<PAGE>
Registration No. 33-19765
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-4
POST-EFFECTIVE AMENDMENT NO. 4
to
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
(Exact Name of Registrant)
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Name of Depositor)
80 Broad Street
New York, New York 10004
(Address of Depositor's
Principal Executive Offices)
Depositor's Telephone Number: (212) 943-3855
Bonnie S. Angus, Assistant Vice President
c/o Sun Life Assurance Company of Canada (U.S.)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
(Name and Address of Agent for Service)
Copies of Communications to:
David N. Brown, Esq.
Covington & Burling
1201 Pennsylvania Avenue, N.W.
P.O. Box 7566
Washington, D.C. 20044
|X| It is proposed that this filing will become effective on May 1, 1997
pursuant to paragraph (b) of Rule 485.
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, the Registrant has registered an indefinite amount of securities under the
Securities Act of 1933. The Rule 24f-2 Notice for the fiscal year ended
December 31, 1996 was filed on February 28, 1997.
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C3 (NY)
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
Post-effective Amendment No. 4 to Form N-4
Cross Reference Sheet Required by Rule 495(a) under
The Securities Act of 1933
Item Number in Form N-4 Location in Prospectus; Caption
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Part A
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1. Cover Page Cover Page
2. Definitions Definitions
3. Synopsis Synopsis; Expense Summary
4. Condensed Financial Condensed Financial Information;
Information Performance Data
5. General Description of A Word About the Company,
Registrant, Depositor the Variable Account and the
and Portfolio Companies Series Fund
6. Deductions Contract Charges; Cash
Withdrawals
7. General Description of Purchase Payments and Contract
Variable Annuity Contracts Values During Accumulation
Period; Other Contractual
Provisions
8. Annuity Period Annuity Provisions
9. Death Benefit Death Benefit
10. Purchases and Contract Purchase Payments and Contract
Value Values During Accumulation
Period
11. Redemptions Cash Withdrawals
12. Taxes Federal Tax Status
13. Legal Proceedings Legal Proceedings
14. Table of Contents of the Table of Contents for Statement
Statement of Additional of Additional Information
Information
<PAGE>
Location in Statement of
Item Number in Form N-4 Additional Information; Caption
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Part B
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15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information and General Information
History
18. Services Other Contractual Provisions*
19. Purchase of Securities Purchase Payments and Contract
Being Offered Values During Accumulation
Period*
20. Underwriters Distribution of the Contracts*
21. Calculation of Performance Calculation of Performance
Data Data
22. Annuity Payments Annuity Provisions
23. Financial Statements Financial Statements
* In the Prospectus.
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
Attached hereto and made a part hereof is the Prospectus dated May 1, 1997.
<PAGE>
PROSPECTUS
MAY 1, 1997
COMPASS 3
The individual flexible payment deferred annuity contracts (the "Contracts")
offered by this Prospectus are designed for use in connection with personal
retirement plans, some of which qualify for federal income tax advantages
available under Sections 401, 403 or 408 of the Internal Revenue Code. The
Contracts are issued by Sun Life Insurance and Annuity Company of New York (the
"Company"). The Company's Annuity Service Mailing Address is 80 Broad Street,
New York, New York 10004.
The Owner of a Contract may elect to have Contract values accumulated on a
fixed basis in the Fixed Account (which is part of the Company's general account
and pays interest at a guaranteed fixed rate) or on a variable basis in Sun Life
(N.Y.) Variable Account B (the "Variable Account"), a separate account of the
Company, or divided among the Fixed Account and Variable Account. The assets of
the Variable Account are divided into Sub-Accounts. Each Sub-Account uses its
assets to purchase, at their net asset value, shares of a specific series of
MFS/Sun Life Series Trust, a mutual fund registered under the Investment Company
Act of 1940 (the "Series Fund"). Shares of the Series Fund are issued in twenty
series, each corresponding to an independent portfolio of securities. Seven
series are available as the investment medium for the Contracts: (1) Money
Market Series; (2) High Yield Series; (3) Capital Appreciation Series; (4)
Government Securities Series; (5) World Governments Series; (6) Total Return
Series; and (7) Managed Sectors Series. If the Owner elects certain forms of an
annuity as a retirement benefit, payments may be funded from either the Fixed
Account or the Variable Account or from both of the Accounts. Contract values
allocated to the Variable Account and annuity payments elected on a variable
basis will vary to reflect the investment performance of the series of the
Series Fund selected by the Owner.
This Prospectus sets forth information about the Contracts and the Variable
Account that a prospective purchaser should know before investing. Additional
information about the Contracts and the Variable Account has been filed with the
Securities and Exchange Commission in a Statement of Additional Information
dated May 1, 1997 which is incorporated herein by reference. The Statement of
Additional Information is available from the Company without charge upon written
request to the above address or by telephoning (212) 943-3855 or (800) 447-7569.
The Table of Contents for the Statement of Additional Information is shown on
page 21 of this Prospectus.
THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUS OF THE
SERIES FUND.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Definitions 2
Synopsis 3
Expense Summary 4
Condensed Financial Information 5
Performance Data 6
Financial Statements 6
A Word About the Company, the Variable Account and the Series Fund 6
Purchase Payments and Contract Values During Accumulation Period 8
Cash Withdrawals 9
Death Benefit 11
Contract Charges 11
Annuity Provisions 14
Other Contractual Provisions 16
Federal Tax Status 18
Distribution of the Contracts 20
Legal Proceedings 20
Contract Owner Inquiries 21
Table of Contents for Statement of Additional Information 21
</TABLE>
DEFINITIONS
The following terms as used in this Prospectus have the indicated meanings:
Accumulation Account: An account established for the Contract to which net
Purchase Payments are credited in the form of Accumulation Units.
Accumulation Unit: A unit of measure used in the calculation of the value of
the Accumulation Account. There are two types of Accumulation Units: Variable
Accumulation Units and Fixed Accumulation Units.
Annuitant: The person or persons named in the Contract and on whose life the
first annuity payment is to be made. If more than one person is so named, all
provisions of the Contract which are based on the death of the "Annuitant" will
be based on the date of death of the last surviving of the persons so named. By
example, the death benefit will become due only upon the death, prior to the
Annuity Commencement Date, of the last surviving of the persons so named.
Collectively, these persons are referred to in this Contract as "Annuitants."
The Owner is not permitted to name a "Co-Annuitant" under a Qualified Contract.
Annuity Commencement Date: The date on which the first annuity payment is to be
made.
Annuity Unit: A unit of measure used in the calculation of the amount of the
second and each subsequent Variable Annuity payment.
Beneficiary: The person who has the right to the death benefit set forth in the
Contract.
Contract Years and Contract Anniversaries: The first Contract Year shall be the
period of 12 months plus a part of a month as measured from the date the
Contract is issued to the first day of the calendar month which follows the
calendar month of issue. All Contract Years and Anniversaries thereafter shall
be 12 month periods based upon such first day of the calendar month which
follows the calendar month of issue.
Due Proof of Death: An original certified copy of an official death
certificate, an original certified copy of a decree of a court of competent
jurisdiction as to the finding of death, or any other proof satisfactory to the
Company.
Fixed Account: The Fixed Account consists of all assets of the Company other
than those allocated to separate accounts of the Company.
Fixed Annuity: An annuity with payments which do not vary as to dollar amount.
Non-Qualified Contract: A Contract used in connection with a retirement plan
which does not receive favorable federal income tax treatment under Sections
401, 403 or 408 of the Internal Revenue Code of 1986, as amended (the "Code").
The Contract must be owned by a natural person or by a trust or other entity as
agent for a natural person for the Contract to receive favorable income tax
treatment as an annuity.
Owner: The person, persons or entity entitled to the ownership rights stated in
the Contract and in whose name or names the Contract is issued.
2
<PAGE>
Payee: The recipient of payments under the Contract. The term may include an
Annuitant, a Beneficiary who becomes entitled to benefits upon the death of the
Annuitant or any person who is designated as the beneficiary of distributions
made as a result of the death of the Owner.
Purchase Payment (Payment): An amount paid to the Company by the Owner or on
the Owner's behalf as consideration for the benefits provided by the Contract.
Qualified Contract: A Contract used in connection with a retirement plan which
receives favorable federal income tax treatment under Sections 401, 403 or 408
of the Code.
Series Fund: MFS/Sun Life Series Trust.
Seven Year Anniversary: The seventh Contract Anniversary and each succeeding
Contract Anniversary occurring at any seven year interval thereafter, for
example, the 14th, 21st and 28th Contract Anniversaries.
Sub-Account: That portion of the Variable Account which invests in shares of a
particular series or sub-series of the Series Fund.
Valuation Period: The period of time from one determination of Accumulation
Unit and Annuity Unit values to the next subsequent determination of these
values.
Variable Annuity: An annuity with payments which vary as to dollar amount in
relation to the investment performance of specified Sub- Accounts of the
Variable Account.
SYNOPSIS
Purchase Payments are allocated to Sub-Accounts of the Variable Account or
to the Fixed Account or to both Sub-Accounts and the Fixed Account as selected
by the Owner. Purchase Payments must total at least $300 for the first Contract
Year and each Purchase Payment must be at least $25 (see "Purchase Payments" on
page 8). Subject to certain conditions, during the accumulation period the Owner
may, without charge, transfer amounts among the Sub-Accounts and between the
Sub-Accounts and the Fixed Account (see "Transfers/Conversions of Accumulation
Units" on page 9).
No sales charge is deducted from Purchase Payments; however, if any portion
of a Contract's Accumulation Account is surrendered, the Company will, with
certain exceptions, deduct a withdrawal charge (contingent deferred sales
charge) ranging from 6% to 0% to cover certain expenses relating to the sale of
the Contracts. A portion of the Accumulation Account may be withdrawn each year
without the assessment of a withdrawal charge and after a Purchase Payment has
been held by the Company for seven years it may be withdrawn without charge.
Also, no withdrawal charge is assessed upon annuitization or upon the
transfers/conversions described above (see "Cash Withdrawals" and "Withdrawal
Charges" on pages 9 and 12, respectively).
Special restrictions on withdrawals apply to Contracts used with
Tax-Sheltered Annuities established pursuant to Section 403(b) of the Code (see
"Section 403(b) Annuities" on page 10).
In addition, under certain circumstances withdrawals may result in tax
penalties (see "Federal Tax Status" on page 18).
In the event of the death of the Annuitant prior to the Annuity Commencement
Date, the Company will pay a death benefit to the Beneficiary. If the death of
the Annuitant occurs on or after the Annuity Commencement Date, no death benefit
will be payable under the Contract except as may be provided under the annuity
option elected (see "Death Benefit" on page 11).
On each Contract Anniversary and on surrender of the Contract for full
value, the Company will deduct a contract maintenance charge of $30 from the
Accumulation Account to reimburse it for administrative expenses related to the
issuance and maintenance of the Contracts. After the Annuity Commencement Date
the charge will be deducted pro rata from each annuity payment made during the
year (see "Contract Maintenance Charge" on page 11).
The Company also deducts a mortality and expense risk charge at the end of
each Valuation Period equal to an annual rate of 1.25% of the daily net assets
of the Variable Account for mortality and expense risks assumed by the Company.
In addition, for the first seven Contract Years the Company deducts a
distribution expense charge at the end of each Valuation Period equal to an
annual rate of 0.15% of the daily
3
<PAGE>
net assets of the Variable Account attributable to the Contracts. There is no
deduction for the distribution expense charge after the seventh Contract
Anniversary (see "Mortality and Expense Risk Charge and Distribution Expense
Charge" on page 12).
Premium taxes payable to any governmental entity will be charged against the
Contracts (see "Premium Taxes" on page 13).
Annuity payments will begin on the Annuity Commencement Date. The Owner
selects the Annuity Commencement Date, frequency of payments, and the annuity
option (see "Annuity Provisions" on page 14).
If the Owner is not satisfied with the Contract it may be returned to the
Company within ten days after it was delivered to the Owner. When the Company
receives the returned Contract it will be cancelled and the value of the
Contract's Accumulation Account at the end of the Valuation Period during which
the Contract was received by the Company will be refunded.
EXPENSE SUMMARY
The purpose of the following table is to help Owners and prospective
purchasers to understand the costs and expenses that are borne, directly and
indirectly, by Contract Owners. The table reflects expenses of the Variable
Account attributable to the Contracts as well as of the Series Fund. The
information set forth should be considered together with the narrative provided
under the heading "Contract Charges" in this Prospectus, and with the Series
Fund's prospectus. In addition to the expenses listed below, premium taxes may
be applicable if the Owner is other than a New York State resident.
<TABLE>
<CAPTION>
MONEY HIGH CAPITAL GOVERNMENT WORLD TOTAL MANAGED
MARKET YIELD APPRECIATION SECURITIES GOVERNMENTS RETURN SECTORS
CONTRACT OWNER TRANSACTION EXPENSES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
- ----------------------------------------------- ------- ------- ------------- ----------- ------------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales Load Imposed on Purchases................ 0 0 0 0 0 0 0
Deferred Sales Load (as a percentage of
Purchase Payments withdrawn) (1)
Number of Complete Contract Years Payment in
Accumulation Account
0-1........................................ 6% 6% 6% 6% 6% 6% 6%
2-3........................................ 5% 5% 5% 5% 5% 5% 5%
4-5........................................ 4% 4% 4% 4% 4% 4% 4%
6.......................................... 3% 3% 3% 3% 3% 3% 3%
7 or more.................................. 0% 0% 0% 0% 0% 0% 0%
Exchange Fee................................... 0 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
ANNUAL CONTRACT MAINTENANCE CHARGE $30 per contract
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<S> <C> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES
- ---------------------------------------------------
(as a percentage of average separate account assets)
Mortality and Expense Risk Fees.................... 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
Distribution Expense Charge (2).................... 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
Other Account Fees and Expenses.................... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Total Separate Account Annual Expenses............. 1.40% 1.40% 1.40% 1.40% 1.40% 1.40% 1.40%
SERIES FUND ANNUAL EXPENSES
- ---------------------------------------------------
(as a percentage of Series Fund average net assets)
Management Fees.................................... 0.50% 0.75% 0.75% 0.55% 0.75% 0.68% 0.75%
Other Expenses..................................... 0.06% 0.09% 0.05% 0.08% 0.15% 0.04% 0.07%
Total Series Fund Annual Expenses.................. 0.56% 0.84% 0.80% 0.63% 0.90% 0.72% 0.82%
<FN>
- ------------------------------
(1) A portion of the Accumulation Account value may be withdrawn each year
without imposition of any withdrawal charge, and after a Purchase Payment
has been held by the Company for seven years it may be withdrawn free of
any withdrawal charge.
(2) The Distribution Expense Charge is imposed only during the first seven
Contract Years. This charge may be deemed a deferred sales charge.
</TABLE>
4
<PAGE>
EXAMPLE
If you surrender your Contract at the end of the applicable time period, you
would pay the following expenses on a $1,000 investment, assuming a 5% annual
return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Series....................................................................... $74 $107 $142 $229
High Yield Series......................................................................... 77 115 156 257
Capital Appreciation Series............................................................... 76 114 154 253
Government Securities Series.............................................................. 75 109 145 236
World Governments Series.................................................................. 77 117 159 264
Total Return Series....................................................................... 76 111 150 245
Managed Sectors Series.................................................................... 77 114 155 255
</TABLE>
If you do NOT surrender your Contract, or if you annuitize at the end of the
applicable time period, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Series....................................................................... $20 $62 $106 $229
High Yield Series......................................................................... 23 70 120 257
Capital Appreciation Series............................................................... 22 69 118 253
Government Securities Series.............................................................. 21 64 109 236
World Governments Series.................................................................. 23 72 123 264
Total Return Series....................................................................... 22 66 114 245
Managed Sectors Series.................................................................... 23 69 119 255
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LOWER THAN THOSE SHOWN.
CONDENSED FINANCIAL INFORMATION--ACCUMULATION UNIT VALUES
The following information should be read in conjunction with the Variable
Account's financial statements appearing in the Statement of Additional
Information, all of which has been audited by Deloitte & Touche LLP, independent
certified public accountants.
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1993* DECEMBER 31, 1994 DECEMBER 31, 1995
------------------ ----------------- -----------------
<S> <C> <C> <C>
CAPITAL APPRECIATION SERIES
Unit Value
Beginning of Period $10.0000 $10.3891 $ 9.8771
End of Period $10.3891 $ 9.8771 $13.0981
Units Outstanding End of Period 17,574 135,042 184,876
GOVERNMENT SECURITIES SERIES
Unit Value
Beginning of Period $10.0000 $10.0022 $ 9.6514
End of Period $10.0022 $ 9.6514 $11.1980
Units Outstanding End of Period 7,140 32,725 39,286
HIGH YIELD SERIES
Unit Value
Beginning of Period $10.0000 $10.4094 $10.0368
End of Period $10.4094 $10.0368 $11.5849
Units Outstanding End of Period 2,726 37,197 43,963
MANAGED SECTORS SERIES
Unit Value
Beginning of Period $10.0000 $ 9.5946 $ 9.2925
End of Period $ 9.5946 $ 9.2925 $12.1391
Units Outstanding End of Period 1,619 28,752 53,846
MONEY MARKET SERIES
Unit Value
Beginning of Period $10.0000 $10.0435 $10.2716
End of Period $10.0435 $10.2716 $10.6823
Units Outstanding End of Period 5,787 33,901 44,348
TOTAL RETURN SERIES
Unit Value
Beginning of Period $10.0000 $ 9.9794 $ 9.6190
End of Period $ 9.9794 $ 9.6190 $12.0270
Units Outstanding End of Period 30,589 154,543 185,716
WORLD GOVERNMENTS SERIES
Unit Value
Beginning of Period $10.0000 $10.1398 $ 9.5512
End of Period $10.1398 $ 9.5512 $10.8976
Units Outstanding End of Period 6,287 43,259 46,895
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
CAPITAL APPRECIATION SERIES
Unit Value
Beginning of Period $13.0981
End of Period $15.6920
Units Outstanding End of Period 231,231
GOVERNMENT SECURITIES SERIES
Unit Value
Beginning of Period $11.1980
End of Period $11.2212
Units Outstanding End of Period 58,052
HIGH YIELD SERIES
Unit Value
Beginning of Period $11.5849
End of Period $12.8082
Units Outstanding End of Period 58,945
MANAGED SECTORS SERIES
Unit Value
Beginning of Period $12.1391
End of Period $14.0980
Units Outstanding End of Period 82,578
MONEY MARKET SERIES
Unit Value
Beginning of Period $10.6823
End of Period $11.0530
Units Outstanding End of Period 83,267
TOTAL RETURN SERIES
Unit Value
Beginning of Period $12.0270
End of Period $13.5283
Units Outstanding End of Period 255,284
WORLD GOVERNMENTS SERIES
Unit Value
Beginning of Period $10.8976
End of Period $11.2477
Units Outstanding End of Period 47,922
<FN>
* From March 1, 1993 (date of commencement of sales of the Contracts).
</TABLE>
5
<PAGE>
PERFORMANCE DATA
From time to time the Variable Account may publish reports to shareholders,
sales literature and advertisements containing performance data relating to the
Sub-Accounts. Performance data will consist of total return quotations which
will always include quotations for the period subsequent to the date each Sub-
Account became available for investment under the Contracts, and for recent one
year and, when applicable, five and ten year periods. Such quotations for such
periods will be the average annual rates of return required for an initial
Purchase Payment of $1,000 to equal the actual variable accumulation value
attributable to such Purchase Payment on the last day of the period, after
reflection of all applicable withdrawal and contract charges. In addition, the
Variable Account may calculate non-standardized rates of return that do not
reflect withdrawal and contract charges. Results calculated without withdrawal
and/or contract charges will be higher. Performance figures used by the Variable
Account are based on the actual historical performance of the Series Fund for
specified periods, and the figures are not intended to indicate future
performance. The Variable Account may also from time to time compare its
investment performance to various unmanaged indices or other variable annuities
and may refer to certain rating and other organizations in its marketing
materials. More detailed information on the computations is set forth in the
Statement of Additional Information.
FINANCIAL STATEMENTS
Financial Statements of the Variable Account and the Company are included in
the Statement of Additional Information.
A WORD ABOUT THE COMPANY, THE VARIABLE ACCOUNT AND THE SERIES FUND
THE COMPANY
Sun Life Insurance and Annuity Company of New York (the "Company") is a
stock life insurance company incorporated under the laws of New York on May 25,
1983. Its Home Office is located at 80 Broad Street, New York, New York 10004.
The Company is a wholly-owned subsidiary of Sun Life Assurance Company of
Canada (U.S.) ("Sun Life of Canada (U.S.)"), a stock life insurance company
incorporated in Delaware and having its Executive Office at One Sun Life
Executive Park, Wellesley Hills, Massachusetts 02181. Sun Life of Canada (U.S.),
in turn, is a wholly-owned subsidiary of Sun Life Assurance Company of Canada,
150 King Street West, Toronto, Ontario, Canada, a mutual life insurance company
incorporated in Canada in 1865.
THE VARIABLE ACCOUNT
Sun Life (N.Y.) Variable Account B (the "Variable Account") was established
as a separate account of the Company on December 3, 1984 pursuant to a
resolution of its Board of Directors. The Variable Account meets the definition
of a separate account under the federal securities laws and is registered with
the Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940. Under New York insurance law, and under the
Contract, the income, gains or losses of the Variable Account are credited to or
charged against the assets of the Variable Account without regard to the other
income, gains or losses of the Company. Although the assets maintained in the
Variable Account will not be charged with any liabilities arising out of any
other business conducted by the Company, all obligations arising under the
Contracts, including the promise to make annuity payments, are general corporate
obligations of the Company.
The assets of the Variable Account are divided into Sub-Accounts. Each
Sub-Account invests exclusively in shares of a specific series of the Series
Fund described below.
In addition to the Contracts offered by this Prospectus, the Company issues
other variable annuity contracts participating in the Variable Account.
6
<PAGE>
THE SERIES FUND
All amounts allocated to the Variable Account will be used to purchase
shares of MFS/Sun Life Series Trust (the "Series Fund") as designated by the
Owner at their net asset value. Any and all distributions made by the Series
Fund with respect to the shares held by the Variable Account will be reinvested
to purchase additional shares at their net asset value. Deductions from the
Variable Account for cash withdrawals, annuity payments, death benefits,
administrative charges, contract charges against the assets of the Variable
Account for the assumption of mortality and expense risks and distribution
expenses and any applicable taxes will, in effect, be made by redeeming the
number of Series Fund shares at their net asset value equal in total value to
the amount to be deducted. The Variable Account will be fully invested in Series
Fund shares at all times.
Shares of the Series Fund are available exclusively to separate accounts
established by the Company and Sun Life of Canada (U.S.) to fund benefits under
variable life insurance and variable annuity products. Certain risks involved in
funding benefits under both life insurance and annuity contracts are discussed
in the prospectus of the Series Fund under the caption "Management of the Series
Fund". The Series Fund is composed of twenty independent portfolios of
securities, each of which has separate investment objectives and policies.
Shares of the Series Fund are issued in twenty series, each corresponding to one
of the portfolios; however the Contracts provide for investment only in shares
of the seven series of the Series Fund described below. Massachusetts Financial
Services Company, a subsidiary of Sun Life of Canada (U.S.), is the Series
Fund's investment adviser. The investment objectives of each of the seven
available series of the Series Fund are summarized below. More detailed
information may be found in the current prospectus of the Series Fund and the
Series Fund's Statement of Additional Information. A prospectus for the Series
Fund must accompany this Prospectus and should be read in conjunction herewith.
(1) MONEY MARKET SERIES ("MMS") will seek maximum current income to the
extent consistent with stability of principal by investing exclusively in money
market instruments maturing in less than 13 months, including U.S. government
securities and repurchase agreements collateralized by such securities,
obligations of the larger banks and prime commercial paper.
(2) HIGH YIELD SERIES ("HYS") will seek high current income and capital
appreciation by investing primarily in fixed income securities of U.S. and
foreign issuers which may be in the lower rated categories or unrated (commonly
known as "junk bonds") and which may include equity features. These securities
generally involve greater volatility of price and risk to principal and income
and less liquidity than securities in the higher rated categories. Any person
contemplating allocating Purchase Payments to the Sub-Account investing in
shares of the High Yield Series should review the risk disclosure in the Series
Fund prospectus carefully and consider the investment risks involved.
(3) CAPITAL APPRECIATION SERIES ("CAS") will seek capital appreciation by
investing in securities of all types, with a major emphasis on common stocks.
(4) GOVERNMENT SECURITIES SERIES ("GSS") will seek current income and
preservation of capital by investing in U.S. Government and Government-related
Securities.
(5) WORLD GOVERNMENTS SERIES ("WGS") will seek moderate current income and
preservation and growth of capital by investing in a portfolio of U.S. and
Foreign Government Securities.
(6) TOTAL RETURN SERIES ("TRS") will seek primarily to obtain above-average
income (compared to a portfolio entirely invested in equity securities)
consistent with prudent employment of capital; its secondary objective is to
take advantage of opportunities for growth of capital and income. Assets will be
allocated and reallocated from time to time between money market, fixed income
and equity securities. Under normal market conditions, at least 25% of the Total
Return Series' assets will be invested in fixed income securities and at least
40% and no more than 75% of its assets will be invested in equity securities.
7
<PAGE>
(7) MANAGED SECTORS SERIES ("MSS") will seek capital appreciation by varying
the weighting of its portfolio of common stocks among certain industry sectors.
Dividend income, if any, is incidental to its objective of capital appreciation.
PURCHASE PAYMENTS AND CONTRACT VALUES
DURING ACCUMULATION PERIOD
PURCHASE PAYMENTS
All Purchase Payments are to be paid to the Company at its Annuity Service
Mailing Address. Purchase Payments may be made annually, semi-annually,
quarterly, monthly, or on any other frequency acceptable to the Company. Unless
the Contract has been surrendered, Purchase Payments may be made at any time
during the life of the Annuitant and before the Annuity Commencement Date. The
amount of Purchase Payments may vary; however, Purchase Payments must total at
least $300 for the first Contract Year, and each Purchase Payment must be at
least $25. In addition, the prior approval of the Company is required before it
will accept a Purchase Payment which would cause the value of a Contract's
Accumulation Account to exceed $1,000,000. If the value of a Contract's
Accumulation Account exceeds $1,000,000, no additional Purchase Payments will be
accepted without prior approval.
Completed application forms, together with the initial Purchase Payment, are
forwarded to the Company. Upon acceptance, the Contract is issued to the Owner
and the initial Purchase Payment is credited to the Contract in the form of
Accumulation Units. The initial Purchase Payment must be applied within two
business days of receipt of a completed application. The Company may retain the
Purchase Payment for up to five business days while attempting to complete an
incomplete application. If the application cannot be made complete within five
business days, the applicant will be informed of the reasons for the delay and
the Purchase Payment will be returned immediately unless the applicant
specifically consents to the Company's retaining the Purchase Payment until the
application is made complete. Thereafter, the Purchase Payment must be applied
within two business days. All subsequent Purchase Payments will be applied using
the Accumulation Unit values for the Valuation Period during which the Purchase
Payment is received by the Company.
The Company will establish an Accumulation Account for each Contract. The
Contract's Accumulation Account value for any Valuation Period is equal to the
variable accumulation value, if any, plus the fixed accumulation value, if any,
for that Valuation Period. The variable accumulation value is equal to the sum
of the value of all Variable Accumulation Units credited to the Contract's
Accumulation Account.
Each net Purchase Payment will be allocated to either the Fixed Account (see
Appendix A to the Statement of Additional Information for a description of the
Fixed Account) or to Sub-Accounts of the Variable Account or to both
Sub-Accounts and the Fixed Account in accordance with the allocation factors
specified by the Owner in the application or as subsequently changed. Upon
receipt of a Purchase Payment, all or that portion, if any, of the net Purchase
Payment to be allocated to the Sub-Accounts will be credited to the Accumulation
Account in the form of Variable Accumulation Units. The number of particular
Variable Accumulation Units to be credited is determined by dividing the dollar
amount allocated to the particular Sub-Account by the Variable Accumulation Unit
value for the particular Sub-Account for the Valuation Period during which the
Purchase Payment is received.
The Variable Accumulation Unit value for each Sub-Account was established at
$10.00 for the first Valuation Period of the particular Sub-Account. The
Variable Accumulation Unit value for any subsequent Valuation Period is
determined by methodology which is the mathematical equivalent of multiplying
the Variable Accumulation Unit value for the immediately preceding Valuation
Period by the appropriate Net Investment Factor for such subsequent Valuation
Period. The Variable Accumulation Unit value for each Sub-Account for any
Valuation Period is determined at the end of the particular Valuation Period and
may increase, decrease or remain constant from Valuation Period to Valuation
Period, depending upon the investment performance of the series of the Series
Fund in which the Sub-Account is invested, and the expenses and charges deducted
from the Variable Account.
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<PAGE>
NET INVESTMENT FACTOR
The Net Investment Factor is an index applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. The Net
Investment Factor may be greater or less than or equal to one; therefore, the
value of a Variable Accumulation Unit may increase, decrease or remain the same.
The Net Investment Factor for any Sub-Account for any Valuation Period is
determined by dividing (a) by (b) and then subtracting (c) from the result
where:
(a) is the net result of:
(1) the net asset value of a Series Fund share held in the
Sub-Account determined as of the end of the Valuation Period,
plus
(2) the per share amount of any dividend or other distribution
declared on the Series Fund shares held in the Sub-Account if
the "ex dividend" date occurs during the Valuation Period, plus
or minus
(3) a per share credit or charge with respect to any taxes paid, or
reserved for by the Company during the Valuation Period which
are determined by the Company to be attributable to the
operation of the Sub-Account (no federal income taxes are
applicable under present law);
(b) is the net asset value of a Series Fund share held in the
Sub-Account determined as of the end of the preceding Valuation
Period; and
(c) is the risk charge factor determined by the Company for the
Valuation Period to reflect the charge for assuming the mortality
and expense risks and distribution expense risk.
TRANSFERS/CONVERSIONS OF ACCUMULATION UNITS
During the accumulation period the Owner may convert the value of a
designated number of Fixed Accumulation Units then credited to a Contract's
Accumulation Account into Variable Accumulation Units of particular Sub-Accounts
having an equal aggregate value, or convert the value of a designated number of
Variable Accumulation Units into other Variable Accumulation Units and/or Fixed
Accumulation Units having an equal aggregate value. These transfers/conversions
are subject to the following conditions: (1) conversions involving Fixed
Accumulation Units may be made only during the 45 day period before and the 45
day period after each Contract Anniversary; (2) not more than 12 conversions may
be made in any Contract Year; and (3) the value of Accumulation Units converted
may not be less than $1,000 unless all of the Fixed Accumulation Units or all of
the Variable Accumulation Units of a particular Sub-Account credited to the
Accumulation Account are being converted. In addition, these
transfers/conversions shall be subject to such terms and conditions as may be
imposed by the Series Fund. The conversion will be made using the Accumulation
Unit values for the Valuation Period during which the request for conversion is
received by the Company.
CASH WITHDRAWALS
At any time before the Annuity Commencement Date and during the lifetime of
the Annuitant, the Owner may elect to receive a cash withdrawal payment from the
Company. Any such election shall specify the amount of the withdrawal and will
be effective on the date that it is received by the Company. The withdrawal will
result in the cancellation of Accumulation Units with an aggregate value equal
to the dollar amount of the cash withdrawal payment plus, if applicable, the
contract maintenance charge and any withdrawal charge. Unless instructed to the
contrary, the Company will cancel Fixed Accumulation Units and Variable
Accumulation Units of the particular Sub-Accounts on a pro rata basis reflecting
the existing composition of the Contract's Accumulation Account. If a partial
withdrawal is requested which would leave an Accumulation Account value of less
than the contract maintenance charge, then such partial withdrawal will be
treated as a full surrender.
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<PAGE>
Under certain conditions, the Company will assess a withdrawal charge if a
cash withdrawal payment is made. The amount of any withdrawal charge and the
conditions under which the charge will apply are discussed under "Withdrawal
Charges".
Any cash withdrawal payment will be paid within seven days from the date the
election becomes effective, except as the Company may be permitted to defer such
payment in accordance with the Investment Company Act of 1940. Deferment is
currently permissible only (1) for any period (a) during which the New York
Stock Exchange is closed other than customary week-end and holiday closings, or
(b) during which trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission, (2) for any period during
which an emergency exists as a result of which (a) disposal of securities held
by the Series Fund is not reasonably practicable, or (b) it is not reasonably
practicable to determine the value of the net assets of the Series Fund, or (3)
for such other periods as the Securities and Exchange Commission may by order
permit for the protection of security holders.
Special restrictions on withdrawals apply to certain Qualified Contracts,
including Contracts used with Tax-Sheltered Annuities established pursuant to
Section 403(b) of the Code ("Section 403(b) Annuities") discussed below.
Reference should be made to the terms of the particular retirement plan for
which Qualified Contracts are issued for any limitations or restrictions on cash
withdrawals. A cash withdrawal under either a Qualified or Non-Qualified
Contract also may result in the imposition of a tax penalty (see "Federal Tax
Status").
SECTION 403(B) ANNUITIES
The Internal Revenue Code imposes restrictions on cash withdrawals from
Contracts used with Section 403(b) Annuities. In order for these Contracts to
receive tax deferred treatment, the Contract must provide that cash withdrawals
of amounts attributable to salary reduction contributions (other than
withdrawals of Accumulation Account value as of December 31, 1988 ("Pre-1989
Account Value")) may be made only when the Contract Owner attains age 59 1/2,
separates from service with the employer, dies or becomes disabled (within the
meaning of Section 72(m)(7) of the Code). These restrictions apply to any growth
or interest on or after January 1, 1989 on Pre-1989 Account Value, salary
reduction contributions made on or after January 1, 1989, and any growth or
interest on such contributions ("Restricted Account Value").
Withdrawals of Restricted Account Value are also permitted in cases of
financial hardship, but only to the extent of contributions; earnings on
contributions cannot be withdrawn for hardship reasons. While specific rules
defining hardship have not been issued by the Internal Revenue Service, it is
expected that to qualify for a hardship distribution, the Owner must have an
immediate and heavy bona fide financial need and lack other resources reasonably
available to satisfy the need. Hardship withdrawals (as well as certain other
premature withdrawals) will be subject to a 10% tax penalty, in addition to any
withdrawal charge applicable under the Contract (see "Federal Tax Status").
Under the terms of a particular Section 403(b) plan, the Owner may be
entitled to transfer all or a portion of the Accumulation Account value to one
or more alternative funding options. Contract Owners should consult the
documents governing their plan and the person who administers the plan for
information as to such investment alternatives.
In imposing these restrictions on withdrawals, the Company is relying upon a
no-action letter dated November 28, 1988 from the staff of the Securities and
Exchange Commission to the American Council of Life Insurance, the requirements
for which have been complied with by the Company.
For information on the federal income tax withholding rules that apply to
distributions from Qualified Contracts (including Section 403(b) Annuities) see
"Federal Tax Status".
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<PAGE>
DEATH BENEFIT
In the event of the death of the Annuitant prior to the Annuity Commencement
Date, the Company will pay a death benefit to the Beneficiary. If the death of
the Annuitant occurs on or after the Annuity Commencement Date, no death benefit
will be payable under the Contract except as may be provided under the annuity
option elected.
During the lifetime of the Annuitant and prior to the Annuity Commencement
Date, the Owner may elect to have the value of the Accumulation Account applied
under one or more annuity options to effect a Variable Annuity or a Fixed
Annuity or a combination of both for the Beneficiary as Payee after the death of
the Annuitant. If no election of a method of settlement of the death benefit by
the Owner is in effect on the date of death of the Annuitant, the Beneficiary
may elect (a) to receive the death benefit in the form of a cash payment; or (b)
to have the value of the Accumulation Account applied under one or more of the
annuity options (on the Annuity Commencement Date described under "Payment of
Death Benefit") to effect a Variable Annuity or a Fixed Annuity or a combination
of both for the Beneficiary as Payee. Any election of a method of settlement of
the death benefit by the Beneficiary will become effective on the later of: (a)
the date the election is received by the Company; or (b) the date Due Proof of
Death of the Annuitant is received by the Company. If an election by the
Beneficiary is not received by the Company within 60 days following the date Due
Proof of Death of the Annuitant is received by the Company, the Beneficiary will
be deemed to have elected a cash payment as of the last day of the 60 day
period.
In all cases, no Owner or Beneficiary shall be entitled to exercise any
rights that would adversely affect the treatment of the Contract as an annuity
contract under the Internal Revenue Code (see "Other Contractual
Provisions--Death of Owner").
PAYMENT OF DEATH BENEFIT
If the death benefit is to be paid in cash to the Beneficiary, payment will
be made within seven days of the date the election becomes effective or is
deemed to become effective, except as the Company may be permitted to defer such
payment in accordance with the Investment Company Act of 1940 under the
circumstances described under "Cash Withdrawals." If the death benefit is to be
paid in one sum to the Owner, or to the estate of the deceased Owner/Annuitant,
payment will be made within seven days of the date Due Proof of Death of the
Annuitant, the Owner and/or the Beneficiary is received. If settlement under one
or more of the annuity options is elected the Annuity Commencement Date will be
the first day of the second calendar month following the effective date or the
deemed effective date of the election, and the Contract's Accumulation Account
will be maintained in effect until the Annuity Commencement Date.
AMOUNT OF DEATH BENEFIT
The death benefit is equal to the greatest of: (1) the value of the
Contract's Accumulation Account; (2) the total Purchase Payments made under the
Contract reduced by all withdrawals; or (3) the value of the Contract's
Accumulation Account on the Seven Year Anniversary immediately preceding the
date of death of the Annuitant, adjusted for any Purchase Payments or cash
withdrawal payments made and contract charges assessed subsequent to such Seven
Year Anniversary. The Accumulation Unit values used in determining the amount of
the death benefit under (1) above will be the values for the Valuation Period
during which Due Proof of Death of the Annuitant is received by the Company if
settlement is elected by the Owner under one or more of the annuity options or,
if no election by the Owner is in effect, either the values for the Valuation
Period during which an election by the Beneficiary is effective or the values
for the Valuation Period during which Due Proof of Death of both the Annuitant
and the designated Beneficiary is received by the Company if the amount of the
death benefit is to be paid in one sum to the deceased Owner/Annuitant's estate.
CONTRACT CHARGES
Contract charges may be assessed under the Contracts as follows:
CONTRACT MAINTENANCE CHARGE
On each Contract Anniversary and on surrender of the Contract for full value
on other than the Contract Anniversary, the Company deducts from the
Accumulation Account a contract maintenance charge of $30
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to reimburse it for administrative expenses relating to the issuance and
maintenance of the Contract. The contract maintenance charge will be deducted in
equal amounts from the Fixed Account and each Sub-Account in which the Owner has
Accumulation Units at the time of such deduction. On the Annuity Commencement
Date the value of the Contract's Accumulation Account will be reduced by a
proportionate amount of the contract maintenance charge to reflect the time
elapsed between the last Contract Anniversary and the day before the Annuity
Commencement Date. After the Annuity Commencement Date, the contract maintenance
charge will be deducted pro rata from each annuity payment made during the year.
The amount of the contract maintenance charge may not be increased by the
Company. The Company reserves the right to reduce the amount of the contract
maintenance charge for groups of participants with individual Contracts under an
employer's retirement program in situations in which the size of the group and
established administrative efficiencies contribute to a reduction in
administrative expenses. The Company does not expect to make a profit on the
contract maintenance charge.
MORTALITY AND EXPENSE RISK CHARGE AND DISTRIBUTION EXPENSE CHARGE
The mortality and expense risks assumed by the Company are the risks that
Annuitants may live for a longer period of time than estimated by the Company in
establishing the guaranteed annuity rates incorporated into the Contract and the
risk that administrative charges assessed under the Contracts may be
insufficient to cover actual administrative expenses incurred by the Company.
For assuming these risks, the Company makes a deduction from the Variable
Account at the end of each Valuation Period during both the accumulation period
and after annuity payments begin at an effective annual rate of 1.25%. The rate
of this deduction may be changed annually but in no event may it exceed 1.25% on
an annual basis. If the deduction is insufficient to cover the actual cost of
the mortality and expense risk undertaking, the Company will bear the loss.
Conversely, if the deduction proves more than sufficient, the excess will be
profit to the Company and would be available for any proper corporate purpose
including, among other things, payment of distribution expenses. If the
withdrawal charges and distribution expense charges described below prove
insufficient to cover expenses associated with the distribution of the
Contracts, the deficiency will be met from the Company's general corporate
funds, which may include amounts derived from the mortality and expense risk
charges. For the year ended December 31, 1996 mortality and expense risk charges
imposed under the Contracts and other contracts participating in the Variable
Account and the distribution expense charges described below were the only
expenses of the Variable Account.
The Company assumes the risk that withdrawal charges assessed under the
Contracts may be insufficient to compensate the Company for the costs of
distributing the Contracts. For assuming such risk the Company makes a deduction
from the Variable Account with respect to the Contracts at the end of each
Valuation Period for the first seven Contract Years (during both the
accumulation period and, if applicable, after annuity payments begin) at an
effective annual rate of 0.15% of the assets of the Variable Account
attributable to the Contracts. No deduction is made after the seventh Contract
Anniversary. If the distribution expense charge is insufficient to cover the
actual risk assumed, the Company will bear the loss; however, if the charge is
more than sufficient, any excess will be profit to the Company and would be
available for any proper corporate purpose. In no event will the distribution
expense charges and any withdrawal charges assessed under a Contract exceed 9%
of the Purchase Payments.
WITHDRAWAL CHARGES
No sales charges are deducted from Purchase Payments. However, a withdrawal
charge (contingent deferred sales charge), when applicable, will be assessed to
reimburse the Company for certain expenses relating to the distribution of the
Contracts, including commissions, costs of preparation of sales literature and
other promotional costs and acquisition expenses.
A portion of the Accumulation Account value may be withdrawn each year
without imposition of any withdrawal charge, and after a Purchase Payment has
been held by the Company for seven years it may be
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<PAGE>
withdrawn free of any withdrawal charge. In addition, no withdrawal charge is
assessed upon annuitization or upon the transfer of Accumulation Account values
among the Sub-Accounts or between the Sub-Accounts and the Fixed Account.
The withdrawal charge is not assessed with respect to a Contract established
for the personal account of an employee of the Company or of any of its
affiliates, or of a licensed insurance agent engaged in distributing the
Contracts.
All other full or partial withdrawals are subject to a withdrawal charge
which will be applied as follows:
(1) Old Payments, new Payments and accumulated value: With respect to a
particular Contract Year, "new Payments" are those Payments made in that
Contract Year or in the six immediately preceding Contract Years; "old Payments"
are those Payments not defined as new Payments; and "accumulated value" is the
value of the Accumulation Account less the sum of old and new Payments.
(2) Order of liquidation: To effect a full surrender or partial withdrawal,
the oldest previously unliquidated Payment will be deemed to have been
liquidated first, then the next oldest, and so forth. Once all old and new
Payments have been withdrawn, additional amounts withdrawn will be attributed to
accumulated value.
(3) Maximum free withdrawal amount: The maximum amount that can be withdrawn
without a withdrawal charge in a Contract Year is equal to the sum of (a) any
old Payments not already liquidated, and (b) 10% of any new Payments,
irrespective of whether these new Payments have been liquidated.
(4) Amount subject to withdrawal charge: The amount subject to the
withdrawal charge will be the excess, if any, of (a) amounts liquidated from old
and new Payments over (b) the remaining maximum free withdrawal amount at the
time of the withdrawal.
The withdrawal charge percentage varies according to the number of complete
Contract Years between the Contract Year in which a Purchase Payment was
credited to a Contract's Accumulation Account and the Contract Year in which it
was withdrawn, in accordance with the following table:
<TABLE>
<CAPTION>
NUMBER OF COMPLETE WITHDRAWAL CHARGE
CONTRACT YEARS PERCENTAGE
----------------------- -----------------
<S> <C>
0-1........................................... 6%
2-3........................................... 5%
4-5........................................... 4%
6............................................. 3%
7 or more..................................... 0%
</TABLE>
In no event shall the aggregate withdrawal charges (including the
distribution expense charge described above) assessed against a Contract exceed
9% of the aggregate Purchase Payments made under the Contract. (See Appendix C
in the Statement of Additional Information for examples of withdrawals and
withdrawal charges.)
PREMIUM TAXES
A deduction, when applicable, is made for premium or similar state or local
taxes. Currently, no premium taxes are applicable in the State of New York;
however, if an Owner or Payee is other than a New York State resident, a premium
tax ranging from 0% to 3.5% may be assessed, depending on the state of
residence. It is currently the Company's policy to deduct the tax from the
amount applied to provide an annuity at the time annuity payments commence;
however, the Company reserves the right to deduct such taxes on or after the
date they are incurred.
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CHARGES OF THE SERIES FUND
The Variable Account purchases shares of the Series Fund at net asset value.
The net asset value of these shares reflects investment management fees and
expenses (including, but not limited to, compensation of trustees, governmental
expenses, interest charges, taxes, fees of auditors, legal counsel, transfer
agent and custodian, transactional expenses and brokerage commissions) already
deducted from the assets of the Series Fund. These fees and expenses are more
fully described in the Series Fund's Prospectus and Statement of Additional
Information.
ANNUITY PROVISIONS
ANNUITY COMMENCEMENT DATE
Annuity payments under a Contract will begin on the Annuity Commencement
Date which is selected by the Owner at the time the Contract is applied for.
This date may be changed by the Owner as provided in the Contract; however the
new Annuity Commencement Date must be at least 30 days after the effective date
of the change, the first day of a month and not later than the first day of the
first month following the Annuitant's 85th birthday, unless otherwise limited or
restricted in the case of a Qualified Contract, by the particular retirement
plan or by applicable law. In most situations, current law requires that the
Annuity Commencement Date under a Qualified Contract be no later than April 1
following the year the Annuitant reaches age 70 1/2, and the terms of the
particular retirement plan may impose additional limitations. The Annuity
Commencement Date may also be changed by an election of an annuity option as
described under "Death Benefit".
On the Annuity Commencement Date the Contract's Accumulation Account will be
cancelled and its adjusted value will be applied to provide an annuity. The
adjusted value will be equal to the value of the Accumulation Account for the
Valuation Period which ends immediately preceding the Annuity Commencement Date,
reduced by any applicable premium or similar taxes and a proportionate amount of
the contract maintenance charge (see "Contract Maintenance Charge"). NO CASH
WITHDRAWALS WILL BE PERMITTED AFTER THE ANNUITY COMMENCEMENT DATE EXCEPT AS MAY
BE AVAILABLE UNDER THE ANNUITY OPTION ELECTED.
Since the Contracts offered by this Prospectus may be issued in connection
with retirement plans which meet the requirements of Sections 401, 403, or 408
of the Internal Revenue Code, as well as certain non-qualified plans, reference
should be made to the terms of the particular plan for any limitations or
restrictions on the Annuity Commencement Date.
ANNUITY OPTIONS
Unless restricted by the particular retirement plan or any applicable
legislation, during the lifetime of the Annuitant and prior to the Annuity
Commencement Date the Owner may elect one or more of the annuity options
described below or such other settlement option as may be agreed to by the
Company for the Annuitant as Payee. Annuity options may also be elected by the
Owner or the Beneficiary as provided under "Death Benefit." The Owner may not
change any election after 30 days prior to the Annuity Commencement Date, and no
change of annuity option is permitted after the Annuity Commencement Date. If no
election is in effect on the 30th day prior to the Annuity Commencement Date,
Annuity Option B, for a Life Annuity with 120 monthly payments certain, will be
deemed to have been elected. If more than one person is named as "Annuitant" due
to the designation of a co-annuitant, the adjusted value of the Accumulation
Account will be applied under Annuity Option C, with the survivor benefit to be
calculated in accordance with such option using fifty percent (50%).
Any election may specify the proportion of the adjusted value of the
Contract's Accumulation Account to be applied to the Fixed Account and the
Sub-Accounts. In the event the election does not so specify, then the portion of
the adjusted value of the Accumulation Account to be applied to the Fixed
Account and the Sub-Accounts will be determined on a pro rata basis from the
composition of the Accumulation Account on the Annuity Commencement Date.
Annuity options A, B and C are available to provide either a Fixed Annuity
or a Variable Annuity. Annuity options D and E are available only to provide a
Fixed Annuity.
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Annuity Option A. Life Annuity: Monthly payments during the lifetime of the
Payee. This option offers a higher level of monthly payments than options B or C
because no further payments are payable after the death of the Payee and there
is no provision for a death benefit payable to a Beneficiary.
Annuity Option B. Life Annuity with 60, 120, 180 or 240 Monthly Payments
Certain: Monthly payments during the lifetime of the Payee and in any event for
60, 120, 180 or 240 months certain as elected. The election of a longer period
certain results in smaller monthly payments than would be the case if a shorter
period certain were elected.
Annuity Option C. Joint and Survivor Annuity: Monthly payments payable
during the joint lifetime of the Payee and the designated second person and
during the lifetime of the survivor. During the lifetime of the survivor,
variable monthly payments, if any, will be determined using the percentage
chosen at the time of the election of this option of the number of each type of
Annuity Unit credited to the Contract and each fixed monthly payment, if any,
will be equal to the same percentage of the fixed monthly payment payable during
the joint lifetime of the Payee and the designated second person.
*Annuity Option D. Fixed Payments for a Specified Period Certain: Fixed
monthly payments for a specified period of time (at least five years but not
exceeding 30 years), as elected.
*Annuity Option E. Fixed Payments: The amount applied to provide fixed
payments in accordance with this option will be held by the Company at interest.
Fixed payments will be made in such amounts and at such times (at least over a
period of five years) as may be agreed upon with the Company and will continue
until the amount held by the Company with interest is exhausted. Interest will
be credited yearly on the amount remaining unpaid at a rate which shall be
determined by the Company from time to time but which shall not be less than 4%
per year compounded annually. The rate so determined may be changed by the
Company at any time; however, the rate may not be reduced more frequently than
once during each calendar year.
DETERMINATION OF ANNUITY PAYMENTS
The dollar amount of the first variable annuity payment will be determined
in accordance with the annuity payment rates found in the Contract which are
based on an assumed interest rate of 4% per year. All variable annuity payments
other than the first are determined by means of Annuity Units credited to the
Contract. The number of Annuity Units to be credited in respect of a particular
Sub-Account is determined by dividing that portion of the first variable annuity
payment attributable to that Sub-Account by the Annuity Unit value of that
Sub-Account for the Valuation Period which ends immediately preceding the
Annuity Commencement Date. The number of Annuity Units of each particular
Sub-Account credited to the Contract then remains fixed unless an exchange of
Annuity Units is made as described below. The dollar amount of each variable
annuity payment after the first may increase, decrease or remain constant
depending on the investment performance of the Sub-Accounts.
The Statement of Additional Information contains detailed disclosure
regarding the method of determining the amount of each variable annuity payment
and calculating the value of a Variable Annuity Unit, as well as hypothetical
examples of these calculations.
EXCHANGE OF VARIABLE ANNUITY UNITS
After the Annuity Commencement Date the Payee may exchange the value of a
designated number of Variable Annuity Units of particular Sub-Accounts then
credited to the Contract for other Variable Annuity Units, the value of which
would be such that the dollar amount of an annuity payment made on the date of
the exchange would be unaffected by the fact of the exchange. Exchanges may be
made only between Sub-Accounts of the Variable Account. Twelve such exchanges
may be made within each Contract Year.
ANNUITY PAYMENT RATES
The Contract contains annuity payment rates for each annuity option
described above. The rates show, for each $1,000 applied, the dollar amount of
(a) the first monthly variable annuity payment based on the assumed interest
rate of 4%, and (b) the monthly fixed annuity payment, when this payment is
based on the minimum guaranteed interest rate of 4% per year. The annuity
payment rates may vary according to the
- ---------
* The election of this annuity option may result in the imposition of a penalty
tax.
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<PAGE>
annuity option elected and the adjusted age of the Payee. Over a period of time,
if the Sub-Accounts achieved a net investment return exactly equal to the
assumed interest rate of 4%, the amount of each variable annuity payment would
remain constant. However, if the Sub-Accounts achieved a net investment result
greater than 4%, the amount of each variable annuity payment would increase;
conversely, a net investment result smaller than 4% would decrease the amount of
each variable annuity payment.
OTHER CONTRACTUAL PROVISIONS
OWNER
The Owner is entitled to exercise all Contract rights and privileges without
the consent of the Beneficiary or any other person. Such rights and privileges
may be exercised only during the lifetime of the Annuitant and prior to the
Annuity Commencement Date, except as otherwise provided in the Contract. The
Owner of a Non-Qualified Contract may change the ownership of the Contract,
subject to the provisions of the Contract, although such change may result in
the imposition of tax (see "Federal Tax Status--Taxation of Annuities in
General"). Transfer of ownership of a Qualified Contract is governed by the laws
and regulations applicable to the retirement or deferred compensation plan for
which the Contract was issued. Subject to the foregoing, a Qualified Contract
may not be sold, assigned, transferred, discounted or pledged as collateral for
a loan or as security for the performance of an obligation or for any other
purpose to any person other than the Company.
Subject to the rights of an irrevocably designated Beneficiary, the Owner
may change or revoke the designation of a Beneficiary at any time while the
Annuitant is living.
DEATH OF OWNER
If the Owner of a Non-Qualified Contract dies prior to the Annuitant and
before the Annuity Commencement Date the death benefit (as determined in
accordance with the Amount of Death Benefit provision) must be distributed to
the Beneficiary, if then alive, either (1) within five years after the date of
death of the Owner, or (2) over some period not greater than the life or
expected life of the Beneficiary, with annuity payments beginning within one
year after the date of death of the Owner. The person named as Beneficiary shall
be considered the designated beneficiary for the purposes of Section 72(s) of
the Internal Revenue Code and if no person then living has been so named, then
the Annuitant shall automatically be the designated beneficiary for this
purpose.
These mandatory distribution requirements will not apply when the designated
beneficiary is the spouse of the Owner, if the spouse elects to continue the
Contract in the spouse's own name as Owner. When the Owner was also the
Annuitant the surviving spouse (if the designated beneficiary) may elect to be
named as both Owner and Annuitant and continue the Contract, but if that
election is not made, the Death Benefit provision of the Contract shall be
controlling. In all other cases where the Owner and the Annuitant are the same
individual, the Death Benefit provision of the Contract controls.
If the Owner/Annuitant dies on or after the Annuity Commencement Date and
before the entire accumulation under the Contract has been distributed, the
remaining portion of such accumulation, if any, must be distributed at least as
rapidly as the method of distribution then in effect.
In all cases, no Owner or Beneficiary shall be entitled to exercise any
rights that would adversely affect the treatment of the Contract as an annuity
contract under the Internal Revenue Code.
Any distributions upon the death of the Owner of a Qualified Contract will
be subject to the laws and regulations governing the particular retirement or
deferred compensation plan in connection with which the Qualified Contract was
issued.
VOTING OF SERIES FUND SHARES
The Company will vote Series Fund shares held by the Sub-Accounts at
meetings of shareholders of the Series Fund, but will follow voting instructions
received from persons having the right to give voting instructions. Series Fund
shares for which no timely voting instructions are received will be voted by the
Company in the same proportion as the shares for which instructions are received
from persons having
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<PAGE>
such voting rights. The Owner is the person having the right to give voting
instructions prior to the Annuity Commencement Date. On or after the Annuity
Commencement Date the Payee is the person having such voting rights.
Owners of Contracts held pursuant to retirement plans may be subject to
other voting provisions of the particular retirement plan. Employees who
contribute to retirement plans which are funded by the Contracts are entitled to
instruct the Owners as to how to instruct the Company to vote the Series Fund
shares attributable to their contributions. Such plans may also provide the
additional extent, if any, to which the Owners shall follow voting instructions
of persons with rights under the plans.
The number of particular Series Fund shares as to which each such person is
entitled to give instructions will be determined by the Company on a date not
more than 90 days prior to each such meeting. Prior to the Annuity Commencement
Date, the number of particular Series Fund shares as to which voting
instructions may be given to the Company is determined by dividing the value of
all of the Variable Accumulation Units of the particular Sub-Account credited to
the Contract's Accumulation Account by the net asset value of one particular
Series Fund share as of the same date. On or after the Annuity Commencement
Date, the number of particular Series Fund shares as to which such instructions
may be given by a Payee is determined by dividing the reserve held by the
Company in the particular Sub-Account for the Contract by the net asset value of
a particular Series Fund share as of the same date.
SUBSTITUTED SECURITIES
Shares of a particular series of the Series Fund may not always be available
for purchase by the Variable Account or the Company may decide that further
investment in any such shares is no longer appropriate in view of the purposes
of the Variable Account or in view of legal, regulatory or federal income tax
restrictions. In either event, shares of another series or shares of another
registered open-end investment company may be substituted both for Series Fund
shares already purchased by the Variable Account and as the security to be
purchased in the future provided that these substitutions have been approved by
the Securities and Exchange Commission and the Superintendent of Insurance of
the State of New York. In the event of any substitution pursuant to this
provision, the Company may make appropriate endorsement to the Contract to
reflect the substitution.
MODIFICATION
Upon notice to the Owner, or to the Payee during the annuity period, the
Contract may be modified by the Company, but only if such modification (i) is
necessary to make the Contract or the Variable Account comply with any law or
regulation issued by a governmental agency to which the Company is subject or
(ii) is necessary to assure continued qualification of the Contract under the
Internal Revenue Code or other federal or state laws relating to retirement
annuities or annuity contracts or (iii) is necessary to reflect a change in the
operation of the Variable Account or the Sub-Accounts or (iv) provides
additional Variable Account and/or fixed accumulation options. In the event of
any such modification, the Company may make appropriate endorsement to the
Contract to reflect such modification.
CHANGE IN OPERATION OF VARIABLE ACCOUNT
At the Company's election and subject to the prior approval of the
Superintendent of Insurance of the State of New York and to any necessary vote
by persons having the right to give instructions with respect to the voting of
Series Fund shares held by the Sub-Accounts, the Variable Account may be
operated as a management company under the Investment Company Act of 1940 or it
may be deregistered under the Investment Company Act of 1940 in the event
registration is no longer required. Deregistration of the Variable Account
requires an order by the Securities and Exchange Commission. In the event of any
change in the operation of the Variable Account pursuant to this provision, the
Company, subject to the prior approval of the Superintendent of Insurance of the
State of New York, may make appropriate endorsement to the Contract to reflect
the change and take such action as may be necessary and appropriate to effect
the change.
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<PAGE>
SPLITTING UNITS
The Company reserves the right to split or combine the value of Variable
Accumulation Units, Fixed Accumulation Units, Annuity Units or any of them. In
effecting any such change in unit values, strict equity will be preserved and no
change will have a material effect on the benefits or other provisions of the
Contract.
FEDERAL TAX STATUS
INTRODUCTION
The Contracts described in this Prospectus are designed for use in
connection with retirement plans that may or may not be qualified plans under
Sections 401, 403 or 408 of the Internal Revenue Code (the "Code"). The ultimate
effect of federal income taxes may depend upon the type of retirement plan for
which the Contract is purchased and a number of different factors. This
discussion is general in nature, is based upon the Company's understanding of
current federal income tax laws, and is not intended as tax advice. Congress has
the power to enact legislation affecting the tax treatment of annuity contracts,
and such legislation could be applied retroactively to Contracts purchased
before the date of enactment. Any person contemplating the purchase of a
Contract should consult a qualified tax adviser. THE COMPANY DOES NOT MAKE ANY
GUARANTEE REGARDING THE TAX STATUS, FEDERAL, STATE OR LOCAL, OF ANY CONTRACT OR
ANY TRANSACTION INVOLVING A CONTRACT.
TAX TREATMENT OF THE COMPANY AND THE VARIABLE ACCOUNT
The Company is taxed as a life insurance company under the Code. The
operations of the Variable Account are accounted for separately from other
operations of the Company for purposes of federal income taxation, but the
Variable Account is not taxable as a regulated investment company or otherwise
as an entity separate from the Company. The income of the Variable Account
(consisting primarily of interest, dividends and net capital gains) is not
taxable to the Company to the extent that it is applied to increase reserves
under contracts participating in the Variable Account.
TAXATION OF ANNUITIES IN GENERAL
Purchase Payments made under Non-Qualified Contracts are not deductible from
the Owner's income for federal income tax purposes. Owners of Qualified
Contracts should consult a tax adviser regarding the tax treatment of Purchase
Payments.
Generally, no taxes are imposed on the increase in the value of a Contract
held by an individual Owner until a distribution occurs, either as an annuity
payment or as a cash withdrawal or lump-sum payment prior to the Annuity
Commencement Date. However, corporate Owners and other Owners that are not
natural persons are subject to current taxation on the annual increase in the
value of a Non-Qualified Contract, unless the non-natural person holds the
Contract as agent for a natural person (such as where a bank or other entity
holds a Contract as trustee under a trust agreement). This current taxation of
annuities held by non-natural persons does not apply to earnings accumulated
under an immediate annuity, which the Code defines as a single premium contract
with an annuity commencement date within one year of the date of purchase.
A partial cash withdrawal (that is, a withdrawal of less than the entire
value of the Contract's Accumulation Account) from a Non-Qualified Contract
before the Annuity Commencement Date is treated first as a withdrawal from the
increase in the Accumulation Account's value, rather than as a return of
Purchase Payments. The amount of the withdrawal allocable to this increase will
be includible in the Owner's income and subject to tax at ordinary income rates.
If an individual receives a loan under a Contract or if the Contract is assigned
or pledged as collateral for a loan, the amount borrowed from the Contract or
the amount assigned or pledged must be treated as if it were withdrawn from the
Contract.
In the case of annuity payments under a Non-Qualified Contract after the
Annuity Commencement Date, a portion of each payment is treated as a nontaxable
return of Purchase Payments. The nontaxable
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<PAGE>
portion is determined by applying to each annuity payment an "exclusion ratio,"
which, in general, is the ratio that the total amount the Owner paid for the
Contract bears to the Payee's expected return under the Contract. The remainder
of the payment is taxable at ordinary income rates.
The total amount that a Payee may exclude from income through application of
the "exclusion ratio" is limited to the amount the Owner paid for the Contract.
If the Annuitant survives for his full life expectancy, so that the Payee
recovers the entire amount paid for the Contract, any subsequent annuity
payments will be fully taxable as income. Conversely, if the Annuitant dies
before the Payee recovers the entire amount paid, the Payee will be allowed a
deduction for the amount of unrecovered Purchase Payments.
Taxable cash withdrawals and lump-sum payments from Non-Qualified Contracts
may be subject to a penalty tax equal to 10% of the amount treated as taxable
income. This 10% penalty also may apply to certain annuity payments. This
penalty will not apply in certain circumstances (such as where the distribution
is made upon the death of the Owner). The withdrawal penalty also does not apply
to distributions under an immediate annuity (as defined above).
In the case of a Qualified Contract, distributions generally are taxable and
distributions made prior to age 59 1/2 are subject to a 10% penalty tax,
although this penalty tax will not apply in certain circumstances. Certain
distributions, known as "eligible rollover distributions," if rolled over to
certain other qualified retirement plans (either directly or after being
distributed to the Payee), are not taxable until distributed from the plan to
which they are rolled over. In general, an eligible rollover distribution is any
taxable distribution other than a distribution that is part of a series of
payments made for life or for a specified period of ten years or more. Owners,
Annuitants, Payees and Beneficiaries should seek qualified advice about the tax
consequences of distributions, withdrawals, payments and rollovers under the
retirement plans in connection with which the Contracts are purchased.
If the Owner of a Non-Qualified Contract dies, the value of the Contract
generally must be distributed within a specified period (see "Other Contractual
Provisions--Death of Owner"). For Contracts owned by non-natural persons, a
change in the Annuitant is treated as the death of the Owner.
A purchaser of a Qualified Contract should refer to the terms of the
applicable retirement plan and consult a tax adviser regarding distribution
requirements upon the death of the Owner.
A transfer of a Non-Qualified Contract by gift (other than to the Owner's
spouse) is treated as the receipt by the Owner of income in an amount equal to
the value of the Contract's Accumulation Account minus the total amount paid for
the Contract.
The Company will withhold and remit to the U.S. government a part of the
taxable portion of each distribution made under a Non-Qualified Contract or
under a Qualified Contract issued in connection with an individual retirement
account, unless the Owner or Payee provides his or her taxpayer identification
number to the Company and notifies the Company (in the manner prescribed) before
the time of the distribution that he or she chooses not to have any amounts
withheld.
In the case of distributions from a Qualified Contract (other than
distributions from a Contract issued for use with an individual retirement
account), the Company or the plan administrator must withhold and remit to the
U.S. government 20% of each distribution that is an eligible rollover
distribution (as defined above) unless the Owner or Payee elects to make a
direct rollover of the distribution to another qualified retirement plan that is
eligible to receive the rollover. If a distribution from a Qualified Contract is
not an eligible rollover distribution, then the Owner or Payee can choose not to
have amounts withheld as described above for Non-Qualified Contracts and
individual retirement accounts.
Amounts withheld from any distribution may be credited against the Owner's
or Payee's federal income tax liability for the year of the distribution.
The Internal Revenue Service has issued regulations that prescribe
investment diversification requirements for mutual fund series underlying
nonqualified variable contracts. Contracts that do not comply with
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<PAGE>
these regulations do not qualify as annuities for federal income tax purposes,
and therefore the annual increase in the value of such contracts is subject to
current taxation. The Company believes that each series of the Series Fund
complies with the regulations.
The preamble to the regulations states that the Internal Revenue Service may
promulgate guidelines under which a variable contract will not be treated as an
annuity for tax purposes if the owner has excessive control over the investments
underlying the contract. It is not known whether such guidelines, if in fact
promulgated, would have retroactive effect. If guidelines are promulgated, the
Company will take any action (including modification of the Contract and/or the
Variable Account) necessary to comply with the guidelines.
QUALIFIED RETIREMENT PLANS
The Qualified Contracts described in this Prospectus are designed for use
with the following types of qualified retirement plans:
(1) Pension and Profit-Sharing Plans established by business employers
and certain associations, as permitted by Sections 401(a), 401(k) and 403(a)
of the Internal Revenue Code ("Code"), including those purchasers who would
have been covered under the rules governing old H.R. 10 (Keogh) Plans;
(2) Tax-Sheltered Annuities established pursuant to the provisions of
Section 403(b) of the Code for public school employees and employees of
certain types of charitable, educational and scientific organizations
specified in Section 501(c)(3) of the Code; and
(3) Individual Retirement Annuities permitted by Sections 219 and 408 of
the Code, including Simplified Employee Pensions established by employers
pursuant to Section 408(k) and Simple Retirement Accounts established
pursuant to Section 408(p).
The tax rules applicable to participants in such plans vary according to the
type of plan and its terms and conditions. Therefore, no attempt is made herein
to provide more than general information about the use of Qualified Contracts.
Participants in such plans as well as Owners, Annuitants, Payees and
Beneficiaries are cautioned that the rights of any person to any benefits under
these plans are subject to the terms and conditions of the plans themselves,
regardless of the terms and conditions of the Qualified Contracts. The Company
will provide purchasers of Qualified Contracts used in connection with
Individual Retirement Annuities with such supplemental information as may be
required by the Internal Revenue Service or other appropriate agency. Any person
contemplating the purchase of a Qualified Contract should consult a qualified
tax adviser.
DISTRIBUTION OF THE CONTRACTS
The Contracts will be sold by licensed insurance agents in the State of New
York. Such agents will be registered representatives of broker-dealers
registered under the Securities Exchange Act of 1934 who are members of the
National Association of Securities Dealers, Inc. The Contracts will be
distributed by Clarendon Insurance Agency, Inc., 500 Boylston Street, Boston,
Massachusetts 02116, a wholly-owned subsidiary of Massachusetts Financial
Services Company, the Series Fund's investment adviser. Commissions and other
distribution expenses will be paid by the Company and will not be more than
6.31% of Purchase Payments. Commissions will not be paid with respect to
Contracts established for the personal account of employees of the Company or
any of its affiliates, or of persons engaged in the distribution of the
Contracts.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Variable Account. The
Company is engaged in various kinds of routine litigation which, in management's
opinion, is not of material importance to the Company's total assets or material
with respect to the Variable Account.
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<PAGE>
CONTRACT OWNER INQUIRIES
All Contract Owner inquiries should be directed to the Company at its
Annuity Service Mailing Address.
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
General Information
Annuity Provisions
Other Contractual Provisions
Administration of the Contracts
Distribution of the Contracts
Legal Matters
Accountants
Calculation of Performance Data
Advertising and Sales Literature
Financial Statements
</TABLE>
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<PAGE>
This Prospectus sets forth information about the Contracts and the Variable
Account that a prospective purchaser should know before investing. Additional
information about the Contracts and the Variable Account has been filed with the
Securities and Exchange Commission in a Statement of Additional Information
dated May 1, 1997 which is incorporated herein by reference. The Statement of
Additional Information is available upon request and without charge from Sun
Life Insurance and Annuity Company of New York. To receive a copy, return this
request form to the address shown below or telephone (212) 943-3855 or (800)
447-7569.
-------------------------------------------------------------------------------
To: Sun Life Insurance and Annuity Company of New York
80 Broad Street
New York, New York 10004
Please send me a Statement of Additional Information for
Compass 3 Sun Life (N.Y.) Variable Account B.
Name ____________________________________________
Address ____________________________________________
____________________________________________
City____________________________ State___________ Zip______________
Telephone ____________________________________________
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<PAGE>
PROSPECTUS
MAY 1, 1997
COMBINATION FIXED/VARIABLE
ANNUITY FOR PERSONAL AND
QUALIFIED RETIREMENT PLANS
ISSUED BY
SUN LIFE INSURANCE AND ANNUITY COMPANY
OF NEW YORK
Annuity Service Mailing Address:
80 Broad Street
New York, New York 10004
GENERAL DISTRIBUTOR
Clarendon Insurance Agency, Inc.
500 Boylston Street
Boston, Massachusetts 02116
LEGAL COUNSEL
Covington & Burling
1201 Pennsylvania Avenue, N.W.
P.O. Box 7566
Washington, D.C. 20044
AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, Massachusetts 02110
ISSUED IN CONNECTION
WITH SUN LIFE (N.Y.)
VARIABLE ACCOUNT B
CO3NY-1 5/97
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF
ADDITIONAL INFORMATION
Attached hereto and made a part hereof is a Statement of Additional
Information dated May 1, 1997.
<PAGE>
MAY 1, 1997
COMPASS 3
STATEMENT OF ADDITIONAL INFORMATION
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
TABLE OF CONTENTS
General Information............................... 2
Annuity Provisions................................ 2
Other Contractual Provisions...................... 3
Administration of the Contracts................... 4
Distribution of the Contracts..................... 4
Legal Matters..................................... 5
Accountants....................................... 5
Calculation of Performance Data................... 5
Advertising and Sales Literature.................. 7
Financial Statements.............................. 9
This Statement of Additional Information sets forth information which may be
of interest to prospective purchasers of Compass 3 Combination Fixed/Variable
Annuity Contracts (the "Contracts") for personal and qualified retirement plans
issued by Sun Life Insurance and Annuity Company of New York (the "Company") in
connection with Sun Life (N.Y.) Variable Account B (the "Variable Account")
which is not necessarily included in the Prospectus dated May 1, 1997. This
Statement of Additional Information should be read in conjunction with the
Prospectus, a copy of which may be obtained without charge from the Company at
its Annuity Service Mailing Address, 80 Broad Street, New York, New York 10004,
or by telephoning (212) 943-3855 or (800) 447-7569.
The terms used in this Statement of Additional Information have the same
meanings as in the Prospectus.
- --------------------------------------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE PURCHASERS ONLY IF PRECEDED OR ACCOMPANIED BY A
CURRENT PROSPECTUS.
<PAGE>
GENERAL INFORMATION
THE COMPANY
Sun Life Insurance and Annuity Company of New York (the "Company") is a
stock life insurance company incorporated under the laws of New York on May 25,
1983. Its Home Office is located at 80 Broad Street, New York, New York 10004.
The Company is a wholly-owned subsidiary of Sun Life Assurance Company of Canada
(U.S.) ("Sun Life of Canada (U.S.)"), a stock life insurance company
incorporated in Delaware and having its Executive Office at One Sun Life
Executive Park, Wellesley Hills, Massachusetts 02181. Sun Life of Canada (U.S.),
in turn, is a wholly-owned subsidiary of Sun Life Assurance Company of Canada
("Sun Life (Canada)"), 150 King Street West, Toronto, Ontario, Canada, a mutual
life insurance company incorporated in Canada in 1865.
THE VARIABLE ACCOUNT
Sun Life (N.Y.) Variable Account B (the "Variable Account") is a separate
account of the Company which meets the definition of a separate account under
the federal securities laws and which is registered with the Securities and
Exchange Commission as a unit investment trust under the Investment Company Act
of 1940.
THE FIXED ACCOUNT
If the Owner elects to have Contract values accumulated on a fixed basis,
Purchase Payments are allocated to the Fixed Account, which is the general
account of the Company. Because of exemptive and exclusionary provisions, that
part of the Contract relating to the Fixed Account is not registered under the
Securities Act of 1933 ("1933 Act") and the Fixed Account is not registered as
an investment company under the Investment Company Act of 1940 ("1940 Act").
Accordingly, neither the Fixed Account, nor any interests therein, are subject
to the provisions or restrictions of the 1933 Act or the 1940 Act, and the staff
of the Securities and Exchange Commission has not reviewed the disclosures in
this Statement of Additional Information with respect to that portion of the
Contract relating to the Fixed Account. Disclosures regarding the fixed portion
of the Contract and the Fixed Account, however, may be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made herein (see "Fixed Account" in
Appendix A).
ANNUITY PROVISIONS
DETERMINATION OF ANNUITY PAYMENTS
On the Annuity Commencement Date the Contract's Accumulation Account will be
cancelled and its adjusted value will be applied to provide a Variable Annuity
or a Fixed Annuity or a combination of both. The adjusted value will be equal to
the value of the Accumulation Account for the Valuation Period which ends
immediately preceding the Annuity Commencement Date, reduced by any applicable
premium or similar taxes and a proportionate amount of the contract maintenance
charge to reflect the time elapsed between the last Contract Anniversary and the
day before the Annuity Commencement Date.
The dollar amount of the first variable annuity payment will be determined
in accordance with the annuity payment rates found in the Contract which are
based on an assumed interest rate of 4% per year. All variable annuity payments
other than the first are determined by means of Annuity Units credited to the
Contract. The number of Annuity Units to be credited in respect of a particular
Sub-Account is determined by dividing that portion of the first variable annuity
payment attributable to that Sub-Account by the Annuity Unit value of that
Sub-Account for the Valuation Period which ends immediately preceding the
Annuity Commencement Date. The number of Annuity Units of each particular
Sub-Account credited to the Contract then remains fixed unless an exchange of
Annuity Units is made as described in the Prospectus. The dollar amount of each
variable annuity payment after the first may increase, decrease or remain
constant, and is
2
<PAGE>
equal to the sum of the amounts determined by multiplying the number of Annuity
Units of a particular Sub-Account credited to the Contract by the Annuity Unit
value for the particular Sub-Account for the Valuation Period which ends
immediately preceding the due date of each subsequent payment.
For a description of fixed annuity payments, see Appendix A.
For a hypothetical example of the calculation of a variable annuity payment,
see Appendix B.
ANNUITY UNIT VALUE
The Annuity Unit value for each Sub-Account was established at $10.00 for
the first Valuation Period of the particular Sub-Account. The Annuity Unit value
for any subsequent Valuation Period is determined by multiplying the Annuity
Unit value for the immediately preceding Valuation Period by the appropriate Net
Investment Factor (See "Net Investment Factor" in the Prospectus) for the
current Valuation Period and then multiplying that product by a factor to
neutralize the assumed interest rate of 4% per year used to establish the
annuity payment rates found in the Contract. The factor is 0.99989255 for a one
day Valuation Period.
For a hypothetical example of the calculation of the value of a Variable
Annuity Unit, see Appendix B.
OTHER CONTRACTUAL PROVISIONS
OWNER AND CHANGE OF OWNERSHIP
The Contract shall belong to the Owner. All Contract rights and privileges
may be exercised by the Owner without the consent of the Beneficiary (other than
an irrevocably designated beneficiary) or any other person. Such rights and
privileges may be exercised only during the lifetime of the Annuitant and prior
to the Annuity Commencement Date, except as otherwise provided in the Contract.
The Annuitant becomes the Owner on and after the Annuity Commencement Date. The
Beneficiary becomes the Owner on the death of the Annuitant. In some qualified
plans the Owner of the Contract is a Trustee and the Trust authorizes the
Annuitant/participant to exercise certain contract rights and privileges.
Ownership of a Qualified Contract may not be transferred except to: (1) the
Annuitant; (2) a trustee or successor trustee of a pension or profit sharing
trust which is qualified under Section 401 of the Internal Revenue Code; (3) the
employer of the Annuitant provided that the Qualified Contract after transfer is
maintained under the terms of a retirement plan qualified under Section 403(a)
of the Internal Revenue Code for the benefit of the Annuitant; (4) the trustee
of an individual retirement account plan qualified under Section 408 of the
Internal Revenue Code for the benefit of the Owner; or (5) as otherwise
permitted from time to time by laws and regulations governing the retirement or
deferred compensation plans for which a Qualified Contract may be issued.
Subject to the foregoing, a Qualified Contract may not be sold, assigned,
transferred, discounted or pledged as collateral for a loan or as security for
the performance of an obligation or for any other purpose to any person other
than the Company.
The Owner of a Non-Qualified Contract may change the ownership of the
Contract during the lifetime of the Annuitant and prior to the Annuity
Commencement Date, although such change may result in the imposition of tax (see
"Federal Tax Status--Taxation of Annuities in General" in the Prospectus). A
change of ownership will not be binding upon the Company until written
notification is received by the Company. Once received by the Company the change
will be effective as of the date on which the request for change was signed by
the Owner but the change will be without prejudice to the Company on account of
any payment made or any action taken by the Company prior to receiving the
change. The Company may require that the signature of the Owner be guaranteed by
a member firm of the New York, American, Boston, Midwest, Philadelphia or
Pacific Stock Exchange, or by a commercial bank (not a savings bank) which is a
member of the Federal Deposit Insurance Corporation or, in certain cases, by a
member firm of the National Association of Securities Dealers, Inc. which has
entered into an appropriate agreement with the Company.
3
<PAGE>
DESIGNATION AND CHANGE OF BENEFICIARY
The Beneficiary designation contained in the application will remain in
effect until changed. The interest of any Beneficiary is subject to the
particular Beneficiary surviving the Annuitant.
Subject to the rights of an irrevocably designated Beneficiary, the Owner
may change or revoke the designation of a Beneficiary at any time while the
Annuitant is living by filing with the Company a written beneficiary designation
or revocation in such form as the Company may require. The change or revocation
will not be binding upon the Company until it is received by the Company. When
it is so received the change or revocation will be effective as of the date on
which the beneficiary designation or revocation was signed by the Owner.
CUSTODIAN
The Company is Custodian of the assets of the Variable Account. The Company,
as Custodian, will purchase shares of a particular series of the Series Fund at
net asset value in connection with amounts allocated to the particular
Sub-Account in accordance with the instructions of the Owner and redeem Series
Fund shares at net asset value for the purpose of meeting the contractual
obligations of the Variable Account, paying charges relative to the Variable
Account or making adjustments for annuity reserves held in the Variable Account.
ADMINISTRATION OF THE CONTRACTS
The Company performs certain administrative functions relating to the
Contracts and the Variable Account. These functions include, among other things,
maintaining the books and records of the Variable Account and the Sub-Accounts,
and maintaining records of the name, address, taxpayer identification number,
Contract number, type of contract issued to each owner, the status of the
Accumulation Account under each Contract, and other pertinent information
necessary to the administration and operation of the Contracts. The Company has
entered into service agreements with its parent, Sun Life Assurance Company of
Canada (U.S.) and Sun Life Assurance Company of Canada, under which the latter
have agreed to provide the Company with certain services on a cost reimbursement
basis. These services include, but are not limited to, accounting and investment
services, systems support and development, pricing, product development,
actuarial, legal and compliance functions, marketing services and staff
training. The Company has also entered into a service agreement with MFS Fund
Distributors, Inc. ("MFD"), a wholly-owned subsidiary of MFS, under which
employees of the Company may perform certain sales and marketing functions and
administrative services incidental thereto on behalf of MFD on a cost
reimbursement basis.
DISTRIBUTION OF THE CONTRACTS
The offering of the Contracts is continuous. The Contracts will be sold by
licensed insurance agents in the State of New York. Such agents will be
registered representatives of broker-dealers registered under the Securities
Exchange Act of 1934 who are members of the National Association of Securities
Dealers, Inc. The Contracts will be distributed by Clarendon Insurance Agency,
Inc. ("Clarendon"), 500 Boylston Street, Boston, Massachusetts 02116, a
wholly-owned subsidiary of Massachusetts Financial Services Company, the Series
Fund's investment adviser. Commissions and other distribution compensation will
be paid by the Company and will not be more than 6.31% of Purchase Payments.
Commissions will not be paid with respect to Contracts established for the
personal account of employees of the Company or any of its affiliates, or of
persons engaged in the distribution of the Contracts. During 1994, 1995 and
1996, approximately $48,424, $21,127 and $39,481, respectively, was paid to and
retained by Clarendon in connection with the distribution of the Contracts.
4
<PAGE>
LEGAL MATTERS
The organization of the Company, its authority to issue the Contracts and
the validity of the form of the Contracts have been passed upon by David D.
Horn, Esq., Senior Vice President of the Company. Covington & Burling,
Washington, D.C., has advised the Company on certain legal matters concerning
federal securities laws applicable to the issue and sale of the Contracts and
federal income tax laws applicable to the Contracts.
ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts 02110, are
the Variable Account's independent certified public accountants providing
auditing and other professional services.
CALCULATION OF PERFORMANCE DATA
AVERAGE ANNUAL TOTAL RETURN:
The table below shows, for various Sub-Accounts of the Variable Account, the
Average Annual Total Return for the stated periods (or shorter period indicated
in the note below), based upon a hypothetical initial Purchase Payment of
$1,000, calculated in accordance with the formula set out below the table. For
purposes of determining these investment results, the actual investment
performance of each Series of MFS/Sun Life Series Trust is reflected from the
date such Series commenced operations, although the Contracts have been offered
only since March 1, 1993.
AVERAGE ANNUAL TOTAL RETURN
PERIOD ENDING DECEMBER 31, 1996
<TABLE>
<CAPTION>
10 YEAR
PERIOD
OR
LIFETIME
1 YEAR 5 YEAR OF DATE OF
PERIOD PERIOD SERIES INCEPTION
-------- ------- -------- --------------
<S> <C> <C> <C> <C>
August 13,
Capital Appreciation Series............. 13.57 % 13.46 % 13.69 % 1985
August 12,
Government Securities Series............ -5.48 % 3.87 % 5.92 % 1985
August 13,
High Yield Series....................... 4.93 % 9.39 % 7.73 % 1985
Managed Sectors Series.................. 10.35 % 8.41 % -- May 27, 1988
August 29,
Money Market Series..................... -2.12 % 1.68 % 3.82 % 1985
Total Return Series..................... 6.38 % 9.07 % -- May 16, 1988
World Governments Series................ -2.42 % 4.42 % -- May 16, 1988
<FN>
- ------------------------
*From Date of Inception, as the lifetimes of these series are less than ten
years.
</TABLE>
The length of the period and the last day of each period used in the above
table are set out in the table heading and in the footnotes above. The Average
Annual Total Return for each period was determined by finding the average annual
compounded rate of return over each period that would equate the initial amount
invested to the ending redeemable value for that period, in accordance with the
following formula:
P(1 + T)n = ERV
<TABLE>
<C> <C> <S>
Where: P = a hypothetical initial Purchase Payment of $1,000
T = average annual total return for the period
n = number of years
ERV = redeemable value (as of the end of the period) of a
hypothetical $1,000 Purchase Payment made at the beginning of
the 1-year, 5-year, or 10-year period (or fractional portion
thereof)
</TABLE>
The formula assumes that: 1) all recurring fees have been deducted from the
Contract's Accumulation Account; 2) all applicable non-recurring Contract
charges are deducted at the end of the period; and 3) there will be a full
surrender at the end of the period.
5
<PAGE>
The $30 annual contract maintenance charge will be allocated among the
Sub-Accounts so that each Sub-Account's allocated portion of the charge is
proportional to the percentage of the number of Contracts that have amounts
allocated to that Sub-Account. Because the impact of contract maintenance
charges on a particular Contract may differ from those assumed in the
computation due to differences between actual allocations and the assumed ones,
the total return that would have been experienced by an actual Contract over
these same time periods may have been different from that shown above.
NON-STANDARDIZED INVESTMENT PERFORMANCE:
The Variable Account may illustrate its results over various periods and
compare its results to indices and other variable annuities in sales materials
including advertisements, brochures and reports. Such results may be computed on
a "cumulative" and/or "annualized" basis.
"Cumulative" quotations are arrived at by calculating the change in the
Accumulation Unit value of a Sub-Account between the first and last day of the
base period being measured, and expressing the difference as a percentage of the
Accumulation Unit value at the beginning of the base period.
"Annualized" quotations (described in the following table as "Compound
Growth Rate") are calculated by applying a formula which determines the level
rate of return which, if earned over the entire base period, would produce the
cumulative return.
NON-STANDARDIZED INVESTMENT PERFORMANCE:
<TABLE>
<S> <C>
$10,000 INVESTED IN WOULD HAVE GROWN TO THIS AMOUNT ON
THIS SUB-ACCOUNT UNDER A DECEMBER 31, 1996*
COMPASS 3 CONTRACT
THIS MANY YEARS AGO...
</TABLE>
<TABLE>
<CAPTION>
Capital Appreciation Series Government Securities Series High Yield Series
------------------------------- ------------------------------- -------------------------------
Number Cumulative Compound Cumulative Compound Cumulative Compound
of Growth Growth Growth Growth Growth Growth
Years Periods Amount Rate Rate Amount Rate Rate Amount Rate Rate
- ---------- ---------------- ---------- ---------- -------- ---------- ---------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/95-12/31/96 $11,980.37 19.80% 19.80% $10,020.70 0.21% 0.21% $11,055.97 10.56% 10.56%
2 12/31/95-12/31/96 $15,887.33 56.87% 26.04% $11,626.46 16.26% 7.83% $12,761.29 27.61% 12.97%
3 12/31/93-12/31/96 $15,104.33 51.04% 14.74% $11,218.67 12.19% 3.91% $12,304.45 23.04% 7.16%
4 12/31/92-12/31/96 $17,583.42 75.83% 15.15% $12,023.98 20.24% 4.72% $14,291.36 42.91% 9.34%
5 12/31/91-12/31/96 $19,704.36 97.04% 14.53% $12,633.86 26.64% 4.84% $16,201.81 62.02% 10.13%
10 12/31/86-12/31/96 $37,760.83 277.61% 14.21% $18,617.96 86.18% 6.41% $21,972.95 119.73% 8.19%
Lifetime
of Series 8/13/85-12/31/96 $45,186.10 351.86% 14.16% $21,360.16 113.60% 6.89% $24,871.56 148.72% 8.33%
<CAPTION>
Managed Sectors Series Total Return Series World Governments Series
------------------------------- ------------------------------- -------------------------------
Cumulative Compound Cumulative Compound Cumulative Compound
Growth Growth Growth Growth Growth Growth
Amount Rate Rate Amount Rate Rate Amount Rate Rate
---------- ---------- -------- ---------- ---------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/95-12/31-96 $11,613.71 16.14% 16.14% $11,248.32 12.48% 12.48% $10,321.25 3.21% 3.21%
2 12/31/94-12/31-96 $15,171.29 51.71% 23.17% $14,064.12 40.64% 18.59% $11,776.17 17.76% 8.52%
3 12/31/93-12/31-96 $14,693.65 46.94% 13.69% $13,556.21 35.56% 10.67% $11,092.55 10.93% 3.52%
4 12/31/92-12/31-96 $14,773.19 47.73% 10.25% $15,156.05 51.56% 10.95% $13,013.97 30.14% 6.81%
5 12/31/91-12/31-96 $15,514.84 55.15% 9.18% $16,228.07 62.28% 10.17% $12,910.73 29.11% 5.24%
Lifetime
of Series 5/27/88-12/31-96 $32,607.46 226.07% 14.73% $23,940.33 139.40% 10.64% $18,307.06 83.07% 7.26%
<FN>
- ------------------------------
*For purposes of determining these investment results, the actual investment
performance of each Series of MFS/Sun Life Series Trust is reflected from the
date such Series commenced operations, although the Contracts have been offered
only since March 1, 1993. The charges imposed under the Contract against the
assets of the Variable Account for mortality and expense risks and distribution
expenses have been deducted. However, the annual Account Fee is not reflected
and these examples do not assume surrender at the end of the period.
</TABLE>
6
<PAGE>
ADVERTISING AND SALES LITERATURE
As set forth in the Prospectus, the Company may refer to the following
organizations (and others) in its marketing materials:
A.M. BEST'S RATING SYSTEM is designed to evaluate the various factors
affecting the overall performance of an insurance company in order to provide an
opinion as to an insurance company's relative financial strength and ability to
meet its contractual obligations. The procedure includes both a quantitative and
qualitative review of each company.
DUFF & PHELPS CREDIT RATING COMPANY's Insurance Company Claims Paying
Ability Rating is an independent evaluation by a nationally accredited rating
organization of an insurance company's ability to meet its future obligations
under the contracts and products it sells. The rating takes into account both
quantitative and qualitative factors.
LIPPER VARIABLE INSURANCE PRODUCTS PERFORMANCE ANALYSIS SERVICE is a
publisher of statistical data covering the investment company industry in the
United States and overseas. Lipper is recognized as the leading source of data
on open-end and closed-end funds. Lipper currently tracks the performance of
over 5,000 investment companies and publishes numerous specialized reports,
including reports on performance and portfolio analysis, fee and expense
analysis.
STANDARD & POOR's insurance claims-paying ability rating is an opinion of an
operating insurance company's financial capacity to meet obligations of its
insurance policies in accordance with their terms.
VARDS (Variable Annuity Research Data Service) provides a comprehensive
guide to variable annuity contract features and historical fund performance. The
service also provides a readily understandable analysis of the comparative
characteristics and market performance of funds inclusive in variable contracts.
STANDARD & POOR'S INDEX--broad-based measurement of changes in stock-market
conditions based on the average performance of 500 widely held common stocks;
commonly known as the Standard & Poor's 500 (S&P 500). The selection of stocks,
their relative weightings to reflect differences in the number of outstanding
shares, and publication of the index itself are services of Standard & Poor's
Corporation, a financial advisory, securities rating, and publishing firm. The
index tracks 400 industrial company stocks, 20 transportation stocks, 40
financial company stocks, and 40 public utilities.
NASDAQ-OTC Price Index--this index is based on the National Association of
Securities Dealers Automated Quotations (NASDAQ) and represents all domestic
over-the-counter stocks except those traded on exchanges and those having only
one market maker, a total of some 3,500 stocks. It is market value-weighted and
was introduced with a base of 100.00 on February 5, 1971.
DOW JONES INDUSTRIAL AVERAGE (DJIA)--price-weighted average of 30 actively
traded blue chip stocks, primarily industrials, but including American Express
Company and American Telephone and Telegraph Company. Prepared and Published by
Dow Jones & Company, it is the oldest and most widely quoted of all the market
indicators. The average is quoted in points, not dollars.
In its advertisements and other sales literature for the Variable Account
and the Series Fund, the Company intends to illustrate the advantages of the
Contracts in a number of ways:
COMPOUND INTEREST ILLUSTRATIONS. These will emphasize several advantages of
the variable annuity contract. For example, but not by way of limitation, the
literature may emphasize the potential savings through tax deferral; the
potential advantage of the Variable Account over the fixed account; and the
compounding effect when an Owner makes regular deposits to his or her Account.
DOLLAR COST AVERAGING ILLUSTRATIONS. These illustrations will generally
discuss the price-leveling effect of making regular investments in the same
Sub-Accounts over a period of time, to take advantage of the trends in market
prices of the portfolio securities purchased by those Sub-Accounts.
7
<PAGE>
THE COMPANY'S ASSETS, SIZE. The Company may discuss its general financial
condition (see, for example, the references to Standard & Poor's, A.M. Best
Company and Duff & Phelps above); it may refer to its assets; it may also
discuss its relative size and/or ranking among companies in the industry or
among any sub-classification of those companies, based upon recognized
evaluation criteria.
8
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
STATEMENT OF CONDITION-- December 31, 1996
<TABLE>
<CAPTION>
ASSETS:
Investments in MFS/Sun Life Series Trust: Shares Cost Value
---------- ------------ ------------
<S> <C> <C> <C>
Capital Appreciation Series ("CAS")...... 1,666,783 $ 46,630,660 $ 59,723,935
Government Securities Series ("GSS")..... 2,089,102 26,209,896 26,880,850
High Yield Series ("HYS")................ 1,468,395 12,666,389 13,527,963
Money Market Series ("MMS").............. 15,626,723 15,626,723 15,626,723
Managed Sectors Series ("MSS")........... 446,110 10,124,036 11,710,226
Total Return Series ("TRS").............. 2,119,044 33,103,413 41,194,053
World Governments Series ("WGS")......... 637,353 7,421,095 7,175,143
------------ ------------
$151,782,212 $175,838,893
------------
------------
LIABILTY:
Payable to sponsor................................................... 49,354
------------
Net Assets..................................................... $175,789,539
------------
------------
</TABLE>
<TABLE>
<CAPTION>
Applicable to Owners of
Deferred Variable Annuity Contracts Reserve for
NET ASSETS: ----------------------------------- Variable
COMPASS 2 CONTRACTS: Units Unit Value Value Annuities Total
--------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
CAS................................................ 1,149,253 $ 48.6833 $ 55,945,505 $161,493 $ 56,106,998
GSS................................................ 1,160,869 22.5040 26,120,603 106,515 26,227,118
HYS................................................ 489,793 25.9755 12,725,125 43,245 12,768,370
MMS................................................ 917,551 16.0115 14,685,977 -- 14,685,977
MSS................................................ 314,243 33.5381 10,547,471 11,516 10,558,987
TRS................................................ 1,532,369 24.2332 37,168,687 528,580 37,697,267
WGS................................................ 358,117 18.5138 6,636,842 -- 6,636,842
------------ ----------- ------------
$163,830,210 $851,349 $164,681,559
------------ ----------- ------------
<CAPTION>
COMPASS 3 CONTRACTS:
<S> <C> <C> <C> <C> <C>
CAS................................................ 231,231 $ 15.6920 $ 3,628,190 $ 160 $ 3,628,350
GSS................................................ 58,052 11.2212 650,941 -- 650,941
HYS................................................ 58,945 12.8082 755,007 -- 755,007
MMS................................................ 83,267 11.0530 920,235 327 920,562
MSS................................................ 82,578 14.0980 1,161,735 -- 1,161,735
TRS................................................ 255,284 13.5283 3,452,935 148 3,453,083
WGS................................................ 47,922 11.2477 538,302 -- 538,302
------------ ----------- ------------
$ 11,107,345 $ 635 $ 11,107,980
------------ ----------- ------------
Net Assets............................................................ $174,937,555 $851,984 $175,789,539
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
See notes to financial statements
9
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
STATEMENTS OF OPERATIONS-- Year Ended December 31, 1996
<TABLE>
<CAPTION>
CAS GSS HYS MMS
Sub-Account Sub-Account Sub-Account Sub-Account
----------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Dividend income and capital gain distributions
received....................................... $ 4,738,438 $1,612,644 $1,120,332 $ 720,534
Mortality and expense risk charges.............. 752,284 370,701 177,311 194,882
Distribution expense charges.................... 4,630 877 965 821
----------- ----------- ---------- ------------
Net investment income....................... $ 3,981,524 $1,241,066 $ 942,056 $ 524,831
----------- ----------- ---------- ------------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales........................... $16,230,201 $9,813,452 $6,256,541 $ 12,850,999
Cost of investments sold...................... 11,653,410 9,840,522 5,975,298 12,850,999
----------- ----------- ---------- ------------
Net realized gains (losses)................. $ 4,576,791 $ (27,070 ) $ 281,243 $ --
----------- ----------- ---------- ------------
Net unrealized appreciation (depreciation) on
investments
End of year................................... $13,093,275 $ 670,954 $ 861,574 $ --
Beginning of year............................. 11,078,267 1,795,171 692,848 --
----------- ----------- ---------- ------------
Change in unrealized appreciation
(depreciation)............................. $ 2,015,008 $(1,124,217) $ 168,726 $ --
----------- ----------- ---------- ------------
Realized and unrealized gains (losses)........ $ 6,591,799 $(1,151,287) $ 449,969 $ --
----------- ----------- ---------- ------------
INCREASE IN NET ASSETS FROM OPERATIONS............ $10,573,323 $ 89,779 $1,392,025 $ 524,831
----------- ----------- ---------- ------------
----------- ----------- ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
MSS TRS WGS
Sub-Account Sub-Account Sub-Account Total
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Dividend income and capital gain distributions
received....................................... $1,389,216 $2,905,588 $1,047,797 $13,534,549
Mortality and expense risk charges.............. 135,188 497,130 95,011 2,222,507
Distribution expense charges.................... 1,321 4,426 809 13,849
---------- ---------- ---------- -----------
Net investment income....................... $1,252,707 $2,404,032 $ 951,977 $11,298,193
---------- ---------- ---------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales........................... $2,187,159 $7,642,534 $2,039,768 $57,020,654
Cost of investments sold...................... 1,840,838 5,704,710 2,170,077 50,035,854
---------- ---------- ---------- -----------
Net realized gains (losses)................. $ 346,321 $1,937,824 $(130,309 ) $ 6,984,800
---------- ---------- ---------- -----------
Net unrealized appreciation (depreciation) on
investments
End of year................................... $1,586,190 $8,090,640 $(245,952 ) $24,056,681
Beginning of year............................. 1,558,915 7,601,596 336,154 23,062,951
---------- ---------- ---------- -----------
Change in unrealized appreciation
(depreciation)............................. $ 27,275 $ 489,044 $(582,106 ) $ 993,730
---------- ---------- ---------- -----------
Realized and unrealized gains (losses)........ $ 373,596 $2,426,868 $(712,415 ) $ 7,978,530
---------- ---------- ---------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS............ $1,626,303 $4,830,900 $ 239,562 $19,276,723
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
</TABLE>
See notes to financial statements
10
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CAS GSS
Sub-Account Sub-Account
------------------------------ -------------------------------
Year Ended December 31, Year Ended December 31,
------------------------------ -------------------------------
1996 1995 1996 1995
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.......................... $ 3,981,524 $ 552,397 $ 1,241,066 $ 1,637,451
Net realized gains (losses).................... 4,576,791 2,507,432 (27,070) 603,085
Net unrealized gains (losses).................. 2,015,008 10,932,150 (1,124,217) 2,707,574
-------------- ------------- -------------- --------------
Increase in net assets from operations..... $10,573,323 $13,991,979 $ 89,779 $ 4,948,110
-------------- ------------- -------------- --------------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received................... $ 2,717,881 $ 2,487,233 $ 894,639 $ 1,033,624
Net transfers between Sub-Accounts and Fixed
Account..................................... (1,800,976) 2,243,560 493,206 (7,186,488)
Withdrawals, surrenders, annuitizations and
contract charges............................ (7,564,122) (5,693,451) (4,694,596) (5,369,947)
-------------- ------------- -------------- --------------
Net accumulation activity.................. $(6,647,217) $ (962,658) $(3,306,751) $(11,522,811)
-------------- ------------- -------------- --------------
Annuitization Activity:
Annuitizations............................... $ 7,453 $ 41,730 $ 10,761 $ 51,369
Annuity payments and contract charges........ (21,172) (16,842) (43,569) (41,652)
Adjustments to annuity reserve............... 775 2,207 1,408 1,228
-------------- ------------- -------------- --------------
Net annuitization activity................. $ (12,944) $ 27,095 $ (31,400) $ 10,945
-------------- ------------- -------------- --------------
Decrease in net assets from contract owner
transactions.................................. $(6,660,161) $ (935,563) $(3,338,151) $(11,511,866)
-------------- ------------- -------------- --------------
Increase (decrease) in net assets............ $ 3,913,162 $13,056,416 $(3,248,372) $ (6,563,756)
NET ASSETS:
Beginning of year.............................. 55,822,186 42,765,770 30,126,431 36,690,187
-------------- ------------- -------------- --------------
End of year.................................... $59,735,348 $55,822,186 $26,878,059 $ 30,126,431
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
<CAPTION>
HYS MMS
Sub-Account Sub-Account
------------------------------ -------------------------------
Year Ended December 31, Year Ended December 31,
------------------------------ -------------------------------
1996 1995 1996 1995
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.......................... $ 942,056 $ 785,539 $ 524,831 $ 711,100
Net realized gains............................. 281,243 183,759 -- --
Net unrealized gains........................... 168,726 1,082,523 -- --
-------------- ------------- -------------- --------------
Increase in net assets from operations..... $ 1,392,025 $ 2,051,821 $ 524,831 $ 711,100
-------------- ------------- -------------- --------------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received................... $ 373,887 $ 263,434 $ 506,719 $ 424,234
Net transfers between Sub-Accounts and Fixed
Account..................................... (133,634) (431,236) 1,225,167 5,180,410
Withdrawals, surrenders, annuitizations and
contract charges............................ (2,039,017) (2,037,347) (3,891,615) (5,371,738)
-------------- ------------- -------------- --------------
Net accumulation activity.................. $(1,798,764) $(2,205,149) $(2,159,729) $ 232,906
-------------- ------------- -------------- --------------
Annuitization Activity:
Annuitizations $ -- $ -- $ -- $ --
Annuity payments and contract charges........ (6,135) (5,761) (4,273) (7,368)
Adjustments to annuity reserve............... (255) (530) (11,568) (11,104)
-------------- ------------- -------------- --------------
Net annuitization activity................. $ (6,390) $ (6,291) $ (15,841) $ (18,472)
-------------- ------------- -------------- --------------
Increase (decrease) in net assets from contract
owner transactions............................ $(1,805,154) $(2,211,440) $(2,175,570) $ 214,434
-------------- ------------- -------------- --------------
Increase (decrease) in net assets............ $ (413,129) $ (159,619) $(1,650,739) $ 925,534
NET ASSETS:
Beginning of year.............................. 13,936,506 14,096,125 17,257,278 16,331,744
-------------- ------------- -------------- --------------
End of year.................................... $13,523,377 $13,936,506 $15,606,539 $ 17,257,278
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
</TABLE>
See notes to financial statements
11
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
MSS TRS
Sub-Account Sub-Account
------------------------------ -----------------------------
Year Ended December 31, Year Ended December 31,
------------------------------ -----------------------------
1996 1995 1996 1995
--------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income................................ $ 1,252,707 $ 209,209 $ 2,404,032 $ 975,755
Net realized gains................................... 346,321 724,204 1,937,824 2,476,482
Net unrealized gains................................. 27,275 1,724,469 489,044 5,260,617
--------------- ------------ -------------- ------------
Increase in net assets from operations........... $ 1,626,303 $ 2,657,882 $ 4,830,900 $ 8,712,854
--------------- ------------ -------------- ------------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received......................... $ 728,572 $ 676,945 $ 1,903,724 $ 1,453,111
Net transfers between Sub-Accounts and Fixed
Account........................................... 455,068 1,442,412 (23,251) (2,492,700)
Withdrawals, surrenders, annuitizations and
contract charges.................................. (1,326,391) (2,086,791) (5,723,230) (5,149,792)
--------------- ------------ -------------- ------------
Net accumulation activity........................ $ (142,751) $ 32,566 $ (3,842,757) $ (6,189,381)
--------------- ------------ -------------- ------------
Annuitization Activity:
Annuitizations..................................... $ -- $ -- $ 19,728 $ --
Annuity payments and contract charges.............. (135) (121) (68,505) (59,803)
Adjustments to annuity reserve..................... 11,582 (148) (13,885) (11,643)
--------------- ------------ -------------- ------------
Net annuitization activity....................... $ 11,447 $ (269) $ (62,662) $ (71,446)
--------------- ------------ -------------- ------------
Increase (decrease) in net assets from contract owner
transactions........................................ $ (131,304) $ 32,297 $ (3,905,419) $ (6,260,827)
--------------- ------------ -------------- ------------
Increase in net assets............................. $ 1,494,999 $ 2,690,179 $ 925,481 $ 2,452,027
NET ASSETS:
Beginning of year.................................... 10,225,723 7,535,544 40,224,869 37,772,842
--------------- ------------ -------------- ------------
End of period........................................ $11,720,722 $10,225,723 $ 41,150,350 $ 40,224,869
--------------- ------------ -------------- ------------
--------------- ------------ -------------- ------------
<CAPTION>
WGS
Sub-Account Total
------------------------------ -----------------------------
Year Ended December 31, Year Ended December 31,
------------------------------ -----------------------------
1996 1995 1996 1995
--------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income................................ $ 951,977 $ 403,047 $ 11,298,193 $ 5,274,498
Net realized gains (losses).......................... (130,309) 110,004 6,984,800 6,604,966
Net unrealized gains (losses)........................ (582,106) 702,901 993,730 22,410,234
--------------- ------------ -------------- ------------
Increase in net assets from operations........... $ 239,562 $ 1,215,952 $ 19,276,723 $ 34,289,698
--------------- ------------ -------------- ------------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received......................... $ 408,414 $ 273,558 $ 7,533,836 $ 6,612,139
Net transfers between Sub-Accounts and Fixed
Account........................................... (463,423) (595,533) (247,843) (1,839,575)
Withdrawals, surrenders, annuitizations and
contract charges.................................. (1,295,854) (1,346,149) (26,534,825) (27,055,215)
--------------- ------------ -------------- ------------
Net accumulation activity........................ $(1,350,863) $(1,668,124) $(19,248,832) $(22,282,651)
--------------- ------------ -------------- ------------
Annuitization Activity:
Annuitizations..................................... $ -- $ -- $ 37,942 $ 93,099
Annuity payments and contract charges.............. -- -- (143,789) (131,547)
Adjustments to annuity reserve..................... -- -- (11,943) (19,990)
--------------- ------------ -------------- ------------
Net annuitization activity....................... $ -- $ -- $ (117,790) $ (58,438)
--------------- ------------ -------------- ------------
Decrease in net assets from contract owner
transactions........................................ $(1,350,863) $(1,668,124) $(19,366,622) $(22,341,089)
--------------- ------------ -------------- ------------
Increase (decrease) in net assets.................. $(1,111,301) $ (452,172) $ (89,899) $ 11,948,609
NET ASSETS:
Beginning of year.................................... 8,286,445 8,738,617 175,879,438 163,930,829
--------------- ------------ -------------- ------------
End of year.......................................... $ 7,175,144 $ 8,286,445 $175,789,539 $175,879,438
--------------- ------------ -------------- ------------
--------------- ------------ -------------- ------------
</TABLE>
See notes to financial statements
12
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
Sun Life (N.Y.) Variable Account B (the "Variable Account"), a separate account
of Sun Life Insurance and Annuity Company of New York, the Sponsor (a
wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.)), was
established on December 3, 1984 as a funding vehicle for individual variable
annuities. The Variable Account is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940 as a unit investment trust.
The assets of the Variable Account are divided into Sub-Accounts. Each
Sub-Account is invested in shares of a specific series of MFS/Sun Life Series
Trust (the "Series Trust") as selected by contract owners. The Series Trust is
an open-end management investment company registered under the Investment
Company Act of 1940. Massachusetts Financial Services Company, a subsidiary of
Sun Life Assurance Company of Canada (U.S.), is investment adviser to the Series
Trust.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENT VALUATIONS
Investments in shares of the Series Trust are recorded at their net asset value.
Realized gains and losses on sales of shares of the Series Trust are determined
on the identified cost basis. Dividend income and capital gain distributions
received by the Sub-Accounts are reinvested in additional Series Trust shares
and are recognized on the ex-dividend date.
Exchanges between Sub-Accounts requested by contract owners are recorded in the
new Sub-Account upon receipt of the redemption proceeds.
FEDERAL INCOME TAX STATUS
The operations of the Variable Account are part of the operations of the Sponsor
and are not taxed separately; the Variable Account is not taxed as a regulated
investment company. The Sponsor qualifies for the federal income tax treatment
granted to life insurance companies under Subchapter L of the Internal Revenue
Code. Under existing federal income tax law, investment income and capital gains
earned by the Variable Account on contract owner reserves are not subject to
tax.
(3) CONTRACT CHARGES
A mortality and expense risk charge based on the value of the Variable Account
is deducted from the Variable Account at the end of each valuation period for
the mortality and expense risks assumed by the
13
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS -- continued
Sponsor. These deductions are transferred periodically to the Sponsor.
Currently, the deduction is at an effective annual rate of 1.3% of the assets of
the Variable Account attributable to Compass 2 contracts and 1.25% of the assets
of the Variable Account attributable to Compass 3 contracts.
Each year on the contract anniversary, a contract maintenance charge of $30 is
deducted from each contract's accumulation account to cover administrative
expenses relating to the contract. After the annuity commencement date the
charge is deducted pro rata from each annuity payment made during the year.
The Sponsor does not deduct a sales charge from purchase payments. However, a
withdrawal charge (contingent deferred sales charge) may be deducted to cover
certain expenses relating to the sale of the contract. In no event shall the
aggregate withdrawal charges (including the distribution expense charge
described below applicable to Compass 3 contracts) exceed 5% of the purchase
payments made under a Compass 2 contract or 9% of the purchase payments made
under a Compass 3 contract.
For assuming the risk that withdrawal charges may be insufficient to compensate
it for the costs of distributing the Compass 3 contracts, the Sponsor makes a
deduction from the Variable Account at the end of each valuation period for the
first seven contract years (during both the accumulation period and, if
applicable, after annuity payments begin) at an effective annual rate of 0.15%
of the assets of the Variable Account attributable to such contracts. No
deduction is made after the seventh contract anniversary. No such deduction is
made with respect to assets attributable to Compass 2 contracts.
(4) ANNUITY RESERVES
Annuity reserves for contracts with annuity commencement dates prior to February
1, 1987 have been calculated using the 1971 Individual Annuitant Mortality
Table. Annuity reserves for contracts with annuity commencement dates on or
after February 1, 1987 are calculated using the 1983 Individual Annuitant
Mortality Table. All annuity reserves are calculated using an assumed interest
rate of 4%. Required adjustments to the reserve are accomplished by transfers to
or from the Sponsor.
14
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS -- continued
(5) UNIT ACTIVITY FROM CONTRACT OWNER TRANSACTIONS
<TABLE>
<CAPTION>
CAS GSS
Sub-Account Sub-Account
----------------------- -----------------------
Year Ended Year Ended
December 31, December 31,
----------------------- -----------------------
COMPASS 2 CONTRACTS 1996 1995 1996 1995
- ---------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of Year 1,311,905 1,352,145 1,317,288 1,877,778
Units purchased 34,513 53,525 29,010 40,875
Units transferred between
Sub-Accounts and Fixed Account (32,094) 61,551 25,659 (341,163)
Units withdrawn, surrendered, and
annuitized (165,071) (155,316) (211,088) (260,202)
---------- ---------- ---------- ----------
Units Outstanding End of Year 1,149,253 1,311,905 1,160,869 1,317,288
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
<CAPTION>
HYS MMS
Sub-Account Sub-Account
------------------- -----------------------
Year Ended Year Ended
December 31, December 31,
------------------- -----------------------
COMPASS 2 CONTRACTS 1996 1995 1996 1995
- ---------------------------------------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of Year 570,116 673,380 1,084,910 1,074,216
Units purchased 5,193 8,072 20,814 22,486
Units transferred between
Sub-Accounts and Fixed Account (6,162) (19,382) 58,322 338,828
Units withdrawn, surrendered, and
annuitized (79,354) (91,954) (246,495) (350,620)
-------- -------- ---------- ----------
Units Outstanding End of Year 489,793 570,116 917,551 1,084,910
-------- -------- ---------- ----------
-------- -------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
MSS TRS WGS
Sub-Account Sub-Account Sub-Account
---------------------- ---------------------- ------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
---------------------- ---------------------- ------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Units Outstanding Beginning of Year 331,221 328,532 1,740,564 2,083,366 433,736 530,682
Units purchased 11,544 14,042 40,026 52,963 10,747 11,682
Units transferred between
Sub-Accounts and Fixed Account 12,613 63,983 (6,258) (132,595) (20,115) (31,859)
Units withdrawn, surrendered, and
annuitized (41,135) (75,336) (241,963) (263,170) (66,251) (76,769)
---------- ---------- ---------- ---------- -------- --------
Units Outstanding End of Year 314,243 331,221 1,532,369 1,740,564 358,117 433,736
---------- ---------- ---------- ---------- -------- --------
---------- ---------- ---------- ---------- -------- --------
</TABLE>
15
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
CAS GSS
Sub-Account Sub-Account
----------------------- -----------------------
Year Ended Year Ended
December 31, December 31,
----------------------- -----------------------
COMPASS 3 CONTRACTS 1996 1995 1996 1995
- ---------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of Year 184,876 135,042 39,286 32,725
Units purchased 82,988 51,695 23,535 17,789
Units transferred between
Sub-Accounts and Fixed Account (23,851) 6,001 (1,004) (9,242)
Units withdrawn, surrendered, and
annuitized (12,782) (7,862) (3,765) (1,986)
---------- ---------- ---------- ----------
Units Outstanding End of Year 231,231 184,876 58,052 39,286
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
<CAPTION>
HYS MMS
Sub-Account Sub-Account
------------------- -----------------------
Year Ended Year Ended
December 31, December 31,
------------------- -----------------------
COMPASS 3 CONTRACTS 1996 1995 1996 1995
- ---------------------------------------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of Year 43,963 37,197 44,348 33,901
Units purchased 20,780 7,798 16,424 7,957
Units transferred between
Sub-Accounts and Fixed Account 1,055 1,400 25,043 4,581
Units withdrawn, surrendered, and
annuitized (6,853) (2,432) (2,548) (2,091)
-------- -------- ---------- ----------
Units Outstanding End of Year 58,945 43,963 83,267 44,348
-------- -------- ---------- ----------
-------- -------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
MSS TRS WGS
Sub-Account Sub-Account Sub-Account
---------------------- ---------------------- ------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
---------------------- ---------------------- ------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Units Outstanding Beginning of Year 53,846 28,752 185,716 154,543 46,895 43,259
Units purchased 29,174 27,333 80,349 39,993 20,202 6,637
Units transferred between
Sub-Accounts and Fixed Account 4,546 (147) 10,544 (2,984) (9,737) 191
Units withdrawn, surrendered, and
annuitized (4,988) (2,092) (21,325) (5,836) (9,438) (3,192)
---------- ---------- ---------- ---------- -------- --------
Units Outstanding End of Year 82,578 53,846 255,284 185,716 47,922 46,895
---------- ---------- ---------- ---------- -------- --------
---------- ---------- ---------- ---------- -------- --------
</TABLE>
16
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Contract Owners participating in Sun Life (N.Y.) Variable Account B
and the Board of Directors of Sun Life Insurance and Annuity Company of New
York:
We have audited the accompanying statement of condition of Sun Life (N.Y.)
Variable Account B (the "Variable Account") as of December 31, 1996, the related
statements of operations for the year then ended and the statements of changes
in net assets for the years ended December 31, 1996 and 1995. These financial
statements are the responsibility of management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities held at December 31, 1996 by correspondence with the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Variable Account as of December 31,
1996, the results of its operations and the changes in its net assets for the
respective stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 7, 1997
17
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
STATUTORY STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND CAPITAL STOCK AND
SURPLUS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
ADMITTED ASSETS
Bonds $ 81,649,792 $132,026,064
Mortgage loans 40,431,773 51,843,936
Real estate, net of encumbrances 1,377,041 0
Policy loans 651,332 476,194
Cash 107,821 1,267,905
Investment income due and accrued 1,737,199 3,255,286
Due from (to) separate accounts 1,689,278 (1,036,679)
Other assets 505,452 443,663
------------ ------------
General account assets 128,149,688 188,276,369
Unitized separate account assets 297,690,137 250,782,417
Non-unitized separate account assets 92,192,714 81,110,554
------------ ------------
Total assets $518,032,539 $520,169,340
------------ ------------
------------ ------------
LIABILITIES
Policy reserves $ 25,264,586 $ 23,548,885
Annuity and other deposits 61,747,147 129,743,536
Accrued expenses and taxes 532,957 376,573
Other liabilities 941,534 906,238
Due to (from) parent and
affiliates--net 2,014,355 (1,292,878)
Interest maintenance reserve 1,173,961 1,648,375
Asset valuation reserve 1,845,237 1,545,857
------------ ------------
General account liabilities 93,519,777 156,476,586
Unitized separate account
liabilities 297,517,405 250,617,786
Non-unitized separate account
liabilities 92,192,714 81,110,554
------------ ------------
Total liabilities 483,229,896 488,204,926
------------ ------------
CAPITAL STOCK AND SURPLUS
Capital stock--Par value $1,000:
Authorized, issued and
outstanding;
2,000 shares 2,000,000 2,000,000
Surplus 32,802,643 29,964,414
------------ ------------
Total capital stock and surplus 34,802,643 31,964,414
------------ ------------
Total liabilities, capital stock and
surplus $518,032,539 $520,169,340
------------ ------------
------------ ------------
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
18
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
STATUTORY STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
INCOME
Premiums and annuity considerations $ 11,581,817 $ 11,731,623 $ 8,798,684
Deposit-type funds 72,121,136 73,714,439 67,198,340
Net investment income 12,313,903 18,450,106 21,947,153
Amortization of interest maintenance
reserve 704,763 753,351 750,567
Net gain from operations from
separate accounts 8,101 0 0
------------ ------------ ------------
96,729,720 104,649,519 98,694,744
------------ ------------ ------------
BENEFITS AND EXPENSES
Death benefits 2,964,690 2,589,934 2,269,435
Annuity benefits 7,175,995 6,606,801 6,567,874
Disability benefits and benefits
under accident and health policies 464,615 233,549 162,660
Surrender benefits and other fund
withdrawals 118,432,072 118,975,912 73,728,402
Increase (decrease) in aggregate
reserves for life and accident
health policies and contracts 1,550,701 3,022,081 (1,000,757)
Decrease in liability for premium
and other deposit funds (67,996,389) (71,733,008) (34,019,334)
------------ ------------ ------------
62,591,684 59,695,269 47,708,280
Commissions on premiums and annuity
considerations 3,047,358 3,212,849 2,921,526
General insurance expenses 6,093,131 5,716,492 5,391,935
Insurance taxes, licenses and fees 729,244 579,585 466,088
Net transfers to separate accounts 19,487,747 32,047,554 36,365,814
------------ ------------ ------------
91,949,164 101,251,749 92,853,643
------------ ------------ ------------
Net gain from operations before
federal income taxes 4,780,556 3,397,770 5,841,101
Federal income taxes incurred
(excluding tax on capital gains) 1,938,734 2,446,706 1,017,155
------------ ------------ ------------
Net gain from operations after
federal income taxes and before
realized capital losses 2,841,822 951,064 4,823,946
Net realized capital losses less
capital gains tax (439,101) (21,536) (469,115)
------------ ------------ ------------
NET INCOME $ 2,402,721 $ 929,528 $ 4,354,831
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
19
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
STATUTORY STATEMENTS OF CHANGES IN CAPITAL STOCK AND SURPLUS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CAPITAL STOCK $ 2,000,000 $ 2,000,000 $ 2,000,000
----------- ----------- -----------
PAID-IN SURPLUS
Balance, beginning of year 28,750,000 28,750,000 28,750,000
Transfer from special contingency
reserve 750,000 0 0
----------- ----------- -----------
Balance, end of year 29,500,000 28,750,000 28,750,000
----------- ----------- -----------
SPECIAL CONTINGENCY RESERVE
Balance, beginning of year 750,000 750,000 750,000
Transfer to paid-in surplus (750,000) 0 0
----------- ----------- -----------
Balance, end of year 0 750,000 750,000
----------- ----------- -----------
UNASSIGNED SURPLUS
Balance, beginning of year 464,414 (90,931) (4,295,377)
Net income 2,402,721 929,528 4,354,831
Unrealized gains (losses) 702,000 (672,000) 0
Change in non-admitted assets 32,888 71,263 (139,468)
Earnings on and transfers of
separate account surplus 0 8,490 (150,603)
Change in asset valuation reserve (299,380) 218,064 139,686
----------- ----------- -----------
Balance, end of year 3,302,643 464,414 (90,931)
----------- ----------- -----------
TOTAL SURPLUS 32,802,643 29,964,414 29,409,069
----------- ----------- -----------
TOTAL CAPITAL STOCK AND SURPLUS $34,802,643 $31,964,414 $31,409,069
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
20
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
STATUTORY STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH PROVIDED
Premiums, annuity considerations and
deposit funds received $ 83,598,181 $ 85,243,958 $ 76,078,969
Net investment income received 14,106,521 19,808,090 22,786,790
------------ ------------ ------------
Total receipts 97,704,702 105,052,048 98,865,759
------------ ------------ ------------
Benefits paid 128,975,968 128,129,129 82,549,621
Insurance expenses and taxes paid 9,712,774 9,655,310 8,541,614
Net cash transfers to separate
accounts 22,213,704 29,702,679 36,637,408
Federal income tax payments
(excluding tax on capital gains) 2,909,899 2,125,541 242,155
------------ ------------ ------------
Total payments 163,812,345 169,612,659 127,970,798
------------ ------------ ------------
Net cash from operations (66,107,643) (64,560,611) (29,105,039)
------------ ------------ ------------
Proceeds from long-term investments
sold, matured or repaid (after
deducting taxes on capital gains
of $(112,405) for 1996, $324,248
for 1995 and $75,024 for 1994) 86,583,714 123,662,512 98,478,190
Other cash provided 4,654,856 444,240 2,649,519
------------ ------------ ------------
Total cash provided 91,238,570 124,106,752 101,127,709
------------ ------------ ------------
CASH APPLIED
Cost of long-term investments
acquired 28,654,582 51,631,901 68,372,127
Other cash applied 166,107 2,401,799 2,267,072
------------ ------------ ------------
Total cash applied 28,820,689 54,033,700 70,639,199
------------ ------------ ------------
Net change in cash and short-term
investments (3,689,762) 5,512,441 1,383,471
CASH AND SHORT-TERM INVESTMENTS:
BEGINNING OF YEAR 8,304,756 2,792,315 1,408,844
------------ ------------ ------------
END OF YEAR $ 4,614,994 $ 8,304,756 $ 2,792,315
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
21
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
GENERAL--
Sun Life Insurance and Annuity Company of New York (the Registrant) is
incorporated as a life insurance company and is currently engaged in the sale of
individual fixed and variable annuities and group life and long- term disability
insurance. The parent company, Sun Life Assurance Company of Canada (U.S.) (Sun
Life of Canada (U.S.)), is a wholly-owned subsidiary of Sun Life Assurance
Company of Canada (Sun Life (Canada)), a mutual life insurance company.
The Registrant, which is domiciled in the State of New York, prepares its
financial statements in accordance with statutory accounting practices
prescribed or permitted by the State of New York Insurance Department.
Prescribed accounting practices include a variety of publications of the
National Association of Insurance Commissioners (NAIC), as well as New York
State laws, regulations and general administrative rules. Permitted accounting
practices encompass all accounting practices not so prescribed. The permitted
accounting practices adopted by the Registrant are not material to the financial
statements. Prior to 1996, statutory accounting practices were recognized by the
insurance industry and the accounting profession as generally accepted
accounting principles (GAAP) for mutual life insurance companies and stock life
insurance companies wholly owned by mutual life insurance companies. In April,
1993, the Financial Accounting Standards Board (FASB) issued an interpretation
(the Interpretation), that became effective in 1996, that has changed the
previous practice of mutual life insurance companies (and stock life insurance
companies that are wholly owned subsidiaries of mutual life insurance companies)
with respect to utilizing statutory basis financial statements for general
purposes, in that it will no longer allow such financial statements to be
described as having been prepared in conformity with GAAP. Consequently, these
financial statements prepared in conformity with statutory accounting practices
as described above, vary from and are not intended to present the Registrant's
financial position and results of operations and capital in conformity with
GAAP. (See Note 17 for further discussion relative to the Registrant's basis of
financial statement presentation.) The effects on the financial statements of
the variances between the statutory basis of accounting and GAAP, although not
reasonably determinable, are presumed to be material.
INVESTED ASSETS--
Bonds are carried at cost adjusted for amortization of premium or accrual of
discount. Mortgage loans acquired at a premium or discount are carried at
amortized values and other mortgage loans at the amounts of the unpaid balances.
Real estate investments are carried at the lower of cost, adjusted for
accumulated depreciation, or appraised value less encumbrances. Short-term
investments are carried at amortized cost which approximates fair value.
Depreciation of buildings and improvements is calculated using the straight-line
method over the estimated useful life of the property, generally three to
sixteen years.
POLICY AND CONTRACT RESERVES--
The reserves for group life insurance, group long-term disability insurance and
annuity contracts, developed by accepted actuarial methods, have been
established and maintained on the basis of published mortality and morbidity
tables using assumed interest rates and valuation methods that will provide
reserves at least as great as those required by law and contract provisions.
INCOME AND EXPENSES--
For group life, group long-term disability and annuity contracts, premiums are
recognized as revenues over the premium paying period, whereas commissions and
other costs applicable to the acquisition of new business are charged to
operations as incurred.
22
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED):
SEPARATE ACCOUNTS--
The Registrant has established unitized separate accounts applicable to
individual qualified and non-qualified variable annuity contracts.
Assets and liabilities of the separate accounts, representing net deposits and
accumulated net investment earnings less fees, held primarily for the benefit of
contract holders, are shown as separate captions in the financial statements.
Assets held in the separate accounts are carried at market values.
The Registrant has also established a non-unitized separate account for amounts
allocated to the fixed portion of a certain combination fixed/variable deferred
annuity contracts. The assets of this account are available to fund general
account liabilities and general account assets are available to fund liabilities
of this account.
Gains (losses) from mortality experience and investment experience, not
applicable to contract owners, are transferred to (from) the general account.
Accumulated gains (losses) that have not been transferred are recorded as
payable (receivable) to (from) the general account. Amounts payable to the
general account of the Registrant amounted to $1,689,000 in 1996. The amount
receivable from the general account of the Registrant was $1,037,000 in 1995.
CHANGES IN ACCOUNTING PRINCIPLES AND REPORTING--
During 1996 the Registrant changed its method of accounting and reporting for
deposits to and withdrawals from its unitized separate accounts. Previously,
deposits were recorded as direct increases in liabilities of the separate
accounts and withdrawals and benefits were recorded as direct decreases in that
liability. Effective for 1996 the Registrant recorded deposits as revenue in the
general account, withdrawals and benefits as expenses in the general account and
the transfer of those funds between the general account and the separate account
are reflected as an expense (income) item. Amounts presented for the years ended
December 31, 1995 and 1994 have been restated to conform to this presentation.
The effect of this change was to increase revenue and expenses by $54 million in
1996, $29 million in 1995 and $40 million in 1994, with no impact on net income
of the general account. This new method of reporting is consistent with the
accounting treatment for deposits and withdrawals and benefits of the
non-unitized separate account of the Registrant and is consistent with
prescribed statutory accounting practices.
The Registrant has also revised the format of its statutory statements of
operations, changes in capital stock and surplus and cash flow in order to to
match more exactly the presentation used in the preparation of its Annual
Statement. As a result, reclassifications have been made in the amounts as
reported in the 1995 and 1994 audited financial statements to conform to the
presentation used for the 1996 amounts. For 1995 and 1994, surplus as reported
in these financial statements differs from the amounts reported in the statutory
Annual Statement by an immaterial amount because prepaid items were reported as
non-admitted.
OTHER--
Preparation of the financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses. Actual results could differ from those estimates.
23
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
2. BONDS:
The amortized cost and estimated fair value of investments in debt securities as
of December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------- ---------- -------- --------
(IN 000'S)
<S> <C> <C> <C> <C>
Long-term bonds:
United States government and
government agencies and authorities $ 9,075 $ 179 $ 0 $ 9,254
Foreign governments 530 14 0 544
Public utilities 19,997 434 8 20,423
Transportation 468 34 0 502
Finance 9,643 182 0 9,825
All other corporate bonds 37,430 1,149 33 38,546
-------- ---------- --- --------
Total long-term bonds 77,143 1,992 41 79,094
Short-term bonds:
U.S. Treasury Bills, bankers
acceptances and commercial paper 4,507 0 0 4,507
-------- ---------- --- --------
$81,650 $1,992 $41 $83,601
-------- ---------- --- --------
-------- ---------- --- --------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,1995
--------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------- ---------- ---------- --------
(IN 000'S)
<S> <C> <C> <C> <C>
Long-term bonds:
United States government and
government agencies and authorities $ 11,243 $ 327 $ 10 $ 11,560
Foreign governments 1,824 157 0 1,981
Public utilities 39,018 1,249 20 40,247
Transportation 3,908 45 0 3,953
Finance 14,047 385 6 14,426
All other corporate bonds 54,949 2,700 0 57,649
-------- ---------- --- --------
Total long-term bonds 124,989 4,863 36 129,816
Short-term bonds:
U.S. Treasury Bills, bankers
acceptances and commercial paper 7,037 0 0 7,037
-------- ---------- --- --------
$132,026 $4,863 $ 36 $136,853
-------- ---------- --- --------
-------- ---------- --- --------
</TABLE>
24
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
2. BONDS (CONTINUED):
The amortized cost and estimated fair value of bonds at December 31, 1996 and
1995 by contractual maturity are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call and/or prepayment penalties.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ------------
(IN 000'S)
<S> <C> <C>
Maturities are:
Due in one year or less $ 22,247 $ 22,452
Due after one year through five
years 48,956 50,205
Due after five years through ten
years 3,279 3,415
Due after ten years 3,400 3,598
--------- ------------
Subtotal 77,882 79,670
Mortgage-backed securities 3,768 3,931
--------- ------------
$ 81,650 $ 83,601
--------- ------------
--------- ------------
<CAPTION>
DECEMBER 31, 1995
-----------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ------------
(000'S)
<S> <C> <C>
Maturities are:
Due in one year or less $ 33,138 $ 33,410
Due after one year through five
years 70,212 72,833
Due after five years through ten
years 16,167 17,283
Due after ten years 6,765 7,289
--------- ------------
Subtotal 126,282 130,815
Mortgage-backed securities 5,744 6,038
--------- ------------
$132,026 $ 136,853
--------- ------------
--------- ------------
</TABLE>
Proceeds from sales and maturities of investments in debt securities during
1996, 1995 and 1994 were $76,431,000, $111,448,000 and $85,719,000,
respectively. Gross gains of $537,000, $1,295,000 and $1,400,000 and gross
losses of $183,000, $335,000 and $464,000 were realized on such sales during
1996, 1995 and 1994, respectively.
A bond, included above, with an amortized cost of approximately $412,000 and
$399,000 at December 31, 1996 and 1995, respectively, was on deposit with the
Superintendent of Insurance of the State of New York as required by law.
25
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
3. MORTGAGE LOANS:
The Registrant invests in commercial first mortgage loans throughout the United
States. The Registrant monitors the condition of the mortgage loans in its
portfolio. In those cases where mortgages have been restructured, appropriate
provisions have been made. In those cases where, in management's judgement, the
mortgage loans' values are impaired, appropriate losses are recorded.
The following table shows the geographic distribution of the mortgage portfolio.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1995
------- -------
(IN 000'S)
<S> <C> <C>
New York $10,717 $14,264
California 4,884 5,076
Massachusetts 6,542 6,720
Ohio 3,445 4,748
Florida 3,795 4,020
All other 11,049 17,016
------- -------
$40,432 $51,844
------- -------
------- -------
</TABLE>
As of December 31, 1996, the Registrant has restructured mortgage loans
totalling $3,545,000 against which there are provisions of $497,000.
4. INVESTMENT GAINS (LOSSES):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1996 1995 1994
----- ----- -----
(IN 000'S)
<S> <C> <C> <C>
Realized losses:
Mortgage loans $(676) $ (1) $(722)
Real estate 0 (32) 0
----- ----- -----
$(676) $ (33) $(722)
----- ----- -----
----- ----- -----
Changes in unrealized gains (losses):
Mortgage loans $ 702 $(672) $ 0
----- ----- -----
----- ----- -----
</TABLE>
Realized capital gains and losses on bonds and mortgages which relate to changes
in levels of interest rate risk are charged or credited to an interest
maintenance reserve (IMR) and amortized into income over the remaining
contractual life of the security sold. The gross realized capital gains credited
to the interest maintenance reserve were $354,000, $960,000 and $936,000 in
1996, 1995 and 1994, respectively. All gains are transferred net of applicable
income taxes.
26
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
5. INVESTMENT INCOME:
Net investment income consisted of:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
(IN 000'S)
<S> <C> <C> <C>
Interest income from bonds $ 8,576 $13,020 $15,562
Interest income from mortgage loans 4,252 5,882 6,875
Real estate investment income (loss) 376 (52) (85)
Other investment income (loss) (93) 170 117
------- ------- -------
Gross investment income 13,111 19,020 22,469
Investment expenses 797 570 522
------- ------- -------
$12,314 $18,450 $21,947
------- ------- -------
------- ------- -------
</TABLE>
6. REINSURANCE:
The Registrant has agreements with Sun Life (Canada) which provide that Sun Life
(Canada) will reinsure the mortality and morbidity risks of the group life
insurance contracts and group long-term disability contracts issued by the
Registrant. Under these agreements, basic death benefits and long-term
disability benefits are reinsured on a yearly renewable term basis. The
agreements provide that Sun Life (Canada) will reinsure the mortality risks in
excess of $50,000 per policy for group life insurance contracts and $3,000 per
policy per month for the group long-term disability contracts ceded by the
Registrant. Reinsurance transactions under these agreements had the effect of
decreasing income from operations by $500,000 for the year ended December 31,
1996 and increasing income from operations by $652,000 and $222,000 for the
years ended December 31, 1995 and 1994, respectively.
The group life and long-term disability reinsurance agreements require that the
reinsurer provide funds in amounts equal to the reserves ceded.
The following are summarized proforma results of operations of the Registrant
for the years ended December 31, 1996, 1995 and 1994 before the effect of
reinsurance transactions with Sun Life (Canada).
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
(IN 000'S)
<S> <C> <C> <C>
Income:
Premiums, annuity deposits and other
revenues $85,947 $86,819 $76,681
Net investment income 13,019 19,204 22,698
------- ------- -------
Subtotal 98,966 106,023 99,379
------- ------- -------
Benefits and expenses:
Policyholder benefits 64,328 61,720 48,614
Other expenses 29,357 41,557 45,146
------- ------- -------
Subtotal 93,685 103,277 93,760
------- ------- -------
Income from operations $ 5,281 $ 2,746 $ 5,619
------- ------- -------
------- ------- -------
</TABLE>
27
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
7. WITHDRAWAL CHARACTERISTICS OF ANNUITY ACTUARIAL RESERVES AND DEPOSIT
LIABILITIES:
Withdrawal characteristics of general account and separate account annuity
reserves and deposits:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------
AMOUNT % OF TOTAL
-------- ----------
(IN 000'S)
<S> <C> <C>
Subject to discretionary withdrawal
--with market value adjustment $ 92,135 19.6%
--at book value less surrender charges
(surrender charge > 5%) 38,668 8.2%
--at book value (minimal or no charge
or adjustment) 318,886 67.9%
Not subject to discretionary withdrawal
provision 20,326 4.3%
-------- -----
Total annuity actuarial reserves and
deposit liabilities $470,015 100.0%
-------- -----
-------- -----
<CAPTION>
DECEMBER 31, 1995
--------------------
AMOUNT % OF TOTAL
-------- ----------
(IN 000'S)
<S> <C> <C>
Subject to discretionary withdrawal
--with market value adjustment $ 81,085 16.9%
--at book value less surrender charges
(surrender charge > 5%) 103,767 21.6%
--at book value (minimal or no charge
or adjustment) 275,075 57.3%
Not subject to discretionary withdrawal
provision 20,181 4.2%
-------- -----
Total annuity actuarial reserves and
deposit liabilities $480,108 100.0%
-------- -----
-------- -----
</TABLE>
8. PENSION PLANS:
The Registrant participates with Sun Life (Canada) and Sun Life of Canada (U.S.)
in a non-contributory defined benefit pension plan covering essentially all
employees. The benefits are based on years of service and compensation.
The funding policy for the pension plan is to contribute an amount which at
least satisfies the minimum amount required by ERISA. The Registrant is charged
for its share of the pension cost based upon its covered participants. Pension
plan assets consist principally of a variable accumulation fund contract held in
a separate account of Sun Life (Canada).
The Registrant's share of the group's accrued pension cost at December 31, 1996,
1995 and 1994 was $178,000, $97,000 and $79,000, respectively. The Registrant's
share of net periodic pension cost was $81,000, $18,000 and $79,000 for the
years ended December 31, 1996, 1995 and 1994, respectively.
The Registrant also participates with Sun Life (Canada), Sun Life of Canada
(U.S.) and certain affiliates in a 401(k) savings plan for which substantially
all employees are eligible. The Registrant matches, up to specified amounts,
employees' contributions to the plan. Employer contributions were $27,000,
$21,000 and $17,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
28
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
8. PENSION PLANS (CONTINUED):
OTHER POST-RETIREMENT BENEFIT PLANS
In addition to pension benefits, the Registrant provides certain health, dental
and life insurance benefits ("post-retirement benefits") for retired employees
and dependents. Substantially all employees may become eligible for these
benefits if they reach normal retirement age while working for the Registrant,
or retire early upon satisfying an alternate age plus service condition. Life
insurance benefits are generally set at a fixed amount.
Effective January 1, 1993, the Registrant began to accrue the estimated cost of
retiree benefit payments during the years the employee provides service. The
Registrant has elected to recognize a transition obligation of approximately
$52,000 over a period of ten years. The expense recognized in the financial
statements relative to this plan was $8,000 in 1996, $7,000 in 1995 and $5,000
in 1994. Effective June 5, 1996, the Registrant made certain changes regarding
eligibility and benefits to its post-retirement health benefits plans for
retirees on or after that date. The impact of these changes is a decrease of
1996 post-retirement costs of $13,000. The Registrant's post-retirement health
care plans currently are not funded.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following table presents the carrying amounts and fair values of the
Registrant's financial instruments at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
----------------------------- -----------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------------- ------------ -------------- ------------
(IN 000'S)
<S> <C> <C> <C> <C>
ASSETS
Bonds $ 81,650 $ 83,601 $132,026 $ 136,853
Mortgages 40,432 41,196 51,844 53,718
-------------- ------------ -------------- ------------
Total $122,082 $ 124,797 $183,870 $ 190,571
-------------- ------------ -------------- ------------
-------------- ------------ -------------- ------------
LIABILITIES
Individual annuities $ 70,166 $ 68,830 $138,661 $ 137,463
-------------- ------------ -------------- ------------
-------------- ------------ -------------- ------------
</TABLE>
The major methods and assumptions used in estimating the fair values of
financial instruments are as follows:
The fair values of short-term bonds are estimated to be the amortized cost. The
fair values of long-term bonds which are publicly traded are based upon market
prices or dealer quotes. For privately placed bonds, fair values are estimated
using prices for publicly traded bonds of similar credit risk, maturity,
repayment and liquidity characteristics.
The fair values of the Registrant's general account reserves and liabilities
under investment-type contracts (insurance and annuity contracts that do not
involve mortality or morbidity risks) are estimated using discounted cash flow
analyses or surrender values. Those contracts that are deemed to have short-term
guarantees have a carrying amount equal to the estimated market value.
The fair values of mortgages are estimated by discounting future cash flows
using current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
29
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
10. STATUTORY INVESTMENT VALUATION RESERVES:
The asset valuation reserve (AVR) provides a reserve for losses from investments
in bonds, mortgage loans, real-estate and other invested assets with related
increases or decreases being recorded directly to surplus.
Realized capital gains and losses on bonds and mortgages which relate to changes
in levels of interest rate risk are charged or credited to an IMR and amortized
into income over the remaining contractual life of the security sold.
The table shown below presents changes in the major elements of the AVR and IMR.
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
AVR IMR AVR IMR
------ ------ ------ ------
(IN 000'S) (IN 000'S)
<S> <C> <C> <C> <C>
Balance, beginning of year $1,546 $1,648 $1,764 $1,778
Realized capital gains (losses), net of
tax (439) 230 (22) 624
Amortization of investment gains 0 (704) 0 (754)
Unrealized investment gains (losses) 702 0 (672) 0
Required by formula 36 0 476 0
------ ------ ------ ------
Balance, end of year $1,845 $1,174 $1,546 $1,648
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
11. LIABILITY FOR UNPAID CLAIMS AND CLAIM ADJUSTMENT EXPENSE:
Activity in the liability for unpaid claims and claim adjustment expense is
summarized below (in 000's).
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Balance at January 1 $ 4,320 $ 2,322 $ 1,648
Claims Incurred 5,061 4,789 2,930
Claims Paid (3,252) (2,791) (2,256)
------- ------- -------
Balance at December 31 $ 6,129 $ 4,320 $ 2,322
------- ------- -------
------- ------- -------
</TABLE>
The information presented above includes unpaid benefit claims and claim
adjustment expenses for the group life and group long-term disability contracts.
As of December 31, 1996 and 1995 the unpaid claim and claim adjustment liability
for these contracts is included in Policy Reserves.
12. FEDERAL INCOME TAXES:
The Registrant files a consolidated federal income tax return with Sun Life of
Canada (U.S.) and other affiliates. Federal income taxes are calculated as if
the Registrant filed a return as a separate company. No provision is recognized
for timing differences which may exist between financial statement and taxable
income. Such differences include reserves, depreciation and accrual of market
discount on bonds.
The Registrant made cash payments to Sun Life of Canada (U.S.) of $2,797,000,
$2,421,000 and $725,000 during 1996, 1995 and 1994, respectively.
30
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
13. LEASE COMMITMENTS:
The Registrant leases two separate facilities for its annuity operations and
group sales office. Both leases commenced in March, 1994.
Future minimum lease commitments are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------------ AMOUNT
------
(IN
000'S)
<S> <C>
1997 $ 336
1998 336
1999 253
2000 237
2001 237
Thereafter 511
------
Total $1,910
------
------
</TABLE>
Rent expense under these and prior leases in 1996, 1995 and 1994 amounted to
$336,000, $336,000 and $307,000, respectively.
14. CAPITAL STOCK AND SURPLUS:
On January 2, 1985, the Registrant issued 2,000 shares of common stock to Sun
Life of Canada (U.S.) for $6,000,000. Through December 31, 1996, Sun Life of
Canada (U.S.) has contributed an additional $25,500,000 to the Registrant's
capital, of which $750,000 was used to establish a special contingency reserve
in support of separate account business as required by New York Insurance Law.
As a result of the law being repealed, the Registrant is no longer required to
hold a special contingency reserve and has included the funds with paid-in
capital.
15. MANAGEMENT AND SERVICE CONTRACTS:
The Registrant has agreements with Sun Life (Canada) which provide that Sun Life
(Canada) will furnish to the Registrant, as requested, personnel as well as
certain investment, actuarial and administrative services on a cost
reimbursement basis. Expenses under these agreements amounted to approximately
$1,866,000 in 1996, $1,741,000 in 1995 and $1,559,000 in 1994.
16. RISK-BASED CAPITAL:
Effective December 31, 1993, the NAIC adopted risk-based capital requirements
for life insurance companies. The risk-based capital requirements provide a
method for measuring the minimum acceptable amount of adjusted capital that a
life insurer should have, as determined under statutory accounting practices,
taking into account the risk characteristics of its investments and products.
The Registrant has met the minimum risk-based capital requirements at December
31, 1996 and 1995.
17. ACCOUNTING POLICIES AND PRINCIPLES:
The financial statements of the Registrant have been prepared on the basis of
statutory accounting practices, which prior to 1996, were considered by the
insurance industry and the accounting profession to be in accordance with GAAP
for mutual life insurance companies. The primary differences between statutory
accounting and GAAP are described as follows. Statutory accounting practices do
not recognize the following assets or liabilities which are reflected under
GAAP: deferred acquisition costs, deferred federal income taxes and statutory
non-admitted assets. AVR and IMR are established under statutory accounting
31
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
17. ACCOUNTING POLICIES AND PRINCIPLES (CONTINUED):
practices but not under GAAP. Methods for calculating real estate depreciation
and investment valuation allowances differ under statutory accounting practices
and GAAP. Premiums for investment type products are recognized as income for
statutory purposes and as deposits to policyholders' accounts for GAAP.
Because the Registrant's management uses financial information prepared in
conformity with accounting policies generally accepted in Canada in the normal
course of business, the management of the Registrant has determined that the
cost of complying with Statement No. 120 would exceed the benefits that the
Registrant, or the users of its financial statements, would experience.
Consequently, the Registrant has elected not to apply such standards in the
preparation of these financial statements.
32
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDER
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
NEW YORK, NEW YORK
We have audited the accompanying statutory statements of admitted assets,
liabilities and capital stock and surplus of Sun Life Insurance and Annuity
Company of New York as of December 31, 1996 and 1995, and the related statutory
statements of operations, changes in capital stock and surplus and cash flow for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described more fully in Notes 1 and 17 to the financial statements, the
Company prepared these financial statements using accounting practices
prescribed or permitted by the Insurance Department of the State of New York,
which practices differ from generally accepted accounting principles. The
effects on the financial statements of the variances between the statutory basis
of accounting and generally accepted accounting principles, although not
reasonably determinable, are presumed to be material.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the admitted assets, liabilities and capital stock and
surplus of Sun Life Insurance and Annuity Company of New York as of December 31,
1996 and 1995, and the results of its operations and its cash flow for each of
the three years in the period ended December 31, 1996 on the basis of accounting
described in Notes 1 and 17.
However, because of the effects of the matter discussed in the second preceding
paragraph, in our opinion, the financial statements referred to above do not
present fairly, in conformity with generally accepted accounting principles, the
financial position of Sun Life Insurance and Annuity Company of New York as of
December 31, 1996 and 1995 or the results of its operations or its cash flow for
each of the three years in the period ended December 31, 1996.
In our previous report dated February 7, 1996 we expressed an opinion that the
1995 and 1994 financial statements, prepared using accounting practices
prescribed or permitted by the Insurance Department of the State of New York,
presented fairly, in all material respects, the financial position of Sun Life
Insurance and Annuity Company of New York, as of December 31, 1995, and the
results of its operations and its cash flow for the years ended December 31,
1995 and 1994 in conformity with generally accepted accounting principles. As
described in Notes 1 and 17 to the financial statements, pursuant to provisions
of Statement of Financial Accounting Standards No. 120, ACCOUNTING AND REPORTING
BY MUTUAL LIFE INSURANCE ENTERPRISES AND BY INSURANCE ENTERPRISES FOR CERTAIN
LONG-DURATION PARTICIPATING CONTRACTS, financial statements of mutual life
insurance enterprises (and stock life insurance companies that are wholly owned
subsidiaries of mutual life insurance companies) for periods ending on or before
December 15, 1996, prepared using accounting practices prescribed or permitted
by insurance regulators are not considered presentations in conformity with
generally accepted accounting principles when presented for comparative purposes
with the enterprise's financial statements for periods subsequent to the
effective date of Statement No. 120. Accordingly, our present opinion on the
presentation of the 1995 and 1994 financial statements in accordance with
generally accepted accounting principles, as presented herein, is different from
that expressed in our previous report.
33
<PAGE>
As management has stated in Note 17, because the Company's management uses
financial information prepared in accordance with accounting principles
generally accepted in Canada in the normal course of business, the management of
Sun Life Insurance and Annuity Company of New York has determined that the cost
of complying with Statement No. 120 would exceed the benefits that the Company,
or the users of its financial statements would experience. Consequently, the
Company has elected not to apply such standards in the preparation of these
financial statements.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 3, 1997
34
<PAGE>
APPENDIX A
THE FIXED ACCOUNT.
THAT PORTION OF THE CONTRACT RELATING TO THE FIXED ACCOUNT IS NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") AND THE FIXED ACCOUNT IS NOT
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940
("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS THEREIN
ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT,
AND THE DISCLOSURE IN THIS APPENDIX A HAS NOT BEEN REVIEWED BY THE STAFF OF THE
SECURITIES AND EXCHANGE COMMISSION. HOWEVER, THE FOLLOWING DISCLOSURE ABOUT THE
FIXED ACCOUNT MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF THE
FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF DISCLOSURE.
A WORD ABOUT THE FIXED ACCOUNT
The Fixed Account is made up of all of the general assets of the Company
other than those allocated to any separate account. Purchase Payments will be
allocated to the Fixed Account as elected by the Owner at the time of purchase
or as subsequently changed. The Company will invest the assets of the Fixed
Account in those assets chosen by the Company and allowed by applicable law.
Investment income from such Fixed Account assets will be allocated between the
Company and the contracts participating in the Fixed Account, in accordance with
the terms of such contracts.
Annuity payments made to Annuitants under the Contracts will not be affected
by the mortality experience (death rate) of persons receiving such payments or
of the general population. The Company assumes this "mortality risk" by virtue
of annuity rates incorporated in the Contract which cannot be changed. In
addition, the Company guarantees that it will not increase charges for
maintenance of the Contracts regardless of its actual expenses.
Investment income from the Fixed Account allocated to the Company includes
compensation for mortality and expense risks borne by the Company in connection
with Fixed Account Contracts. The Company expects to derive a profit from this
compensation. The amount of such investment income allocated to the Contracts
will vary from year to year in the sole discretion of the Company. However, the
Company guarantees that it will credit interest at a rate of not less than 3%
per year, compounded annually, to amounts allocated to the Fixed Account under
the Contracts. The Company may credit interest at a rate in excess of 3% per
year; however, the Company is not obligated to credit any interest in excess of
3% per year. There is no specific formula for the determination of excess
interest credits. Such credits, if any, will be determined by the Company based
on information as to expected investment yields. Some of the factors that the
Company may consider in determining whether to credit interest to amounts
allocated to the Fixed Account and the amount thereof are general economic
trends, rates of return currently available and anticipated on the Company's
investments, regulatory and tax requirements and competitive factors. ANY
INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 3% PER
YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF THE COMPANY. THE OWNER ASSUMES
THE RISK THAT INTEREST CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE
MINIMUM GUARANTEED OF 3% FOR ANY GIVEN YEAR.
The Company is aware of no statutory limitations on the maximum amount of
interest it may credit, and the Board of Directors has set no limitations.
However, inherent in the Company's exercise of discretion in this regard is the
equitable allocation of distributable earnings and surplus among its various
policyholders and contract owners and to its sole stockholder.
Excess interest, if any, will be credited on the fixed accumulation value.
The Company guarantees that, at any time, the fixed accumulation value will not
be less than the amount of Purchase Payments allocated to the Fixed Account,
plus interest at the rate of 3% per year, compounded annually, plus any
additional interest which the Company may, in its discretion, credit to the
Fixed Account, less the sum of all administrative or withdrawal charges, any
applicable premium taxes, and less any amounts surrendered. If the Owner
surrenders the Contract, the amount available from the Fixed Account will be
reduced by any applicable
35
<PAGE>
withdrawal charge (see "Withdrawal Charges" in the Prospectus). In no event will
the portion of the contract maintenance charge that is deducted from the Fixed
Account cause the Contract's fixed accumulation value (adjusted for any cash
withdrawals) to increase by less than 3% per year.
If on any Contract Anniversary the rate at which the Company credits
interest to amounts allocated to the Fixed Account under the Contract is less
than 80% of the average discount rate on 52-week United States Treasury Bills
for the most recent auction prior to the Contract Anniversary on which the
declared interest rate becomes applicable, then during the 45-day period after
the Contract Anniversary the Owner may elect to receive the value of the Fixed
Accumulation Units credited to the Contract's Accumulation Account without
assessment of a withdrawal charge. Such withdrawal may, however, result in
adverse tax consequences (see "Federal Tax Status" in the Prospectus).
The Company reserves the right to defer the payment of amounts withdrawn
from the Fixed Account for a period not to exceed six months from the date
written request for such withdrawal is received by the Company.
FIXED ACCUMULATION VALUE
(1) CREDITING FIXED ACCUMULATION UNITS
Upon receipt of a Purchase Payment by the Company, all or that portion, if
any, of the net Purchase Payment to be allocated to the Fixed Account in
accordance with the allocation factor will be credited to the Accumulation
Account in the form of Fixed Accumulation Units. The number of Fixed
Accumulation Units to be credited is determined by dividing the dollar amount
allocated to the Fixed Account by the Fixed Accumulation Unit value for the
Contract for the Valuation Period during which the Purchase Payment is received
by the Company.
(2) FIXED ACCUMULATION UNIT VALUE
A Fixed Accumulation Unit value is established at $10.00 for the first
Valuation Period of the calendar month in which the Contract is issued and will
increase for each successive Valuation Period as interest is accrued. All
Contracts issued in a particular calendar month and at a particular rate of
interest, as specified in advance by the Company from time to time, will use the
same series of Fixed Accumulation Unit values throughout the first Contract
Year.
At the first Contract Anniversary the Fixed Accumulation Units credited to a
Contract's Accumulation Account will be exchanged for a second type of Fixed
Accumulation Unit with an equal aggregate value. The value of this second type
of Fixed Accumulation Unit will increase for each Valuation Period during each
Contract Year as interest is accrued at a rate which shall have been determined
by the Company prior to the first day of each Contract Year.
The Company will credit interest to the Contract's Fixed Accumulation
Account at a rate of not less than 3% per year, compounded annually. Once the
rate applicable to a specific Contract is established by the Company, it may not
be changed for the balance of the Contract Year. Additional Payments made during
the Contract Year will be credited with interest for the balance of the Contract
Year at the rate applicable at the beginning of that Contract Year. The Fixed
Accumulation Unit value for the Contract for any Valuation Period is the value
determined as of the end of such Valuation Period.
(3) FIXED ACCUMULATION VALUE
The fixed accumulation value of a Contract, if any, for any Valuation Period
is equal to the value of the Fixed Accumulation Units credited to the
Accumulation Account for such Valuation Period.
LOANS FROM THE FIXED ACCOUNT (QUALIFIED CONTRACTS ONLY)
Loans will be permitted from the Contract's Fixed Accumulation Account (to
the extent permitted by the retirement plan for which the Contract is purchased)
UNDER QUALIFIED CONTRACTS ONLY. The maximum
36
<PAGE>
loan amount is the amount determined under the Company's maximum loan formula
for qualified plans. The minimum loan amount is $1,000. Loans will be secured by
a security interest in the Contract. Loans are subject to applicable retirement
program legislation and their taxation is determined under the federal income
tax laws. The amount borrowed will be transferred to a fixed minimum guarantee
accumulation account in the Company's general account where it will accrue
interest at a specified rate below the then current loan interest rate.
Generally, loans must be repaid within five years.
The amount of the death benefit, the amount payable on a full surrender and
the amount applied to provide an annuity on the Annuity Commencement Date will
be reduced to reflect any outstanding loan balance (plus accrued interest
thereon). Partial withdrawals may be restricted by the maximum loan limitation.
FIXED ANNUITY PAYMENTS
The dollar amount of each fixed annuity payment will be determined in
accordance with the annuity payment rates found in the Contract which are based
on a minimum guaranteed interest rate of 4% per year, or, if more favorable to
the Payee(s), in accordance with the Single Premium Immediate Settlement Rates
published by the Company and in use on the Annuity Commencement Date.
APPENDIX B
ILLUSTRATIVE EXAMPLE OF VARIABLE ACCUMULATION UNIT VALUE CALCULATIONS
Suppose the net asset value of a particular Series Fund share at the end of
the current Valuation Period is $18.38; at the end of the immediately preceding
Valuation Period is $18.32; the Valuation Period is one day; no dividends or
distributions caused the particular Series Fund shares to go "ex-dividend"
during the current Valuation Period. $18.38 divided by $18.32 is 1.00327511.
Subtracting the one day risk factor for mortality and expense risks of .00003809
(the daily equivalent of the current charge of 1.40% on an annual basis) gives a
net investment factor of 1.00323702. If the value of the Variable Accumulation
Unit for the immediately preceding Valuation Period had been 14.5645672, the
value for the current Valuation Period would be 14.6117130 (14.5645672 X
1.00323702).
ILLUSTRATIVE EXAMPLE OF VARIABLE ANNUITY UNIT VALUE CALCULATIONS
Suppose the circumstances of the first example exist, and the value of an
Annuity Unit for the immediately preceding Valuation Period had been 12.3456789.
If the first variable annuity payment is determined by using an annuity payment
based on an assumed interest rate of 4% per year, the value of the Annuity Unit
for the current Valuation Period would be 12.3843113 (12.3456789 X 1.00323702 X
0.99989255).
ILLUSTRATIVE EXAMPLE OF VARIABLE ANNUITY PAYMENT CALCULATIONS
Suppose that the Accumulation Account of a deferred Contract is credited
with 8,765.4321 Variable Accumulation Units of a particular Sub-Account but is
not credited with any Fixed Accumulation Units; that the Variable Accumulation
Unit value and the Annuity Unit value for the particular Sub-Account for the
Valuation Period which ends immediately preceding the Annuity Commencement Date
are 14.5645672 and 12.3456789, respectively; that the annuity payment rate for
the age and option elected is $6.78 per $1,000; and that the Annuity Unit value
on the day prior to the second variable annuity payment date is 12.3856421. The
first variable annuity payment would be $865.57 (8,765.4321 X 14.5645672 X 6.78
divided by 1,000). The number of Annuity Units credited would be 70.1112
($865.57 divided by 12.3456789) and the second variable annuity payment would be
$868.28 (70.1112 X 12.3843113).
37
<PAGE>
APPENDIX C
WITHDRAWALS AND WITHDRAWAL CHARGES
This example assumes that the date of the full surrender or partial
withdrawal is during the 9th Contract Year.
<TABLE>
<CAPTION>
1 2 3 4 5 6
- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1 $ 1,000 $ 1,000 $ 0 0% $ 0
2 1,200 1,200 0 0 0
3 1,400 1,280 120 3 3.60
4 1,600 0 1,600 4 64.00
5 1,800 0 1,800 4 72.00
6 2,000 0 2,000 5 100.00
7 2,000 0 2,000 5 100.00
8 2,000 0 2,000 6 120.00
9 2,000 0 2,000 6 120.00
--------- --------- --------- ---------
$ 15,000 $ 3,480 $ 11,520 $ 579.60
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
EXPLANATION OF COLUMNS IN TABLE
COLUMNS 1 AND 2:
Represent Purchase Payments ("Payments") and amounts of Payments. Each
Payment was made on the first day of each Contract Year.
COLUMN 3:
Represents the amounts that may be withdrawn without the imposition of
withdrawal charges, as follows:
a) Payments 1 and 2, $1,000 and $1,200, respectively, have been
credited to the Contract for more than seven years.
b) $1,280 of Payment 3 represents 10% of Payments that have been
credited to the Contract for less than seven years. The 10% amount is
applied to the oldest unliquidated Payment, then the next oldest and so
forth.
COLUMN 4:
Represents the amount of each Payment that is subject to a withdrawal
charge. It is determined by subtracting the amount in Column 3 from the Payment
in Column 2.
COLUMN 5:
Represents the withdrawal charge percentages imposed on the amounts in
Column 4.
COLUMN 6:
Represents the withdrawal charge imposed on each Payment. It is determined
by multiplying the amount in Column 4 by the percentage in Column 5. For
example, the withdrawal charge imposed on Payment 8
= Payment 8 Column 4 X Payment 8 Column 5
= $2,000 X 6%
= $120
FULL SURRENDER:
The total of Column 6, $579.60, represents the total amount of withdrawal
charges imposed on Payments in this example.
38
<PAGE>
PARTIAL WITHDRAWAL:
The sum of amounts in Column 6 for as many Payments as are liquidated
reflects the withdrawal charges imposed in the case of a partial withdrawal.
For example, if $7,000 of Payments (Payments 1, 2, 3, 4, and 5) were
withdrawn, the amount of the withdrawal charges imposed would be the sum of
amounts in Column 6 for Payments 1, 2, 3, 4, and 5 which is $139.60
39
<PAGE>
SUN LIFE INSURANCE AND ANNUITY
COMPANY OF
NEW YORK
Annuity Service Mailing Address:
80 Broad Street
New York, New York 10004
GENERAL DISTRIBUTOR
Clarendon Insurance Agency, Inc.
500 Boylston Street
Boston, Massachusetts 02116
LEGAL COUNSEL
Covington & Burling
1201 Pennsylvania Avenue, N.W.
P.O. Box 7566
Washington, D.C. 20044
AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, Massachusetts 02110
CO3NY-13 5/97
<PAGE>
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) The following Financial Statements are included in this Registration
Statement:
Included in Part A:
None.
Included in Part B:
A. Financial Statements of the Registrant:
1. Statement of Condition, December 31, 1996;
2. Statement of Operations, Year Ended December 31, 1996;
3. Statements of Changes in Net Assets, Years Ended December 31, 1996
and 1995;
4. Notes to Financial Statements; and
5. Independent Auditors' Report.
B. Financial Statements of the Depositor:
1. Statutory Statements of Admitted Assets, Liabilities and Capital
Stock and Surplus, December 31, 1996 and 1995;
2. Statutory Statements of Operations, Years Ended December 31, 1996,
1995 and 1994;
3. Statutory Statements of Changes in Capital Stock and Surplus, Years
Ended December 31, 1996, 1995 and 1994;
4. Statutory Statements of Cash Flow, Years Ended December 31, 1996,
1995 and 1994;
5. Notes to Statutory Financial Statements; and
6. Independent Auditors' Report.
<PAGE>
(b) The following Exhibits are incorporated in this Registration
Statement by reference unless otherwise indicated:
(1) Resolution of the Board of Directors of the depositor dated December
3, 1984, authorizing the establishment of the Registrant (filed as Exhibits
A.(1) to the Registration Statement of the Registrant on Form N-8B-2, File No.
811-4183);
(2) Not applicable;
(3) (a) Marketing Coordination and Administrative Services Agreement
between the depositor, Massachusetts Financial Services Company and Clarendon
Insurance Agency, Inc. dated December 3, 1984 (filed as Exhibit A.(3)(a) to the
Registration Statement of the Registrant on Form N-8B-2);
(b)(i) Specimen Sales Operations and General Agent Agreement;
(b)(ii) Specimen Broker-Dealer Supervisory and Service Agreement;
(b)(iii) Specimen Registered Representatives Agent Agreement (filed
as Exhibits A.(3)(b)(i), A.(3)(b)(ii) and A.(3)(b)(iii), respectively, to the
Registration Statement of the Registrant on Form N-8B-2);
(4) Compass 3 Flexible Payment Deferred Combination Variable and Fixed
Annuity Contract (filed as Exhibit 4 to Pre-Effective Amendment No. 3 to the
Registration Statement of the Registrant on Form N-4 Reg. No. 33-19765);
(5) Form of Application used with the variable annuity contract filed as
Exhibit (4) (filed as Exhibit 5 to Pre-Effective Amendment No. 3 to the
Registration Statement of the Registrant on Form N-4 Reg. No. 33-19765);
(6) Declaration of Intent and Charter and the by-laws of the Depositor
(filed as Exhibits A.(6)(a) and A.(6)(b), respectively, to the Registration
Statement of the Registrant on Form N-8B-2).
(7) Not Applicable;
(8) Service Agreement between the depositor and Massachusetts Financial
Services Company dated December 3, 1984 (filed as Exhibit A.(8)(a) to the
Registration Statement of the Registrant on Form N-8B-2);
(9) Opinion of Counsel and Consent to its use as to the legality of the
securities being registered (filed as Exhibit 9 to Pre-Effective Amendment No. 3
to the Registration Statement of the Registrant on Form N-4 Reg. No. 33-19765);
<PAGE>
(10) (a) Consent of Deloitte & Touche (filed herewith);
(b) Consent of David D. Horn, Esq. (filed herewith); and
(c) Certification of Counsel (filed herewith);
(11) None;
(12) Not Applicable;
(13) Schedule for Computation of Performance Quotations (filed herewith);
and
(14) Financial Data Schedule meeting the requirements of Rule 483 under
the Securities Act of 1933 (filed herewith).
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Name and Principal Positions and Offices
Business Address with the Depositor
- -------------------- ----------------------
John D. McNeil Chairman and Director
150 King Street West
Toronto, Ontario
Canada M5H 1J9
Donald A. Stewart President and Director
150 King Street West
Toronto, Ontario
Canada M5H 1J9
David D. Horn Senior Vice President
One Sun Life Executive Park and Director
Wellesley Hills, MA 02181
John S. Lane Director
150 King Street West
Toronto, Ontario
Canada M5H 1J9
Richard B. Bailey Director
500 Boylston Street
Boston, MA 02116
A. Keith Brodkin Director
500 Boylston Street
Boston, MA 02116
M. Colyer Crum Director
104 West Cliff Road
Wellesley, MA 02181
John G. Ireland Director
680 Steamboat Road
Greenwich, CT 06830
<PAGE>
Name and Principal Positions and Offices
Business Address with the Depositor
- -------------------- ----------------------
Edward M. Lamont Director
Moores Hill Road
Syosset, New York 11791
Angus A. MacNaughton Director
950 Tower Lane
Metro Tower, Suite 1170
Foster City, California 94404
Fioravante G. Perrotta Director
200 Park Avenue
New York, New York 10166
Ralph F. Peters Director
55 Strimples Mill Road
Stockton, New Jersey 08559
Pamela T. Timmins Director
306 East 61st Street
New York, New York 10028
Robert P. Vrolyk Vice President, Controller
One Sun Life Executive Park and Actuary
Wellesley Hills, MA 02181
S. Caesar Raboy Senior Vice President
One Sun Life Executive Park
Wellesley Hills, MA 02181
Michael A. Cohen Vice President and
80 Broad Street Regional Manager
New York, New York 10004
C. James Prieur Vice President, Investments
One Sun Life Executive Park
Wellesley Hills, MA 02181
L. Brock Thomson Vice President
One Sun Life Executive Park and Treasurer
Wellesley Hills, MA 02181
Margaret Sears Mead Assistant Vice President and
One Sun Life Executive Park Secretary
Wellesley Hills, MA 02181
<PAGE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
No person is directly or indirectly controlled by the Registrant. The
Registrant is a separate account of Sun Life Insurance and Annuity Company of
New York which is a wholly-owned subsidiary of Sun Life Assurance Company of
Canada (U.S.). Sun Life Assurance Company of Canada (U.S.) is a wholly-owned
subsidiary of Sun Life Assurance Company of Canada.
The following is a list of all corporations directly or indirectly
controlled by or under common control with Sun Life Assurance Company of Canada,
showing the state or other sovereign power under the laws of which each is
organized and the percentage ownership of voting securities giving rise to the
control relationship:
<PAGE>
<TABLE>
<CAPTION>
Percent of
State or Country Ownership
or Jurisdiction of Voting
of Incorporation Securities
---------------- ----------
<S> <C> <C>
Sun Life Assurance Company of Canada Canada 100%
- --------------------------------------------------------------------------------
Sun Life Assurance Company of Canada
(U.S.).................................... Delaware 100%
Sun Life Assurance Company of Canada
(U.K.) Limited ........................... United Kingdom 100%
Sun Life of Canada Investment Management
Limited .................................. Canada 100%
Sun Life of Canada Benefit Management
Limited .................................. Canada 100%
Spectrum United Holdings, Inc............... Canada 100%
Sun Canada Financial Co. ................... Delaware 100%
Sun Life Insurance and Annuity Company of
New York ................................. New York 0%**
Sun Investment Services Company ............ Delaware 0%**
Sun Benefit Services Company, Inc. ......... Delaware 0%**
Massachusetts Financial Services Company ... Delaware 0%*
New London Trust, F.S.B..................... Federally Chartered 0%**
Massachusetts Casualty Insurance Company.... Massachusetts 0%**
Clarendon Insurance Agency, Inc. ........... Massachusetts 0%***
MFS Service Center, Inc..................... Delaware 0%***
MFS/Sun Life Series Trust .................. Massachusetts 0%****
Sun Capital Advisers, Inc. ................. Delaware 0%**
MFS International, Ltd. .................... Ireland 0%***
MFS Institutional Advisers, Inc. ........... Delaware 0%***
MFS Fund Distributors, Inc. ................ Delaware 0%***
MFS Retirement Services, Inc. .............. Delaware 0%***
Sun Life Financial Service Limited ......... Bermuda 0%**
</TABLE>
- ----------
* 94.8% of the issued and outstanding voting securities of Massachusetts
Financial Services Company are owned by Sun Life Assurance Company of
Canada (U.S.).
** 100% of the issued and outstanding voting securities of New London Trust,
F.S.B., Sun Life Insurance and Annuity Company of New York, Sun Investment
Services Company, Sun Benefit Services Company, Inc., Sun Capital
Advisers, Inc., Sun Life Financial Services Limited and Massachusetts
Casualty Insurance Company are owned by Sun Life Assurance Company of
Canada (U.S.).
*** 100% of the issued and outstanding voting securities of Clarendon
Insurance Agency, Inc., MFS Service Center, Inc., MFS International, Ltd.,
MFS Institutional Advisers, Inc., MFS Fund Distributors, Inc., and MFS
Retirement Services, Inc. are owned by Massachusetts Financial Services
Company.
**** 100% of the issued and outstanding voting securities of MFS/Sun Life Series
Trust are owned by separate accounts of Sun Life Assurance Company of
Canada (U.S.) and Sun Life Insurance and Annuity Company of New York.
<PAGE>
Omitted from the list are subsidiaries of Sun Life Assurance Company of
Canada which, considered in the aggregate, would not constitute a "significant
subsidiary" (as that term is defined in Rule 8b-2 under Section 8 of the
Investment Company Act of 1940) of Sun Life Assurance Company of Canada.
None of the companies listed is a subsidiary of the Registrant, therefore
the only financial statements being filed are those of Sun Life Insurance and
Annuity Company of New York.
Item 27. NUMBER OF CONTRACT OWNERS
As of February 28, 1997 there were 762 qualified and 186 non-qualified
contracts participating in the investment experience of the Variable Account.
Item 28. INDEMNIFICATION
Article 5, Section 5.6 of the By-laws of Sun Life Insurance and Annuity
Company of New York, a copy of which was filed as Exhibit A.(6)(b) to the
Registration Statement of the Registrant on Form N-8B-2 (File No. 811-4183),
provides for indemnification of directors, officers and employees of Sun Life
Insurance and Annuity Company of New York.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of Sun
Life Insurance and Annuity Company of New York pursuant to the certificate of
incorporation, by-laws, or otherwise, Sun Life (N.Y.) has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by Sun Life (N.Y.) of expenses incurred or paid by a director,
officer, or controlling person of Sun Life (N.Y.) in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, Sun Life
(N.Y.) will, unless in the opinion of their counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by them is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Item 29. PRINCIPAL UNDERWRITERS
(a) Clarendon Insurance Agency, Inc., which is a wholly- owned subsidiary
of Massachusetts Financial Services Company, acts as general distributor for the
Registrant, Sun Life of Canada (U.S.) Variable Accounts C, D, E and F, Sun
Life (N.Y.)
<PAGE>
Variable Accounts A and C and Money Market Variable Account, High Yield Variable
Account, Capital Appreciation Variable Account, Government Securities Variable
Account, World Governments Variable Account, Total Return Variable Account and
Managed Sectors Variable Account.
Name and Principal Positions and Offices
Business Address* with Underwriter
- ----------------- --------------------
A. Keith Brodkin....... Chairman and Director**
Jeffrey L. Shames...... Director
Arnold D. Scott........ Director
Cynthia M. Orcutt...... President
Bruce C. Avery......... Vice President
Joseph W. Dello Russo... Treasurer
Stephen E. Cavan....... Secretary
Robert T. Burns........ Assistant Secretary
Thomas B. Hastings..... Assistant Treasurer
- --------------------
* The principal business address of all directors and officers of the
principal underwriter except Ms. Orcutt is 500 Boylston Street, Boston,
Massachusetts 02116. The principal business address of Ms. Orcutt is One
Sun Life Executive Park, Wellesley Hills, Massachusetts 02181.
** Mr. Brodkin is a Director of Sun Life Assurance Company of Canada (U.S.)
and Sun Life Insurance and Annuity Company of New York.
(c) Inapplicable.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder are maintained by Sun Life Insurance and Annuity Company of New
York, in whole or in part, at its Home Office at 80 Broad Street, New York, New
York 10004, at the offices of Massachusetts Financial Services Company at 500
Boylston Street, Boston, Massachusetts 02116, or at the offices of Sun Life
Assurance Company of Canada (U.S.) at 50 Milk Street, Boston Massachusetts 02103
and One Sun Life Executive Park, Wellesley Hills, Massachusetts 02181.
Item 31. MANAGEMENT SERVICES
Not applicable.
Item 32. UNDERTAKINGS
Representation with respect to Section 26(a) of the Investment Company
Act of 1940.
Sun Life Insurance and Annuity Company of New York represents that the
fees and charges deducted under the contract, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by the insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant certifies that it meets all of the requirements for
effectiveness of this Amendment to the Registration Statement pursuant to Rule
485(b) under the Securities Act of 1993 and has caused this Amendment to its
Registration Statement to be signed on its behalf in the Town of Wellesley and
Commonwealth of Massachusetts on the 14th day of April, 1997.
Sun Life (N.Y.)
Variable Account B
(Registrant)
Sun Life Insurance and Annuity
Company of New York
(Depositor)
By:* /s/ JOHN D. McNEIL
--------------------------------
John D. McNeil
Chairman
Attest: /s/ BONNIE S. ANGUS
------------------------------
Bonnie S. Angus
Assistant Vice President
As required by the Securities Act of 1933, this Amendment to the
Registration Statement has been signed below by the following persons in the
capacities with the Depositor, Sun Life Insurance and Annuity Company of New
York, and on the dates indicated.
Signatures Title Date
---------- ----- ----
Chairman and
Director
(Principal
* /s/ JOHN D. McNEIL Executive Officer) April 14, 1997
- ---------------------------
John D. McNeil
- ---------------------------
* By Bonnie S. Angus pursuant to Power of Attorney filed with Post-Effective
Amendment No. 1 to the Registration Statement of the Registrant on Form N-
4, Reg. No. 33-19765.
<PAGE>
Signatures Title Date
---------- ----- ----
Vice President,
Controller and
Actuary (Principal
* /s/ ROBERT P. VROLYK Accounting Officer) April 14, 1997
- ------------------------------
Robert P. Vrolyk
President
and Director
- ------------------------------
Donald A. Stewart
* /s/ RICHARD B. BAILEY Director April 14, 1997
- ------------------------------
Richard B. Bailey
* /s/ A. KEITH BRODKIN Director April 14, 1997
- ------------------------------
A. Keith Brodkin
* /s/ JOHN S. LANE Director April 14, 1997
- ------------------------------
John S. Lane
Senior Vice
President
* /s/ DAVID D. HORN and Director April 14, 1997
- ------------------------------
David D. Horn
* /s/ JOHN G. IRELAND Director April 14, 1997
- ------------------------------
John G. Ireland
* /s/ EDWARD M. LAMONT Director April 14, 1997
- ------------------------------
Edward M. Lamont
* /s/ FIORAVANTE G. PERROTTA Director April 14, 1997
- ------------------------------
Fioravante G. Perrotta
- ------------------------------
* By Bonnie S. Angus pursuant to Power of Attorney filed with Post-Effective
Amendment No. 1 to the Registration Statement of the Registrant on Form N-
4, Reg. No. 33-19765.
<PAGE>
Signatures Title Date
---------- ----- ----
* /s/ RALPH F. PETERS Director April 14, 1997
- ------------------------------
Ralph F. Peters
* /s/ PAMELA T. TIMMINS Director April 14, 1997
- ------------------------------
Pamela T. Timmins
* /s/ ANGUS A. MacNAUGHTON Director April 14, 1997
- ------------------------------
Angus A. MacNaughton
* /s/ M. COLYER CRUM Director April 14, 1997
- ------------------------------
M. Colyer Crum
- ------------------------------
* By Bonnie S. Angus pursuant to Power of Attorney filed with Post-Effective
Amendment No. 1 to the Registration Statement of the Registrant on Form N-
4, Reg. No. 33-19765.
<PAGE>
Exhibit 10 (a).
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-effective Amendment No. 4 to
Registration Statement No. 33-19765 on Form N-4 of Sun Life (N.Y.) Variable
Account B of our report dated February 7, 1997 accompanying the financial
statements of Sun Life (N.Y.) Variable Account B and our report dated February
3, 1997 accompanying the financial statements of Sun Life Insurance and Annuity
Company of New York appearing in the Statement of Additional Information, which
is part of such Registration Statement. We also consent to the reference to us
under the heading "Condensed Financial Information - Accumulation Unit Values"
appearing in the Prospectus, which is part of such Registration Statement.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 23, 1997
<PAGE>
Exhibit 10(b).
CONSENT OF COUNSEL
I hereby consent to the reference to me in Post-Effective Amendment
No. 4 to the Registration Statement on Form N-4 of Sun Life (N.Y.) Variable
Account B under the caption "Legal Matters" in the Statement of Additional
Information contained therein.
DAVID D. HORN, ESQ.
April 14, 1997
<PAGE>
Exhibit 10(c)
CERTIFICATION OF COUNSEL
I, David D. Horn, in my capacity as counsel for Sun Life Insurance
and Annuity Company of New York, have reviewed Post-effective Amendment No. 4 to
the Registration Statement of Sun Life (N.Y.) Variable Account B (the "Account")
which is being filed pursuant to paragraph (b) of Rule 485 under the Securities
Act of 1933. Based on my review of this Post-effective Amendment and such other
material relating to the operations of the Account as I deemed relevant, I
hereby certify as of April 23, 1997, the date of filing of this Amendment, that
the Amendment does not contain disclosure which would render it ineligible to
become effective pursuant to paragraph (b) of Rule 485.
I hereby consent to the filing of this certification as part of Post-
effective Amendment No. 4 to the Registration Statement of the Account.
DAVID D. HORN, ESQ.
April 23, 1997
<PAGE>
Exhibit 13
Performance Data To Come
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SUN LIFE
(N.Y.) VARIABLE ACCOUNT B - COMPASS 3 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 151,782,212
<INVESTMENTS-AT-VALUE> 175,838,893
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 175,838,893
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 49,354
<TOTAL-LIABILITIES> 49,354
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 817,279
<SHARES-COMMON-PRIOR> 598,930
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 175,789,539
<DIVIDEND-INCOME> 13,534,549
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 2,236,356
<NET-INVESTMENT-INCOME> 11,298,193
<REALIZED-GAINS-CURRENT> 6,984,800
<APPREC-INCREASE-CURRENT> 993,730
<NET-CHANGE-FROM-OPS> 19,276,723
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 273,452
<NUMBER-OF-SHARES-REDEEMED> 55,103
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (89,899)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,236,356
<AVERAGE-NET-ASSETS> 175,834,489
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
