealth Management

|                                  |                        |      |         |      |  |      |         |     |  |  |         |     | 
|--------------------------------- | ---------------------- | ---- | ------- | ---- |  | ---- | ------- | --- |  |  | ------- | --- | 
|(in millions of Canadian dollars) |                        | 2002 |         | 2001 |  | 2000
|                                  |                        |      |         |      |  |     
|Revenue                           |                        |      | 13,030  |      |  |      | 9,033   |     |  |  | 9,120   |    
|Shareholders Net Income          |                        |      |         |      |  |      |         |     |  |  |         |    
|                                  | Equity Linked          |      |         | 231  |  |      |         | 289 |  |  |         | 357 | 
|                                  | Fixed Income and Other |      |         | 437  |  |      |         | 224 |  |  |         | 112 | 
|                                  |                        |      |         |      |  |      |         |     |  |  |         |    
|                                  | Total                  |      |         | 668  |  |      |         | 513 |  |  |         | 469 | 
|                                 
|                                 
|                                 
|                                 
|                                 
|Assets Under Management           |                        |      | 295,824 |      |  |      | 315,159 |     |  |  | 293,840 |    
|                                  |                        |      |         |      |  |      |         |     |  |  |         |    

Canada

In Canada, Sun Life Financial is a leading provider of group retirement
products and services based on assets under management. Sun Life Financial
administers and manages group retirement products including, primarily, defined
contribution plans, deferred profit sharing plans, group Registered Retirement
Savings Plans, group Registered Retirement Income Funds, Life Income Funds, and
accumulation and pay-out annuities. Sun Life Financial provides management
services for pension and retirement products through its own facilities as well
as through a multi-manager approach, which offers to plan members access to the
funds of over 35 institutional and mutual fund managers. As at December 31,
2002, Sun Life Financials group retirement services business unit in Canada
had $23.3 billion in assets under management. In 2002, this business unit
provided services to approximately 6,100 Canadian companies, covering
approximately 805,000 group plan members.

Sun Life Financial, through its subsidiary McLean Budden Limited (McLean
Budden) and strategic partner CI, also offers mutual funds and investment
management services to individual and institutional clients. McLean Budden is
primarily engaged in providing investment management services to a broad range
of institutional and high net worth clients across Canada. In addition, it has
its own family of no-load mutual funds that are sold to individuals. As at
December 31, 2002, McLean Budden had assets under management of $22.5 billion,
of which $3.0 billion was managed for other areas of Sun Life Financials
operations in Canada. Currently, Sun Life Assurance has a 56% voting interest
in McLean Budden.

CI has an established track record in investment management and offers a
broad selection of investment funds in the Canadian market. It is the fourth
largest retail mutual fund company in Canada based on long-term mutual fund
assets of $25.6 billion as at December 31, 2002. CI is a cornerstone for Sun
Life Financial to grow its retail wealth management business in Canada.

Sun Life Financial is also a leading provider of individual annuity
products and segregated funds in Canada with assets under management of $16.5
billion as at December 31, 2002. Sun Life Financials direct retail sales force
provides a strong support to its continuing growth in the Canadian retail
annuity and segregated fund markets.

United States

Sun Life Financial conducts its operations in wealth management in the
United States primarily through its subsidiaries, MFS, Sun Life Assurance
Company of Canada (U.S.) and Keyport Life Insurance Company (Keyport). MFS
is one of the largest U.S.-based investment management companies, offering a
broad range of investment products and services in the U.S. to both retail and
institutional investors. The MFS business includes

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mutual funds, variable annuities, pension funds, and management of
institutional funds. As at December 31, 2002, MFS managed $178.0 billion in
assets for individual and institutional investors worldwide, of which $16.1
billion was managed for other areas of Sun Life Financials operations.

As at December 31, 2002, 77% of the total number of MFS equity and fixed
income funds ranked by Lipper achieved either the first or second quartile
performance for the 1-year period. Results for 3-, 5- and 10-year periods had
81%, 73% and 78% of the funds achieving the top two-quartile rankings. Based on
long-term open-end mutual fund assets, MFS retained its top 10 position among
mutual fund companies in the United States. As at December 31, 2002, MFS had
total open-end mutual fund assets of $104.0 billion, of which $100.5 billion
were long-term mutual funds.

Sun Life Financial is a major provider of individual annuity products in
the U.S. market. It offers a full annuity product suite. In 2002, the solid
performance of Keyport, which operates principally in the fixed annuity market,
compensated for the slowdown in the growth momentum of Sun Life Financials
variable annuity business, which is highly sensitive to market volatility. As
at December 31, 2002, Sun Life Financial had $62.1 billion of assets under
management related to its U.S. annuity and investment products. Its operations
in the United States reported total sales of $7.2 billion in fixed and variable
annuities in 2002.

Asia

In Asia, Sun Life Financials India asset management joint venture, Birla
Sun Life Asset Management Company Limited (BSLAMC), was the fourth largest
private mutual fund company in India. As at December 31, 2002, it had $1.9
billion in assets under management and approximately 346,000 investor accounts.
BSLAMC continues to strengthen its competitive position by enhancing its
infrastructure and broadening its product and customer base.

Sun Life Financials mutual fund operation in the Philippines continued to
perform strongly in 2002. It had $79 million in assets under management as at
December 31, 2002. The Philippines operations also strengthened its business
platform to meet product needs in the retirement and education areas and became
a top 10 provider of these pre-need services in the Philippines in 2002.

MFS also has an emerging presence in Asia with offices in Singapore and
Tokyo.

United Kingdom

In the United Kingdom, Sun Life Financials operations in wealth
management are primarily focused on servicing the block of in-force annuity and
pension policies. As at December 31, 2002, these operations had $11.0 billion
in assets under management.

MFS also has growing European operations based in London, England.

Protection

Sun Life Financial offers protection products and services primarily in
Canada, the United States and Asia. Sun Life Financials operations in
protection comprise (i) retail insurance, offering a wide range of individual
life and health insurance products, (ii) group benefits, offering customized
group products to meet the protection needs of employers, and (iii)
reinsurance, primarily life retrocession. Sun Life Financials individual life
insurance products are positioned to provide value added protection for
individual customers. Its group insurance products are custom-designed to
fulfill the protection needs of group plan members.

Protection represents a steady and consistent growth market for Sun Life
Financial, contributing 48% and 43%, respectively, of the earnings and total
revenue for the combined operations in wealth management and protection in
2002. The premium income from protection recorded a compound annual growth
rate of 13% in the period from 1997 to 2002. The principal sources of
protection revenue are (i) premiums earned on individual life and health, group
life and group health, and reinsurance contracts, and (ii) net investment
income on assets supporting actuarial liabilities associated with protection
products.

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Sun Life Financial believes that the success of its operations in
protection results from the variety and quality of its protection products, its
financial strength, as measured by its claims paying ability, the effectiveness
of its underwriting and the quality of its customer service.

Financial Performance  Protection

|                                  |  |      |        |      |  |      |        |  |  |  |        | 
|--------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|(in millions of Canadian dollars) |  | 2002 |        | 2001 |  | 2000
|                                  |  |      |        |      |  |     
|Revenue                           |  |      | 9,915  |      |  |      | 7,462  |  |  |  | 7,291  | 
|Shareholders Net Income(1)       |  |      | 603    |      |  |      | 407    |  |  |  | 320    | 
|Assets Under Management           |  |      | 53,189 |      |  |      | 33,163 |  |  |  | 30,345 | 



|(1) |  | The amount for 2002 excludes the charge of $150 million related to the run-off
block of accident and health reinsurance business.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------

Canada

Sun Life Financial is a leading provider of retail insurance in Canada
based on premium income. It offers a full range of life and health insurance
products tailored to the needs of individual customers. Its principal products
include universal life, variable universal life, term life, permanent life and
health insurance. These products are marketed through a distinctive,
multi-channel distribution model consisting of an exclusive sales force of over
4,200 independent career advisors, a partnership-based wholesale channel, and
internet driven direct marketing. With its significant scale, extensive
distribution network, strong brand recognition and efficient operating
structure, Sun Life Financial is well positioned to effectively compete in a
highly competitive and mature Canadian market. In 2002, Sun Life Financial had
total premiums of $1.3 billion from retail insurance in Canada with insurance
in force of $224 billion as at December 31, 2002.

Sun Life Financial is also a leading provider of group life and health
insurance products in Canada with approximately 22% market share based on
premiums and premium equivalents. It provides extended health care as well as
short-term and long-term disability insurance. Its group products are
custom-designed and are positioned to fulfil the protection needs of employers
of all sizes. Sun Life Financial competes on its strength of scale, product
offerings, advanced technology, and by leveraging its ability to provide
integrated group benefits and group retirement services. The group benefit
products are marketed and distributed across Canada by its experienced sales
representatives in co-operation with independent brokers and benefit
consultants. At December 31, 2002, Sun Life Financial had approximately 11,000
group life and health accounts in Canada, covering 6 million lives.

Sun Life Financials reinsurance operations provide customized reinsurance
solutions, with a primary focus on the life retrocession business in North
America. It is a market leader in North America with 27% market share based on
life retrocession in force. Sun Life Financials leadership position in life
retrocession reflects its expertise in pricing and mortality risk management as
well as its high credit rating. As at December 31, 2002, Sun Life Financial had
business in force of $183 billion in life retrocession.

United States

In the United States, Sun Life Financial is well positioned in the
individual insurance business as a insurance provider for the high net worth
and emerging affluent customers. It ranked #2 in policy size in universal life
products sold in the United States in 2002. Sun Life Financial focuses on
value-added products including universal life, variable universal life,
bank-owned life insurance (BOLI) and corporate-owned life insurance (COLI).
Sun Life Financials core distribution channels, consisting principally of
general agents and third party intermediaries, provide strong access to its
target customers. To maintain its market strength, Sun Life Financial competes
in the high growth estate protection and wealth transfer segments, and the COLI
and BOLI markets. At December 31, 2002, Sun Life Financial had approximately
240,000 individual life insurance policies in force in the United States and
approximately 200,000 individual life insurance policyholders.

In the United States, Sun Life Financials growth in the group protection
business is focused on high margin and less capital intensive segments
including life insurance, short- and long-term disability benefits and medical
stop-loss plans. Sun Life Financial continues to leverage its underwriting
expertise to service group

9



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benefit needs of small and medium-sized companies.
Sun Life Financial is a leading provider of stop-loss products, ranking #3
based on sales in 2002. Sun Life Financials group insurance products are
marketed and distributed by its sales representatives in its 20 regional sales
offices in the Unites States. These representatives maintain close
relationships with independent brokers and consultants who are the primary
contacts with employers.

Asia

In Asia, Sun Life Financial continues to expand its operations, reflecting
its positive assessment of long-term growth opportunities in the region. Sun
Life Financials focus in Asia is principally on individual life products.
However, it also intends to grow group insurance business in this region. The
products of Sun Life Financial in Asia are primarily marketed and distributed
through its agency system and brokers.

In Hong Kong, Sun Life Financial continued to focus on the bancassurance
distribution channel, which accounted for 47% of total sales in 2002. Sun Life
Financials Hong Kong operation also continued to strengthen its product
offerings by focusing on unit-linked insurance products such as variable
universal life and by enhancing traditional insurance products. Sun Life
Financial introduced unit-linked products in 2001 and has since grown its
market share rapidly, capturing a top five position in the unit-linked product
market based on sales in 2002. Unit-linked products accounted for 38% of sales
in 2002.

In the Philippines, Sun Life Financial continued to solidify its market
position by broadening product portfolios and enhancing customer services in
2002. The Philippines operations accounted for 47% of the Sun Life Financials
total insurance premiums in Asia.

Sun Life Financials India life insurance joint venture, Birla Sun Life
Insurance Company Limited, continued to grow by launching products and
expanding distribution capabilities in individual insurance, group insurance
and savings. By focusing on unit-linked life products, Sun Life Financial
achieved the highest average policy premium sales in the market. As at December
31, 2002, Birla Sun Life Insurance Company Limited had a direct sales force of
3,740 agents with sales offices in 16 cities and alternate channels with 75
corporate agents. While the direct sales force served as a principal
distribution channel, alternate channels were also significant contributors,
generating approximately 28% of total sales in 2002.

Sun Life Financial launched life insurance operations in the municipality
of Tianjin, China, in April 2002 through its China joint venture, Sun Life
Everbright Life Insurance Company Limited. This joint venture has since been
growing rapidly. It launched a product portfolio consisting of life, critical
illness, education saving products and unit-linked products. By the end of
2002, it had a sales force of 1,600 agents.

Sun Life Financials operations in Indonesia were repositioned in 2002,
and major initiatives were launched to improve its infrastructure. A
unit-linked product was launched in September and is becoming a major
contributor to sales growth.

10



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United Kingdom

In January 2003, Sun Life Financial, as part of its continuing efforts to
realize the underlying value of its operations in the United Kingdom, signed a
definitive agreement to sell its U.K. group insurance business. The
transaction closed in the first quarter of 2003. Sun Life Financials U.K.
operation is focusing on managing its in-force individual insurance business.

The Wealth Management and Insurance Industries

The global financial services industry is undergoing a period of
significant evolution, particularly in North America. The wealth management
and insurance industries are transforming rapidly in response to demographic
shifts, changing government regulations, advances in technology and increased
competition and consolidation in the financial services sector.

Demographic shifts, particularly in North America, highlighted by
increasing life expectancies and growing retirement population, have resulted
in an increased emphasis on retirement planning and saving, with a focus on
inter-generational wealth transfer vehicles. Concerns about the ability of
governments to finance traditional sources of retirement income have led
consumers to focus on self-directed investments intended to supplement these
sources of retirement income. Customers in the insurance and wealth management
industries have also grown increasingly sophisticated which, together with a
growing desire for self-directed investments, has resulted in a more
knowledgeable customer base that requires more customer-focused products.

Changes in the regulation of the financial services industry in North
America have reduced the traditional barriers between the banking, insurance
and investment industries, heightening competition in these markets. Several of
the major Canadian banks have significant operations in securities, wealth
management and insurance operations. Recently enacted Canadian financial
services legislation provides a regulatory framework for further convergence of
the banking, insurance and investment industries. In the United States, recent
consolidation has created larger financial institutions involved in the
banking, insurance and investment management businesses, and the enactment of
the Gramm-Leach-Bliley Act of 1999, which implements fundamental changes in the
regulation of the U.S. financial services industry, may encourage further
consolidation.

Financial services companies, particularly in North America, are
increasing their development of multiple distribution channels, including
independent third party brokers and financial planners, and making increasing
use of electronic communication channels, such as the Internet, to reach
customers.

Competition

The wealth management and protection markets in which Sun Life Financial
engages are highly competitive. Sun Life Financials competitors include other
insurance companies, mutual fund companies, banks, financial planners and other
providers. Frequently, competition is on the basis of pricing and ability to
provide value-added services to distributors and customers. Among other things,
the competition in the wealth management and protection industries throughout
the world has resulted in a trend towards the global consolidation of the
financial services industry including, in particular, the insurance, banking
and investment management sectors. Management believes that Sun Life Financial
will increasingly face more competition from large, well capitalized financial
services companies in each jurisdiction in which it operates.

Sun Life Financial intends to sustain it competitive advantage and
leadership in the marketplace through its financial strength and high credit
ratings, its recognized brand, its product innovation and underwriting
expertise, and its quality customer services. The acquisition of Clarica has
created a much stronger organization with enhanced products, expanded
distribution power, greater management depth and lower cost structures, and has
further strengthened Sun Life Financials ability to compete successfully at
home and in the international marketplace.

11



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Strategy

Sun Life Financials strategy is derived from its belief that the creation
of shareholder value in its business is fundamentally driven by scale,
diversification and operational excellence. Sun Life Financial intends to
pursue the following strategies:

4Focus on markets where effective scale and scope can be built and sustained



| |  |  | Pursue expansion in key strategic markets                    
| | - |  | -------------------------------------------------------------
|
| |  |  | Divest operations that do not fit long-term growth objectives

4Balance the stable performance of protection with the strong growth prospects of wealth management



| |  |  | Expand and strengthen core operations in wealth management
| | - |  | ----------------------------------------------------------
|
| |  |  | Grow higher return protection business lines              

4Maintain a highly efficient and cost-effective business platform characterized by operational excellence



| |  |  | Leverage strong brands across multiple product offerings                                                   
| | - |  | -----------------------------------------------------------------------------------------------------------
|
| |  |  | Capitalize on product innovation, distribution and
customer service strengths across the whole organization
|
| |  |  | Achieve superior returns through value-added risk management and
effective deployment of capital           

Geographic Operations and Other Activities

Sun Life Financials operations in Canada, the United States, the United
Kingdom and Asia, as well as its risk management and investment activities, are
described in detail in SLF Inc.s Managements Discussion and Analysis on the
pages in the Annual Report indicated below, which are incorporated by reference
into this AIF.

|                                           |  |                  |       | 
|------------------------------------------ |  | ---------------- | ----- | 
|                                           |  | Annual Report   
|Geographic Operations and Other Activities |  | (Page Reference)
|                                           |  |                 
|SLF Canada                                 |  |                  | 28-34 | 
|SLF United States                          |  |                  | 35-39 | 
|MFS Investment Management                  |  |                  | 40-41 | 
|SLF United Kingdom                         |  |                  | 42    | 
|SLF Asia                                   |  |                  | 43-44 | 
|Risk Management                            |  |                  | 46-48 | 
|Investments                                |  |                  | 50-53 | 

12



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SELECTED CONSOLIDATED FINANCIAL INFORMATION

Selected consolidated financial information for the years ended December
31, 2002, 2001 and 2000 is included on the pages of the Annual Report listed in
the following table. This information should be read in conjunction with SLF
Inc.s Managements Discussion and Analysis located at pages 17 to 58 of the
Annual Report.

|                                                                  |  |                  |         | 
|----------------------------------------------------------------- |  | ---------------- | ------- | 
|                                                                  |  | Annual Report   
|Selected Consolidated Financial Information                       |  | (Page Reference)
|                                                                  |  |                 
|Financial Highlights                                              |  |                  | 17      | 
|Consolidated Statements of Operations                             |  |                  | 60      | 
|Consolidated Balance Sheets                                       |  |                  | 61      | 
|Consolidated Statements of Equity                                 |  |                  | 62      | 
|Consolidated Statements of Cash Flows                             |  |                  | 63      | 
|Consolidated Statements of Changes in Segregated Funds Net Assets |  |                  | 64      | 
|Consolidated Statements of Segregated Fund Net Assets             |  |                  | 64      | 
|Notes to the Consolidated Financial Statements                    |  |                  | 65-109  | 
|Financial Results Under U.S. GAAP                                 |  |                  | 100-109 | 
|Segmented Information                                             |  |                  | 76-77   | 
|Quarterly Information                                             |  |                  | 17      | 
|Shareholder Dividends                                             |  |                  | 54, 92  | 

MANAGEMENTS DISCUSSION AND ANALYSIS

SLF Inc.s Managements Discussion and Analysis, located at pages 17 to 58
of the Annual Report, is incorporated by reference into this AIF.

MARKET FOR SECURITIES

The common shares of SLF Inc. are listed on the Toronto (TSX), New York
(NYSE) and Philippine (PSE) Stock Exchanges under the ticker symbol of SLF.

13



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DIRECTORS AND EXECUTIVE OFFICERS

Directors

The committees of the Board of Directors of SLF Inc. and the members of
each committee are listed on pages 5 through 7 of the Annual Report. The
following table sets out the directors of SLF Inc. and, for each director, his
or her municipality of residence, principal occupation, years as director and
the year in which the term of office expires.

|                                               |  |          |  |                                                                                              |  |                                                 
|---------------------------------------------- |  | -------- |  | -------------------------------------------------------------------------------------------- |  | ------------------------------------------------
|                                               |  | Position |  |                                                                                              |  |                                                 
|Name and                                       |  | with     |  | Principal                                                                                    |  | Term                                            
|Municipality of Residence                      |  | SLF Inc. |  | Occupation                                                                                   |  | as Director                                     
|                                               |  |          |  |                                                                                              |  |                                                 
|Robert M. Astley
    Waterloo, Ontario         |  | Director |  | President, Sun Life Financial Canada                                                         |  | Director since(1): 2002
*1989
Term expires: 2004
|                                              
|James C. Baillie
    Toronto, Ontario          |  | Director |  | Counsel, Torys LLP                                                                           |  | Director since: 2000
Term expires: 2005         
|                                              
|William R. Fatt
    Toronto, Ontario           |  | Director |  | C.E.O., Fairmont Hotels & Resorts Inc.                                                       |  | Director since: 2001
Term expires: 2004         
|                                              
|David A. Ganong
    St. Stephen, New Brunswick |  | Director |  | President, Ganong Bros. Limited                                                              |  | Director since: 2002
*1991
Term expires: 2005   
|                                              
|Germaine Gibara
    Montreal, Quebec           |  | Director |  | President, Avvio Management Inc.                                                             |  | Director since: 2002
*1997
Term expires: 2004   
|                                              
|Stanley H. Hartt
    Toronto, Ontario          |  | Director |  | Chairman, Citigroup Global Markets
Canada Inc.                                               |  | Director since: 1993
Term expires: 2003         
|                                              
|Krystyna T. Hoeg
    Toronto, Ontario          |  | Director |  | President & C.E.O., Corby Distilleries
Limited                                               |  | Director since: 2002
*1999
Term expires: 2005   
|                                              
|Idalene F. Kesner
    Bloomington, Indiana     |  | Director |  | Frank P. Popoff Chair of Strategic
Management, Kelley School of
Business, Indiana University |  | Director since: 2002
*1997
Term expires: 2005   
|                                              
|John D. McNeil
    Toronto, Ontario            |  | Director |  | Chairman, Fairmont Hotels & Resorts
Inc.                                                     |  | Director since: 1987
Term expires: 2003         
|                                              
|Bertin F. Nadeau
    Montreal, Quebec          |  | Director |  | Chairman and C.E.O., GescoLynx Inc.                                                          |  | Director since: 1990
Term expires: 2005         
|                                              
|Ronald W. Osborne
    Toronto, Ontario         |  | Director |  | President and C.E.O., Ontario Power
Generation Inc.                                          |  | Director since: 1989
Term expires: 2004         
|                                              
|Madeleine M. Paquin
    Ile des Soeurs, Quebec |  | Director |  | President and C.E.O., Logistec
Corporation                                                   |  | Director since: 2001
Term expires: 2004         
|                                              
|C. James Prieur
    Toronto, Ontario           |  | Director |  | President & C.O.O., SLF Inc. and Sun
Life Assurance                                          |  | Director since: 2002
Term expires: 2004         
|                                              
|Sir Bob Reid
    London, England               |  | Director |  | Deputy Governor, Bank of Scotland                                                            |  | Director since: 1997
Term expires: 2003         
|                                              
|Donald A. Stewart
    Toronto, Ontario         |  | Director |  | Chairman and C.E.O., SLF Inc. and
Sun Life Assurance                                         |  | Director since: 1996
Term expires: 2003         



---

|(1) |  | Director since means the date on which the director first joined the Board
of SLF Inc. Where a director served as a director of Sun Life Assurance before
the formation of SLF Inc. in 1999, the date on which that director first joined
the board of Sun Life Assurance is indicated. Where a director served as a
director of Clarica Life Insurance Company prior to the combination transaction
with SLF Inc. on May 29, 2002, the date on which that director first joined the
board of Clarica Life Insurance Company is indicated by *.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|                                                 |  |          |  |                                                |  |                                        
|------------------------------------------------ |  | -------- |  | ---------------------------------------------- |  | ---------------------------------------
|                                                
|William W. Stinson
    Toronto, Ontario          |  | Director |  | Lead Director, SLF Inc. and Sun Life
Assurance |  | Director since: 1985
Term expires: 2003
|                                                
|W. Vickery Stoughton
    Los Angeles, California |  | Director |  | Corporate Director                             |  | Director since: 1988
Term expires: 2004
|                                                
|**David G. Vice
    Mississauga, Ontario         |  | Director |  | Corporate Director                             |  | Director since: 1989
Term expires: 2003



|** |  | Mr. Vice will retire from the Board of Directors at SLF Inc.s next annual
meeting on June 4, 2003.
|-- |  | ---------------------------------------------------------------------------------------------------

On April 3, 2003, the directors announced that they intend to separate the
positions of Chairman and Chief Executive Officer immediately following SLF
Inc.s annual meeting on June 4, 2003 and that William W. Stinson, currently
Lead Director, would become the Non-Executive Chairman of the Board.

Each director of SLF Inc. has been engaged for more than five years in his
or her present principal occupation or in other capacities with the company or
organization (or predecessor thereof) in which he or she currently holds his or
her principal occupation, except Mr. Astley who, prior to January 2003, was
President and Chief Executive Officer of Clarica, and Mr. Baillie who, prior to
January 2000, was a partner at Torys.

Executive Officers

The executive officers of SLF Inc. as at the date of this AIF, were as
follows:

|                                                    |  |                                                                                                 
|--------------------------------------------------- |  | ------------------------------------------------------------------------------------------------
|Name and Municipality of Residence                  |  | Position                                                                                        
|                                                    |  |                                                                                                 
|Donald A. Stewart
   Toronto, Ontario               |  | Chairman and Chief Executive Officer                                                            
|C. James Prieur
   
Toronto, Ontario                |  | President and Chief Operating Officer                                                           
|Robert M. Astley
   
Waterloo, Ontario              |  | President, Sun Life Financial Canada                                                            
|Thomas A. Bogart
   
Toronto, Ontario               |  | Executive Vice-President and Chief Legal Officer                                                
|David W. Davies
   
Epsom, Surrey, United Kingdom   |  | Managing Director & Chief Executive Officer, Sun Life
Assurance Company of Canada (U.K.) Limited
|Paul W. Derksen
   
Mississauga, Ontario            |  | Executive Vice-President and Chief Financial Officer                                            
|Douglas C. Henck
   
Hong Kong, China               |  | President, Sun Life Financial Asia                                                              
|*Robert C. Salipante
   
Minnetonka, Minnesota, USA |  | President, Sun Life Financial United States                                                     
|John R. Wright
   
Norwell, Massachusetts, USA      |  | Executive Vice-President and Chief Information Officer                                          



|* |  | Mr. Salipante was appointed President, Sun Life Financial United
States effective February 25, 2003. Prior to this date, James A. McNulty
III was Executive Vice-President, United States, the executive officer
responsible for Sun Life Financials U.S. operations.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Each executive officer of SLF Inc. has been engaged for more than five
years in his present principal occupation or in other capacities with the
company or organization (or predecessor thereof) in which he currently holds
his principal occupation, except Mr. Astley who, prior to January 2003 was
President and Chief Executive Officer of Clarica, Mr. Bogart who, prior to
August 1998 was a partner with Torys, Mr. Davies who, prior to September 2002
was Trustee and Advisor for Alba Life, Police Mutual Friendly Society and LAHC,
prior to March 2002 was Chief Executive for Royal National Pension Fund for
Nurses, and prior to February 1999 was a Consultant for the Brittania Life
subsidiary of Brittania Building Society, Mr. Derksen who, prior to February
2000 was Executive Vice-President and Chief Financial Officer of CT Financial
Services Inc., Mr. Henck who,

15



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prior to April 2000 was Senior Vice-President of
American International Group, Inc., and Mr. Salipante who, prior to February
2003 was President and General Manager of ING U.S. Financial Services.

As at December 31, 2002, Sun Life Financials directors and executive
officers, as a group, owned, directly or indirectly, or had voting control or
direction over, less than 1% of the outstanding common shares of SLF Inc.

REGULATORY MATTERS

Sun Life Financial is subject to regulation and supervision by
governmental authorities in the jurisdictions in which it does business.

Canada

General

SLF Inc. and Sun Life Assurance are governed by the Insurance Act. The
Insurance Act is administered, and the activities of Sun Life Financial are
supervised, by the Office of the Superintendent of Financial Institutions
(OSFI). The Insurance Act permits insurance companies to offer, directly or
through subsidiaries or through networking arrangements, a broad range of
financial services, including banking services, investment counselling and
portfolio management, mutual funds, trust services, real property brokerage and
appraisal and merchant banking services. The Insurance Act and the regulations
thereunder contain restrictions on the purchase or other acquisition, issue,
transfer and voting rights of the shares of an insurance company.

The Insurance Act requires the filing of annual and other reports on the
financial condition of insurance companies, provides for periodic examinations
of insurance companies affairs, imposes restrictions on transactions with
related parties, and sets forth requirements governing certain aspects of
insurance companies businesses.

Regulation of Sun Life Financial

SLF Inc. and Sun Life Assurance have all the powers and restrictions
applicable to life insurance companies governed by the Insurance Act.

Investment Powers

Under the Insurance Act, a life insurance company must maintain a prudent
portfolio of investments, subject to certain overall limitations on the amount
it may invest in certain classes of investments, such as commercial loans, real
estate and stocks. Additional restrictions (and, in some cases, the need for
regulatory approvals) limit the type of investments which Sun Life Financial
can make in excess of 10% of the voting rights or 25% of the equity of any
entity.

Minimum Continuing Capital and Surplus Requirements

The Insurance Act requires Canadian life insurance companies to maintain
adequate capital and adequate and appropriate forms of liquidity in relation to
their operations. OSFI has established Minimum Continuing Capital and Surplus
Requirements (MCCSR). Under MCCSR, a life insurance company is required to
maintain an amount of capital which is calculated by reference to, and which
varies with, the risk characteristics of each category of on- and off- balance
sheet assets and liabilities held by it. The MCCSR calculation involves
applying quantitative factors to specific assets and liabilities, as well as to
certain off-balance sheet items, based on the following risk components: (i)
asset default risk, (ii) mortality/morbidity and lapse risk, (iii) interest
margin pricing risk, (iv) changes in interest rate environment risk, (v)
segregated fund risk, and (vi) off-balance sheet exposure. The total capital
required is the sum of the capital required calculated for each of the six risk
components. OSFI uses this total, in conjunction with the amount calculated as
available capital, together with other considerations, in assessing the capital
adequacy of a life insurance company. OSFI generally expects life insurance
companies to maintain a minimum MCCSR of 150% or greater, based on the risk
profile of the relevant insurance company.

16



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The principal elements of available capital include common shares,
contributed surplus, retained earnings, reported surplus, unamortized deferred
realized and unrealized gains and certain losses on investments not taken into
account in the valuation of liabilities, a certain portion of actuarial
liabilities related to future policyholder termination dividends, preferred
shares, qualifying innovative capital instruments and subordinated debt. Funds
raised by a life insurance company through borrowing or issuing securities are
treated as different categories of available capital for MCCSR purposes
depending on the characteristics of the instrument issued.

The amount of available capital is then reduced by SLF Inc.s and Sun Life
Assurances goodwill and controlling interests in non-life financial
corporations, non-controlling substantial investments in corporations, a
portion of negative policy reserves and cash value deficiencies and reserves on
reinsurance ceded to unregistered reinsurers. OSFI may require that a higher
amount of capital be available for an insurance company, taking into account
such factors as the companys operating experience and diversification of asset
or insurance portfolios. OSFI may intervene and assume control of an insurance company if it deems
the amount of available capital insufficient. MCCSR may be adjusted by OSFI in
the future as experience develops, the risk profile of Canadian life insurers
changes, and to reflect other risks.

Restrictions on Dividends and Capital Transactions

The Insurance Act prohibits the declaration or payment of any dividend on
shares of an insurance company if there are reasonable grounds for believing an
insurance company is, or the payment of the dividend would cause the company to
be, in contravention of MCCSR, and requires an insurance company to notify the
Superintendent of Financial Institutions (the Superintendent) of the
declaration of a dividend at least 10 days prior to the date fixed for its
payment. The Insurance Act also prohibits the purchase for cancellation of any
shares issued by an insurance company or the redemption of any redeemable
shares or other similar capital transactions, if there are reasonable grounds
for believing that the company is, or the payment would cause the company to
be, in contravention of MCCSR. Further, any purchase for cancellation of any
shares issued by an insurance company or the redemption of any redeemable
shares or similar capital transactions are prohibited without the prior
approval of the Superintendent.

Appointed Actuary

In accordance with the Insurance Act, the Board of Directors of each of
SLF Inc. and Sun Life Assurance has appointed a Fellow of the Canadian
Institute of Actuaries as the Appointed Actuary. The Appointed Actuary is
required to value the consolidated policy liabilities of each of SLF Inc. and
Sun Life Assurance as at the end of each period in accordance with accepted
actuarial practices, including selection of appropriate assumptions and
methods, and provide an opinion as to whether the amount of policy liabilities
makes appropriate provisions for all obligations to policyholders and whether
the valuation of liabilities is fairly presented in the consolidated financial
statements. At least once in each financial year, the Appointed Actuary must
meet with the Board of Directors or the Audit Committee to report, in
accordance with accepted actuarial practice, on the financial position and the
expected future financial condition of SLF Inc. and Sun Life Assurance. The
Appointed Actuary is required to report to the Chief Executive Officer and the
Chief Financial Officer of each of SLF Inc. and Sun Life Assurance if the
Appointed Actuary identifies any matters which, in the Appointed Actuarys
opinion, have material adverse effects on the financial condition of Sun Life
Financial.

Provincial Insurance Regulation

Sun Life Financial is subject to provincial regulation and supervision in
each of the provinces in Canada in which it carries on business. Provincial
insurance regulation is concerned primarily with the form of insurance
contracts and the sale and marketing of insurance and annuity products,
including the licensing and supervision of insurance producers. Individual
variable insurance and annuity products and the underlying segregated funds to
which they relate are subject to guidelines adopted by the Canadian Council of
Insurance Regulators and incorporated by reference into provincial insurance
regulations. These guidelines govern a number of matters relating to the sale
of these products and the administration of the underlying segregated funds.

Privacy of Customer Information

Canadian federal law and regulation requires financial institutions to
protect the security and confidentiality of customer information and to notify
customers about their policies and practices relating to their

17



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collection and disclosure of customer information and their policies relating
to protecting the security and confidentiality of that information. These laws
also regulate disclosures of customer information.

Securities Laws

Certain subsidiaries of Sun Life Assurance, including McLean Budden,
Clarica Investco Inc. and IQON Financial Inc., certain of their employees or
sales representatives and certain products offered by these subsidiaries, are
registered with provincial securities commissions and are subject to regulation
and supervision under provincial securities laws in each of the provinces of
Canada. These registrations may be terminated or suspended for failure to
adhere to certain regulatory requirements.

Reforms to the Financial Services Sector

In October 2001, significant amendments were made to the governing
legislation for federally regulated financial institutions, including the
Insurance Act. Among major amendments is a modification to the previous
ownership limits which restricted ownership to 10% of any class of shares of a
demutualized insurance company, or its holding body corporate. The amendment
allows an investor to hold up to 20% of any class of voting shares and up to
30% of any class of non-voting shares of a demutualized insurance company
having shareholders equity in excess of $5 billion, subject to the Minister of
Finances being satisfied with the character and integrity of the applicant and
provided that the applicant will not be able to exercise control over the
insurance company.

In addition, prior to December 31, 2001, demutualized insurance companies
were required to remain widely held, and no mergers among, or acquisitions of,
demutualized insurance companies were permitted. On and after January 1, 2002,
demutualized insurance companies with less than $5 billion in shareholders
equity may be acquired by another institution, subject to certain restrictions
including prior approval of the Minister of Finance. However, insurance
companies or their corporate holding bodies with more than $5 billion of
shareholders equity, such as SLF Inc., must remain widely held.

SLF Inc. is required to continue to control, but not wholly own, Sun Life
Assurance. Any shares of Sun Life Assurance that are not owned by SLF Inc. are
required to meet the widely held criteria. The 20% limit on voting share
ownership and 30% limit on non-voting share ownership apply to the direct and
indirect cumulative ownership of Sun Life Assurance, with the effect that no
single investor will be able to use the holding company structure to exceed the
ownership restrictions.

OSFI supervises SLF Inc. on a consolidated basis (including from a capital
adequacy perspective) to ensure that it has an overview of activities of SLF
Inc. and its consolidated subsidiaries. This consolidated regulation includes
the ability to review both insurance and non-insurance activities conducted by
subsidiaries of SLF Inc. and adequate supervisory power to bring about
corrective action.

United States

General Regulation at the State Level

In the United States, each state, the District of Columbia, and U.S.
territories and possessions have insurance laws that apply to companies
licensed to carry on an insurance business in the jurisdiction. However, the
state of domicile of the insurer is the primary regulator of the company. The
extent of regulation by the domiciliary jurisdiction varies, but most
jurisdictions have laws and regulations governing the financial aspects of
insurers, including standards of solvency, reserves, reinsurance, capital
adequacy and the business conduct of insurers. In addition, the laws of the
various states establish state insurance departments with broad administrative
powers to approve policy forms and, for certain lines of insurance, rates,
grant and revoke licenses to transact business, regulate trade practices,
license agents, require statutory financial statements and prescribe the type
and amount of investments permitted. The primary purpose of such regulation by
the state insurance departments is for the benefit of policyholders, rather
than shareholders. Insurance companies are required to file detailed annual and
quarterly financial statements with state insurance regulators in each of the
states in which they are licensed , and their business and accounts are subject
to examination by such agencies at any time. In addition, as part of their
routine oversight process, state insurance departments conduct detailed
examinations periodically (generally every three years) of the books, records,
accounts and market conduct of insurance companies domiciled in their states.
Market conduct reviews examine, among other things, content of disclosures,
illustrations, and sales

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practices. Examinations are generally conducted in cooperation with the
departments of two or three other states under guidelines published by the
National Association of Insurance Commissioners (NAIC).

SLF Inc. is not regulated as an insurance company in the United States but
is, as the direct or indirect owner of the capital stock of Sun Life Assurance
and other U.S. insurance subsidiaries, subject to the insurance holding company
acts of the states in which Sun Life Assurance and its other U.S. insurance
subsidiaries are domiciled (or deemed to be commercially domiciled). Most
states have enacted legislation that generally requires each insurer that is
domiciled therein and that is a member of a holding company system to register
with the insurance regulatory authority of that state and, annually, to furnish
financial and other information concerning the operations of companies within
the holding company system that may materially affect the operations,
management or financial condition of the insurers within that system. SLF Inc.
has insurance subsidiaries domiciled in Delaware, Rhode Island and New York. In
addition, Michigan is Sun Life Assurances state of entry and, as such, it is treated as Sun Life Assurances state of
domicile in the United States for purposes of the insurance holding company
laws. Under most states holding company laws, all transactions within the
holding company system that affect the domestic insurer must be fair and
equitable and such insurers policyholder surplus following any such
transaction must be both reasonable in relation to its outstanding liabilities
and adequate for its needs. In addition, most states, including Michigan, also
require prior notice or regulatory approval of the change of control of the
domestic insurer or an entity that controls the domestic insurer and of
material intercorporate transfers of assets or other material affiliate
transactions to which the domestic insurer is a party. The laws of the states
in which Sun Life Financials U.S. insurance subsidiaries are domiciled contain
similar provisions with respect to such subsidiaries and their affiliates.
Generally, under such laws, a state insurance authority must approve in advance
the direct or indirect acquisition of 10% or more of the voting securities of
an insurance company domiciled in its state.

Sun Life Assurance is licensed to transact business through its U.S.
branch in every state in the United States (except New York, where it is an
accredited reinsurer), the District of Columbia, Puerto Rico and the U.S.
Virgin Islands. Sun Life Financials insurance subsidiaries are, collectively,
licensed to transact business in all states, the District of Columbia, Puerto
Rico and the U.S. Virgin Islands.

In recent years, a number of life and annuity insurers have been the
subject of regulatory proceedings and litigation relating to alleged improper
life insurance pricing and sales practices. Some of these insurers have
incurred or paid substantial amounts in connection with the resolution of these
matters. In addition, state insurance regulatory authorities regularly make
inquiries, hold investigations and administer market conduct examinations with
respect to insurers compliance with applicable insurance laws and regulations.
In addition, state regulatory authorities, industry groups and rating agencies
have developed several initiatives regarding market conduct. Sun Life Assurance
and its U.S. insurance subsidiaries monitor sales, marketing and advertising
practices and related activities of their distributors and provide education
and training in an effort to ensure compliance with applicable insurance laws
and regulations.

Restrictions on Dividends and Capital Transactions

As an insurance holding company, SLF Inc. will depend primarily on the
receipt of funds from its operating subsidiaries to pay dividends and operating
expenses. The inability of these subsidiaries to pay dividends to SLF Inc. in
the future may materially impair the ability of SLF Inc. to pay dividends to
shareholders or to meet its cash obligations. The insurance holding company
laws and regulations of various states regulate the amount of dividends that a
domestic insurance company may pay to its parent without prior regulatory
approval. Under relevant insurance laws and regulations in Michigan and
Delaware, prior regulatory approval is required for any dividends or other
distributions that are paid other than from earned surplus or that, together
with any other dividends or distributions made within the preceding 12 months,
exceed the greater of (i) 10% of the insurance companys surplus as of the
preceding December 31 or (ii) its net gain from operations for the preceding
year. Under relevant insurance laws and regulations in Rhode Island, the state
of domicile of Keyport, prior regulatory approval is required for any dividends
or other distributions that, together with any other dividends or distributions
made within the preceding 12 months, exceed the lesser of (i) 10% of the
insurance companys surplus as of the preceding December 31 or (ii) its net
gain from operations for the preceding year. In addition, in connection with
its acquisition, Keyport is restricted pursuant to a regulatory order from the
payment of dividends until the end of the first quarter of 2003.

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NAIC IRIS Ratios

The NAIC has developed a set of financial relationships or tests known
as the NAIC Insurance Regulatory Information System (IRIS) to assist state
regulators in monitoring the financial condition of insurance companies and
identifying companies that may require special attention or action by insurance
regulatory authorities. A second set of confidential ratios, called Financial
Analysis Solvency Tracking System, (FAST), are also used for monitoring.
Insurance companies generally submit data quarterly to the NAIC, which in turn
analyzes the data using prescribed financial data ratios, each with defined
usual ranges. If an insurance companys results vary significantly from
expected ranges, regulators may make further inquiries. Regulators have the
authority to impose remedies ranging from increased monitoring to certain
business limitations to various degrees of supervision.For the year ended
December 31, 2002, neither Sun Life Assurance nor any of its U.S. insurance
subsidiaries were outside the usual ranges.

Statutory Investment Valuation Reserves

Under NAIC rules, life insurance companies must maintain an asset
valuation reserve (AVR), supplemented by an interest maintenance reserve
(IMR). These reserves are recorded for purposes of statutory accounting
practices; they are not recorded under the provisions of Canadian GAAP and
therefore have no impact on SLF Inc.s reported results of operations or
financial position. These reserves affect the determination of statutory
surplus, and changes in such reserves may impact the ability of a U.S.
insurance subsidiary to pay dividends or other distributions to its parent and
also may impact the amounts required to be maintained in trust by the U.S.
branch. The impact of the AVR will depend upon future composition of the
investment portfolios of the U.S. branch and SLF Inc.s U.S. life insurance
subsidiaries.

Michigan insurance law and the laws of several other states require life
insurance companies to analyze the adequacy of their reserves annually. Sun
Life Financials designated actuary must submit an opinion that such reserves,
when considered in light of the assets held with respect to those reserves,
make adequate provision for Sun Life Financials contractual obligations and
related expenses.

The NAIC has adopted a model regulation called Valuation of Life
Insurance Policies Model Regulation that would establish new minimum statutory
reserve requirements for individual life insurance policies written in the
future. These reserve standards have been enacted by most of the states. As a
result, insurers selling some individual life insurance products such as term
life insurance with guaranteed premium periods may need to adjust reserves
and/or shorten guarantee periods. While the model regulation has been enacted
by certain states in which Sun Life Financial has domestic companies, the
enactment of the regulation has not had a material impact on Sun Life
Financial. The NAIC is currently considering revisions to this regulation;
however, the revisions are not expected to have a material impact on Sun Life
Financial.

Risk-Based Capital Requirements

In order to enhance the regulation of insurer solvency, the NAIC has
adopted a model law to implement risk-based capital (RBC) requirements for
life insurance companies, including the U.S. branches of foreign life insurance
companies. The requirements are designed to monitor capital adequacy, to
facilitate identification by insurance regulators of inadequately capitalized
insurance companies based upon type and mixture of risks inherent in the
insurers operations, and to raise the level of protection that statutory
surplus provides for policyholders. The formulas for determining the amount of
risk-based capital specify various weighting factors that are applied to
financial balances or various levels of activity based on the perceived level
of risk. Regulatory compliance is determined by a ratio of the companys
regulatory total adjusted capital, as defined by the NAIC, to its authorized
control level risk-based capital, as defined by the NAIC. The model law
measures four major areas of risk facing life insurers: (i) the risk of loss
from asset defaults and asset value fluctuations, (ii) the risk of loss from
adverse mortality and morbidity experience, (iii) the risk of loss from
mismatching of asset and liability cash flow due to changing interest rates and
(iv) business risks. Insurers having less statutory surplus than required by
the RBC model formula will be subject to varying degrees of regulatory action
depending on the level of capital inadequacy.

The RBC formula provides a mechanism for the calculation of an insurance
companys Authorized Control Level RBC and its total adjusted capital. The
model law sets forth the points at which a state insurance regulator is
authorized and expected to take regulatory action. The first level is known as
Company Action Level

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RBC, which is set at twice the Authorized Control Level RBC. The second
level is the Regulatory Action Level RBC, set at 1.5 times the Authorized
Control Level RBC. The third is the Authorized Control Level RBC, and the
fourth is the Mandatory Control Level RBC, set at 70% of the Authorized Control
Level RBC.

If an insurance companys adjusted capital is higher than the Regulatory
Action Level RBC but below Company Action Level RBC, the insurance company must
submit to its insurance regulator a comprehensive financial plan. If an
insurance companys adjusted capital is higher than the Authorized Control
Level RBC but lower than the Regulatory Action Level RBC, the insurance
regulator is required to perform such examination or analysis as the regulator
deems necessary of the insurers business and operations and issue any
appropriate corrective orders to address the insurance companys financial
problems. If an insurers adjusted capital is higher than the Mandatory Control
Level RBC but lower than the Authorized Control Level RBC, the regulator may
place the insurer under regulatory control. If the insurance companys adjusted
capital falls below the Mandatory Control Level RBC, the regulator will be required to place the insurer
under regulatory control. Based on the formula adopted by the NAIC, the U.S.
branch of Sun Life Assurance and U.S. insurance subsidiaries of Sun Life
Assurance exceeded Company Action Level RBC as of December 31, 2002.

Minimum Statutory Surplus and Capital

Sun Life Assurances U.S. branch is required to maintain a certain amount
of assets in trust with a financial institution acceptable to the Michigan
Insurance Commissioner in an amount at all times at least equal to the sum of
the U.S. branchs reserves and other liabilities, the minimum required capital
and surplus and any additional amounts considered necessary by the Michigan
Insurance Commissioner to cover Sun Life Assurances liabilities plus a portion
of its surplus in the United States. These assets are generally only available
to meet the policyholder obligations of Sun Life Assurance to its U.S.
policyholders, claimants and other U.S. branch creditors. Any amendment to the
trust agreement must be approved by the Michigan Insurance Commissioner. As at
December 31, 2002, Sun Life Assurance had assets in trust in excess of
Michigans requirements for branches of alien insurers including the RBC
requirements referred to above.

The U.S. branch of Sun Life Assurance and Sun Life Financials U.S. life
insurance subsidiaries are required to have minimum statutory surplus and
capital of various amounts, depending on the state in which they are licensed
and the types of business they transact.

Regulation of Investments

The U.S. branch of Sun Life Assurance and Sun Life Financials U.S.
insurance subsidiaries are subject to state laws and regulations that require
diversification of their investment portfolios and limit the amount of
investments in certain investment categories such as below investment grade
fixed income securities, equity real estate and equity investments. Failure to
comply with these laws and regulations would cause investments exceeding
regulatory limitations to be treated as non-admitted assets for purposes of
measuring surplus, and, in some instances, would require divestiture of such
non-qualifying investments.

Assessments Against Insurers

Insurance guaranty association laws exist in all states, the District of
Columbia and Puerto Rico. Insurers doing business in any of these jurisdictions
can be assessed for policyholder losses incurred by impaired or insolvent
insurance companies. Assessments are generally based upon the proportionate
share of premiums written by member insurers in the lines of business in which
the impaired or insolvent insurer is engaged. Recent regulatory actions against
certain large life insurers encountering financial difficulty have prompted the
various state insurance guaranty associations to begin assessing life insurance
companies for the deemed loss. 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 for annual limits on such assessments. A large
part of the assessments paid by Sun Life Financial pursuant to these laws may
be used as credits for a portion of Sun Life Financials premium taxes. Based
on the best information presently available, Sun Life Financial believes the
total assessments will not be material to its operating results or financial
position.

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General Regulation of Insurance at Federal Level

Although the U.S. federal government does not directly regulate the
insurance business, federal legislation and administrative policies in several
areas, including pension regulation, age and sex discrimination, investment
company regulation, financial services regulation and federal taxation, do
affect the insurance business. For example, the U.S. Congress has from time to
time considered legislation related to the deferral of taxation on the
accretion of value within certain annuities and life insurance products,
limitations on antitrust immunity, the alteration of the federal income tax
structure and the availability of 401(k) or individual retirement accounts. In
addition, legislation has been introduced from time to time in recent years
which, if ever enacted, could result in the U.S. federal government assuming a
more direct role in the regulation of the insurance industry.

Until passage of the Gramm-Leach-Bliley Act of 1999,the Glass-Steagall
Act of 1933,as amended, had limited the ability of banks to engage in
securities-related businesses, and the Bank Holding Company Act of 1956,as
amended, had restricted banks from being affiliated with insurance companies.
With the passage of the Gramm-Leach-Bliley Act of 1999,among other things,
bank holding companies may acquire insurers, and insurance holding companies
may acquire banks. The ability of banks to affiliate with insurance companies
may materially adversely affect all of Sun Life Financials products by
substantially increasing the number and financial strength of potential
competitors.

The Bush Administrations fiscal year 2004 budget contains proposals that,
if enacted, would more fully integrate corporate and individual taxes by
permitting the distribution of nontaxable dividends to shareholders under
certain circumstances. These proposals could have an effect on sales of
variable annuities and other retirement savings products.

Privacy of Customer Information

U.S. federal law and regulation requires financial institutions to protect
the security and confidentiality of customer information and to notify
customers about their policies and practices relating to their collection and
disclosure of customer information and their policies relating to protecting
the security and confidentiality of that information. U.S federal and state
laws also regulate disclosures of customer information. Congress and state
legislatures are expected to consider additional regulation relating to privacy
and other aspects of customer information.

Securities Laws

Certain subsidiaries of SLF Inc., and certain policies and contracts
offered by these subsidiaries, are subject to various levels of regulation
under U.S. federal securities laws administered by the Securities and Exchange
Commission (the SEC) and under certain state securities laws.

All aspects of SLF Inc.s subsidiaries investment advisory activities are
subject to various federal and state laws and regulations in jurisdictions in
which they conduct business. These laws and regulations are primarily intended
to benefit investment advisory clients and investment company shareholders. MFS
and certain of SLF Inc.s other subsidiaries are investment advisors registered
under the Investment Advisers Act of 1940, as amended (the Investment Advisers
Act) and, as such, are regulated by and subject to examination by the SEC. The
Investment Advisers Act imposes numerous obligations on registered investment
advisors, including fiduciary duties, recordkeeping and reporting requirements,
operational requirements, and disclosure obligations. The SEC is authorized to
institute proceedings and impose sanctions for violations of the Investment
Advisers Act, ranging from censure to limitations on the investment advisors
activities to termination of an investment advisors registration. Certain
investment companies managed by such subsidiaries, including the MFS mutual
funds, are registered with the SEC under, and subject to, the Investment
Company Act of 1940, as amended, and the shares of certain of these entities
are qualified for sale in certain states in the United States and the District
of Columbia.

Certain annuity contracts and insurance policies issued by SLF Inc.s U.S.
subsidiaries are registered under the Securities Act of 1933, as amended. Sun
Life Assurance Company of Canada (U.S.) and Keyport file periodic reports with
the SEC under the Securities Exchange Act of 1934, as amended (the Exchange
Act). Certain other subsidiaries of SLF Inc. are registered as broker-dealers
under the Exchange Act, are subject to the

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SECs net capital rules, and are members of, and subject to regulation by,
the National Association of Securities Dealers, Inc.

United Kingdom

Insurance Regulation

SLF Inc.s U.K. life insurance subsidiary, Sun Life Assurance Company of
Canada (U.K.) Limited (Sun Life (UK)) carries on activities in relation to
long term insurance products by way of business and is required to be regulated
under the Financial Services and Markets Act 2000(the Financial Services and
Markets Act) by the Financial Services Authority (the FSA). All U.K.
insurance companies are required to conduct their affairs in accordance with
the principles for business set out in the FSA Handbook of Rules and Guidance
(the FSA Handbook). These include a requirement to conduct their business
with due regard to the interests of policyholders.

The FSA also requires insurance companies to file accounts and related
reports and other prescribed documents with the FSA.

Long-term Assets and Liabilities

Sun Life (UK) is required to maintain its life and pension assets separate
from the assets attributable to non-life insurance business, if any, or to
shareholders. Separate accounting and other records must be maintained and one
or more separate funds to hold receipts of money applicable to life insurance
business must be established. Sun Life (UK) maintains separate sub-funds for
assets and liabilities representing participating policies and
non-participating policies. The FSA also restricts the extent to which life
fund assets may be used for other purposes.

Margin of Solvency

The FSA requires that insurance companies maintain a margin of solvency,
the calculation of which in any particular case depends upon the type and
amount of insurance business a company writes. Failure to maintain the margin
required is one of the grounds on which wide powers of intervention provided
for in the Financial Services and Markets Act may be exercised.

Fluctuations in the levels of financial markets have led to some
volatility in the free asset ratios and cover ratios of most U.K. life
companies, since assets are valued broadly at market value, while liabilities
are not so directly affected. In particular, in valuing liabilities, the
Appointed Actuary is required to exercise judgment about future economic
conditions, demographic experience and operating costs Sun Life (UK).
Currently, all solvency margin requirements for Sun Life Financials United
Kingdom insurance operations are being met.

The European directive on the supplementary supervision of insurance
companies within an insurance group (98/78/EC) (the Insurance Groups
Directive) introduced certain additional measures to strengthen supervision of
insurance companies which are part of a group (solo-plus supervision)
including the following: (i) an additional solvency calculation which is
designed to eliminate double-gearing, or the use of the same capital to cover
different risks within a group, (ii) the insurance holding company test which
is intended to allow supervisory authorities to assess the potential effect of
the holding companys capital structure on the solvency of the insurance
company, (iii) the monitoring of intra-group transactions, and (iv) further
provisions to ensure that supervisory authorities can receive, and exchange
with each other, the information needed to fulfill their functions under the
directive. The FSAs Interim Prudential Sourcebook for Insurers and Friendly
Societies has implemented the provisions of the Insurance Groups Directive in
the U.K.

Restrictions on Dividends

Insurance companies are subject to the provisions of the Companies Act
1985in the payment of dividends, which prevents any distribution by a company
except out of profits available for this purpose. In addition, under FSA
Handbook, a life insurance company and any parent company of a life insurance
company cannot declare a dividend at any time when the assets of the long term
business fund do not exceed the liabilities of the long term business. The FSA
also requires that once an allocation of surplus in the long term fund in which

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policyholders are eligible to participate has been made to policyholders,
no transfer of assets representing a subsequent part of such surplus can be
made to shareholders unless the relevant minimum (as defined in the FSA
Handbook) of such surplus has been allocated to policyholders or a statutory
notification procedure has been carried out. Calculation of the relevant
minimum is based upon the percentage of the relevant surplus previously
allocated to the eligible policyholders. Sun Life (UK) is prohibited from
transferring any assets maintained in the account for participating policies to
the shareholders account.

Conduct of Business

The FSA imposes a duty on the staff representatives of regulated firms to
offer suitable advice to customers in respect of the range of investment
products offered by the firm, having regard to the circumstances and
aspirations of the customer. Advertisements are also regulated and it is
necessary for firms to comply with prescribed requirements in respect of
pre-contractual information. The FSA Handbook specifies various product
disclosure requirements and arrangements for the handling of complaints and
contains stringent training and competence standards for staff.

Financial Services Compensation Scheme

The Financial Services Compensation Scheme (administered by the Financial
Services Compensation Scheme Limited) was established under the Financial
Services and Markets Act. It provides for the protection of certain individual
U.K. policyholders who may be affected by the inability of established
insurance companies carrying on business in the United Kingdom to meet their
liabilities.

The Financial Services Compensation Scheme is funded by statutory levies
on authorized insurance companies. Separate levies are imposed on long term and
general insurance business.

Intervention

The FSA has extensive powers to intervene in the affairs of an insurance
company. These include the power to limit an insurance companys premium
income, to restrict the range of investments in which insurance funds are
placed, to impose requirements for the submission of quarterly management
accounts and powers relating to investigation, information and search and the
power to require the company to take appropriate actions for the fulfillment of
the criteria of sound and prudent threshold conditions for authorization.

Reform Proposals

The regulation of the insurance industry in the United Kingdom is likely
to undergo significant change in the future. In particular, a review carried
out by the FSA has raised issues in relation to securing a fair deal for
consumers, the operation of with-profits business, promoting sound management
in firms and ensuring firms have adequate financial resources. In addition,
the Sandler Review, commissioned by the UK Treasury also sets out
recommendations on reforms to with-profits business to make its structure and
management simpler.

Other Jurisdictions

In each of the countries in which subsidiaries or joint ventures of Sun
Life Financial operate, local regulatory authorities supervise and monitor
their business and financial condition. In a number of countries, certain
insurance subsidiaries or joint ventures are required to meet specific minimum
working and regulatory capital requirements.

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RISK FACTORS

The following risk factors should be considered in conjunction with the
other information included in this AIF and in the documents incorporated by
reference in and forming part of this AIF.

Integration Risks

The acquisition of Clarica has been entered into with the expectation that
its successful completion will result in long-term strategic benefits and
synergies. These anticipated benefits and synergies will depend in part on
whether the operations of both organizations can be integrated in an efficient
and effective manner. It is possible that this integration will not be
accomplished smoothly or successfully or will result in financial benefits that
will be less than anticipated. The integration of the operations will give rise
to restructuring costs and charges and it may be that these costs and charges
will be greater than those currently anticipated and that the difference may be
material. Integration costs of combining the operations are expected to include
severance costs associated with any employee terminations, costs associated
with conforming employee benefits plans, charges associated with the closure of
duplicate facilities and asset writedowns related to duplicate business
systems. Further, the diversion of the attention of management from day-to-day
operations and any difficulties encountered in the transition process could
have an adverse impact on the combined companies businesses, results of
operations and financial condition. The process of integrating the operations
of the two organizations could cause the interruption of, or a loss of momentum
in, the activities of either or both of the companies businesses, which could
have an adverse effect on their respective operations.

United Kingdom Operations

Sun Life Financial stopped selling new individual insurance in the United
Kingdom in 2001, but it continues to manage its existing block of business.
Sun Life Financials United Kingdom operations continue to be subject to
regulatory scrutiny in the United Kingdom, including reviews of past business
sold, and Sun Life Financial has regularly engaged in discussions with United
Kingdom regulators with respect to these and other matters. Sun Life
Financials United Kingdom operations may be subject to censure if it fails to
satisfy the FSA as to the scope and conduct of these reviews.

Sun Life Financial has sold a variety of endowment products in the United
Kingdom. Endowment policies are sometimes sold to provide customers with a
method of repaying mortgage debt at the end of a mortgage term. The sale of
endowment policies by life insurance companies has attracted criticism from the
press, consumer lobby groups and politicians in the United Kingdom. There can
be no guarantee that United Kingdom regulators will not, in the future, require
providers of endowment products to bear some or all of the additional costs
required to ensure that such policies meet their target mortgage debts.

In recent years, Sun Life Financials United Kingdom operations have
experienced significant losses arising out of certain pension sales practices.
At December 31, 2002, Sun Life Financial had provisions for potential future
policyholder costs, including pensions review, and expenses for decommissioning
the pension review team of $227 million. While management believes that Sun
Life Financial has appropriately dealt with the required compensation for
pension sales practices in accordance with current guidelines of the FSA in the
United Kingdom, there can be no guarantee that Sun Life Financial will not
experience further losses in connection with personal pension selling practices
or other policyholder compensation requirements.

Sun Life Financial has established significant actuarial liabilities
against future losses in connection with certain guaranteed annuities issued in
the United Kingdom prior to 1994. A hedging program has been instituted with
the objective of limiting losses that would otherwise arise upon further
declines in interest rates in the United Kingdom. This program provides a
substantial, although not complete, hedge against declines in interest rates
that, however, becomes less effective as rates decline further. There can be no
assurances that material additional reserves will not be required in the future
in connection with these guaranteed annuities.

Sun Life Financial in the UK has outsourced the administration of both its
individual business and its group risk business as part of the repositioning of
the business as a closed fund. There are risks inherent in

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outsourcing
arrangements. The outsourcing contracts are monitored and controlled by a
dedicated team in the UK operation, whose role includes the application of
appropriate mitigation actions for these risks.

Unicover and other Run-off Reinsurance Operations

Sun Life Financial has been engaged in an arbitration proceeding in the
United States against Cragwood Managers, LLC (formerly Unicover Managers, Inc.)
and the members of the Unicover reinsurance pool in respect of certain
contracts of reinsurance of accident and health insurance components of
workers compensation insurance policies written by U.S. insurers. The
arbitration with Cragwood and the Unicover pool companies has been resolved on
a basis that fell short of recission but which was broadly favourable to Sun
Life Financial.

Sun Life Financial established provisions of $150 million after taxes
during 1999 in connection with the Unicover business. Since establishing the
provision, Sun Life Financial has achieved certain settlements in connection
with the Unicover related claims. The remaining provision is consistent with
Sun Life Financials assessment of its liabilities following the decision of
the Unicover arbitration.

Certain of the arrangements in Sun Life Financials run-off reinsurance
operations other than the Unicover-related treaties are also subject to
litigation or arbitration. In particular, Sun Life Financial has been engaged
in arbitration proceedings in the United States and in England with certain of
the companies that have contracts to provide reinsurance to Sun Life Financial.
Those contracts would provide coverage for Unicover-related and non-Unicover
claims. Those companies are disputing their obligation to provide retrocession
cover to Sun Life Financial under their respective contracts of reinsurance.
Other reinsurers of Sun Life Financial may institute similar proceedings. One
of the retrocessional arbitrations involving Sun Life Financial was resolved in
favour of the retrocessionaire. The other retrocessional arbitrations are
scheduled to be heard in 2003.

The liabilities of Sun Life Financial under these arrangements are subject
to measurement uncertainty, and therefore uncertainty about the ultimate level
of liability, but they are not expected to have a material adverse effect on
Sun Life Financials consolidated financial position.

Certain Factors Affecting the Wealth Management and Protection Businesses

Guaranteed Minimum Benefits with Respect to Certain Annuities

Certain of Sun Life Financials variable annuity products sold in the
United States and Canada contain guarantees upon death, maturity or
annuitization, where the guarantee may vary with, or may be triggered by, the
market performance of the underlying funds. Although Sun Life Financial has
entered into some reinsurance arrangements with respect to these products
(whereby Sun Life Financial has passed on some risk to other insurance
companies), has some hedging programs in place, and has diversified its
exposure to market changes in either direction, if a significant market shift
is experienced within Sun Life Financials book of business, these guarantees
could have an adverse effect on Sun Life Financials financial position and
results of operations.

Sun Life Financial has also assumed some risk, through reinsurance
transactions, with respect to certain variable annuity policies issued in the
United States by other insurance companies that contain guarantees upon death
or annuitization, where the guarantee may vary with, or be triggered by, the
market performance of the underlying funds. While Sun Life Financial has
established a hedging program for these reinsured policies, these guarantees
could have an adverse effect on Sun Life Financial if a significant market
shift is experienced in these reinsurance policies.

Effect of Changes in Market Conditions

Sun Life Financial derives a substantial portion of its revenue from fees
generated by its wealth management business including, in particular, MFS. Sun
Life Financial intends to continue expanding its wealth management business in
the future. The fees earned from the wealth management business are generally
assessed as a percentage of assets under management and therefore vary directly
with the value of such assets.

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Accordingly, fluctuations in the market value of
such assets may result in fluctuations in Sun Life Financials wealth
management revenue.

The level of assets under management in the wealth management business and
amount of fee income derived from those assets are also affected by other
factors. The investment management business is highly competitive, with the
amount of assets under management dependent in large part on the types and
performance of products, fees charged and the strength of distribution channels.
Significant growth in the retirement-oriented investment market and uncommonly
strong stock and bond market appreciation have been material factors in the
growth of Sun Life Financials assets under management and its ability to
generate sales of its wealth management products in recent years. These
economic and market trends did not continue in 2002. Adverse economic
conditions, such as reduced or negative growth in North American and other
economies, and other factors, including a protracted or precipitous decline in
the stock markets could affect the popularity of Sun Life Financials products
and services or result in investors withdrawing from the markets or decreasing
their rate of investment, which could materially adversely affect Sun Life
Financials wealth management business. In addition, a decline in market values
of investments or an increase in asset withdrawals (which could occur as a
result of volatile markets, a general or protracted drop in share prices,
changes in public perceptions about certain investment classes, poor investment
performance, changes in the regulation of certain products, a weakening of
distribution channels or other factors) could materially adversely affect Sun
Life Financials level of fee income.

Risks Related to Equity Indexed Products

Sun Life Financial is exposed to certain equity-market related risks
associated with its equity-indexed annuity products. These annuities typically
provide for the crediting of interest at rates related to the performance of
various equity indices. If there is a substantial decline in the applicable
index, the attractiveness of equity-indexed annuity and variable annuity
products to customers will be diminished, and holders of equity-indexed
annuities may seek to surrender their policies prior to the end of the product
term. Equity-indexed annuity policies typically provide for early surrender
charges and restrictions. An increase in surrenders in such annuities, however,
could have an adverse effect on Sun Life Financial. In addition to the risk of
surrenders, Sun Life Financial bears the risk that its investment alternatives
may not be able to match any increase in crediting rates provided for under its
equity-indexed annuity policies.

Interest Rate Risk

Movements in interest rates create several interest rate risks for Sun
Life Financials protection business and the fixed annuity portion of the
wealth management business. Many of Sun Life Financials annuity products
contain explicit or implicit guarantees and, if long-term interest rates fall
below these guaranteed rates, Sun Life Financial may be required to increase
reserves against losses, thereby adversely affecting its results of operations.
Interest rate changes can also cause compression of Sun Life Financials net
spread between interest earned on investments and interest credited on
insurance policies or fixed annuities, thereby adversely affecting SLF Inc.s
results of operations. Rapid declines in interest rates may result in, among
other things, increased asset calls, mortgage prepayments or policy withdrawals
and reinvestment at significantly lower yields, which could adversely affect
earnings. Interest rate changes can also produce an unanticipated increase in
transfers to separate account (variable) options or surrenders by holders of
Sun Life Financials fixed annuity products, which may force Sun Life Financial
to sell investment assets at a loss in order to fund such transfers or
surrenders and accelerate recognition of expenses related to the acquisition of
fixed annuity products.

Sun Life Financial mitigates the negative impact of interest rate changes
through asset/liability management, including duration matching and the
management of interest rate options embedded in assets or liabilities. There
can be no assurance that management of Sun Life Financial will be able to avoid
the negative impact of interest rate changes.

Investment Portfolio

The capital and earnings of Sun Life Financial are affected by, among
other things, the investment results, carrying value and levels of allowances
for losses on, and write-downs of, Sun Life Financials

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investment portfolio.
The market value of Sun Life Financials investments varies depending upon
prevailing economic and market conditions, including interest rates and the
strength of the stock markets. A pronounced and sustained decline in the
Canadian or United States stock markets would reduce the market value of Sun
Life Financials general fund equity portfolio.

Sun Life Financial is also subject to credit risk relating to the
uncertainty associated with the continued ability of debtors to make timely
payments pursuant to the contractual terms underlying such loans. Although Sun
Life Financials bonds are mostly investment-grade and Sun Life Financial
believes that it maintains prudent issuer diversification, a major economic
downturn could result in issuer defaults.

Regulatory and Related Matters

Both the wealth management business and the protection business are
subject to extensive levels of regulation. Changes in laws or regulations, or
in government policies, could materially and adversely affect the business and
operations of Sun Life Financial.

In particular, insurance regulators in Canada and the United States have
given greater emphasis in recent years to the investigation of allegations of
improper life insurance pricing and sales practices by life and annuity
insurers, including churning and misleading sales presentations by insurance
agents. In the United States, state insurance regulatory authorities regularly
make inquiries, hold investigations and administer market conduct examinations
with respect to insurers compliance with applicable insurance laws and
regulations. In the United States, the NAIC has adopted a model law and
regulation which would standardize the form and content of any illustrations
provided to prospective purchasers of individual life insurance products. There
can be no assurances as to whether this reform will adversely affect sales of
such products by the industry as a whole or by Sun Life Financials U.S.
subsidiaries.

Sun Life Financial is required to maintain adequate regulatory capital in
relation to its operations. Currently, Sun Life Financials capital ratios are
in excess of those required by OSFI. However, a protracted or precipitous
decline in the stock markets may require Sun Life Financial to allocate
additional capital to support its operations. This, in turn, will have an
adverse effect on its capital ratios.

Key Employee Retention

The future success of the wealth management business depends, in part, on
Sun Life Financials ability to attract and retain qualified personnel to
conduct its fund management and investment advisory business. Failure to do so
could have a material adverse impact on Sun Life Financials financial
condition and results of operations.

Dependence on Third Party Relationships

Sun Life Financial distributes its wealth management and protection
products through a variety of distribution channels, including broker-dealers,
banks, wholesalers, its own internal sales force and other third party
marketing organizations. An interruption in Sun Life Financials continuing
relationship with certain of these third parties or the impairment of their
reputation or creditworthiness could materially and adversely affect Sun Life
Financials ability to market its products. There can be no assurance that Sun
Life Financial would be able to find alternate sources of distribution in a
timely manner. The financial strength ratings of Sun Life Financials insurance
company subsidiaries are a key competitive factor in marketing products and in
attracting and retaining agents. Should the financial strength rating of one or
more of those insurance subsidiaries decline, Sun Life Financials competitive
position would be negatively impacted.

Sun Life Financials businesses in China and India are start-up operations
conducted through joint ventures in each of those countries. There are risks
inherent in start-up operations and joint ventures. including execution and
operational risk and management of the joint venture relationship.

Competition

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The wealth management and protection businesses in which Sun Life
Financial engages are highly competitive. Sun Life Financials products compete
not only with those offered by other insurance companies, but with those
offered by mutual fund companies, banks, financial planners and other
providers. Frequently, competition is on the basis of pricing and service
provided to distribution channels. Many of Sun Life Financials competitors are
better capitalized and have greater access to resources than Sun Life
Financial. Among other things, the competition in these industries throughout
the world has resulted in a trend towards the global consolidation of the
financial services industry including, in particular, the insurance, banking
and investment management sectors. To the extent that consolidation continues,
Sun Life Financial will increasingly face more competition from large, well
capitalized financial services companies in each jurisdiction in which it
operates. There can be no assurance that this increasing level of competition will
not adversely affect Sun Life Financials businesses in certain countries.

In the United States, national banks, with their pre-existing customer
bases for financial services products, may, in the future, provide increased
competition to insurers, including Sun Life Financial, as a result of, among
other things, the Gramm-Leach-Bliley Act of 1999, which removed restrictions on
bank affiliations with insurers. With the passage of this legislation, among
other things, bank holding companies may acquire insurers, and insurance
holding companies may acquire banks. The ability of banks to affiliate with
insurance companies may materially adversely affect all of Sun Life Financials
products by substantially increasing the number and financial strength of
potential competitors.

Variations in Claims Experience

An insurance companys earnings depend significantly upon the claims paid
under its insurance contracts and will vary from period to period depending on
the amount of claims incurred in the relevant periods. Therefore, there is a
limited predictability of claims experience within any given month or year. As
a result, it is anticipated that Sun Life Financials financial results may
vary from period to period and that such variations may be material in any
given period. Sun Life Financial uses certain assumptions in pricing its
products, including assumptions relating to guaranteed payments or levels of
expenses associated with these products. There can be no assurance that actual
experience will match the assumptions made for pricing purposes and, to the
extent they differ, Sun Life Financials operating results could be materially
adversely affected.

Currency Exchange Rate Fluctuations

As an international provider of financial services, Sun Life Financial
operates in a number of countries, with revenues and expenses denominated in
several local currencies. In each territory in which it operates, it is Sun
Life Financials policy to invest in sufficient local-currency assets to match
its aggregate liabilities and minimum surplus requirements in that territory.
This approach provides an operational hedge against disruptions in local
operations caused by currency fluctuations. However, changes in exchange rates
can affect Sun Life Financials net income and surplus when results in local
currency are translated into Canadian dollars. Strengthening of the Canadian
dollar against the U.S. dollar and the pound sterling in the future could
adversely affect Sun Life Financials reported net income.

Potential Tax Legislation

The attractiveness to customers of many of Sun Life Financials U.S.
products is due in part to favourable tax treatment. The U.S. Congress has
enacted legislation to lower marginal tax rates and to reduce the federal
estate tax gradually over a ten-year period, with total elimination of the
federal estate tax in 2010. While these U.S. tax changes will expire at the
beginning of 2011 absent future congressional action, they could in the interim
diminish the appeal of Sun Life Financials U.S. annuity and life insurance
products. Additionally, the U.S. Congress has considered, from time to time,
other possible changes to the U.S. tax laws, including elimination of the tax
deferral on the accretion of value within certain annuities and life insurance
products, adoption of a simplified flat tax income tax structure with an
exemption from taxation for investment income, reductions in U.S. capital gains
tax rates, expansion of the availability of 401(k) accounts and individual
retirement accounts, and an increase in the maximum contributions to 401(k)
accounts. There can be no assurance that further tax legislation will not be
enacted which would contain provisions with possible adverse effects on Sun
Life Financials U.S. annuity and life insurance products.

Environmental Considerations

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As the owner and operator of real property, Sun Life Financial is subject
to extensive federal, provincial, state and municipal environmental laws and
regulations. Inherent in such ownership and operation is the risk that there
may be potential environmental liabilities and costs in connection with any
required remediation of such properties. In addition, Sun Life Financial holds
equity stakes in companies that could potentially be subject to environmental
liabilities. While Sun Life Financial routinely conducts environmental
assessments for real estate being acquired for investment or on foreclosure,
there can be no assurance that unexpected environmental liabilities will not
arise.

ADDITIONAL INFORMATION

When SLF Inc. is in the course of a distribution pursuant to a short form
prospectus or a preliminary short form prospectus has been filed in respect of
a distribution of its securities, SLF Inc. will provide to any person one copy
of each of the following documents (the Disclosure Documents) upon request:
(i) this AIF and any document or the pertinent pages of any document
incorporated by reference herein, (ii) the comparative consolidated financial
statements of SLF Inc. for the most recently completed financial year with the
accompanying auditors report, (iii) any interim consolidated financial
statements of SLF Inc. subsequent to the financial statements for its most
recently completed financial year, (iv) SLF Inc.s most recent proxy circular
and (v) any other documents incorporated by reference into a preliminary short
form prospectus or a short form prospectus. When SLF Inc. has not filed a
preliminary short form prospectus or is not in the course of a distribution, it
shall provide copies of any of the foregoing Disclosure Documents subject to

its right to require persons who are not security holders to pay a reasonable
charge. Requests for such copies may be sent to the Corporate Secretary of SLF
Inc. at 150 King Street West, 6th Floor, Toronto, Ontario, Canada M5H 1J9, or
the foregoing Disclosure Documents may be accessible at SLF Inc.s Web site,
www.sunlife.com.

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