<PAGE>
As filed with the Securities and Exchange Commission on April 23, 1998
Registration No. 33-19765
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM N-4
POST-EFFECTIVE AMENDMENT NO. 5
to
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
and
AMENDMENT NO. 5
to
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |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
Margaret Hankard, Senior Associate Counsel
c/o Sun Life Assurance Company of Canada (U.S.)
Retirement Products and Services
One Copley Place
Boston, Massachusetts 02116
(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, 1998
pursuant to paragraph (b) of Rule 485.
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- --------------------------------------------------------------------------------
C3 (NY)
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
Post-Effective Amendment No. 5 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
- ------------------------------ -------------------------------
Part A
- ------
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
- ------------------------------ -------------------------------
Part B
- -------
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, 1998.
<PAGE>
PROSPECTUS
MAY 1, 1998
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 the 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 (the "Series Fund"), a mutual fund registered under
the Investment Company Act of 1940. Shares of the Series Fund are issued in
twenty-six 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 the Fixed Account and the Variable
Account. 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, 1998 which is incorporated herein by reference. The Statement of
Additional Information is available without charge from the Company 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
Owner Inquiries 20
Table of Contents for Statement of Additional Information 21
Appendix A -- The Fixed Account
Appendix B -- Illustrative Examples
Appendix C -- Withdrawals and Withdrawal Charges
</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 Contract 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, or 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 a separate account 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.
2
<PAGE>
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.
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 (i.e., a 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
3
<PAGE>
distribution expense charge at the end of each Valuation Period equal to an
annual rate of 0.15% of the daily 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 to the Owner.
EXPENSE SUMMARY
The purpose of the following table and Examples is to help Owners and
prospective purchasers of the Contracts to understand the costs and expenses
that are borne, directly and indirectly, by 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
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
- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES
- ---------------------------------------------------
(as a percentage of average Variable 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 Variable 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% 0.73% 0.55% 0.75% 0.66% 0.74%
Other Expenses..................................... 0.07% 0.09% 0.05% 0.08% 0.16% 0.05% 0.08%
Total Series Fund Annual Expenses.................. 0.57% 0.84% 0.78% 0.63% 0.91% 0.71% 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>
EXAMPLES
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 $224
High Yield Series......................................................................... 77 115 156 252
Capital Appreciation Series............................................................... 76 113 153 246
Government Securities Series.............................................................. 75 109 145 230
World Governments Series.................................................................. 77 117 160 259
Total Return Series....................................................................... 75 111 149 239
Managed Sectors Series.................................................................... 77 114 155 250
</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 $224
High Yield Series......................................................................... 23 70 120 252
Capital Appreciation Series............................................................... 22 68 117 246
Government Securities Series.............................................................. 21 64 109 230
World Governments Series.................................................................. 23 72 124 259
Total Return Series....................................................................... 21 66 113 239
Managed Sectors Series.................................................................... 23 69 119 250
</TABLE>
THE EXAMPLES SHOULD NOT BE CONSIDERED TO BE REPRESENTATIONS 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, DECEMBER 31, DECEMBER 31,
1993* 1994 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 YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
----------------- -----------------
<S> <C> <C>
CAPITAL APPRECIATION SERIES
Unit Value
Beginning of Period $13.0981 $15.6920
End of Period $15.6920 $19.0541
Units Outstanding End of Period 231,231 291,968
GOVERNMENT SECURITIES SERIES
Unit Value
Beginning of Period $11.1980 $11.2212
End of Period $11.2212 $12.0343
Units Outstanding End of Period 58,052 55,194
HIGH YIELD SERIES
Unit Value
Beginning of Period $11.5849 $12.8082
End of Period $12.8082 $14.3002
Units Outstanding End of Period 58,945 60,217
MANAGED SECTORS SERIES
Unit Value
Beginning of Period $12.1391 $14.0980
End of Period $14.0980 $17.4931
Units Outstanding End of Period 82,578 100,687
MONEY MARKET SERIES
Unit Value
Beginning of Period $10.6823 $11.0530
End of Period $11.0530 $11.4533
Units Outstanding End of Period 83,267 47,433
TOTAL RETURN SERIES
Unit Value
Beginning of Period $12.0270 $13.5283
End of Period $13.5283 $16.2726
Units Outstanding End of Period 255,284 281,915
WORLD GOVERNMENTS SERIES
Unit Value
Beginning of Period $10.8976 $11.2477
End of Period $11.2477 $11.0071
Units Outstanding End of Period 47,922 42,551
<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.)
is an indirect 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 the Company's 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 Contracts, 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, at
their net asset value, shares of MFS/Sun Life Series Trust (the "Series Fund")
as designated by the Owner. 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 Series Fund prospectus 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-six 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, an affiliate 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. An investment in this series
is neither insured nor guaranteed by the U.S. Government. There can be no
assurance that this series will be able to maintain a stable net asset value of
$1.00 per share.
(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.
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<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.
An applicant's 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 may 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 Contract or a
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 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. Owners should consult the documents
governing their plan and the person who administers the plan for information as
to such investment alternatives.
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".
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.
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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 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 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
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<PAGE>
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 will 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 would 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, 1997 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 (i.e., a 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 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.
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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 minus the sum of both 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
in a Contract Year without a withdrawal charge 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 taxes 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 the Statement of Additional
Information.
ANNUITY PROVISIONS
ANNUITY COMMENCEMENT DATE
Annuity payments under a Contract will begin on the Annuity Commencement
Date 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, in the case of a
Qualified Contract, otherwise limited or restricted 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 Annuity
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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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 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 or in connection with similar
solicitations, 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
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are received from persons having 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
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 (i.e., 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 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 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 Pension Plans 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., One Sun Life Executive Park,
Wellesley Hills, Massachusetts 02181, a wholly-owned subsidiary of Sun Life
Assurance Company of Canada (U.S.). 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.
OWNER INQUIRIES
All Owner inquiries should be directed to the Company at its Annuity Service
Mailing Address.
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<PAGE>
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
Appendix A -- The Fixed Account
Appendix B -- Illustrative Examples
Appendix C -- Withdrawals and Withdrawal Charges
</TABLE>
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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, 1998 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, 1998
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
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 5/98
<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, 1998.
<PAGE>
MAY 1, 1998
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
Accountants....................................... 4
Calculation of Performance Data................... 4
Advertising and Sales Literature.................. 7
Financial Statements.............................. 9
Appendix A -- The Fixed Account................... 32
Appendix B -- Illustrative Examples............... 34
Appendix C -- Withdrawals and Withdrawal
Charges......................................... 35
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, 1998. 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.)
is an indirect 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. 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 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.
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<PAGE>
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.
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
3
<PAGE>
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.
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"), One Sun Life Executive Park, Wellesley Hills, Massachusetts
02181, a wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.).
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 1995, 1996 and 1997, approximately $21,127, $39,481 and
$30,614, respectively, was paid to and retained by Clarendon in connection with
the distribution of 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
4
<PAGE>
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, 1997
<TABLE>
<CAPTION>
10
1 YEAR 5 YEAR YEAR DATE OF
PERIOD PERIOD PERIOD LIFE* INCEPTION
-------- ------- ------ -- --------------
<S> <C> <C> <C> <C>
August 13,
Capital Appreciation Series............. 15.16 % 15.31 % 15.88 % -- 1985
August 12,
Government Securities Series............ 1.59 % 4.33 % 6.58 % -- 1985
August 13,
High Yield Series....................... 6.02 % 9.09 % 9.05 % -- 1985
Managed Sectors Series.................. 18.26 % 12.14 % -- 15.56% May 27, 1988
August 29,
Money Market Series..................... -1.97 % 2.08 % 3.74 % -- 1985
Total Return Series..................... 14.19 % 11.66 % -- 11.27% May 16, 1988
World Governments Series................ -7.75 % 4.12 % -- 6.11% 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.
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.
5
<PAGE>
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, 1997*
COMPASS 3 CONTRACT
THIS MANY YEARS AGO...
</TABLE>
<TABLE>
<CAPTION>
Capital Appreciation Series Government Securities Series
- --------------------------------------------------------- ---------------------------------------------------------
Number Cumulative Compound Number Cumulative Compound
of Growth Growth of Growth Growth
Years Periods Amount Rate Rate Years Periods Amount Rate Rate
- ------ ----------------- ---------- ---------- -------- ------ ----------------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/96-12/31/97 $12,142.58 21.43% 21.43% 1 12/31/96-12/31/97 $10,724.65 7.25% 7.25%
2 12/31/95-12/31/97 $14,547.26 45.47% 20.61% 2 12/31/95-12/31/97 $10,746.86 7.47% 3.67%
3 12/31/94-12/31/97 $19,291.32 92.91% 24.49% 3 12/31/94-12/31/97 $12.468.98 24.69% 7.63%
4 12/31/93-12/31/97 $18,340.56 83.41% 16.37% 4 12/31/93-12/31/97 $12.031.63 20.32% 4.73%
5 12/31/92-12/31/97 $21,350.81 113.51% 16.38% 5 12/31/92-12/31/97 $12,895.30 28.95% 5.22%
10 12/31/87-12/31/97 $45,412.54 354.13% 16.34% 10 12/31/87-12/31/97 $19,668.62 96.69% 7.00%
Life 8/13/85-12/31/97 $54,867.60 448.68% 14.73% Life 8/12/85-12/31/97 $22,908.04 129.08% 6.92%
</TABLE>
<TABLE>
<CAPTION>
High Yield Series Managed Sectors Series
- --------------------------------------------------------- ---------------------------------------------------------
Number Cumulative Compound Number Cumulative Compound
of Growth Growth of Growth Growth
Years Periods Amount Rate Rate Years Periods Amount Rate Rate
- ------ ----------------- ---------- ---------- -------- ------ ----------------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/96-12/31/97 $11,164.85 11.65% 11.65% 1 12/31/96-12/31/97 $12,408.26 24.08% 24.08%
2 12/31/95-12/31/97 $12,343.83 23.44% 11.10% 2 12/31/95-12/31/97 $14,410.59 44.11% 20.04%
3 12/31/94-12/31/97 $14,247.79 42.48% 12.53% 3 12/31/94-12/31/97 $18,824.92 88.25% 23.47%
4 12/31/93-12/31/97 $13,737.73 37.38% 8.26% 4 12/31/93-12/31/97 $18,232.26 82.32% 16.20%
5 12/31/92-12/31/97 $15,956.09 59.56% 9.80% 5 12/31/92-12/31/97 $18,330.95 83.31% 12.89%
10 12/31/87-12/31/97 $24,614.10 146.14% 9.43%
Life 8/13/85-12/31/97 $27,768.73 177.69% 8.59% Life 5/27/88-12/31/97 $40,460.18 304.60% 15.67%
</TABLE>
<TABLE>
<CAPTION>
Total Return Series World Governments Series
- --------------------------------------------------------- ---------------------------------------------------------
Number Cumulative Compound Number Cumulative Compound
of Growth Growth of Growth Growth
Years Periods Amount Rate Rate Years Periods Amount Rate Rate
- ------ ----------------- ---------- ---------- -------- ------ ----------------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/96-12/31/97 $12,028.52 20.29% 20.29% 1 12/31/96-12/31/97 $ 9,786.08 -2.14% -2.14%
2 12/31/95-12/31/97 $13,530.06 35.30% 16.32% 2 12/31/95-12/31/97 $10,100.46 1.00% 0.50%
3 12/31/94-12/31/97 $16,917.05 69.17% 19.15% 3 12/31/94-12/31/97 $11,524.25 15.24% 4.84%
4 12/31/93-12/31/97 $16,306.12 63.06% 13.00% 4 12/31/93-12/31/97 $10,855.26 8.55% 2.07%
5 12/31/92-12/31/97 $18,230.49 82.30% 12.76% 5 12/31/92-12/31/97 $12,735.58 27.36% 4.96%
Life 5/16/88-12/31/97 $28,796.67 187.97% 11.61% Life 5/16/88-12/31/97 $17,915.44 79.15% 6.24%
</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. 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.
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, 1997
<TABLE>
<CAPTION>
ASSETS:
Investment in MFS/Sun Life Series Trust Shares Cost Value
---------- ------------ ------------
<S> <C> <C> <C>
Capital Appreciation Series ("CAS")...... 1,690,865 $ 51,349,789 $ 67,868,674
Government Securities Series ("GSS")..... 1,720,075 21,379,490 22,430,830
High Yield Series ("HYS")................ 1,353,848 11,994,948 13,146,857
Managed Sectors Series ("MSS")........... 446,837 11,030,212 13,029,464
Money Market Series ("MMS").............. 12,406,672 12,406,672 12,406,672
Total Return Series ("TRS").............. 2,090,778 34,857,281 44,569,654
World Governments Series ("WGS")......... 478,903 5,498,072 5,137,026
------------ ------------
$148,516,464 $178,589,177
------------
------------
LIABILITY:
Payable to sponsor................................................... 70,619
------------
Net Assets..................................................... $178,518,558
------------
------------
</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................................................ 1,049,111 $ 59.1724 $ 62,072,312 $ 241,312 $ 62,313,624
GSS................................................ 897,267 24.1586 21,672,617 94,840 21,767,457
HYS................................................ 421,472 29.0298 12,237,445 43,066 12,280,511
MSS................................................ 270,624 41.5939 11,272,473 -- 11,272,473
MMS................................................ 713,552 16.6078 11,843,273 10,976 11,854,249
TRS................................................ 1,345,153 29.1777 39,309,920 609,566 39,919,486
WGS................................................ 256,940 18.1356 4,669,373 -- 4,669,373
------------ ----------- ------------
$163,077,413 $ 999,760 $164,077,173
------------ ----------- ------------
<CAPTION>
COMPASS 3 CONTRACTS:
<S> <C> <C> <C> <C> <C>
CAS................................................ 291,968 $ 19.0541 $ 5,562,736 $ 109 $ 5,562,845
GSS................................................ 55,194 12.0343 663,723 -- 663,723
HYS................................................ 60,217 14.3002 861,335 -- 861,335
MSS................................................ 100,687 17.4931 1,755,888 227 1,756,115
MMS................................................ 47,433 11.4533 543,064 -- 543,064
TRS................................................ 281,915 16.2726 4,586,550 100 4,586,650
WGS................................................ 42,551 11.0071 467,653 -- 467,653
------------ ----------- ------------
$ 14,440,949 $ 436 $ 14,441,385
------------ ----------- ------------
Net Assets............................................................ $177,518,362 $1,000,196 $178,518,558
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
See notes to financial statements
9
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
STATEMENTS OF OPERATIONS-- December 31, 1997
<TABLE>
<CAPTION>
CAS GSS HYS MSS
Sub-Account Sub-Account Sub-Account Sub-Account
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Dividend income and capital gain distributions
received...................................... $ 5,671,221 $ 1,773,033 $ 888,949 $ 1,371,268
Mortality and expense risk charges.............. 842,418 321,292 169,971 157,979
Distribution expense charges.................... 7,164 992 1,194 2,203
------------ ------------ ----------- ------------
Net investment income....................... $ 4,821,639 $ 1,450,749 $ 717,784 $ 1,211,086
------------ ------------ ----------- ------------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales........................... $ 14,132,590 $ 9,865,167 $5,608,186 $ 4,092,808
Cost of investments sold...................... 9,867,505 9,941,116 5,133,558 3,008,351
------------ ------------ ----------- ------------
Net realized gains (losses)................. $ 4,265,085 $ (75,949) $ 474,628 $ 1,084,457
------------ ------------ ----------- ------------
Net unrealized appreciation on investments:
End of year................................... $ 16,518,885 $ 1,051,340 $1,151,909 $ 1,999,252
Beginning of year............................. 13,093,275 670,954 861,574 1,586,190
------------ ------------ ----------- ------------
Change in unrealized appreciation........... $ 3,425,610 $ 380,386 $ 290,335 $ 413,062
------------ ------------ ----------- ------------
Realized and unrealized gains................. $ 7,690,695 $ 304,437 $ 764,963 $ 1,497,519
------------ ------------ ----------- ------------
INCREASE IN NET ASSETS FROM OPERATIONS............ $ 12,512,334 $ 1,755,186 $1,482,747 $ 2,708,605
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
MMS TRS WGS
Sub-Account Sub-Account Sub-Account Total
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Dividend income and capital gain distributions
received...................................... $ 675,167 $4,275,683 $ 252,673 $14,907,994
Mortality and expense risk charges.............. 176,350 528,904 74,258 2,271,172
Distribution expense charges.................... 1,117 6,104 775 19,549
---------- ---------- ---------- -----------
Net investment income....................... $ 497,700 $3,740,675 $ 177,640 $12,617,273
---------- ---------- ---------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales........................... $14,314,584 $8,762,067 $2,194,887 $58,970,289
Cost of investments sold...................... 14,314,584 6,102,334 2,416,005 50,783,453
---------- ---------- ---------- -----------
Net realized gains (losses)................. $ -- $2,659,733 $(221,118 ) $ 8,186,836
---------- ---------- ---------- -----------
Net unrealized appreciation (depreciation) on
investments
End of Year................................... $ -- $9,712,373 $(361,046 ) $30,072,713
Beginning of Year............................. -- 8,090,640 (245,952 ) 24,056,681
---------- ---------- ---------- -----------
Change in unrealized appreciation
(depreciation)............................ $ -- $1,621,733 $(115,094 ) $ 6,016,032
---------- ---------- ---------- -----------
Realized and unrealized gains (losses)........ $ -- $4,281,466 $(336,212 ) $14,202,868
---------- ---------- ---------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS....................................... $ 497,700 $8,022,141 $(158,572 ) $26,820,141
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
</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,
------------------------------ -------------------------------
1997 1996 1997 1996
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.......................... $ 4,821,639 $ 3,981,524 $ 1,450,749 $ 1,241,066
Net realized gains (losses).................... 4,265,085 4,576,791 (75,949) (27,070)
Net unrealized gains (losses).................. 3,425,610 2,015,008 380,386 (1,124,217)
-------------- ------------- -------------- --------------
Increase in net assets from operations..... $12,512,334 $10,573,323 $ 1,755,186 $ 89,779
-------------- ------------- -------------- --------------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received................... $ 2,627,696 $ 2,717,881 $ 593,679 $ 894,639
Net transfers between Sub-Accounts and Fixed
Account.................................... 668,389 (1,800,976) (1,912,328) 493,206
Withdrawals, surrenders, annuitizations and
contract charges........................... (7,704,458) (7,564,122) (4,863,706) (4,694,596)
-------------- ------------- -------------- --------------
Net accumulation activity.................. $(4,408,373) $(6,647,217) $(6,182,355) $ (3,306,751)
-------------- ------------- -------------- --------------
Annuitization Activity:
Annuitizations............................... $ 67,112 $ 7,453 $ -- $ 10,761
Annuity payments and contract charges........ (26,334) (21,172) (22,850) (43,569)
Adjustments to annuity reserve............... (3,618) 775 3,140 1,408
-------------- ------------- -------------- --------------
Net annuitization activity................. $ 37,160 $ (12,944) $ (19,710) $ (31,400)
-------------- ------------- -------------- --------------
Decrease in net assets from contract owner
transactions................................. $(4,371,213) $(6,660,161) $(6,202,065) $ (3,338,151)
-------------- ------------- -------------- --------------
Increase (decrease) in net assets............ $ 8,141,121 $ 3,913,162 $(4,446,879) $ (3,248,372)
NET ASSETS:
Beginning of year.............................. 59,735,348 55,822,186 26,878,059 30,126,431
-------------- ------------- -------------- --------------
End of year.................................... $67,876,469 $59,735,348 $22,431,180 $ 26,878,059
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
<CAPTION>
HYS MSS
Sub-Account Sub-Account
------------------------------ -------------------------------
Year Ended December 31, Year Ended December 31,
------------------------------ -------------------------------
1997 1996 1997 1996
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.......................... $ 717,784 $ 942,056 $ 1,211,086 $ 1,252,707
Net realized gains............................. 474,628 281,243 1,084,457 346,321
Net unrealized gains........................... 290,335 168,726 413,062 27,275
-------------- ------------- -------------- --------------
Increase in net assets from operations..... $ 1,482,747 $ 1,392,025 $ 2,708,605 $ 1,626,303
-------------- ------------- -------------- --------------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received................... $ 212,184 $ 373,887 $ 641,130 $ 728,572
Net transfers between Sub-Accounts and Fixed
Account.................................... 199,334 (133,634) 83,029 455,068
Withdrawals, surrenders, annuitizations and
contract charges........................... (2,269,739) (2,039,017) (2,113,363) (1,326,391)
-------------- ------------- -------------- --------------
Net accumulation activity.................. $(1,858,221) $(1,798,764) $(1,389,204) $ (142,751)
-------------- ------------- -------------- --------------
Annuitization Activity:
Annuitizations............................... $ -- $ -- $ -- $ --
Annuity payments and contract charges........ (5,630) (6,135) (164) (135)
Adjustments to annuity reserves.............. (427) (255) (11,371) 11,582
-------------- ------------- -------------- --------------
Net annuitization activity................. $ (6,057) $ (6,390) $ (11,535) $ 11,447
-------------- ------------- -------------- --------------
Decrease in net assets from contract owner
transactions................................. $(1,864,278) $(1,805,154) $(1,400,739 $ (131,304)
-------------- ------------- -------------- --------------
(Increase) in net assets................... $ (381,531) $ (413,129) $ 1,307,866 1,494,999
NET ASSETS:
Beginning of year.............................. 13,523,377 13,936,506 11,720,722 10,225,723
-------------- ------------- -------------- --------------
End of year.................................... $13,141,846 $13,523,377 $13,028,588 $ 11,720,722
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
</TABLE>
See notes to financial statements
11
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
MMS TRS
Sub-Account Sub-Account
------------------------------ -----------------------------
Year Ended December 31, Year Ended December 31,
------------------------------ -----------------------------
1997 1996 1997 1996
--------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income................................ $ 497,700 $ 524,831 $ 3,740,675 $ 2,404,032
Net realized gains................................... -- -- 2,659,733 1,937,824
Net unrealized gains................................. -- -- 1,621,733 489,044
--------------- ------------ -------------- ------------
Increase in net assets from operations........... $ 497,700 $ 524,831 $ 8,022,141 $ 4,830,900
--------------- ------------ -------------- ------------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received......................... $ 361,788 $ 506,719 $ 1,583,065 $ 1,903,724
Net transfers between Sub-Accounts and Fixed
Account.......................................... 457,557 1,225,167 101,838 (23,251)
Withdrawals, surrenders, annuitizations and
contract charges................................. (4,535,913) (3,891,615) (6,305,584) (5,723,230)
--------------- ------------ -------------- ------------
Net accumulation activity........................ $(3,716,568) $(2,159,729) $ (4,620,681) $ (3,842,757)
--------------- ------------ -------------- ------------
Annuitization Activity:
Annuitizations..................................... $ -- $ -- $ 56,378 $ 19,728
Annuity payments and contract charges.............. (1,179) (4,273) (82,242) (68,505)
Adjustments to annuity reserves.................... 10,821 (11,568) (19,810) (13,885)
--------------- ------------ -------------- ------------
Net annuitization activity....................... $ 9,642 $ (15,841) $ (45,674) $ (62,662)
--------------- ------------ -------------- ------------
Decrease in net assets from contract owner
transactions....................................... $(3,706,926) $(2,175,570) $ (4,666,355) $ (3,905,419)
--------------- ------------ -------------- ------------
Increase (decrease) in net assets.................. $(3,209,226) $(1,650,739) $ 3,355,786 $ 925,481
NET ASSETS:
Beginning of year.................................... 15,606,539 17,257,278 41,150,350 40,224,869
--------------- ------------ -------------- ------------
End of year.......................................... $12,397,313 $15,606,539 $ 44,506,136 $ 41,150,350
--------------- ------------ -------------- ------------
--------------- ------------ -------------- ------------
<CAPTION>
WGS
Sub-Account Total
------------------------------ -----------------------------
Year Ended December 31, Year Ended December 31,
------------------------------ -----------------------------
1997 1996 1997 1996
--------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income................................ $ 177,640 $ 951,977 $ 12,617,273 $ 11,298,193
Net realized gains (losses).......................... (221,118) (130,309) 8,186,836 6,984,800
Net unrealized gains (losses)........................ (115,094) (582,106) 6,016,032 993,730
--------------- ------------ -------------- ------------
Increase (decrease) in net assets from
operations..................................... $ (158,572) $ 239,562 $ 26,820,141 $ 19,276,723
--------------- ------------ -------------- ------------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received......................... $ 200,405 $ 408,414 $ 6,219,947 $ 7,533,836
Net transfers between Sub-Accounts and Fixed
Account.......................................... (327,982) (463,423) (730,163) (247,843)
Withdrawals, surrenders, annuitizations and
contract charges................................. (1,751,969) (1,295,854) (29,544,732) (26,534,825)
--------------- ------------ -------------- ------------
Net accumulation activity........................ $(1,879,546) $(1,350,863) $(24,054,948) $(19,248,832)
--------------- ------------ -------------- ------------
Annuitization Activity:
Annuitizations..................................... $ -- $ -- $ 123,490 $ 37,942
Annuity payments and contract charges.............. -- -- (138,399) (143,789)
Adjustments to annuity reserves.................... -- -- (21,265) (11,943)
--------------- ------------ -------------- ------------
Net annuitization activity $ -- $ -- $ (36,174) $ (117,790)
--------------- ------------ -------------- ------------
Decrease in net assets from contract owner
transactions....................................... $(1,879,546) $(1,350,863) $(24,091,122) $(19,366,622)
--------------- ------------ -------------- ------------
Increase (decrease) in net assets.................. $(2,038,118) $(1,111,301) $ 2,729,019 $ (89,899)
NET ASSETS:
Beginning of year.................................... 7,175,144 8,286,445 175,789,539 175,879,438
--------------- ------------ -------------- ------------
End of year.......................................... $ 5,137,026 $ 7,175,144 $178,518,558 $175,789,539
--------------- ------------ -------------- ------------
--------------- ------------ -------------- ------------
</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, an affiliate 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 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.
13
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS -- continued
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 HYS
Sub-Account Sub-Account Sub-Account
----------------------- ----------------------- -------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
----------------------- ----------------------- -------------------
COMPASS 2 CONTRACTS 1997 1996 1997 1996 1997 1996
- --------------------------------- ---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Units Outstanding Beginning of
Year 1,149,253 1,311,905 1,160,869 1,317,288 489,793 570,116
Units purchased 25,636 34,513 22,468 29,010 3,272 5,193
Units transferred between
Sub-Accounts and Fixed
Account 7,308 (32,094) (79,806) 25,659 6,890 (6,162)
Units withdrawn, surrendered,
and annuitized (133,086) (165,071) (206,264) (211,088) (78,483) (79,354)
---------- ---------- ---------- ---------- -------- --------
Units Outstanding End of Year 1,049,111 1,149,253 897,267 1,160,869 421,472 489,793
---------- ---------- ---------- ---------- -------- --------
---------- ---------- ---------- ---------- -------- --------
<CAPTION>
MSS
Sub-Account
-----------------------
Year Ended
December 31,
-----------------------
COMPASS 2 CONTRACTS 1997 1996
- --------------------------------- ---------- ----------
<S> <C> <C>
Units Outstanding Beginning of
Year 314,243 331,221
Units purchased 8,716 11,544
Units transferred between
Sub-Accounts and Fixed
Account (1,885) 12,613
Units withdrawn, surrendered,
and annuitized (50,450) (41,135)
---------- ----------
Units Outstanding End of Year 270,624 314,243
---------- ----------
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
MMS TRS WGS
Sub-Account Sub-Account Sub-Account
---------------------- ---------------------- ------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
---------------------- ---------------------- ------------------
1997 1996 1997 1996 1997 1996
---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Units Outstanding Beginning of
Year 917,551 1,084,910 1,532,369 1,740,564 358,117 433,736
Units purchased 14,540 20,814 34,725 40,026 6,591 10,747
Units transferred between
Sub-Accounts and Fixed
Account 50,095 58,322 146 (6,258) (15,604) (20,115)
Units withdrawn, surrendered,
and annuitized (268,634) (246,495) (222,087) (241,963) (92,164) (66,251)
---------- ---------- ---------- ---------- -------- --------
Units Outstanding End of Year 713,552 917,551 1,345,153 1,532,369 256,940 358,117
---------- ---------- ---------- ---------- -------- --------
---------- ---------- ---------- ---------- -------- --------
</TABLE>
15
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
CAS GSS HYS
Sub-Account Sub-Account Sub-Account
----------------------- ----------------------- -------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
----------------------- ----------------------- -------------------
COMPASS 3 CONTRACTS 1997 1996 1997 1996 1997 1996
- --------------------------------- ---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Units Outstanding Beginning of
Year 231,231 184,876 58,052 39,286 58,945 43,963
Units purchased 72,122 82,988 6,833 23,535 9,036 20,780
Units transferred between
Sub-Accounts and Fixed
Account 6,347 (23,851) (373) (1,004) 291 1,055
Units withdrawn, surrendered,
and annuitized (17,732) (12,782) (9,318) (3,765) (8,055) (6,853)
---------- ---------- ---------- ---------- -------- --------
Units Outstanding End of Year 291,968 231,231 55,194 58,052 60,217 58,945
---------- ---------- ---------- ---------- -------- --------
---------- ---------- ---------- ---------- -------- --------
<CAPTION>
MSS
Sub-Account
-----------------------
Year Ended
December 31,
-----------------------
COMPASS 3 CONTRACTS 1997 1996
- --------------------------------- ---------- ----------
<S> <C> <C>
Units Outstanding Beginning of
Year 82,578 53,846
Units purchased 18,777 29,174
Units transferred between
Sub-Accounts and Fixed
Account 10,378 4,546
Units withdrawn, surrendered,
and annuitized (11,046) (4,988)
---------- ----------
Units Outstanding End of Year 100,687 82,578
---------- ----------
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
MMS TRS WGS
Sub-Account Sub-Account Sub-Account
---------------------- ---------------------- ------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
---------------------- ---------------------- ------------------
1997 1996 1997 1996 1997 1996
---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Units Outstanding Beginning of
Year 83,267 44,348 255,284 185,716 47,922 46,895
Units purchased 11,190 16,424 44,905 80,349 7,395 20,202
Units transferred between
Sub-Accounts and Fixed
Account (32,545) 25,043 4,923 10,544 (4,116) (9,737)
Units withdrawn, surrendered,
and annuitized (14,479) (2,548) (23,197) (21,325) (8,650) (9,438)
---------- ---------- ---------- ---------- -------- --------
Units Outstanding End of Year 47,433 83,267 281,915 255,284 42,551 47,922
---------- ---------- ---------- ---------- -------- --------
---------- ---------- ---------- ---------- -------- --------
</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, 1997, the related
statements of operations for the year then ended and the statements of changes
in net assets for the years ended December 31, 1997 and 1996. 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, 1997 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,
1997, 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 6, 1998
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,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
ADMITTED ASSETS
General Account Assets:
Bonds $ 61,703,336 $ 77,142,619
Mortgage loans on real estate 25,787,001 40,431,773
Properties acquired in satisfaction
of debt -- 1,377,041
Policy loans 636,277 651,332
Cash and short-term investments 10,120,237 4,614,994
Life insurance premiums and annuity
considerations due and uncollected 791,011 421,112
Accident and health premiums due and
unpaid 158,858 69,672
Investment income due and accrued 1,083,939 1,737,199
Other assets 497,790 14,668
------------ ------------
General account assets 100,778,449 126,460,410
Separate Account Assets:
Unitized 406,430,585 303,896,114
Non-unitized 116,889,545 87,676,015
------------ ------------
Total Admitted Assets $624,098,579 $518,032,539
------------ ------------
------------ ------------
LIABILITIES
General Account Liabilities:
Aggregate reserve for life policies
and contracts $ 22,374,626 $ 20,404,586
Aggregate reserve for accident and
health policies 7,414,000 4,185,000
Policy and contract claims 1,912,737 1,107,333
Liability for premium and other
deposit funds 31,341,254 61,747,147
Interest maintenance reserve 885,581 1,173,961
Commissions to agents due or accrued 521,106 217,449
General expenses due or accrued 415,105 218,624
Transfers from Separate Accounts due
or accrued (7,224,058) (1,689,278)
Taxes, licenses and fees due or
accrued 114,986 96,884
Federal income taxes due or accrued 1,000,000 400,000
Asset valuation reserve 1,346,335 1,845,237
Payable to parent, subsidiaries and
affiliates 1,266,475 1,614,355
Other liabilities 810,594 509,201
------------ ------------
General account liabilities 62,178,741 91,830,499
Separate Account Liabilities:
Unitized 406,249,110 303,723,382
Non-unitized 116,889,545 87,676,015
------------ ------------
Total liabilities 585,317,396 483,229,896
------------ ------------
CAPITAL STOCK AND SURPLUS
Capital Stock--Par value $1,000;
authorized issued and outstanding;
2,000 shares 2,000,000 2,000,000
------------ ------------
Gross paid in and contributed
surplus 29,500,000 29,500,000
Group life contingency reserve fund 180,457 118,381
Unassigned funds 7,100,726 3,184,262
------------ ------------
Total Surplus 36,781,183 32,802,643
------------ ------------
Capital Stock and Surplus 38,781,183 34,802,643
------------ ------------
Total liabilities, capital stock and
surplus $624,098,579 $518,032,539
------------ ------------
------------ ------------
</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,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
INCOME:
Premiums and annuity considerations $ 16,670,915 $ 11,581,817 $ 11,731,623
Deposit-type funds 122,789,862 72,121,136 73,714,439
Net investment income 8,824,668 12,313,903 18,450,106
Amortization of interest maintenance
reserve 519,001 704,763 753,351
Net gain from operations from
Separate Accounts 8,743 8,101 --
------------ ------------ ------------
Total Income 148,813,189 96,729,720 104,649,519
------------ ------------ ------------
BENEFITS AND EXPENSES:
Death benefits 4,916,746 2,881,367 2,589,934
Annuity benefits 5,439,091 7,175,995 6,606,801
Disability benefits and benefits
under accident and health policies 939,635 464,615 233,549
Surrender benefits and other fund
withdrawals 111,623,776 118,432,072 118,975,912
Interest on policy or contract funds 75,069 83,323 --
Increase in aggregate reserves for
life and accident and health
policies and contracts 5,199,040 1,550,701 3,022,081
Decrease in liability for premium
and other deposit funds (30,405,893) (67,996,389) (71,733,008)
------------ ------------ ------------
Total Benefits 97,787,464 62,591,684 59,695,269
Commissions on premiums and annuity
considerations (direct business
only) 5,582,738 3,047,358 3,212,849
General insurance expenses 7,687,478 6,093,131 5,716,492
Insurance taxes, licenses and fees,
excluding federal income taxes 788,386 729,244 579,585
Net transfers to Separate Accounts 31,479,097 19,487,747 32,047,554
------------ ------------ ------------
Total Benefits and Expenses 143,325,163 91,949,164 101,251,749
------------ ------------ ------------
Net gain from operations before
dividends to policyholders and
federal income taxes 5,488,026 4,780,556 3,397,770
Federal income taxes incurred
(excluding tax on capital gains) 2,315,259 1,938,734 2,446,706
------------ ------------ ------------
Net gain from operations after
dividends to policyholders and
federal income taxes and before
realized capital gains 3,172,767 2,841,822 951,064
Net realized capital gains (losses)
less capital gains tax and
transferred to the interest
maintenance reserve 183,262 (439,101) (21,536)
------------ ------------ ------------
NET INCOME $ 3,356,029 $ 2,402,721 $ 929,528
------------ ------------ ------------
------------ ------------ ------------
</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,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CAPITAL AND SURPLUS, BEGINNING OF YEAR $34,802,643 $31,964,414 $31,409,069
----------- ----------- -----------
Net income 3,356,029 2,402,721 929,528
Change in net unrealized capital
gains (losses) 138,000 702,000 (672,000)
Change in nonadmitted assets and
related items (14,391) 32,888 71,263
Change in asset valuation reserve 498,902 (299,380) 226,554
----------- ----------- -----------
Net change in capital and surplus
for the year 3,978,540 2,838,229 555,345
----------- ----------- -----------
CAPITAL AND SURPLUS, END OF YEAR $38,781,183 $34,802,643 $31,964,414
----------- ----------- -----------
----------- ----------- -----------
</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,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH PROVIDED
Premiums, annuity considerations and
deposit funds received $139,005,632 $ 83,598,181 $ 85,243,958
Net investment income 9,707,801 14,106,521 19,808,090
------------ ------------ ------------
Total receipts 148,713,433 97,704,702 105,052,048
------------ ------------ ------------
Benefits paid 122,170,301 128,975,968 128,129,129
Insurance expenses and taxes paid 13,540,362 9,712,774 9,655,310
Net cash transfers to separate
accounts 37,013,877 22,213,704 29,702,679
Federal income tax payments
(excluding tax on capital gains) 1,715,259 2,909,899 2,125,541
------------ ------------ ------------
Total payments 174,439,799 163,812,345 169,612,659
Net cash from operations (25,726,366) (66,107,643) (64,560,611)
Proceeds from long-term investments
sold, matured or repaid (after
deducting taxes on capital gains
of $222,860 for 1997, $(112,405)
for 1996 and $324,248 for 1995) 59,132,310 86,583,714 123,662,512
Other cash provided 325,543 4,654,856 444,240
------------ ------------ ------------
Total cash provided 59,457,853 91,238,570 124,106,752
------------ ------------ ------------
CASH APPLIED
Cost of long-term investments
acquired 27,369,138 28,654,582 51,631,901
Other cash applied 857,106 166,107 2,401,799
------------ ------------ ------------
Total cash applied 28,226,244 28,820,689 54,033,700
------------ ------------ ------------
Net change in cash and short-term
investments 5,505,243 (3,689,762) 5,512,441
CASH AND SHORT-TERM INVESTMENTS:
BEGINNING OF YEAR 4,614,994 8,304,756 2,792,315
------------ ------------ ------------
END OF YEAR $ 10,120,237 $ 4,614,994 $ 8,304,756
------------ ------------ ------------
------------ ------------ ------------
</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, 1997, 1996 AND 1995
1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
GENERAL--
Sun Life Insurance and Annuity Company of New York (the "Company") 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 ultimately a wholly-owned subsidiary of Sun Life
Assurance Company of Canada (Sun Life (Canada)), a mutual life insurance
company.
The Company, which is domiciled in the State of New York, prepares its financial
statements in accordance with statutory accounting practices prescribed or
permitted by the Insurance Department of the State of New York. 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 Company 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 of 1993, the
Financial Accounting Standards Board ("FASB") issued an interpretation (the
"Interpretation") which 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 Company's
financial position, results of operations or cash flow in conformity with GAAP.
(See Note 16 for further discussion relative to the Company'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, 1997, 1996 AND 1995
1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED):
SEPARATE ACCOUNTS--
The Company 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 statutory financial
statements. Assets held in the separate accounts are carried at market values.
The Company has also established a non-unitized separate account for amounts
allocated to the fixed portion of a certain combination fixed/variable deferred
annuity contract. 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 of the
separate accounts, 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. Transfers
from separate accounts due or accrued amounted to $7,224,000 in 1997 and
$1,689,000 in 1996.
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.
Certain 1996 and 1995 amounts have been reclassified to conform to amounts as
presented in 1997.
2. BONDS:
Investments in debt securities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------------------
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 $15,005 $ 311 -$ $15,316
Foreign governments 523 16 - 539
Public utilities 12,126 341 - 12,467
Finance 4,026 80 - 4,106
All other corporate bonds 30,023 696 16 30,703
-------- ---------- -------- --------
Total long-term bonds 61,703 1,444 16 63,131
-------- ---------- -------- --------
Short-term bonds:
U.S. Treasury Bills, bankers
acceptances and commercial paper 9,406 - - 9,406
-------- ---------- -------- --------
$71,109 $1,444 $16 $72,537
-------- ---------- -------- --------
-------- ---------- -------- --------
</TABLE>
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, 1997, 1996 AND 1995
2. BONDS (CONTINUED):
<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 $- $ 9,254
Foreign governments 530 14 - 544
Public utilities 19,997 434 8 20,423
Transportation 468 34 - 502
Finance 9,643 182 - 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 - - 4,507
-------- ---------- ----- --------
$81,650 $1,992 $ 41 $83,601
-------- ---------- ----- --------
-------- ---------- ----- --------
</TABLE>
The amortized cost and estimated fair value of bonds at December 31, 1997 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, 1997
-----------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ------------
(IN 000'S)
<S> <C> <C>
Maturities are:
Due in one year or less $21,723 $ 21,825
Due after one year through five
years 33,228 34,015
Due after five years through ten
years 2,386 2,499
Due after ten years 6,162 6,471
--------- ------------
Subtotal 63,499 64,810
--------- ------------
Mortgage-backed securities 7,610 7,727
--------- ------------
$71,109 $ 72,537
--------- ------------
--------- ------------
</TABLE>
Proceeds from sales and maturities of investments in debt securities during
1997, 1996 and 1995 were $42,986,000, $76,431,000 and $111,448,000,
respectively. Gross gains of $395,000, $537,000 and $1,295,000 and gross losses
of $40,000, $183,000 and $335,000 were realized on such sales during 1997, 1996
and 1995, respectively.
A bond, included above, with an amortized cost of approximately $408,000 and
$412,000 at December 31, 1997 and 1996, respectively, was on deposit with the
Superintendent of Insurance of the State of New York as required by law.
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, 1997, 1996 AND 1995
3. MORTGAGE LOANS:
The Company invests in commercial first mortgage loans throughout the United
States. The Company monitors the condition of the mortgage loans in its
portfolio. In those cases where mortgages have been restructured, appropriate
allowances for losses have been made. In those cases where, in management's
judgment, the mortgage loans' values are impaired, appropriate losses are
recorded.
The following table shows the geographic distribution of the mortgage loan
portfolio at December 31:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN 000'S)
<S> <C> <C>
New York $ 4,375 $10,717
California 4,672 4,884
Massachusetts 2,556 6,542
Ohio 1,308 3,445
Florida 3,313 3,795
All other 9,563 11,049
------- -------
$25,787 $40,432
------- -------
------- -------
</TABLE>
As of December 31, 1997, the Company has restructured mortgage loans totaling
$960,000 against which there are allowances for losses of $250,000.
4. INVESTMENT GAINS (LOSSES):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1997 1996 1995
----- ----- -----
(IN 000'S)
<S> <C> <C> <C>
Realized capital gains (losses):
Mortgage loans $ (6) $(676) $ (1)
Real estate 288 - (32)
----- ----- -----
282 (676) (33)
----- ----- -----
----- ----- -----
Changes in unrealized capital gains
(losses) on mortgage loans $ 138 $ 702 $(672)
----- ----- -----
----- ----- -----
</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 $355,000, $354,000 and $960,000 in
1997, 1996 and 1995, respectively. All gains are transferred net of applicable
income taxes.
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, 1997, 1996 AND 1995
5. NET INVESTMENT INCOME:
Net investment income consisted of the following for:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1997 1996 1995
------- ------- -------
(IN 000'S)
<S> <C> <C> <C>
Interest income from bonds $ 5,622 $ 8,576 $13,020
Interest income from mortgage loans 3,279 4,252 5,882
Real estate investment income (loss) 483 376 (52)
Other investment income (loss) 170 (93) 170
------- ------- -------
Gross investment income 9,554 13,111 19,020
Investment expenses 729 797 570
------- ------- -------
Net investment income $ 8,825 $12,314 $18,450
------- ------- -------
------- ------- -------
</TABLE>
6. REINSURANCE:
The Company 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
Company. 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 Company. Reinsurance
transactions under these agreements had the effect of increasing income from
operations by $139,000 for the year ended December 31, 1997, decreasing income
from operations by $500,000 for the year ended December 31, 1996 and increasing
income from operations by $652,000 for the year ended December 31, 1995.
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 Company for
the years ended December 31, 1997, 1996 and 1995 before the effect of
reinsurance transactions with Sun Life (Canada).
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1997 1996 1995
-------- ------- --------
(IN 000'S)
<S> <C> <C> <C>
Income:
Premiums, annuity deposits and other
revenues $142,915 $85,947 $ 86,819
Net investment income 9,343 13,019 19,204
-------- ------- --------
Subtotal 152,258 98,966 106,023
-------- ------- --------
Benefits and expenses:
Policyholder benefits 101,371 64,328 61,720
Other expenses 45,538 29,357 41,557
-------- ------- --------
Subtotal 146,909 93,685 103,277
-------- ------- --------
Income from operations $ 5,349 $ 5,281 $ 2,746
-------- ------- --------
-------- ------- --------
</TABLE>
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, 1997, 1996 AND 1995
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, 1997
--------------------
AMOUNT % OF TOTAL
-------- ----------
(IN 000'S)
<S> <C> <C>
Subject to discretionary withdrawal:
--with market value adjustment $120,764 21.40%
--at book value less surrender charges
(surrender charge > 5%) 13,811 2.40
--at book value (minimal or no charge
or adjustment) 410,484 72.70
Not subject to discretionary withdrawal
provision 19,972 3.50
-------- ----------
Total annuity actuarial reserves and
deposit liabilities $565,031 100.00%
-------- ----------
-------- ----------
<CAPTION>
DECEMBER 31, 1996
--------------------
AMOUNT % OF TOTAL
-------- ----------
(IN 000'S)
<S> <C> <C>
Subject to discretionary withdrawal:
--with market value adjustment $ 92,135 19.60%
--at book value less surrender charges
(surrender charge > 5%) 38,668 8.20
--at book value (minimal or no
surrender charge or adjustment) 318,886 67.90
Not subject to discretionary withdrawal
provision 20,326 4.30
-------- ----------
Total annuity actuarial reserves and
deposit liabilities $470,015 100.00%
-------- ----------
-------- ----------
</TABLE>
8. RETIREMENT PLANS:
The Company participates with Sun Life (Canada) and Sun Life of Canada (U.S.) in
a noncontributory 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 plan is currently
fully funded. The Company 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 Company's share of the group's accrued pension cost at December 31, 1997,
1996 and 1995 was $211,000, $178,000 and $97,000, respectively. The Company's
share of net periodic pension cost was $33,000, $81,000 and $18,000 for the
years ended December 31, 1997, 1996 and 1995, respectively.
The Company 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 Company matches, up to specified amounts, employees'
contributions to the plan. Employer contributions were $28,000, $27,000 and
$21,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
OTHER POST-RETIREMENT BENEFIT PLANS
In addition to pension benefits, the Company 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 Company, or retire
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, 1997, 1996 AND 1995
8. RETIREMENT PLANS (CONTINUED):
early upon satisfying an alternate age plus service condition. Life insurance
benefits are generally set at a fixed amount. The expense recognized in the
financial statements relative to this plan was $16,000 in 1997, $8,000 in 1996
and $7,000 in 1995.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following table presents the carrying amounts and fair values of the
Company's financial instruments at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
----------------------------- -----------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------------- ------------ -------------- ------------
(IN 000'S)
<S> <C> <C> <C> <C>
ASSETS:
Bonds $ 71,109 $ 72,537 $ 81,650 $ 83,601
Mortgages 25,787 26,557 40,432 41,196
------- ------------ -------------- ------------
Total $ 98,896 $ 99,094 $122,082 $ 124,797
------- ------------ -------------- ------------
------- ------------ -------------- ------------
LIABILITIES:
Individual annuities $ 40,479 $ 38,177 $ 70,166 $ 68,830
------- ------------ -------------- ------------
------- ------------ -------------- ------------
</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 Company'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.
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.
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, 1997, 1996 AND 1995
10. STATUTORY INVESTMENT VALUATION RESERVES (CONTINUED):
The table shown below presents changes in the major elements of the AVR and IMR.
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
AVR IMR AVR IMR
------ ------ ------ ------
(IN 000'S) (IN 000'S)
<S> <C> <C> <C> <C>
Balance, beginning of year $1,845 $1,174 $1,546 $1,648
Net realized capital gains (losses), net
of tax 183 231 (439) 230
Amortization of net investment gains - (519) - (704)
Unrealized investment gains 138 - 702 -
Required by formula (820) - 36 -
------ ------ ------ ------
Balance, end of year $1,346 $ 886 $1,845 $1,174
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
11. LIABILITY FOR UNPAID CLAIMS AND CLAIM ADJUSTMENT EXPENSES:
Activity in the liability for unpaid claims and claim adjustment expense is
summarized below (in 000's).
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Balance, January 1 $ 6,129 $ 4,320 $ 2,322
Claims incurred 9,008 5,061 4,789
Claims paid (4,898) (3,252) (2,791)
------- ------- -------
Balance, December 31 $10,239 $ 6,129 $ 4,320
------- ------- -------
------- ------- -------
</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, 1997, the unpaid claim and claim adjustment liability for
these contracts is included in Policy Reserves.
12. FEDERAL INCOME TAXES:
The Company 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 Company 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 Company made cash payments to Sun Life of Canada (U.S.)
of $1,938,000, $2,797,000 and $2,421,000 during 1997, 1996 and 1995,
respectively.
13. LEASE COMMITMENTS:
The Company leases two separate facilities for its annuity operations and group
sales office. Both leases commenced in March 1994.
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, 1997, 1996 AND 1995
13. LEASE COMMITMENTS (CONTINUED):
Future minimum lease commitments are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------------ AMOUNT
------
(IN
000'S)
<S> <C>
1998 $ 354
1999 305
2000 237
2001 237
2002 237
Thereafter 275
------
Total $1,645
------
------
</TABLE>
Rent expense under these and prior leases in 1997, 1996 and 1995 amounted to
$348,000, $336,000 and $336,000, respectively.
14. MANAGEMENT AND SERVICE CONTRACTS:
The Company has agreements with Sun Life (Canada) which provide that Sun Life
(Canada) will furnish to the Company, as requested, personnel as well as certain
investment, actuarial and administrative services on a cost reimbursement basis.
Expenses under these agreements amounted to approximately $1,155,000 in 1997,
$1,866,000 in 1996 and $1,741,000 in 1995.
15. 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 Company has met the minimum risk-based capital requirements at December 31,
1997 and 1996.
16. ACCOUNTING POLICIES AND PRINCIPLES:
The financial statements of the Company 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
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 Company'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 Company 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.
30
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS
SUN LIFE INSURANCE AND ANNUITY COMPANY OF 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 ("the Company") as of December 31, 1997 and 1996, 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, 1997. 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 16 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,
1997 and 1996, and the results of its operations and its cash flow for each of
the three years in the period ended December 31, 1997 on the basis of accounting
described in Notes 1 and 16.
However, because of the effects of the matter discussed in the second preceding
paragraph, in our opinion, the statutory 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, 1997 and 1996 or the results of its operations or
its cash flow for each of the three years in the period ended December 31, 1997.
As management has stated in Note 16, 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, Accounting and Reporting by Mutual Life
Insurance Enterprises and by Insurance Enterprises for Certain Long-Duration
Participating Contracts, 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
February 5, 1998
31
<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
32
<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
33
<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 EXAMPLES
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).
34
<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.
35
<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
36
<PAGE>
SUN LIFE INSURANCE AND ANNUITY
COMPANY OF
NEW YORK
Annuity Service Mailing Address:
80 Broad Street
New York, New York 10004
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 5/98
<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, 1997;
2. Statement of Operations, Year Ended December 31, 1997;
3. Statements of Changes in Net Assets, Years Ended December 31, 1997
and 1996;
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, 1997 and 1996;
2. Statutory Statements of Operations, Years Ended December 31, 1997,
1996 and 1995;
3. Statutory Statements of Changes in Capital Stock and Surplus, Years
Ended December 31, 1997, 1996 and 1995;
4. Statutory Statements of Cash Flow, Years Ended December 31, 1997,
1996 and 1995;
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;*
(2) Not applicable;
(3) (a) Marketing Coordination Agreement between the Depositor,
MFS Fund Distributors, Inc. and Clarendon Insurance Agency, Inc.;*
(b)(i) Specimen Sales Operations and General Agent Agreement;*
(b)(ii) Specimen Broker-Dealer Supervisory and Service Agent
Agreement;*
(b)(iii) Specimen Broker-Dealer Supervisory and Service Agent
Agreement;*
(4) Form of Flexible Payment Deferred Combination Variable and Fixed
Annuity Contract;**
(5) Form of Application used with the variable annuity contract filed as
Exhibit (4);**
(6) Declaration of Intent and Charter and the By-Laws of the
Depositor;*
(7) Not Applicable;
(8) Not Applicable;
(9) Previously filed;
<PAGE>
(10) Consent of Deloitte & Touche**;
(11) None;
(12) Not Applicable;
(13) Schedule for Computation of Performance Quotations**;
(14) Not applicable;
(15) Powers of Attorney**.
* Filed as an Exhibit to Post-Effective Amendment No. 2 to the Form N-4
Registration Statement of the Registrant, File No. 333-05037.
** 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 Director
56 Pinckney Street
Boston, Massachusetts 02114
John S. Lane Director
150 King Street West
Toronto, Ontario
Canada M5H 1J9
Richard B. Bailey Director
500 Boylston Street
Boston, Massachusetts 02116
M. Colyer Crum Director
104 Westcliff Road
Weston, Massachusetts 02193
John G. Ireland Director
680 Steamboat Road
Greenwich, Connecticut 06830
<PAGE>
Name and Principal Positions and Offices
Business Address with the Depositor
- -------------------- ----------------------
Edward M. Lamont Director
1234 Moores Hill Road
Syosset, New York 11791
Angus A. MacNaughton Director
Metro Tower, Suite 1170
950 Tower Lane
Foster City, California 94404
Fioravante G. Perrotta Director
13 Clarke Lane
Essex, Connecticut 06426
Ralph F. Peters Director
66 Strimples Mill Road
Stockton, New Jersey 08559
Peter R. O'Flinn Director
125 West 55th Street
New York, New York 10019
Frederick B. Whittemore Director
1221 West 55th Street
New York, New York 10020
C. James Prieur Senior Vice President and Director
One Sun Life Executive Park
Wellesley Hills,
Massachusetts 02181
S. Caesar Raboy Senior Vice President and Director
One Sun Life Executive Park
Wellesley Hills,
Massachusetts 02181
Michael A. Cohen Vice President and
80 Broad Street Regional Manager
New York, New York 10004
James M.A. Anderson Vice President, Investments
One Sun Life Executive Park
Wellesley Hills,
Massachusetts 02181
L. Brock Thomson Vice President
One Sun Life Executive Park and Treasurer
Wellesley Hills,
Massachusetts 02181
Robert P. Vrolyk Vice President, Controller
One Sun Life Executive Park and Actuary
Wellesley Hills,
Massachusetts 02181
Margaret Sears Mead Assistant Vice President and
One Sun Life Executive Park Secretary
Wellesley Hills,
Massachusetts 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 an indirect
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. Operations Holdings, Inc.......... 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 of Canada (U.S.) Holdings, Inc. ... Delaware 0%*
Sun Life of Canada (U.S.) Financial
Services Holdings, Inc. .................. Delaware 0%*
Sun Life Assurance Company of Canada
(U.S.).................................... Delaware 0%**
Sun Life Insurance and Annuity Company of
New York ................................. New York 0%****
Sun Life of Canada (U.S.) Distributors, Inc. Delaware 0%****
Sun Benefit Services Company, Inc. ......... Delaware 0%****
Sun Life of Canada (U.S.) SPE 97-1, 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>
- ----------
* 100% of the issued and outstanding voting securities of Sun Life of
Canada (U.S.) Holdings, Inc. and Sun Life of Canada (U.S.) Financial
Services Holdings, Inc. is owned by Sun Life Assurance Company of
Canada -- U.S. Operations Holdings, Inc.
** 100% of the issued and outstanding voting securities of Sun Life
Assurance Company of Canada (U.S.) is owned by Sun Life of Canada
(U.S.) Holdings, Inc.
*** 93.6% of the issued and outstanding voting securities of
Massachusetts Financial Services Company is owned by Sun Life of
Canada (U.S.) Financial Services Holdings, Inc.
**** 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 Life of Canada (U.S.) Distributors, Inc., Sun Benefit Services
Company, Inc., Sun Life of Canada (U.S.) SPE 97-1, Inc., Sun Capital
Advisers, Inc., Sun Life Financial Services Limited and Massachusetts
Casualty Insurance Company is 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. is owned by Massachusetts
Financial Services Company.
****** 100% of the issued and outstanding voting securities of MFS/Sun Life
Series Trust is 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, 1998 there were 852 qualified and 210 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 Sun Life Assurance Company of Canada (U.S.), acts as general
distributor for the Registrant, Sun Life of Canada (U.S.) Variable Accounts
C, D, E, F and G, 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
- ----------------- --------------------
Jane M. Mancini President and Director
S. Caesar Raboy Director
C. James Prieur Director
Robert P. Vrolyk Director
L. Brock Thompson Vice President and Treasurer
Roy P. Creedon Secretary
Margaret Sears Mead Assistant Secretary
Donald E. Kaufman Vice President
Cynthia M. Orcutt Vice President
Laurie Lennox Vice President
Peter A. Marion Tax Officer
- --------------------
* The principal business address of all directors and officers of the
principal underwriter except Ms. Mancini and Ms. Lennox is One Sun Life
Executive Park, Wellesley Hills, Massachusetts 02181. The principal
business address of Ms. Mancini and Ms. Lennox is One Copley Place,
Boston, Massachusetts 02116.
(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 Sun Life Assurance
Company of Canada (U.S.) at One Copley Place, Boston Massachusetts 02116 and
One Sun Life Executive Park, Wellesley Hills, Massachusetts 02181, or at the
office of Clarendon Insurance Agency, Inc. at 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 City of Boston and
Commonwealth of Massachusetts on the 21st day of April, 1998.
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/ MARGARET HANKARD
------------------------------
Margaret Hankard
Senior Associate Counsel
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 21, 1998
- ---------------------------
John D. McNeil
- ---------------------------
* By Margaret Hankard pursuant to Power of Attorney filed herewith.
<PAGE>
Signatures Title Date
---------- ----- ----
Vice President,
Controller and
Actuary (Principal
* /s/ ROBERT P. VROLYK Accounting Officer) April 21, 1998
- ------------------------------
Robert P. Vrolyk
President
* /s/ DONALD A. STEWART and Director April 22, 1998
- ------------------------------
Donald A. Stewart
* /s/ RICHARD B. BAILEY Director April 21, 1998
- ------------------------------
Richard B. Bailey
* /s/ JOHN S. LANE Director April 21, 1998
- ------------------------------
John S. Lane
* /s/ DAVID D. HORN Director April 21, 1998
- ------------------------------
David D. Horn
* /s/ JOHN G. IRELAND Director April 21, 1998
- ------------------------------
John G. Ireland
* /s/ EDWARD M. LAMONT Director April 21, 1998
- ------------------------------
Edward M. Lamont
* /s/ FIORAVANTE G. PERROTTA Director April 21, 1998
- ------------------------------
Fioravante G. Perrotta
* /s/ FREDERICK B. WHITTEMORE Director April 21, 1998
- ------------------------------
Frederick B. Whittemore
Director
- ------------------------------
Peter R. O'Flinn
- ------------------------------
* By Margaret Hankard pursuant to Power of Attorney filed herewith.
<PAGE>
Signatures Title Date
---------- ----- ----
* /s/ RALPH F. PETERS Director April 21, 1998
- ------------------------------
Ralph F. Peters
* /s/ ANGUS A. MacNAUGHTON Director April 21, 1998
- ------------------------------
Angus A. MacNaughton
* /s/ M. COLYER CRUM Director April 21, 1998
- ------------------------------
M. Colyer Crum
* /s/ S. CAESAR RABOY Director April 21, 1998
- ------------------------------
S. Caesar Raboy
* /s/ C. JAMES PRIEUR Director April 21, 1998
- ------------------------------
C. James Prieur
- ------------------------------
* By Margaret Hankard pursuant to Power of Attorney filed herewith.
<PAGE>
Sun Life (N.Y.) Sun Life Insurance and Annuity Company of New York
Home Office: Annuity Service Mailing Address:
80 Broad Street, 25th Floor 80 Broad Street, 25th Floor
New York, New York 10004-2209 New York, New York 10004-2209
Sun Life Insurance and Annuity Company of New York (the "Company") will
pay an annuity to the Annuitant if then living, commencing on the Annuity
Commencement Date, by applying the adjusted value of the Accumulation Account of
the Contract in accordance with the Settlement Provisions. If the Annuitant dies
while the Contract is in effect and before the Annuity Commencement Date, the
Company will pay a death benefit to the Beneficiary upon receipt of due proof of
death of the Annuitant. Under certain circumstances, if the Owner dies prior to
the Annuitant and before the Annuity Commencement Date, a distribution is
required by law.
All payments will be made to the persons and in the manner set forth in
this Contract. Provisions and endorsements printed or written by the Company on
the following pages form part of the Contract.
Signed by the Company at its Home Office, New York, New York on the
Issue Date.
/s/ Donald A. Stewart /s/ Margaret Sears Mead
Donald A. Stewart Margaret Sears Mead
President Secretary
Flexible Payment Deferred Combination Variable and Fixed Annuity Contract
Sun Life (N.Y.) Variable Account B
Nonparticipating
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT WHEN BASED ON THE INVESTMENT
EXPERIENCE OF A VARIABLE ACCOUNT ARE VARIABLE AND ARE NOT GUARANTEED AS TO
DOLLAR AMOUNT.
USE OF CONTRACT. This contract is available for personal retirement plans some
of which may qualify for special tax treatment under Internal Revenue Code
Sections 401, 403, or 408.
RIGHT TO RETURN CONTRACT. Please read this Contract. If not satisfied with it,
the Owner may, within 10 days after its receipt, return it by delivering or
mailing it to the Annuity Service Mailing Address indicated above. Immediately
upon receipt of the Contract by the Company, the Contract will be deemed void as
though it had never been applied for, and the value of the Contract's
Accumulation Account at the end of the Valuation Period during which the
Contract is delivered or mailed to the Annuity Service Mailing Address indicated
above will be refunded to the Owner.
The smallest annual rate of investment return which would have to be earned on
the assets of the Variable Account so that the dollar amount of variable annuity
payments will not decrease is 4.0%. Explicit charges against the assets of the
Variable Account are a mortality risk charge and an expense risk charge which
are assessed at an effective annual rate of 0.80% and 0.45%, respectively, and
deducted from the Variable Account at the end of each Valuation Period. In
addition, during the first seven (7) Contract Years, a distribution expense
charge will be deducted from the Variable Account at the end of each Valuation
Period at an effective annual rate of 0.15%.
IMPORTANT NOTICE
It is not necessary to employ any person to collect any payment or benefit
provided by this Contract. When you require help or advice, write directly to
the Company at its Annuity Service Mailing Address. This Contract contains many
benefits. In your own best interest you should consult the Company if anyone
advises you to surrender this Contract or to replace it with a new contract.
NYVA87-MFS(REV)
<PAGE>
TABLE OF CONTENTS
Page
Specifications Page
- --------------------------------------------------------------------------------
Application
- --------------------------------------------------------------------------------
Definitions 5
- --------------------------------------------------------------------------------
Fixed and Variable Accounts 6
Fixed Account 6
Variable Account and Sub-Accounts 6
Ownership of Assets 7
Investments of the Sub-Accounts 7
Substitution 7
- --------------------------------------------------------------------------------
Purchase Payments 8
Payments 8
Amount 8
Contract Continuation 8
Net Purchase Payments and Their Allocation 8
- --------------------------------------------------------------------------------
Contract Values During Accumulation Period 8
Accumulation Account 8
Crediting Variable Accumulation Units 8
Variable Accumulation Unit Value 9
Variable Accumulation Value 9
Net Investment Factor 9
Crediting Fixed Accumulation Units 10
Fixed Accumulation Unit Value 10
Fixed Accumulation Value 10
Transfer Privilege (Conversion of Accumulation Units) 11
Contract Maintenance Charge 11
- --------------------------------------------------------------------------------
Cash Withdrawals and Withdrawal Charges 11
Cash Withdrawals 11
Withdrawal Charges 12
- --------------------------------------------------------------------------------
Death Benefit 13
Death Benefit Provided by the Contract 13
Election and Effective Date of Election 13
Payment of Death Benefit 14
Amount of Death Benefit 14
- --------------------------------------------------------------------------------
Settlement Provisions 15
General 15
Election and Effective Date of Election 15
Determination of Amount 15
Effect of Annuity Commencement Date on Accumulation Account 15
Annuity Commencement Date 16
Fixed Annuity Payments 16
Variable Annuity Payments 16
Annuity Unit Value 16
Exchange of Variable Annuity Units 17
Contract Maintenance Charge 17
Description of Annuity Options 17
Amounts Payable on Death of Payee 18
Annuity Payment Rates 18
2
<PAGE>
TABLE OF CONTENTS--(Continued)
Page
Ownership Provisions 20
Owner 20
Change of Ownership 20
Death of Owner 20
Voting of Series Fund Shares 21
Periodic Reports 21
- --------------------------------------------------------------------------------
Beneficiary Provision 22
Designation and Change of Beneficiary 22
- --------------------------------------------------------------------------------
General Provisions 22
Age and Sex Misstatement 22
Contract 22
Currency 22
Determination of Values 22
Governing Law 22
Guarantees 23
Incontestability 23
Modification 23
Nonparticipating 23
Payments and Values 23
Payments by the Company 23
Proof of Age 23
Proof of Survival 23
Splitting Units 23
- --------------------------------------------------------------------------------
Qualfied Plan Provisions
3
<PAGE>
DEFINITIONS
ACCUMULATION ACCOUNT: An account established for the Contract to which Net
Purchase Payments are credited in the form of Accumulation Units.
ACCUMULATION PERIOD: The period before the Annuity Commencement Date and
during the lifetime of the Annuitant.
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 Application 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 survivor of the persons so named. By
example, the death benefit of the Contract will become due only upon the death,
prior to the Annuity Commencement Date, of the last survivor of the persons so
named. Collectively, these persons are referred to in this Contract as
"Annuitants." Each Annuitant is as specified in the Application, unless changed.
ANNUITY COMMENCEMENT DATE: The date on which the first annuity payment is to
be made. It is the date specified in the Application, unless changed.
ANNUITY OPTION: The method for making annuity payments. The Annuity Option is
specified in the Application, unless changed.
ANNUITY UNIT: A unit of measure used in the calculation of the amount of the
second and each subsequent variable annuity payment from the Variable Account.
BENEFICIARY: The person who has the right to the death benefit set forth in
the Contract. The Beneficiary is specified in the Application, unless changed.
CONTRACT YEARS AND CONTRACT ANNIVERSARIES: The first Contract Year shall be the
period of twelve (12) months plus a part of a month as measured from the Issue
Date to the first day of the calendar month which follows the calendar month of
issue. All Contract Years and Anniversaries thereafter shall be twelve (12)
month periods based upon such first day of the calendar month which follows the
calendar month of issue. If, by example, the Issue Date of this Contract is in
March, the first Contract Year will be determined from the Issue Date but will
end on the last day of March in the following year; all other Contract Years and
all Contract Anniversaries will be measured from April 1.
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 a separate account of the Company.
FIXED ANNUITY: An annuity with payments which do not vary as to dollar amount.
INITIAL ANNUAL INTEREST RATE PERCENTAGE: The annual rate of increase, during
the first Contract Year, of Fixed Accumulation Unit Values.
ISSUE DATE: The date on which the Contract becomes effective.
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. Such Contract must be owned by a
natural person or by a trust or other entity as agent for a natural person in
order for the Contract to receive favorable income tax treatment as an Annuity.
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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. The Owner
is specified in the Application, unless changed.
PAYEE: The recipient of annuity payments under the Contract. The term includes
an Annuitant or a Beneficiary who becomes entitled to benefits upon the death
of the Annuitant.
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 Internal Revenue Code.
SERIES FUND: MFS/Sun Life Series Trust.
SEVEN YEAR ANNIVERSARY: The seventh (7th) Contract Anniversary and each
succeeding Contract Anniversary occurring at any seven (7) year interval
thereafter, for example, the fourteenth (14), twenty-first (21st) and
twenty-eighth (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.
SUCCESSOR BENEFICIARY: The person or persons named to become the Beneficiary
if the Beneficiary is not alive. The Successor Beneficiary is specified in the
Application, unless changed.
VALUATION PERIOD: The period of time from one determination of Accumulation Unit
and Annuity Unit values to the next subsequent determination of these values.
Such determination shall be made as of the close of the New York Stock Exchange
on each day the Exchange is open for trading and on such other days on which
there is a sufficient degree of trading in the portfolio securities of the
Variable Account so that the values of the Variable Accumulation Units and
Annuity Units might be materially affected.
VARIABLE ACCOUNT: A separate account of the Company described in this Contract
consisting of assets set aside by the Company, the investment performance of
which is kept separate from that of the general assets of the Company.
VARIABLE ANNUITY: An annuity with payments which vary as to dollar amounts in
relation to the investment performance of specified Sub-Accounts of the
Variable Account.
FIXED AND VARIABLE ACCOUNTS
Fixed Account
The Fixed Account consists of all assets of the Company other than those
allocated to any separate account of the Company.
Variable Account and Sub Accounts
The Variable Account to which the variable accumulation values and
variable annuity payments, if any, under this Contract relate is entitled "Sun
Life (N.Y.) Variable Account B". It was established on December 3, 1984 pursuant
to a resolution of its Board of Directors and is registered as a unit investment
trust under the Investment Company Act of 1940. That portion of the assets of
the Variable Account equal to the reserves and other contract liabilities shall
not be chargeable with liabilities arising out of any other business the Company
may conduct.
The assets of the Variable Account are divided into Sub-Accounts. Each
Sub-Account invests exclusively in shares of a designated mutual fund portfolio
of the Series Fund. The values of the Variable Accumulation units and the
Annuity Units described in this Contract reflect the investment performance of
the Sub-Accounts.
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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. 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 in this and other contracts providing benefits
which vary in accordance with the investment performance of the Sub-Accounts to
reflect the change and take such other action as may be necessary and
appropriate to effect the change.
Ownership of Assets
The Company shall have exclusive and absolute ownership and control of its
assets, including all assets of the Sub-Accounts.
Investments of the Sub-Accounts
All amounts allocated to a Sub-Account will be used to purchase Series
Fund shares as specified on the Application or as subsequently changed, at the
net asset value next computed following receipt by the Company of the Purchase
Payment to which the particular amount allocated is attributable. The Series
Fund shares available on the Issue Date are shown on the Contract Specifications
Page; more series may be subsequently added to the Series Fund. The Series Fund
is an open-end investment company or "mutual fund" registered under the
Investment Company Act of 1940. Any and all distributions made by the Series
Fund with respect to the Series Fund shares held by a Sub-Account will be
reinvested to purchase additional shares of the Series Fund at net asset value.
Deductions from the Sub-Accounts will, in effect, be made by redeeming a number
of Series Fund shares at net asset value equal in total value to the amount to
be deducted. The Sub-Accounts will be fully invested in Series Fund shares at
all times.
Substitution
Shares of the series corresponding to a particular portfolio of securities
held by the Series Fund may not always be available for purchase by the
Sub-Accounts 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.
In either event, shares of another registered open-end investment company may be
substituted both for Series Fund shares already purchased by the Sub-Account
and/or as the security to be purchased in the future, provided that any such
substitution has 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 in this and other contracts providing benefits which vary in
accordance with the investment performance of the Sub-Accounts to reflect the
substitution.
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PURCHASE PAYMENTS
Payments
All Purchase Payments are to be paid to the Company at its Annuity Service
Mailing Address. Unless the Owner has surrendered the Contract, Purchase
Payments may be made at any time during the life of the Annuitant and before the
Annuity Commencement Date.
Amount
The Initial Purchase Payment is shown on the Contract Specifications Page.
Subsequent Payments may vary. Each Purchase Payment must be at least $25. The
Company will not accept Purchase Payments which, on an annualized basis, are
less than $300 for the first Contract Year. In addition, the prior approval of
the Company is required before the Company will accept a Purchase Payment which
would cause the value of the Accumulation Account to exceed $1,000,000; if the
value of an Accumulation Account exceeds $1,000,000, no additional Purchase
Payments will be accepted without the prior approval of the Company.
Contract Continuation
The Contract shall automatically be continued in full force during the
lifetime of the Annuitant until the Annuity Commencement Date or until it is
surrendered. The Contract will not be in default, even if no additional Purchase
Payments are made.
Net Purchase Payments and Their Allocation
The Net Purchase Payment is that portion of a Purchase Payment which
remains after deduction of any applicable premium or similar tax. Each Net
Purchase Payment will be allocated, upon receipt by the Company at its Annuity
Service Mailing Address, either to Sub-Accounts or to the Fixed Account or to
both Sub-Accounts and the Fixed Account in accordance with the allocation
factors specified in the Application or as subsequently changed.
The allocation factors for Net Purchase Payments between the Fixed Account
and the Variable Account and among the Sub-Acounts of the Variable Account may
be changed by the Owner at any time by giving written notice of the change to
the Company at its Annuity Service Mailing Address. Any change will take effect
with the first Purchase Payment received with or after the receipt of the notice
of the change by the Company and will continue in effect until subsequently
changed.
CONTRACT VALUES DURING ACCUMULATION PERIOD
Accumulation Account
The Company will establish an Accumulation Account for this Contract and
will maintain the Accumulation Account during the Accumulation Period. The
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.
Crediting Variable Accumulation Units
Upon receipt of a Purchase Payment by the Company at its Annuity Service
Mailing Address, all or that portion, if any, of the Net Purchase Payment which
is allocated to Sub-
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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 by the Company at its Annuity Service Mailing Address.
Variable Accumulation Unit Value
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 the value determined as of the end of the particular
Valuation Period and may increase, decrease or remain constant from Valuation
Period to Valuation Period.
Variable Accumulation Value
The Variable Accumulation Value of the Contract, if any, for any Valuation
Period is equal to the sum of the Variable Accumulation Values of each
Sub-Account credited to the Accumulation Account for such Valuation Period. The
Variable Accumulation Value of each Sub-Account is determined by multiplying the
number of Variable Accumulation Units, if any, credited to each Sub-Account by
the Variable Accumulation Unit Value of the particular Sub-Account for such
Valuation Period.
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;
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 any distribution expense risk.
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The risk charge factor for any Valuation Period is equal to the daily risk
charge factor multiplied by the number of 24 hour periods in the Valuation
Period. The daily risk charge factor will be determined by the Company annually,
but in no event may it exceed the Maximum Daily Risk Charge Factor specified on
the Contract Specifications Page.
Crediting Fixed Accumulation Units
Upon receipt of a Purchase Payment by the Company at its Annuity Service
Mailing Address, all or that portion, if any, of the Net Purchase Payment which
is allocated to the Fixed Account 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 at
its Annuity Service Mailing Address.
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 Issue Date occurs, and will
increase for each successive Valuation Period as interest is accrued. All
contracts whose Issue Dates occur in the same calendar month and which are
issued 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 their first Contract Year.
At the first Contract Anniversary, the Fixed Accumulation Units credited
to the 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 rate at which interest accrues to the Fixed Accumulation Value of the
Contract will be determined by the Company, at its discretion, before the
beginning of each Contract Year; however, this rate will not be less than 3% per
annum compounded annually. Once set, the rate applicable to the Contract may not
be changed by the Company 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 period.
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 forty-five (45) day
period after the Contract Anniversary the Owner may elect to receive the Fixed
Accumulation Value of the Contract without assessment of a withdrawal charge by
filing a written request with the Company at its Annuity Service Mailing
Address.
Fixed Accumulation Value
The Fixed Accumulation Value of the 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. The Fixed Accumulation Value is
determined by multiplying the number of Fixed Accumulation Units, if any,
credited to the Accumulation Account by the Fixed Accumulation Unit Value for
such Valuation Period.
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Transfer Privilege (Conversion of Accumulation Units)
During the Accumulation Period the Owner may, upon written request
received by the Company at its Annuity Service Mailing Address, convert the
value of a designated number of Fixed Accumulation Units then credited to the
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 then credited to the Accumulation Account into other
Variable Accumulation Units and/or Fixed Accumulation Units having an equal
aggregate value. These conversions shall, however, be subject to the following
conditions: (1) conversions involving Fixed Accumulation Units may be made only
during the forty-five (45) day period before and the forty-five (45) day period
after each Contract Anniversary; (2) not more than twelve (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 conversions shall
be subject to such terms and conditions as may be imposed by the Series Fund.
Any conversion shall be made using the Accumulation Unit Values for the
Valuation Period during which the request for conversion is received by the
Company at its Annuity Service Mailing Address.
Contract Maintenance Charge
Prior to the Annuity Commencement Date, at the end of each Contract Year,
the Company will deduct from the value of the Accumulation Account a contract
maintenance charge of $30 to reimburse it for administrative expenses relating
to the Contract, the Fixed Account, the Variable Account and the Sub-Accounts.
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 on the
Contract Anniversary. If the Contract is surrendered for the full value of the
Accumulation Account on other than the Contract Anniversary, the contract
maintenance charge will be deducted in full at the time of such surrender. In no
event will the portion of the contract maintenance charge that is deducted from
the Fixed Account cause the value of a Contract's Fixed Accumulation Account
(adjusted for any cash withdrawals) to increase by less than three percent (3%)
per annum.
CASH WITHDRAWALS AND WITHDRAWAL CHARGES
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 by filing with the Company a written election in such form as the
Company may require. Any such election shall specify the amount of the cash
withdrawal payment and will be effective on the date that it is received by the
Company at its Annuity Service Mailing Address.
The amount of the cash withdrawal payment may be equal to the total value
of the Accumulation Account at the end of the Valuation Period during which the
election becomes effective less the contract maintenance charge and any
withdrawal charge which applies (a "full surrender"), or it may be for a lesser
amount (a "partial withdrawal"). If a partial with-
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drawal 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.
The cash withdrawal payment 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 in the same proportion that the total value of Fixed
Accumulation Units and Variable Accumulation units of the particular
Sub-Accounts then credited to the Accumulation Account bear to the value of the
Accumulation Account at the end of the Valuation Period during which the
election becomes effective. Any cash withdrawal payment generally will be paid
within seven (7) days from the date the election becomes effective, except as
the Company may be permitted to defer any such payment in accordance with the
Investment Company Act of 1940. The Company reserves the right to defer the
payment of amounts withdrawn from the Fixed Account for a period not to exceed
six (6) months from the date written request for such withdrawal is received by
the Company at its Annuity Service Mailing Address.
Withdrawal Charges
If a cash withdrawal payment is made, a withdrawal charge may be assessed
by the Company. The amount of any withdrawal charge is determined as follows:
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.
Order of liquidation: For purposes of 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.
Maximum withdrawal amount without a withdrawal charge: 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.
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Amount subject to withdrawal charge: On a particular partial withdrawal or
full surrender, the amount subject to a withdrawal charge will be the excess, if
any, of (a) amounts liquidated from old and new Payments as specified in the
"order of liquidation" section above) over (b) the remaining maximum withdrawal
amount without a withdrawal charge at the time of the partial withdrawal or
surrender.
Withdrawal charge percentage: 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 the Accumulation Account and the
Contract Year in which it is withdrawn.
Amount of withdrawal charge: The amount of the withdrawal charge is
determined by multiplying the amount subject to the withdrawal charge by the
withdrawal charge percentage(s) according to the following table.
<TABLE>
<CAPTION>
Number of Complete Withdrawal Charge
Contract Years Percentage
-------------- ----------
<S> <C>
0 6%
1 6
2 5
3 5
4 4
5 4
6 3
7 or more 0
</TABLE>
DEATH BENEFIT
Death Benefit Provided by the Contract
If the Annuitant dies while this Contract is in effect and before the
Annuity Commencement Date, the Company, upon receipt of due proof of death of
the Annuitant, will pay a death benefit to the Beneficiary in accordance with
this "Death Benefit" provision. If there is no designated Beneficiary living on
the date of death of the Annuitant, the Company will pay the death benefit upon
receipt of due proof of the death of both the Annuitant and the designated
Beneficiary in one sum to the Owner, or, if the Annuitant was the Owner, to the
estate of the Owner/Annuitant. 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 form of annuity elected.
Election and Effective Date of Election
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 of the Annuity Options in accordance with
the Settlement Provisions 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. This election may be made or subsequently revoked by filing with
the Company a written election or revocation of an election in such form as
the Company may require. Any written election or revocation of an election of
a method of settlement of the death benefit by the Owner will become
effective on the date it is received by the Company at its Annuity Service
Mailing Address.
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, in which event
the Accumulation Account will be cancelled, or (b) to have the value of the
Accumulation Account applied under one or more
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of the Annuity Options in accordance with the Settlement Provisions to effect,
on the Annuity Commencement Date determined in the section "Payment of Death
Benefit" below, a Variable Annuity or a Fixed Annuity or a combination of both
for the Beneficiary as Payee. This election may be made by filing with the
Company a written election in such form as the Company may require. Any written
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 at its Annuity Service Mailing Address; or (b) the date due proof of the
death of the Annuitant is received by the Company at its Annuity Service Mailing
Address. If a written election by the Beneficiary is not received by the Company
within sixty (60) days following the date due proof of the death of the
Annuitant is received by the Company at its Annuity Service Mailing Address, the
Beneficiary shall be deemed to have elected a cash payment as of the last day of
the sixty (60) day period.
Payment of Death Benefit
If the death benefit is to be paid in cash to the Beneficiary, payment
will be made within seven (7) days of the date the election becomes effective or
is deemed to become effective, except as the Company may be permitted to defer
any such payment of amounts derived from the Variable Account in accordance with
the Investment Company Act of 1940. If the death benefit is to be paid in one
sum to the Owner, or, if the Annuitant was the Owner, to the estate of the
deceased Owner/Annuitant, payment will be made within seven (7) days of the date
due proof of the death of the Annuitant, the Owner, and/or the designated
Beneficiary, as applicable, is received by the Company at its Annuity Service
Mailing Address. 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. The Owner or Beneficiary, as applicable,
may elect an Annuity Commencement Date later than that specified above, provided
that such date is (a) the first day of a calendar month and (b) not later than
the first day of the first month following the 85th birthday of the Owner or
Beneficiary, as the case may be. If a later Annuity Commencement Date has been
elected and the Owner or Beneficiary dies before this later Annuity Commencement
Date, the Contract's accumulated value will be paid in cash to the estate or
beneficiary, as appropriate, of the individual making the election.
Amount of Death Benefit
The death benefit is equal to the greatest of (a) the Contract's
Accumulation Account value; (b) the sum of all Purchase Payments made under the
Contract less the sum of all cash withdrawal payments; or (c) the Contract's
Accumulation Account value on the Seven Year Anniversary immediately preceding
the date of death of the Annuitant, adjusted for any subsequent Purchase
Payments, cash withdrawal payments and charges assessed between the immediately
preceding Seven Year Anniversary and the date of death of the Annuitant. If (b)
or (c) is operative, the Accumulation Account value will be increased by the
excess of (b) or (c), as applicable, over (a) and the amount of the increase
will be allocated to the Fixed Account and the Sub-Accounts based on the
respective values of the Fixed Account and the Sub-Accounts on the date the
amount of the death benefit is determined.
The Accumulation Unit Values used in determining the amount of the death
benefit under (a) above will be those for the Valuation Period during which due
proof of death of the Annuitant is received by the Company at its Annuity
Service Mailing Address 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
either becomes effective or is deemed effective, or the values for the Valuation
Period during which due proof of the death of both the Annuitant and the
designated Beneficiary is received by the Company at its Annuity Service Mailing
Address if the amount of the death benefit is to be paid in one sum to the
deceased Owner/Annuitant's estate.
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SETTLEMENT PROVISIONS
General
On the Annuity Commencement Date, the adjusted value of the Accumulation
Account as determined in accordance with the "Determination of Amount" provision
will be applied, as specified by the Owner, under one or more of the Annuity
Options provided in the Contract or under such other settlement options as may
be agreed to by the Company.
After the Annuity Commencement Date, no change of Annuity Option is
permitted and no payments may be requested under the Cash Withdrawals and
Withdrawal Charges provisions of the Contract. Exchanges of Variable Annuity
Units are permitted.
Election and Effective Date of Election
During the lifetime of the Annuitant and prior to the Annuity Commencement
Date, the Owner may elect to have the adjusted value of the Accumulation Account
applied on the Annuity Commencement Date under one or more of the Annuity
Options provided in the Contract. The Owner may also change any election but any
election or change of election must be effective at least thirty (30) days prior
to the Annuity Commencement Date. This election or change of election may be
made by filing with the Company a written election or change of election in such
form as the Company may require. Any such election or change of election will
become effective on the date it is received by the Company at its Annuity
Service Mailing Address. If no such election is in effect on the 30th day prior
to the Annuity Commencement Date, the adjusted value of the Accumulation Account
will be applied under Annuity Option B, for a Life Annuity with 120 monthly
payments certain. 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 on the Annuity Commencement Date under Annuity Option C with the
survivor benefit to be fifty percent (50%) of the joint-life annuity payment and
the co-annuitant to be the designated second person.
Any such election may specify the proportion of the adjusted value of the
Accumulation Account to be applied to the Fixed Account and the various
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 various Sub-Accounts will be determined on a pro rata basis from
the composition of the Accumulation Account on the Annuity Commencement Date.
The Annuity Options in the Contract may also be elected by the Owner or
the Beneficiary as provided in the section of the Contract entitled "Death
Benefit".
Determination of Amount
The adjusted value of the Accumulation Account of the Contract to be
applied to provide a Variable Annuity or a Fixed Annuity or a combination of
both, shall be equal to the value of the Accumulation Account for the Valuation
Period which ends immediately preceding the Annuity Commencement Date, minus the
sum of any applicable premium or similar tax 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.
Effect of Annuity Commencement Date on Accumulation Account
On the Annuity Commencement Date the Accumulation Account of this Contract
will be cancelled.
15
<PAGE>
Annuity Commencement Date
The Annuity Commencement date is set forth on the Contract Specifications
Page. This date may be changed from time to time by the Owner provided that each
change is effective at least thirty (30) days prior to the then current Annuity
Commencement Date and the new Annuity Commencement Date is a date which is: (1)
at least thirty (30) days after the effective date of the change; (2) the first
day of a month; and (3) not later than the first day of the first month
following the Annuitant's 85th birthday. Any change of the Annuity Commencement
Date may be made by filing with the Company a written designation of a new
Annuity Commencement Date in such form as the Company may require. Any such
change will become effective on the date the designation is received by the
Company at its Annuity Service Mailing Address.
The Annuity Commencement Date may also be changed by an election of a
settlement option as provided in the section of the Contract entitled "Death
Benefit".
Fixed Annuity Payments
The dollar amount of each fixed annuity payment shall 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.
Variable Annuity Payments
The dollar amount of the first variable annuity payment shall 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 pursuant to the "Exchange of Annuity
Units" section. The dollar amount of each variable annuity payment after the
first may increase, decrease or remain constant, and is 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.
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 Net Investment
Factor 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 this Contract. The factor is 0.99989255 for a
one day Valuation Period.
16
<PAGE>
Exchange of Variable Annuity Units
After the Annuity Commencement Date the Payee may, by filing a written
request with the Company at its Annuity Service Mailing Address, exchange the
value of a designated number of Annuity Units of particular Sub-Accounts then
credited to the Contract into other 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 exchange. No more than twelve (12) exchanges
may be made in any Contract Year.
Exchanges may be made within the Variable Account only. Exchanges shall be
made using the Annuity Unit Values for the Valuation Period during which the
request for exchange is received by the Company at its Annuity Service Mailing
Address.
Contract Maintenance Charge
After the Annuity Commencement Date a contract maintenance charge
amounting to $30 on an annual basis will be deducted pro rata from each annuity
payment made during the year to reimburse the Company for administrative
expenses relating to the Contract, the Fixed Account, the Variable Account and
the Sub-Accounts.
Description of Annuity Options
Annuity Options A, B and C are available on either a fixed annuity or a
variable annuity basis. Annuity Options D and E are available on a fixed annuity
basis only.
Annuity Option A. Life Annuity: Monthly payments during the lifetime of
the Payee.
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
sixty (60), one hundred twenty (120), one hundred eighty (180) or two hundred
forty (240) months certain as 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
payments for any specified period of time (at least five (5) years but not
exceeding thirty (30) years), as elected.
Annuity Option E. Fixed Payments: The amount applied to provide fixed
payments in accordance with this Annuity 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 (5) years) as may be agreed upon with the
Company and will continue until the amount held by the Company with interest
is exhausted. The final payment will be for the balance remaining and may be
less than the amount of each preceding payment. 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 at any time and as
often as may be determined by the Company, provided, however, that the rate
may not be reduced more frequently than once during each calendar year.
17
<PAGE>
Amounts Payable on Death of Payee
In the event of the death of the Annuitant on or after the Annuity
Commencement Date, the Company will pay the Beneficiary any remaining payments
under any Annuity Option then in effect as they become due. If there is no
designated Beneficiary then living, the Company will pay the amount specified in
the Schedule below for any Annuity Option then in effect in one sum to the
deceased Annuitant's estate. Any Beneficiary who becomes entitled to any
remaining payments under any Annuity Option may elect to receive the amount
specified in the Schedule below for such Option in one sum. In the event of the
death of a Beneficiary who has become entitled to receive any remaining payments
under any Annuity Option, the Company will pay the amount specified for such
Option in the Schedule below in one sum to the deceased Beneficiary's estate.
All payments made in one sum by the Company as provided in this paragraph are
made in lieu of paying any remaining payments under any Annuity Option then in
effect.
Option Amount
------ ------
B The discounted value of the remaining payments, if any, for
the certain period.
D The discounted value of the remaining payments, if any, for
the certain period.
E The unpaid balance of the proceeds and interest
In the case of Option B the discounted value will be based, for payments
being made on a variable basis, on interest compounded annually at the assumed
interest rate and on the assumptions that the particular Annuity Unit Values
applicable to the remaining payments will be the particular Annuity Unit Values
for the Valuation Period which ends on the day before the date of the
determination and that this value will remain unchanged thereafter.
In the case of Options B and D for payments being made on a fixed basis,
the discounted value will be based on the interest rate initially used by the
Company to determine the amount of each payment.
Annuity Payment Rates
The Annuity Payment Rates below show, for each $1,000 applied, the dollar
amount of both (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 a minimum guaranteed interest rate of 4% per year.
The mortality table used in determining the Annuity Payment Rates for
Options A, B and C is the 1983 Individual Annuitant Mortality Table A. In using
this mortality table, ages of Annuitants will be reduced by one year for Annuity
Commencement Dates occurring during the 1990's, reduced two years for Annuity
Commencement Dates occurring during the decade 2000-2009, and so on.
The Annuity Payment Rates in the tables shown below reflect rates of
mortality appropriate for Annuity Commencement Dates occurring during the
1980's. Thus, for Annuity Commencement Dates occurring during the 1980's the
term "Adjusted Age", as used in the tables below, means actual age. "Adjusted
Age" shall mean actual age less one year for Annuity Commencement Dates
occurring during the 1990's, actual age less two years for Annuity Commencement
Dates occurring in the decade 2000-2009, and so on.
Adjusted ages will be determined based on the actual age(s) of
Annuitant(s), in completed years and months, as of the Annuity Commencement
Date. The tables below show Annuity Payment Rates for exact Adjusted Ages; rates
for Adjusted Ages expressed in completed years and months will be based on
straight line interpolation between the appropriate Annuity Payment Rates.
18
<PAGE>
The dollar amount of each annuity payment for any Adjusted Age or
combination of Adjusted Ages not shown below or for any other form of Annuity
Option agreed to by the Company will be quoted by the Company on request.
AMOUNT OF FIRST MONTHLY ANNUITY PAYMENT PER $1,000
SINGLE LIFE ANNUITY
<TABLE>
<CAPTION>
OPTION A OPTION B
LIFE ANNUITY LIFE ANNUITY WITH PAYMENTS CERTAIN
60 Payments 120 Payments 180 Payments 240 Payments
Adjusted
Age Male Female Male Female Male Female Male Female Male Female
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20 3.69 3.60 3.69 3.60 3.69 3.59 3.68 3.59 3.68 3.59
25 3.79 3.67 3.79 3.67 3.78 3.67 3.78 3.67 3.77 3.66
30 3.91 3.77 3.91 3.76 3.90 3.76 3.90 3.76 3.88 3.75
35 4.06 3.89 4.06 3.88 4.06 3.88 4.04 3.88 4.02 3.87
40 4.27 4.04 4.26 4.04 4.25 4.03 4.23 4.02 4.20 4.01
45 4.53 4.24 4.52 4.23 4.50 4.23 4.46 4.21 4.40 4.18
50 4.86 4.50 4.85 4.49 4.81 4.47 4.74 4.45 4.65 4.40
55 5.29 4.84 5.26 4.83 5.20 4.80 5.09 4.74 4.94 4.67
60 5.86 5.29 5.82 5.27 5.70 5.22 5.51 5.12 5.24 4.98
65 6.68 5.92 6.60 5.89 6.35 5.77 5.98 5.58 5.54 5.32
70 7.82 6.81 7.64 6.74 7.14 6.50 6.47 6.12 5.77 5.63
75 9.41 8.14 9.00 7.95 8.00 7.40 6.87 6.64 5.91 5.85
80 11.68 10.12 10.72 9.61 8.81 8.38 7.14 7.03 5.98 5.96
85 14.79 13.08 12.64 11.72 9.43 9.21 7.28 7.24 6.00 6.00
</TABLE>
OPTION C
JOINT AND SURVIVOR ANNUITY*
<TABLE>
<CAPTION>
Adjusted Age of Female
Adjusted Age ---------------------------------------------
of Male 55 60 65 70 75
------- -- -- -- -- --
<S> <C> <C> <C> <C> <C>
55 4.76 4.96 5.19 5.46 5.75
60 4.94 5.18 5.46 5.77 6.13
65 5.15 5.43 5.76 6.15 6.59
70 5.38 5.70 6.09 6.57 7.14
75 5.62 5.98 6.45 7.02 7.73
</TABLE>
OPTION D
PAYMENTS FOR A SPECIFIED PERIOD CERTAIN
<TABLE>
<CAPTION>
Years Amount Years Amount Years Amount
<S> <C> <C> <C> <C> <C>
5 18.32 13 8.17 22 5.64
6 15.56 14 7.72 23 5.49
7 13.59 15 7.34 24 5.35
8 12.12 16 7.00 25 5.22
9 10.97 17 6.71 26 5.10
10 10.06 18 6.44 27 5.00
11 9.31 19 6.21 28 4.90
12 8.69 20 6.00 29 4.80
21 5.81 30 4.72
</TABLE>
- ----------
* Table Based on Assumed Election of Joint and Two-Thirds Survivor Annuity.
19
<PAGE>
OWNERSHIP PROVISIONS
Owner
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.
Change of Ownership
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. A change of ownership will not be binding upon the
Company until written notification is received by the Company at its Annuity
Service Mailing Address. When such notification is so received, 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.
Death of Owner
If the Owner of a Non-Qualified Contract dies before the Annuity
Commencement Date, the death benefit must be either (1) distributed within five
(5) years after the date of death of the Owner, or (2) distributed over some
period not greater than the life or expected life of the "designated
beneficiary" as defined below, with annuity payments beginning within one (1)
year after the date of death of the Owner. The amount of death benefit will be
determined in accordance with the Amount of Death Benefit provision on page 14.
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. In all cases, no Owner or Beneficiary
shall be entitled to exercise any rights prohibited by applicable federal income
tax law. These mandatory distribution requirements will not apply where the
Beneficiary is the spouse of the Owner; rather, in such a case the Contract may
be continued in the name of the spouse as Owner. 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.
20
<PAGE>
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 at least one day prior to each such meeting 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 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 receiving or entitled to receive variable annuity payments is the person
having such voting rights.
Neither the Variable Account nor the Company is under any duty to inquire
as to the instructions received or the authority of Owners or others to instruct
the voting of Series Fund shares. Except as the Variable Account or the Company
has actual knowledge to the contrary, the instructions given by Owners and
Payees will be valid as they affect the Variable Account, the Company and any
others having voting instruction rights with respect to the Variable Account.
All Series Fund proxy material, together with an appropriate form to be
used to give voting instructions, will be provided to each Owner and each Payee
having the right to give voting instructions at least ten (10) days prior to
each meeting of the shareholders of the Series Fund. 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 not more than ninety (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 by the Owner is determined by dividing the value of all of the
Variable Accumulation Units of the particular Sub-Account credited to the
Accumulation Account of the Contract 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 by the net asset value of one particular
Series Fund share as of the same date.
Periodic Reports
The Company will send the Owner, or other such person having voting
rights, at least once during each Contract Year, a statement showing the number,
type and value of the Accumulation Units credited to the Contract and the cash
withdrawal value of the Contract, which statement shall be accurate as of a date
not more than two (2) months previous to the date of mailing. In addition, every
person having voting rights will receive such reports or prospectuses concerning
the Variable Account and the Series Fund as may be required by the Investment
Company Act of 1940 and the Securities Act of 1933. The Company will also send
such statements reflecting transactions in the Accumulation Account as may be
required by applicable laws, rules and regulations.
21
<PAGE>
BENEFICIARY PROVISION
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
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 at the Annuity Service
Mailing Address. 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, but the change or revocation 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 or revocation.
GENERAL PROVISIONS
Age and Sex Misstatement
If any date of birth or sex, or both, has been mis-stated, the amounts
payable pursuant to the Contract will be the amounts which would have been
provided using the correct age or sex, or both. Any deficiency in the payments
already made by the Company, plus interest at 4% per annum, shall be paid
immediately and any excess in the payments already made by the Company, plus
interest at 4% per annum, shall be charged against the benefits falling due
after adjustment.
Contract
The Contract is issued in consideration of the Application and payment of
the first Purchase Payment. The Contract and the Application, a copy of which is
attached, constitute the entire Contract. All statements made in the Application
will be deemed representations and not warranties, and no statement will void
the Contract or be used in defense to a claim under the Contract unless it is
contained in the Application and a copy of the Application is attached at issue.
Only the President, a Vice President, the Actuary or the Secretary of the
Company has authority to agree on behalf of the Company to any alteration of the
Contract or to any waiver of the rights or requirements of the Company.
Currency
All amounts due under the Contract are payable in United States Dollars,
lawful money of the United States of America.
Determination of Values
The method of determination by the Company of the Net Investment Factor
and the number and value of Accumulation Units and Annuity Units shall be
conclusive upon the Owner, any Payee and any Beneficiary.
Governing Law
This contract will be governed by the laws of the jurisdiction in which
this contract is delivered. This contract's values are not less than the minimum
required by any statute of the state in which this contract is delivered.
22
<PAGE>
Guarantees
Subject to the Net Investment Factor provision, the Company guarantees
that the dollar amount of Variable Annuity payments made during the lifetime of
the Payee(s) will not be adversely affected by the actual mortality experience
of the Company or by the actual expenses incurred by the Company in excess of
the expense deductions provided for in this and other Contracts providing
benefits which vary in accordance with the investment performance of the
Sub-Accounts.
Incontestability
This Contract is incontestable.
Modification
Upon notice to the Owner or the Payee(s) the Contract may be modified by
the Company, but only if such modification (i) is necessary to make the Contract
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 Accounts or the Sub-Accounts or (iv)
provides additional Variable Account and/or fixed accumulations options. In the
event of any such modification, the Company may make appropriate endorsement in
this Contract to reflect such modification.
Nonparticipating
The Contract is nonparticipating and will not share in any surplus
earnings of the Company.
Payments and Values
All payments and values that may be available under this Contract are not
less than the minimum benefits required by the laws of the State of New York.
Payments by the Company
All sums payable by the Company pursuant to the Contract are payable only
at its Home Office or such other place as may be designated by the Company. The
Company may require surrender of the Contract upon final payment of all sums
payable by the Company pursuant to the Contract.
Proof of Age
The Company shall have the right to require evidence of the age of any
Payee under Annuity Options A, B and C prior to the Annuity Commencement Date.
Proof of Survival
The Company shall have the right to require evidence of the survival of
any Payee under Annuity Options A, B and C at the time any payment payable to
such Payee is due.
Splitting Units
The Company reserves the right to split or combine the value of the
Variable Accumulation Units, the Fixed Accumulation Units, the 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 this Contract.
23
<PAGE>
Sun Life (N.Y.) Sun Life Insurance and Annuity Company of New York
Home Office:
80 Broad Street, 25th Floor
New York, New York 10004-2209
Annuity Service Mailing Address:
80 Broad Street, 25th Floor
New York, New York 10004-2209
Flexible Payment Deferred Combination Variable and Fixed Annuity Contract
Sun Life (N.Y.) Variable Account B
Nonparticipating
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE VARIABLE ACCOUNT ARE VARIABLE AND ARE NOT GUARANTEED AS TO
DOLLAR AMOUNT
NYVA87-MFS (REV)
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
80 Broad Street, 25th Floor, New York, NY 10004-2209
[LOGO] Sunlife (N.Y.)
Please make checks payable to Sun Life Insurance and Annuity Company of New
York. Send the Application and check to either your Broker/Dealer home office or
Sun Life Insurance and Annuity Company of New York, 80 Broad Street, 25th Floor,
New York, NY 10004-2209
VARIABLE ANNUITY APPLICATION
- --------------------------------------------------------------------------------
1. Owner_______________________________________________________________________
FIRST MIDDLE LAST
- --------------------------------------------------------------------------------
2. Address_____________________________________________________________________
STREET
_____________________________________________________________________
CITY STATE ZIP
- --------------------------------------------------------------------------------
3. Owner's Soc. Sec. No. |_|_|_|_|_|_|_|_|_|
- --------------------------------------------------------------------------------
4. Owner's Sex: |_| M |_| F 5. Date of Birth |_|_| Mo. |_|_| Day |_|_| Year
- --------------------------------------------------------------------------------
6. Annuitant
|_| same as Owner, or: _____________________________________________________
FIRST MIDDLE LAST
- --------------------------------------------------------------------------------
7. Annuitant's Address__________________________________________________________
STREET
__________________________________________________________
CITY STATE ZIP
- --------------------------------------------------------------------------------
8. Annuitant's Soc. Sec. No. |_|_|_|_|_|_|_|_|_|
- --------------------------------------------------------------------------------
9. Annuitant's Sex: |_| M |_| F
- --------------------------------------------------------------------------------
10. Date of Birth |_|_| Mo. |_|_| Day |_|_| Year
- --------------------------------------------------------------------------------
11. Co-Annuitant _______________________________________________________________
FIRST MIDDLE LAST
12. Date of Birth ________________
MONTH/DAY/YEAR
- --------------------------------------------------------------------------------
13. Co-Annuitant's Address______________________________________________________
STREET
______________________________________________________
CITY STATE ZIP
Co-Annuitant's Soc. Sec. No. |_|_|_|_|_|_|_|_|_|
- --------------------------------------------------------------------------------
14. Beneficiary ________________________________________________________________
FIRST MIDDLE LAST
__________________________
RELATIONSHIP TO ANNUITANT
- --------------------------------------------------------------------------------
15. IRS TAX QUALIFIED PLAN SELECTION
|_| 401(k) |_| Self-Employed |_| 403(b)
|_| Corporate |_| SEP/IRA |_| IRA Rollover
|_| Other _________________________________
_______________________________________
- --------------------------------------------------------------------------------
16. Purchase Payment Allocation (Whole %, must total 100%)
_______% Money Market Series (MMS) 0
_______% High Yield Series (HYS) 1
_______% Capital Appreciation Series (CAS) 2
_______% Fixed Account (SGA) 3
_______% World Governments Series (WGS) 4
_______% Managed Sectors Series (MSS) 5
_______% Total Return Series (TRS) 6
_______% Government Securities Series (GSS) 7
- --------------------------------------------------------------------------------
17. PURCHASE PAYMENTS Initial purchase payments of $_________ is attached
(payments must total at least $300 in the first year). Subsequent payments
<PAGE>
may be $25.00 or more. Please check |_| for information on Bank Draft for
future purchase payments.
- --------------------------------------------------------------------------------
18. Special Instructions (Annuity Options, etc.)
- --------------------------------------------------------------------------------
19. Annuity Commencement Date Year |_|_|_|_| The first day of |_|_| Month
- --------------------------------------------------------------------------------
20. Will this contract replace or change any existing life insurance or annuity
in this or any other company? |_| Yes |_| No If yes, please explain under
Special Instructions and request replacement information from your agent.
I hereby represent my answers to the above questions to be correct and true
to the best of my knowledge and belief and agree that this application shall
be a part of any Contract issued by the Company. ALL PAYMENTS AND VALUES
PROVIDED BY THE CONTRACT WHEN BASED ON THE INVESTMENT EXPERIENCE OF A
VARIABLE ACCOUNT ARE VARIABLE AND NOT GUARANTEED AS TO DOLLAR AMOUNT. I
acknowledge receipt of a current prospectus and MFS/Sun Life Series Trust
Prospectus.
________________________________________________________________________________
PRINT AGENT'S NAME AND PHONE NUMBER DATE
___________________________________ ____________________________________________
AGENT'S SIGNATURE SIGNED AT CITY STATE
___________________________________ ____________________________________________
OWNER'S SIGNATURE ANNUITANT'S/CO-ANNUITANT'S SIGNATURE
(IF DIFFERENT THAN OWNER)
Agent: Will this contract replace or change any existing life insurance or
annuity in this or any other company? |_| Yes |_| No
If yes, please explain under Special Instructions.
General Agent/Dealer ____________________________________________________
Branch Office Address ___________________________________________________
STREET CITY STATE ZIP
APP-VA96-MF5R
<PAGE>
- --------------------------------------------------------------------------------
ASSET ALLOCATION PROGRAM The owner authorizes automatic exchanges among the
variable sub-accounts until the owner specifically revokes the authorization.
The automatic exchanges are made quarterly based on the recommendations of the
MFS Asset Allocation Committee.
The undersigned hereby authorizes you to effect exchanges among the Compass-3 NY
sub-accounts consistent with the asset allocation recommendation as existing
from time to time, without the requirement of any further authorizations or
instructions. It is understood that authorization shall continue until a
written, signed revocation is received by Sun Life (N.Y.) at its annuity service
mailing address.
_______________________________________
(Owner's Signature)
Note: Sign here ONLY if you are enrolling in the
Asset Allocation Program
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWAL PROGRAM The owner determines who receives the income, the
amount of income, and the frequency: monthly, quarterly, semiannually, or
annually. Withdrawals under this program may be fully or partially includible in
income and may be subject to a 10% federal penalty tax prior to age 59 1/2. All
withdrawals are subject to any applicable qualified retirement plan provisions.
A $10,000 minimum account value is required to begin the Program (This is not
for annuitization; if you wish to annuitize please see Sections 18 and 19 of the
Application).
Frequency: |_| Monthly |_| Quarterly |_| Semiannually |_| Annually
Withdraw: $________ and send to ______ owner; or ______________
designated payee
Check one: |_| Please withhold; federal income tax from each payment
|_| Please do not withhold;
If designated payee, please complete the following:
NAME ________________________________ SS#/TAX ID# (of recipient) _______________
ADDRESS ________________________________________________________________________
CITY __________________________________________ STATE ____________ ZIP _________
- --------------------------------------------------------------------------------
DOLLAR COST AVERAGING PROGRAM The owner invests a minimum of $5,000 in the Money
Market Series sub-account. Every month or quarter a level amount is
automatically transferred, at no cost, into one or more of the other
sub-accounts of the owners choice, up to a maximum of four. The balance in the
Money Market Series sub-account continues earning money market rates. The
program continues until the Money Market Series sub-account balance falls below
the transfer amount or the owner stops the program. (Exchanges into the Fixed
Account are not included).
A $5,000 minimum balance is required to begin the program.
Frequency: |_| Monthly |_| Quarterly
Transfers will be made on the second Wednesday of the month. Please indicate the
sub-account(s) you have selected and the amount to be transferred ($100 minimum)
to each:
Sub-account Transfer amount Sub-account Transfer amount
1 _________ $_____________ 3 _________ $_____________
2 _________ $_____________ 4 _________ $_____________
I have read the explanation of the Dollar Cost Averaging Program and I authorize
Sun Life (N.Y.) to transfer amounts from the Money Market Series sub-account to
the other sub-accounts. I understand that these transfers will continue until
the value of the Money Market Series sub-account falls below the total monthly
or quarterly transfer amount or until I terminate the program.
<PAGE>
Exhibit 10
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 5 to
Registration Statement No. 33-19765 of Sun Life (N.Y.) Variable Account B on
Form N-4 of our report dated February 6, 1998 accompanying the financial
statements of Sun Life (N.Y.) Variable Account B and to the use of our report
dated February 5, 1998 accompanying the statutory financial statements of Sun
Life Insurance and Annuity Company of New York appearing in the Statement of
Additional Information, which is part of such Amendment to the Registration
Statement.
We also consent to the reference to us under the headings "Condensed
Financial Information - Accumulation Unit Values" and "Accountants" in such
Prospectus.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 23, 1998
<PAGE>
Compass 3 N.Y. 97
1-Year SEC thru 12/31/97
<TABLE>
<CAPTION>
accumulated
initial 12/31/97 12/31/96 value ending %
amount unit value unit value fee less fees cdsc value Change
------ ---------- ---------- --- --------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MMS 1000.00 11.4533170 11.0529920 1.87 1034.35 54.00 980.35 -1.97%
HYS 1000.00 14.3002010 12.8082300 2.32 1114.17 54.00 1060.17 6.02%
CAS 1000.00 19.0541470 15.6920040 8.65 1205.61 54.00 1151.61 15.16%
WGS 1000.00 11.0070690 11.2476760 2.11 976.50 54.00 922.50 -7.75%
MSS 1000.00 17.4931190 14.0979660 4.25 1236.58 54.00 1182.58 18.26%
TRS 1000.00 16.2725690 13.5283220 6.98 1195.87 54.00 1141.87 14.19%
GSS 1000.00 12.0343240 11.2211760 2.61 1069.86 54.00 1015.86 1.59%
</TABLE>
Compass 3 N.Y. 5-Year SEC thru 12/31/97
Money Market
<TABLE>
<S> <C> <C> <C> <C>
1000.00 11.4533170 9.9233900 1154.1738 92
1.36 11.4533170 10.0434900 1.5509 93
1.97 11.4533170 10.2716400 2.1966 94
1.90 11.4533170 10.6823064 2.0371 95
1.87 11.4533170 11.052992 1.9377 96
1.87 11.4533170 11.453317 1.8700 97
------
accumulated value less fees: 1144.58
cdsc: 36.00
ending value: 1108.58 2.08%
</TABLE>
High Yield
<TABLE>
<S> <C> <C> <C> <C> <C>
1000.00 14.3002010 8.9622200 1595.6092 -- 12/31/92
2.26 14.3002010 10.4094300 3.1047 -- 12/31/93
2.40 14.3002010 10.0367900 3.4195 -- 12/31/94
2.40 14.3002010 11.5849025 2.9625 -- 12/31/95
2.34 14.3002010 12.8082300 2.6126 -- 12/31/96
2.32 14.3002010 14.3002010 2.3200 -- 12/31/97
------
accumulated value less fees: 1581.19
cdsc: 36.00
ending value: 1545.19 9.09%
</TABLE>
Capital Appreciation
<TABLE>
<S> <C> <C> <C> <C> <C>
1000.00 19.0541470 8.9243200 2135.0811 -- 12/31/92
7.54 19.0541470 10.3890700 13.8288 -- 12/31/93
8.12 19.0541470 9.8770600 15.6645 -- 12/31/94
8.19 19.0541470 13.0981003 11.9142 -- 12/31/95
8.34 19.0541470 15.6920040 10.1269 -- 12/31/96
8.65 19.0541470 19.0541470 8.6500 -- 12/31/97
------
accumulated value less fees: 2074.90
cdsc: 36.00
ending value: 2038.90 15.31%
</TABLE>
World Governments
<TABLE>
<S> <C> <C> <C> <C> <C>
1000.00 11.0070690 8.6427700 1273.5580 -- 12/31/92
3.62 11.0070690 10.1398500 3.9296 -- 12/31/93
2.77 11.0070690 9.5512200 3.1922 -- 12/31/94
2.55 11.0070690 10.8975914 2.5756 -- 12/31/95
2.34 11.0070690 11.2476760 2.2899 -- 12/31/96
2.11 11.0070690 11.0070690 2.1100 -- 12/31/97
------
accumulated value less fees: 1259.46
cdsc: 36.00
ending value: 1223.46 4.12%
</TABLE>
Managed Sectors
<TABLE>
<S> <C> <C> <C> <C> <C>
1000.00 17.4931190 9.5429400 1833.0954 -- 12/31/92
2.56 17.4931190 9.5946000 4.6675 -- 12/31/93
2.89 17.4931190 9.2925300 5.4404 -- 12/31/94
3.35 17.4931190 12.1390756 4.8275 -- 12/31/95
3.89 17.4931190 14.0979660 4.8268 -- 12/31/96
4.25 17.4931190 17.4931190 4.2500 -- 12/31/97
------
accumulated value less fees: 1809.08
cdsc: 36.00
ending value: 1773.08 12.14%
</TABLE>
Total Return
<TABLE>
<S> <C> <C> <C> <C> <C>
1000.00 16.2725690 8.9260200 1823.0487 -- 12/31/92
8.74 16.2725690 9.9794300 14.2515 -- 12/31/93
7.31 16.2725690 9.6190300 12.3664 -- 12/31/94
7.07 16.2725690 12.0269759 9.5658 -- 12/31/95
7.03 16.2725690 13.5283220 8.4560 -- 12/31/96
6.98 16.2725690 16.2725690 6.9800 -- 12/31/97
------
accumulated value less fees: 1771.43
cdsc: 36.00
ending value: 1735.43 11.66%
</TABLE>
Government Securities
<TABLE>
<S> <C> <C> <C> <C> <C>
1000.00 12.0343240 9.3323300 1289.5305 -- 12/31/92
3.47 12.0343240 10.0022400 4.1750 -- 12/31/93
3.40 12.0343240 9.6514100 4.2395 -- 12/31/94
3.21 12.0343240 11.1979956 3.4497 -- 12/31/95
2.91 12.0343240 11.2211760 3.1209 -- 12/31/96
2.61 12.0343240 12.0343240 2.6100 -- 12/31/97
------
accumulated value less fees: 1271.94
cdsc: 36.00
ending value: 1235.94 4.33%
</TABLE>
<PAGE>
Compass 3 N.Y. Life SEC returns through 2/31/97
Money Market 12/31/87
<TABLE>
<S> <C> <C> <C> <C>
1000.00 11.4533170 7.7314400 1481.3951 12/31/87
4.43 11.4533170 8.1689800 6.2111 12/31/88
4.64 11.4533170 8.7742900 6.0567 12/31/89
4.75 11.4533170 9.3322100 5.8296 12/31/90
4.69 11.4533170 9.7373800 5.5165 12/31/91
4.45 11.4533170 9.9233900 5.1361 12/31/92
1.36 11.4533170 10.0434900 1.5509 12/31/93
1.97 11.4533170 10.2716400 2.1966 12/31/94
1.90 11.4533170 10.6823064 2.0371 12/31/95
1.87 11.4533170 11.0529920 1.9377 12/31/96
1.87 11.4533170 11.4533170 1.8700 12/31/97
------
Yrs: cumulated value less fees: 1443.05
10 cdsc % cdsc: 0.00
10 0% Ending value: 1443.05 3.74%
</TABLE>
High Yield 12/31/87
<TABLE>
<S> <C> <C> <C> <C>
1000.00 14.3002010 5.8097600 2461.4099 12/31/87
7.89 14.3002010 6.5835200 17.1380 12/31/88
7.21 14.3002010 6.4317200 16.0306 12/31/89
6.71 14.3002010 5.4315900 17.6660 12/31/90
5.73 14.3002010 7.9054300 10.3650 12/31/91
4.84 14.3002010 8.9622200 7.7227 12/31/92
2.26 14.3002010 10.4094300 3.1047 12/31/93
2.40 14.3002010 10.0367900 3.4195 12/31/94
2.40 14.3002010 11.5849025 2.9625 12/31/95
2.34 14.3002010 12.8082300 2.6126 12/31/96
2.32 14.3002010 14.3002010 2.3200 12/31/97
------
Yrs: cumulated value less fees: 2378.07
10 cdsc % cdsc: 0.00
10 0% Ending value: 2378.07 9.05%
</TABLE>
Capital Appreciation 12/31/87
<TABLE>
<S> <C> <C> <C> <C>
1000.00 19.0541470 4.1957900 4541.2537 12/31/87
8.38 19.0541470 4.4318900 36.0284 12/31/88
7.90 19.0541470 6.4333900 23.3979 12/31/89
7.24 19.0541470 5.7307900 24.0721 12/31/90
6.85 19.0541470 7.9637200 16.3894 12/31/91
6.51 19.0641470 8.9243200 13.8994 12/31/92
7.54 19.0541470 10.3890700 13.8288 12/31/93
8.12 19.0541470 9.8770600 15.6645 12/31/94
8.19 19.0541470 13.0981003 11.9142 12/31/95
8.34 19.0541470 15.6920040 10.1269 12/31/96
8.65 19.0541470 19.0541470 8.6500 12/31/97
------
Yrs: cumulated value less fees: 4367.28
10 cdsc % cdsc: 0.00
10 0% Ending value: 4367.28 15.88%
</TABLE>
World Governments 5/16/88
<TABLE>
<S> <C> <C> <C> <C>
1000.00 11.0070690 6.1439000 1791.5443 5/16/88
0.23 11.0070690 6.3537200 0.3984 5/31/89
0.40 11.0070690 6.8797800 0.6400 5/31/90
0.73 11.0070690 7.5518700 1.0640 5/31/91
1.18 11.0070690 8.6248100 1.5059 5/31/92
3.62 11.0070690 9.2595300 4.3032 5/31/93
2.77 11.0070690 9.1967992 3.3152 5/31/94
2.55 11.0070690 10.6268770 2.6412 5/31/95
2.34 11.0070690 10.7172250 2.4033 5/31/96
2.11 11.0070690 10.9075580 2.1292 5/31/97
2.11 11.0070690 11.0070690 2.1100 12/31/97
------
Yrs: cumulated value less fees: 1771.03
9.6328767 cdsc % cdsc: 0.00
10 0% Ending value: 1771.03 6.11%
</TABLE>
Managed Sectors 5/27/88
<TABLE>
<S> <C> <C> <C> <C>
1000.00 17.4931190 4.3235400 4046.0176 5/27/88
0.17 17.4931190 5.7985400 0.5129 5/31/89
0.46 17.4931190 6.4178900 1.2538 5/31/90
0.84 17.4931190 7.0740600 2.0772 5/31/91
1.30 17.4931190 8.2389100 2.7602 5/31/92
2.56 17.4931190 9.2056600 4.8647 5/31/93
2.89 17.4931190 9.2434971 5.4693 5/31/94
3.35 17.4931190 10.9353448 5.3589 5/31/95
3.89 17.4931190 13.5283720 5.0300 5/31/96
4.25 17.4931190 15.6888580 4.7388 5/31/97
4.25 17.4931190 17.4931190 4.2500 12/31/97
------
Yrs: cumulated value less fees: 4009.70
9.6027397 cdsc % cdsc: 0.00
10 0% Ending value: 4009.70 15.56%
</TABLE>
Total Return 5/16/88
<TABLE>
<S> <C> <C> <C> <C>
1000.00 16.2725690 5.6508500 2879.6675 5/16/88
1.01 16.2725690 6.4831100 2.5351 5/31/89
2.03 16.2725690 6.9748200 4.7361 5/31/90
3.01 16.2725690 7.7019800 6.3595 5/31/91
3.94 16.2725690 8.4994100 7.5433 5/31/92
8.74 16.2725690 9.5715200 14.8589 5/31/93
7.31 16.2725690 9.7039037 12.2582 5/31/94
7.07 16.2725690 10.8209092 10.6319 5/31/95
7.03 16.2725690 12.4479370 9.1900 5/31/96
6.98 16.2725690 14.6669430 7.7441 5/31/97
6.98 16.2725690 16.2725690 6.9800 12/31/97
------
Yrs: cumulated value less fees: 2796.83
9.6328767 cdsc % cdsc: 0.00
10 0% Ending value: 2796.83 11.27%
</TABLE>
Government Securities 12/31/87
<TABLE>
<S> <C> <C> <C> <C>
1000.00 12.0343240 6.1185400 1966.8620 12/31/87
8.57 12.0343240 6.4924400 15.8853 12/31/88
7.99 12.0343240 7.2251700 13.3082 12/31/89
7.24 12.0343240 7.7573100 11.2318 12/31/90
6.71 12.0343240 8.8607900 9.1132 12/31/91
6.24 12.0343240 9.3323300 8.0467 12/31/92
3.47 12.0343240 10.0022400 4.1750 12/31/93
3.40 12.0343240 9.6514100 4.2395 12/31/94
3.21 12.0343240 11.1979956 3.4497 12/31/95
2.91 12.0343240 11.2211760 3.1209 12/31/96
2.61 12.0343240 12.0343240 2.6100 12/31/97
------
Yrs: cumulated value less fees: 1891.68
10 cdsc % cdsc: 0.00
10 0% Ending value: 1891.68 6.58%
</TABLE>
<PAGE>
Compass 3 New York
COMPASS 3 NEW YORK 12/31/97
NON-STANDARDIZED RESULTS
High Yield Series
<TABLE>
<S> <C> <C> <C> <C>
12/31/96 - 12/31/97 10000 x (14.3002010/12.8082300) = 11164.85
12/31/95 - 12/31/97 10000 x (14.3002010/11.5849025) = 12343.83
12/31/94 - 12/31/97 10000 x (14.3002010/10.0367852) = 14247.79
12/31/93 - 12/31/97 10000 x (14.3002010/10.4094320) = 13737.73
12/31/92 - 12/31/97 10000 x (14.3002010/8.9622200) = 15956.09
12/31/87 - 12/31/97 10000 x (14.3002010/5.8097600) = 24614.10
8/13/85 - 12/31/97 10000 x (14.3002010/5.1497500) = 27768.73
12/31/96 - 12/31/97 1.116485 1 -1 = 11.65%
12/31/95 - 12/31/97 1.234383 1/2 -1 = 11.10%
12/31/94 - 12/31/97 1.424779 1/3 -1 = 12.53%
12/31/93 - 12/31/97 1.373773 1/4 -1 = 8.26%
12/31/92 - 12/31/97 1.595609 1/5 -1 = 9.80%
12/31/87 - 12/31/97 2.461410 1/10 -1 = 9.43%
8/13/85 - 12/31/97 2.776873 1/12.391781 -1 = 8.59%
</TABLE>
Capital Appreciation Series
<TABLE>
<S> <C> <C> <C> <C>
12/31/96 - 12/31/97 10000 x (19.0541470/15.6920040) = 12142.58
12/31/95 - 12/31/97 10000 x (19.0541470/13.0981003) = 14547.26
12/31/94 - 12/31/97 10000 x (19.0541470/9.8770583) = 19291.32
12/31/93 - 12/31/97 10000 x (19.0541470/10.3890742) = 18340.56
12/31/92 - 12/31/97 10000 x (19.0541470/8.9243200) = 21350.81
12/31/87 - 12/31/97 10000 x (19.0541470/4.1957900) = 45412.54
8/13/85 - 12/31/97 10000 x (19.0541470/3.4727500) = 54867.60
12/31/96 - 12/31/97 1.214258 1 -1 = 21.43%
12/31/95 - 12/31/97 1.454726 1/2 -1 = 20.61%
12/31/94 - 12/31/97 1.929132 1/3 -1 = 24.49%
12/31/93 - 12/31/97 1.834056 1/4 -1 = 16.37%
12/31/92 - 12/31/97 2.135081 1/5 -1 = 16.38%
12/31/87 - 12/31/97 4.541254 1/10 -1 = 16.34%
8/13/85 - 12/31/97 5.486760 1/12.391781 -1 = 14.73%
</TABLE>
Government Securities Series
<TABLE>
<S> <C> <C> <C> <C>
12/31/96 - 12/31/97 10000 x (12.0343240/11.2211760) = 10724.65
12/31/95 - 12/31/97 10000 x (12.0343240/11.1979956) = 10746.86
12/31/94 - 12/31/97 10000 x (12.0343240/9.6514085) = 12468.98
12/31/93 - 12/31/97 10000 x (12.0343240/10.0022382) = 12031.63
12/31/92 - 12/31/97 10000 x (12.0343240/9.3323300) = 12895.30
12/31/87 - 12/31/97 10000 x (12.0343240/6.1185400) = 19668.62
8/12/85 - 12/31/97 10000 x (12.0343240/5.2533200) = 22908.04
12/31/96 - 12/31/97 1.072465 1 -1 = 7.25%
12/31/95 - 12/31/97 1.074686 1/2 -1 = 3.67%
12/31/94 - 12/31/97 1.246898 1/3 -1 = 7.63%
12/31/93 - 12/31/97 1.203163 1/4 -1 = 4.73%
12/31/92 - 12/31/97 1.289530 1/5 -1 = 5.22%
12/31/87 - 12/31/97 1.966862 1/10 -1 = 7.00%
8/12/85 - 12/31/97 2.290804 1/12.394521 -1 = 6.92%
</TABLE>
<PAGE>
Compass 3 New York
World Governments Series
<TABLE>
<S> <C> <C> <C> <C>
12/31/96 - 12/31/97 10000 x (11.0070690/11.2476760) = 9786.08
12/31/95 - 12/31/97 10000 x (11.0070690/10.8975914) = 10100.46
12/31/94 - 12/31/97 10000 x (11.0070690/9.5512201) = 11524.25
12/31/93 - 12/31/97 10000 x (11.0070690/10.1398466) = 10855.26
12/31/92 - 12/31/97 10000 x (11.0070690/8.6427700) = 12735.58
12/31/87 - 12/31/97
5/16/88 - 12/31/97 10000 x (11.0070690 /6.1439000) = 17915.44
12/31/96 - 12/31/97 0.978608 1 -1 = -2.14%
12/31/95 - 12/31/97 1.010046 1/2 -1 = 0.50%
12/31/94 - 12/31/97 1.152425 1/3 -1 = 4.84%
12/31/93 - 12/31/97 1.085526 1/4 -1 = 2.07%
12/31/92 - 12/31/97 1.273558 1/5 -1 = 4.96%
12/31/87 - 12/31/97
5/16/88 - 12/31/97 1.791544 1/9.632877 -1 = 6.24%
</TABLE>
Managed Sectors Series
<TABLE>
<S> <C> <C> <C> <C>
12/31/96 - 12/31/97 10000 x (17.4931190/14.0979660) = 12408.26
12/31/95 - 12/31/97 10000 x (17.4931190/12.1390756) = 14410.59
12/31/94 - 12/31/97 10000 x (17.4931190/9.2925320) = 18824.92
12/31/93 - 12/31/97 10000 x (17.4931190/9.5945950) = 18232.26
12/31/92 - 12/31/97 10000 x (17.4931190/9.5429400) = 18330.95
12/31/87 - 12/31/97
5/27/88 - 12/31/97 10000 x (17.4931190/4.3235400) = 40460.18
12/31/96 - 12/31/97 1.240826 1 -1 = 24.08%
12/31/95 - 12/31/97 1.441059 1/2 -1 = 20.04%
12/31/94 - 12/31/97 1.882492 1/3 -1 = 23.47%
12/31/93 - 12/31/97 1.823226 1/4 -1 = 16.20%
12/31/92 - 12/31/97 1.833095 1/5 -1 = 12.89%
12/31/87 - 12/31/97
5/27/88 - 12/31/97 4.046018 1/9.602740 -1 = 15.67%
</TABLE>
Total Return Series
<TABLE>
<S> <C> <C> <C> <C>
12/31/96 - 12/31/97 10000 x (16.2725690/13.5283220) = 12028.52
12/31/95 - 12/31/97 10000 x (16.2725690/12.0269759) = 13530.06
12/31/94 - 12/31/97 10000 x (16.2725690/9.6190339) = 16917.05
12/31/93 - 12/31/97 10000 x (16.2725690/9.9794270) = 16306.12
12/31/92 - 12/31/97 10000 x (16.2725690/8.9260200) = 18230.49
12/31/87 - 12/31/97
5/16/88 - 12/31/97 10000 x (16.2725690/5.6508500) = 28796.67
12/31/96 - 12/31/97 1.202852 1 -1 = 20.29%
12/31/95 - 12/31/97 1.353006 1/2 -1 = 16.32%
12/31/94 - 12/31/97 1.691705 1/3 -1 = 19.15%
12/31/93 - 12/31/97 1.630612 1/4 -1 = 13.00%
12/31/92 - 12/31/97 1.823049 1/5 -1 = 12.76%
12/31/87 - 12/31/97
5/16/88 - 12/31/97 2.879667 1/9.632877 -1 = 11.61%
</TABLE>
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Robert P. Vrolyk, whose signature
appears below, constitutes and appoints Margaret E. Hankard, Margaret Sears
Mead and David N. Brown, and each of them, his attorneys-in-fact, each with
the power of substitution, for him in any and all capacities, to sign a
Registration Statement on Form N-4 of Sun Life (N.Y.) Variable Account B
(Reg. No. 33-19765), and any amendments thereto, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact or his substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ Robert P. Vrolyk
---------------------------
Robert P. Vrolyk
March 23, 1998
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Ralph F. Peters, whose signature
appears below, constitutes and appoints Margaret E. Hankard, Margaret Sears
Mead and David N. Brown, and each of them, his attorneys-in-fact, each with
the power of substitution, for him in any and all capacities, to sign a
Registration Statement on Form N-4 of Sun Life (N.Y.) Variable Account B
(Reg. No. 33-19765), and any amendments thereto, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact or his substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ Ralph F. Peters
---------------------------
Ralph F. Peters
March 23, 1998
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Frederick B. Whittemore, whose
signature appears below, constitutes and appoints Margaret E. Hankard,
Margaret Sears Mead and David N. Brown, and each of them, his
attorneys-in-fact, each with the power of substitution, for him in any and
all capacities, to sign a Registration Statement on Form N-4 of Sun Life
(N.Y.) Variable Account B (Reg. No. 33-19765), and any amendments thereto,
and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact or his
substitute or substitutes, may do or cause to be done by virtue hereof.
/s/ Frederick B. Whittemore
----------------------------
Frederick B. Whittemore
March 23, 1998
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Edward M. Lamont, whose signature
appears below, constitutes and appoints Margaret E. Hankard, Margaret Sears
Mead and David N. Brown, and each of them, his attorneys-in-fact, each with
the power of substitution, for him in any and all capacities, to sign a
Registration Statement on Form N-4 of Sun Life (N.Y.) Variable Account B
(Reg. No. 33-19765), and any amendments thereto, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact or his substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ Edward M. Lamont
---------------------------
Edward M. Lamont
March 23, 1998
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that John G. Ireland, whose signature
appears below, constitutes and appoints Margaret E. Hankard, Margaret Sears
Mead and David N. Brown, and each of them, his attorneys-in-fact, each with
the power of substitution, for him in any and all capacities, to sign a
Registration Statement on Form N-4 of Sun Life (N.Y.) Variable Account B
(Reg. No. 33-19765), and any amendments thereto, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact or his substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ John G. Ireland
---------------------------
John G. Ireland
March 23, 1998
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that John D. McNeil, whose signature
appears below, constitutes and appoints Margaret E. Hankard, Margaret Sears
Mead and David N. Brown, and each of them, his attorneys-in-fact, each with
the power of substitution, for him in any and all capacities, to sign a
Registration Statement on Form N-4 of Sun Life (N.Y.) Variable Account B
(Reg. No. 33-19765), and any amendments thereto, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact or his substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ John D. McNeil
---------------------------
John D. McNeil
March 23, 1998
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that John S. Lane, whose signature
appears below, constitutes and appoints Margaret E. Hankard, Margaret Sears
Mead and David N. Brown, and each of them, his attorneys-in-fact, each with
the power of substitution, for him in any and all capacities, to sign a
Registration Statement on Form N-4 of Sun Life (N.Y.) Variable Account B
(Reg. No. 33-19765), and any amendments thereto, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact or his substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ John S. Lane
---------------------------
John S. Lane
March 23, 1998
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Fioravante G. Perrotta, whose
signature appears below, constitutes and appoints Margaret E. Hankard,
Margaret Sears Mead and David N. Brown, and each of them, his
attorneys-in-fact, each with the power of substitution, for him in any and
all capacities, to sign a Registration Statement on Form N-4 of Sun Life
(N.Y.) Variable Account B (Reg. No. 33-19765), and any amendments thereto,
and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact or his
substitute or substitutes, may do or cause to be done by virtue hereof.
/s/ Fioravante G. Perrotta
---------------------------
Fioravante G. Perrotta
March 23, 1998
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Donald A. Stewart, whose signature
appears below, constitutes and appoints Margaret E. Hankard, Margaret Sears
Mead and David N. Brown, and each of them, his attorneys-in-fact, each with
the power of substitution, for him in any and all capacities, to sign a
Registration Statement on Form N-4 of Sun Life (N.Y.) Variable Account B
(Reg. No. 33-19765), and any amendments thereto, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact or his substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ Donald A. Stewart
---------------------------
Donald A. Stewart
March 23, 1998
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Angus A. MacNaughton, whose
signature appears below, constitutes and appoints Margaret E. Hankard,
Margaret Sears Mead and David N. Brown, and each of them, his
attorneys-in-fact, each with the power of substitution, for him in any and
all capacities, to sign a Registration Statement on Form N-4 of Sun Life
(N.Y.) Variable Account B (Reg. No. 33-19765), and any amendments thereto,
and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact or his
substitute or substitutes, may do or cause to be done by virtue hereof.
/s/ Angus A. MacNaughton
---------------------------
Angus A. MacNaughton
March 23, 1998
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that S. Caesar Raboy, whose signature
appears below, constitutes and appoints Margaret E. Hankard, Margaret Sears
Mead and David N. Brown, and each of them, his attorneys-in-fact, each with
the power of substitution, for him in any and all capacities, to sign a
Registration Statement on Form N-4 of Sun Life (N.Y.) Variable Account B
(Reg. No. 33-19765), and any amendments thereto, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact or his substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ S. Caesar Raboy
---------------------------
S. Caesar Raboy
March 23, 1998
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that M. Colyer Crum, whose signature
appears below, constitutes and appoints Margaret E. Hankard, Margaret Sears
Mead and David N. Brown, and each of them, his attorneys-in-fact, each with
the power of substitution, for him in any and all capacities, to sign a
Registration Statement on Form N-4 of Sun Life (N.Y.) Variable Account B
(Reg. No. 33-19765), and any amendments thereto, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact or his substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ M. Colyer Crum
---------------------------
M. Colyer Crum
March 23, 1998
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that David D. Horn, whose signature
appears below, constitutes and appoints Margaret E. Hankard, Margaret Sears
Mead and David N. Brown, and each of them, his attorneys-in-fact, each with
the power of substitution, for him in any and all capacities, to sign a
Registration Statement on Form N-4 of Sun Life (N.Y.) Variable Account B
(Reg. No. 33-19765), and any amendments thereto, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact or his substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ David D. Horn
---------------------------
David D. Horn
March 23, 1998
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that C. James Prieur, whose signature
appears below, constitutes and appoints Margaret E. Hankard, Margaret Sears
Mead and David N. Brown, and each of them, his attorneys-in-fact, each with
the power of substitution, for him in any and all capacities, to sign a
Registration Statement on Form N-4 of Sun Life (N.Y.) Variable Account B
(Reg. No. 33-19765), and any amendments thereto, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact or his substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ C. James Prieur
---------------------------
C. James Prieur
March 23, 1998
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Richard B. Bailey, whose signature
appears below, constitutes and appoints Margaret E. Hankard, Margaret Sears
Mead and David N. Brown, and each of them, his attorneys-in-fact, each with
the power of substitution, for him in any and all capacities, to sign a
Registration Statement on Form N-4 of Sun Life (N.Y.) Variable Account B
(Reg. No. 33-19765), and any amendments thereto, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact or his substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ Richard B. Bailey
---------------------------
Richard B. Bailey
March 23, 1998
