##### 



(SUN LIFE Q2 SHAREHOLDERS' REPORT FRONT COVER)




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##### 



CANADIAN RESIDENTS PARTICIPATING IN THE SHARE ACCOUNT




---



##### 



Sun
Life Financial reports record quarterly earnings of
$477 millionROE hits 13.0%
 Toronto
 July 28, 2005 
   Financial Highlights
 
    
    ROE increased 100 basis points to 13.0% from 12.0% in the second quarter of 2004,
at the high end of the Companys goal to increase its ROE by 75 to 100 basis points
for the year.
    
    EPS for the quarter increased 11% compared to the second quarter of 2004. Excluding the
negative impact of the strengthening of the Canadian dollar against foreign currencies,
EPS would have been up 16% for the quarter. This exceeded the Companys 2005 target
of 10% constant currency earnings growth.
    
    On July 28, 2005, the Board of Directors approved an increase in the quarterly common share
dividend to 25.5 cents per share, up 6% from 24 cents per share paid previously, bringing
the total increase this year to 16%.
    
    In the second quarter of 2005, Sun Life Financial Inc. repurchased approximately 6 million
common shares at an average price of $39.79 under its share repurchase program. Year-to-date
9.6 million shares have been repurchased for $379 million, on track to achieve the stated
objective of $500 million for the year.
    
    Sun Life Financial Inc. issued $325 million of Non-Cumulative Preferred Shares, Series 2
priced at $25 per share and paying non-cumulative quarterly dividends of $0.30 per share,
yielding 4.8% annually. The offering closed on July 15, 2005 and provides Sun Life Financial
with attractive, low-cost capital.
    
    Sun Life Assurance Company of Canada redeemed its Non-Cumulative Redeemable Class E Preferred
Shares, yielding 6.5%, at $25 per share.
 Business Highlights
 CORPORATE DEVELOPMENTS
 
    
    Sun Life Financial released its 2004 Public Accountability Statement, Investing in the
Future, highlighting its charitable contributions in the community, the principles guiding its
relations with key stakeholders and its broad economic impact in areas of financing,
employment, taxes and the environment. The Public Accountability Statement is available in the Publications section of Sun Life Financials website, www.sunlife.com.
    
    Sun Life Financial was ranked first among North American
insurance companies in an independent assessment of value drivers and
intangible risk factors; the study, completed by Innovest Strategic
Value Advisors, rated the relative performance of the insurance
sector on over 120 aspects of corporate governance, stakeholder
capital, human capital and emerging markets strategy, products and
services.
 SUN LIFE FINANCIAL CANADA (SLF CANADA)
 
    
    Supporting the Companys expansion into the wholesale channel, the Individual Insurance &
Investments business unit launched Sun Limited Pay Life, a universal life product that
provides a series of guarantees, including guarantees with respect to payment periods, cost of
insurance, death benefits and cash values.
    
    Individual Insurance & Investments introduced a unique e-signature feature that allows
advisors to capture a customers signature at the point of sale, improving service to
customers and advisors.
    
    Group Benefits entered into a strategic alliance with WarrenShepell, one of North Americas
leading Employee Assistance Program (EAP) providers. WarrenShepell becomes SLF
Canadas preferred provider for its new EAP offering to Group Benefits plan
sponsors.
 1




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##### 




    
    After an extensive review of the marketplace, Sun Life
Financial was selected as the Ontario Hospital Association (OHA)
Sponsored Group Benefit Plans provider, covering 62,000 employees for
life, optional life, accidental death and dismemberment, and
long-term disability, creating a new, dynamic partnership with Sun
Life Financial that will meet the needs of the OHA and participating
employers today and in the future.
    
    Group Retirement Services continued to enhance its asset retention program through a series
of pre-retirement seminars designed to help its clients employees prepare for the time when
they will receive income from their accumulated retirement accounts.
 SUN LIFE FINANCIAL U.S. (SLF U.S.)
 
    
    SLF U.S. achieved its objective to strengthen its annuities wholesaling sales force
to 75 by the end of the second quarter.
    
    The Annuities business unit, in conjunction with a third-party vendor, launched an identity
theft monitoring service offered to customers who purchase variable or select equity-indexed
annuities; a first in the life insurance industry.
    
    Gross sales in the second quarter of 2005 in Group Life
& Health were up 30%, in U.S.
dollars, compared to the second quarter of 2004.
    
    SLF U.S. issued a US$600 million funding agreement on June 10, 2005 and a
US$300 million funding agreement on July 5, 2005 in connection with a medium term
note program.
 MFS INVESTMENT MANAGEMENT (MFS)
 
    
    MFS continued to produce positive net sales with US$3.5 billion of net
inflows for the three-month period ended June 30, 2005. MFSs assets
reached US$150 billion at the end of June 2005.
    
    A floating rate high grade asset backed security (ABS) collateralized debt
obligation (CDO) issued during the quarter added
US$1 billion in AUM representing MFSs seventh CDO under management.
    
    MFS has been recognized as a leader in addressing sponsor and participant concerns
by providing greater transparency of its recordkeeping and fund expenses. For its leadership
in this area, MFS was named Bundled Provider of the Year by Defined Contribution
Newsas part of the magazines 2005 Impact Player of the Year awards.
 SUN LIFE FINANCIAL ASIA (SLF ASIA)
 
    
    The Company entered into an agreement to purchase the Hong Kong insurance and pension
operations of the Commonwealth Bank of Australia, for $560 million. The transaction, which is
subject to regulatory approval, is expected to close late in the third quarter of this year.
 USE OF NON-GAAP FINANCIAL MEASURES
  Sun Life Financial
   2




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##### 



MANAGEMENTS DISCUSSION & ANALYSIS
 
 
 Earnings and Profitability
 FINANCIAL SUMMARY
 (Unaudited)
    
    Quarterly Results
    
    
    Year to DateQ205
    
    

Q105
    
    
    Q404
    
    
    Q304
    
    
    Q204
    
    
    2005
    
    
    2004Revenues ($ millions)
    
    
    6,026
    
    
    
    5,119
    
    
    
    5,269
    
    
    
    5,390
    
    
    
    5,551
    
    
    
    11,145
    
    
    
    11,089Common Shareholders Net Income ($ millions)
    
    
    477
    
    
    
    458
    
    
    
    438
    
    
    
    439
    
    
    
    438
    
    
    
    935
    
    
    
    803Operating
Earnings(1)($ millions)
    
    
    477
    
    
    
    458
    
    
    
    438
    
    
    
    439
    
    
    
    438
    
    
    
    935
    
    
    
    862Earnings Per Common Share (EPS) ($)
    
    
    0.81
    
    
    
    0.77
    
    
    
    0.74
    
    
    
    0.73
    
    
    
    0.73
    
    
    
    1.58
    
    
    
    1.34Operating
EPS(1)($)
    
    
    0.81
    
    
    
    0.77
    
    
    
    0.74
    
    
    
    0.73
    
    
    
    0.73
    
    
    
    1.58
    
    
    
    1.44Fully diluted operating EPS(1)($)
    
    
    0.81
    
    
    
    0.77
    
    
    
    0.73
    
    
    
    0.73
    
    
    
    0.72
    
    
    
    1.57
    
    
    
    1.42Return on Common Equity (ROE) (%)
    
    
    13.0
    
    
    
    12.6
    
    
    
    12.1
    
    
    
    11.9
    
    
    
    12.0
    
    
    
    12.8
    
    
    
    11.2Operating ROE(1)(%)
    
    
    13.0
    
    
    
    12.6
    
    
    
    12.1
    
    
    
    11.9
    
    
    
    12.0
    
    
    
    12.8
    
    
    
    12.0Average Common Shares Outstanding (millions)
    
    
    587.4
    
    
    
    591.8
    
    
    
    595.2
    
    
    
    598.7
    
    
    
    600.7
    
    
    
    589.6
    
    
    
    600.4S&P 500 Index (daily average)
    
    
    1,181
    
    
    
    1,192
    
    
    
    1,162
    
    
    
    1,104
    
    
    
    1,123
    
    
    
    1,187
    
    
    
    1,128S&P 500 Index (close)
    
    
    1,191
    
    
    
    1,181
    
    
    
    1,212
    
    
    
    1,115
    
    
    
    1,141
    
    
    
    1,191
    
    
    
    1,141
 Certain comparative figures have been restated to conform with the presentation adopted in
the first quarter of 2005.
 (2)
 (1)
  Performance by Business Group
  (1)
    
    See Use of Non-GAAP Financial Measures. As previously disclosed, common
shareholders net income in the first quarter of 2004 included regulatory charges against
MFS.(2)
    
    Or together with its subsidiaries and joint ventures the Company or Sun Life
Financial.
 3




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##### 



SLF CANADA
 Quarterly Results
    
    
    Year to DateQ205
    
    
    Q105
    
    
    Q404
    
    
    Q304
    
    
    Q204
    
    
    2005
    
    
    2004Revenues ($ millions)
    
    
    2,104
    
    
    
    2,146
    
    
    
    2,029
    
    
    
    1,960
    
    
    
    2,032
    
    
    
    4,250
    
    
    
    4,173Premiums & Deposits ($ millions)
    
    
    3,800
    
    
    
    5,412
    
    
    
    3,900
    
    
    
    3,942
    
    
    
    4,350
    
    
    
    9,212
    
    
    
    8,914Common Shareholders Net Income ($ millions)Individual Insurance & Investments
    
    
    145
    
    
    
    168
    
    
    
    126
    
    
    
    121
    
    
    
    139
    
    
    
    313
    
    
    
    264Group Benefits
    
    
    54
    
    
    
    38
    
    
    
    63
    
    
    
    66
    
    
    
    47
    
    
    
    92
    
    
    
    123Group Retirement Services & Institutional Investments
    
    
    37
    
    
    
    39
    
    
    
    35
    
    
    
    34
    
    
    
    34
    
    
    
    76
    
    
    
    63Total
    
    
    236
    
    
    
    245
    
    
    
    224
    
    
    
    221
    
    
    
    220
    
    
    
    481
    
    
    
    450ROE (%)
    
    
    14.2
    
    
    
    14.8
    
    
    
    13.7
    
    
    
    13.4
    
    
    
    13.2
    
    
    
    14.5
    
    
    
    13.5
    
    
    Individual Insurance & Investments earnings increased 4% over the second quarter of
2004 due to favourable mortality experience, favourable credit experience and increased
earnings from the investment in CI Financial Inc.
    
    Improved mortality and morbidity experience contributed to the 15% earnings growth in
Group Benefits over the second quarter of 2004.
    
    The 9% increase in Group Retirement Services & Institutional Investments earnings
over the second quarter of 2004 was driven by higher AUM, higher
fee income and favourable credit experience.
 SLF U.S.
 Quarterly Results
    
    
    Year to DateQ205
    
    
    Q105
    
    
    Q404
    
    
    Q304
    
    
    Q204
    
    
    2005
    
    
    2004Revenues (US$ millions)
    
    
    2,281
    
    
    
    1,539
    
    
    
    1,825
    
    
    
    1,832
    
    
    
    1,807
    
    
    
    3,820
    
    
    
    3,588Revenues (C$ millions)
    
    
    2,835
    
    
    
    1,889
    
    
    
    2,228
    
    
    
    2,399
    
    
    
    2,453
    
    
    
    4,724
    
    
    
    4,802Common Shareholders Net Income (US$ millions)Annuities
    
    
    72
    
    
    
    34
    
    
    
    45
    
    
    
    44
    
    
    
    33
    
    
    
    106
    
    
    
    95Individual Life
    
    
    20
    
    
    
    25
    
    
    
    19
    
    
    
    19
    
    
    
    33
    
    
    
    45
    
    
    
    43Group Life & Health
    
    
    15
    
    
    
    6
    
    
    
    12
    
    
    
    7
    
    
    
    14
    
    
    
    21
    
    
    
    16Total (US$ millions)
    
    
    107
    
    
    
    65
    
    
    
    76
    
    
    
    70
    
    
    
    80
    
    
    
    172
    
    
    
    154Total (C$ millions)
    
    
    132
    
    
    
    81
    
    
    
    93
    
    
    
    92
    
    
    
    109
    
    
    
    213
    
    
    
    206ROE (%)
    
    
    13.8
    
    
    
    8.6
    
    
    
    10.5
    
    
    
    9.9
    
    
    
    11.2
    
    
    
    11.2
    
    
    
    10.6
     
    
    Annuities earnings increased US$39 million compared to the second quarter of 2004,
primarily as a result of stronger equity markets, improved spreads, the impact of the
variable annuity economic hedging program in the second quarter of 2005, and reserve
strengthening which negatively affected the second quarter of 2004. The earnings increase
of US$38 million compared to the first quarter of 2005 resulted from stronger equity
markets, improved spreads and the impact of the variable annuity economic hedging program.
 4




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##### 




    
    Individual Life earnings were US$13 million lower in the second quarter of 2005
compared to the second quarter of 2004, primarily due to increased reserves due to lower
interest rates in the second quarter of 2005, which was partially offset by improved
mortality. In addition, the second quarter of 2004 benefited from the implementation of a
hedging program for universal life products.
    
    Group Life & Health earnings increased US$9 million compared to the first quarter of
2005 primarily due to improved claims experience.
  MFS INVESTMENT MANAGEMENT
 Quarterly Results
    
    
    Year to DateQ205
    
    
    Q105
    
    
    Q404
    
    
    Q304
    
    
    Q204
    
    
    2005
    
    
    2004Revenues (US$ millions)
    
    
    332
    
    
    
    332
    
    
    
    330
    
    
    
    316
    
    
    
    319
    
    
    
    664
    
    
    
    660Revenues (C$ millions)
    
    
    413
    
    
    
    407
    
    
    
    402
    
    
    
    414
    
    
    
    434
    
    
    
    820
    
    
    
    884Common Shareholders Net
Income/(Loss) (US$ millions)
    
    
    34
    
    
    
    37
    
    
    
    36
    
    
    
    32
    
    
    
    30
    
    
    
    71
    
    
    
    20Operating Earnings (US$ millions)
    
    
    34
    
    
    
    37
    
    
    
    36
    
    
    
    32
    
    
    
    30
    
    
    
    71
    
    
    
    65Common Shareholders Net
Income/(Loss) (C$ millions)
    
    
    42
    
    
    
    46
    
    
    
    44
    
    
    
    42
    
    
    
    41
    
    
    
    88
    
    
    
    28Operating Earnings (C$ millions)
    
    
    42
    
    
    
    46
    
    
    
    44
    
    
    
    42
    
    
    
    41
    
    
    
    88
    
    
    
    87Average Net Assets (US$ billions)
    
    
    147
    
    
    
    145
    
    
    
    140
    
    
    
    132
    
    
    
    138
    
    
    
    146
    
    
    
    141Assets Under Management (US$ billions)
    
    
    150
    
    
    
    145
    
    
    
    146
    
    
    
    134
    
    
    
    137
    
    
    
    150
    
    
    
    137Net New Sales/(Redemptions) (US$ billions)
    
    
    3.5
    
    
    
    0.7
    
    
    
    0.1
    
    
    
    (2.5
    )
    
    
    (5.3
    )
    
    
    4.2
    
    
    
    (6.5
    )Market Movement (US$ billions)
    
    
    1.8
    
    
    
    (2.4
    )
    
    
    12.1
    
    
    
    (0.9
    )
    
    
    0.5
    
    
    
    (0.6
    )
    
    
    3.6S&P 500 Index (daily average)
    
    
    1,181
    
    
    
    1,192
    
    
    
    1,162
    
    
    
    1,104
    
    
    
    1,123
    
    
    
    1,187
    
    
    
    1,128
     SLF ASIA
 Quarterly Results
    
    
    Year to DateQ205
    
    
    Q105
    
    
    Q404
    
    
    Q304
    
    
    Q204
    
    
    2005
    
    
    2004Revenues ($ millions)
    
    
    205
    
    
    
    214
    
    
    
    239
    
    
    
    189
    
    
    
    182
    
    
    
    419
    
    
    
    340Common Shareholders Net
Income ($ millions)
    
    
    19
    
    
    
    6
    
    
    
    18
    
    
    
    10
    
    
    
    10
    
    
    
    25
    
    
    
    17ROE (%)
    
    
    17.6
    
    
    
    5.4
    
    
    
    16.8
    
    
    
    9.3
    
    
    
    9.0
    
    
    
    11.4
    
    
    
    7.6
  5




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##### 



CORPORATE
  Quarterly Results
    
    
    Year to DateQ205
    
    
    Q105
    
    
    Q404
    
    
    Q304
    
    
    Q204
    
    
    2005
    
    
    2004Revenues ($ millions)
    
    
    538
    
    
    
    530
    
    
    
    477
    
    
    
    534
    
    
    
    576
    
    
    
    1,068
    
    
    
    1,126Common Shareholders Net Income/(Loss) ($ millions)SLF U.K.
    
    
    39
    
    
    
    47
    
    
    
    45
    
    
    
    39
    
    
    
    42
    
    
    
    86
    
    
    
    89Reinsurance
    
    
    15
    
    
    
    14
    
    
    
    26
    
    
    
    21
    
    
    
    10
    
    
    
    29
    
    
    
    25Other
    
    
    (6
    )
    
    
    19
    
    
    
    (12
    )
    
    
    14
    
    
    
    6
    
    
    
    13
    
    
    
    (12
    )Total
    
    
    48
    
    
    
    80
    
    
    
    59
    
    
    
    74
    
    
    
    58
    
    
    
    128
    
    
    
    102
    Additional Financial Disclosure
 REVENUE
     6




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##### 



ASSETS UNDER MANAGEMENT
  (i)
    
    an increase of $4.5 billion from market movements,(ii)
    
    net sales of mutual, managed and segregated funds of $4.5 billion, and(iii)
    
    an increase of $1.4 billion due to fluctuation in currency exchange rates.
  (i)
    
    an increase of $19.6 billion from increases in capital markets, and(ii)
    
    $4.9 billion of net sales of mutual, managed and segregated funds, partially offset
by(iii)
    
    $23.9 billion from the strengthening of the Canadian dollar against foreign
currencies.
 CHANGES IN THE BALANCE SHEET AND SHAREHOLDERS EQUITY
        7




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##### 



CASH FLOWS
 Quarterly Results
    
    
    Year to Date($ millions)
    
    Q205
    
    
    Q204
    
    
    2005
    
    
    2004Cash and cash equivalents, beginning of period
    
    
    3,961
    
    
    
    3,386
    
    
    
    3,748
    
    
    
    3,175Cash flows provided by (used in):Operating activities
    
    
    1,109
    
    
    
    1,447
    
    
    
    1,900
    
    
    
    1,501Financing activities
    
    
    (425
    )
    
    
    (290
    )
    
    
    (277
    )
    
    
    (280
    )Investing activities
    
    
    (282
    )
    
    
    (971
    )
    
    
    (992
    )
    
    
    (833
    )Changes due to fluctuations in exchange rates
    
    
    (20
    )
    
    
    56
    
    
    
    (36
    )
    
    
    65Increase in cash and cash equivalents
    
    
    382
    
    
    
    242
    
    
    
    595
    
    
    
    453Cash and cash equivalents, end of period
    
    
    4,343
    
    
    
    3,628
    
    
    
    4,343
    
    
    
    3,628Short-term securities, end of period
    
    
    1,892
    
    
    
    2,791
    
    
    
    1,892
    
    
    
    2,791Total cash, cash equivalents and short-term securities
    
    
    6,235
    
    
    
    6,419
    
    
    
    6,235
    
    
    
    6,419
     RISK MANAGEMENT
   OUTLOOK
  8




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##### 



REGULATORY MATTERS
  USE OF NON-GAAP FINANCIAL MEASURES
   FORWARD-LOOKING STATEMENTS
    9




---



##### 



Consolidated Statements of Operations
 For the three months ended
    
    
    For the six months endedJune 30
    
    
    June 30
    *
    
    June 30
    
    
    June 30
    *(unaudited, in millions of Canadian dollars, except for per share amounts)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004RevenuePremium income:Annuities
    
    $
    1,662
    
    
    $
    1,311
    
    
    $
    2,571
    
    
    $
    2,515Life insurance
    
    
    1,434
    
    
    
    1,412
    
    
    
    2,853
    
    
    
    2,873Health insurance
    
    
    643
    
    
    
    600
    
    
    
    1,255
    
    
    
    1,1893,739
    
    
    
    3,323
    
    
    
    6,679
    
    
    
    6,577Net investment income
    
    
    1,561
    
    
    
    1,484
    
    
    
    3,026
    
    
    
    2,992Fee income
    
    
    726
    
    
    
    744
    
    
    
    1,440
    
    
    
    1,5206,026
    
    
    
    5,551
    
    
    
    11,145
    
    
    
    11,089Policy Benefits and ExpensesPayments to policyholders, beneficiaries and depositors:Maturities and surrenders
    
    
    1,628
    
    
    
    1,344
    
    
    
    2,928
    
    
    
    3,151Annuity payments
    
    
    389
    
    
    
    383
    
    
    
    756
    
    
    
    758Death and disability benefits
    
    
    606
    
    
    
    628
    
    
    
    1,223
    
    
    
    1,326Health benefits
    
    
    463
    
    
    
    438
    
    
    
    904
    
    
    
    897Policyholder dividends and interest on claims and deposits
    
    
    258
    
    
    
    285
    
    
    
    537
    
    
    
    5663,344
    
    
    
    3,078
    
    
    
    6,348
    
    
    
    6,698Net transfers to segregated funds
    
    
    135
    
    
    
    108
    
    
    
    310
    
    
    
    363Increase in
actuarial liabilities (Note 6)
    
    
    651
    
    
    
    530
    
    
    
    742
    
    
    
    360Commissions
    
    
    431
    
    
    
    492
    
    
    
    857
    
    
    
    975Operating expenses
    
    
    712
    
    
    
    687
    
    
    
    1,439
    
    
    
    1,422Premium taxes
    
    
    45
    
    
    
    45
    
    
    
    89
    
    
    
    91Interest expense
    
    
    70
    
    
    
    67
    
    
    
    135
    
    
    
    1345,388
    
    
    
    5,007
    
    
    
    9,920
    
    
    
    10,043Income before Income Taxes and Non-controlling Interests
    
    
    638
    
    
    
    544
    
    
    
    1,225
    
    
    
    1,046Income taxes
    
    
    148
    
    
    
    93
    
    
    
    265
    
    
    
    221Non-controlling interests in net income of subsidiaries
    
    
    7
    
    
    
    9
    
    
    
    13
    
    
    
    13Total Net Income
    
    
    483
    
    
    
    442
    
    
    
    947
    
    
    
    812Less: Participating policyholders net income
    
    
    1
    
    
    
    4
    
    
    
    5
    
    
    
    9Preferred shareholder dividends
    
    
    5
    
    
    
    
    
    
    
    7
    
    
    
    Common Shareholders Net Income
    
    $
    477
    
    
    $
    438
    
    
    $
    935
    
    
    $
    803Average exchange rates:U.S. Dollars
    
    
    1.24
    
    
    
    1.36
    
    
    
    1.24
    
    
    
    1.34U.K. Pounds
    
    
    2.31
    
    
    
    2.46
    
    
    
    2.32
    
    
    
    2.44
 *
    
    As restated for adoption of Consolidation of Variable Interest Entities, Canadian Institute of Chartered Accountants (CICA) Handbook Accounting Guideline 15 (AcG 15) (Note 2)
 Earnings per share (Note 4)Basic
    
    $
    0.81
    
    
    $
    0.73
    
    
    $
    1.58
    
    
    $
    1.34Diluted
    
    $
    0.81
    
    
    $
    0.72
    
    
    $
    1.57
    
    
    $
    1.33Weighted average shares outstanding in millions (Note 4)Basic
    
    
    587
    
    
    
    601
    
    
    
    590
    
    
    
    600Diluted
    
    
    590
    
    
    
    604
    
    
    
    593
    
    
    
    603
  10




---



##### 



Consolidated Balance Sheets
 As atJune 30
    
    
    December 31
    *
    
    June 30
    *(unaudited, in millions of Canadian dollars)
    
    2005
    
    
    2004
    
    
    2004AssetsBonds
    
    $
    66,285
    
    
    $
    64,496
    
    
    $
    67,840Mortgages
    
    
    14,165
    
    
    
    13,862
    
    
    
    13,827Stocks
    
    
    3,526
    
    
    
    3,463
    
    
    
    3,847Real estate
    
    
    3,273
    
    
    
    3,148
    
    
    
    3,161Cash, cash equivalents and short-term securities
    
    
    6,235
    
    
    
    5,958
    
    
    
    6,419Policy loans and other invested assets
    
    
    5,965
    
    
    
    5,984
    
    
    
    6,253Invested assets
    
    
    99,449
    
    
    
    96,911
    
    
    
    101,347Goodwill
    
    
    5,556
    
    
    
    5,471
    
    
    
    5,650Intangible assets
    
    
    771
    
    
    
    751
    
    
    
    759Other assets
    
    
    5,609
    
    
    
    4,670
    
    
    
    5,932Total general fund assets
    
    $
    111,385
    
    
    $
    107,803
    
    
    $
    113,688Segregated funds net assets
    
    $
    58,889
    
    
    $
    56,564
    
    
    $
    57,598Liabilities and EquityActuarial
liabilities and other policy liabilities
(Note 6)
    
    $
    77,377
    
    
    $
    76,056
    
    
    $
    79,730Amounts on deposit
    
    
    3,170
    
    
    
    3,144
    
    
    
    3,172Deferred net realized gains
    
    
    3,650
    
    
    
    3,466
    
    
    
    3,487Other liabilities
    
    
    10,539
    
    
    
    9,072
    
    
    
    10,504Total general fund liabilities
    
    
    94,736
    
    
    
    91,738
    
    
    
    96,893Subordinated debt
    
    
    1,467
    
    
    
    1,462
    
    
    
    1,741Non-controlling interests in subsidiaries
    
    
    24
    
    
    
    188
    
    
    
    181Total equity
    
    
    15,158
    
    
    
    14,415
    
    
    
    14,873Total general fund liabilities and equity
    
    $
    111,385
    
    
    $
    107,803
    
    
    $
    113,688Segregated funds contract liabilities
    
    $
    58,889
    
    
    $
    56,564
    
    
    $
    57,598Exchange rate at balance sheet date:U.S. Dollars
    
    
    1.23
    
    
    
    1.20
    
    
    
    1.35U.K. Pounds
    
    
    2.22
    
    
    
    2.32
    
    
    
    2.43
 *
    
    As restated for adoption of AcG 15 (Note 2)
       
 
   
 
 11




---



##### 



Consolidated Statements of Equity
 For the six months endedParticipating
    
    
    
    
    
    
    June 30
    
    
    June 30
    *(unaudited, in millions of Canadian dollars)
    
    Policyholders
    
    
    Shareholders
    
    
    2005
    
    
    2004Preferred SharesBalance, beginning of period
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Preferred
shares issued (Note 8)
    
    
    
    
    
    
    400
    
    
    
    400
    
    
    
    Issuance
costs, net of taxes (Note 8)
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )
    
    
    Balance, end of period
    
    
    
    
    
    
    394
    
    
    
    394
    
    
    
    Common SharesBalance, beginning of period
    
    
    
    
    
    
    7,238
    
    
    
    7,238
    
    
    
    7,289Stock options exercised
    
    
    
    
    
    
    45
    
    
    
    45
    
    
    
    46Common
shares purchased for cancellation (Note
3)
    
    
    
    
    
    
    (118
    )
    
    
    (118
    )
    
    
    (19
    )Balance, end of period
    
    
    
    
    
    
    7,165
    
    
    
    7,165
    
    
    
    7,316Contributed SurplusBalance, beginning of period
    
    
    
    
    
    
    70
    
    
    
    70
    
    
    
    76Stock option compensation
    
    
    
    
    
    
    6
    
    
    
    6
    
    
    
    7Stock options exercised
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )
    
    
    (11
    )Balance, end of period
    
    
    
    
    
    
    67
    
    
    
    67
    
    
    
    72Retained EarningsBalance, beginning of period, as previously reported
    
    
    85
    
    
    
    8,116
    
    
    
    8,201
    
    
    
    7,284Adjustment
for change in accounting policy (Note
2)
    
    
    
    
    
    
    3
    
    
    
    3
    
    
    
    4Balance, beginning of period, as restated
    
    
    85
    
    
    
    8,119
    
    
    
    8,204
    
    
    
    7,288Net income
    
    
    5
    
    
    
    942
    
    
    
    947
    
    
    
    812Dividends on common shares
    
    
    
    
    
    
    (283
    )
    
    
    (283
    )
    
    
    (252
    )Dividends on preferred shares
    
    
    
    
    
    
    (7
    )
    
    
    (7
    )
    
    
    Common
shares purchased for cancellation (Note
3)
    
    
    
    
    
    
    (261
    )
    
    
    (261
    )
    
    
    (38
    )Balance, end of period
    
    
    90
    
    
    
    8,510
    
    
    
    8,600
    
    
    
    7,810Currency Translation AccountBalance, beginning of period
    
    
    (8
    )
    
    
    (1,089
    )
    
    
    (1,097
    )
    
    
    (673
    )Adjustment
for foreign exchange gain (Note 10)
    
    
    
    
    
    
    (69
    )
    
    
    (69
    )
    
    
    Changes for the period
    
    
    
    
    
    
    98
    
    
    
    98
    
    
    
    348Balance, end of period
    
    
    (8
    )
    
    
    (1,060
    )
    
    
    (1,068
    )
    
    
    (325
    )Total equity
    
    $
    82
    
    
    $
    15,076
    
    
    $
    15,158
    
    
    $
    14,873
 *
    
    As restated for adoption of AcG 15
(Note 2)
  12




---



##### 



Condensed Consolidated Statements of Cash Flows
 For the three months ended
    
    
    For the six months endedJune 30
    
    
    June 30
    *
    
    June 30
    
    
    June 30
    *(unaudited, in millions of Canadian dollars)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Cash Flows Provided by (Used in) Operating ActivitiesTotal net income
    
    $
    483
    
    
    $
    442
    
    
    $
    947
    
    
    $
    812New mutual fund business acquisition costs capitalized
    
    
    (25
    )
    
    
    (21
    )
    
    
    (52
    )
    
    
    (51
    )Redemption fees of mutual funds
    
    
    11
    
    
    
    17
    
    
    
    24
    
    
    
    35Items not affecting cash
    
    
    640
    
    
    
    1,009
    
    
    
    981
    
    
    
    705Net cash provided by operating activities
    
    
    1,109
    
    
    
    1,447
    
    
    
    1,900
    
    
    
    1,501Cash Flows Provided by (Used in) Financing ActivitiesBorrowed funds
    
    
    (74
    )
    
    
    (132
    )
    
    
    (35
    )
    
    
    (6
    )Issuance of
preferred shares (Note 8)
    
    
    
    
    
    
    
    
    
    
    400
    
    
    
    Payments to
underwriters (Note 8)
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    Issuance of common shares on exercise of stock options
    
    
    15
    
    
    
    17
    
    
    
    36
    
    
    
    35Common
shares purchased for cancellation (Note
3)
    
    
    (218
    )
    
    
    (49
    )
    
    
    (379
    )
    
    
    (57
    )Dividends paid on common shares
    
    
    (141
    )
    
    
    (126
    )
    
    
    (283
    )
    
    
    (252
    )Dividends paid on preferred shares
    
    
    (7
    )
    
    
    
    
    
    
    (7
    )
    
    
    Net cash used in financing activities
    
    
    (425
    )
    
    
    (290
    )
    
    
    (277
    )
    
    
    (280
    )Cash Flows Provided by (Used in) Investing ActivitiesSales, maturities and repayments of bonds, mortgages,
stocks and real estate
    
    
    9,193
    
    
    
    10,355
    
    
    
    16,831
    
    
    
    21,672Purchases of bonds, mortgages, stocks and real estate
    
    
    (9,386
    )
    
    
    (10,350
    )
    
    
    (18,008
    )
    
    
    (21,487
    )Policy loans
    
    
    (20
    )
    
    
    (14
    )
    
    
    (34
    )
    
    
    (1
    )Short-term securities
    
    
    12
    
    
    
    (1,014
    )
    
    
    349
    
    
    
    (996
    )Other investments
    
    
    69
    
    
    
    52
    
    
    
    20
    
    
    
    (21
    )Redemption
of preferred shares of subsidiary (Note
8)
    
    
    (150
    )
    
    
    
    
    
    
    (150
    )
    
    
    Net cash used in investing activities
    
    
    (282
    )
    
    
    (971
    )
    
    
    (992
    )
    
    
    (833
    )Changes due to fluctuations in exchange rates
    
    
    (20
    )
    
    
    56
    
    
    
    (36
    )
    
    
    65Increase in cash and cash equivalents
    
    
    382
    
    
    
    242
    
    
    
    595
    
    
    
    453Cash and cash equivalents, beginning of period
    
    
    3,961
    
    
    
    3,386
    
    
    
    3,748
    
    
    
    3,175Cash and cash equivalents, end of period
    
    
    4,343
    
    
    
    3,628
    
    
    
    4,343
    
    
    
    3,628Short-term securities, end of period
    
    
    1,892
    
    
    
    2,791
    
    
    
    1,892
    
    
    
    2,791Cash, cash equivalents and short-term securities, end of period
    
    $
    6,235
    
    
    $
    6,419
    
    
    $
    6,235
    
    
    $
    6,419Supplementary InformationCash and cash equivalents:Cash
    
    
    
    
    
    
    
    
    
    $
    287
    
    
    $
    340Cash equivalents
    
    
    
    
    
    
    
    
    
    
    4,056
    
    
    
    3,288$
    4,343
    
    
    $
    3,628Cash disbursements made for:Interest on borrowed funds and subordinated debt
    
    $
    130
    
    
    $
    133
    
    
    $
    134
    
    
    $
    135Income taxes, net of refunds
    
    $
    87
    
    
    $
    124
    
    
    $
    176
    
    
    $
    116
 *
    
    As restated for adoption of AcG 15 (Note 2)
  13




---



##### 



Consolidated Statements of Changes in Segregated Funds Net Assets
 For the three months ended
    
    
    For the six months endedJune 30
    
    
    June 30
    
    
    June 30
    
    
    June 30(unaudited, in millions of Canadian dollars)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Additions to Segregated FundsDeposits:Annuities
    
    $
    1,659
    
    
    $
    1,615
    
    
    $
    3,847
    
    
    $
    3,376Life insurance
    
    
    43
    
    
    
    218
    
    
    
    120
    
    
    
    3091,702
    
    
    
    1,833
    
    
    
    3,967
    
    
    
    3,685Net transfers from general funds
    
    
    135
    
    
    
    108
    
    
    
    310
    
    
    
    363Net realized and unrealized gains
    
    
    1,079
    
    
    
    545
    
    
    
    1,159
    
    
    
    1,254Other investment income
    
    
    462
    
    
    
    466
    
    
    
    675
    
    
    
    675Effect of changes in currency exchange rates
    
    
    7
    
    
    
    880
    
    
    
    305
    
    
    
    1,5433,385
    
    
    
    3,832
    
    
    
    6,416
    
    
    
    7,520Deductions from Segregated FundsPayments to policyholders and their beneficiaries
    
    
    1,851
    
    
    
    1,746
    
    
    
    3,687
    
    
    
    3,637Management fees
    
    
    173
    
    
    
    157
    
    
    
    334
    
    
    
    311Taxes and other expenses
    
    
    37
    
    
    
    13
    
    
    
    70
    
    
    
    602,061
    
    
    
    1,916
    
    
    
    4,091
    
    
    
    4,008Net additions to segregated funds for the period
    
    
    1,324
    
    
    
    1,916
    
    
    
    2,325
    
    
    
    3,512Segregated funds net assets, beginning of period
    
    
    57,565
    
    
    
    55,682
    
    
    
    56,564
    
    
    
    54,086Segregated funds net assets, end of period
    
    $
    58,889
    
    
    $
    57,598
    
    
    $
    58,889
    
    
    $
    57,598
 Consolidated Statements of Segregated Funds Net Assets
 As atJune 30
    
    
    December 31
    
    
    June 30(unaudited, in millions of Canadian dollars)
    
    2005
    
    
    2004
    
    
    2004AssetsSegregated and mutual fund units
    
    $
    45,327
    
    
    $
    43,589
    
    
    $
    44,339Stocks
    
    
    7,527
    
    
    
    7,082
    
    
    
    7,421Bonds
    
    
    5,825
    
    
    
    5,600
    
    
    
    5,723Cash, cash equivalents and short-term securities
    
    
    1,612
    
    
    
    961
    
    
    
    1,254Real estate
    
    
    174
    
    
    
    159
    
    
    
    157Mortgages
    
    
    58
    
    
    
    61
    
    
    
    73Other assets
    
    
    1,812
    
    
    
    716
    
    
    
    2,13362,335
    
    
    
    58,168
    
    
    
    61,100Liabilities
    
    
    3,446
    
    
    
    1,604
    
    
    
    3,502Net assets attributable to segregated funds policyholders
    
    $
    58,889
    
    
    $
    56,564
    
    
    $
    57,598
  14




---



##### 



Condensed Notes to the Interim Consolidated Financial Statements
 
  1. Basis of Presentation
  2. Changes in Accounting Policies
 Consolidation of Variable Interest Entities:
  Sun Life ExchangEable Capital Securities (SLEECS):
  Cumulative Capital Securities (Securities):
  Other Variable Interest Entities:
  Financial Instruments  Disclosure and Presentation:
 15




---



##### 



3. Normal Course Issuer Bid and Cancellation of Common Shares
  4. Earnings Per Share
  For the three months ended
    
    
    For the six months endedJune 30
    
    
    June 30
    *
    
    June 30
    
    
    June 30
    *2005
    
    
    2004
    
    
    2005
    
    
    2004Common shareholders net income
    
    $
    477
    
    
    $
    438
    
    
    $
    935
    
    
    $
    803Less: Effect of stock options of subsidiaries(1)
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    1Common shareholders net income on a diluted basis
    
    $
    476
    
    
    $
    437
    
    
    $
    933
    
    
    $
    802Weighted average number of shares outstanding for basic earnings per share (in millions)
    
    
    587
    
    
    
    601
    
    
    
    590
    
    
    
    600Add: Adjustments relating to the dilutive impact of stock options(1)
    
    
    3
    
    
    
    3
    
    
    
    3
    
    
    
    3Weighted average number of shares outstanding on a diluted basis (in millions)
    
    
    590
    
    
    
    604
    
    
    
    593
    
    
    
    603
 (1)
    
    The effect of stock options is calculated based on the treasury stock method
requirements which assume that unrecognized compensation, as well as any proceeds from the exercise
of the options, would be used to purchase common shares at the average market prices during the
period.*
    
    As restated for adoption of AcG 15 (Note 2)
 5. Segmented Information
      Results by segment for the three months ended June 30, 2005United States
    
    
    
    
    
    
    
    
    
    
    ConsolidationCanada
    
    
    Sun Life
    
    
    MFS
    
    
    Asia
    
    
    Corporate
    
    
    Adjustments
    
    
    TotalRevenue
    
    $
    2,104
    
    
    $
    2,835
    
    
    $
    413
    
    
    $
    205
    
    
    $
    538
    
    
    $
    (69
    )
    
    $
    6,026Total net income
    
    $
    238
    
    
    $
    131
    
    
    $
    42
    
    
    $
    19
    
    
    $
    53
    
    
    $
    
    
    
    $
    483
 Results by segment for the three months ended June 30, 2004
    *United States
    
    
    
    
    
    
    
    
    
    
    ConsolidationCanada
    
    
    Sun Life
    
    
    MFS
    
    
    Asia
    
    
    Corporate
    
    
    Adjustments
    
    
    TotalRevenue
    
    $
    2,032
    
    
    $
    2,453
    
    
    $
    434
    
    
    $
    182
    
    
    $
    576
    
    
    $
    (126
    )
    
    $
    5,551Total net income
    
    $
    223
    
    
    $
    110
    
    
    $
    41
    
    
    $
    10
    
    
    $
    58
    
    
    $
    
    
    
    $
    442
 16




---



##### 



Results and assets by segment for the six months ended June 30, 2005United States
    
    
    
    
    
    
    
    
    
    
    ConsolidationCanada
    
    
    Sun Life
    
    
    MFS
    
    
    Asia
    
    
    Corporate
    
    
    Adjustments
    
    
    TotalRevenue
    
    $
    4,250
    
    
    $
    4,724
    
    
    $
    820
    
    
    $
    419
    
    
    $
    1,068
    
    
    $
    (136
    )
    
    $
    11,145Total net income
    
    $
    486
    
    
    $
    213
    
    
    $
    88
    
    
    $
    25
    
    
    $
    135
    
    
    $
    
    
    
    $
    947AssetsGeneral fund assets
    
    $
    51,146
    
    
    $
    43,351
    
    
    $
    815
    
    
    $
    2,614
    
    
    $
    15,185
    
    
    $
    (1,726
    )
    
    $
    111,385Segregated funds net assets
    
    $
    26,315
    
    
    $
    25,346
    
    
    $
    
    
    
    $
    69
    
    
    $
    7,159
    
    
    $
    
    
    
    $
    58,889
 Results and assets by segment for the six months ended June 30, 2004
    *United States
    
    
    
    
    
    
    
    
    
    
    ConsolidationCanada
    
    
    Sun Life
    
    
    MFS
    
    
    Asia
    
    
    Corporate
    
    
    Adjustments
    
    
    TotalRevenue
    
    $
    4,173
    
    
    $
    4,802
    
    
    $
    884
    
    
    $
    340
    
    
    $
    1,126
    
    
    $
    (236
    )
    
    $
    11,089Total net income
    
    $
    458
    
    
    $
    207
    
    
    $
    28
    
    
    $
    17
    
    
    $
    102
    
    
    $
    
    
    
    $
    812AssetsGeneral fund assets
    
    $
    50,932
    
    
    $
    43,317
    
    
    $
    1,059
    
    
    $
    2,275
    
    
    $
    16,935
    
    
    $
    (830
    )
    
    $
    113,688Segregated funds net assets
    
    $
    24,059
    
    
    $
    26,209
    
    
    $
    
    
    
    $
    20
    
    
    $
    7,310
    
    
    $
    
    
    
    $
    57,598
 *
    
    As restated for adoption of AcG 15 (Note 2)
 6. Changes in Actuarial Liabilities
  2005
    
    
    2004Actuarial liabilities, January 1
    
    $
    74,258
    
    
    $
    75,324Increase in actuarial liabilities
    
    
    742
    
    
    
    360Actuarial liabilities before the following:
    
    
    75,000
    
    
    
    75,684Other
    
    
    53
    
    
    
    (72
    )Effect of changes in currency exchange rates
    
    
    517
    
    
    
    2,013Actuarial liabilities, June 30
    
    
    75,570
    
    
    
    77,625Add: other policy liabilities
    
    
    1,807
    
    
    
    2,105Actuarial liabilities and other policy liabilities, June 30
    
    $
    77,377
    
    
    $
    79,730
 7. Pension Plans and Other Post-Retirement Benefits
 For the three months ended
    
    
    For the six months endedJune 30
    
    
    June 30
    
    
    June 30
    
    
    June 302005
    
    
    2004
    
    
    2005
    
    
    2004Pension benefit cost
    
    $
    3
    
    
    $
    2
    
    
    $
    7
    
    
    $
    5Other post-retirement benefit cost
    
    $
    6
    
    
    $
    5
    
    
    $
    12
    
    
    $
    13
 8. Significant Capital Transactions
   SUBSEQUENT EVENT
  17




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9. Commitments, Guarantees and Contingencies
 LEGAL AND REGULATORY PROCEEDINGS
  In re Mutual Funds
Investment Litigation (Alger, Columbia, Janus, MFS, One Group, Putnam, Allianz Dresdner),
No.1:04-md-15863 (transfer began March 19, 2004) Riggs v. MFS et al., Case No. 04-CV-01162-JFM (direct), Hammerslough v. MFS et al.,
Case No. 04-MD-01620 Anita Walker v. MFS et al., Case No. 1:04-CV-01758 Forsythe v. Sun Life Financial Inc., et al., No. 04cv10584 (GAO) (a
consolidated action); and Marcus Dumond, et al. v. Massachusetts Financial Servs. Co., et al., No.
04cv11458 (GAO) Securities Act of 1933 Securities Exchange Act
of 1934 Investment Company Act of 1940 Investment Advisers Act of 1940 Employee
Retirement Income Security Act of 1974 Reaves, et al. v. MFS Series Trust I, et al, Mass, Super.Ct, C.A. No. 05-1094
  PROVISIONS IN THE UNITED KINGDOM
   18




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10. Foreign Exchange Gain
  11. Subsequent Event
  12. Comparative Figures
  19




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MAJOR OFFICES
 
  Sun Life Financial Canada
 Canadian Headquarters
 Toronto Office
 Montreal Office
 Sun Life Financial U.S.
 
 Bermuda
 Sun Life Financial U.K.
 
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 China
 
 Hong Kong   th
 India   th th
 nd
 nd
 Indonesia   th th
 Philippines   th
   20




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CORPORATE AND SHAREHOLDER INFORMATION
 
  CORPORATE OFFICE
 INVESTOR RELATIONS
 SHAREHOLDER SERVICES
 TRANSFER AGENT
 Canada and the United States                 ®
 United Kingdom
 
 Philippines
 Hong Kong    th
 DIVIDENDS 2005
Dividend Dates
  Record Dates
    
    Payment DatesFebruary 23
    
    March 31May 25
    
    June 30August 24
    
    September 30November 23*
    
    December 30
 *
    
    Subject to approval by the Board of Directors
 Direct Deposit Dividend Service
 
 STOCK EXCHANGE LISTINGS




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(SUN LIFE Q2 SHAREHOLDERS' REPORT BACK COVER)