<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
Attached hereto and made a part hereof is the Prospectus dated May 1, 2000.
<PAGE>
Rule 497(c)
File No. 2-95003
811-04183
PROSPECTUS
MAY 1, 2000
COMPASS 2
Sun Life Insurance and Annuity Company of New York ("we" or the "Company")
and Sun Life of New York (N.Y.) Variable Account B (the "Variable Account")
offer the individual flexible payment deferred annuity contracts described in
this Prospectus (the "Contracts").
You may choose among 7 variable investment options and a fixed account
option. The variable options are Sub-Accounts in the Variable Account, each of
which invests in shares of one of the following series of the MFS/Sun Life
Series Trust (the "Series Fund"), a mutual fund advised by our affiliate
Massachusetts Financial Services Company:
<TABLE>
<S> <C>
Money Market Series Global Governments Series
High Yield Series Total Return Series
Capital Appreciation Series Managed Sectors Series
Government Securities Series
</TABLE>
The fixed account option pays interest at a guaranteed fixed rate.
THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE SERIES
FUND. PLEASE READ THIS PROSPECTUS AND THE SERIES FUND PROSPECTUS CAREFULLY
BEFORE INVESTING AND KEEP THEM FOR FUTURE REFERENCE. THEY CONTAIN IMPORTANT
INFORMATION ABOUT THE CONTRACTS AND THE SERIES FUND.
We have filed a Statement of Additional Information dated May 1, 2000 (the
"SAI"), which is incorporated by reference in this Prospectus, with the
Securities and Exchange Commission (the "SEC"). The table of contents for the
SAI is on page 23 of this Prospectus. You may obtain a copy without charge by
writing to us at the address shown below (which we sometimes refer to as our
"Service Address") or by telephoning (800) 447-7569. In addition, the SEC
maintains a website (http://www.sec.gov) that contains the SAI, materials
incorporated by reference, and other information regarding companies that file
with the SEC.
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.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
ANY REFERENCE IN THIS PROSPECTUS TO RECEIPT BY US MEANS RECEIPT AT THE
FOLLOWING ADDRESS:
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
P.O. BOX 9141
BOSTON, MASSACHUSETTS 02117
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Definitions 2
Synopsis 3
Expense Summary 5
Condensed Financial Information--Accumulation Unit Values 7
Performance Data 8
Financial Statements 8
A Word About the Company, the Variable Account and the
Series Fund 8
Purchase Payments and Contract Values During Accumulation
Phase 10
Withdrawals 11
Death Benefit 13
Contract Charges 14
Annuity Provisions 16
Other Contract Provisions 18
Tax Considerations 20
Distribution of the Contracts 22
Legal Proceedings 23
Owner Inquiries 23
Table of Contents for Statement of Additional Information 23
</TABLE>
DEFINITIONS
The Contract is a legal document that uses a number of specially defined
terms. We explain some of the terms that we use in this Prospectus in the
context where they arise, and others are self-explanatory. In addition, for
convenient reference, we have compiled a list of terms used in this Prospectus,
which appears below. If you come across a term that you do not understand,
please refer to this list of definitions for an explanation.
The terms "we" and "the Company" will be used to refer to Sun Life Insurance
and Annuity Company of New York. We will use the term "you" to refer to the
Owner of the Contract. Readers of this Prospectus should note that unless they
are the Owner of the Contract, their ability to exercise any rights belonging to
the Owner will depend on their agreement with the Owner.
Accumulation Account: An account we establish for the Contract to which we
credit net Purchase Payments in the form of Accumulation Units.
Accumulation Phase: The period before the Annuity Commencement Date and during
the lifetime of the Annuitant. The Accumulation Phase will also terminate when
you surrender your Contract.
Accumulation Unit: A unit of measure we use to calculate 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.
Annuity Commencement Date: The date on which we are to make the first annuity
payment.
Annuity Unit: A unit of measure we use to calculate 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.
Company: Sun Life Insurance and Annuity Company of New York (also referred to
in this Prospectus as "we").
Contract Years and Contract Anniversaries: The first Contract Year is the
period of 12 months plus a part of a month as measured from the date we issue
the Contract to the first day of the calendar
2
<PAGE>
month that follows the calendar month of issue. All Contract Years and Contract
Anniversaries thereafter are 12 month periods based upon the first day of the
calendar month that 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 us.
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 that do not vary as to dollar amount.
Non-Qualified Contract: A Contract used in connection with a retirement plan
that does not receive favorable federal income tax treatment under Sections 401,
403 or 408 of the Internal Revenue Code of 1986, as amended (the "Code"). The
Contract must be owned by a natural person or by a trust or other entity as
agent for a natural person for the Contract to receive favorable income tax
treatment as an annuity.
Owner: The person, persons or entity entitled to the ownership rights stated in
the Contract and in whose name or names the Contract is issued. In this
Prospectus, we refer to the Owner as "you".
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 you, or someone on your behalf, pay to us
as consideration for the benefits provided by the Contract.
Qualified Contract: A Contract used in connection with a retirement plan that
receives favorable federal income tax treatment under Sections 401, 403 or 408
of the Code.
Series Fund: MFS/Sun Life Series Trust.
Sub-Account: That portion of the Variable Account that invests in shares of a
particular 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 that vary as to dollar amount in
relation to the investment performance of specified Sub-Accounts of the Variable
Account.
We: Sun Life Insurance and Annuity Company of New York.
You: The Owner of the Contract.
SYNOPSIS
You may allocate Purchase Payments to Sub-Accounts of the Variable Account
or to the Fixed Account or to both. 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 10). During the Accumulation Phase you may, without
charge, transfer amounts among the Sub-Accounts and between the Sub-Accounts and
the Fixed Account, subject to certain conditions (see "Transfers" on page 11).
We do not deduct a sales charge from Purchase Payments; however, if you make
a cash withdrawal, we will, with certain exceptions, deduct a withdrawal charge
of 5% of the amount withdrawn. You may withdraw a portion of your Accumulation
Account each year before we impose the withdrawal charge, and after we have held
a Purchase Payment for 5 years you may withdraw it without charge. We do not
impose a withdrawal charge upon annuitization or upon the transfers described
above (see "Withdrawals" and "Withdrawal Charges" on pages 11 and 14,
respectively).
3
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Special restrictions on withdrawals apply to Qualified Contracts, including
Contracts used with Tax-Sheltered Annuities established pursuant to Section
403(b) of the Internal Revenue Code. In addition, under certain circumstances,
withdrawals may result in tax penalties (see "Tax Considerations" on page 20).
If the Annuitant dies before the Annuity Commencement Date, we will pay a
death benefit to your Beneficiary. If the Annuitant dies on or after the Annuity
Commencement Date, we will not pay a death benefit (unless the annuity option
elected provides for a death benefit) (see "Death Benefit" on page 13).
On each Contract Anniversary and on surrender of the Contract for full
value, we will deduct a contract maintenance charge of $30. After the Annuity
Commencement Date, we deduct this pro rata from each annuity payment we make
during the year (see "Contract Maintenance Charge" on page 14).
We also deduct a mortality and expense risk charge equal to an annual rate
of 1.30% of the daily net assets of the Variable Account attributable to the
Contracts (see "Mortality and Expense Risk Charge " on page 14).
We will deduct a charge for premium taxes payable to any governmental entity
(see "Premium Taxes" on page 15).
Annuity payments will begin on the Annuity Commencement Date. You select the
Annuity Commencement Date, frequency of payments, and the annuity option (see
"Annuity Provisions" on page 16).
If you are not satisfied with the Contract, you may return it to us at our
Service Address within 10 days after we deliver the Contract to you. When we
receive the returned Contract, we will cancel it and refund to you the full
amount of all Purchase Payments made.
4
<PAGE>
EXPENSE SUMMARY
The purpose of the following table and Examples is to help you understand
the costs and expenses that you will bear, directly and indirectly, under a
Contract. 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 prospectus. In addition to
the expenses listed below, premium taxes may be applicable if you are a resident
of a state other than New York.
<TABLE>
<CAPTION>
MONEY HIGH CAPITAL GOVERNMENT GLOBAL 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 Contract Years Payment in
Accumulation Account
0-5......................................... 5% 5% 5% 5% 5% 5% 5%
Thereafter.................................. 0% 0% 0% 0% 0% 0% 0%
Exchange Fee.................................... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
ANNUAL CONTRACT MAINTENANCE CHARGE
---------------$30 per Contract ---------------
SEPARATE ACCOUNT ANNUAL EXPENSES
- ------------------------------------------------
(as a percentage of average Separate Account assets)
Mortality and Expense Risk Fees................. 1.30% 1.30% 1.30% 1.30% 1.30% 1.30% 1.30%
Other Account Fees and Expenses................. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Total Separate Account Annual Expenses.......... 1.30% 1.30% 1.30% 1.30% 1.30% 1.30% 1.30%
SERIES FUND ANNUAL EXPENSES
(as a percentage of Series Fund average net
assets)(2)
Management Fees................................. 0.50% 0.75% 0.71% 0.55% 0.75% 0.65% 0.73%
Other Expenses(3)............................... 0.07% 0.08% 0.05% 0.06% 0.15% 0.04% 0.06%
Total Series Fund Annual Expenses............... 0.57% 0.83% 0.76% 0.61% 0.90% 0.69% 0.79%
</TABLE>
- ------------------------
(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 5 years it may be withdrawn free of any
withdrawal charge.
(2) The information relating to Series Fund expenses was provided by the Series
Fund and we have not independently verified it. You should consult the
Series Fund prospectus for more information about Series Fund expenses.
(3) Each series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the Series with
its custodian and dividend disbursing agent, and may enter into such other
arrangements and directed brokerage arrangements (which would also have the
effect of reducing the Series' expenses). Any such fee reductions are not
reflected in the table. If these fees had been taken into account, "Total
Series Fund Annual Expenses" would be 0.75% for the Capital Appreciation
Series.
5
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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 an average
Contract size of $30,000 and a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Series........................................ $ 65 $107 $151 $230
High Yield Series.......................................... $ 67 $114 $163 $254
Capital Appreciation Series................................ $ 67 $113 $161 $249
Global Governments Series.................................. $ 68 $117 $168 $264
Government Securities Series............................... $ 65 $108 $153 $234
Total Return Series........................................ $ 66 $110 $157 $242
Managed Sectors Series..................................... $ 67 $114 $162 $252
</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 an average Contract size of $30,000 and 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 $230
High Yield Series.......................................... $ 22 $ 69 $118 $254
Capital Appreciation Series................................ $ 22 $ 68 $116 $249
Global Governments Series.................................. $ 23 $ 72 $123 $264
Government Securities Series............................... $ 20 $ 63 $108 $234
Total Return Series........................................ $ 21 $ 65 $112 $242
Managed Sectors Series..................................... $ 22 $ 69 $117 $252
</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.
6
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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
auditors.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL APPRECIATION SERIES
Unit Value:
Beginning of Period $19.8292 $17.6811 $24.5945 $27.5884 $32.1362 $30.5824 $40.5956
End of Period $17.6811 $24.5945 $27.5884 $32.1362 $30.5824 $40.5956 $48.6833
Units Outstanding at End of
Period 1,488,508 1,498,930 1,647,257 1,631,966 1,352,145 1,311,905 1,149,253
HIGH YIELD SERIES
Unit Value:
Beginning of Period $12.9242 $10.9543 $15.9592 $18.1105 $21.0484 $20.3148 $23.4173
End of Period $10.9543 $15.9592 $18.1105 $21.0484 $20.3148 $23.4173 $25.9755
Units Outstanding at End of
Period 1,031,781 822,234 799,929 815,313 673,380 570,116 489,793
GOVERNMENT SECURITIES SERIES
Unit Value:
Beginning of Period $14.3889 $15.4639 $17.6811 $18.6404 $20.0002 $19.3176 $23.4352
End of Period $15.4639 $17.6811 $18.6404 $20.0002 $19.3176 $23.4352 $22.5040
Units Outstanding at End of
Period 3,019,599 2,805,551 2,572,771 2,077,587 1,877,778 1,317,288 1,160,869
MONEY MARKET SERIES
Unit Value:
Beginning of Period $12.6230 $13.4389 $14.0362 $14.3185 $14.5062 $14.8503 $15.4592
End of Period $13.4389 $14.0362 $14.3185 $14.5062 $14.8503 $15.4592 $16.0115
Units Outstanding at End of
Period 2,049,178 1,572,794 945,904 822,445 1,074,216 1,084,910 917,551
GLOBAL GOVERNMENTS SERIES
Unit Value:
Beginning of Period $11.2281 $12.5679 $14.2565 $14.1646 $16.6299 $15.6877 $17.9197
End of Period $12.5679 $14.2565 $14.1646 $16.6299 $15.6877 $17.9197 $18.5138
Units Outstanding at End of
Period 203,424 447,204 539,885 572,506 530,682 433,736 358,117
TOTAL RETURN SERIES
Unit Value:
Beginning of Period $12.1807 $12.3512 $14.8323 $15.9052 $17.8114 $17.1937 $21.5225
End of Period $12.3512 $14.8323 $15.9052 $17.8114 $17.1937 $21.5225 $24.2332
Units Outstanding at End of
Period 1,182,806 1,568,328 1,958,326 2,239,181 2,083,366 1,740,564 1,532,369
MANAGED SECTORS SERIES
Unit Value:
Beginning of Period $14.9199 $13.1936 $21.1295 $22.2236 $22.8407 $22.1251 $28.8928
End of Period $13.1936 $21.1295 $22.2236 $22.8407 $22.1251 $28.8928 $33.5381
Units Outstanding at End of
Period 141,628 207,819 343,592 338,757 328,532 331,221 314,243
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
CAPITAL APPRECIATION SERIES
Unit Value:
Beginning of Period $48.6833 $59.1724 $75.1838
End of Period $59.1724 $75.1838 $98.4308
Units Outstanding at End of
Period 1,049,111 881,482 723,461
HIGH YIELD SERIES
Unit Value:
Beginning of Period $25.9755 $29.0298 $28.8320
End of Period $29.0298 $28.8320 $30.4067
Units Outstanding at End of
Period 421,472 327,184 253,467
GOVERNMENT SECURITIES SERIES
Unit Value:
Beginning of Period $22.5040 $24.1586 $25.9309
End of Period $24.1586 $25.9309 $25.1036
Units Outstanding at End of
Period 897,267 737,003 698,455
MONEY MARKET SERIES
Unit Value:
Beginning of Period $16.0115 $16.6078 $17.2190
End of Period $16.6078 $17.2190 $17.7923
Units Outstanding at End of
Period 713,552 745,670 662,084
GLOBAL GOVERNMENTS SERIES
Unit Value:
Beginning of Period $18.5138 $18.1356 $20.6718
End of Period $18.1356 $20.6718 $19.3460
Units Outstanding at End of
Period 256,940 158,924 124,494
TOTAL RETURN SERIES
Unit Value:
Beginning of Period $24.2332 $29.1777 $32.1854
End of Period $29.1777 $32.1854 $32.6681
Units Outstanding at End of
Period 1,345,153 1,076,662 881,186
MANAGED SECTORS SERIES
Unit Value:
Beginning of Period $33.5381 $41.5939 $46.0991
End of Period $41.5939 $46.0991 $84.4636
Units Outstanding at End of
Period 270,624 230,507 198,732
</TABLE>
7
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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, 5- and 10-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. 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 is a stock life insurance
company incorporated under the laws of New York on May 25, 1983. Our Home Office
is located at 122 East 42nd Street, New York, New York 10017.
We are a wholly-owned subsidiary of Sun Life Assurance Company of Canada
(U.S.) ("Sun Life (U.S.)"), a stock life insurance company incorporated in
Delaware. Sun Life (U.S.) is an indirect wholly-owned subsidiary of Sun Life
Assurance Company of Canada ("Sun Life (Canada)"). Sun Life (Canada) completed
its demutualization on March 22, 2000. As a result of the demutualization, a new
holding company, Sun Life Financial Services of Canada Inc. ("Sun Life
Financial"), is now the ultimate parent of Sun Life (Canada) and the Company.
Sun Life Financial, a corporation organized in Canada, is a reporting company
under the Securities Exchange Act of 1934 with common shares listed on the
Toronto, New York, London, and Manila stock exchanges.
THE VARIABLE ACCOUNT
We established the Variable Account 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, we issue other variable annuity contracts
participating in the Variable Account.
8
<PAGE>
THE SERIES FUND
The Series Fund is an open-end management investment company registered
under the Investment Company Act of 1940. Our affiliate Massachusetts Financial
Services Company ("MFS") serves as the investment adviser to the Series Fund.
All amounts allocated to the Variable Account will be used to purchase
shares of the Series Fund at their net asset value as you designate. 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. We will make 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,
in effect, 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.
The Series Fund is composed of 27 independent portfolios of securities, each
of which has separate investment objectives and policies. Shares of the Series
Fund are issued in 27 series, each corresponding to one of the portfolios. The
Contracts provide for investment by the Sub-Accounts in shares of 7 series of
the Series Fund. The investment objectives of each of the 7 available series of
the Series Fund are summarized below.
(1) MONEY MARKET SERIES 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.
(2) HIGH YIELD SERIES will seek high current income and capital appreciation
by investing primarily in certain lower rated or unrated securities (possibly
with equity features) of U.S. and foreign issuers (also known as "junk bonds").
(3) CAPITAL APPRECIATION SERIES will seek to maximize capital appreciation
by investing in securities of all types, with major emphasis on common stocks.
(4) GOVERNMENT SECURITIES SERIES will seek current income and preservation
of capital by investing in U.S. Government and U.S. Government-related
securities.
(5) GLOBAL GOVERNMENTS SERIES will seek to provide moderate current income,
preservation of capital and growth of capital by investing in debt obligations
that are issued or guaranteed as to principal and interest by either (i) the
U.S. Government, its agencies, authorities, or instrumentalities, or (ii) the
governments of foreign countries (to the extent that the series' adviser
believes that the higher yields available from foreign government securities are
sufficient to justify the risks of investing in these securities).
(6) TOTAL RETURN SERIES 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 since many securities offering a
better than average yield may also possess growth potential.
(7) MANAGED SECTORS SERIES will seek capital appreciation by varying the
weighting of its portfolio among 13 industry sectors.
Shares of the Series Fund are available exclusively to separate accounts
established by the Company and Sun Life (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."
More detailed information may be found in the current Series Fund prospectus
and the Series Fund's statement of additional information. A prospectus for the
Series Fund must accompany this Prospectus and you should read it together with
this Prospectus.
THE FIXED ACCOUNT
See Appendix A to the Statement of Additional Information for a description
of the Fixed Account.
9
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PURCHASE PAYMENTS AND CONTRACT VALUES
DURING ACCUMULATION PHASE
PURCHASE PAYMENTS
You must send all Purchase Payments to us at our Service Address. Unless you
have surrendered the Contract, you may make Purchase Payments at any time during
the life of the Annuitant and before the Annuity Commencement Date. Purchase
Payments may be made annually, semi-annually, quarterly, monthly, or on any
other frequency acceptable to us. 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, our approval is
required before we will accept a Purchase Payment if the value of your
Accumulation Account exceeds $1,000,000 or if the Purchase Payment would cause
the value of your Accumulation Account to exceed $1,000,000.
Your completed application forms, together with the initial Purchase
Payment, are forwarded to us. Upon acceptance, we issue the Contract to you and
credit the initial Purchase Payment to the Contract in the form of Accumulation
Units. We will credit the initial Purchase Payment within 2 business days after
we receive your completed application. If your application is incomplete, we may
retain the Purchase Payment for up to 5 business days while we try to complete
the application. If we cannot complete the application within 5 business days,
we will notify you of the reason for the delay and will return the Purchase
Payment immediately, unless you specifically consent to our retaining the
Purchase Payment until we can complete the application. Once the application is
completed, we will credit the Purchase Payment within 2 business days. We will
credit all subsequent Purchase Payments using the Accumulation Unit values for
the Valuation Period during which we receive the Purchase Payment.
We will establish an Accumulation Account for each Contract. Your
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 your Accumulation Account.
We will allocate each net Purchase Payment to either 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 you have specified in the
application or as subsequently changed. When we receive a Purchase Payment, we
will credit all of that portion, if any, of the net Purchase Payment to be
allocated to the Sub-Accounts to the Accumulation Account in the form of
Variable Accumulation Units. The number of Variable Accumulation Units we credit
is determined by dividing the dollar amount allocated to the Sub-Account by the
Variable Accumulation Unit value for that Sub-Account for the Valuation Period
during which we receive the Purchase Payment.
We established the Variable Accumulation Unit value for each Sub-Account at
$10.00 for the first Valuation Period of that Sub-Account. We determine the
Variable Accumulation Unit value for any subsequent Valuation Period as follows:
we multiply the Variable Accumulation Unit value for the immediately preceding
Valuation Period by the appropriate Net Investment Factor for the subsequent
Valuation Period. The Variable Accumulation Unit value for each Sub-Account for
any Valuation Period is determined at the end of the Valuation Period and may
increase, decrease or remain constant from Valuation Period to Valuation Period,
depending on 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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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 we
determine 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 we determine for the Valuation Period to
reflect the charge for assuming the mortality and expense risks.
TRANSFERS
During the Accumulation Phase, you may transfer all or part of the value of
your Accumulation Account to one or more Sub-Accounts then available or to the
Fixed Account, or to any combination of these options. We make these transfers
by converting the value of the Accumulation Units you wish to transfer into
Variable Accumulation Units of Sub-Accounts and/or Fixed Accumulation Units of
the same aggregate value, as you choose. These transfers are subject to the
following conditions:
(1) You may make transfers involving Fixed Accumulation Units only
during the 45 day period before and the 45 day period after each
Contract Anniversary;
(2) You may not make more than 12 transfers in any Contract Year; and
(3) The amount transferred may not be less than $1,000 unless you are
transferring your entire balance in the Fixed Account or a
Sub-Account.
In addition, these transfers will be subject to such terms and conditions as
the Series Fund may impose. We will make these transfers using the Accumulation
Unit values for the Valuation Period during which we receive the request for
transfer. You may request transfers in writing or by telephone. The telephone
transfer privilege is available automatically, and does not require your written
election. We will require personal identifying information to process a request
for transfer made by telephone. We will not be liable for following instructions
communicated by telephone that we reasonably believe are genuine.
WITHDRAWALS
At any time during the Accumulation Phase, you may withdraw in cash all or
any portion of the value of your Accumulation Account. Withdrawals may be
subject to a withdrawal charge (see "Withdrawal Charges"). Withdrawals also may
have adverse federal income tax consequences, including a
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10% penalty tax (see "Tax Considerations"). In addition, if you own a Qualified
Contract you should check the terms of your retirement plan for restrictions on
withdrawals.
Your withdrawal request will be effective on the date we receive it. If you
request a withdrawal of more than $5,000, we may require a signature guarantee.
Your request must specify the amount you wish to withdraw. For a partial
withdrawal, you may specify the amount you want withdrawn from the Fixed Account
and/or each Sub-Account to which your Accumulation Account is allocated. If you
do not so specify, we will deduct the total amount you request pro rata based on
your allocations at the end of the Valuation Period during which we receive your
request.
If you request a full withdrawal, we will pay you the value of your
Accumulation Account at the end of the Valuation Period during which we receive
your request, minus the contract maintenance charge for the current Contract
Year and any applicable withdrawal charge. If you request a partial withdrawal,
we will pay you the amount you request less any applicable withdrawal charge and
reduce the value of your Accumulation Account by deducting the amount requested.
If you request a partial withdrawal that would result in the value of your
Accumulation Account being reduced to an amount less than the contract
maintenance charge for the current Contract Year, we will treat it as a request
for a full withdrawal.
We will pay you the applicable amount of any full or partial withdrawal
within seven days after we receive your withdrawal request, except in cases
where we are permitted to defer payment under the Investment Company Act of 1940
and New York insurance law. Currently, we may defer payment of amounts you
withdraw only for following periods:
- When the New York Stock Exchange is closed except weekends and holidays or
when trading on the New York Stock Exchange is restricted;
- When it is not reasonably practical to dispose of securities held by the
Series Fund or to determine the value of the net assets of the
Series Fund, because an emergency exists; and
- When an SEC order permits us to defer payment for the protection of
securities holders.
SECTION 403(b) ANNUITIES
The Internal Revenue Code imposes restrictions on cash withdrawals from
contracts used with Section 403(b) Annuities. In order for a Contract 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 certain circumstances, the 10% tax penalty will not apply to withdrawals
to pay medical expenses.
Under the terms of a particular Section 403(b) plan, you may be entitled to
transfer all or a portion of the Accumulation Account value to one or more
alternative funding options. You should consult the documents governing their
plan and the person who administers such plan for information as to such
investment alternatives.
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For information on the federal income tax withholding rules that apply to
distributions from Qualified Contracts (including Section 403(b) Annuities), see
"Tax Considerations."
DEATH BENEFIT
If the Annuitant dies before the Annuity Commencement Date, we will pay a
death benefit to your Beneficiary. If the Annuitant dies on or after the Annuity
Commencement Date, we will not pay a death benefit, except as may be provided
under Annuity Options B, D, or E, if elected. (Under these options, the
Beneficiary may choose to receive remaining payments as they become due or a
single lump sum payment of their discounted value.)
You select the Beneficiary in your Contract application. You may change your
Beneficiary at any time by sending us written notice on our required form,
unless you previously made an irrevocable Beneficiary designation. A new
Beneficiary designation is not effective until we record the change. If your
designated Beneficiary is not living on the date of death of the Annuitant, we
will pay the death benefit in one lump sum to you or, if you are the Annuitant,
to your estate.
During the lifetime of the Annuitant and before the Annuity Commencement
Date, you may elect to have the death benefit payable under one or more of our
annuity options listed under "Annuity Provisions" for the Beneficiary as Payee.
If you have not elected a method of settlement of the death benefit that is in
effect on the date of death of the Annuitant, the Beneficiary may elect to
receive the death benefit in the form of either a cash payment or one or more of
our annuity options. If we do not receive an election by the Beneficiary within
60 days after the date we receive Due Proof of Death of the Annuitant and any
required release or consent, 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 will be entitled to exercise any
rights that would adversely affect the treatment of the Contract as an annuity
contract under the Internal Revenue Code (see "Other Contractual
Provisions--Death of Owner").
PAYMENT OF DEATH BENEFIT
If the death benefit is to be paid in cash to the Beneficiary, we will make
payment within 7 days of the date the election becomes effective or is deemed to
become effective, except as we may be permitted to defer such payment in
accordance with the Investment Company Act of 1940 under the circumstances
described in this Prospectus under "Cash Withdrawals." If the death benefit is
to be paid in one lump sum to you (or to your estate if you are the Annuitant),
we will make payment within 7 days of the date we receive Due Proof of Death of
the Annuitant, the Owner and/or the Beneficiary, as applicable. If the death
benefit is to be paid under one or more of our annuity options, 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 we will
maintain your Accumulation Account in effect until the Annuity Commencement
Date. You or your Beneficiary, as the case may be, may elect an Annuity
Commencement Date later than that described 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 you or your Beneficiary, as
applicable, unless otherwise restricted (in the case of a Qualified Contract) by
the particular retirement plan or by applicable law (see "Annuity Commencement
Date").
AMOUNT OF DEATH BENEFIT
The death benefit is equal to the greatest of:
(1) the value of your Accumulation Account;
(2) the total Purchase Payments made under the Contract reduced by all
withdrawals; and
(3) the value of your Accumulation Account on the fifth Contract
Anniversary, adjusted for any Purchase Payments or cash withdrawal
payments made and Contract charges assessed after the fifth Contract
Anniversary.
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To determine the amount of the death benefit under (1) above, we will use
Accumulation Values for the Valuation Period during which we receive Due Proof
of Death of the Annuitant, if you have elected settlement under one or more of
the annuity options; if no election by you is in effect, we will use either the
values for the Valuation Period during which an election by the Beneficiary
becomes or is deemed effective or, if the death benefit is to be paid in one sum
to you or your estate, the values for the Valuation Period during which we
receive Due Proof of Death of both the Annuitant and the designated Beneficiary.
CONTRACT CHARGES
We will assess contract charges under the Contracts as follows:
CONTRACT MAINTENANCE CHARGE
We deduct an annual contract maintenance charge of $30 as partial
reimbursement to us for administrative expenses relating to the issuance and
maintenance of the Contract. Prior to the Annuity Commencement Date, we deduct
this charge on each Contract Anniversary. We also deduct this charge on
surrender of the Contract for full value on a date other than the Contract
Anniversary. We deduct the contract maintenance charge in equal amounts from the
Fixed Account and each Sub-Account in which you have Accumulation Units at the
time of the deduction.
On the Annuity Commencement Date we will reduce the value of your
Accumulation Account by the proportionate amount of the contract maintenance
charge to reflect the time elapsed between the last Contract Anniversary and the
day before the Annuity Commencement Date. After the Annuity Commencement Date,
we will deduct the contract maintenance charge pro rata from each annuity
payment made during the year.
We will not increase the amount of the contract maintenance charge. We
reserve 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.
MORTALITY AND EXPENSE RISK CHARGE
We assume the risk that Annuitants may live for a longer period of time than
we have estimated 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 our actual administrative expenses.
For assuming these risks, we make a deduction from the Variable Account at
the end of each Valuation Period both during the Accumulation Phase and after
annuity payments begin at an effective annual rate of 1.30%. We may change the
rate of this deduction annually, but it will not exceed 1.30% on an annual
basis. If the deduction is insufficient to cover the actual cost of the
mortality and expense risk undertaking, we will bear the loss. Conversely, if
the deduction proves more than sufficient, the excess would be profit to us and
would be available for any proper corporate purpose including, among other
things, payment of distribution expenses. If the withdrawal charges described
below prove insufficient to cover expenses associated with the distribution of
the Contracts, we will meet the deficiency from our general corporate funds,
which may include amounts derived from the mortality and expense risk charges.
For the year ended December 31, 1999, mortality and expense risk charges
imposed under the Contracts and mortality and expense risk charges and
distribution expense charges imposed under other contracts participating in the
Variable Account were the only expenses of the Variable Account.
WITHDRAWAL CHARGES
We do not deduct a sales charge from Purchase Payments. However, we will
impose a withdrawal charge (I.E., a contingent deferred sales charge) on certain
amounts you withdraw as reimbursement
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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.
You may withdraw a portion of your Accumulation Account value each year
before incurring the withdrawal charge, and after we have held a Purchase
Payment for 5 years you may withdraw it free of any withdrawal charge. In
addition, we do not impose a withdrawal charge upon annuitization or upon the
transfer of Accumulation Account values among the Sub-Accounts or between the
Sub-Accounts and the Fixed Account.
We do not impose the withdrawal charge with respect to a Contract
established for the personal account of an employee of the Company or of any of
its affiliates, or of a licensed insurance agent engaged in distributing the
Contracts.
All other full or partial withdrawals are subject to a withdrawal charge
equal to 5% of the amount withdrawn that is subject to the charge. We will apply
the charge as follows:
(1) OLD PAYMENTS, NEW PAYMENTS AND ACCUMULATED VALUE: In a given Contract
Year, "New Payments" are Payments you have made in that Contract Year or in the
4 previous Contract Years; "Old Payments" are all Purchase Payments made before
the previous 4 Contract Years; and the remainder of your Accumulation Account
value--that is, the value of your Accumulation Account minus the total of Old
Payments and New Payments--is called the "accumulated value."
(2) ORDER OF WITHDRAWAL: When you make a partial withdrawal or surrender
your Contract, we consider the oldest Payment not previously withdrawn to be
withdrawn first, then the next oldest, and so forth. Once all Old Payments and
New Payments have been withdrawn, additional amounts withdrawn will be
attributed to accumulated value.
(3) FREE WITHDRAWAL AMOUNT: In any Contract Year, you may withdraw the
following amount before we impose a withdrawal charge: (a) any Old Payments you
have not previously withdrawn, and (b) 10% of any New Payments, whether or not
these New Payments have been previously withdrawn
(4) AMOUNT SUBJECT TO WITHDRAWAL CHARGE: We will impose the withdrawal
charge on the excess, if any, of (a) Old Payments and New Payments being
withdrawn over (b) the remaining free withdrawal amount at the time of the
withdrawal. We do not impose the withdrawal charge on amounts attributed to
accumulated value.
Aggregate withdrawal charges assessed against a Contract will never exceed
5% of the total amount of Purchase Payments made under the Contract. (See
Appendix C to the Statement of Additional Information for examples of
withdrawals and withdrawal charges.)
PREMIUM TAXES
We will make a deduction, when applicable, for premium taxes or similar
state or local taxes. Currently, no premium taxes are applicable in the State of
New York; however, if you or the Payee are a resident of a state other than New
York, a premium tax ranging from 0% to 3.5% may be assessed, depending on the
state of residence. It is currently our policy to deduct the tax from the amount
applied to provide an annuity at the time annuity payments commence. However, we
reserve the right to deduct such taxes on or after the date they are incurred.
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 prospectus and the related Statement of
Additional Information.
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ANNUITY PROVISIONS
ANNUITY COMMENCEMENT DATE
We begin making annuity payments under a Contract on the Annuity
Commencement Date, which you select in your Contract application. You may change
the Annuity Commencement Date from time to time as provided in the Contract. The
Annuity Commencement Date must be the first day of a month and not later than
the first day of the first month following the Annuitant's 85th birthday. Any
new Annuity Commencement Date must be at least 30 days after we receive notice
of the change.
For Qualified Contracts, there may be other restrictions on your selection
of the Annuity Commencement Date imposed by the particular retirement plan or by
applicable law. In most situations, current law requires that under a Qualified
Contract certain minimum distributions commence no later than April 1 following
the year the Annuitant reaches age 70 1/2 (or, for Qualified Contracts other
than IRAs, no later than April 1 following the year the Annuitant retires, if
later than the year the Annuitant reaches age 70 1/2). The Annuity Commencement
Date may also be changed by an election of an annuity option, as described under
"Death Benefit." Please refer to the terms of your plan for additional
restrictions.
On the Annuity Commencement Date, we will cancel your Accumulation Account
and apply its adjusted value to provide an annuity. The adjusted value will be
equal to the value of the Accumulation Account for the Valuation Period which
ends immediately before 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
Annuity Options B, D, or E, if elected. (Under these options, if the Annuitant
dies on or after the Annuity Commencement Date, the Beneficiary may choose to
receive the remaining payments as they become due or a single lump sum payment
of their discounted value.)
ANNUITY OPTIONS
During the lifetime of the Annuitant and prior to the Annuity Commencement
Date, you may elect one or more of the annuity options described below or such
other settlement option as we may agree to for the Annuitant as Payee, except as
restricted by the particular retirement plan or any applicable legislation.
These annuity options may also be elected by you or the Beneficiary, as provided
under "Death Benefit."
You may not change any election after 30 days before 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 before
the Annuity Commencement Date, we will deem Annuity Option B, for a Life Annuity
with 120 Monthly Payments Certain, to have been elected.
Any election may specify the proportion of the adjusted value of your
Accumulation Account to be applied to the Fixed Account and the Sub-Accounts. If
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.
ANNUITY OPTION A. LIFE ANNUITY: We make monthly payments during the lifetime
of the Payee. This option offers a higher level of monthly payments than Annuity
Options B or C because we do not make further payments 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: We make monthly payments during the lifetime of the Payee and in any
event for 60, 120, 180 or 240
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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 was
elected.
ANNUITY OPTION C. JOINT AND SURVIVOR ANNUITY: We make monthly payments
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: We make
fixed monthly payments for a specified period of time (at least 5 years but not
exceeding 30 years), as elected. The election of this annuity option may result
in the imposition of a penalty tax.
ANNUITY OPTION E. FIXED PAYMENTS: We will hold the amount applied to provide
fixed payments in accordance with this option at interest. We will make fixed
payments in such amounts and at such times (at least over a period of 5 years)
as we have agreed upon and will continue until the amount we hold with interest
is exhausted. We will credit interest yearly on the amount remaining unpaid at a
rate which we shall determine from time to time but which shall not be less than
4% per year compounded annually. We may change the rate so determined at any
time; however, the rate may not be reduced more frequently than once during each
calendar year. The election of this annuity option may result in the imposition
of a penalty tax.
DETERMINATION OF ANNUITY PAYMENTS
We will determine the dollar amount of the first Variable Annuity payment in
accordance with the annuity payment rates found in the Contract, which are based
on an assumed interest rate of 4% per year. We determine all Variable Annuity
payments other than the first 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 the 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 that ends immediately before the Annuity
Commencement Date. The number of Annuity Units of each 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 Variable Annuity
Units from one Sub-Account to another, up to a maximum of 12 such exchanges each
Contract Year. We calculate the number of new Variable Annuity Units so that the
dollar amount of an annuity payment made on the date of the exchange would be
unaffected by the fact of the exchange.
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 annuity option elected and the adjusted
age of the Payee.
If net investment return of the Sub-Accounts was exactly equal to the
assumed interest rate of 4%, the amount of each Variable Annuity payment would
remain level. If a net investment return is greater
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than 4%, the amount of each Variable Annuity payment would increase; conversely,
if the net investment return is less than 4%, the amount of each Variable
Annuity payment would decrease.
OTHER CONTRACT PROVISIONS
OWNER
As the Owner, you are 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 "Tax Considerations--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 you are the Owner of a Non-Qualified Contract and you die before the
Annuitant and before the Annuity Commencement Date, your Accumulation Account
must be distributed to the Beneficiary, if then alive, either (1) within 5 years
after the date of your death, 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 your death. 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 your spouse, if your spouse elects to continue the Contract in
his or her own name as Owner. If you were the Annuitant as well as the Owner,
your surviving spouse (if the designated Beneficiary) may elect to be named as
both Owner and Annuitant and continue the Contract; if your spouse does not make
that election, the death benefit provision of the Contract shall be controlling,
subject to the condition that any annuity option elected complies with the
Section 72(s) distribution requirements. In all other cases where the Owner and
the Annuitant are the same individual, the death benefit provision of the
Contract controls.
If you are both the Owner and Annuitant and you die on or after the Annuity
Commencement Date and before the entire accumulation under the Contract has been
distributed, the remaining portion of such accumulation, if any, must be
distributed at least as rapidly as the method of distribution then in effect.
In all cases, no Owner or Beneficiary shall be entitled to exercise any
rights that would adversely affect the treatment of the Contract as an annuity
contract under the Internal Revenue Code.
Any distributions upon the death of the Owner of a Qualified Contract will
be subject to the laws and regulations governing the particular retirement or
deferred compensation plan in connection with which the Qualified Contract was
issued.
VOTING OF SERIES FUND SHARES
We 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. We will vote Series Fund shares for which no timely
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voting instructions are received 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 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.
We will determine the number of particular Series Fund shares as to which
each such person is entitled to give instructions on a date not more than 90
days prior to each such meeting. Prior to the Annuity Commencement Date, we
determine that number 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, we determine the number of
particular Series Fund shares as to which such instructions may be given by a
Payee 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 we 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, we may make
appropriate endorsement to the Contract to reflect the substitution.
MODIFICATION
Upon notice to you, or to the Payee during the annuity period, we may modify
the Contract, 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 we are subject or (ii) is necessary to assure
continued qualification of the Contract under the Internal Revenue Code or other
federal or state laws relating to retirement annuities or annuity contracts or
(iii) is necessary to reflect a change in the operation of the Variable Account
or the Sub-Accounts or (iv) provides additional Variable Account and/ or fixed
accumulation options. In the event of any such modification, we 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
such change in the operation of the Variable Account, we may, subject to the
prior approval of the Superintendent of Insurance of the State of New York, make
appropriate endorsement
19
<PAGE>
to the Contract to reflect the change and take such action as may be necessary
and appropriate to effect the change.
SPLITTING UNITS
We reserve 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.
TAX CONSIDERATIONS
The Contracts 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 FEDERAL, STATE OR LOCAL
TAX STATUS 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 first as a withdrawal from the increase in
the Accumulation Account's value, rather than as a return of Purchase Payments.
The amount of the withdrawal allocable to this increase will be includible in
the Owner's income and subject to tax at ordinary income rates. If an individual
receives a loan under a Contract or if the Contract is assigned or pledged as
collateral for a loan, the amount borrowed from the Contract or the amount
assigned or pledged must be treated as if it were withdrawn from the Contract.
20
<PAGE>
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 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 hardship distribution or a distribution that
is part of a series of payments made for life or for a specified period of ten
years or more. Only the plan participant or the participant's spouse may elect
to roll over a distribution to an eligible retirement plan. 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 Contract
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 for use 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
Qualified Contracts issued for use with individual retirement accounts.
21
<PAGE>
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 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 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).
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. These terms
and conditions may include restrictions on, among other things, ownership,
transferability, assignability, contributions and distributions. 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 are sold by licensed insurance agents in the State of New
York. Such agents are 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 02481, 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.
22
<PAGE>
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Variable Account. We
are 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 us at our Service Address as shown
on the cover of this Prospectus.
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
General Information
Annuity Provisions
Other Contract Provisions
Administration of the Contracts
Distribution of the Contracts
Accountants
Calculation of Performance Data
Advertising and Sales Literature
Financial Statements
Appendix A -- The Fixed Account
Appendix B -- Illustrative Examples of Variable Accumulation
Unit Value, Variable Annuity Unit Value and Variable
Annuity Payment Calculations
Appendix C -- Withdrawals and Withdrawal Charges
</TABLE>
23
<PAGE>
This Prospectus sets forth information about the Contracts and the Variable
Account that a prospective purchaser should know before investing. Additional
information about the Contracts and the Variable Account has been filed with the
Securities and Exchange Commission in a Statement of Additional Information
dated May 1, 2000 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 (800) 447-7569.
-------------------------------------------------------------------------------
To: Sun Life Insurance and Annuity Company of New York
P.O. Box 9141
Boston, Massachusetts 02117
Please send me a Statement of Additional Information for Compass 2--Sun Life
(N.Y.) Variable Account B.
<TABLE>
<S> <C>
Name
--------------------------------------
Address
--------------------------------------
--------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
City State Zip
--------------------- ------------ ---------
</TABLE>
<TABLE>
<S> <C>
Telephone
--------------------------------------
</TABLE>
24
<PAGE>
[LOGO]
PROSPECTUS
MAY 1, 2000
COMBINATION FIXED/VARIABLE
ANNUITY FOR PERSONAL AND
QUALIFIED RETIREMENT PLANS
ISSUED IN CONNECTION
WITH SUN LIFE (N.Y.)
VARIABLE ACCOUNT B
CO2NY-1 5/2000
ISSUED BY
SUN LIFE INSURANCE AND ANNUITY COMPANY
OF NEW YORK
P.O. Box 9141
Boston, Massachusetts 02117
AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, Massachusetts 02116
<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, 2000.
<PAGE>
Rule 497(c)
File No. 2-95003
811-04183
MAY 1, 2000
COMPASS 2
STATEMENT OF ADDITIONAL INFORMATION
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information......................................... 2
Annuity Provisions.......................................... 2
Other Contract Provisions................................... 3
Administration of the Contracts............................. 4
Distribution of the Contracts............................... 4
Accountants................................................. 4
Calculation of Performance Data............................. 4
Advertising and Sales Literature............................ 6
Financial Statements........................................ 7
Appendix A -- The Fixed Account............................. 37
Appendix B -- Illustrative Examples of Calculations of
Variable Accumulation Unit Value, Variable Annuity Unit
Value and Variable Annuity Payment........................ 39
Appendix C -- Withdrawals and Withdrawal Charges............ 40
</TABLE>
This Statement of Additional Information sets forth information which may be
of interest to prospective purchasers of Compass 2 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, 2000 (the
"Prospectus") regarding the Contracts. 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 by writing to Sun Life Insurance and
Annuity Company of New York, P.O. Box 9141, Boston, Massachusetts 02117, or by
telephoning (800) 447-7549.
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 122 East 42nd Street, New York, New
York 10017.
The Company is a wholly-owned subsidiary of Sun Life Assurance Company of
Canada (U.S.) ("Sun Life (U.S.)"), a stock life insurance company incorporated
in Delaware. Sun Life (U.S.) is an indirect wholly-owned subsidiary of Sun Life
Assurance Company of Canada ("Sun Life (Canada)"),. Sun Life (Canada) completed
its demutualization on March 22, 2000. As a result of the demutualization, a new
holding company, Sun Life Financial Services of Canada Inc. ("Sun Life
Financial"), is now the ultimate parent of Sun Life (Canada) and the Company.
Sun Life Financial, a corporation organized in Canada, is a reporting company
under the Securities Exchange Act of 1934 with common shares listed on the
Toronto, New York, London, and Manila stock exchanges.
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 Contracts 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. However,
disclosures regarding the fixed portion of the Contracts and the Fixed Account
may be subject to certain generally applicable provisions of the federal
securities laws relating to the accuracy and completeness of statements made
herein (see "A Word About the 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 taxes 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 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 such payment 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.
For a description of fixed annuity payments, see Appendix A.
2
<PAGE>
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 for a one day Valuation
Period is 0.99989255.
For a hypothetical example of the calculation of the value of a Variable
Annuity Unit, see Appendix B.
OTHER CONTRACT PROVISIONS
OWNER AND CHANGE OF OWNERSHIP
A Contract belongs 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 upon 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 after transfer the Qualified Contract
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 or custodian 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
"Tax Considerations--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 Contract application will
remain in effect until changed. The interest of any Beneficiary is subject to
the particular Beneficiary surviving the Annuitant.
Subject to the rights of an irrevocably designated Beneficiary, the Owner
may change or revoke the designation of a Beneficiary at any time while the
Annuitant is living by filing with the Company a written Beneficiary designation
or revocation in such form as the Company may require. The change or revocation
will not be binding upon the Company until it is received by the Company. When
it is so received the change or revocation will be effective as of the date on
which the Beneficiary designation or revocation was signed by the Owner.
3
<PAGE>
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 will 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 Sun Life (U.S.)
and its parent, 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 are sold by
licensed insurance agents in the State of New York. Such agents are
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 are distributed by Clarendon Insurance
Agency, Inc. ("Clarendon"), One Sun Life Executive Park, Wellesley Hills,
Massachusetts 02481, a wholly-owned subsidiary of Sun Life Assurance Company
of Canada (U.S.), the Company's parent company. 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 1997, 1998 and 1999, approximately $40,000, $33,148 and
$26,962, respectively, was paid to and retained by Clarendon in connection
with the distribution of the Contracts.
ACCOUNTANTS
Deloitte & Touche LLP, 200 Berkeley Street, Boston, Massachusetts 02117,
are the Variable Account's independent auditors 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.
4
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
PERIOD ENDING DECEMBER 31, 1999
<TABLE>
<CAPTION>
1 YEAR 5 YEAR 10 YEAR
PERIOD PERIOD PERIOD LIFE* DATE OF INCEPTION
----------- ----------- ------------ ------------ ------------------
<S> <C> <C> <C> <C> <C>
Capital Appreciation Series.......... 25.74% 25.54% 16.93% 16.88% August 13, 1985
Global Governments Series............ (11.08)% 3.35% 5.49% 5.75% May 16, 1988
Government Securities Series......... (8.21)% 4.18% 5.28% 6.16% August 12, 1985
High Yield Series.................... 0.56% 7.41% 8.56% 7.65% August 13, 1985
Managed Sectors Series............... 78.48% 30.25% 18.83% 20.13% May 27, 1988
Money Market Series.................. (1.53)% 2.54% 3.14% 3.77% August 29, 1985
Total Return Series.................. (3.48)% 12.80% 10.09% 10.49% May 16, 1988
</TABLE>
- ---------
*From Date of Inception.
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:
n
P(1 + T) = 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
proportionate to the percentage of the number of Contracts that have amounts
allocated to that Sub-Account.
5
<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 included 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.
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.
6
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
STATEMENT OF CONDITION
-- December 31, 1999
<TABLE>
<CAPTION>
ASSETS: Shares Cost Value
Investments in MFS/Sun Life Series Trust: ---------- ------------ ------------
<S> <C> <C> <C>
Capital Appreciation Series ("CAS")...... 1,527,248 $ 59,537,924 $ 82,648,160
Government Securities Series ("GSS")..... 1,483,463 18,854,554 18,509,168
High Yield Series ("HYS")................ 949,743 8,596,700 8,563,039
Money Market Series ("MMS").............. 12,373,215 12,373,215 12,373,215
Managed Sectors Series ("MSS")........... 398,318 11,488,027 20,880,462
Total Return Series ("TRS").............. 1,847,054 34,785,905 34,649,366
Global Governments Series ("GGS")........ 273,981 2,959,873 2,812,694
------------ ------------
$148,596,198 $180,436,104
============
LIABILITY:
Payable to sponsor................................................... (103,980)
------------
Net Assets..................................................... $180,332,124
============
</TABLE>
<TABLE>
<CAPTION>
NET ASSETS:
Applicable to Owners of
Deferred Variable Annuity Contracts Reserve for
------------------------------------- Variable
Units Unit Value Value Annuities Total
COMPASS 2 CONTRACTS: ---------- ---------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
CAS................................................ 723,461 $98.4308 $ 71,205,879 $ 386,582 $ 71,592,461
GSS................................................ 698,455 25.1036 17,531,391 77,651 17,609,042
HYS................................................ 253,467 30.4067 7,710,132 36,696 7,746,828
MMS................................................ 662,084 17.7923 11,770,983 9,878 11,780,861
MSS................................................ 198,732 84.4636 16,831,824 80,727 16,912,551
TRS................................................ 881,186 32.6681 28,881,144 476,619 29,357,763
GGS................................................ 124,494 19.3460 2,421,657 -- 2,421,657
------------ ---------- ------------
$156,353,010 $1,068,153 $157,421,163
------------ ---------- ------------
COMPASS 3 CONTRACTS:
CAS................................................ 349,564 $31.6334 $ 11,057,373 $ -- $ 11,057,373
GSS................................................ 72,199 12.4804 900,571 -- 900,571
HYS................................................ 54,240 14.9489 811,291 -- 811,291
MMS................................................ 47,556 12.2461 582,034 -- 582,034
MSS................................................ 112,125 35.5119 3,964,077 -- 3,964,077
TRS................................................ 286,275 18.1833 5,204,578 -- 5,204,578
GGS................................................ 33,432 11.7186 391,037 -- 391,037
------------ ---------- ------------
$ 22,910,961 $ -- $ 22,910,961
------------ ---------- ------------
Net Assets............................................................. $179,263,971 $1,068,153 $180,332,124
============ ========== ============
</TABLE>
See notes to financial statements
7
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
STATEMENT OF OPERATIONS
-- Year Ended December 31, 1999
<TABLE>
<CAPTION>
CAS GSS HYS MMS
Sub-Account Sub-Account Sub-Account Sub-Account
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Dividend income and capital gain distributions
received...................................... $ 8,163,481 $ 995,583 $ 787,773 $ 611,158
Mortality and expense risk charges.............. (935,895) (254,121) (121,657) (173,132)
Distribution expense charges.................... (12,923) (1,401) (1,259) (1,081)
------------ ----------- ----------- ------------
Net investment income (loss)................ $ 7,214,663 $ 740,061 $ 664,857 $ 436,945
------------ ----------- ----------- ------------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales........................... $ 19,814,527 $4,615,725 $6,036,161 $ 10,627,519
Cost of investments sold...................... (13,147,573) (4,515,553) (5,989,299) (10,627,519)
------------ ----------- ----------- ------------
Net realized gains (losses)................. $ 6,666,954 $ 100,172 $ 46,862 $ --
------------ ----------- ----------- ------------
Net unrealized appreciation (depreciation) on
investments:
End of year................................... $ 23,110,236 $ (345,386) $ (33,661) $ --
Beginning of year............................. 16,605,335 1,126,376 124,357 --
------------ ----------- ----------- ------------
Change in unrealized appreciation
(depreciation)............................ $ 6,504,901 $(1,471,762) $ (158,018) $ --
------------ ----------- ----------- ------------
Realized and unrealized gains (losses)........ $ 13,171,855 $(1,371,590) $ (111,156) $ --
------------ ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS.................................. $ 20,386,518 $ (631,529) $ 553,701 $ 436,945
============ =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
MSS TRS GGS
Sub-Account Sub-Account Sub-Account
------------ ----------- -----------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Dividend income and capital gain distributions
received...................................... $ -- $5,628,541 $ 397,572
Mortality and expense risk charges.............. (180,435) (470,234) (42,049)
Distribution expense charges.................... (3,816) (7,926) (629)
------------ ----------- -----------
Net investment income (loss)................ $ (184,251) $5,150,381 $ 354,894
------------ ----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales........................... $ 4,454,650 $9,010,684 $ 886,287
Cost of investments sold...................... (3,368,829) (7,177,112) (952,032)
------------ ----------- -----------
Net realized gains (losses)................. $ 1,085,821 $1,833,572 $ (65,745)
------------ ----------- -----------
Net unrealized appreciation (depreciation) on
investments:
End of year................................... $ 9,392,435 $ (136,539) $ (147,179)
Beginning of year............................. 641,306 6,224,618 377,097
------------ ----------- -----------
Change in unrealized appreciation
(depreciation)............................ $ 8,751,129 $(6,361,157) $ (524,276)
------------ ----------- -----------
Realized and unrealized gains (losses)........ $ 9,836,950 $(4,527,585) $ (590,021)
------------ ----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS.................................. $ 9,652,699 $ 622,796 $ (235,127)
============ =========== ===========
</TABLE>
See notes to financial statements
8
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CAS GSS
Sub-Account Sub-Account
---------------------------- ----------------------------
Year Ended Year Ended
December 31, December 31,
1999 1998 1999 1998
-------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).............................. $ 7,214,663 $ 7,202,019 $ 740,061 $ 898,057
Net realized gains (losses)............................... 6,666,954 10,266,206 100,172 521,218
Net unrealized gains (losses)............................. 6,504,901 86,450 (1,471,762) 75,036
------------ ------------ ----------- -----------
Increase (Decrease) in net assets from operations..... $ 20,386,518 $ 17,554,675 $ (631,529) $ 1,494,311
------------ ------------ ----------- -----------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received.............................. $ 1,714,153 $ 2,540,950 $ 366,181 $ 664,851
Net transfers between Sub-Accounts and Fixed Account.... (2,717,099) (3,626,538) 1,300,244 (871,865)
Withdrawals, surrenders, annuitizations and contract
charges............................................... (11,492,973) (9,568,674) (2,582,016) (3,638,620)
------------ ------------ ----------- -----------
Net accumulation activity............................. $(12,495,919) $(10,654,262) $ (915,591) $(3,845,634)
------------ ------------ ----------- -----------
Annuitization Activity:
Annuitizations.......................................... $ -- $ 52,914 $ -- $ --
Annuity payments and contract charges................... (34,365) (30,074) (10,821) (12,398)
Adjustments to annuity reserve.......................... (3,669) (2,453) (571) 666
------------ ------------ ----------- -----------
Net annuitization activity............................ $ (38,034) $ 20,387 $ (11,392) $ (11,732)
------------ ------------ ----------- -----------
Increase (Decrease) in net assets from contract owner
transactions............................................ $(12,533,953) $(10,633,875) $ (926,983) $(3,857,366)
------------ ------------ ----------- -----------
Increase (Decrease) in net assets....................... $ 7,852,565 $ 6,920,800 $(1,558,512) $(2,363,055)
NET ASSETS:
Beginning of year......................................... 74,797,269 67,876,469 20,068,125 22,431,180
------------ ------------ ----------- -----------
End of year............................................... $ 82,649,834 $ 74,797,269 $18,509,613 $20,068,125
============ ============ =========== ===========
</TABLE>
See notes to financial statements
9
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
HYS MMS
Sub-Account Sub-Account
--------------------------- ----------------------------
Year Ended Year Ended
December 31, December 31,
1999 1998 1999 1998
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).............................. $ 664,857 $ 632,722 $ 436,945 $ 456,307
Net realized gains (losses)............................... 46,862 346,052 -- --
Net unrealized gains (losses)............................. (158,018) (1,027,552) -- --
----------- ----------- ----------- -----------
Increase (Decrease) in net assets from operations......... $ 553,701 $ (48,778) $ 436,945 $ 456,307
----------- ----------- ----------- -----------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received.............................. $ 139,687 $ 210,963 $ 331,312 $ 307,131
Net transfers between Sub-Accounts and Fixed Account.... (146,150) (1,472,620) 2,778,316 7,369,452
Withdrawals, surrenders, annuitizations and contract
charges............................................... (2,315,482) (1,495,462) (4,633,677) (7,077,196)
----------- ----------- ----------- -----------
Net accumulation activity............................. $(2,321,945) $(2,757,119) $(1,524,049) $ 599,387
----------- ----------- ----------- -----------
Annuitization Activity:
Annuity payments and contract charges................... $ (4,781) $ (4,897) $ (991) $ (1,057)
Adjustments to annuity reserves......................... 36 56 (489) (471)
----------- ----------- ----------- -----------
Net annuitization activity............................ $ (4,745) $ (4,841) $ (1,480) $ (1,528)
----------- ----------- ----------- -----------
Increase (Decrease) in net assets from contract owner
transactions............................................ $(2,326,690) $(2,761,960) $(1,525,529) $ 597,859
----------- ----------- ----------- -----------
Increase (Decrease) in net assets......................... $(1,772,989) $(2,810,738) $(1,088,584) 1,054,166
NET ASSETS:
Beginning of year......................................... 10,331,108 13,141,846 13,451,479 12,397,313
----------- ----------- ----------- -----------
End of year............................................... $ 8,558,119 $10,331,108 $12,362,895 $13,451,479
=========== =========== =========== ===========
</TABLE>
See notes to financial statements
10
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
MSS TRS
Sub-Account Sub-Account
--------------------------- ----------------------------
Year Ended Year Ended
December 31, December 31,
1999 1998 1999 1998
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).............................. $ (184,251) $ 1,746,947 $ 5,150,381 $ 4,241,657
Net realized gains (losses)............................... 1,085,821 894,798 1,833,572 3,450,365
Net unrealized gains (losses)............................. 8,751,129 (1,357,946) (6,361,157) (3,487,755)
----------- ----------- ----------- -----------
Increase (Decrease) in net assets from operations......... $ 9,652,699 $ 1,283,799 $ 622,796 $ 4,204,267
----------- ----------- ----------- -----------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received.............................. $ 473,194 $ 828,932 $ 777,915 $ 1,457,947
Net transfers between Sub-Accounts and Fixed Account.... 669,451 179,600 (1,352,900) (1,063,470)
Withdrawals, surrenders, annuitizations and contract
charges............................................... (2,808,685) (2,473,049) (6,001,510) (8,364,694)
----------- ----------- ----------- -----------
Net accumulation activity............................. $(1,666,040) $(1,464,517) $(6,576,495) $(7,970,217)
----------- ----------- ----------- -----------
Annuitization Activity:
Annuitizations.......................................... $ -- $ 52,940 $ -- $ --
Annuity payments and contract charges................... (3,962) (3,921) (108,609) (92,029)
Adjustments to annuity reserves......................... (2,394) (564) (8,680) (14,828)
----------- ----------- ----------- -----------
Net annuitization activity............................ $ (6,356) $ 48,455 $ (117,289) $ (106,857)
----------- ----------- ----------- -----------
Increase (Decrease) in net assets from contract owner
transactions............................................ $(1,672,396) $(1,416,062) $(6,693,784) $(8,077,074)
----------- ----------- ----------- -----------
Increase (Decrease) in net assets......................... $ 7,980,303 $ (132,263) $(6,070,988) $(3,872,807)
NET ASSETS:
Beginning of year......................................... 12,896,325 13,028,588 40,633,329 44,506,136
----------- ----------- ----------- -----------
End of year............................................... $20,876,628 $12,896,325 $34,562,341 $40,633,329
=========== =========== =========== ===========
</TABLE>
See notes to financial statements
11
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
STATEMENTS OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
GGS
Sub-Account
--------------------------
Year Ended
December 31,
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).............................. $ 354,894 $ (289)
Net realized gains (losses)............................... (65,745) (239,837)
Net unrealized gains (losses)............................. (524,276) 738,143
---------- -----------
Increase (Decrease) in net assets from operations......... $ (235,127) $ 498,017
---------- -----------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received.............................. $ 99,671 $ 172,382
Net transfers between Sub-Accounts and Fixed Account.... (269,717) (760,745)
Withdrawals, surrenders, annuitizations and contract
charges............................................... (526,930) (1,301,883)
---------- -----------
Net accumulation activity............................. $ (696,976) $(1,890,246)
---------- -----------
Annuitization Activity:
Annuitizations.......................................... $ -- $ --
Annuity payments and contract charges................... -- --
Adjustments to annuity reserves......................... -- --
---------- -----------
Net annuitization activity............................ $ -- $ --
---------- -----------
Increase (Decrease) in net assets from contract owner
transactions............................................ $ (696,976) $(1,890,246)
---------- -----------
Increase (Decrease) in net assets......................... $ (932,103) $(1,392,229)
NET ASSETS:
Beginning of year......................................... 3,744,797 5,137,026
---------- -----------
End of year............................................... $2,812,694 $ 3,744,797
========== ===========
</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 ("MFS"), 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 the Sponsor's 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 taxable, and
therefore, no provision has been made for federal income taxes.
(3) CONTRACT CHARGES
A mortality and expense risk charge based on the value of the Variable Account
is deducted from the Variable Account at the end of each valuation period for
the mortality and expense risks assumed by the
13
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS -- continued
(3) CONTRACT CHARGES -- continued
Sponsor. These deductions are transferred periodically to the Sponsor.
Currently, the deduction is at an effective annual rate of 1.3% of the assets of
the Variable Account attributable to Compass 2 contracts and 1.25% of the assets
of the Variable Account attributable to Compass 3 contracts.
Each year on the contract anniversary, a contract maintenance charge of $30 is
deducted from each contract's accumulation account to cover administrative
expenses relating to the contract. After the annuity commencement date the
charge is deducted pro rata from each annuity payment made during the year.
The Sponsor does not deduct a sales charge from purchase payments. However, a
withdrawal charge (contingent deferred sales charge) may be deducted to cover
certain expenses relating to the sale of the contract. In no event shall the
aggregate withdrawal charges (including the distribution expense charge
described below applicable to Compass 3 contracts) exceed 5% of the purchase
payments made under a Compass 2 contract or 9% of the purchase payments made
under a Compass 3 contract.
For assuming the risk that withdrawal charges may be insufficient to compensate
it for the costs of distributing the Compass 3 contracts, the Sponsor makes a
deduction from the Variable Account at the end of each valuation period for the
first seven contract years (during both the accumulation period and, if
applicable, after annuity payments begin) at an effective annual rate of 0.15%
of the assets of the Variable Account attributable to such contracts. No
deduction is made after the seventh contract anniversary. No such deduction is
made with respect to assets attributable to Compass 2 contracts.
(4) ANNUITY RESERVES
Annuity reserves for contracts with annuity commencement dates prior to
February 1, 1987 have been calculated using the 1971 Individual Annuitant
Mortality Table. Annuity reserves for contracts with annuity commencement dates
on or after February 1, 1987 are calculated using the 1983 Individual Annuitant
Mortality Table. All annuity reserves are calculated using an assumed interest
rate of 4%. Required adjustments to the reserve are accomplished by transfers to
or from the Sponsor.
14
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS -- continued
(5) UNIT ACTIVITY FROM PARTICIPANT TRANSACTIONS
<TABLE>
<CAPTION>
CAS GSS HYS MMS
Sub-Account Sub-Account Sub-Account Sub-Account
-------------------- --------------------- ----------------- -------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
COMPASS 2 CONTRACTS: 1999 1998 1999 1998 1999 1998 1999 1998
- -------------------- --------- ---------- ---------- ---------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Units Outstanding Beginning of Year 881,482 1,049,111 737,003 897,267 327,184 421,472 745,670 713,552
Units purchased 9,916 15,299 16,589 17,550 2,531 2,836 13,565 11,975
Units transferred between Sub-Accounts
and Fixed Account (33,469) (44,627) 42,637 (36,206) (4,831) (49,178) 156,398 426,262
Units withdrawn, surrendered, and
annuitized (134,468) (138,301) (97,774) (141,608) (71,417) (47,946) (253,549) (406,119)
-------- --------- --------- --------- ------- ------- -------- --------
Units Outstanding End of Year 723,461 881,482 698,455 737,003 253,467 327,184 662,084 745,670
======== ========= ========= ========= ======= ======= ======== ========
<CAPTION>
MSS TRS GGS
Sub-Account Sub-Account Sub-Account
-------------------- --------------------- -----------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1999 1998 1999 1998 1999 1998
--------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Units Outstanding Beginning of Year 230,507 270,624 1,076,662 1,345,153 158,924 256,940
Units purchased 3,640 6,466 14,751 18,920 3,999 5,460
Units transferred between Sub-Accounts
and Fixed Account 11,067 3,355 (41,729) (33,825) (12,898) (37,228)
Units withdrawn, surrendered, and
annuitized (46,482) (49,938) (168,498) (253,586) (25,531) (66,248)
-------- --------- --------- --------- ------- -------
Units Outstanding End of Year 198,732 230,507 881,186 1,076,662 124,494 158,924
======== ========= ========= ========= ======= =======
</TABLE>
15
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS -- continued
(5) UNIT ACTIVITY FROM PARTICIPANT TRANSACTIONS -- continued
<TABLE>
<CAPTION>
CAS GSS HYS MMS
Sub-Account Sub-Account Sub-Account Sub-Account
----------------- ----------------- --------------- ---------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
COMPASS 3 CONTRACTS: 1999 1998 1999 1998 1999 1998 1999 1998
- -------------------- -------- -------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Units Outstanding Beginning of Year 339,067 291,968 67,394 55,194 60,336 60,217 51,357 47,433
Units purchased 40,048 73,560 3,908 17,879 5,236 8,915 8,442 9,088
Units transferred between Sub-Accounts and Fixed
Account (29) (4,596) 9,029 3,622 (184) (2,262) 2,921 15,416
Units withdrawn, surrendered, and annuitized (29,522) (21,865) (8,132) (9,301) (11,148) (6,534) (15,164) (20,580)
------- ------- ------- ------- ------- ------ ------- -------
Units Outstanding End of Year 349,564 339,067 72,199 67,394 54,240 60,336 47,556 51,357
======= ======= ======= ======= ======= ====== ======= =======
<CAPTION>
MSS TRS GGS
Sub-Account Sub-Account Sub-Account
----------------- ----------------- ---------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1999 1998 1999 1998 1999 1998
-------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Units Outstanding Beginning of Year 113,778 100,687 296,455 281,915 35,645 42,551
Units purchased 14,017 29,949 21,166 51,882 3,228 5,735
Units transferred between Sub-Accounts and Fixed
Account (3,273) (2,112) (6,116) (2,829) (3,048) (7,056)
Units withdrawn, surrendered, and annuitized (12,397) (14,746) (25,230) (34,513) (2,393) (5,585)
------- ------- ------- ------- ------- ------
Units Outstanding End of Year 112,125 113,778 286,275 296,455 33,432 35,645
======= ======= ======= ======= ======= ======
</TABLE>
16
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Participants 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 Capital Appreciation
Series Sub-Account, Government Securities Series Sub-Account, High Yield Series
Sub-Account, Money Market Series Sub-Account, Managed Sectors Series
Sub-Account, Total Return Series Sub-Account and Global Governments Series
Sub-Account of Sun Life (N.Y.) Variable Account B (the "Sub-Accounts") as of
December 31, 1999, the related statement of operations for the year then ended
and the statements of changes in net assets for the years ended December 31,
1999 and December 31, 1998. 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, 1999 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 Sub-Accounts as of December 31, 1999,
the results of their operations and the changes in their net assets for the
respective stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 10, 2000
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
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
ADMITTED ASSETS
Bonds $ 59,215,128 $ 57,916,869
Mortgage loans on real estate 8,659,610 17,657,672
Properties acquired in satisfaction of debt -- 1,755,854
Policy loans 537,976 625,023
Cash and short-term investments 6,261,102 5,928,556
Life insurance premiums and annuity considerations due
and uncollected 2,168,135 667,087
Accident and health premiums due and unpaid 579,460 156,493
Receivable from parent and affiliates 621,625 --
Investment income due and accrued 795,075 780,020
Federal income tax recoverable 520,467 --
Other assets 235,655 183,602
------------ ------------
General account assets 79,594,233 85,671,176
Separate account assets
Unitized 632,350,720 527,942,310
Non-unitized 94,061,504 100,064,243
------------ ------------
Total admitted assets $806,006,457 $713,677,729
============ ============
LIABILITIES
Aggregate reserve for life policies and contracts $ 21,762,306 $ 22,578,780
Aggregate reserve for accident and health policies 9,251,000 7,830,000
Policy and contract claims 2,182,472 2,174,704
Liability for premium and other deposit funds 18,048,656 20,807,840
Interest maintenance reserve 553,770 830,941
Commissions to agents due or accrued 449,213 374,826
General expenses due or accrued 580,432 369,524
Transfers from Separate Accounts due or accrued (17,043,885) (15,992,081)
Taxes, licenses and fees due or accrued 100,000 64,813
Federal income taxes due or accrued -- 700,000
Asset valuation reserve 1,210,107 1,047,787
Payable to parent, subsidiaries, and affiliates -- 1,218,745
Other liabilities 1,353,930 684,361
------------ ------------
General account liabilities 38,448,001 42,690,240
Separate account liabilities:
Unitized 632,150,968 527,751,720
Non-unitized 94,061,504 100,064,243
------------ ------------
Total liabilities 764,660,473 670,506,203
------------ ------------
CAPITAL STOCK AND SURPLUS
Common capital stock 2,000,000 2,000,000
------------ ------------
Gross paid in and contributed surplus 29,500,000 29,500,000
Group life contingency reserve fund 1,035,323 812,391
Unassigned funds 8,810,661 10,859,135
------------ ------------
Total surplus 39,345,984 41,171,526
------------ ------------
Capital stock and surplus 41,345,984 43,171,526
------------ ------------
Total Liabilities, Capital Stock and Surplus $806,006,457 $713,677,729
============ ============
</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
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
INCOME:
Premiums and annuity considerations $ 19,152,409 $ 16,979,974 $ 16,013,160
Deposit-type funds 39,510,208 84,013,114 115,692,429
Net investment income 5,170,881 6,397,852 8,824,668
Amortization of interest maintenance
reserve 254,220 319,812 519,001
Net gain from operations from
Separate Accounts 9,162 9,115 8,743
Income from fees associated with
investment management,
administration and contract
guarantees from Separate Accounts 7,470,958 6,262,374 4,707,296
Other income 938,657 1,179,261 657,755
------------ ------------ ------------
Total Income 72,506,495 115,161,502 146,423,052
------------ ------------ ------------
BENEFITS AND EXPENSES:
Death benefits 7,357,222 6,237,281 4,916,746
Annuity benefits 5,238,282 5,758,805 5,439,091
Disability benefits and benefits
under accident and health policies 1,351,989 1,094,851 939,635
Surrender benefits and other fund
withdrawals 59,018,693 73,863,143 79,016,904
Interest on policy or contract funds 82,760 101,516 75,069
Increase in aggregate reserves for
life and accident and health
policies and contracts 604,526 620,154 5,199,040
Decrease in liability for premium
and other deposit funds (2,759,184) (10,533,414) (30,405,893)
------------ ------------ ------------
Total Benefits 70,894,288 77,142,336 65,180,592
Commissions on premiums and annuity
considerations (direct business
only) 4,712,712 4,850,390 5,582,738
General insurance expenses 6,372,100 7,017,562 7,687,478
Insurance taxes, licenses and fees,
excluding federal income taxes 742,992 709,440 788,386
Net transfers to (from) Separate
Accounts (16,002,095) 16,673,071 61,695,832
------------ ------------ ------------
Total Benefits and Expenses 66,719,997 106,392,799 140,935,026
------------ ------------ ------------
Net gain from operations before
federal income taxes 5,786,498 8,768,703 5,488,026
Federal income taxes incurred
(excluding tax on capital gains) 1,228,004 2,070,545 2,315,259
------------ ------------ ------------
Net gain from operations after
federal income taxes and before
realized capital gains 4,558,494 6,698,158 3,172,767
Net realized capital (losses) gains
less capital gains tax and
transferred to the interest
maintenance reserve 151,678 (13,249) 183,262
------------ ------------ ------------
NET INCOME $ 4,710,172 $ 6,684,909 $ 3,356,029
============ ============ ============
</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
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Capital and surplus, Beginning of year $43,171,526 $38,781,183 $34,802,643
----------- ----------- -----------
Net income 4,710,172 6,684,909 3,356,029
Change in net unrealized capital gains -- 359,000 138,000
Change in nonadmitted assets and related
items 126,606 47,886 (14,391)
Change in asset valuation reserve (162,320) 298,548 498,902
Dividend to stockholder (6,500,000) (3,000,000) --
----------- ----------- -----------
Net change in capital and surplus for
the year (1,825,542) 4,390,343 3,978,540
----------- ----------- -----------
Capital and surplus, End of year $41,345,984 $43,171,526 $38,781,183
=========== =========== ===========
</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
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Provided:
Premiums, annuity considerations and
deposit funds received $ 57,235,427 $101,168,181 $138,347,877
Net investment income 5,324,547 6,731,025 9,707,801
Fees associated with investment management,
administration and contract guarantees
from Separate Accounts 7,470,958 6,262,374 4,707,296
Fee income 938,659 1,179,261 657,755
------------ ------------ ------------
Total receipts 70,969,591 115,340,841 153,420,729
------------ ------------ ------------
Benefits paid 73,041,178 86,793,629 122,170,301
Insurance expenses and taxes paid 11,229,543 12,819,426 13,540,362
Net cash transfers to (from) Separate
Accounts (14,950,291) 25,441,094 41,721,173
Federal income tax payments (excluding tax
on capital gains) 1,928,000 2,370,545 1,715,259
------------ ------------ ------------
Total payments 71,248,430 127,424,694 179,147,095
------------ ------------ ------------
Net cash used in operations (278,839) (12,083,853) (25,726,366)
------------ ------------ ------------
Proceeds from long-term investments sold,
matured or repaid (after deducting taxes
on capital gains of $81,675 for 1999,
$135,651 for 1998 and $222,860 for 1997) 47,042,986 37,410,774 59,132,310
Other cash provided 717,427 813,054 325,543
------------ ------------ ------------
Total cash provided 47,760,413 38,223,828 59,457,853
------------ ------------ ------------
Cash Applied:
Cost of long-term investments acquired (37,498,243) (26,671,265) (27,369,138)
Other cash applied (9,650,785) (3,660,391) (857,106)
------------ ------------ ------------
Total cash applied (47,149,028) (30,331,656) (28,226,244)
Net change in cash and short-term investments 332,546 (4,191,681) 5,505,243
Cash and short-term investments:
Beginning of year 5,928,556 10,120,237 4,614,994
------------ ------------ ------------
End of year $ 6,261,102 $ 5,928,556 $ 10,120,237
============ ============ ============
</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, 1999, 1998 AND 1997
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, group life and group long-term
disability insurance. The parent company, Sun Life Assurance Company of Canada
(U.S.) ("Sun Life (U.S.)"), is ultimately a wholly-owned subsidiary of Sun Life
Assurance Company of Canada ("SLOC)"), 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 State of New York Insurance Department. Prescribed accounting
practices include practices described in a variety of publications of the
National Association of Insurance Commissioners ("NAIC"), as well as 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 1993, the
Financial Accounting Standards Board ("FASB") issued an interpretation (the
"Interpretation") that became effective in 1996, which 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 17 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 forty to fifty
years.
POLICY AND CONTRACT RESERVES
The reserves for life insurance and annuity contracts are computed in accordance
with presently accepted actuarial standards, and are based on actuarial
assumptions and methods (including use of
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, 1999, 1998 AND 1997
1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED):
published mortality tables and prescribed interest rates) which produce 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.
SEPARATE ACCOUNTS
The Company has established unitized separate accounts applicable to individual
qualified and nonqualified variable annuity contracts.
The Company has also established a nonunitized separate account for amounts
allocated to the fixed portion of a certain combination fixed/variable deferred
annuity contracts. The assets of this account are available to fund general
account liabilities and general account assets are available to fund liabilities
of this account.
Assets and liabilities of the separate accounts, representing net deposits and
accumulated net investment earnings less fees, held primarily for the benefit of
contract holders, are shown as separate captions in the financial statements.
Assets held in the separate accounts are carried at market value as determined
by the quoted market prices of the underlying investments.
Gains (losses) from mortality experience and investment experience of the
separate accounts, not applicable to contract owners, and accrued expense
allowances recognized in reserves are receivable from or payable to the general
account. Accumulated amounts that have not been transferred are recorded as
payable (receivable) to (from) the general account. Transfers from separate
accounts due or accrued amounted to $17,044,000 in 1999 and $15,992,000 in 1998.
CHANGES IN ACCOUNTING PRINCIPLES AND REPORTING
In March 1998, the National Association of Insurance Commissioners adopted the
Codification of Statutory Accounting Principles ("Codification"). The
Codification, which is intended to standardize regulatory accounting and
reporting for the insurance industry, is proposed to be effective January 1,
2001. However, statutory accounting principles will continue to be established
by individual state laws and permitted practices and it is uncertain when, or
if, the State of New York will require adoption of the Codification for the
preparation of statutory financial statements. The Company has not finalized the
quantification of the effects of Codification on its statutory financial
statements.
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 prior year amounts have been reclassified to conform to amounts as
presented in the current year.
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, 1999, 1998 AND 1997
2. BONDS
Investments in debt securities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------------------------
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 $ 6,148 $13 $ (171) $ 5,990
Public utilities 8,765 7 (391) 8,381
Transportation 3,521 -- (16) 3,505
Finance 7,742 -- (183) 7,559
All other corporate bonds 33,039 69 (1,379) 31,729
------- --- ------- -------
Total long-term bonds 59,215 89 (2,140) 57,164
Short-term bonds -- U.S. Treasury Bills, bankers
acceptances and commercial paper 6,958 -- -- 6,958
------- --- ------- -------
Total bonds $66,173 $89 $(2,140) $64,122
======= === ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------------
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 $16,153 $ 319 $(31) $16,441
Public utilities 11,353 213 (16) 11,550
Transportation 2,553 19 -- 2,572
Finance 6,260 122 (9) 6,373
All other corporate bonds 21,598 430 (37) 21,991
------- ------ ---- -------
Total long-term bonds 57,917 1,103 (93) 58,927
Short-term bonds -- U.S. Treasury Bills, bankers
acceptances and commercial paper 5,258 -- -- 5,258
------- ------ ---- -------
Total bonds $63,175 $1,103 $(93) $64,185
======= ====== ==== =======
</TABLE>
24
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
2. BONDS (CONTINUED):
The amortized cost and estimated fair value of debt securities at December 31,
1999 are shown below by contractual maturity.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, 1999
----------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
(IN 000'S)
<S> <C> <C>
Maturities are:
Due in one year or less $12,010 $12,001
Due after one year through five years 21,833 21,766
Due after five years through ten years 19,002 17,447
Due after ten years 6,211 5,873
------- -------
Subtotal 59,056 57,087
Mortgage-backed securities 7,117 7,035
------- -------
Total bonds $66,173 $64,122
======= =======
</TABLE>
Proceeds from sales and maturities of investments in debt securities during
1999, 1998 and 1997 were $35,978,000, $29,068,000 and $42,986,000, gross gains
of $192,000, $407,000 and $395,000 and gross losses of $395,000, $2,000 and
$40,000, respectively.
A bond, included above, with an amortized cost of approximately $405,000 and
$404,000 at December 31, 1999 and 1998, respectively, was on deposit with the
Superintendent of Insurance of the State of New York as required by law.
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 geographical distribution of the mortgage loan
portfolio at December 31:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN 000'S)
<S> <C> <C>
California $ 582 $ 3,421
Florida 733 777
Massachusetts -- 1,090
New York 1,413 2,868
Ohio 1,271 1,291
All other 4,661 8,211
------ -------
$8,660 $17,658
====== =======
</TABLE>
As of December 31, 1999 and 1998, the Company had no restructured mortgage
loans.
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, 1999, 1998 AND 1997
3. MORTGAGE LOANS (CONTINUED):
The Company has no outstanding mortgage loan commitments on real estate.
4. INVESTMENT GAINS (LOSSES)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
-------- -------- --------
(IN 000'S)
<S> <C> <C> <C>
Realized capital gains (losses):
Bonds $ 2 $ 7 $(99)
Mortgage loans (27) (8) (6)
Real estate 177 (12) 288
---- ---- ----
$152 $(13) $183
==== ==== ====
Changes in unrealized capital gains on mortgage loans $-- $359 $138
==== ==== ====
</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 net realized capital gains (losses)
credited to the IMR were $(35,000), $408,000 and $355,000 in 1999, 1998 and
1997, respectively. All gains are transferred net of applicable income taxes.
5. NET INVESTMENT INCOME
Net investment income consisted:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(IN 000'S)
<S> <C> <C> <C>
Interest income from bonds $4,108 $4,570 $5,622
Interest income from mortgage loans 1,370 1,926 3,279
Real estate investment income -- 22 483
Other investment income 43 125 170
------ ------ ------
Gross investment income 5,521 6,643 9,554
Investment expenses 350 245 729
------ ------ ------
Net investment income $5,171 $6,398 $8,825
====== ====== ======
</TABLE>
6. REINSURANCE
The Company has agreements with SLOC which provide that SLOC 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 SLOC will reinsure the
mortality risks in excess of $50,000 per policy for group life insurance
contracts and $4,000 per policy per month for the group long-term disability
contracts ceded by the Company. For the years ended December 31, 1998 and 1997,
the agreements provided that SLOC would reinsure $3,000 per policy per month for
the group long-
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, 1999, 1998 AND 1997
6. REINSURANCE (CONTINUED):
term disability contracts ceded by the Company. Reinsurance transactions under
these agreements had the effect of increasing (decreasing) income from
operations by $(169,000), $(771,000) and $139,000 for the years ended
December 31, 1999, 1998, and 1997, respectively.
The group life and long-term disability reinsurance agreements require that the
reinsurer provide funds in amounts equal to the reserves ceded.
The following are summarized pro forma results of operations of the Company for
the years ended December 31, 1999, 1998 and 1997 before the effect of
reinsurance transactions with SLOC:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(IN 000'S)
<S> <C> <C> <C>
Income:
Premiums, annuity deposits and other revenues $71,099 $105,728 $142,915
Net investment income and realized gains 5,323 6,718 9,343
------- -------- --------
Subtotal 76,422 112,446 152,258
------- -------- --------
Benefits and expenses:
Policyholder benefits 74,539 79,918 101,371
Other expenses (4,225) 22,988 45,538
------- -------- --------
Subtotal 70,314 102,906 146,909
------- -------- --------
Income from operations $ 6,108 $ 9,540 $ 5,349
======= ======== ========
</TABLE>
The Company is contingently liable for the portion of the policies reinsured
under each of its existing reinsurance agreements in the event SLOC is unable to
pay their portion of any reinsured claim. Management believes that any liability
from this contingency is unlikely.
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, 1999, 1998 AND 1997
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, 1999
---------------------
AMOUNT % OF TOTAL
-------- ----------
(IN 000'S)
<S> <C> <C>
Subject to discretionary withdrawal with adjustment:
With market value adjustment $ 90,735 12.2
At book value less surrender charges (surrender charge >
5%) 6,221 0.8
At book value (minimal or no charge or adjustment) 626,008 84.1
Not subject to discretionary withdrawal provision 21,252 2.9
-------- -----
Total annuity actuarial reserves and deposit liabilities $744,216 100.0
======== =====
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
---------------------
AMOUNT % OF TOTAL
-------- ----------
(IN 000'S)
<S> <C> <C>
Subject to discretionary withdrawal:
With market value adjustment $ 98,744 15.2
At book value less surrender charges (surrender charge >
5%) 7,108 1.1
At book value (minimal or no charge or adjustment) 523,814 80.5
Not subject to discretionary withdrawal provision 20,709 3.2
-------- -----
Total annuity actuarial reserves and deposit liabilities $650,375 100.0
======== =====
</TABLE>
8. SEGMENT INFORMATION
The Company offers financial products and services such as fixed and variable
annuities, group life insurance and group long-term disability protection.
Within these areas, the Company conducts business principally in two operating
segments and maintains a corporate segment to provide for the capital needs of
the various operating segments and to engage in other financing related
activities.
The Wealth Management segment markets and administers individual variable and
fixed annuity products, including market value adjusted annuities, while the
Protection segment markets and administers group life insurance and group
long-term disability products.
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, 1999, 1998 AND 1997
8. SEGMENT INFORMATION (CONTINUED):
The following amounts pertain to the various business segments:
<TABLE>
<CAPTION>
FEDERAL TOTAL
TOTAL TOTAL PRETAX INCOME GENERAL ACCOUNT
REVENUES EXPENDITURES INCOME TAXES ASSETS
------------ ------------ ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
1999:
Wealth Management $ 53,466,000 $ 50,636,000 $ 2,830,000 $ 155,000 $ 37,356,000
Protection 16,550,000 15,914,000 636,000 237,000 17,025,000
Corporate 2,490,000 170,000 2,320,000 836,000 25,213,000
------------ ------------ ----------- ---------- ------------
Total: $ 72,506,000 $ 66,720,000 $ 5,786,000 $1,228,000 $ 79,594,000
============ ============ =========== ========== ============
1998:
Wealth Management 97,936,000 92,889,000 5,047,000 449,000 36,148,000
Protection 15,155,000 13,251,000 1,904,000 654,000 14,685,000
Corporate 2,071,000 253,000 1,818,000 968,000 34,838,000
------------ ------------ ----------- ---------- ------------
Total: $115,162,000 $106,393,000 $ 8,769,000 $2,071,000 $ 85,671,000
============ ============ =========== ========== ============
1997:
Wealth Management 130,926,000 127,120,000 3,806,000 1,803,000 43,799,000
Protection 12,623,000 13,791,000 (1,168,000) (406,000) 10,706,000
Corporate 2,874,000 24,000 2,850,000 918,000 46,273,000
------------ ------------ ----------- ---------- ------------
Total: $146,423,000 $140,935,000 $ 5,488,000 $2,315,000 $100,778,000
============ ============ =========== ========== ============
</TABLE>
9. RETIREMENT PLANS
The Company participates with SLOC and Sun Life (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; currently the plan is
fully funded. The Company is charged for its share of the pension cost based
upon its covered participants. Pension plan assets consist principally of
separate accounts of SLOC.
The Company's share of the group's accrued pension cost at December 31, 1999,
1998 and 1997 was $338,000, $275,000 and $211,000, respectively. The Company's
share of net periodic pension cost was $63,000, $65,000 and $33,000 for the
years ended December 31, 1999, 1998 and 1997, respectively.
The Company also participates with SLOC, Sun Life (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.
Company contributions were $26,000, $30,000 and $28,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.
OTHER POSTRETIREMENT BENEFIT PLANS
In addition to pension benefits, the Company provides certain health, dental and
life insurance benefits ("postretirement 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
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, 1999, 1998 AND 1997
9. RETIREMENT PLANS (CONTINUED):
retire early upon satisfying an alternate age plus service condition. Life
insurance benefits are generally set at a fixed amount.
The Company records an accrual of the estimated cost of retiree benefit payments
during the years the employee provides services, and amortizes an obligation of
approximately $50,000 over a period of ten years. The Company's cash flows are
not affected by implementation of this standard, but implementation decreased
net income by $9,000, $6,000 and $16,000 for the years ended December 31, 1999,
1998 and 1997, respectively. The Company's postretirement health, dental and
life insurance benefits currently are not funded.
The following table sets forth the change in the pension and other
postretirement benefit plans' benefit obligations and assets as well as the
plans' funded status reconciled with the amount shown in the Company's statutory
financial statements at December 31:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(IN 000'S)
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $110,792 $ 79,684 $ 10,419 $ 9,845
Service cost 5,632 4,506 413 240
Interest cost 6,952 6,452 845 673
Actuarial (gain) loss (21,480) 21,975 1,048 308
Benefits paid (2,376) (1,825) (508) (647)
-------- -------- -------- --------
Benefit obligation at end of year $ 99,520 $110,792 $ 12,217 $ 10,419
======== ======== ======== ========
The Company's share:
Benefit obligation at beginning of year $ 515 $ 269 $ 21 $ 89
Benefit obligation at end of year 577 515 30 21
Change in plan assets:
Fair value of plan assets at beginning of year $151,575 $136,610 $ -- $ --
Actual return on plan assets 9,072 16,790 -- --
Employer contribution -- -- 508 647
Benefits paid (2,376) (1,825) (508) (647)
-------- -------- -------- --------
Fair value of plan assets at end of year $158,271 $151,575 $ -- $ --
======== ======== ======== ========
Funded status $ 58,752 $ 40,783 $(12,217) $(10,419)
Unrecognized net actuarial gain (loss) (20,071) (2,113) 1,469 586
Unrecognized transition obligation (asset) (22,617) (24,674) 140 185
Unrecognized prior service cost 7,081 7,661 -- --
-------- -------- -------- --------
Prepaid (accrued) benefit cost $ 23,145 $ 21,657 $(10,608) $ (9,648)
======== ======== ======== ========
</TABLE>
30
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
9. RETIREMENT PLANS (CONTINUED):
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(IN 000'S)
<S> <C> <C> <C> <C>
The Company's share of accrued
benefit cost $ (338) $ (275) $ (50) $ (41)
======== ======== ======= =======
Weighted-average assumptions as of
December 31:
Discount rate 7.50% 6.75% 7.50% 6.75%
Expected return on plan assets 8.75% 8.00% N/A N/A
Rate of compensation increase 4.50% 4.50% N/A N/A
Components of net periodic benefit cost:
Service cost $ 5,632 $ 4,506 $ 413 $ 239
Interest cost 6,952 6,452 845 673
Expected return on plan assets (12,041) (10,172) -- --
Amortization of transition obligation (asset) (2,056) (2,056) 45 45
Amortization of prior service cost 580 580 -- --
Recognized net actuarial (gain) loss (554) (677) 164 (20)
-------- -------- ------- -------
Net periodic benefit cost $ (1,487) $ (1,367) $ 1,467 $ 937
======== ======== ======= =======
The Company's share of net periodic
benefit cost $ 63 $ 65 $ 9 $ 6
======== ======== ======= =======
</TABLE>
For measurement purposes, a 10.9% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 1999 (5.6% for dental benefits).
The rates were assumed to decrease gradually to 5% for 2005 and remain at that
level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage-point change in assumed
health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1-PERCENTAGE-POINT 1-PERCENTAGE-POINT
INCREASE DECREASE
------------------ ------------------
(IN 000'S)
<S> <C> <C>
Effect on total of service and interest cost components $ 288 $ (518)
Effect on postretirement benefit obligation $2,754 $(2,279)
</TABLE>
31
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
10. FAIR VALUE OF FINANCIAL STATEMENTS
The following table presents the carrying amounts and fair values of the
Company's financial instruments at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---------------------------- ----------------------------
CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT FAIR VALUE
--------------- ---------- --------------- ----------
(IN 000'S)
<S> <C> <C> <C> <C>
ASSETS:
Bonds (including short-term) $66,173 $64,122 $63,175 $64,185
Mortgages 8,660 8,876 17,658 18,157
Policy loans 538 538 625 625
LIABILITIES:
Individual annuities $26,561 $25,696 $29,724 $29,212
</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
by taking into account prices for publicly traded bonds of similar credit risk,
maturity, repayment and liquidity characteristics.
The fair values of mortgages are estimated by discounting future cash flows
using current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
The fair values of policy loans approximate carrying amounts.
The fair values of the Company's general account insurance 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 fair value.
11. 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 Interest
Maintenance Reserve and amortized into income over the remaining contractual
life of the security sold.
32
<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, 1999, 1998 AND 1997
11. STATUTORY INVESTMENT VALUATION RESERVES (CONTINUED):
The table shown below presents changes in the major elements of the AVR and IMR:
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
AVR IMR AVR IMR
-------- -------- -------- --------
(IN 000'S)
<S> <C> <C> <C> <C>
Balance, beginning of year $1,048 $831 $1,346 $886
Net realized capital (losses) gains, net of tax 152 (21) (13) 265
Amortization of net investment gains -- (256) -- (320)
Unrealized investment gains -- -- 359 --
Required by formula 10 -- (644) --
------ ---- ------ ----
Balance, end of year $1,210 $554 $1,048 $831
====== ==== ====== ====
</TABLE>
12. 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>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Balance, January 1 $11,770 $10,239 $ 6,129
Claims incurred 10,700 8,491 9,008
Claims paid (8,751) (6,960) (4,898)
------- ------- -------
Balance, December 31 $13,719 $11,770 $10,239
======= ======= =======
</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, 1999 and 1998, the unpaid claims and claim adjustment
liability for these contracts is included in aggregate reserves.
13. FEDERAL INCOME TAXES
The Company files a consolidated federal income tax return with Sun Life (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 (U.S.) of $2,521,000,
$2,506,000 and $1,938,000 during 1999, 1998 and 1997, respectively.
14. LEASE COMMITMENTS
Prior to 1999, the Company leased two separate facilities for its annuity
operations and group sales offices. Both leases commenced in March 1994. During
1999, the Company terminated its lease at its annuity operations facility as it
consolidated the functions performed at this facility with its parent company,
Sun Life (U.S.). The group sales office lease expired in July 1999 and was
renewed in August 1999 for a five year term. The total lease obligations are
$1,098,000 through the end of the lease term. Rent expense under these leases in
1999, 1998 and 1997 amounted to $426,000, $344,000, and $348,000, respectively.
33
<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, 1999, 1998 AND 1997
15. TRANSACTIONS WITH AFFILIATES
The Company has agreements with SLOC which provide that SLOC 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 $2,045,000 in 1999, $1,037,000 in 1998 and
$1,155,000 in 1997.
Cash dividends may be paid out of that part of the Company's available and
accumulated surplus funds, which was derived from realized net operating profits
of its business and realized capital gain. A cash dividend otherwise lawful may
be paid out of such earned surplus even though total surplus is at the time less
than previously contributed or paid-in surplus. No cash dividend shall be paid
to stockholder unless a notice of the intention of the Board of Directors to
declare such dividend and the amount thereof shall have been filed with the
Superintendent of Insurance of the State of New York not less than thirty days
in advance of such proposed declaration, nor if the Superintendent within thirty
days after such filing gives written notice to the Company of his disapproval of
such payment. Stock dividends may be paid out of any available surplus funds.
The maximum amount of dividends, which can be paid by the Company without prior
approval of the Insurance Commissioner of the State of New York, is subject to
restrictions relating to statutory surplus. A dividend in the amount of
$3,000,000 was declared and paid during 1998 by the Company to Sun Life (U.S.).
In 1999, a dividend in the amount of $6,500,000 was declared, approved by the
Board of Directors, and paid by the Company to Sun Life (U.S.).
16. RISK-BASED CAPITAL
Effective December 31, 1993, the NAIC adopted risk-based capital requirements
for life insurance companies. The risk-based capital requirements provide a
method for measuring the minimum acceptable amount of adjusted capital that a
life insurer should have, as determined under statutory accounting practices,
taking into account the risk characteristics of its investments and products.
The Company has met the minimum risk-based capital requirements at December 31,
1999 and 1998.
17. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for monetary and punitive damages have
been asserted. Although there can be no assurances, at the present time the
Company does not anticipate that the ultimate liability arising from such
pending or threatened litigation, after consideration of provisions made for
potential losses and costs of defense, will have a material adverse effect on
the financial condition or operating results of the Company.
Under insurance guaranty fund laws in each state, the District of Columbia and
Puerto Rico, insurers licensed to do business can be assessed by state insurance
guaranty associations for certain obligations of insolvent insurance companies
to policyholders and claimants. Recent regulatory actions against certain large
life insurers encountering financial difficulty have prompted various state
insurance guaranty associations to begin assessing life insurance companies for
the deemed losses. Most of these laws do provide, however, that an assessment
may be excused or deferred if it would threaten an insurer's solvency and
further provide annual limits on such assessments. Part of the assessments paid
by the Company and its subsidiaries pursuant to these laws may be used as
credits for a portion of the associated premium taxes.
34
<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, 1999, 1998 AND 1997
17. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED):
The Company incurred guaranty fund assessments of approximately $26,000,
$114,000, and $99,000 in 1999, 1998 and 1997, respectively.
18. 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.
Investments in fixed maturity securities classified as available-for-sale are
carried at aggregate fair value with changes in unrealized gains and losses
reported net of taxes in a separate component of stockholder's equity for GAAP
and generally at amortized cost under statutory accounting practices.
19. CONSOLIDATION OF CERTAIN OPERATIONS AND ACCOUNTING FUNCTIONS
Effective July 1, 1999, the Company consolidated its customer service and
accounting functions, formerly performed at its office at 80 Broad Street in New
York, New York, with its parent company, Sun Life (U.S.), based in Wellesley
Hills, Massachusetts. In 1999 the Company incurred one-time charges
approximating $800,000, which consisted primarily of: (1) severance and employee
benefit costs for 18 employees; (2) termination fee associated with canceling
its lease at its annuity operations facility; and (3) furniture and equipment
write-offs.
35
<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, 1999 and 1998, 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, 1999. 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 18 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 is a comprehensive basis of accounting other than generally accepted
accounting principles. The effects on the financial statements of the
differences 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, 1999 and 1998, and the results of its operations and its cash flow
for each of the three years in the period ended December 31, 1999 on the basis
of accounting described in Notes 1 and 18.
However, because of the differences between the two bases of accounting referred
to 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, 1999 and 1998 or the results of
its operations or its cash flow for each of the three years in the period ended
December 31, 1999.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 10, 2000
36
<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 4%
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 4% per
year; however, the Company is not obligated to credit any interest in excess of
4% 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 4% 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 4% 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 4% 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
37
<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 4% 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
Contract's Accumulation Account without assessment of a withdrawal charge. Such
withdrawal may, however, result in adverse tax consequences (see "Federal Tax
Status").
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 4% 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 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
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subject to applicable retirement program legislation and their taxation is
determined under the federal income tax laws. The amount borrowed will be
transferred to a fixed minimum guarantee accumulation account in the Company's
general account where it will accrue interest at a specified rate below the then
current loan interest rate. Generally, loans must be repaid within five years.
The amount of the death benefit, the amount payable on a full surrender and
the amount applied to provide an annuity on the Annuity Commencement Date will
be reduced to reflect any outstanding loan balance (plus accrued interest
thereon). Partial withdrawals may be restricted by the maximum loan limitation.
FIXED ANNUITY PAYMENTS
The dollar amount of each fixed annuity payment will be determined in
accordance with the annuity payment rates found in the Contract which are based
on a minimum guaranteed interest rate of 4% per year, or, if more favorable to
the Payee(s), in accordance with the Single Premium Immediate Settlement Rates
published by the Company and in use on the Annuity Commencement Date.
APPENDIX B
ILLUSTRATIVE EXAMPLE OF VARIABLE ACCUMULATION UNIT VALUE CALCULATIONS
Suppose the net asset value of a particular Series Fund share at the end of
the current Valuation Period is $18.38; at the end of the immediately preceding
Valuation Period is $18.32; the Valuation Period is one day; no dividends or
distributions caused the particular Series Fund shares to go "ex-dividend"
during the current Valuation Period. $18.38 divided by $18.32 is 1.00327511.
Subtracting the one day risk factor for mortality and expense risks of .00003539
(the daily equivalent of the current charge of 1.3% on an annual basis) gives a
net investment factor of 1.00323972. 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 14.6117523 (14.5645672 X
1.00323972).
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 12.3843446 (12.3456789 X 1.0032372 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 12.3843446. 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 12.3843446).
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APPENDIX C
WITHDRAWALS AND WITHDRAWAL CHARGES
Suppose, for example, that the initial Purchase Payment under a Contract was
$2,000, and that $2,000 Purchase Payments were made on each Contract Anniversary
thereafter. The maximum free withdrawal amount would be $200, $400, $600, $800,
and $1,000 in Contract Years 1, 2, 3, 4, and 5, respectively; these amounts are
determined as 10% of the new Payments (as new Payments are defined in each
Contract Year).
In Contract Years after the 5th, the maximum free withdrawal amount will
be increased by any old Payments which have not already been liquidated.
Continuing the example, consider a partial withdrawal of $4,500 made during
the 7th Contract Year. Let us consider this withdrawal under two sets of
circumstances: first where there were no previous partial withdrawals, and
second where there had been an $800 cash withdrawal payment made in the 5th
Contract Year.
1. In the first instance, there were no previous partial withdrawals. The
maximum free withdrawal amount in the 7th Contract Year is then $5,000,
which consists of $4,000 in old Payments ($2,000 from each of the first
two Contract Years) and $1,000 as 10% of the new Payments in years 3-7.
Because the $4,500 partial withdrawal is less than the maximum free
withdrawal amount of $5,000, no withdrawal charge would be imposed.
This withdrawal would liquidate the Purchase Payments which were made in
Contract Years 1 and 2, and would liquidate $500 of the Purchase Payment
which was made in Contract Year 3.
2. In the second instance, an $800 cash withdrawal payment had been made in
the 5th Contract Year. Because the cash withdrawal payment was less than
the $1,000 maximum free withdrawal amount in the 5th Contract Year, no
surrender charge would have been imposed. The $800 cash withdrawal
payment would have liquidated $800 of the Purchase Payment in the 1st
Contract Year.
As a consequence, the maximum free withdrawal amount in the 7th
Contract Year is only $4,200, consisting of $3,200 in old Payments
($1,200 remaining from Contract Year 1 and $2,000 from Contract Year
2) and $1,000 as 10% of new Payments. A $4,500 partial withdrawal
exceeds the maximum free withdrawal amount by $300. Therefore the
amount subject to the withdrawal charge is $300 and the withdrawal
charge is $300 X 0.05, or $15. The amount of the cash withdrawal
payment is the $4,500 partial withdrawal, minus the $15 withdrawal
charge, or $4,485. The $4,500 partial withdrawal would be charged to
the Contract's Accumulation Account in the form of cancelled
Accumulation Units.
This withdrawal would liquidate the remaining $1,200 from the Purchase
Payment in Contract Year 1, the full $2,000 Purchase Payment from
Contract Year 2, and $1,300 of the Payment from Contract Year 3.
Suppose that the Owner of the Contract wanted to make a full surrender of
the Contract in Contract Year 7 instead of a $4,500 partial withdrawal. The
consequences would be as follows:
1. In the first instance, where there were no previous cash withdrawal
payments, we know from above that the maximum free withdrawal amount in
the 7th Contract Year is $5,000. The sum of the old and new Payments not
previously liquidated is $14,000 ($2,000 from each Contract Year). The
amount subject to the withdrawal charge is thus $9,000. The withdrawal
charge on full surrender would then be $9,000 X 0.05 or $450.
2. In the second instance, where $800 had previously been withdrawn, we
know from above that the maximum free withdrawal amount in the 7th
Contract Year is $4,200. The sum of old and new Payments not previously
liquidated is $14,000 less the $800 which was previously liquidated, or
$13,200. The amount subject to the withdrawal charge is still $9,000
($13,200 - $4,200). The withdrawal charge on full surrender would thus be
the same as in the first example.
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SUN LIFE INSURANCE AND ANNUITY COMPANY OF
NEW YORK
P.O. Box 9141
Boston, Massachusetts 02117
AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, Massachusetts 02116
