<PAGE>
REGISTRATION NO.
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 04-2845273
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
80 BROAD STREET, NEW YORK, NEW YORK 10004
(212) 943-3855
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
COPIES TO:
BONNIE S. ANGUS DAVID N. BROWN, ESQ.
C/O SUN LIFE ASSURANCE COMPANY OF COVINGTON & BURLING
CANADA (U.S.) 1201 PENNSYLVANIA AVENUE N.W.
ONE SUN LIFE EXECUTIVE PARK P.O. BOX 7566
WELLESLEY HILLS, MASSACHUSETTS 02181 WASHINGTON, D.C. 20044
(617) 237-6030 (202) 662-5238
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after effectiveness of the Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. /X/
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)1
of this Form, check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT PRICE FEE
<S> <C> <C> <C> <C>
Fixed Annuity Contract....... * * $100,000,000 $34,483
</TABLE>
* These Contracts are not issued in predetermined amounts or units.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), SHALL DETERMINE.
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<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
Registration Statement on Form S-2
Cross Reference Sheet Pursuant To
Regulation S-K, Item 501(b)
Form S-2 Item Number
and Caption Location in Prospectus; Caption
-------------------- -------------------------------
1. Forepart of the Registration Cover Pages
Statement and Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages; Table of Contents
Cover Pages of Prospectus
3. Summary Information, Risk Cover Pages (Summary); Expense
Factors and Ratio of Earnings Summary
to Fixed Charges
4. Use of Proceeds A Word About the Company, the
Fixed Account, the Variable
Account and the Series Fund
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Distribution of the Contracts
9. Description of Securities to be Cover Pages; A Word About the
Registered Company, the Fixed Account, the
Variable Account and the Series
Fund; Purchase Payments and
Contract Values During
Accumulation Period; Cash
Withdrawals, Withdrawal Charges
and Market Value Adjustment;
Other Contractual Provisions
10. Interests of Named Experts and Not Applicable
Counsel
11. Information with Respect to the A Word About the Company, the
Registrant Fixed Account, the Variable
Account and the Series Fund;
Other Contractual Provisions;
Additional Information About the
Company; The Company's Directors
and Executive Officers; Legal
Proceedings; Legal Matters;
Financial Statements
12. Incorporation of Certain Cover Pages
Information by Reference
13. Disclosure of Commission Not Applicable
Position on Indemnification
for Securities Act
Liabilities
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS
Attached hereto and made a part hereof is the Prospectus dated August 1, 1996.
<PAGE>
PROSPECTUS
AUGUST 1, 1996
REGATTA GOLD - NY
--------------------------------------------------
The individual flexible payment deferred annuity contracts (the "Contracts")
offered by this Prospectus are designed for use in connection with personal
retirement and deferred compensation plans, some of which may qualify as
retirement programs under Sections 401, 403, or 408 of the Internal Revenue
Code. The Contracts are issued by Sun Life Insurance and Annuity Company of New
York (the "Company"), a wholly-owned subsidiary of Sun Life Assurance Company of
Canada (U.S.) ("Sun Life (U.S.)"), having its Principal Executive Offices at 80
Broad Street, New York, New York, 10004, telephone (212) 943-3855 (Toll Free
(800) 447-7569). The Contracts provide for the accumulation of values on either
a variable basis, a fixed basis, or a fixed and variable basis. The Contracts
provide that annuity payments will begin on a selected future date, and provide
for fixed and variable annuity payments as elected.
The initial Purchase Payment must be at least $5,000 and each additional
purchase payment must be at least $1,000 unless waived by the Company. The prior
approval of the Company is required before it will accept a Purchase Payment in
excess of $1,000,000.
The Owner may elect to have Contract values accumulate on a fixed basis in
the Fixed Account, which pays interest at the applicable Guaranteed Interest
Rate(s) for the duration of the particular Guarantee Period(s) selected by the
Owner, or on a variable basis in Sun Life (N.Y.) Variable Account C (the
"Variable Account"), a separate account of the Company, or divided between the
Fixed Account and the Variable Account. The assets of the Variable Account are
divided into Sub-Accounts. Each Sub-Account uses its assets to purchase, at
their net asset value, shares of a specific series of MFS/Sun Life Series Trust
(the "Series Fund"), a mutual fund registered under the Investment Company Act
of 1940, and advised by Massachusetts Financial Services Company, a subsidiary
of Sun Life (U.S.). Fifteen series are available for investment under the
Contracts: (1) Money Market Series; (2) High Yield Series; (3) Capital
Appreciation Series; (4) Government Securities Series; (5) World Governments
Series; (6) Total Return Series; (7) Managed Sectors Series; (8) Conservative
Growth Series; (9) Utilities Series; (10) World Growth Series; (11) Research
Series; (12) World Asset Allocation Series; (13) World Total Return Series; (14)
Emerging Growth Series; and (15) MFS/Foreign & Colonial International Growth and
Income Series. The Series Fund pays its investment adviser certain fees charged
against the assets of each series. Contract values allocated to the Variable
Account and the amount of variable annuity payments will vary to reflect the
investment performance of the series of the Series Fund selected by the Owner
and the deduction of the contract charges described under "How the Contract
Charges Are Assessed" on page 23. For more information about the Series Fund,
see "The Series Fund" on page 14 and the accompanying Series Fund prospectus.
(CONTINUED ON NEXT PAGE)
THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUS OF
MFS/SUN LIFE SERIES TRUST. YOU SHOULD RETAIN THESE PROSPECTUSES FOR FUTURE
REFERENCE.
*ANY REFERENCE IN THIS PROSPECTUS TO RECEIPT BY THE COMPANY MEANS RECEIPT AT ITS
ANNUITY SERVICE MAILING ADDRESS, 80 BROAD STREET, NEW YORK, NEW YORK 10004.
<PAGE>
If the Owner elects to have values accumulated on a fixed basis, Purchase
Payments are allocated to one or more Guarantee Periods made available by the
Company in connection with the Fixed Account with durations of from one to ten
years, as selected by the Owner. The Fixed Account is the general account of the
Company (See "The Fixed Account" on page 12). The Company will credit interest
at a rate of not less than three percent (3%) per year, compounded annually, to
amounts allocated to the Fixed Account and guarantees these amounts at various
interest rates (the "Guaranteed Interest Rates") for the duration of the
Guarantee Period elected by the Owner, subject to the imposition of any
applicable withdrawal charge, Market Value Adjustment, or account administration
fee. The Company may not change a Guaranteed Interest Rate for the duration of
the Guarantee Period; however, Guaranteed Interest Rates applicable to
subsequent Guarantee Periods cannot be predicted and will be determined at the
sole discretion of the Company (subject to the minimum guarantee of three
percent (3%)). That part of the Contract relating to the Fixed Account is
registered under the Securities Act of 1933, but the Fixed Account is not
subject to the restrictions of the Investment Company Act of 1940.
The Company does not deduct a sales charge from Purchase Payments. However,
if any part of a Contract's Accumulation Account is withdrawn, a withdrawal
charge (contingent deferred sales charge) may be assessed by the Company. This
charge is intended to reimburse the Company for expenses relating to the
distribution of the Contracts. A portion of the Contract's Account Value may be
withdrawn in each Contract Year without the imposition of the withdrawal charge
and after a Purchase Payment has been held by the Company for seven years it may
be withdrawn without charge. Also, no withdrawal charge is assessed upon
annuitization, upon payment of the death benefit, or upon transfers. Other
amounts withdrawn, adjusted by any applicable Market Value Adjustment with
respect to the Fixed Account, will be subject to a withdrawal charge ranging
from 6% to 0%. In no event will the withdrawal charges exceed 6% of Purchase
Payments (See "Withdrawal Charges" on page 20).
In addition, any cash withdrawal of amounts allocated to the Fixed Account,
other than a withdrawal effective within 30 days prior to the Expiration Date of
the applicable Guarantee Period or the withdrawal of interest credited to a
Guarantee Amount during the current Contract Year, will be subject to a Market
Value Adjustment. The Market Value Adjustment will reflect the relationship
between the Current Rate (which is the Guaranteed Interest Rate currently
declared by the Company for Guarantee Periods equal to the balance of the
Guarantee Period applicable to the amount being withdrawn) and the Guaranteed
Interest Rate applicable to the amount being withdrawn. Generally, if the
Guaranteed Interest Rate is lower than the Current Rate, then the application of
the Market Value Adjustment will result in a lower payment upon withdrawal.
Similarly, if the Guaranteed Interest Rate is higher than the Current Rate, the
application of the Market Value Adjustment will result in a higher payment upon
withdrawal (See "Market Value Adjustment" on page 21).
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.
Special restrictions on withdrawals apply to Contracts used with Tax
Sheltered Annuities established pursuant to Section 403(b) of the Internal
Revenue Code (See "Section 403(b) Annuities" on page 21).
In addition, under certain circumstances withdrawals may result in tax
penalties (See "Federal Tax Status"). For a discussion of cash withdrawals,
withdrawal charges and the Market Value Adjustment see "Cash Withdrawals,
Withdrawal Charges and Market Value Adjustment" on page 19.
On each Contract Anniversary and on surrender of the Contract for full value
the Company will deduct an annual account administration fee ("Account Fee") of
$30 from the Contract's Accumulation Account. After the Annuity Commencement
Date the Account Fee will be deducted pro rata from each variable annuity
payment made during the year. The Account Fee may be waived by the Company under
certain circumstances. In addition, the Company makes a deduction from the
Variable Account at the end of each Valuation Period at an effective annual rate
of 0.15% of the daily net assets of the Variable Account. These charges are to
reimburse the Company for administrative expenses related to the issue and
maintenance of the Contracts. (See "Administrative Charges" on page 23).
2
<PAGE>
The Company also deducts a mortality and expense risk charge at the end of
each Valuation Period equal to an effective annual rate of 1.25% of the daily
net assets of the Variable Account for mortality and expense risks assumed by
the Company (See "Mortality and Expense Risk Charge" on page 24).
Under certain circumstances the Company may substitute shares of another
series or shares of another registered open-end investment company or unit
investment trust both for Series Fund shares already purchased by the Variable
Account and as the security to be purchased in the future. Also, upon notice to
the Owner, or the Payee during the annuity period, the Company may modify the
contract if such modification: (i) is necessary to make the Contract or the
Variable Account comply with any law or regulation issued by a governmental
agency to which the Company or the Variable Account is subject; or (ii) is
necessary to assure continued qualification of the Contract under the Internal
Revenue Code or other federal or state laws relating to retirement annuities or
annuity contracts; or (iii) is necessary to reflect a change in the operation of
the Variable Account or the Sub-Accounts; or (iv) provides additional Variable
Account and/or fixed accumulation options (See "Substituted Securities" on page
30 and "Change in Operation of Variable Account" and "Modification" on page 31).
In the event of the death of the Annuitant prior to the Annuity Commencement
Date, the Company will pay a death benefit to the Beneficiary. If the death of
the Annuitant occurs on or after the Annuity Commencement Date, no death benefit
will be payable except as may be provided under the Annuity Option elected (See
"Death Benefit" on page 22).
Annuity Payments will begin on the Annuity Commencement Date. The Owner
selects the Annuity Commencement Date, frequency of payments and the Annuity
Option (See "Annuity Provisions" on page 25).
Premium taxes, if any, payable to any governmental entity will be charged
against the Contracts (See "Premium Taxes" on page 24).
Subject to certain conditions, and during the Accumulation Period, the Owner
may transfer amounts among the Sub-Accounts or Guarantee Periods available under
the Contract. Transfers (except of interest credited during the current Contract
Year to the Guarantee Amount transferred and automatic transfers in connection
with an approved dollar cost averaging program) from or within the Fixed Account
will be subject to the Market Value Adjustment unless the transfer is effective
within 30 days prior to the Expiration Date of the amount transferred and other
restrictions may apply (See "Transfer Privilege; Restriction on Market Timers"
on page 18).
After the Annuity Commencement Date, the Payee may, subject to certain
restrictions, exchange the value of a designated number of Annuity Units of
particular Sub-Accounts then credited with respect to the particular Payee for
other Annuity Units, the value of which would be such that the dollar amount of
an annuity payment made on the date of the exchange would be unaffected by the
fact of the exchange (See "Exchange of Variable Annuity Units" on page 27).
The Company will vote Series Fund shares held by the Sub-Accounts at
meetings of shareholders of the Series Fund, but will follow voting instructions
received from persons having the right to give voting instructions. 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. Any shares attributable to the Company and
Series Fund shares for which no timely voting instructions are received will be
voted by the Company in the same proportion as the shares for which instructions
are received from persons having such right (See "Voting of Series Fund Shares"
on page 29).
The Company will furnish Owners with certain reports and statements
described under "Periodic Reports" on page 30. Such reports, other than
prospectuses, will not include the Company's financial statements.
If the Owner is not satisfied with the Contract it may be returned to the
Company within ten days after it was received by the Owner. When the Company
receives the returned Contract it will be cancelled and the
3
<PAGE>
value of the Contract's Accumulation Account at the end of the Valuation Period
during which the Contract was delivered or mailed to the Company at its Annuity
Service Mailing Adress will be refunded (See "Right to Return Contract" on page
31).
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "1934 Act"), as amended, and in accordance therewith
files reports and other information with the Securities and Exchange Commission
(the "Commission"). Such reports and other information can be inspected and
copied at the public reference facilities of the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. and at the Commission's Regional Offices
located at 75 Park Place, New York, New York and Northwest Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
materials also can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
The Company has filed registration statements (the "Registration
Statements") with the Commission under the Securities Act of 1933 relating to
the Contracts offered by this Prospectus. This Prospectus has been filed as a
part of the Registration Statements and does not contain all of the information
set forth in the Registration Statements and exhibits thereto, and reference is
hereby made to such Registration Statements and exhibits for further information
relating to the Company and the Contracts. The Registration Statements and the
exhibits thereto may be inspected and copied, and copies can be obtained at
prescribed rates, in the manner set forth in the preceding paragraph.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Annual Report on Form 10-K for the year ended December 31, 1995 and
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 heretofore
filed by the Company with the Commission under the 1934 Act are incorporated by
reference in this Prospectus.
Any statement contained in a document incorporated by reference herein shall
be deemed modified or superseded hereby to the extent that a statement contained
in a later-filed document or herein shall modify or supersede such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will furnish, without charge, to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of the document referred to above which has been incorporated by reference
in this Prospectus, other than exhibits to such document (unless such exhibits
are specifically incorporated by reference in the Prospectus). Requests for such
document should be directed to Bonnie S. Angus, Secretary, Sun Life Insurance
and Annuity Company of New York, 80 Broad Street, New York, New York, 10004,
telephone (212) 943-3855 or (800) 447-7569.
4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Definitions 7
Expense Summary 9
Performance Data 10
This Prospectus Is a Catalog of Facts 10
Uses of the Contract 11
A Word About the Company, the Fixed Account, the Variable Account and the Series Fund 11
The Company 11
The Fixed Account 12
The Variable Account 13
The Series Fund 14
Purchase Payments and Contract Values During Accumulation Period 16
Purchase Payments 16
Variable Accumulation Value 16
Net Investment Factor 17
Fixed Accumulation Value 17
Guarantee Periods 17
Guaranteed Interest Rates 18
Transfer Privilege; Restriction on Market Timers 18
Cash Withdrawals, Withdrawal Charges and Market Value Adjustment 19
Cash Withdrawals 19
Withdrawal Charges 20
Amount of Withdrawal Charge 20
Section 403(b) Annuities 21
Market Value Adjustment 21
Death Benefit 22
Death Benefit Provided by the Contract 22
Election and Effective Date of Election 22
Payment of Death Benefit 23
Amount of Death Benefit 23
How the Contract Charges Are Assessed 23
Administrative Charges 23
Premium Taxes 24
Mortality and Expense Risk Charge 24
Withdrawal Charges 24
Annuity Provisions 25
Annuity Commencement Date 25
Election--Change of Annuity Option 25
Annuity Options 26
Determination of Annuity Payments 27
Fixed Annuity Payments 27
Variable Annuity Payments 27
Annuity Unit Value 27
Exchange of Variable Annuity Units 27
Annuity Payment Rates 28
</TABLE>
5
<PAGE>
TABLE OF CONTENTS--(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Other Contractual Provisions 28
Payment Limits 28
Designation and Change of Beneficiary 28
Exercise of Contract Rights 28
Change of Ownership 28
Death of Owner 29
Voting of Series Fund Shares 29
Periodic Reports 30
Substituted Securities 30
Change in Operation of Variable Account 31
Splitting Units 31
Modification 31
Custodian 31
Right to Return Contract 31
Federal Tax Status 32
Introduction 32
Tax Treatment of the Company and the Variable Account 32
Taxation of Annuities in General 32
Qualified Retirement Plans 34
Pension and Profit-Sharing Plans 34
Tax-Sheltered Annuities 34
Individual Retirement Accounts 34
Administration of the Contracts 34
Distribution of the Contracts 35
Additional Information About the Company 35
Selected Financial Data 35
Management's Discussion and Analysis of Financial Condition and Results of Operations 36
Reinsurance 36
Reserves 36
Investments 36
Competition 36
Employees 36
Properties 37
The Company's Directors and Executive Officers 37
State Regulation 40
Legal Proceedings 40
Legal Matters 41
Accountants 41
Registration Statements 41
Financial Statements 41
Appendix A--Variable Accumulation Unit Value, Annuity Unit Value and Variable Annuity Payment Calculations 70
Appendix B--Withdrawals, Withdrawal Charges and the Market Value Adjustment 71
Appendix C--Calculation of Performance Data; Advertising and Sales Literature 74
</TABLE>
6
<PAGE>
DEFINITIONS
The following terms as used in this Prospectus have the indicated meanings:
ACCOUNT VALUE: The Variable Accumulation Value, if any, plus the Fixed
Accumulation Value, if any, of a Contract for any Valuation Period.
ACCUMULATION ACCOUNT: An account established for the Contract to which Net
Purchase Payments are credited.
ACCUMULATION PERIOD: The period before the Annuity Commencement Date and
during the lifetime of the Annuitant.
*ANNUITANT: The person or persons named in the Application and on whose
life the first annuity payment is to be made. The Owner may not designate a
Co-Annuitant unless the Owner and the Annuitant are different persons. If more
than one person is so named, all provisions of the Contract which are based on
the death of the Annuitant will be based on the date of death of the last
surviving of the persons so named. By example, the death benefit will become due
only upon the death, prior to the Annuity Commencement Date, of the last
surviving of the persons so named. Collectively, these persons are referred to
in the Contract as "Annuitants." The Owner is not permitted to name a
"Co-Annuitant" under a Qualified Contract.
*ANNUITY COMMENCEMENT DATE: The date on which the first annuity payment is
to be made.
*ANNUITY OPTION: The method for making annuity payments.
ANNUITY UNIT: A unit of measure used in the calculation of the amount of
the second and each subsequent Variable Annuity payment.
APPLICATION: The document signed by the Owner that evidences the Owner's
application for the Contract.
*BENEFICIARY: The person or entity having the right to receive the death
benefit set forth in the Contract, and, for Non-Qualified Contracts, who is the
"designated beneficiary" for purposes of Section 72(s) of the Internal Revenue
Code in the event of the Owner's death.
COMPANY: Sun Life Insurance and Annuity Company of New York.
CONTRACT YEARS AND CONTRACT ANNIVERSARIES: The first Contract Year shall be
the period of 12 months plus a part of a month as measured from the Issue Date
to the first day of the calendar month which follows the calendar month of
issue. All Contract Years and Anniversaries thereafter shall be 12 month periods
based upon such first day of the calendar month which follows the calendar month
of issue. If, for example, the Issue Date is in March, the first Contract Year
will be determined from the Issue Date but will end on the last day of March in
the following year; all other Contract Years and all Contract Anniversaries will
be measured from April 1.
DUE PROOF OF DEATH: An original certified copy of an official death
certificate, an original certified copy of a decree of a court of competent
jurisdiction as to the finding of death, or any other proof satisfactory to the
Company.
EXPIRATION DATE: The last day of a Guarantee Period.
FIXED ACCOUNT: The Fixed Account consists of all assets of the Company
other than those allocated to a separate account of the Company.
FIXED ACCUMULATION UNIT VALUE: The sum of the values of all Guarantee
Amounts credited to a Contract's Accumulation Account.
FIXED ANNUITY: An annuity with payments which do not vary as to dollar
amount.
- ------------------------
*As specified in the Application, unless changed.
7
<PAGE>
GUARANTEE AMOUNT: Any portion of the Contract's Account Value allocated to
a particular Guarantee Period with a particular Expiration Date (including
interest earned thereon).
GUARANTEE PERIOD: The period for which a Guaranteed Interest Rate is
credited.
GUARANTEED INTEREST RATE: The rate of interest credited by the Company on a
compound annual basis during any Guarantee Period.
INTERNAL REVENUE CODE (CODE): The Internal Revenue Code of 1986, as
amended.
ISSUE DATE: The date on which the Contract becomes effective.
NET PURCHASE PAYMENT: That portion of a Purchase Payment which remains
after deduction of any applicable premium or similar tax.
NON-QUALIFIED CONTRACT: A Contract used in connection with a retirement
plan which does not receive favorable federal income tax treatment under
Sections 401, 403, or 408 of the Internal Revenue Code. 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.
PAYEE: The recipient of payments under the Contract. The term may include
an Annuitant or a Beneficiary who becomes entitled to benefits upon the death of
the Annuitant.
PURCHASE PAYMENT (PAYMENT): An amount paid to the Company by the Owner or
on behalf of the Owner as consideration for the benefits provided by the
Contract.
QUALIFIED CONTRACT: A Contract used in connection with a retirement plan
which receives favorable federal income tax treatment under Sections 401, 403,
or 408 of the Internal Revenue Code.
RECEIPT: Receipt by the Company at its Annuity Service Mailing Address
shown on the cover of this Prospectus.
SERIES FUND: MFS/Sun Life Series Trust.
SEVEN YEAR ANNIVERSARY: The seventh Contract Anniversary and each
succeeding Contract Anniversary occurring at any seven year interval thereafter,
for example, the 14th, 21st and 28th Contract Anniversaries.
SUB-ACCOUNT: That portion of the Variable Account which invests in shares
of a specific series or sub-series of the Series Fund.
VALUATION PERIOD: The period of time from one determination of Variable
Accumulation Unit and Annuity Unit values to the next subsequent determination
of these values. Such determination shall be made as of the close of the New
York Stock Exchange on each day the Exchange is open for trading and on such
other days on which there is a sufficient degree of trading in the portfolio
securities of the Variable Account so that the values of Variable Accumulation
Units and Annuity Units might be materially affected.
VARIABLE ACCOUNT: A separate account of the Company consisting of assets
set aside by the Company, the investment performance of which is kept separate
from that of the general assets of the Company.
VARIABLE ACCUMULATION UNIT: A unit of measure used in the calculation of
the value of the variable portion of a Contract's Accumulation Account.
VARIABLE ACCUMULATION VALUE: The sum of the value of all Variable
Accumulation Units credited to a Contract's Accumulation Account.
VARIABLE ANNUITY: An annuity with payments which vary as to dollar amount
in relation to the investment performance of specified Sub-Accounts of the
Variable Account.
- ------------------------
*As specified in the Application, unless changed.
8
<PAGE>
EXPENSE SUMMARY
The purpose of the following table and Example is to help Owners and
prospective purchasers to understand the costs and expenses that are borne,
directly and indirectly, by Contract Owners WHEN PAYMENTS ARE ALLOCATED TO THE
VARIABLE ACCOUNT. The table reflects expenses of the Variable Account as well as
of the Series Fund. The information set forth should be considered together with
the narrative provided under the heading "How the Contract Charges Are Assessed"
in this Prospectus, and with the Series Fund's prospectus. In addition to the
expenses listed below, premium taxes may be applicable if the Owner is other
than a New York State resident.
<TABLE>
<CAPTION>
CAPITAL
MONEY HIGH APPRE- GOVERNMENT WORLD
CONTRACT OWNER MARKET YIELD CIATION SECURITIES GOVERNMENTS
TRANSACTION EXPENSES SERIES SERIES SERIES SERIES SERIES
-------------------------------------------------- ------ ------ ------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Sales Load Imposed on Purchases 0 0 0 0 0
Deferred Sales Load (as a percentage of Purchase
Payments withdrawn)(1)
Number of Complete Account Years Purchase
Payment in Account
0-1........................................... 6% 6% 6% 6% 6%
2-3........................................... 5% 5% 5% 5% 5%
4-5........................................... 4% 4% 4% 4% 4%
6............................................. 3% 3% 3% 3% 3%
7 or more..................................... 0% 0% 0% 0% 0%
Exchange fee(2)................................... 0 0 0 0 0
<CAPTION>
ANNUAL ACCOUNT FEE $30 Per Contract
--------------------------------------------------
SEPARATE ACCOUNT ANNUAL EXPENSES
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
(as a percentage of average separate account
assets)
Mortality and Expense Risk Fees................... 1.25% 1.25% 1.25% 1.25% 1.25%
Administrative Expense Charge..................... 0.15% 0.15% 0.15% 0.15% 0.15%
Other Fees and Expenses of the Separate Account... 0.00% 0.00% 0.00% 0.00% 0.00%
Total Separate Account Annual Expenses............ 1.40% 1.40% 1.40% 1.40% 1.40%
<CAPTION>
SERIES FUND ANNUAL EXPENSES
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
(as a percentage of Series Fund average net
assets)
Management Fees................................... 0.50% 0.75% 0.75% 0.55% 0.75%
Other Expenses.................................... 0.09% 0.12% 0.08% 0.08% 0.14%
Total Series Fund Annual Expenses................. 0.59% 0.87% 0.83% 0.63% 0.89%
<CAPTION>
TOTAL MANAGED CONSERVATIVE
CONTRACT OWNER RETURN SECTORS GROWTH UTILITIES
TRANSACTION EXPENSES SERIES SERIES SERIES SERIES
-------------------------------------------------- ------ ------- ------------ ----------
<S> <C> <C> <C> <C>
Sales Load Imposed on Purchases 0 0 0 0
Deferred Sales Load (as a percentage of Purchase
Payments withdrawn)(1)
Number of Complete Account Years Purchase
Payment in Account
0-1........................................... 6% 6% 6% 6%
2-3........................................... 5% 5% 5% 5%
4-5........................................... 4% 4% 4% 4%
6............................................. 3% 3% 3% 3%
7 or more..................................... 0% 0% 0% 0%
Exchange fee(2)................................... 0 0 0 0
ANNUAL ACCOUNT FEE
--------------------------------------------------
SEPARATE ACCOUNT ANNUAL EXPENSES
--------------------------------------------------
<S> <C> <C> <C> <C>
(as a percentage of average separate account
assets)
Mortality and Expense Risk Fees................... 1.25% 1.25% 1.25% 1.25%
Administrative Expense Charge..................... 0.15% 0.15% 0.15% 0.15%
Other Fees and Expenses of the Separate Account... 0.00% 0.00% 0.00% 0.00%
Total Separate Account Annual Expenses............ 1.40% 1.40% 1.40% 1.40%
SERIES FUND ANNUAL EXPENSES
--------------------------------------------------
<S> <C> <C> <C> <C>
(as a percentage of Series Fund average net
assets)
Management Fees................................... 0.70% 0.75% 0.55% 0.75%
Other Expenses.................................... 0.06% 0.09% 0.09% 0.20%
Total Series Fund Annual Expenses................. 0.76% 0.84% 0.64% 0.95%
</TABLE>
<TABLE>
<CAPTION>
MFS/FOREIGN
&
COLONIAL
INTERNATIONAL
WORLD GROWTH
WORLD WORLD ASSET TOTAL EMERGING AND
CONTRACT OWNER GROWTH RESEARCH ALLOCATION RETURN GROWTH INCOME
TRANSACTION EXPENSES SERIES SERIES SERIES SERIES SERIES SERIES
----------------------------------- -------- -------- ----------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Sales Load Imposed on Purchases 0 0 0 0 0 0
Deferred Sales Load (as a
percentage of Purchase Payments
withdrawn)(1)
Number of Complete Account Years
Purchase Payment in Account
0-1............................ 6% 6% 6% 6% 6% 6%
2-3............................ 5% 5% 5% 5% 5% 5%
4-5............................ 4% 4% 4% 4% 4% 4%
6.............................. 3% 3% 3% 3% 3% 3%
7 or more...................... 0% 0% 0% 0% 0% 0%
Exchange fee(2).................... 0 0 0 0 0 0
<CAPTION>
ANNUAL ACCOUNT FEE $30 Per Contract
-----------------------------------
SEPARATE ACCOUNT ANNUAL EXPENSES
-----------------------------------
<S> <C> <C> <C> <C> <C> <C>
(as a percentage of average
separate account assets)
Mortality and Expense Risk Fees.... 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
Administrative Expense Charge...... 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
Other Fees and Expenses of the
Separate Account................. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Total Separate Account Annual
Expenses......................... 1.40% 1.40% 1.40% 1.40% 1.40% 1.40%
<CAPTION>
SERIES FUND ANNUAL EXPENSES
-----------------------------------
<S> <C> <C> <C> <C> <C> <C>
(as a percentage of Series Fund
average net assets)
Management Fees.................... 0.75% 0.75% 0.75% 0.75% 0.75% 0.975%
Other Expenses..................... 0.32% 0.20% 0.36% 0.44% 0.25% 0.525%
Total Series Fund Annual Expenses
After Any Applicable Expense
Reinbursements(3)................ 1.07% 0.95% 1.11% 1.19% 1.00% 1.50%
</TABLE>
- ------------
(1) A portion of the Account Value may be withdrawn each year without imposition
of any withdrawal charge, and after a Purchase Payment has been held by the
Company for seven years it may be withdrawn free of any withdrawal charge.
(2) A Market Value Adjustment may be imposed on amounts transferred from or
within the Fixed Account.
(3) Other expenses of the MFS/Foreign & Colonial International Growth and Income
Series are based on estimated amounts for the current fiscal year. The
Adviser has undertaken to reimburse the series for expenses that exceed
1.50% of the average daily net assets of the series on an annualized basis,
as more fully described in the Series Fund's Prospectus. Absent such
reimbursement, expenses of the MFS/Foreign & Colonial International Growth
and Income Series for 1995 would have been 1.63% of average net assets.
9
<PAGE>
EXAMPLE
If you surrender your Contract at the end of the applicable time period, you
would pay the following expenses on a $1,000 investment, assuming a 5% annual
return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
----------- -----------
<S> <C> <C>
Capital Appreciation Series $ 77 $ 115
Conservative Growth Series 75 109
Emerging Growth Series 78 120
High Yield Series 77 116
Government Securities Series 75 109
MFS/Foreign & Colonial International Growth and Income Series 83 135
Managed Sectors Series 77 115
Money Market Series 74 107
Research Series 79 123
Total Return Series 76 113
Utilities Series 78 118
World Governments Series 77 117
World Growth Series 79 122
World Asset Allocation Series 84 135
World Total Return Series 80 126
</TABLE>
If you do not surrender your Contract, or if you annuitize at the end of the
applicable time period, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
----------- -----------
<S> <C> <C>
Capital Appreciation Series $ 23 $ 70
Conservative Growth Series 21 64
Emerging Growth Series 24 75
High Yield Series 23 71
Government Securities Series 21 64
MFS/Foreign & Colonial International Growth and Income Series 29 90
Managed Sectors Series 23 70
Money Market Series 20 62
Research Series 25 78
Total Return Series 22 68
Utilities Series 24 73
World Governments Series 23 72
World Growth Series 25 77
World Asset Allocation Series 30 90
World Total Return Series 26 81
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LOWER THAN THOSE SHOWN.
PERFORMANCE DATA
From time to time the Variable Account may publish reports to shareholders,
sales literature and advertisements containing performance data relating to the
Sub-Accounts. Performance data will consist of total return quotations which
will always include quotations for the period subsequent to the date each Sub-
Account became available for investment under the Contracts, and for recent one
year and, when applicable, five and ten year periods. Such quotations for such
periods will be the average annual rates of return required for an initial
Purchase Payment of $1,000 to equal the actual variable accumulation value
attributable to such Purchase Payment on the last day of the period, after
reflection of all applicable withdrawal and contract charges. In addition, the
Variable Account may calculate non-standardized rates of return that do not
reflect withdrawal and contract charges. Results calculated without withdrawal
and/or contract charges will be higher. Performance figures used by the Variable
Account are based on the actual historical performance of the Series Fund for
specified periods, and the figures are not intended to indicate future
performance. The Variable Account may also from time to time compare its
investment performance to various unmanaged indices or other variable annuities
and may refer to certain rating and other organizations in its marketing
materials. More detailed information on the computations is set forth in
Appendix C.
THIS PROSPECTUS IS A CATALOG OF FACTS
This Prospectus contains information about the Contract which provides fixed
benefits, variable benefits or a combination of both. It describes its uses and
objectives, its benefits and costs, and the rights and
10
<PAGE>
privileges of the Owner. It also contains information about the Company, the
Variable Account, the Fixed Account and the Series Fund. It has been carefully
prepared in non-technical language to help you decide whether the purchase of a
Contract will fit the needs of your retirement plan. We urge you to read it
carefully and retain it for future reference. The Contract has appropriate
provisions relating to variable and fixed accumulation values and variable and
fixed annuity payments. A Variable Annuity and a Fixed Annuity have certain
similarities. Both provide that Purchase Payments, less certain deductions, will
be accumulated prior to the Annuity Commencement Date. After the Annuity
Commencement Date, annuity payments will be made to the Annuitant. The Company
assumes the mortality and expense risks under the Contract, for which it
receives certain amounts. The significant difference between a Variable Annuity
and a Fixed Annuity is that under a Variable Annuity, all investment risk is
assumed by the Owner or Payee and the amounts of the annuity payments vary with
the investment performance of the Variable Account; under a Fixed Annuity, the
investment risk is assumed by the Company (except in the case of early
withdrawals (See "Cash Withdrawals" and "Market Value Adjustment")) and the
amounts of the annuity payments do not vary. However, the Owner bears the risk
that the Guaranteed Interest Rate to be credited on amounts allocated to the
Fixed Account may not exceed the minimum guaranteed rate of 3% for any Guarantee
Period.
USES OF THE CONTRACT
The Contract is designed for use in connection with retirement plans which
meet the requirements of Section 401 (including Section 401(k)), Section 403,
Section 408(b), Section 408(c) or Section 408(k) of the Internal Revenue Code,
however the Company may discontinue offering new Contracts in connection with
certain types of qualified plans. Certain federal tax advantages are currently
available to retirement plans which qualify as (1) self-employed individuals'
retirement plans under Section 401; (2) corporate or association retirement
plans under Section 401; (3) annuity purchase plans sponsored by certain tax
exempt organizations or public school systems under Section 403(b); or (4)
individual retirement accounts, including employer or association of employees
individual retirement accounts under Section 408(c) and SEP-IRAs under Section
408(k) (See "Federal Tax Status").
The Contract is also designed so that it may be used in connection with
certain non-tax-qualified retirement plans, such as payroll savings plans and
such other groups (trusteed or nontrusteed) as may be eligible under applicable
law.
A WORD ABOUT THE COMPANY,
THE FIXED ACCOUNT, THE VARIABLE ACCOUNT AND THE SERIES FUND
THE COMPANY
The Company is a stock life insurance company incorporated under the laws of
New York on May 25, 1983. Its Home Office is located at 80 Broad Street, New
York, New York, 10004, telephone (212) 943-3855. The Company currently issues
individual fixed and combination fixed/variable annuity contracts and group life
and long-term disability insurance only in the State of New York.
The Company is a wholly-owned subsidiary of Sun Life Assurance Company of
Canada (U.S.) ("Sun Life of Canada (U.S.)"), a stock life insurance company
incorporated in Delaware and having its Executive Office at One Sun Life
Executive Park, Wellesley Hills, Massachusetts 02181. Sun Life of Canada (U.S.)
has obtained authorization to do business in forty-eight states, the District of
Columbia and Puerto Rico, and it is anticipated that it will be authorized to do
business in all states except New York. Sun Life of Canada (U.S.) issues life
insurance policies and individual and group annuities. Sun Life of Canada
(U.S.)'s other subsidiaries are Massachusetts Financial Services Company and Sun
Capital Advisers, Inc., registered investment advisers, Sun Investment Services
Company, a registered broker-dealer and investment adviser, Sun Benefit Services
Company, Inc. which offers claims, administrative and actuarial services, New
London Trust, F.S.B., a federally chartered savings bank, Sun Life Financial
Services Limited, which provides off-shore administrative services and
Massachusetts Casualty Insurance Company, which issues individual disability
income policies.
Sun Life of Canada (U.S.), in turn, is a wholly-owned subsidiary of Sun Life
Assurance Company of Canada, 150 King Street West, Toronto, Ontario, Canada. Sun
Life Assurance Company of Canada is a mutual life insurance company incorporated
pursuant to Act of Parliament of Canada in 1865 and currently
11
<PAGE>
transacts business in all of the Canadian provinces and territories, all states
except New York, the District of Columbia, Puerto Rico, the Virgin Islands,
Great Britain, Ireland, Hong Kong, Bermuda and the Philippines (See "Additional
Information about the Company").
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 Guarantee Periods available in connection with the Fixed Account to
the extent elected by the Owner at the time the Contract is issued, or as
subsequently changed. In addition, all or part of the Contract's Account Value
may be transferred to Guarantee Periods available under the Contract as
described under "Transfer Privilege". Assets supporting amounts allocated to
Guarantee Periods become part of the Company's general account assets and are
available to fund the claims of all classes of customers of the Company,
including claims for benefits under the Contracts.
The Company will invest the assets of the Fixed Account in those assets
chosen by the Company and allowed by the laws of the State of New York regarding
the nature and quality of investments that may be made by life insurance
companies and the percentage of their assets that may be committed to any
particular type of investment. In general, these laws permit investments, within
specified limits and subject to certain qualifications, in federal, state and
municipal obligations, corporate bonds, preferred and common stocks, real estate
mortgages, real estate and certain other investments.
The Company intends to invest the assets of the Fixed Account primarily in
debt instruments as follows: (1) Securities issued by the United States
Government or its agencies or instrumentalities, which issues may or may not be
guaranteed by the United States Government; (2) Debt securities which have an
investment grade, at the time of purchase, within the four highest grades
assigned by Moody's Investors Services, Inc. (Aaa, Aa, A or Baa), Standard &
Poor's Corporation (AAA, AA, A or BBB) or any other nationally recognized rating
service; (3) Other debt instruments, including, but not limited to, issues of or
guaranteed by banks or bank holding companies and other corporations, which
obligations, although not rated by Moody's or Standard & Poor's, are deemed by
the Company's management to have an investment quality comparable to securities
which may be purchased as stated above; and (4) Other evidences of indebtedness
secured by mortgages or deeds of trust representing liens upon real estate.
Notwithstanding the foregoing, the Company may also invest a portion of the
Fixed Account in below investment grade debt instruments. Instruments rated Baa
and/or BBB or lower normally involve a higher risk of default and are less
liquid than higher rated instruments. If the rating of an investment grade debt
security held by the Company is subsequently downgraded to below investment
grade, the decision to retain or dispose of the security will be made based upon
an individual evaluation of the circumstances surrounding the downgrading and
the prospects for continued deterioration, stabilization and/or improvement.
The Company is not obligated to invest amounts allocated to the Fixed
Account according to any particular strategy, except as may be required by
applicable state insurance laws. Investment income from such Fixed Account
assets will be allocated between the Company and all contracts participating in
the Fixed Account, including the Contracts offered by this Prospectus, in
accordance with the terms of such contracts.
Fixed 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 and administrative expenses borne
by the Company in connection with contracts participating in the Fixed Account.
The Company expects to derive a profit from this compensation. The amount of
investment income allocated to the Contracts will vary from Guarantee Period to
Guarantee Period in the sole discretion of the Company. However, the Company
guarantees that it will credit interest at a rate of not less than three percent
(3%) per year, compounded annually, to amounts allocated to the Fixed Account
under the Contract. The Company may credit interest at a rate in excess of three
percent (3%) per year; however, the Company is not obligated to credit any
interest in excess of three percent (3%) per year. There is no specific formula
for the determination of excess interest credits. Such credits, if any, will be
12
<PAGE>
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. The Company's general investment strategy will be to invest
amounts allocated to the Fixed Account in investment-grade debt securities and
mortgages using immunization strategies with respect to the applicable Guarantee
Periods. This includes, with respect to investments and average terms of
investments, using dedication (cash flow matching) and/or duration matching to
minimize the Company's risk of not achieving the rates it is crediting under
Guarantee Periods in volatile interest rate environments. ANY INTEREST CREDITED
TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 3% PER YEAR WILL BE
DETERMINED IN THE SOLE DISCRETION OF THE COMPANY. THE OWNER ASSUMES THE RISK
THAT INTEREST CREDITED ON AMOUNTS ALLOCATED TO THE FIXED ACCOUNT MAY NOT EXCEED
THE MINIMUM GUARANTEE OF 3% FOR ANY GIVEN YEAR.
The Company is aware of no statutory limitations on the maximum amount of
interest it may credit, and the Board of Directors has set no limitations.
However, inherent in the Company's exercise of discretion in this regard is the
equitable allocation of distributable earnings and surplus among its various
policyholders and contract owners and to its sole stockholder.
THE VARIABLE ACCOUNT
The basic objective of a variable annuity contract is to provide variable
annuity payments which will be to some degree responsive to changes in the
economic environment, including inflationary forces and changes in rates of
return available from various types of investments. The Contract is designed to
seek to accomplish this objective by providing that variable annuity payments
(1) will reflect the investment performance of the Variable Account with respect
to amounts allocated to the Variable Account before the Annuity Commencement
Date and (2) will reflect the investment performance of the Variable Account
after that date. Since the Variable Account is always fully invested in Series
Fund shares, its investment performance reflects the investment performance of
the Series Fund. Values of Series Fund shares held by the Variable Account
fluctuate and are subject to the risks of changing economic conditions as well
as the risk inherent in the ability of the Series Fund's management to make
necessary changes in its portfolios to anticipate changes in economic
conditions. Therefore, the Owner bears the entire investment risk that the basic
objectives of the Contract may not be realized, and that the adverse effects of
inflation may not be lessened and there can be no assurance that the aggregate
amount of variable annuity payments will equal or exceed the aggregate amount of
Purchase Payments for the reasons described above or because of the premature
death of a Payee.
Another important feature of the Contract related to its basic objective is
the Company's promise that the dollar amount of variable annuity payments made
during the lifetime of the Payee will not be adversely affected by the actual
mortality experience of the Company or by the actual expenses incurred by the
Company in excess of expense deductions provided for in the Contract.
Sun Life (N.Y.) Variable Account C (the "Variable Account") was established
by the Company as a separate account on October 18, 1985 pursuant to a
resolution of its Board of Directors. Under New York insurance law and under the
Contract, the income, gains or losses of the Variable Account are credited to or
charged against the assets of the Variable Account without regard to the other
income, gains, or losses of the Company. These assets are held in relation to
the Contracts described in this Prospectus and such other variable annuity
contracts issued by the Company and designated by it as providing benefits which
vary in accordance with the investment performance of the Variable Account.
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 Variable Account meets the definition of a separate account under the
federal securities laws and is registered as a unit investment trust under the
Investment Company Act of 1940. Registration with the Securities and Exchange
Commission does not involve supervision of the management or investment
practices or policies of the Variable Account or of the Company by the
Commission.
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. All amounts allocated to the Variable Account will be
13
<PAGE>
used to purchase Series Fund shares as designated by the Owner at their net
asset value. Any and all distributions made by the Series Fund with respect to
the shares held by the Variable Account will be reinvested to purchase
additional shares at their net asset value. Deductions from the Variable Account
for cash withdrawals, annuity payments, death benefits, Account Fees, contract
charges against the assets of the Variable Account for the assumption of
mortality and expense risks, administrative expenses and any applicable taxes
will, in effect, be made by redeeming the number of Series Fund shares at their
net asset value equal in total value to the amount to be deducted. The Variable
Account will be fully invested in Series Fund shares at all times.
THE SERIES FUND
MFS/Sun Life Series Trust (the "Series Fund") is an open-end investment
management company registered under the Investment Company Act of 1940.
Currently shares of the Series Fund are also sold to other separate accounts
established by the Company and Sun Life (U.S.) in connection with individual and
group variable annuity contracts and single premium variable life insurance
contracts. In the future, shares of the Series Fund may be sold to other
separate accounts established by the Company or its affiliates to fund other
variable annuity or variable life insurance contracts. The Company and its
affiliates will be responsible for reporting to the Series Fund's Board of
Trustees any potential or existing conflicts between the interests of variable
annuity contract owners and the interests of owners of variable life insurance
contracts that provide for investment in shares of the Series Fund. The Board of
Trustees, a majority of whom are not "interested persons" of the Series Fund, as
that term is defined in the Investment Company Act of 1940, also intends to
monitor the Series Fund to identify the existence of any such irreconcilable
material conflicts and to determine what action, if any, should be taken by the
Series Fund and/or the Company and its affiliates (see "Management of the Series
Fund" in the Series Fund prospectus).
The Series Fund is composed of nineteen independent portfolios of
securities, each of which has separate investment objectives and policies.
Shares of the Series Fund are issued in nineteen series, each corresponding to
one of the portfolios; however, the Contracts currently provide for investment
only in shares of the fifteen series of the Series Fund described below.
Additional portfolios may be added to the Series Fund which may or may not be
available for investment by the Variable Account.
(1) MONEY MARKET SERIES ("MMS") will seek maximum current income to the
extent consistent with stability of principal by investing exclusively in money
market instruments maturing in less than 13 months, including U.S. government
securities and repurchase agreements collateralized by such securities,
obligations of the larger banks and prime commercial paper.
(2) HIGH YIELD SERIES ("HYS") will seek high current income and capital
appreciation by investing primarily in fixed income securities of U.S. and
foreign issuers which may be in the lower rated categories or unrated (commonly
known as "junk bonds") and which may include equity features. These securities
generally involve greater volatility of price and risk to principal and income
and less liquidity than securities in the higher rated categories. Any person
contemplating allocating Purchase Payments to the Sub-Account investing in
shares of the High Yield Series should review the risk disclosure in the Series
Fund prospectus carefully and consider the investment risks involved.
(3) CAPITAL APPRECIATION SERIES ("CAS") will seek capital appreciation by
investing in securities of all types, with a major emphasis on common stocks.
(4) GOVERNMENT SECURITIES SERIES ("GSS") will seek current income and
preservation of capital by investing in U.S. Government and Government-related
Securities.
(5) WORLD GOVERNMENTS SERIES ("WGS") will seek moderate current income and
preservation and growth of capital by investing in a portfolio of U.S. and
Foreign Government Securities.
(6) TOTAL RETURN SERIES ("TRS") will seek primarily to obtain above-average
income (compared to a portfolio entirely invested in equity securities)
consistent with prudent employment of capital; its secondary objective is to
take advantage of opportunities for growth of capital and income. Assets will be
allocated and reallocated from time to time between money market, fixed income
and equity securities. Under normal market conditions, at least 25% of the Total
Return Series' assets will be invested in fixed income securities and at least
40% and no more than 75% of its assets will be invested in equity securities.
14
<PAGE>
(7) MANAGED SECTORS SERIES ("MSS") will seek capital appreciation by varying
the weighting of its portfolio of common stocks among certain industry sectors.
Dividend income, if any, is incidental to its objective of capital appreciation.
(8) CONSERVATIVE GROWTH SERIES ("CGS") will seek long-term growth of capital
and future income while providing more current dividend income than is normally
obtainable from a portfolio of only growth stocks by investing a substantial
proportion of its assets in the common stocks or securities convertible into
common stocks of companies believed to possess better than average prospects for
long-term growth and a smaller proportion of its assets in securities whose
principal characteristic is income production.
(9) UTILITIES SERIES ("UTS") will seek capital growth and current income
(income above that available from a portfolio invested entirely in equity
securities) by investing, under normal market conditions, at least 65% of its
assets in equity and debt securities issued by both domestic and foreign utility
companies.
(10) WORLD GROWTH SERIES ("WGR") will seek capital appreciation by investing
in securities of companies worldwide growing at rates expected to be well above
the growth rate of the overall U.S. economy.
(11) RESEARCH SERIES ("RES") will seek to provide long-term growth of
capital and future income.
(12) WORLD ASSET ALLOCATION SERIES ("WAA") will seek total return over the
long term through investments in foreign and domestic equity and fixed income
securities and will also seek to have low volatility of share price (i.e. net
asset value per share) and reduced risk (compared to an aggressive equity/ fixed
income portfolio).
(13) WORLD TOTAL RETURN SERIES ("WTR") will seek total return by investing
in securities which will provide above average current income (compared to a
portfolio invested entirely in equity securities) and opportunities for
long-term growth of capital and income. The series will invest primarily in
global equity and fixed income securities (i.e. those of U.S. and non-U.S.
issuers).
(14) EMERGING GROWTH SERIES ("EGS") will seek to provide long-term growth of
capital by investing primarily (i.e. at least 80% of its assets under normal
circumstances) in common stocks of emerging growth companies, including small
and medium sized companies that are early in their life cycle but which have the
potential to become major enterprises. Dividend and interest income from
portfolio securities, if any, is incidental to its objective of long-term growth
of capital.
(15) MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH AND INCOME SERIES ("IGI")
will seek capital appreciation and current income by investing, under normal
market conditions, at least 65% of its total assets in equity and fixed income
securities of issuers whose principal activities are outside the U.S.
The investment adviser of the Series Fund, Massachusetts Financial Services
Company ("MFS"), is paid fees by the Series Fund for its services pursuant to
investment advisory agreements. MFS, a Delaware corporation, is a subsidiary of
Sun Life (U.S.). MFS also serves as investment adviser to each of the funds in
the MFS Family of Funds, and to certain other investment companies established
or distributed by MFS and/ or Sun Life (U.S.). MFS Asset Management Inc., a
subsidiary of MFS, provides investment advice to substantial private clients.
MFS and its predecessor organizations have a history of money management dating
from 1924. MFS operates as an autonomous organization and the obligation of
performance with respect to the investment advisory and underwriting agreements
(including supervision of the sub-advisers noted below) is solely that of MFS.
Neither the Company nor Sun Life (U.S.) undertakes any obligation in this
respect.
The investment advisory agreements for the World Growth Series and the
MFS/Foreign & Colonial International Growth and Income Series permit MFS from
time to time to engage one or more sub-advisers to assist in the performance of
its services. MFS has engaged Foreign & Colonial Management Limited ("FCM") and
its subsidiary, Foreign & Colonial Emerging Markets Limited ("FCEM"), as
sub-advisers of these series and has engaged Oechsle International Advisors,
L.P. as an additional sub-adviser of the World Growth Series. FCM and FCEM
replaced Batterymarch Financial Management, Inc. as sub-advisers to the World
Growth Series as of May 1, 1996.
15
<PAGE>
A more detailed description of the Series Fund, its management, its
investment objectives, policies and restrictions and its expenses may be found
in the accompanying current prospectus of the Series Fund and in the Series
Fund's Statement of Additional Information.
PURCHASE PAYMENTS AND CONTRACT VALUES DURING ACCUMULATION PERIOD
PURCHASE PAYMENTS
(1) PLACE, AMOUNT AND FREQUENCY
All Purchase Payments are to be paid to the Company at its Annuity Service
Mailing Address. The amount of Purchase Payments may vary; however, the Company
will not accept an initial Purchase Payment which is less than $5,000, and each
additional Purchase Payment must be at least $1,000, unless waived by the
Company. In addition, the prior approval of the Company is required before it
will accept a Purchase Payment which would cause the value of a Contract's
Accumulation Account to exceed $1,000,000. If a Contract's Account Value exceeds
$1,000,000, no additional Purchase Payments will be accepted without the prior
approval of the Company.
The completed Application and the initial Purchase Payment are forwarded to
the Company for acceptance. Upon acceptance, the Contract is issued to the Owner
and the initial Purchase Payment is then credited to the Contract's Accumulation
Account. The initial Purchase Payment must be applied within two business days
of receipt by the Company of a completed Application. The Company may retain the
Purchase Payment for up to five business days while attempting to complete an
incomplete Application. If the Application cannot be made complete within five
business days, the applicant will be informed of the reasons for the delay and
the Purchase Payment will be returned immediately unless the applicant
specifically consents to the Company's retaining the Purchase Payment until the
Application is made complete. Thereafter, the Purchase Payment must be applied
within two business days. Subsequent Purchase Payments are applied at the end of
the Valuation Period during which they are received by the Company.
(2) CONTRACT CONTINUATION
The Contract shall be continued automatically in full force during the
lifetime of the Annuitant until the Annuity Commencement Date or until the
Contract is surrendered.
(3) ACCUMULATION ACCOUNT
The Company will establish an Accumulation Account for each Contract and
will maintain the Accumulation Account during the Accumulation Period. The
Contract's Account Value for any Valuation Period is equal to the sum of the
variable accumulation value, if any, plus the fixed accumulation value, if any,
of the Contract's Accumulation Account for that Valuation Period.
(4) ALLOCATION OF NET PURCHASE PAYMENTS
The Net Purchase Payment is that portion of a Purchase Payment which remains
after deduction of any applicable premium or similar tax. Each Net Purchase
Payment will be allocated either to Guarantee Periods available in connection
with the Fixed Account or to Sub-Accounts of the Variable Account or to both
Sub-Accounts and the Fixed Account in accordance with the allocation factors
specified by the Owner in the Application or as subsequently changed.
The allocation factors for new Payments among the Guarantee Periods and
among the Sub-Accounts may be changed by the Owner at any time by giving written
notice of the change to the Company. Any change will take effect with the first
Purchase Payment received with or after receipt of notice of the change by the
Company and will continue in effect until subsequently changed.
VARIABLE ACCUMULATION VALUE
The variable accumulation value, if any, for any Valuation Period is equal
to the sum of the value of all Variable Accumulation Units credited to the
Contract's Accumulation Account for such Valuation Period.
(1) CREDITING VARIABLE 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 Sub-Accounts in
accordance with the allocation factors will be credited to the
16
<PAGE>
Accumulation Account in the form of Variable Accumulation Units. The number of
particular Variable Accumulation Units to be credited is determined by dividing
the dollar amount allocated to the particular Sub-Account by the Variable
Accumulation Unit value for the particular Sub-Account for the Valuation Period
during which the Purchase Payment is received by the Company.
(2) VARIABLE ACCUMULATION UNIT VALUE
The Variable Accumulation Unit value for each Sub-Account was established at
$10.00 for the first Valuation Period of the particular Sub-Account. The
Variable Accumulation Unit value for the particular Sub-Account for any
subsequent Valuation Period is determined by methodology which is the
mathematical equivalent of multiplying the Variable Accumulation Unit value for
the particular Sub-Account for the immediately preceding Valuation Period by the
Net Investment Factor for the particular Sub-Account for such subsequent
Valuation Period. The Variable Accumulation Unit value for each Sub-Account for
any Valuation Period is the value determined as of the end of the particular
Valuation Period and may increase, decrease or remain the same from Valuation
Period to Valuation Period in accordance with the Net Investment Factor
described below. For a hypothetical example of the calculation of the value of a
Variable Accumulation Unit, see Appendix A.
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 by the Series Fund on the shares held in the Sub-Account if the
"ex-dividend" date occurs during the Valuation Period, plus or minus
(3) a per share credit or charge with respect to any taxes paid or
reserved for by the Company during the Valuation Period which are
determined by the Company to be attributable to the operation of the
Sub-Account (no federal income taxes are applicable under present law);
(b) is the net asset value of a Series Fund share held in the
Sub-Account determined as of the end of the preceding Valuation Period; and
(c) is the asset charge factor determined by the Company for the
Valuation Period to reflect the charges for assuming the mortality and
expense risks and administrative expense risk.
FIXED ACCUMULATION VALUE
The fixed accumulation value, if any, for any Valuation Period is equal to
the sum of the values of all Guarantee Amounts credited to the Contract's
Accumulation Account for such Valuation Period.
GUARANTEE PERIODS
The Owner may elect one or more Guarantee Period(s) with durations of from
one to ten years from among those made available by the Company. The period(s)
elected will determine the Guaranteed Interest Rate(s). A Purchase Payment, or
the portion thereof (at least $1,000) (or the amount transferred in accordance
with the Transfer Privilege) allocated to a particular Guarantee Period, less
any applicable premium or similar taxes and any amounts subsequently withdrawn,
will earn interest at the Guaranteed Interest Rate during the Guarantee Period.
Initial Guarantee Periods begin on the date the Purchase Payment is applied, or,
in the case of a transfer, on the effective date of the transfer, and end the
number of calendar years in the
17
<PAGE>
Guarantee Period elected from the end of the calendar month in which the amount
was allocated to the Guarantee Period (the "Expiration Date"). Subsequent
Guarantee Periods begin on the first day following the Expiration Date.
Any portion of a Contract's Account Value allocated to a particular
Guarantee Period with a particular Expiration Date (including interest earned
thereon) will be referred to herein as a "Guarantee Amount". Interest will be
credited daily at a rate equivalent to the compound annual rate. As a result of
additional Purchase Payments, renewals and transfers of portions of the Account
Value described under "Transfer Privilege" below, which will begin new Guarantee
Periods, Guarantee Amounts allocated to Guarantee Periods of the same duration
may have different Expiration Dates. Thus each Guarantee Amount will be treated
separately for purposes of determining any Market Value Adjustment (see "Market
Value Adjustment").
The Company will notify the Owner in writing at least 45 and no more than 75
days prior to the Expiration Date for any Guarantee Amount. A new Guarantee
Period of the same duration as the previous Guarantee Period will commence
automatically at the end of the previous Guarantee Period unless the Company
receives, prior to the end of such Guarantee Period, a written election by the
Owner of a different Guarantee Period from among those being offered by the
Company at such time, or instructions to transfer all or a portion of the
Guarantee Amount to one or more Sub-Accounts in accordance with the Transfer
Privilege Provision. Each new Guarantee Amount must be at least $1,000 unless it
is equal to the entire Guarantee Amount being transferred.
GUARANTEED INTEREST RATES
The Company periodically will establish an applicable Guaranteed Interest
Rate for each Guarantee Period offered by the Company. Current Guaranteed
Interest Rates may be changed by the Company frequently or infrequently
depending on interest rates available to the Company and other factors as
described below, but once established rates will be guaranteed for the duration
of the respective Guarantee Periods. However, Account Value withdrawn from the
Fixed Account will be subject to any applicable withdrawal charge and Account
Fee and may be subject to a Market Value Adjustment on withdrawal or surrender
(See "Market Value Adjustment").
The Guaranteed Interest Rate will not be less than three percent (3%) per
year compounded annually. The Company has no specific formula for determining
the rate of interest that it will declare as a Guaranteed Interest Rate, as
these rates will be reflective of interest rates available on the types of debt
instruments in which the Company intends to invest amounts allocated to the
Fixed Account (See "The Fixed Account"). In addition, the Company's management
may consider other factors in determining Guaranteed Interest Rates for a
particular duration including: regulatory and tax requirements; sales
commissions and administrative and distribution expenses borne by the Company;
general economic trends; and competitive factors. The Owner bears the risk that
the Guaranteed Interest Rate to be credited on amounts allocated to the Fixed
Account may not exceed the minimum guaranteed rate of three percent (3%) for any
Guarantee Period.
TRANSFER PRIVILEGE; RESTRICTION ON MARKET TIMERS
At any time during the Accumulation Period the Owner may, upon written
request received by the Company, transfer all or part of the Account Value to
one or more Sub-Accounts or Guarantee Periods available under the Contract,
subject to the following conditions: (1) not more than 12 transfers may be made
in any Contract Year; (2) a minimum of 30 days must elapse between transfers
made to or from the Fixed Account or among Guarantee Periods; (3) the amount
being transferred from a Sub-Account may not be less than $1,000, unless the
total Account Value attributable to the Sub-Account is being transferred; (4)
any Account Value remaining in a Sub-Account may not be less than $1,000; and
(5) the total Account Value attributable to a Guarantee Amount must be
transferred; however, the transfer of interest credited to such Guarantee Amount
during the current Contract Year and automatic transfers to a Sub-Account of
amounts allocated to a Guarantee Period with a one-year duration in connection
with an approved dollar cost averaging program are not subject to this
restriction. In addition, transfers of a Guarantee Amount (except the transfer
of interest credited during the current Contract Year and the automatic
transfers described under (5) above) will be subject to the Market Value
Adjustment described below unless the transfer is effective within 30 days prior
to the Expiration Date applicable to the Guarantee Amount; and transfers
involving
18
<PAGE>
Variable Accumulation Units shall be subject to such terms and conditions as may
be imposed by the Series Fund. A transfer generally will be effective on the
date the request for transfer is received by the Company. Under current law, a
transfer will not result in any tax liability to the Owner.
The Contracts are not designed for professional market timing organizations
or other entities using programmed and frequent transfers. The Series Fund has
reserved the right to temporarily or permanently refuse exchange requests if, in
the judgment of the Series Fund's investment adviser, a series would be unable
to invest effectively in accordance with its investment objective and policies,
or would otherwise potentially be adversely affected. In particular, a pattern
of exchanges that coincide with a "market timing" strategy may be disruptive to
a series and therefore may be refused. Accordingly, the Variable Account may not
be in a position to effectuate transfers and may refuse transfer requests
without prior notice. Persons who wish to employ such strategies should not
purchase a Contract.
CASH WITHDRAWALS, WITHDRAWAL CHARGES AND MARKET VALUE ADJUSTMENT
CASH WITHDRAWALS
At any time before the Annuity Commencement Date and during the lifetime of
the Annuitant, the Owner may elect to receive a cash withdrawal payment from the
Company. Any such election shall specify the amount of the withdrawal and will
be effective on the date that it is received by the Company.
The Owner may request a full surrender or partial withdrawal. A full
surrender will result in a cash withdrawal payment equal to the Contract's
Account Value at the end of the Valuation Period during which the election
becomes effective less the Account Fee, plus or minus any applicable Market
Value Adjustment, and less any applicable withdrawal charge. A request for a
partial withdrawal will result in the cancellation of a portion of the
Contract's Account Value equal to the dollar amount of the cash withdrawal
payment, plus or minus any applicable Market Value Adjustment and plus any
applicable withdrawal charge. If a partial withdrawal is requested which would
leave an Account Value of less than the Account Fee, then such partial
withdrawal will be treated as a full surrender. The Account Fee and any
applicable Market Value Adjustment will be deducted from the Accumulation
Account before the application of any withdrawal charge.
In the case of a partial withdrawal, the Owner may instruct the Company as
to the amounts to be withdrawn from each Sub-Account and/or Guarantee Amount. If
not so instructed, the Company will effect such withdrawal pro-rata from each
Sub-Account and Guarantee Amount in which the Contract's Accumulation Account is
invested at the end of the Valuation Period during which the withdrawal becomes
effective. ALL CASH WITHDRAWALS OF ANY GUARANTEE AMOUNT, EXCEPT THOSE EFFECTIVE
WITHIN 30 DAYS PRIOR TO THE EXPIRATION DATE OF SUCH GUARANTEE AMOUNT OR THE
WITHDRAWAL OF INTEREST CREDITED DURING THE CURRENT CONTRACT YEAR, WILL BE
SUBJECT TO THE MARKET VALUE ADJUSTMENT.
Cash withdrawals from a Sub-Account will result in the cancellation of
Variable Accumulation Units with an aggregate value on the effective date of the
withdrawal equal to the total amount by which the Sub-Account is reduced. The
cancellation of such units will be based on the Variable Accumulation Unit
values of the Sub-Account for the Valuation Period during which the cash
withdrawal is effective.
The Company, upon request, will advise the Owner of the amounts that would
be payable in the event of a full surrender or partial withdrawal.
Any cash withdrawal payment will be paid within seven days from the date the
election becomes effective, except as the Company may be permitted to defer such
payment in accordance with the Investment Company Act of 1940 and New York
insurance law. Deferral of amounts withdrawn from the Variable Account is
currently permissible only (1) for any period (a) during which the New York
Stock Exchange is closed other than customary week-end and holiday closings or
(b) during which trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission, (2) for any period during
which an emergency exists as a result of which (a) disposal of securities held
by the Series Fund is not reasonably practicable or (b) it is not reasonably
practicable to determine the value of the net assets of the Series Fund or (3)
for such other periods as the Securities and Exchange Commission may by
19
<PAGE>
order permit for the protection of security holders. 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.
Since the Qualified Contracts offered by this Prospectus will be issued in
connection with retirement plans which meet the requirements of Sections 401,
403, and 408 of the Internal Revenue Code, reference should be made to the terms
of the particular retirement plan for any limitations or restrictions on cash
withdrawals. For special restrictions applicable to withdrawals from Contracts
used with Tax-Sheltered Annuities established pursuant to Section 403(b) of the
Internal Revenue Code, see "Section 403(b) Annuities" below.
A cash withdrawal under either a Qualified or Non-Qualified Contract offered
by this Prospectus also may result in a tax penalty. The tax consequences of a
cash withdrawal payment under both Qualified and Non-Qualified Contracts should
be carefully considered (See "Federal Tax Status").
WITHDRAWAL CHARGES
No sales charges are deducted from Purchase Payments. However, a withdrawal
charge (contingent deferred sales charge), when applicable, will be assessed to
reimburse the Company for certain expenses relating to the distribution of the
Contracts, including commissions, costs of preparation of sales literature and
other promotional costs and acquisition expenses. Cash withdrawals may result in
a 10% tax penalty in addition to any withdrawal charge applicable under the
Contracts (See "Federal Tax Status").
A portion of the Contract's Account Value may be withdrawn each year without
imposition of any withdrawal charge, and after a Purchase Payment has been held
by the Company for seven years it may be withdrawn free of any withdrawal
charge. In addition, no withdrawal charge is assessed upon annuitization, upon
payment of the death benefit or upon transfers among the Sub-Accounts or between
the Sub-Accounts and the Fixed Account or within the Fixed Account.
The withdrawal charge is not assessed with respect to a Contract owned by an
employee of the Company or of any of its affiliates, or of a licensed insurance
agent engaged in distributing the Contracts, and the Company may waive the
withdrawal charge with respect to Purchase Payments derived from the surrender
of certain single premium combination fixed/variable annuity contracts issued by
the Company.
All other full or partial withdrawals are subject to a withdrawal charge
which will be determined on the following basis:
(1) Old Payments and new Payments: With respect to a particular Contract
Year, "new Payments" are those Payments made in that Contract Year or in the six
immediately preceding Contract Years, and "old Payments" are those Payments not
defined as new Payments.
(2) Order of liquidation: To effect a full surrender or partial withdrawal,
each withdrawal is allocated first to the withdrawal amount without a withdrawal
charge and then to previously unliquidated Payments (on a first-in, first-out
basis) until all Purchase Payments have been liquidated.
(3) Withdrawal amount without a withdrawal charge: In each Contract Year,
10% of any new Payments may be withdrawn without the application of a withdrawal
charge, irrespective of whether these new Payments have been liquidated. Any
portion of this amount that is not used in the current Contract Year is
cumulative into future years. The maximum amount that can be withdrawn without a
withdrawal charge in a Contract Year is equal to the sum of (a) any previously
unliquidated withdrawal amount without a withdrawal charge, and (b) any
previously unliquidated old Payments.
(4) Amount subject to withdrawal charge: The amount subject to the
withdrawal charge is the amount of the partial withdrawal or full surrender less
the maximum withdrawal amount without a withdrawal charge, up to a maximum of
the sum of all unliquidated new Payments.
AMOUNT OF WITHDRAWAL CHARGE
The withdrawal charge percentage varies according to the number of complete
Contract Years between the Contract Year in which a Purchase Payment was
credited to the Contract's Accumulation Account
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<PAGE>
and the Contract Year in which it was withdrawn. The amount of the withdrawal
charge is determined by multiplying the amount subject to the withdrawal charge
by the withdrawal charge percentage in accordance with the following table:
<TABLE>
<CAPTION>
NUMBER OF COMPLETE
CONTRACT YEARS WITHDRAWAL CHARGE
- --------------------------------------------------------- -------------------------
<S> <C>
0-1 6%
2-3 5%
4-5 4%
6 3%
7 or more 0%
</TABLE>
In no event shall the aggregate withdrawal charges assessed against a
Contract exceed 6% of the aggregate Purchase Payments made under a Contract (See
Appendix B for examples of withdrawals, withdrawal charges and the Market Value
Adjustment).
SECTION 403(B) ANNUITIES
The Internal Revenue Code imposes restrictions on cash withdrawals from
Contracts used with Section 403(b) Annuities. In order for these Contracts to
receive tax deferred treatment, the Contract must provide that cash withdrawals
of amounts attributable to salary reduction contributions (other than
withdrawals of accumulation account value as of December 31, 1988 ("Pre-1989
Account Value")) may be made only when the Contract Owner attains age 59 1/2,
separates from service with the employer, dies or becomes disabled (within the
meaning of Section 72(m)(7) of the Code). These restrictions apply to any growth
or interest on or after January 1, 1989 on Pre-1989 Account Value, salary
reduction contributions made on or after January 1, 1989, and any growth or
interest on such contributions ("Restricted Account Value").
Withdrawals of Restricted Account Value are also permitted in cases of
financial hardship, but only to the extent of contributions; earnings on
contributions cannot be withdrawn for hardship reasons. While specific rules
defining hardship have not been issued by the Internal Revenue Service, it is
expected that to qualify for a hardship distribution, the Owner must have an
immediate and heavy bona fide financial need and lack other resources reasonably
available to satisfy the need. Hardship withdrawals (as well as certain other
premature withdrawals) will be subject to a 10% tax penalty, in addition to any
withdrawal charge applicable under the Contract (See "Federal Tax Status").
Under the terms of a particular Section 403(b) plan, the Owner may be
entitled to transfer all or a portion of the Contract's Account Value to one or
more alternative funding options. Contract Owners should consult the documents
governing their plan and the person who administers the plan for information as
to such investment alternatives.
With respect to these restrictions on withdrawals from the Variable Account,
the Company is relying upon a no-action letter dated November 28, 1988 from the
staff of the Securities and Exchange Commission to the American Council of Life
Insurance, the requirements for which have been complied with by the Company.
For information on the federal income tax withholding rules that apply to
distributions from Qualified Contracts (including Section 403(b) Annuities) see
"Federal Tax Status".
MARKET VALUE ADJUSTMENT
Any cash withdrawal of a Guarantee Amount, other than a withdrawal effective
within 30 days prior to the Expiration Date of the Guarantee Amount or the
withdrawal of interest credited on such Guarantee Amount during the current
Contract Year, will be subject to a Market Value Adjustment ("MVA") (for this
purpose, transfers (except automatic transfers to a Sub-Account of amounts
allocated to a Guarantee Period with a one-year duration in connection with an
approved dollar cost averaging program), distributions on the death of the Owner
and amounts applied to purchase an annuity are treated as cash withdrawals). The
MVA will be applied to the amount being withdrawn which is subject to the MVA,
after deduction of any applicable Account Fee and before deduction of any
applicable withdrawal charge.
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<PAGE>
The MVA will reflect the relationship between the Current Rate (as defined
below) for the Guarantee Amount being withdrawn and the Guaranteed Interest Rate
applicable to the amount being withdrawn. It also reflects the time remaining in
the applicable Guarantee Period. Generally, if the Guaranteed Interest Rate is
lower than the applicable Current Rate, then the application of the MVA will
result in a lower payment upon withdrawal. Similarly, if the Guaranteed Interest
Rate is higher than the applicable Current Rate, the application of the MVA will
result in a higher payment upon withdrawal.
The Market Value Adjustment is determined by the application of the
following formula:
<TABLE>
<C> <S> <C> <C> <C>
N/12
1 + I
( 1 + J ) -1
</TABLE>
where,
I is the Guaranteed Interest Rate being credited to the Guarantee Amount
subject to the Market Value Adjustment,
J is the Guaranteed Interest Rate declared by the Company, as of the
effective date of the application of the Market Value Adjustment, for current
allocations to Guarantee Periods equal to the balance of the Guarantee Period of
the Guarantee Amount subject to the Market Value Adjustment, rounded to the next
higher number of complete years (the "Current Rate"), and
N is the number of complete months remaining in the Guarantee Period of the
Guarantee Amount subject to the Market Value Adjustment.
In the determination of J, if the Company currently does not offer the
applicable Guarantee Period, then the rate will be determined by linear
interpolation of the current rates for Guarantee Periods that are available.
See Appendix B for examples of the application of the Market Value
Adjustment.
DEATH BENEFIT
DEATH BENEFIT PROVIDED BY THE CONTRACT
In the event of the death of the Annuitant prior to the Annuity Commencement
Date, the Company will pay a death benefit to the Beneficiary. If there is no
designated Beneficiary living on the date of death of the Annuitant, the Company
will, upon receipt of Due Proof of Death of both the Annuitant and the
designated Beneficiary, pay the death benefit in one sum to the Owner or, if the
Annuitant was the Owner, to the estate of the deceased Owner/Annuitant. If the
death of the Annuitant occurs on or after the Annuity Commencement Date, no
death benefit will be payable under the Contract except as may be provided under
the Annuity Option elected.
ELECTION AND EFFECTIVE DATE OF ELECTION
During the lifetime of the Annuitant and prior to the Annuity Commencement
Date, the Owner may elect to have the death benefit applied under one or more
Annuity Options to effect a Variable Annuity or a Fixed Annuity or a combination
of both for the Beneficiary as Payee after the death of the Annuitant. If no
election of a method of settlement of the death benefit by the Owner is in
effect on the date of death of the Annuitant, the Beneficiary may elect (a) to
receive the death benefit in the form of a single cash payment; or (b) to have
the death benefit applied under one or more of the Annuity Options (on the
Annuity Commencement Date described under "Payment of Death Benefit") to effect
a Variable Annuity or a Fixed Annuity or a combination of both for the
Beneficiary as Payee. Either election described above may be made by filing with
the Company a written election in such form as `the Company may require. Any
election of a method of settlement of the death benefit by the Owner will become
effective on the date it is received by the Company. For the purposes of the
Payment of Death Benefit and Amount of Death Benefit sections below, any
election of the method of settlement of the death benefit by the Owner which is
in effect on the date of death of the Annuitant will be deemed effective on the
date Due Proof of Death of the Annuitant is received by the Company. Any
election of a method of settlement of the death benefit by the Beneficiary will
become effective on the later of: (a) the date the election is received by the
Company; or (b) the date Due Proof of
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<PAGE>
Death of the Annuitant is received by the Company. If an election by the
Beneficiary is not received by the Company within 60 days following the date Due
Proof of Death of the Annuitant is received by the Company, the Beneficiary will
be deemed to have elected a cash payment as of the last day of the 60 day
period.
In all cases, no Owner or Beneficiary shall be entitled to exercise any
rights that would adversely affect the treatment of the Contract as an annuity
contract under the Internal Revenue Code. (See "Other Contractual
Provisions--Death of Owner").
PAYMENT OF DEATH BENEFIT
If the death benefit is to be paid in cash to the Beneficiary, payment will
be made within seven days of the date the election becomes effective or is
deemed to become effective, except as the Company may be permitted to defer any
such payment of amounts derived from the Variable Account in accordance with the
Investment Company Act of 1940. If the death benefit is to be paid in one sum to
the Owner or, if the Annuitant was the Owner, to the estate of the deceased
Owner/Annuitant, payment will be made within seven days of the date Due Proof of
Death of the Annuitant, the Owner and/or the designated Beneficiary, as
applicable, is received by the Company. If settlement under one or more of the
Annuity Options is elected the Annuity Commencement Date will be the first day
of the second calendar month following the effective date or the deemed
effective date of the election, and the Contract's Accumulation Account will be
maintained in effect until the Annuity Commencement Date.
AMOUNT OF DEATH BENEFIT
The death benefit is determined as of the effective date or deemed effective
date of the death benefit election and is equal to the greatest of (1) the
Contract's Account Value for the Valuation Period during which the death benefit
election is effective or is deemed to become effective; (2) total Purchase
Payments made under the Contract, minus the sum of all partial withdrawals; (3)
the Contract's Account Value on the Seven Year Anniversary immediately preceding
the date the death benefit election is effective or is deemed to become
effective, adjusted for any subsequent Purchase Payments, partial withdrawals
and charges; (4) the amount that would have been payable in the event of a full
surrender of the Contract on the date the death benefit election is effective or
is deemed to become effective; or, if the Annuitant is less than age 80 on the
date of death, (5) the Contract's Account Value on the Contract Anniversary
immediately preceding the date the death benefit election is effective or is
deemed to become effective, adjusted for any subsequent Purchase Payments,
partial withdrawals and charges.
If (2), (3), (4) or (5) is operative, the Contract's Account Value will be
increased by the excess of (2), (3), (4) or (5), as applicable, over (1) and the
increase will be allocated to the Sub-Accounts based on the respective values of
the Sub-Accounts on the date the amount of the death benefit is determined. If
no portion of the Account Value is allocated to the Sub-Accounts on that date,
the entire increase will be allocated to the Sub-Account invested in the Money
Market Series of the Series Fund.
HOW THE CONTRACT CHARGES ARE ASSESSED
As more fully described below, charges under the Contract offered by this
Prospectus are assessed in three ways: (1) as deductions for the Account Fee
and, if applicable, for premium taxes (currently, no premium taxes are
applicable in the State of New York); (2) as charges against the assets of the
Variable Account for the assumption of mortality and expense risks and
administrative expenses; and (3) as withdrawal charges (contingent deferred
sales charges). In addition, certain deductions are made from the assets of the
Series Fund for investment management fees and expenses. These fees and expenses
are described in the Series Fund's prospectus and Statement of Additional
Information.
ADMINISTRATIVE CHARGES
Each year on the Contract Anniversary, the Company deducts from the
Contract's Accumulation Account an annual account administration fee ("Account
Fee") of $30 as partial compensation for administrative expenses relating to the
issue and maintenance of the Contract. If the Contract is surrendered for its
full value on other than the Contract Anniversary, the Account Fee will be
deducted in full at the time of such surrender. The Account Fee will be deducted
on a pro rata basis from amounts allocated to each Guarantee Period and each
Sub-Account in which the Accumulation Account is invested at the time of such
deduction.
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<PAGE>
The Account Fee will be waived by the Company when the entire Account Value has
been allocated to the Fixed Account during the entire previous Contract Year or
the Contract's Account Value is greater than $75,000 on the Contract
Anniversary. On the Annuity Commencement Date, the value of the Accumulation
Account will be reduced by a proportionate amount of the Account Fee to reflect
the time elapsed between the last Contract Anniversary and the day before the
Annuity Commencement Date. After the Annuity Commencement Date the Account Fee
will be deducted in equal amounts from each variable annuity payment made during
the year. No deduction will be made from fixed annuity payments.
The Company makes a deduction from the Variable Account at the end of each
Valuation Period (during both the Accumulation Period and after annuity payments
begin) at an effective annual rate of 0.15% to reimburse the Company for those
administrative expenses attributable to the Contracts and the Variable Account
which exceed the revenues received from the Account Fee. The Company believes
that the administrative expense charge has been set at a level that will recover
no more than the actual costs associated with administering the Contracts. For a
description of administrative services provided see "Administration of the
Contracts."
PREMIUM TAXES
A deduction, when applicable, is made for premium or similar state or local
taxes. Currently, no premium taxes are applicable in the State of New York;
however, if an Owner or Payee is other than a New York State resident, a premium
tax ranging from 0% to 3.5% may be assessed, depending on the state of
residence. It is currently the policy of the Company to deduct any tax from the
amount applied to provide an annuity at the time annuity payments commence;
however, the Company reserves the right to deduct such taxes when incurred.
MORTALITY AND EXPENSE RISK CHARGE
The mortality risk assumed by the Company arises from the contractual
obligation to continue to make annuity payments to each Annuitant regardless of
how long the Annuitant lives and regardless of how long all annuitants as a
group live. This assures each annuitant that neither the longevity of fellow
annuitants nor an improvement in the life expectancy generally will have an
adverse effect on the amount of any annuity payment received under the Contract.
The Company assumes this mortality risk by virtue of annuity rates incorporated
into the Contract which cannot be changed. The expense risk assumed by the
Company is the risk that the administrative charges assessed under the Contract
may be insufficient to cover the actual total administrative expenses incurred
by the Company.
For assuming these risks, the Company makes a deduction from the Variable
Account at the end of each Valuation Period during both the Accumulation Period
and after annuity payments begin at an effective annual rate of 1.25%. If the
deduction is insufficient to cover the actual cost of the mortality and expense
risk undertaking, the Company will bear the loss. Conversely, if the deduction
proves more than sufficient, the excess will be profit to the Company and would
be available for any proper corporate purpose including, among other things,
payment of distribution expenses. The Company will recoup its expected costs
associated with registering and distributing the Contracts by the assessment of
the withdrawal charges (contingent deferred sales charges) described below.
However, the withdrawal charges may prove to be insufficient to cover actual
distribution expenses. If this is the case, the deficiency will be met from the
Company's general corporate funds which may include amounts derived from the
mortality and expense risk charges.
Mortality and expense risk charges and administrative charges assessed under
other contracts participating in the investment experience of the Variable
Account were the only expenses of the Variable Account for the year ended
December 31, 1995.
WITHDRAWAL CHARGES
No deduction for sales charges is made from Purchase Payments. However, a
withdrawal charge (contingent deferred sales charge) of up to 6% of certain
amounts withdrawn, when applicable, will be used to cover certain expenses
relating to the sale of the Contracts, including commissions paid to sales
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personnel, the costs of preparation of sales literature and other promotional
costs and acquisition expenses. Gross commissions and other distribution
expenses paid on the sale of these Contracts are not more than 7.10% of the
Purchase Payments. (See "Cash Withdrawals" and "Withdrawal Charges").
ANNUITY PROVISIONS
ANNUITY COMMENCEMENT DATE
Annuity payments will begin on the Annuity Commencement Date which is
selected by the Owner at the time the Contract is applied for. The Annuity
Commencement Date may not be sooner than the first day of the second calendar
month following the Issue Date. The Annuity Commencement Date may be changed by
the Owner from time to time by written notice to the Company, provided that
notice of each change is received by the Company at least 30 days prior to the
then current Annuity Commencement Date and the new Annuity Commencement Date is
a date which is: (1) at least 30 days after the effective date of the change;
(2) the first day of a month; and (3) not later than the first day of the first
month following the Annuitant's 90th birthday, unless otherwise restricted, in
the case of a Qualified Contract, by the particular retirement plan or by
applicable law. In most situations, current law requires that the Annuity
Commencement Date under a Qualified Contract be no later than April 1 following
the year the Annuitant reaches age 70 1/2, and the terms of the particular
retirement plan may impose additional limitations. The Annuity Commencement Date
may also be changed by an election of an Annuity Option as described in the
Death Benefit section of this Prospectus.
On the Annuity Commencement Date the Contract's Accumulation Account will be
cancelled and its adjusted value will be applied to provide an annuity under one
or more of the options described below. No withdrawal charge will be imposed
upon amounts applied to purchase an annuity. However, the Market Value
Adjustment may apply, as noted under "Determination of Annuity Payments" below.
NO PAYMENTS MAY BE REQUESTED UNDER THE CONTRACT'S CASH WITHDRAWAL PROVISIONS ON
OR AFTER THE ANNUITY COMMENCEMENT DATE, AND NO CASH WITHDRAWAL WILL BE PERMITTED
EXCEPT AS MAY BE AVAILABLE UNDER THE ANNUITY OPTION ELECTED.
Since the Contracts offered by this Prospectus may be issued in connection
with retirement plans which meet the requirements of Section 401, 403 or 408 of
the Internal Revenue Code, as well as certain non-qualified plans, reference
should be made to the terms of the particular plan for any limitations or
restrictions on the Annuity Commencement Date.
ELECTION--CHANGE OF ANNUITY OPTION
During the lifetime of the Annuitant and prior to the Annuity Commencement
Date, the Owner may elect one or more of the Annuity Options described below, or
such other settlement option as may be agreed to by the Company, for the
Annuitant as Payee. The Owner may also change any election, but written notice
of any election or change of election must be received by the Company at least
30 days prior to the Annuity Commencement Date. If no election is in effect on
the 30th day prior to the Annuity Commencement Date, Annuity Option B, for a
Life Annuity with 120 monthly payments certain, will be deemed to have been
elected. If more than one person is named as "Annuitant" due to the designation
of a co-annuitant, the adjusted value of the Accumulation Account will be
applied under Annuity Option C, with the survivor benefit to be calculated in
accordance with such option using fifty percent (50%) and the Co-Annuitant as
the designated second person.
Any election may specify the proportion of the adjusted value of the
Contract's Accumulation Account to be applied to provide a Fixed Annuity and a
Variable Annuity. In the event the election does not so specify, or if no
election is in effect on the 30th day prior to the Annuity Commencement Date,
then the portion of the adjusted value of the Contract's Accumulation Account to
be applied to provide a Fixed Annuity and/or Variable Annuity will be determined
on a pro rata basis from the composition of the Accumulation Account on the
Annuity Commencement Date.
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Annuity Options may also be elected by the Owner or the Beneficiary as
provided in the Death Benefit section of this Prospectus.
Reference should be made to the terms of a particular retirement plan and
any applicable legislation for any limitations or restrictions on the options
which may be elected.
NO CHANGE OF ANNUITY OPTION IS PERMITTED AFTER THE ANNUITY COMMENCEMENT
DATE.
ANNUITY OPTIONS
No lump sum settlement option is available under the Contract. The Owner may
surrender the Contract prior to the Annuity Commencement Date; however, any
applicable surrender charge will be deducted from the cash withdrawal payment
and a Market Value Adjustment, if applicable, will be applied.
Annuity Options A, B, C and D are available to provide either a Fixed
Annuity or a Variable Annuity. Annuity Option E is available only to provide a
Fixed Annuity.
Annuity Option A. Life Annuity: Monthly payments during the lifetime of
the Payee. This option offers a higher level of monthly payments than Annuity
Options B or C because no further payments are payable after the death of the
Payee and there is no provision for a death benefit payable to a Beneficiary.
Annuity Option B. Life Annuity with 60, 120, 180 or 240 Monthly Payments
Certain: Monthly payments during the lifetime of the Payee and in any event for
60, 120, 180 or 240 months certain as elected. The election of a longer period
certain results in smaller monthly payments than would be the case if a shorter
period certain were elected. In the event of the death of the Payee under this
option, the Contract provides that if there is no designated beneficiary
entitled to the remaining payments then living, the discounted value of the
remaining payments, if any, will be calculated and paid in one sum to the
deceased Payee's estate. In addition, any beneficiary who becomes entitled to
any remaining payments under this option may elect to receive the amounts due
under this option in one sum. The discounted value for variable annuity payments
will be based on interest compounded annually at the assumed interest rate of
three percent (3%). The discounted value for payments being made on a fixed
basis will be based on the interest rate initially used by the Company to
determine the amount of each payment.
Annuity Option C. Joint and Survivor Annuity: Monthly payments payable
during the joint lifetime of the Payee and a 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 election of this option of the number of each type of Annuity Unit
credited with respect to the Payee and fixed monthly payments, 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. Monthly Payments for a Specified Period
Certain: Monthly payments for a specified period of time (at least five years
but not exceeding 30 years), as elected. In the event of the death of the Payee
under this option, the Contract provides that, as described under Annuity Option
B above, in certain circumstances the discounted value of the remaining
payments, if any, will be calculated and paid in one sum.
*Annuity Option E. Fixed Payments: The amount applied to provide fixed
payments in accordance with this option will be held by the Company at interest.
Fixed payments will be made in such amounts and at such times (at least over a
period of five years) as may be agreed upon with the Company and will continue
until the amount held by the Company with interest is exhausted. The final
payment will be for the balance remaining and may be less than the amount of
each preceding payment. Interest will be credited on an annual basis on the
amount remaining unpaid at a rate which shall be determined by the Company from
time to time but which shall not be less than three percent (3%) per year,
compounded annually. The rate so determined may be changed at any time and as
often as may be determined by the Company, provided, however, that the rate may
not be reduced more frequently than once during each calendar year. In the event
of the death of the Payee under this option, the Contract provides that, as
described under Annuity Option B above, in certain circumstances the unpaid
balance of the proceeds and interest will be paid in one sum.
- ------------------------
*The election of this annuity option may result in the imposition of a penalty
tax.
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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 Account Value for the Valuation Period which ends immediately preceding the
Annuity Commencement Date, reduced by a proportionate amount of the Account Fee
to reflect the time elapsed between the last Contract Anniversary and the day
before the Annuity Commencement Date, plus or minus any applicable Market Value
Adjustment and minus any applicable premium or similar taxes.
If the amount to be applied under any annuity option is less than $2,000, or
if the first annuity payment payable in accordance with such option is less than
$20, the Company will pay the amount to be applied in a single payment to the
Payee.
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 three percent (3%) per year, or, if
more favorable to the Payee, in accordance with the Annuity Payment Rates
published by the Company and in use on the Annuity Commencement Date.
VARIABLE ANNUITY PAYMENTS
The dollar amount of the first variable annuity payment will be determined
in accordance with the Annuity Payment Rates found in the Contract which are
based on an assumed interest rate of three percent (3%) 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 at the end of the Valuation Period which ends
immediately preceding the Annuity Commencement Date. The number of Annuity Units
of each particular Sub-Account credited to the Contract then remains fixed
unless an exchange of Annuity Units is made as described below. The dollar
amount of each variable annuity payment after the first may increase, decrease
or remain constant, 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. If the net investment return on the assets of the Variable
Account is the same as the assumed interest rate of three percent (3%) per year,
variable annuity payments will remain level. If the net investment return
exceeds the assumed interest rate variable annuity payments will increase and,
conversely, if it is less than the assumed interest rate the payments will
decrease.
For a hypothetical example of the calculation of a Variable Annuity Payment,
see Appendix A.
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 the particular Sub-Account for any subsequent Valuation Period is determined
by multiplying the Annuity Unit value for the particular Sub-Account for the
immediately preceding Valuation Period by the Net Investment Factor (See
"Variable Accumulation Value, Net Investment Factor") for the particular
Sub-Account for the current Valuation Period and then multiplying that product
by a factor to neutralize the assumed interest rate of three percent (3%) per
year used to establish the Annuity Payment Rates found in the Contract. The
factor is 0.99991902 for a one day Valuation Period.
For a hypothetical example of the calculation of the value of an Annuity
Unit, see Appendix A.
EXCHANGE OF VARIABLE ANNUITY UNITS
After the Annuity Commencement Date the Payee may, by filing a written
request with the Company, exchange the value of a designated number of Annuity
Units of particular Sub-Accounts then credited with respect to the particular
Payee into other Annuity Units, the value of which would be such that the dollar
amount of an annuity payment made on the date of the exchange would be
unaffected by the fact of the exchange. No more than twelve (12) exchanges may
be made within each Contract Year.
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Exchanges may be made only between Sub-Accounts. Exchanges will be made
using the Annuity Unit values for the Valuation Period during which any request
for exchange is received by the Company.
ANNUITY PAYMENT RATES
The Contract contains Annuity Payment Rates for each Annuity Option
described in this Prospectus. 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 3%; and (b) the monthly fixed annuity payment, when
this payment is based on the minimum guaranteed interest rate of 3% per year.
The annuity payment rates may vary according to the Annuity Option elected
and the adjusted age of the Payee. The Contract also describes the method of
determining the adjusted age of the Payee. The mortality table used in
determining the annuity payment rates for Options A, B and C is the 1983
Individual Annuitant Mortality Table.
OTHER CONTRACTUAL PROVISIONS
PAYMENT LIMITS
The initial Purchase Payment must be at least $5,000 and each additional
Purchase Payment must be at least $1,000, unless waived by the Company. In
addition, the prior approval of the Company is required before it will accept a
Purchase Payment which would cause a Contract's Account Value to exceed
$1,000,000. If a Contract's Account Value exceeds $1,000,000, no additional
Purchase Payments will be accepted without the prior approval of the Company.
Purchase Payments may be made annually, semi-annually, quarterly, monthly or at
any other frequency acceptable to the Company. The Owner may, subject to the
minimum payment, increase or decrease the amount of Purchase Payments or change
the frequency of payment, but the Owner is not obligated to continue Purchase
Payments in the amount or frequency elected. There are no penalties for failure
to continue to make Purchase Payments. While the Contract is in force, Purchase
Payments may be made at any time prior to the Annuity Commencement Date.
DESIGNATION AND CHANGE OF BENEFICIARY
The beneficiary designation contained in the application will remain in
effect until changed. The interest of any Beneficiary is subject to the
particular Beneficiary surviving the Annuitant and, in the case of a Non-
Qualified Contract, the Owner as well.
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, but the change or
revocation will be without prejudice to the Company on account of any payment
made or any action taken by the Company prior to receiving the change or
revocation.
Reference should be made to the terms of a particular retirement plan and
any applicable legislation for any restrictions on the beneficiary designation.
EXERCISE OF CONTRACT RIGHTS
The Owner is entitled to exercise all Contract rights and privileges 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 Payee on and after the Annuity Commencement Date.
The Beneficiary becomes the Payee on the death of the Annuitant. Such Payees may
thereafter exercise such rights and privileges, if any, of ownership which
continue.
CHANGE OF OWNERSHIP
Ownership of a Qualified Contract may not be transferred except to: (1) the
Annuitant; (2) a trustee or successor trustee of a pension or profit sharing
trust which is qualified under Section 401 of the Internal
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Revenue Code; (3) the employer of the Annuitant provided that the Qualified
Contract after transfer is maintained under the terms of a retirement plan
qualified under Section 403(a) of the Internal Revenue Code for the benefit of
the Annuitant; (4) the trustee of an individual retirement account plan
qualified under Section 408 of the Internal Revenue Code for the benefit of the
Owner; or (5) as otherwise permitted from time to time by laws and regulations
governing the retirement or deferred compensation plans for which a Qualified
Contract may be issued. Subject to the foregoing, a Qualified Contract may not
be sold, assigned, transferred, discounted or pledged as collateral for a loan
or as security for the performance of an obligation or for any other purpose to
any person other than the Company.
The Owner of a Non-Qualified Contract may change the ownership of the
Contract during the lifetime of the Annuitant and prior to the Annuity
Commencement Date, subject to the provisions of the Contract, although such
change may result in the imposition of tax (See "Federal Tax Status -- Taxation
of Annuities in General"). A change of ownership will not be binding upon the
Company until written notification is received by the Company. When such
notification is so received, the change will be effective as of the date on
which the request for change was signed by the Owner, but the change will be
without prejudice to the Company on account of any payment made or any action
taken by the Company prior to receiving the change.
DEATH OF OWNER
If the Owner of a Non-Qualified Contract dies prior to the Annuitant and
before the Annuity Commencement Date, an amount equal to the death benefit
(determined in accordance with the Amount of Death Benefit provision, except
that the deemed effective date of the death benefit election will be the date
the Company receives Due Proof of Death of the Owner) must be distributed to the
designated beneficiary (as defined below), if then alive, either (1) within five
years after the date of death of the Owner, or (2) as an annuity over some
period not greater than the life or expected life of the designated beneficiary,
with annuity payments beginning within one year after the date of death of the
Owner. The person named as the Beneficiary shall be considered the designated
beneficiary for this purpose and for the purposes of Section 72(s) of the
Internal Revenue Code and if no person then living has been so named, then the
Annuitant shall automatically be the designated beneficiary for this purpose.
These mandatory distribution requirements will not apply when the designated
beneficiary is the spouse of the deceased Owner, if the spouse elects to
continue the Contract in the spouse's own name, as Owner. When the deceased
Owner was also the Annuitant, the surviving spouse (if the designated
beneficiary) may elect to be named as both Owner and Annuitant and continue the
Contract, but if that election is not made, the Death Benefit provision of the
Contract shall be controlling. In all other cases where the Owner and the
Annuitant are the same individual, the Death Benefit provision of the Contract
controls.
If the Payee dies on or after the Annuity Commencement Date and before the
entire accumulation under the Contract has been distributed, the remaining
portion of such accumulation, if any, must be distributed at least as rapidly as
the method of distribution then in effect.
In any case in which a non-natural person constitutes a holder of the
Contract for the purposes of Section 72(s) of the Internal Revenue Code, (1) the
distribution requirements described above shall apply upon the death of any
Annuitant, and (2) a change in any Annuitant shall be treated as the death of an
Annuitant.
In all cases, no Owner or Beneficiary shall be entitled to exercise any
rights that would adversely affect the treatment of the Contract as an annuity
contract under the Internal Revenue Code.
Any distributions upon the death of the Owner of a Qualified Contract will
be subject to the laws and regulations governing the particular retirement or
deferred compensation plan in connection with which the Qualified Contract was
issued.
VOTING OF SERIES FUND SHARES
The Company will vote Series Fund shares held by the Sub-Accounts at
meetings of shareholders of the Series Fund, but will follow voting instructions
received from persons having the right to give voting instructions. 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
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voting rights. Any shares attributable to the Company and Series Fund shares for
which no timely voting instructions are received will be voted by the Company in
the same proportion as the shares for which instructions are received from
persons having such voting rights.
Owners of Qualified Contracts may be subject to other voting provisions of
the particular plan and of the
Investment Company Act of 1940. Employees who contribute to plans which are
funded by the Contracts may be 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.
Neither the Variable Account nor the Company is under any duty to provide
information concerning the voting instruction rights of persons who may have
such rights under plans, other than rights afforded by the Investment Company
Act of 1940, nor any duty to inquire as to the instructions received or the
authority of Owners or others to instruct the voting of Series Fund shares.
Except as the Variable Account or the Company has actual knowledge to the
contrary, the instructions given by Owners and Payees will be valid as they
affect the Variable Account, the Company and any others having voting
instruction rights with respect to the Variable Account.
All Series Fund proxy material, together with an appropriate form to be used
to give voting instructions, will be provided to each person having the right to
give voting instructions at least ten days prior to each meeting of the
shareholders of the Series Fund. The number of Series Fund shares as to which
each such person is entitled to give instructions will be determined by the
Company on a date not more than 90 days prior to each such meeting. Prior to the
Annuity Commencement Date, the number of Series Fund shares as to which voting
instructions may be given to the Company is determined by dividing the value of
all of the Variable Accumulation Units of the particular Sub-Account credited to
the Contract's Accumulation Account by the net asset value of one Series Fund
share as of the same date. On or after the Annuity Commencement Date, the number
of Series Fund shares as to which such instructions may be given by a Payee is
determined by dividing the reserve held by the Company in the Sub-Account for
the Contract by the net asset value of a Series Fund share as of the same date.
After the Annuity Commencement Date, the number of Series Fund shares as to
which a Payee is entitled to give voting instructions will generally decrease
due to the decrease in the reserve.
PERIODIC REPORTS
During the Accumulation Period the Company will send the Owner, at least
once during each Contract Year, a statement showing the number, type and value
of Accumulation Units credited to the Contract's Accumulation Account and the
Fixed Accumulation Value of such account which statement shall be accurate as of
a date not more than two months previous to the date of mailing. In addition,
every person having voting rights will receive such reports or prospectuses
concerning the Variable Account and the Series Fund as may be required by the
Investment Company Act of 1940 and the Securities Act of 1933. The Company will
also send such statements reflecting transactions in the Contract's Accumulation
Account and benefits available under the Contract as may be required by
applicable laws, rules and regulations.
Upon request, the Company will provide the Owner with information regarding
fixed and variable accumulation values.
SUBSTITUTED SECURITIES
Shares of any or all Series of the Series Fund may not always be available
for purchase by the Sub-Accounts of the Variable Account or the Company may
decide that further investment in any such shares is no longer appropriate in
view of the purposes of the Variable Account or in view of legal, regulatory or
federal income tax restrictions. In such event, shares of another series or
shares of another registered open-end investment company or unit investment
trust may be substituted both for Series Fund shares already purchased by the
Variable Account and/or as the security to be purchased in the future provided
that these substitutions meet applicable Internal Revenue Service
diversification guidelines, and have been approved by the Securities and
Exchange Commission and the Superintendent of Insurance of the State of New
York. In the event of any substitution pursuant to this provision, the Company
may make appropriate endorsement to the Contract to reflect the substitution.
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CHANGE IN OPERATION OF VARIABLE ACCOUNT
At the Company's election and subject to the prior approval of the
Superintendent of Insurance of the State of New York and to any necessary vote
by persons having the right to give instructions with respect to the voting of
Series Fund shares held by the Sub-Accounts, the Variable Account may be
operated as a management company under the Investment Company Act of 1940 or it
may be deregistered under the Investment Company Act of 1940 in the event
registration is no longer required. Deregistration of the Variable Account
requires an order by the Securities and Exchange Commission. In the event of any
change in the operation of the Variable Account pursuant to this provision, the
Company, subject to the prior approval of the Superintendent of Insurance of the
State of New York, may make appropriate endorsement to the Contract to reflect
the change and take such other action as may be necessary and appropriate to
effect the change.
SPLITTING UNITS
The Company reserves the right to split or combine the value of Variable
Accumulation Units, Annuity Units or any of them. In effecting any such change
of unit values, strict equity will be preserved and no change will have a
material effect on the benefits or other provisions of the Contract.
MODIFICATION
Upon notice to the Owner (or to the Payee during the annuity period), the
Contract may be modified by the Company if such modification: (i) is necessary
to make the Contract or the Variable Account comply with any law or regulation
issued by a governmental agency to which the Company or the Variable Account is
subject; or (ii) is necessary to assure continued qualification of the Contract
under the Internal Revenue Code or other federal or state laws relating to
retirement annuities or annuity contracts; or (iii) is necessary to reflect a
change in the operation of the Variable Account or the Sub-Account(s) (See
"Change in Operation of Variable Account"); or (iv) provides additional Variable
Account and/or fixed accumulation options. In the event of any such
modification, the Company may make appropriate endorsement in the Contract to
reflect such modification.
CUSTODIAN
The Company is the Custodian of the assets of the Variable Account. The
Company will purchase Series Fund shares at net asset value in connection with
amounts allocated to the Sub-Accounts in accordance with the instructions of the
Owner and redeem Series Fund shares at net asset value for the purpose of
meeting the contractual obligations of the Variable Account, paying charges
relative to the Variable Account or making adjustments for annuity reserves held
in the Variable Account.
RIGHT TO RETURN CONTRACT
If the Owner is not satisfied with the Contract it may be returned by
delivering or mailing it to the Company at its Annuity Service Mailing Address
within ten days after it was received by the Owner. When the Company receives
the returned Contract it will be cancelled and the Contract's Account Value at
the end of the Valuation Period during which the Contract was delivered or
mailed to the Company will be refunded to the Owner.
With respect to Individual Retirement Accounts, under the Employee
Retirement Income Security Act of 1974 ("ERlSA") an Owner establishing an
Individual Retirement Account must be furnished with a disclosure statement
containing certain information about the Contract and applicable legal
requirements. This statement must be furnished on or before the date the
Individual Retirement Account is established. If the Owner is furnished with
such disclosure statement before the seventh day preceding the date the
Individual Retirement Account is established, the Owner will not have any right
of revocation. If the disclosure statement is furnished after the seventh day
preceding the establishment of the Individual Retirement Account, then the Owner
may give a notice of revocation to the Company at any time within seven days
after the Issue Date. Upon such revocation, the Company will refund the Purchase
Payment(s) made by the Owner. The foregoing right of revocation with respect to
an Individual Retirement Account is in addition to the return privilege set
forth in the preceding paragraph. The Company will allow an Owner establishing
an Individual Retirement Account a "ten day free-look," notwithstanding the
provisions of ERISA.
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FEDERAL TAX STATUS
INTRODUCTION
The Contracts described in this Prospectus are designed for use in
connection with retirement plans that may or may not be qualified plans under
Sections 401, 403 or 408 of the Internal Revenue Code (the "Code"). The ultimate
effect of federal income taxes may depend upon the type of retirement plan for
which the Contract is purchased and a number of different factors. This
discussion is general in nature, is based upon the Company's understanding of
current federal income tax laws, and is not intended as tax advice. Congress has
the power to enact legislation affecting the tax treatment of annuity contracts,
and such legislation could be applied retroactively to Contracts purchased
before the date of enactment. Any person contemplating the purchase of a
Contract should consult a qualified tax adviser. THE COMPANY DOES NOT MAKE ANY
GUARANTEE REGARDING THE TAX STATUS, FEDERAL, STATE OR LOCAL, OF ANY CONTRACT OR
ANY TRANSACTION INVOLVING A CONTRACT.
TAX TREATMENT OF THE COMPANY AND THE VARIABLE ACCOUNT
The Company is taxed as a life insurance company under the Code. The
operations of the Variable Account are accounted for separately from other
operations of the Company for purposes of federal income taxation, but the
Variable Account is not taxable as a regulated investment company or otherwise
as an entity separate from the Company. The income of the Variable Account
(consisting primarily of interest, dividends and net capital gains) is not
taxable to the Company to the extent that it is applied to increase reserves
under contracts participating in the Variable Account.
TAXATION OF ANNUITIES IN GENERAL
Purchase Payments made under Non-Qualified Contracts are not deductible from
the Owner's income for federal income tax purposes. Owners of Qualified
Contracts should consult a tax adviser regarding the tax treatment of Purchase
Payments.
Generally, no taxes are imposed on the increase in the value of a Contract
held by an individual Owner until a distribution occurs, either as an annuity
payment or as a cash withdrawal or lump-sum payment prior to the Annuity
Commencement Date. However, corporate Owners and other Owners that are not
natural persons are subject to current taxation on the annual increase in the
value of a Non-Qualified Contract, unless the non-natural person holds the
Contract as agent for a natural person (such as where a bank or other entity
holds a Contract as trustee under a trust agreement). This current taxation of
annuities held by non-natural persons does not apply to earnings accumulated
under an immediate annuity, which the Code defines as a single premium contract
with an annuity commencement date within one year of the date of purchase. Also,
the Internal Revenue Service could assert that Owners of both Qualified and
Non-Qualified Contracts annually receive and are subject to a tax on a deemed
distribution equal to the cost of any life insurance benefit provided by the
Contract.
A partial cash withdrawal (that is, a withdrawal of less than the entire
value of the Contract's Accumulation Account) from a Non-Qualified Contract
before the Annuity Commencement Date is treated first as a withdrawal from the
increase in the Accumulation Account's value, rather than as a return of the
Purchase Payment. 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 a Contract is assigned or pledged as collateral for a loan, the amount
assigned or pledged must be treated as if it were withdrawn from the Contract.
In the case of annuity payments under a Non-Qualified Contract after the
Annuity Commencement Date, a portion of each payment is treated as a nontaxable
return of the Purchase Payment. 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 payment
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 the unrecovered Purchase Payment.
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Taxable cash withdrawals and lump-sum payments from Non-Qualified Contracts
may be subject to a penalty tax equal to 10% of the amount treated as taxable
income. This 10% penalty also may apply to certain annuity payments. This
penalty will not apply in certain circumstances (such as where the distribution
is made upon the death of the Owner). The withdrawal penalty also does not apply
to distributions under an immediate annuity (as defined above).
In the case of a Qualified Contract, distributions generally are taxable and
distributions made prior to age 59 1/2 are subject to a 10% penalty tax,
although this penalty tax will not apply in certain circumstances. Certain
distributions, known as "eligible rollover distributions," if rolled over to
certain other qualified retirement plans (either directly or after being
distributed to the Payee), are not taxable until distributed from the plan to
which they are rolled over. In general, an eligible rollover distribution is any
taxable distribution other than a distribution that is part of a series of
payments made for life or for a specified period of ten years or more. Owners,
Annuitants, Payees and Beneficiaries should seek qualified advice about the tax
consequences of distributions, withdrawals, payments and rollovers under the
retirement plans in connection with which the Contracts are purchased.
If the Owner of a Non-Qualified Contract dies, the value of the Contract
generally must be distributed within a specified period (see "Other Contractual
Provisions -- Death of Owner"). For Contracts owned by non-natural persons, a
change in the Annuitant is treated as the death of the Owner.
A purchaser of a Qualified Contract should refer to the terms of the
applicable retirement plan and consult a tax adviser regarding distribution
requirements upon the death of the Owner.
A transfer of a Non-Qualified Contract by gift (other than to the Owner's
spouse) is treated as the receipt by the Owner of income in an amount equal to
the value of the Contract's Accumulation Account minus the total amount paid for
the Contract.
The Company will withhold and remit to the U.S. government a part of the
taxable portion of each distribution made under a Non-Qualified Contract or
under a Qualified Contract issued in connection with an individual retirement
account unless the Owner or Payee provides his or her taxpayer identification
number to the Company and notifies the Company (in the manner prescribed) before
the time of the distribution that he or she chooses not to have any amounts
withheld.
In the case of distributions from a Qualified Contract (other than
distributions from a Contract issued for use with an individual retirement
account), the Company or the plan administrator must withhold and remit to the
U.S. government 20% of each distribution that is an eligible rollover
distribution (as defined above) unless the Owner or Payee elects to make a
direct rollover of the distribution to another qualified retirement plan that is
eligible to receive the rollover. If a distribution from a Qualified Contract is
not an eligible rollover distribution, then the Owner or Payee can choose not to
have amounts withheld as described above for Non-Qualified Contracts and
individual retirement accounts.
Amounts withheld from any distribution may be credited against the Owner's
or Payee's federal income tax liability for the year of the distribution.
The Internal Revenue Service has issued regulations that prescribe
investment diversification requirements for mutual fund series underlying
nonqualified variable contracts. Contracts that do not comply with these
regulations do not qualify as annuities for 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 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.
THE FOLLOWING INFORMATION SHOULD BE CONSIDERED ONLY WHEN AN IMMEDIATE
ANNUITY CONTRACT AND A DEFERRED ANNUITY CONTRACT ARE PURCHASED TOGETHER: The
Company understands that the Treasury Department is in the process of
reconsidering the tax treatment of annuity payments under an immediate
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<PAGE>
annuity contract (as defined above) purchased together with a deferred annuity
contract. The Company believes that any adverse change in the existing tax
treatment of such immediate annuity contracts is likely to be prospective, that
is, it would not apply to contracts issued before such a change is announced.
However, there can be no assurance that any such change, if adopted, would not
be applied retroactively.
QUALIFIED RETIREMENT PLANS
The Qualified Contracts described in this Prospectus are designed for use
with several types of qualified retirement plans. The tax rules applicable to
participants in such qualified retirement 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 the Qualified Contracts
with the various types of qualified retirement plans. Owners, Annuitants, Payees
and Beneficiaries are cautioned that the rights of any person to any benefits
under these plans may be subject to the terms and conditions of the plans
themselves, regardless of the terms and conditions of the Qualified Contracts
issued in connection therewith. In addition, Owners, Payees, Beneficiaries and
administrators of qualified retirement plans should consider and consult their
tax adviser concerning whether the Death Benefit payable under the Contract
affects the qualified status of their retirement plan. Following are brief
descriptions of various types of qualified retirement plans and the use of the
Qualified Contracts in connection therewith.
PENSION AND PROFIT-SHARING PLANS
Sections 401(a), 401(k) and 403(a) of the Code permit business employers and
certain associations to establish various types of retirement plans for
employees. The Tax Equity and Fiscal Responsibility Act of 1982 eliminated most
differences between qualified retirement plans of corporations and those of
self-employed individuals. The Contract may be purchased by those who would have
been covered under the rules governing old H.R. 10 (Keogh) Plans as well as by
corporate plans. Such retirement plans may permit the purchase of the Qualified
Contracts to provide benefits under the plans. Employers intending to use the
Qualified Contracts in connection with such plans should seek qualified advice
in connection therewith.
TAX-SHELTERED ANNUITIES
Section 403(b) of the Code permits public school employees and employees of
certain types of charitable, educational and scientific organizations specified
in Section 501(c) (3) of the Code to purchase annuity contracts and, subject to
certain limitations, exclude the amount of purchase payments from gross income
for tax purposes. These annuity contracts are commonly referred to as
"Tax-Sheltered Annuities." Purchasers of the Qualified Contracts for such
purposes should seek qualified advice as to eligibility, limitations on
permissible amounts of Purchase Payments and tax consequences of distributions.
Only one Purchase Payment per Contract will be accepted (See "Section 403(b)
Annuities").
INDIVIDUAL RETIREMENT ACCOUNTS
Sections 219 and 408 of the Code permit eligible individuals to contribute
to an individual retirement program, including Simplified Employee Pension Plans
and Employer/Association of Employees Established Individual Retirement Account
Trusts, known as an Individual Retirement Account ("IRA"). These IRA's are
subject to limitations on the amount that may be contributed, the persons who
may be eligible, and on the time when distributions may commence. In addition,
certain distributions from some other types of retirement plans may be placed on
a tax-deferred basis in an IRA. Sale of the Contracts for use with IRA's may be
subject to special requirements imposed by the Internal Revenue Service.
Purchasers of the Contracts for such purposes will be provided with such
supplementary information as may be required by the Internal Revenue Service or
other appropriate agency, and will have the right to revoke the Contract under
certain circumstances as described in the section of this Prospectus entitled
"Right to Return Contract."
ADMINISTRATION OF THE CONTRACTS
The Company performs certain administrative functions relating to the
Contracts and the Variable Account. These functions include, but are not limited
to, maintaining the books and records of the Variable Account and the
Sub-Accounts; maintaining records of the name, address, taxpayer identification
number, Contract number, type of contract issued to each owner, the status of
each Contract's Accumulation
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Account, and other pertinent information necessary to the administration and
operation of the Contracts; processing Applications, Purchase Payments,
transfers and full and partial surrenders; issuing Contracts; administering
annuity payments; furnishing accounting and valuation services; reconciling and
depositing cash receipts; providing confirmations; providing toll-free customer
service lines; and furnishing telephonic transfer services. The Company has
entered into agreements with Sun Life (U.S.), Massachusetts Financial Services
Company ("MFS"), 500 Boylston Street, Boston, Massachusetts 02116, a subsidiary
of Sun Life (U.S.) and the Series Fund's investment adviser, and Sun Life
Assurance Company of Canada ("Sun Life (Canada)"), under which Sun Life (U.S.),
MFS and Sun Life (Canada) may provide certain administrative services relating
to the Contracts and the Variable Account on a cost reimbursement basis. The
Company also has entered into a Service Agreement with MFS which provides that
the Company will furnish MFS, as required, with personnel as well as certain
services on a cost reimbursement basis to enable MFS to perform certain duties
required under the agreement described above.
DISTRIBUTION OF THE CONTRACTS
The offering of the Contracts is continuous. The Contracts will be sold by
licensed insurance agents in the state of New York. Such agents will be
registered representatives of broker-dealers registered under the Securities
Exchange Act of 1934 who are members of the National Association of Securities
Dealers, Inc. and who have entered into distribution agreements with the Company
and the General Distributor, Clarendon Insurance Agency, Inc. ("Clarendon"), 500
Boylston Street, Boston, Massachusetts 02116, a wholly-owned subsidiary of
Massachusetts Financial Services Company, which in turn is a subsidiary of Sun
Life (U.S.). Clarendon is registered with the Securities and Exchange Commission
under the Securities Exchange Act of 1934 as broker-dealer and is a member of
the National Association of Securities Dealers, Inc. Clarendon also acts as the
general distributor of certain other annuity contracts issued by the Company and
Sun Life (U.S.), and variable life insurance contracts issued by Sun Life
(U.S.). Commissions and other distribution expenses will be paid by the Company
on the sale of the Contracts and will not be more than 7.10% 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.
ADDITIONAL INFORMATION ABOUT THE COMPANY
SELECTED FINANCIAL DATA
The following selected financial data for the Company should be read in
conjunction with the Company's financial statements and notes thereto included
in this Prospectus beginning on page 49.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(IN $ THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues
Premiums, annuity deposits and other revenue $ 59,554 $ 49,227 $ 24,778 $ 50,685 $ 71,366
Net investment income and realized gains 19,170 21,976 25,629 25,269 21,645
--------- --------- --------- --------- ---------
78,724 71,203 50,407 75,954 93,011
--------- --------- --------- --------- ---------
Benefits and Expenses
Policyholder benefits 65,850 57,303 36,672 66,081 85,144
Other expenses 9,509 8,780 6,851 6,061 6,417
--------- --------- --------- --------- ---------
75,359 66,083 43,523 72,142 91,561
--------- --------- --------- --------- ---------
Net income before federal income tax expense 3,365 5,119 6,884 3,812 1,450
Federal income tax 2,435 764 2,924 1,161 75
--------- --------- --------- --------- ---------
Net income $ 930 $ 4,355 $ 3,960 $ 2,651 $ 1,375
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total Assets $ 522,499 $ 503,982 $ 507,012 $ 483,045 $ 443,083
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(1) LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash flow from operations sufficient to meet its
liquidity needs. It has an active asset liability management program in order to
maintain adequate liquidity. Capital is considered to be adequate; the Company
has not required capital contributions since 1990 when Sun Life (U.S.)
contributed an additional $12 million.
(2) RESULTS OF OPERATIONS
The Company had net income of $930,000 for 1995 as compared to $4,355,000
for 1994. An increase in group life and health insurance premiums and fixed
annuity deposits in 1995 was offset by lower earnings on investments, higher
annuity surrenders and proportionally higher federal income taxes.
The Company had net income of $4,355,000 for 1994 as compared to $3,960,000
for 1993. An increase in group life and health insurance premiums and fixed
annuity deposits and proportionally lower federal income taxes in 1994 were
offset by lower earnings on investments and higher annuity surrenders.
REINSURANCE
The Company has executed agreements which provide that the parent company
will reinsure risks under certain group life, health, and long-term disability
insurance contracts sold by the Company.
RESERVES
In accordance with the life insurance laws and regulations under which the
Company operates it is obligated to carry on its books, as liabilities,
actuarially determined reserves to meet its obligations on its outstanding
contracts. Reserves are based on mortality tables in general use in the United
States and are computed to equal amounts that, with additions from premiums to
be received, and with interest on such reserves computed annually at certain
assumed rates, will be sufficient to meet the Company's policy obligations at
their maturities or in the event of an insured's death. In the accompanying
Financial Statements these reserves are determined in accordance with statutory
regulations which are generally accepted accounting principles for the Company.
INVESTMENTS
The Company maintains investments in bonds and mortgages with cash flows to
match estimated cash flows of its liabilities.
It is the Company's policy to acquire only investment grade securities. Only
3% of the Company's holdings of bonds were rated below investment grade at
December 31, 1995. Publicly traded government and corporate bonds comprised 68%
of the Company's total bonds at December 31, 1995. The Company underwrites
commercial mortgages with a maximum loan to value ratio of 75%, and as a rule
invests only in properties that are almost fully leased. The Company had no
mortgage loans in arrears more than 60 days at December 31, 1995 and it had a
provision for loss of $672,000.
COMPETITION
The Company is engaged in a business that is highly competitive because of
the large number of stock and mutual life insurance companies and other entities
marketing insurance products. There are approximately 150 insurers in the life
insurance business in the State of New York. Best's Insurance Reports, Life-
Health Edition, 1995, assigned the Company its highest classification, A++, as
of December 31, 1994. Standard & Poor's has assigned the Company its highest
rating for claims paying ability, AAA, and Duff & Phelps has assigned the
Company its highest rating, AAA. These ratings should not be considered as
bearing on the investment performance of the Series Fund shares held in the
Sub-Accounts of the Variable Account. However, the ratings are relevant to the
Company's ability to meet its general corporate obligations under the Contracts.
EMPLOYEES
The Company and Sun Life Assurance Company of Canada have entered into a
Service Agreement which provides that the latter will furnish the Company, as
required, with personnel as well as certain
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<PAGE>
services and facilities on a cost reimbursement basis. As of December 31, 1995
the Company had 28 direct employees all of whom are employed at its Home Office
and Group Insurance Sales Office in New York, New York.
PROPERTIES
The Company leases the office space occupied by it at 80 Broad Street, New
York, New York. The monthly cost of the lease, which expires in February, 2004,
is $17,500.
THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS
The directors and principal officers of the Company are listed below,
together with information as to their ages, dates of election and principal
business occupations during the last five years (if other than their present
business occupations). Except as otherwise indicated, the directors and officers
of the Company who are associated with Sun Life Assurance Company of Canada
and/or its subsidiaries have been associated with Sun Life Assurance Company of
Canada for more than five years either in the position shown or in other
positions.
JOHN D. MCNEIL, 62, Chairman and Director (1984*)
150 King Street West
Toronto, Ontario, Canada M5H 1J9
He is Chairman and a Director of Sun Life Assurance Company of Canada and
Sun Life of Canada (U.S.); a Director of Massachusetts Financial Services
Company; President and a Director of Sun Growth Variable Annuity Fund, Inc.;
Chairman and a Trustee of MFS/Sun Life Series Trust; Chairman and a Member of
the Boards of Managers of Money Market Variable Account, High Yield Variable
Account, Capital Appreciation Variable Account, Government Securities Variable
Account, World Governments Variable Account, Total Return Variable Account and
Managed Sectors Variable Account; and a Director of Shell (Canada) Limited and
Canadian Pacific, Ltd.
JOHN R. GARDNER, 58, President and Director (1986*)
150 King Street West
Toronto, Ontario, Canada M5H 1J9
He is President and a Director of Sun Life Assurance Company of Canada and
Sun Life of Canada (U.S.) and a Director of Massachusetts Financial Services
Company, Massachusetts Casualty Insurance Company and Sun Life Financial
Services Limited.
DAVID D. HORN, 55, Senior Vice President and Director (1984*)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Senior Vice President and General Manager for the United States of Sun
Life Assurance Company of Canada; Chairman and President and a Director of Sun
Investment Services Company; Senior Vice President and General Manager and a
Director of Sun Life of Canada (U.S.); Vice President and a Director of Sun
Growth Variable Annuity Fund, Inc.; President and a Director of Sun Benefit
Services Company, Inc., Sun Canada Financial Co., and Sun Life Financial
Services Limited; a Director of Sun Capital Advisers, Inc.; Chairman and a
Director of Massachusetts Casualty Insurance Company; a Trustee of MFS/Sun Life
Series Trust; and a Member of the Boards of Managers of Money Market Variable
Account, High Yield Variable Account, Capital Appreciation Variable Account,
Government Securities Variable Account, World Governments Variable Account,
Total Return Variable Account and Managed Sectors Variable Account.
JOHN G. IRELAND, 71, Director (1984*)
280 Steamboat Road,
Greenwich, Connecticut 06830
Prior to March 31, 1990, he was the Chairman of William M. Mercer-Meidinger,
Incorporated.
- ------------------------
*Year Elected Director
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<PAGE>
EDWARD M. LAMONT, 69, Director (1984*)
1234 Moores Hill Road
Syosset, New York 11791
He is self employed as a private investor and consultant.
ANGUS A. MACNAUGHTON, 65, Director (1984*)
Metro Tower, 950 Tower Lane
Foster City, California 94404-2121
He is President of Genstar Investment Corporation and a Director of Sun Life
Assurance Company of Canada, Sun Life of Canada (U.S.), Canadian Pacific, Ltd.,
Stelco, Inc. and Varian Associates, Inc.
JOHN S. LANE, 61, Director (1991*)
150 King Street West
Toronto, Ontario, Canada M5H 1J9
He is Senior Vice President, Investments of Sun Life Assurance Company of
Canada; and a Director of Sun Investment Services Company, Sun Capital Advisers,
Inc. and Sun Life of Canada (U.S.).
RICHARD B. BAILEY, 69, Director (1984*)
500 Boylston Street
Boston, Massachusetts 02116
He is a Director of Sun Life of Canada (U.S.) and a Director/Trustee of
certain funds in the MFS Family of Funds. Prior to October 1, 1991 he was
Chairman and a Director of Massachusetts Financial Services Company.
A. KEITH BRODKIN, 60, Director (1990*)
500 Boylston Street
Boston, Massachusetts 02116
He is Chairman and a Director of Massachusetts Financial Services Company; a
Director of Sun Life of Canada (U.S.); and a Director/Trustee and/or Officer of
the Funds in the MFS Family of Funds.
M. COLYER CRUM, 64, Director (1986*)
Harvard Business School
Soldiers Field Road
Boston, Massachusetts 02163
He is a Professor at the Harvard Business School; and a Director of Sun Life
Assurance Company of Canada, Sun Life of Canada (U.S.), Merrill Lynch Ready
Assets Trust, Merrill Lynch Basic Value Fund, Inc., Merrill Lynch Special Value
Fund, Inc., Merrill Lynch Capital Fund, Inc., Merrill Lynch U.S.A. Government
Reserves, Merrill Lynch Natural Resources Trust, Merrill Lynch U.S. Treasury
Money Fund, MuniVest California Insured Fund, Inc., MuniVest Florida Fund, Inc.,
MuniVest Michigan Insured Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest
New York Insured Fund, Inc., MuniYield Florida Insured Fund, MuniYield Insured
Fund II, Inc., MuniYield Michigan Insured Fund, Inc., MuniYield New Jersey
Insured Fund, Inc., MuniYield New York Insured Fund III, Inc. and MuniYield
Pennsylvania Fund.
FIORAVANTE G. PERROTTA, ESQ., 65, Director (1984*)
200 Park Avenue
New York, New York 10166
He is a Partner in the law firm of Rogers & Wells.
RALPH F. PETERS, 67, Director (1984*)
58 Pine Street
New York, New York 10005
He is Chairman of the Executive Committee of Discount Corporation of New
York.
- ------------------------
*Year Elected Director
38
<PAGE>
PAMELA T. TIMMINS, 58, Director, (1984*)
25 East 86th Street
New York, New York 10028
She is Treasurer of Timmins-Minn Incorporated, an interior design firm.
ROBERT P. VROLYK, 43, Vice President, Controller, and Actuary (1986)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Vice President, Finance for the United States of Sun Life Assurance
Company of Canada; Vice President and Actuary of Sun Life of Canada (U.S.); a
Director of Massachusetts Casualty Insurance Company; and Vice President and a
Director of Sun Canada Financial Co.
S. CAESAR RABOY, 60, Vice President (1994)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Vice President, Individual Insurance for the United States of Sun Life
Assurance Company of Canada; Vice President, Individual Insurance of Sun Life of
Canada (U.S.); and Vice President and a Director of Sun Life Financial Services
Limited. Prior to 1990 he was President and Chief Operating Officer of
Connecticut Mutual Life Insurance Company.
C. JAMES PRIEUR, 45, Vice President, Investments (1993)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Vice President, Investments for the United States of Sun Life
Assurance Company of Canada; Vice President, Investments of Sun Investment
Services Company and Sun Life of Canada (U.S.); and a Director of Sun Capital
Advisers, Inc., New London Trust, F.S.B. and Sun Canada Financial Co.
BONNIE S. ANGUS, 54, Secretary (1984)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
She is Assistant Secretary for the United States of Sun Life Assurance
Company of Canada; and Secretary of Sun Investment Services Company, Sun Benefit
Services Company, Inc., MFS/Sun Life Series Trust, Sun Growth Variable Annuity
Fund, Inc., Money Market Variable Account, High Yield Variable Account, Capital
Appreciation Variable Account, Government Securities Variable Account, World
Governments Variable Account, Total Return Variable Account, Managed Sectors
Variable Account, Sun Capital Advisers, Inc., Sun Life of Canada (U.S.), New
London Trust, F.S.B., Sun Life Financial Services Limited and Sun Canada
Financial Co.
L. BROCK THOMSON, 55, Vice President and Treasurer (1986)
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02181
He is Vice President, Portfolio Management for the United States of Sun Life
Assurance Company of Canada; Vice President and Treasurer of Sun Investment
Service Company, Sun Capital Advisers, Inc., Sun Benefit Services Company, Inc.
and Sun Life of Canada (U.S.); and Assistant Treasurer of Massachusetts Casualty
Insurance Company.
MICHAEL A. COHEN, 56, Vice President and Regional Manager (1991)
80 Broad Street
New York, New York 10004
He is Vice President and Regional Manager of the Company.
The directors, officers and employees of the Company are covered under a
commercial blanket bond and a liability policy. The directors, officers and
employees of Massachusetts Financial Services Company and Clarendon Insurance
Agency, Inc. are covered under a fidelity bond and errors and omissions policy.
- ------------------------
*Year Elected Director
39
<PAGE>
Directors of the Company who are also officers of Sun Life Assurance Company
of Canada or its affiliates receive no compensation in addition to their
compensation as officers of Sun Life Assurance Company of Canada or its
affiliates. The other directors receive compensation in the amount of $5,000 per
year, plus $800 for each meeting attended, plus expenses.
No shares of the Company are owned by any executive officer or director. The
Company is a wholly-owned subsidiary of Sun Life Assurance Company of Canada
(U.S.), One Sun Life Executive Park, Wellesley Hills, Massachusetts 02181,
which, in turn, is a wholly-owned subsidiary of Sun Life Assurance Company of
Canada, 150 King Street West, Toronto, Ontario, Canada M5H 1J9.
STATE REGULATION
The Company is subject to the laws of the State of New York governing life
insurance companies and to regulation by the Superintendent of Insurance of New
York. An annual statement is filed with the Superintendent of Insurance on or
before March 1st in each year relating to the operations of the Company for the
preceding year and its financial condition on December 31st of such year. Its
books and records are subject to review or examination by the Superintendent or
his agents at any time and a full examination of its operations is conducted at
periodic intervals.
The Superintendent of Insurance has broad administrative powers with respect
to licensing to transact business, overseeing trade practices, licensing agents,
approving policy forms, establishing reserve requirements, fixing maximum
interest rates on life insurance policy loans and minimum rates for accumulation
of surrender values, prescribing the form and content of required financial
statements and regulating the type and amounts of investments permitted.
In addition, affiliated groups of insurers, such as the Company, its parent
and its affiliates, are regulated under insurance holding company legislation in
New York and certain other states. Under such laws, inter-company transfers of
assets and dividend payments from insurance subsidiaries may be subject to prior
notice or approval, depending on the size of such transfers and payments in
relation to the financial positions of the companies involved.
Under insurance guaranty fund laws in New York, insurers doing business
therein can be assessed (up to prescribed limits) for policyholder losses
incurred by insolvent companies. The amount of any future assessments of the
Company under these laws cannot be reasonably estimated. However, most of these
laws do provide that an assessment may be excused or deferred if it would
threaten an insurer's own financial strength and also may permit the deduction
of all or a portion of any such assessment from any future premium or similar
taxes payable.
Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the business
in a variety of ways. Current and proposed federal measures which may
significantly affect the insurance business include employee benefit regulation,
removal of barriers preventing banks from engaging in the insurance business,
tax law changes affecting the taxation of insurance companies, the tax treatment
of insurance products and its impact on the relative desirability of various
personal investment vehicles, and proposed legislation to prohibit the use of
gender in determining insurance and pension rates and benefits.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Variable Account. The
Company and Sun Life (U.S.) and its other subsidiaries are engaged in various
kinds of routine litigation which, in their management's judgment, is not of
material importance to their respective total assets or material with respect to
the Variable Account.
40
<PAGE>
LEGAL MATTERS
The organization of the Company, its authority to issue the Contracts and
the validity of the form of the Contracts have been passed upon by David D.
Horn, Esq., Senior Vice President of the Company. Covington & Burling,
Washington, D. C., has advised the Company on certain legal matters concerning
federal securities laws applicable to the issue and sale of the Contracts and
federal income tax laws applicable to the Contracts.
ACCOUNTANTS
The financial statements of the Variable Account for the year ended December
31, 1995 and the financial statements of the Company for the years ended
December 31, 1995, 1994 and 1993 included in this Prospectus have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their reports
appearing herein, and are included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
REGISTRATION STATEMENTS
Registration statements have been filed with the Securities and Exchange
Commission, Washington, D.C., under the Securities Act of 1933 as amended, with
respect to the Contracts offered by this Prospectus. This Prospectus does not
contain all the information set forth in the registration statements and the
exhibits filed as part of the registration statements, to all of which reference
is hereby made for further information concerning the Variable Account, the
Fixed Account, the Company, the Series Fund and the Contract. Statements found
in this Prospectus as to the terms of the Contracts and other legal instruments
are summaries, and reference is made to such instruments as filed.
FINANCIAL STATEMENTS
The financial statements of the Company which are included in this
Prospectus should be considered only as bearing on the ability of the Company to
meet its obligations with respect to amounts allocated to the Fixed Account and
with respect to the death benefit and the Company's assumption of the mortality
and expense risks. They should not be considered as bearing on the investment
performance of the Series Fund shares held in the Sub-Accounts of the Variable
Account. The Variable Account value of the interests of Owners, Annuitants,
Payees and Beneficiaries under the Contracts is affected primarily by the
investment results of the Series Fund. The financial statements of the Variable
Account reflect units outstanding and expenses incurred under other contracts
participating in the Variable Account which impose certain contract charges that
are different from those imposed under the Contracts.
-------------------
41
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT C
STATEMENT OF CONDITION-- December 31, 1995
<TABLE>
<CAPTION>
ASSETS:
Investments in MFS/Sun Life Series Trust: Shares Cost Value
--------- ----------- -----------
<S> <C> <C> <C>
Capital Appreciation Series ("CAS")......... 488,954 $13,454,645 $15,640,591
Conservative Growth Series ("CGS").......... 410,700 7,547,025 9,042,888
Government Securities Series ("GSS")........ 483,094 6,013,249 6,468,724
High Yield Series ("HYS")................... 456,811 3,839,638 4,076,225
Managed Sectors Series ("MSS").............. 150,157 3,379,699 3,820,877
Money Market Series ("MMS")................. 6,710,773 6,710,773 6,710,773
Total Return Series ("TRS")................. 978,217 15,695,323 17,984,372
Utilities Series ("UTS").................... 100,383 1,109,970 1,230,673
World Governments Series ("WGS")............ 263,774 3,140,298 3,293,630
World Growth Series ("WGO")................. 223,256 2,597,450 2,756,331
----------- -----------
$63,488,070 $71,025,084
-----------
-----------
LIABILITY:
Payable to sponsor 16,892
-----------
Net Assets.............................. $71,008,192
-----------
-----------
</TABLE>
<TABLE>
<CAPTION>
NET ASSETS:
<S> <C> <C> <C> <C> <C>
Applicable to Owners of
Deferred Variable Annuity
Contracts: Reserve for
---------------------------------- Variable
Units Unit Value Value Annuities Total
--------- ---------- ----------- ----------- -----------
CAS............. 1,106,267 $14.0890 $15,588,241 $ 24,045 $15,612,286
CGS............. 671,847 13.4205 9,016,047 -- 9,016,047
GSS............. 554,873 11.5958 6,433,863 11,625 6,445,488
HYS............. 334,034 12.1149 4,055,424 -- 4,055,424
MSS............. 277,142 13.6882 3,793,501 -- 3,793,501
MMS............. 623,252 10.7318 6,686,486 2,813 6,689,299
TRS............. 1,365,757 12.6896 17,329,800 612,551 17,942,351
UTS............. 97,337 12.6438 1,230,673 -- 1,230,673
WGS............. 268,890 12.1203 3,261,358 7,960 3,269,318
WGO............. 251,193 10.9711 2,756,331 -- 2,756,331
----------- ----------- -----------
$70,151,724 $658,994 $70,810,718
----------- ----------- -----------
Net Assets Applicable to Sponsor........... $ 197,474 -- $ 197,474
----------- ----------- -----------
Net Assets......................... $70,349,198 $658,994 $71,008,192
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See notes to financial statements
42
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT C
STATEMENT OF OPERATIONS-- Year Ended December 31, 1995
<TABLE>
<CAPTION>
CAS CGS GSS HYS MSS MMS
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Dividend income and capital gain distributions
received....................................... $ 224,481 $ 111,440 $ 322,630 $ 213,861 $ 71,906 $ 288,344
Mortality and expense risk charges.............. 132,083 69,343 71,560 41,185 32,786 67,735
Administrative charges.......................... 15,850 8,321 8,587 4,942 3,934 8,128
----------- ----------- ----------- ----------- ----------- -----------
Net investment income....................... $ 76,548 $ 33,776 $ 242,483 $ 167,734 $ 35,186 $ 212,481
----------- ----------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment
transactions:
Proceeds from sales........................... $2,126,188 $ 622,581 $2,810,900 $1,953,259 $ 366,556 $8,452,643
Cost of investments sold...................... 2,046,319 529,653 2,926,830 1,876,474 357,078 8,452,643
----------- ----------- ----------- ----------- ----------- -----------
Net realized gains (losses)................. $ 79,869 $ 92,928 $ (115,930) $ 76,785 $ 9,478 $ --
----------- ----------- ----------- ----------- ----------- -----------
Net unrealized appreciation (depreciation) on
investments:
End of year................................... $2,185,946 $1,495,863 $ 455,475 $ 236,587 $ 441,178 $ --
Beginning of year............................. (444,059 ) (63,065) (280,915) 2,634 (115,855) --
----------- ----------- ----------- ----------- ----------- -----------
Change in unrealized appreciation........... $2,630,005 $1,558,928 $ 736,390 $ 233,953 $ 557,033 $ --
----------- ----------- ----------- ----------- ----------- -----------
Realized and unrealized gains............. $2,709,874 $1,651,856 $ 620,460 $ 310,738 $ 566,511 $ --
----------- ----------- ----------- ----------- ----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS............ $2,786,422 $1,685,632 $ 862,943 $ 478,472 $ 601,697 $ 212,481
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
TRS UTS WGS WGO
Sub-Account Sub-Account Sub-Account Sub-Account Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Dividend income and capital gain distributions received..... $ 495,869 $ 5,187 $ 145,916 $ 22,994 $ 1,902,628
Mortality and expense risk charges.......................... 168,244 5,195 36,144 15,306 639,581
Administrative charges...................................... 20,189 624 4,337 1,837 76,749
----------- ----------- ----------- ----------- -----------
Net investment income (expense)......................... $ 307,436 $ (632) $ 105,435 $ 5,851 $ 1,186,298
----------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Realized gains (losses) on investment transactions:
Proceeds from sales....................................... $1,452,666 $ 76,222 $ 535,837 $227,806 $18,624,658
Cost of investments sold.................................. 1,393,147 65,907 573,584 223,153 18,444,788
----------- ----------- ----------- ----------- -----------
Net realized gains (losses)............................. $ 59,519 $ 10,315 $ (37,747) $ 4,653 $ 179,870
----------- ----------- ----------- ----------- -----------
Net unrealized appreciation (depreciation) on investments:
End of year............................................... $2,289,049 $120,703 $ 153,332 $158,881 $ 7,537,014
Beginning of year......................................... (488,155) (16) (156,082) (9,029) (1,554,542)
----------- ----------- ----------- ----------- -----------
Change in unrealized appreciation....................... $2,777,204 $120,719 $ 309,414 $167,910 $ 9,091,556
----------- ----------- ----------- ----------- -----------
Realized and unrealized gains......................... $2,836,723 $131,034 $ 271,667 $172,563 $ 9,271,426
----------- ----------- ----------- ----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS........................ $3,144,159 $130,402 $ 377,102 $178,414 $10,457,724
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
43
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT C
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CAS CGS
Sub-Account Sub-Account
----------------------- ----------------------
<S> <C> <C> <C> <C>
Year Ended Year Ended
December 31, December 31,
----------------------- ----------------------
<CAPTION>
1995 1994 1995 1994
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income................. $ 76,548 $ 433,150 $ 33,776 $ 571
Net realized gains (losses)........... 79,869 (53,721) 92,928 8,292
Net unrealized gains (losses)......... 2,630,005 (639,647) 1,558,928 (86,740)
----------- ---------- ---------- ----------
Increase (decrease) in net assets
from operations.................. $ 2,786,422 $ (260,218) $1,685,632 $ (77,877)
----------- ---------- ---------- ----------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $ 5,366,882 $3,333,263 $3,495,520 $1,764,910
Net transfers between Sub-Accounts
and Fixed Account.................. 1,418,442 (1,194,320) 649,433 401,697
Withdrawals, surrenders,
annuitizations and account fees.... (418,456) (145,010) (200,218) (57,330)
----------- ---------- ---------- ----------
Net accumulation activity......... $ 6,366,868 $1,993,933 $3,944,735 $2,109,277
----------- ---------- ---------- ----------
Annuitization Activity:
Annuitizations...................... $ 14,987 $ 9,700 $ -- $ --
Annuity payments and account fees... (3,311) (535) -- --
Adjustments to annuity reserve...... (185) 59 -- --
----------- ---------- ---------- ----------
Net annuitization activity........ $ 11,491 $ 9,224 $ -- $ --
----------- ---------- ---------- ----------
Increase in net assets from contract
owner transactions................... $ 6,378,359 $2,003,157 $3,944,735 $2,109,277
----------- ---------- ---------- ----------
Increase in net assets.............. $ 9,164,781 $1,742,939 $5,630,367 $2,031,400
NET ASSETS:
Beginning of year..................... 6,475,684 4,732,745 3,412,521 1,381,121
----------- ---------- ---------- ----------
End of year........................... $15,640,465 $6,475,684 $9,042,888 $3,412,521
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
GSS HYS MSS
Sub-Account Sub-Account Sub-Account
---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
---------------------- ---------------------- ----------------------
<CAPTION>
1995 1994 1995 1994 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income................. $ 242,483 $ 211,106 $ 167,734 $ 16,020 $ 35,186 $ 106,490
Net realized gains (losses)........... (115,930) (37,180) 76,785 (23,468) 9,478 (11,801)
Net unrealized gains (losses)......... 736,390 (317,514) 233,953 (36,679) 557,033 (127,017)
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets
from operations.................. $ 862,943 $ (143,588) $ 478,472 $ (44,127) $ 601,697 $ (32,328)
---------- ---------- ---------- ---------- ---------- ----------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $1,638,343 $1,830,983 $1,270,014 $1,981,987 $1,349,023 $ 889,420
Net transfers between Sub-Accounts
and Fixed Account.................. (2,027,001) 876,341 583,971 162,539 399,369 64,070
Withdrawals, surrenders,
annuitizations and account fees.... (154,062) (167,944) (1,757,160) (592,296) (103,799) (33,375)
---------- ---------- ---------- ---------- ---------- ----------
Net accumulation activity......... $ (542,720) $2,539,380 $ 96,825 $1,552,230 $1,644,593 $ 920,115
---------- ---------- ---------- ---------- ---------- ----------
Annuitization Activity:
Annuitizations...................... $ 11,807 $ -- $ -- $ -- $ -- $ --
Annuity payments and account fees... (656) -- -- -- -- --
Adjustments to annuity reserve...... (43) -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Net annuitization activity........ $ 11,108 $ -- $ -- $ -- $ -- $ --
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets from
contract owner transactions.......... $ (531,612) $2,539,380 $ 96,825 $1,552,230 $1,644,593 $ 920,115
---------- ---------- ---------- ---------- ---------- ----------
Increase in net assets.............. $ 331,331 $2,395,792 $ 575,297 $1,508,103 $2,246,290 $ 887,787
NET ASSETS:
Beginning of year..................... 6,137,350 3,741,558 3,500,928 1,992,825 1,574,587 686,800
---------- ---------- ---------- ---------- ---------- ----------
End of year........................... $6,468,681 $6,137,350 $4,076,225 $3,500,928 $3,820,877 $1,574,587
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
See notes to financial statements
44
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT C
STATEMENTS OF CHANGES IN NET ASSETS -- continued
<TABLE>
<CAPTION>
MMS TRS UTS
Sub-Account Sub-Account Sub-Account
---------------------- ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
---------------------- ------------------------ ------------------------
<CAPTION>
1995 1994 1995 1994 1995 1994
---------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (expense)....... $ 212,481 $ 91,209 $ 307,436 $ 235,767 $ (632) $ (126)
Net realized gains (losses)........... -- -- 59,519 (4,636) 10,315 (2)
Net unrealized gains (losses)......... -- -- 2,777,204 (590,260) 120,719 (16)
---------- ---------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets
from operations.................. $ 212,481 $ 91,209 $ 3,144,159 $ (359,129) $ 130,402 $ (144)
---------- ---------- ----------- ----------- ----------- -----------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $7,242,711 $6,306,719 $ 3,549,303 $ 5,146,982 $ 648,062 $ 59,250
Net transfers between Sub-Accounts
and Fixed Account.................. (4,861,678) (3,706,476) 647,551 565,870 398,554 --
Withdrawals, surrenders,
annuitizations and account fees.... (120,225) (286,328) (662,572) (790,391) (5,451) --
---------- ---------- ----------- ----------- ----------- -----------
Net accumulation activity......... $2,260,808 $2,313,915 $ 3,534,282 $ 4,922,461 $ 1,041,165 $ 59,250
---------- ---------- ----------- ----------- ----------- -----------
Annuitization Activity:
Annuitizations...................... $ 2,948 $ -- $ -- $ 574,554 $ -- $ --
Annuity payments and account fees... (162) -- (53,574) (33,619) -- --
Adjustments to annuity reserve...... (10) -- 1,036 (17,678) -- --
---------- ---------- ----------- ----------- ----------- -----------
Net annuitization activity........ $ 2,776 $ -- $ (52,538) $ 523,257 $ -- $ --
---------- ---------- ----------- ----------- ----------- -----------
Increase in net assets from contract
owner transactions................... $2,263,584 $2,313,915 $ 3,481,744 $ 5,445,718 $ 1,041,165 $ 59,250
---------- ---------- ----------- ----------- ----------- -----------
Increase in net assets.............. $2,476,065 $2,405,124 $ 6,625,903 $ 5,086,589 $ 1,171,567 $ 59,106
NET ASSETS:
Beginning of year..................... 4,234,698 1,829,574 11,341,827 6,255,238 59,106 --
---------- ---------- ----------- ----------- ----------- -----------
End of year........................... $6,710,763 $4,234,698 $17,967,730 $11,341,827 $ 1,230,673 $ 59,106
---------- ---------- ----------- ----------- ----------- -----------
---------- ---------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
WGS WGO
Sub-Account Sub-Account Total
---------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
---------------------- ---------------------- ------------------------
<CAPTION>
1995 1994 1995 1994 1995 1994
---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (expense)....... $ 105,435 $ 140,277 $ 5,851 $ (674) $ 1,186,298 $ 1,233,790
Net realized gains (losses)........... (37,747) (46,585) 4,653 (183) 179,870 (169,284)
Net unrealized gains (losses)......... 309,414 (185,295) 167,910 (9,029) 9,091,556 (1,992,197)
---------- ---------- ---------- ---------- ----------- -----------
Increase (decrease) in net assets
from operations.................. $ 377,102 $ (91,603) $ 178,414 $ (9,886) $10,457,724 $ (927,691)
---------- ---------- ---------- ---------- ----------- -----------
CONTRACT OWNER TRANSACTIONS:
Accumulation Activity:
Purchase payments received.......... $ 492,054 $1,163,925 $1,231,855 $ 134,195 $26,283,767 $22,611,634
Net transfers between Sub-Accounts
and Fixed Account.................. (30,310) (29,717) 1,034,283 212,427 (1,787,386) (2,647,569)
Withdrawals, surrenders,
annuitizations and account fees.... (109,230) (55,014) (24,904) (53) (3,556,077) (2,127,741)
---------- ---------- ---------- ---------- ----------- -----------
Net accumulation activity......... $ 352,514 $1,079,194 $2,241,234 $ 346,569 $20,940,304 $17,836,324
---------- ---------- ---------- ---------- ----------- -----------
Annuitization Activity:
Annuitizations...................... $ -- $ 9,467 $ -- $ -- $ 29,742 $ 593,721
Annuity payments and account fees... (2,227) (522) -- -- (59,930) (34,676)
Adjustments to annuity reserve...... (119) 48 -- -- 679 (17,571)
---------- ---------- ---------- ---------- ----------- -----------
Net annuitization activity........ $ (2,346) $ 8,993 $ -- $ -- $ (29,509) $ 541,474
---------- ---------- ---------- ---------- ----------- -----------
Increase in net assets from contract
owner transactions................... $ 350,168 $1,088,187 $2,241,234 $ 346,569 $20,910,795 $18,377,798
---------- ---------- ---------- ---------- ----------- -----------
Increase in net assets.............. $ 727,270 $ 996,584 $2,419,648 $ 336,683 $31,368,519 $17,450,107
NET ASSETS:
Beginning of year..................... 2,566,289 1,569,705 336,683 -- 39,639,673 22,189,566
---------- ---------- ---------- ---------- ----------- -----------
End of year........................... $3,293,559 $2,566,289 $2,756,331 $ 336,683 $71,008,192 $39,639,673
---------- ---------- ---------- ---------- ----------- -----------
---------- ---------- ---------- ---------- ----------- -----------
</TABLE>
See notes to financial statements
45
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT C
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
Sun Life (N.Y.) Variable Account C (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 October 18, 1985 as a funding vehicle for the variable portion of
certain individual combination fixed/variable annuity contracts. Sale of the
contracts commenced on April 1, 1993. The Variable Account is registered with
the Securities and Exchange Commission under the Investment Company Act of 1940
as a unit investment trust.
The assets of the Variable Account are divided into Sub-Accounts. Each
Sub-Account is invested in shares of a specific series of MFS/Sun Life Series
Trust (the "Series Trust") as selected by contract owners. The Series Trust is
an open-end management investment company registered under the Investment
Company Act of 1940. Massachusetts Financial Services Company, a wholly-owned
subsidiary of Sun Life Assurance Company of Canada (U.S.), is investment adviser
to the Series Trust.
(2) SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATIONS
Investments in shares of the Series Trust are recorded at their net asset value.
Realized gains and losses on sales of shares of the Series Trust are determined
on the identified cost basis. Dividend income and capital gain distributions
received by the Sub-Accounts are reinvested in additional Series Trust shares
and are recognized on the ex-dividend date.
Exchanges between Sub-Accounts requested by contract owners are recorded in the
new Sub-Account upon receipt of the redemption proceeds.
FEDERAL INCOME TAX STATUS
The operations of the Variable Account are part of the operations of the Sponsor
and are not taxed separately; the Variable Account is not taxed as a regulated
investment company. The Sponsor qualifies for the federal income tax treatment
granted to life insurance companies under Subchapter L of the Internal Revenue
Code. Under existing federal income tax law, investment income and capital gains
earned by the Variable Account on contract owner reserves are not subject to
tax.
(3) CONTRACT CHARGES
A mortality and expense risk charge based on the value of the Variable Account
is deducted from the Variable Account at the end of each valuation period for
the mortality and expense risks assumed by the Sponsor. These deductions are
transferred periodically to the Sponsor. Currently, the deduction is at an
effective annual rate of 1.25%.
Each year on the contract anniversary, an account administration fee ("Account
Fee") of $30 is deducted from each contract's accumulation account. After the
annuity commencement date the Account Fee is deducted pro rata from each
variable annuity payment made during the year. In addition, a deduction is made
from the Variable Account at the end of each valuation period (during both the
accumulation period
46
<PAGE>
SUN LIFE (N.Y.) VARIABLE ACCOUNT C
NOTES TO FINANCIAL STATEMENTS -- continued
and after annuity payments begin) at an effective annual rate of 0.15% of the
daily net assets of the Variable Account. These charges are paid to the Sponsor
to reimburse it for administrative expenses which exceed the revenues received
from the Account Fee.
The Sponsor does not deduct a sales charge from the purchase payment. However, a
withdrawal charge (contingent deferred sales charge) of up to 6% of certain
amounts withdrawn, when applicable, will be deducted to cover certain expenses
relating to the sale of the contracts. In no event shall the aggregate
withdrawal charges assessed against a contract exceed 9% of the purchase
payment.
(4) ANNUITY RESERVES
Annuity reserves are calculated using the 1983 Individual Annuitant Mortality
Table and an assumed interest rate of 4%. Required adjustments to the reserves
are accomplished by transfers to or from the Sponsor.
(5) UNIT ACTIVITY FROM CONTRACT OWNER TRANSACTIONS
<TABLE>
<CAPTION>
CAS CGS GSS
Sub-Account Sub-Account Sub-Account
------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
------------------------- ------------------------- -------------------------
<CAPTION>
1995 1994 1995 1994 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding beginning of
year.............................. 606,673 421,509 342,664 134,044 612,070 359,235
Units purchased.................. 415,058 308,485 293,750 176,149 149,800 182,365
Units transferred between
Sub-Accounts
and Fixed Account............... 118,528 (108,776) 53,992 39,537 (191,789) 87,835
Units withdrawn, surrendered and
annuitized...................... (33,992) (14,545) (18,559) (7,066) (15,208) (17,365)
----------- ----------- ----------- ----------- ----------- -----------
Units outstanding end of year...... 1,106,267 606,673 671,847 342,664 554,873 612,070
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
HYS MSS
Sub-Account Sub-Account
------------------------- -------------------------
<S> <C> <C> <C> <C>
Year Ended Year Ended
December 31, December 31,
------------------------- -------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Units outstanding beginning of
year.............................. 331,677 181,341 148,048 61,302
Units purchased.................. 108,668 182,903 105,019 84,515
Units transferred between
Sub-Accounts
and Fixed Account............... 50,762 24,035 32,193 6,118
Units withdrawn, surrendered and
annuitized...................... (157,073) (56,602) (8,118) (3,887)
----------- ----------- ----------- -----------
Units outstanding end of year...... 334,034 331,677 277,142 148,048
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MMS TRS UTS
Sub-Account Sub-Account Sub-Account
------------------------- ------------------------- -------------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
------------------------- ------------------------- -------------------------
1995 1994 1995 1994 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding beginning of
year.............................. 408,469 179,323 1,063,840 592,068 6,103 --
Units purchased.................. 687,664 632,853 305,777 497,829 57,226 6,103
Units transferred between
Sub-Accounts
and Fixed Account............... (460,986) (363,042) 54,692 54,207 34,485 --
Units withdrawn, surrendered and
annuitized...................... (11,895) (40,665) (58,552) (80,264) (477) --
----------- ----------- ----------- ----------- ----------- -----------
Units outstanding end of year...... 623,252 408,469 1,365,757 1,063,840 97,337 6,103
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
WGS WGO
Sub-Account Sub-Account
------------------------- -------------------------
Year Ended Year Ended
December 31, December 31,
------------------------- -------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Units outstanding beginning of
year.............................. 238,927 137,181 35,096 --
Units purchased.................. 41,956 111,248 118,652 13,786
Units transferred between
Sub-Accounts
and Fixed Account............... (2,027) (2,702) 100,386 21,315
Units withdrawn, surrendered and
annuitized...................... (9,966) (6,800) (2,941) (5)
----------- ----------- ----------- -----------
Units outstanding end of year...... 268,890 238,927 251,193 35,096
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
47
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Contract Owners participating in Sun Life (N.Y.) Variable Account C
and the Board of Directors of Sun Life Insurance and Annuity Company of New
York:
We have audited the accompanying statement of condition of Sun Life (N.Y.)
Variable Account C (the "Variable Account") as of December 31, 1995, the related
statement of operations for the year then ended and the statements of changes in
net assets for the years ended December 31, 1995 and 1994. 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 with the custodian of securities held for the Variable Account as
of December 31, 1995. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Variable Account as of December 31,
1995, the results of its operations and the changes in its net assets for the
respective stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 2, 1996
48
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Bonds $132,026,064 $188,460,195
Mortgage loans 51,843,936 63,377,327
Real estate 0 823,655
Policy loans 476,194 520,383
Cash 1,267,905 (756,378)
Investment income due and accrued 3,255,286 4,393,086
Due from (to) parent and
affiliates--net 1,292,878 (591,254)
Other assets 443,663 204,302
------------ ------------
General account assets 190,605,926 256,431,316
------------ ------------
Separate account assets
Unitized 250,782,417 208,575,098
Non-unitized 81,110,554 35,768,295
------------ ------------
$522,498,897 $500,774,709
------------ ------------
------------ ------------
LIABILITIES
Policy reserves $ 23,548,885 $ 20,402,804
Annuity and other deposits 129,743,536 201,476,544
Accrued expenses and taxes 376,573 525,863
Other liabilities 906,238 539,438
Due to (from) separate accounts 1,036,679 (1,308,196)
Interest maintenance reserve 1,648,375 1,778,014
Asset valuation reserve 1,545,857 1,763,921
------------ ------------
General account liabilities 158,806,143 225,178,388
------------ ------------
Separate account liabilities
Unitized 250,617,786 208,418,957
Non-unitized 81,110,554 35,768,295
------------ ------------
490,534,483 469,365,640
------------ ------------
CAPITAL STOCK AND SURPLUS
Capital stock--Par value $1,000:
Authorized, issued and
outstanding
2,000 shares 2,000,000 2,000,000
Surplus 29,964,414 29,409,069
------------ ------------
Total capital stock and surplus 31,964,414 31,409,069
------------ ------------
$522,498,897 $500,774,709
------------ ------------
------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
INCOME
Premiums and annuity considerations $ 11,608,782 $ 8,191,112 $ 6,272,860
Annuity and other deposit funds 44,946,931 37,829,796 15,069,691
Net investment income 18,450,106 21,947,153 25,281,626
Amortization of interest maintenance
reserve 753,350 750,567 451,075
Realized losses on investments (33,133) (721,715) (103,689)
Mortality and expense risk charges 2,997,827 2,768,194 2,448,085
------------ ------------ ------------
78,723,863 70,765,107 49,419,648
------------ ------------ ------------
BENEFITS AND EXPENSES
Increase (decrease) in policy
reserves 3,146,081 (883,568) (2,272,569)
Decrease in liability for annuity
deposit funds (71,733,008) (34,019,523) (20,342,940)
Death, health benefits and annuity
payments 9,114,806 8,703,872 8,482,195
Annuity and other deposit fund
withdrawals 91,409,854 53,964,415 45,532,023
Surplus transfer to (from) separate
account 2,344,875 (437,497) (988,017)
Transfers to non-unitized separate
account 31,567,692 29,538,473 5,273,703
------------ ------------ ------------
65,850,300 58,866,172 35,684,395
General expenses 4,030,452 3,864,223 2,891,251
Commissions 4,937,953 4,497,683 3,704,138
Taxes, licenses and fees 540,521 417,643 255,538
------------ ------------ ------------
75,359,226 65,645,721 42,535,322
------------ ------------ ------------
Net income from operations before
federal
income tax 3,364,637 5,119,386 6,884,326
Federal income tax expense (2,435,109) (764,555) (2,924,442)
------------ ------------ ------------
NET INCOME $ 929,528 $ 4,354,831 $ 3,959,884
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
50
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
STATEMENTS OF CAPITAL STOCK AND SURPLUS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CAPITAL STOCK $ 2,000,000 $ 2,000,000 $ 2,000,000
PAID-IN SURPLUS 28,750,000 28,750,000 28,750,000
SPECIAL CONTINGENCY RESERVE 750,000 750,000 750,000
UNASSIGNED SURPLUS
Balance, beginning of year (90,931) (4,295,377) (8,114,755)
Net income 929,528 4,354,831 3,959,884
Unrealized losses (672,000) 0 0
Change in non-admitted assets 71,263 (139,468) (7,314)
Earnings on and transfers of
separate account surplus 8,490 (150,603) 3,856
Change in asset valuation reserve 218,064 139,686 (137,048)
----------- ----------- -----------
Balance, end of year 464,414 (90,931) (4,295,377)
----------- ----------- -----------
TOTAL SURPLUS 29,964,414 29,409,069 25,204,623
----------- ----------- -----------
TOTAL CAPITAL STOCK AND SURPLUS $31,964,414 $31,409,069 $27,204,623
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
51
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income from operations $ 929,528 $ 4,354,831 $ 3,959,884
Adjustments to reconcile net income
to net cash:
Increase (decrease) in policy
reserves 3,146,081 (883,568) (20,342,940)
Decrease in liability for
annuity and other deposit funds (71,733,008) (34,019,523) (2,272,569)
Decrease in investment income
due and accrued 1,137,800 448,252 370,334
Net accrual and amortization of
discount and premium on
investments 209,593 409,961 296,280
Realized losses on investments 33,133 721,715 103,689
Change in non-admitted assets 71,263 (139,468) (7,314)
Other 365,912 1,189,737 82,349
------------ ------------ ------------
Net cash used in operating activities (65,839,698) (27,918,063) (17,810,287)
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sale and maturity of
investments 124,028,229 98,636,780 46,154,969
Purchase of investments (52,676,090) (69,335,246) (27,502,652)
Net change in short-term investments (3,488,158) (1,570,559) 280,549
------------ ------------ ------------
Net cash provided by investing
activities 67,863,981 27,730,975 18,932,866
------------ ------------ ------------
Increase (decrease) in cash during the
year 2,024,283 (187,088) 1,122,579
Cash, beginning of year (756,378) (569,290) (1,691,869)
------------ ------------ ------------
Cash, end of year $ 1,267,905 $ (756,378) $ (569,290)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
52
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
GENERAL--
Sun Life Insurance and Annuity Company of New York (the Company) is incorporated
as a life insurance company and is currently engaged in the sale of individual
fixed and variable annuities and group life and long-term disability insurance.
The parent company, Sun Life Assurance Company of Canada (U.S.) (Sun Life of
Canada (U.S.)), is a wholly-owned subsidiary of Sun Life Assurance Company of
Canada (Sun Life (Canada)), a mutual life insurance company. The Company, which
is domiciled in the State of New York, prepares its financial statements in
accordance with statutory accounting practices prescribed by the State of New
York Insurance Department. Statutory accounting practices are considered to be
generally accepted accounting principles for mutual insurance companies and
subsidiaries and affiliates of mutuals. Prescribed accounting practices include
a variety of publications of the National Association of Insurance Commissioners
(NAIC), as well as New York state laws, regulations and general administrative
rules. Permitted accounting practices encompass all accounting practices not so
prescribed. The permitted accounting practices adopted by the Company are not
material to the financial statements. Preparation of the financial statements
requires management to make certain estimates and assumptions.
Assets in the balance sheets are stated at values prescribed or permitted to be
reported by state regulatory authorities. 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 or appraised value, adjusted for accumulated depreciation, less
encumbrances. Depreciation of buildings and improvements is calculated using the
straight line method over the estimated useful life of the property. For life
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. Furniture and equipment
acquisitions are capitalized but treated as nonadmitted assets. Furniture and
equipment depreciation is calculated on a straight line basis over the useful
life of the assets.
MANAGEMENT AND SERVICE CONTRACTS--
The Company has agreements with Sun Life (Canada) which provide that Sun Life
(Canada) will furnish to the Company, as requested, personnel as well as certain
investment and administrative services on a cost reimbursement basis. Expenses
under these agreements amounted to approximately $1,741,000 in 1995, $1,559,000
in 1994 and $1,200,000 in 1993.
REINSURANCE--
The Company has agreements with Sun Life (Canada) which provide that Sun Life
(Canada) will reinsure the mortality and morbidity risks of the group life
insurance contracts and group long term disability contracts issued by the
Company. Under these agreements, basic death benefits and long term disability
benefits are reinsured on a yearly renewable term basis. The agreements provide
that Sun Life (Canada) will reinsure the mortality risks in excess of $50,000
per policy for group life insurance contracts and $3,000 per policy per month
for the group long term disability contracts ceded by the Company. Reinsurance
transactions under these agreements had the effect of increasing income from
operations by approximately $652,000 and $222,000 for the years ended December
31, 1995 and 1994, respectively.
The group life and long term disability reinsurance agreements require that the
reinsurer provide funds in amounts equal to the reserves ceded.
53
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
The following are summarized pro-forma results of operations of the Company for
the years ended December 31, 1995 and 1994 before the effect of reinsurance
transactions with Sun Life (Canada).
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1995 1994
------- -------
(IN 000'S)
<S> <C> <C>
Income:
Premiums, annuity deposits and other revenues $60,927 $49,473
Net investment income and realized losses 19,170 21,976
------- -------
Subtotal 80,097 71,449
------- -------
Benefits and expenses:
Policyholder benefits 67,875 57,772
Other expenses 9,509 8,780
------- -------
Subtotal 77,384 66,552
------- -------
Income from operations $ 2,713 $ 4,897
------- -------
------- -------
</TABLE>
SEPARATE ACCOUNTS--
The Company has established unitized separate accounts applicable to individual
qualified and non-qualified variable annuity contracts.
Assets and liabilities of the separate accounts, representing net deposits and
accumulated net investment earnings less fees, held primarily for the benefit of
contract holders, are shown as separate captions in the financial statements.
Assets held in the separate accounts are carried at market values.
Deposits to all separate accounts are reported as increases in separate account
liabilities and are not reported as revenues. Mortality and expense risk charges
and surrender fees incurred by the separate accounts are included in income of
the Company.
The Company has established a non-unitized separate account for amounts
allocated to the fixed portion of a certain combination fixed/variable deferred
annuity contract. The assets of this account are available to fund general
account liabilities and general account assets are available to fund liabilities
of this account.
Any difference between the assets and liabilities of the separate accounts is
treated as payable to or receivable from the general account of the Company. The
amount receivable from the general account of the Company amounted to $1,037,000
in 1995. The amount payable to the general account of the Company in 1994 was
$1,308,000.
OTHER--
Income on investments is recognized on the accrual method.
The reserves for life insurance, health insurance and annuity contracts,
developed by accepted actuarial methods, have been established and maintained on
the basis of published mortality and morbidity tables using assumed interest
rates and valuation methods that will provide reserves at least as great as
those required by law and contract provisions.
Certain reclassifications have been made in the 1994 financial statements to
conform to the classifications used in 1995.
54
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
2. CAPITAL STOCK AND SURPLUS:
On January 2, 1985, the Company issued 2,000 shares of common stock to Sun Life
of Canada (U.S.) for $6,000,000. Through December 31, 1995, Sun Life of Canada
(U.S.) has contributed an additional $25,500,000 to the Company's capital, of
which $750,000 was used to establish a special contingency reserve in support of
separate account business as required by New York Insurance Law.
3. BONDS:
The amortized cost and estimated market value of investments in debt securities
as of December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
-------- ---------- -------- --------
(000'S)
<S> <C> <C> <C> <C>
Long-term bonds:
United States government and
government agencies and authorities $ 11,243 $ 327 $10 $ 11,560
Foreign governments 1,824 157 0 1,981
Public utilities 39,018 1,249 20 40,247
Transportation 3,908 45 0 3,953
Finance 14,047 385 6 14,426
All other corporate bonds 54,949 2,700 0 57,649
-------- ---------- --- --------
Total long-term bonds 124,989 4,863 36 129,816
Short-term bonds:
U.S. Treasury Bills, bankers
acceptances and commercial paper 7,037 0 0 7,037
-------- ---------- --- --------
$132,026 $4,863 $36 $136,853
-------- ---------- --- --------
-------- ---------- --- --------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
--------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
-------- ---------- ---------- --------
(000'S)
<S> <C> <C> <C> <C>
Long-term bonds:
United States government and
government agencies and authorities $ 34,300 $ 92 $ 746 $ 33,646
Foreign governments 5,536 44 162 5,418
Public utilities 47,125 333 896 46,562
Transportation 7,128 53 185 6,996
Finance 14,450 39 270 14,219
All other corporate bonds 76,372 823 1,347 75,848
-------- ---------- ---------- --------
Total long-term bonds 184,911 1,384 3,606 182,689
Short-term bonds:
U.S. Treasury Bills, bankers
acceptances and commercial paper 3,549 0 0 3,549
-------- ---------- ---------- --------
$188,460 $1,384 $3,606 $186,238
-------- ---------- ---------- --------
-------- ---------- ---------- --------
</TABLE>
55
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
3. BONDS (CONTINUED):
The amortized cost and estimated market value of bonds at December 31, 1995 and
1994 by contractual maturity are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------
AMORTIZED ESTIMATED
COST MARKET VALUE
--------- ------------
(000'S)
<S> <C> <C>
Maturities are:
Due in one year or less $ 33,138 $ 33,410
Due after one year through five
years 70,212 72,833
Due after five years through ten
years 16,167 17,283
Due after ten years 6,765 7,289
--------- ------------
Subtotal 126,282 130,815
Mortgage-backed securities 5,744 6,038
--------- ------------
$132,026 $136,853
--------- ------------
--------- ------------
<CAPTION>
DECEMBER 31, 1994
-----------------------
AMORTIZED ESTIMATED
COST MARKET VALUE
--------- ------------
(000'S)
<S> <C> <C>
Maturities are:
Due in one year or less $ 16,291 $ 16,362
Due after one year through five
years 120,253 118,837
Due after five years through ten
years 35,577 34,682
Due after ten years 8,002 8,130
--------- ------------
Subtotal 180,123 178,011
Mortgage-backed securities 8,337 8,227
--------- ------------
$188,460 $186,238
--------- ------------
--------- ------------
</TABLE>
A bond included above with an amortized cost of approximately $399,000 and
$398,000 at December 31, 1995 and 1994, respectively, was on deposit with the
Superintendent of Insurance of the State of New York as required by law.
4. 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
provisions have been made. In those cases where, in management's judgement, the
mortgage loans' values are impaired, appropriate losses are recorded.
56
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
4. MORTGAGE LOANS (CONTINUED):
The following table shows the geographic distribution of the mortgage portfolio.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1994
------- -------
(000'S)
<S> <C> <C>
New York $14,264 $16,474
California 5,076 10,751
Massachusetts 6,720 8,205
Ohio 4,748 4,803
Florida 4,020 4,414
All other 17,016 18,730
------- -------
$51,844 $63,377
------- -------
------- -------
</TABLE>
As of December 31, 1995, the Company has restructured mortgage loans totalling
$4,891,000, against which there are provisions of $497,000.
5. INVESTMENTS--LOSSES:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1995 1994 1993
----- ----- -----
(000'S)
<S> <C> <C> <C>
Realized losses:
Mortgage loans $ (1) $(722) $ (96)
Real estate (32) -- (7)
Stocks -- -- (1)
----- ----- -----
$ (33) $(722) $(104)
----- ----- -----
----- ----- -----
Changes in unrealized losses:
Mortgage loans $(672) $ 0 $ 0
----- ----- -----
----- ----- -----
</TABLE>
Realized capital gains and losses on bonds and mortgages which relate to changes
in levels of interest rate risk are charged or credited to an interest
maintenance reserve and amortized into income over the remaining contractual
life of the security sold. The realized capital gains credited to the interest
maintenance reserve were $960,000, $936,000 and $1,081,000 in 1995, 1994 and
1993, respectively. All gains are net of applicable taxes.
57
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
6. INVESTMENT INCOME:
Net investment income consisted of:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1995 1994 1993
------- ------- -------
(000'S)
<S> <C> <C> <C>
Interest income from bonds $13,020 15,562 $18,180
Interest income from mortgage loans 5,882 6,875 7,290
Real estate investment income (loss) (52) (85) 572
Other investment income 170 117 69
------- ------- -------
Gross investment income 19,020 22,469 26,111
Investment expenses 570 522 829
------- ------- -------
$18,450 $21,947 $25,282
------- ------- -------
------- ------- -------
</TABLE>
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, 1995
--------------------
AMOUNT % OF TOTAL
-------- ----------
(000'S)
<S> <C> <C>
Subject to discretionary withdrawal
--with market value adjustment $ 81,085 16.9%
--at book value less surrender charges
(surrender charge > 5%) 103,767 21.6%
--at book value (minimal or no charge
or adjustment) 275,075 57.3%
Not subject to discretionary withdrawal
provision 20,181 4.2%
-------- -----
Total annuity actuarial reserves and
deposit liabilities $480,108 100.0%
-------- -----
-------- -----
<CAPTION>
DECEMBER 31, 1994
--------------------
AMOUNT % OF TOTAL
-------- ----------
(000'S)
<S> <C> <C>
Subject to discretionary withdrawal
--with market value adjustment $ 35,768 7.7%
--at book value less surrender charges
(surrender charge > 5%) 181,770 39.3%
--at book value (minimal or no charge
or adjustment) 226,854 49.1%
Not subject to discretionary withdrawal
provision 17,994 3.9%
-------- -----
Total annuity actuarial reserves and
deposit liabilities $462,386 100.0%
-------- -----
-------- -----
</TABLE>
8. RETIREMENT PLANS:
The Company participates with Sun Life (Canada) and Sun Life of Canada (U.S.) in
a non-contributory defined benefit pension plan covering essentially all
employees. The benefits are based on years of service and compensation.
58
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
8. RETIREMENT PLANS (CONTINUED):
The funding policy for the pension plan is to contribute an amount which at
least satisfies the minimum amount required by ERISA. The Company is charged for
its share of the pension cost based upon its covered participants. Pension plan
assets consist principally of a variable accumulation fund contract held in a
separate account of Sun Life (Canada).
On January 1, 1994, the Company adopted Statement of Financial Accounting
Standard No. 87, "Employers Accounting for Pensions," which is in accordance
with generally accepted accounting principles.
The following table sets forth the funded status for the pension plan (for Sun
Life (Canada), Sun Life of Canada (U.S.), Sun Investment Services Company,
another wholly-owned subsidiary of Sun Life of Canada (U.S.), and the Company)
at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
TOTAL PENSION PLAN
------------------
1995 1994
-------- --------
(000'S)
<S> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligations $(40,949) $(38,157)
Accumulated benefit obligation (42,452) (39,686)
-------- --------
-------- --------
Projected benefit obligation for service
rendered to date $(60,885) $(53,494)
Plan assets at fair value 117,178 101,833
-------- --------
Difference between plan assets and
projected benefit obligations 56,293 48,339
Unrecognized net (gain) loss from past
experience different from that assumed
and effects of changes in assumptions (9,016) (1,238)
Unrecognized net asset at January 1,
1994 being recognized
over 17 years (30,842) (32,898)
-------- --------
(Accrued) prepaid pension cost included
in other assets $ 16,435 $ 14,203
-------- --------
-------- --------
</TABLE>
The components of the 1995 and 1994 pension cost for the pension plan were:
<TABLE>
<CAPTION>
TOTAL PENSION PLAN
---------------------
1995 1994
------- ------------
(000'S)
<S> <C> <C>
Service cost $ 3,390 $ 2,847
Interest cost 4,051 3,769
Actual return on plan assets (16,388) (8,294)
Net amortization and deferral 6,715 (817)
------- ------------
Net pension income $(2,232) $(2,495)
------- ------------
------- ------------
</TABLE>
The Company's share of the group's accrued pension cost at December 31, 1995 and
1994 was $97,000 and $79,000, respectively. The Company's share of net periodic
pension cost was $18,000 and $79,000, respectively.
The discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation were
7.5% and 4.5%, respectively. The expected long-term rate of return on assets was
7.5%.
59
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
8. RETIREMENT PLANS (CONTINUED):
The Company also participates with Sun Life (Canada), Sun Life of Canada (U.S.)
and certain affiliates in a 401(k) savings plan for which substantially all
employees are eligible. The Company matches, up to specified amounts, employees'
contributions to the plan. Employer contributions were $21,000, $17,000 and
$14,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
9. OTHER POST-RETIREMENT BENEFIT PLANS:
In addition to pension benefits the Company provides certain health, dental and
life insurance benefits ("post-retirement benefits") for retired employees and
dependents. Substantially all employees may become eligible for these benefits
if they reach normal retirement age while working for the Company, or retire
early upon satisfying an alternate age plus service condition. Life insurance
benefits are generally set at a fixed amount.
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 106 (SFAS No. 106), "Employers Accounting for Post-retirement
Benefits other than Pensions." SFAS No. 106 requires the Company to accrue the
estimated cost of retiree benefit payments during the years the employee
provides service. SFAS No. 106 allows recognition of the cumulative effect of
the liability in the year of adoption or the amortization of the obligation over
a period of up to 20 years. The Company has elected to recognize this obligation
of approximately $52,000 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 $7,000 in 1995, $5,000 in 1994 and $14,000 in 1993. The
Company's post-retirement health care plans currently are not funded.
The following table sets forth the plan's funded status, reconciled with amounts
recognized in the Company's balance sheet:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1994
-------- --------
<S> <C> <C>
Accumulated post-retirement benefit
obligation:
Retirees $ 0 $ 0
Fully eligible active plan participants 0 0
Other active plan participants (19,000) (11,000)
-------- --------
Total (19,000) (11,000)
Plan assets at market value 0 0
-------- --------
Accumulated post-retirement benefit
obligation in excess of plan assets (19,000) (11,000)
Unrecognized gains from past experience (44,000) (50,000)
Unrecognized transition obligation 37,000 42,000
-------- --------
Accrued post-retirement benefit cost $(26,000) $(19,000)
-------- --------
-------- --------
</TABLE>
60
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
9. OTHER POST-RETIREMENT BENEFIT PLANS (CONTINUED):
Net periodic post-retirement benefit cost components:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1995 1994
------- -------
<S> <C> <C>
Service cost--benefits earned $ 5,000 $ 3,000
Interest cost on accumulated
post-retirement benefit obligation 1,000 1,000
Amortization of transition obligation 5,000 5,000
Net amortization and deferral (4,000) (4,000)
------- -------
Net periodic post-retirement benefit
cost $ 7,000 $ 5,000
------- -------
------- -------
</TABLE>
The discount rate used in determining the accumulated post-retirement benefit
obligation was 7.5% in 1995 and 8.0% in 1994 and the assumed health care cost
trend rate was 12.0% graded to 6% over 10 years after which it remains constant.
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the post-retirement
benefit obligation as of December 31, 1995 by $8,000 and the estimated service
and interest cost components of the net periodic post-retirement benefit cost
for 1995 by $3,000.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following table presents the carrying amounts and fair values of the
Company's financial instruments at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
----------------------------- -----------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------------- ------------ -------------- ------------
(000'S)
<S> <C> <C> <C> <C>
ASSETS
Bonds $132,026 $ 136,853 $188,460 $ 186,238
Mortgages 51,844 53,718 63,377 63,193
-------------- ------------ -------------- ------------
Total $183,870 $ 190,571 $251,837 $ 249,431
-------------- ------------ -------------- ------------
-------------- ------------ -------------- ------------
LIABILITIES
Individual annuities $138,661 $ 137,463 $221,675 $ 200,582
-------------- ------------ -------------- ------------
-------------- ------------ -------------- ------------
</TABLE>
The major methods and assumptions used in estimating the fair values of
financial instruments are as follows:
The fair values of short-term bonds are estimated to be the amortized cost. The
fair values of long-term bonds which are publicly traded are based upon market
prices or dealer quotes. For privately placed bonds, fair values are estimated
using prices for publicly traded bonds of similar credit risk and maturity and
repayment characteristics.
The fair values of the Company's general account reserves and liabilities under
investment-type contracts (insurance and annuity contracts that do not involve
mortality or morbidity risks) are estimated using discounted cash flow analyses
or surrender values. Those contracts that are deemed to have short-term
guarantees have a carrying amount equal to the estimated market value.
61
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
10. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED):
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 maturities.
11. STATUTORY INVESTMENT VALUATION RESERVES:
The asset valuation reserve (AVR) provides a reserve for losses from investments
in bonds, stocks, 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 (IMR) and amortized into income over the remaining
contractual life of the security sold.
The table shown below presents changes in the major elements of the AVR and IMR.
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
AVR IMR AVR IMR
------ ------ ------ ------
(000'S) (000'S)
<S> <C> <C> <C> <C>
Balance, beginning of year $1,764 $1,778 $1,904 $1,920
Realized capital gains (losses), net of
tax (22) 624 (127) 609
Amortization of investment gains 0 (754) 0 (751)
Unrealized investment losses (672) 0 (527) 0
Required by formula 476 0 514 0
------ ------ ------ ------
Balance, end of year $1,546 $1,648 $1,764 $1,778
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
12. LIABILITY FOR UNPAID CLAIMS AND CLAIM ADJUSTMENT EXPENSE:
Activity in the liability for unpaid claims and claim adjustment expense is
summarized below.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994 1993
------- ------- -------
(000'S)
<S> <C> <C> <C>
Balance at January 1 $ 2,322 $ 1,648 $ 659
Claims Incurred 4,789 2,930 2,587
Claims Paid (2,791) (2,256) (1,598)
------- ------- -------
Balance at December 31 $ 4,320 $ 2,322 $ 1,648
------- ------- -------
------- ------- -------
</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, 1995 and 1994 the unpaid claim and claim adjustment liability
for these contracts is included in Policy Reserves on the Balance Sheet.
13. FEDERAL INCOME TAXES:
The Company files a consolidated federal income tax return with Sun Life of
Canada (U.S.) and other affiliates. Federal income taxes are calculated as if
the Company filed a return as a separate company. No provision is recognized for
timing differences which may exist between financial statement and taxable
62
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
13. FEDERAL INCOME TAXES (CONTINUED):
income. Such differences include reserves, depreciation and accrual of market
discount on bonds. The Company made cash payments to Sun Life of Canada (U.S.)
of $2,421,000, $725,000 and $3,472,000 during 1995, 1994 and 1993, respectively.
14. LEASE COMMITMENTS:
The Company leases two separate facilities for its annuity operations and group
sales office. Both leases commenced in March, 1994.
Future minimum lease commitments are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------------------------ AMOUNT
------
(000'S)
<S> <C>
1996 $ 225
1997 225
1998 225
1999 221
2000 221
Thereafter 823
------
Total $1,940
------
------
</TABLE>
Rent expense under these and prior leases in 1995, 1994 and 1993 amounted to
$336,000, $307,000 and $286,000, respectively.
15. RISK-BASED CAPITAL:
Effective December 31, 1993 the NAIC adopted risk-based capital requirements for
life insurance companies. The risk-based capital requirements provide a method
for measuring the minimum acceptable amount of adjusted capital that a life
insurer should have, as determined under statutory accounting practices, taking
into account the risk characteristics of its investments and products. The
Company has met the minimum risk-based capital requirements for 1995 and 1994.
16. NEW ACCOUNTING PRONOUNCEMENT:
In April 1993, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 40, "Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises." Under this new
interpretation, annual financial statements of mutual life insurance enterprises
for fiscal years beginning after December 15, 1992, shall provide a brief
description that financial statements prepared on the basis of statutory
accounting practices will no longer be described as prepared in conformity with
generally accepted accounting principles. In January 1995, Statement of
Financial Accounting Standards No. 120 (SFAS No. 120), "Accounting and Reporting
by Mutual Life Insurance Enterprises for Certain Long Duration Participating
Contracts" was issued. SFAS No. 120 delays the effective date of Interpretation
No. 40 until fiscal years beginning after December 15, 1995.
Beginning In 1996, the Company will file financial statements prepared in
accordance with all applicable pronouncements that define generally accepted
accounting principles for all enterprises.
63
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDER
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
WELLESLEY HILLS, MASSACHUSETTS
We have audited the accompanying balance sheets of Sun Life Insurance and
Annuity Company of New York (a wholly-owned subsidiary of Sun Life Assurance
Company of Canada) as of December 31, 1995 and 1994, and the related statements
of operations, capital stock and surplus, and cash flows for each of the three
years in the period ended December 31, 1995. 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 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. 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 Company as of December 31, 1995 and
1994, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 7, 1996
64
<PAGE>
INTERIM PERIOD FINANCIAL STATEMENTS
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
BALANCE SHEET (UNAUDITED)
MARCH 31, 1996
<TABLE>
<S> <C>
ASSETS
Bonds $129,693,184
Mortgage loans 48,316,508
Policy loans 515,702
Cash 498,472
Investment income due and accrued 2,863,385
Other assets 450,939
------------
General account assets 182,338,190
------------
Separate account assets
Unitized 255,076,536
Non-unitized 80,606,212
------------
$518,020,938
------------
------------
LIABILITIES
Policy reserves $ 24,333,564
Annuity and other deposits 119,787,747
Accrued expenses and taxes 409,367
Other liabilities 810,877
Due to parent and affiliates--net 1,014,777
Due to separate accounts 1,227,171
Interest maintenance reserve 1,702,453
Asset valuation reserve 1,476,427
------------
General account liabilities 150,762,383
------------
Separate account liabilities
Unitized 254,909,934
Non-unitized 80,606,212
------------
486,278,529
------------
CAPITAL STOCK AND SURPLUS
Capital stock--Par value $1,000:
Authorized, issued and outstanding
2,000 shares 2,000,000
Surplus 29,742,409
------------
Total capital stock and surplus 31,742,409
------------
$518,020,938
------------
------------
</TABLE>
SEE NOTES TO UNAUDITED FINANCIAL STATEMENTS
65
<PAGE>
INTERIM PERIOD FINANCIAL STATEMENTS (CONTINUED)
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
INCOME
Premiums and annuity considerations $ 3,195,110 $ 2,452,911
Annuity and other deposit funds 2,542,860 23,052,514
Net investment income 3,556,647 5,099,317
Amortization of interest maintenance reserve 183,397 185,659
Realized losses on investments 0 (450,000)
Mortality and expense risk charges 836,799 689,407
-------------- --------------
10,314,813 31,029,808
-------------- --------------
BENEFITS AND EXPENSES
Increase in policy reserves 784,679 110,011
Decrease in liability for annuity and other deposit funds (9,955,789) (15,205,795)
Death, health benefits and annuity payments 1,947,339 2,267,334
Annuity and other deposit fund withdrawals 15,205,960 19,614,846
Surplus transfer to separate account 190,492 2,203,434
Transfers to (from) non-unitized separate account (39,146) 20,043,133
-------------- --------------
8,133,535 29,032,963
-------------- --------------
General expenses 1,237,168 1,731,491
Commissions 684,118 1,173,484
Taxes, licenses and fees 176,346 126,453
-------------- --------------
10,231,167 32,064,391
-------------- --------------
Net income (loss) from operations before federal income tax 83,646 (1,034,583)
Federal income tax expense (benefit) 262,129 (847,325)
-------------- --------------
NET LOSS $ (178,483) $ (187,258)
-------------- --------------
-------------- --------------
</TABLE>
SEE NOTES TO UNAUDITED FINANCIAL STATEMENTS
66
<PAGE>
INTERIM PERIOD FINANCIAL STATEMENTS (CONTINUED)
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
STATEMENTS OF CAPITAL STOCK AND SURPLUS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
CAPITAL STOCK $ 2,000,000 $ 2,000,000
PAID-IN SURPLUS 28,750,000 28,750,000
SPECIAL CONTINGENCY RESERVE 750,000 750,000
UNASSIGNED SURPLUS
Balance, beginning of period 464,414 (90,931)
Net loss (178,483) (187,258)
Unrealized losses (125,000) 0
Change in non-admitted assets 10,077 21,471
Change in separate account surplus 1,971 2,106
Change in asset valuation reserve 69,430 (244,609)
-------------- --------------
Balance, end of period 242,409 (499,221)
-------------- --------------
TOTAL SURPLUS 29,742,409 29,000,779
-------------- --------------
TOTAL CAPITAL STOCK AND SURPLUS $ 31,742,409 $ 31,000,779
-------------- --------------
-------------- --------------
</TABLE>
SEE NOTES TO UNAUDITED FINANCIAL STATEMENTS
67
<PAGE>
INTERIM PERIOD FINANCIAL STATEMENTS (CONTINUED)
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------
1996 1995
-------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss from operations $ (178,483) $ (187,258)
Adjustments to reconcile net loss to net cash:
Increase in policy reserves 784,679 110,011
Decrease in liability for annuity and other deposit funds (9,955,789) (15,205,795)
Decrease in investment income due and accrued 391,901 382,829
Net accrual and amortization of discount and premium on investments 66,078 68,935
Realized losses on investments 0 450,000
Change in non-admitted assets 10,077 21,471
Other 2,442,873 384,414
-------------- ---------------
Net cash used in operating activities (6,438,664) (13,975,393)
-------------- ---------------
Cash flows from investing activities:
Proceeds from sale and maturity of investments 19,824,304 31,537,439
Purchase of investments (6,249,706) (18,448,820)
Net change in short-term investments (7,905,367) 2,078,894
-------------- ---------------
Net cash provided by investing activities 5,669,231 15,167,513
-------------- ---------------
Increase (decrease) in cash during the period (769,433) 1,192,120
Cash, beginning of period 1,267,905 (756,378)
-------------- ---------------
Cash, end of period $ 498,472 $ 435,742
-------------- ---------------
-------------- ---------------
</TABLE>
SEE NOTES TO UNAUDITED FINANCIAL STATEMENTS
68
<PAGE>
INTERIM PERIOD FINANCIAL STATEMENTS (CONTINUED)
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO UNAUDITED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
1. GENERAL
In management's opinion all adjustments, which include only normal recurring
adjustments, necessary for a fair presentation of the financial statements have
been made.
2. MANAGEMENT AND SERVICE CONTRACTS
The Company has agreements with Sun Life (Canada) which provide that Sun
Life (Canada) will furnish to the Company, as requested, personnel as well as
certain investment and administrative services on a cost reimbursement basis.
Expenses under these agreements amounted to approximately $424,000 and $506,000
for the three month periods in 1996 and 1995, respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
The Company had net losses of $178,000 and $187,000 in the three month
periods ended March 31, 1996 and March 31, 1995, respectively.
Total income for the three months ended March 31, 1996 was $10,315,000, a
decrease of $20,715,000 from the same period one year ago. The decrease was
primarily the result of decreases in annuity sales and net investment income.
The decrease in annuity sales was due to lower credited rates and competitive
pressures, while the decrease in net investment income was due to a decline in
invested assets, primarily the result of the Company selling fixed income
securities to cover maturing annuity deposit fund obligations.
Policyholder benefits for the three months ended March 31, 1996 decreased
$20,899,000 to $8,134,000. The decrease was primarily due to a decrease in
transfers to the non-unitized separate account, the result of a decrease in
sales of the Company's market-value adjusted deferred annuity contract.
General expenses and commissions decreased by $984,000 for the three month
period ended March 31, 1996 as a result of a decrease in annuity sales.
Federal income taxes increased $1,110,000 over the same period one year ago
as a result of an under-accrued income tax provision at March 31, 1995.
69
<PAGE>
APPENDIX A
ILLUSTRATIVE EXAMPLE OF VARIABLE ACCUMULATION UNIT VALUE CALCULATIONS:
Suppose the net asset value of a Series Fund share at the end of the current
valuation period is $18.38; at the end of the immediately preceding valuation
period was $18.32; the Valuation Period is one day; and no dividends or
distributions caused 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 and the administrative expense
charge of .00003809 (the daily equivalent of the current maximum charge of 1.40%
on an annual basis) gives a net investment factor of 1.00323702. If the value of
the variable accumulation unit for the immediately preceding valuation period
had been 14.5645672, the value for the current valuation period would be
14.6117130 (14.5645672 X 1.00323702).
ILLUSTRATIVE EXAMPLE OF 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 three percent (3%) per year, the value of
the annuity unit for the current valuation period would be 12.3847226
(12.3456789 X 1.00324378 (the Net Investment Factor) X 0.99991902). 0.99991902
is the factor, for a one day Valuation Period, that neutralizes the assumed
interest rate of three percent (3%) per year used to establish the Annuity
Payment Rates found in the Contract.
ILLUSTRATIVE EXAMPLE OF VARIABLE ANNUITY PAYMENT CALCULATIONS:
Suppose that a Contract's Accumulation Account 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 12.3847226. 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 $868.31 (70.1112
X 12.3847226).
70
<PAGE>
APPENDIX B
WITHDRAWALS, WITHDRAWAL CHARGES AND THE MARKET VALUE ADJUSTMENT
PART 1: VARIABLE ACCOUNT (THE MARKET VALUE ADJUSTMENT DOES NOT APPLY TO THE
VARIABLE ACCOUNT)
FULL SURRENDER:
Assume a Purchase Payment of $40,000 is made on the Issue Date, no
additional Purchase Payments are made and there are no partial withdrawals. The
table below presents four examples of the withdrawal charge resulting from a
full surrender of the Contract, based on hypothetical Account Values.
<TABLE>
<CAPTION>
WITHDRAWAL
AMOUNT PURCHASE WITHDRAWAL WITHDRAWAL
ACCOUNT HYPOTHETICAL WITHOUT PAYMENTS CHARGE CHARGE
YEAR ACCOUNT VALUE CHARGE LIQUIDATED PERCENTAGE AMOUNT
---------- -------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
1 $41,000 $ 4,000(a) $37,000 6.00% $2,220
3 $52,000 $12,000(b) $40,000 5.00% $2,000
7 $80,000 $28,000(c) $40,000 3.00% $1,200
9 $98,000 $28,000(d) $40,000 0.00% $ 0
</TABLE>
- ------------------------
(a) The withdrawal amount without a withdrawal charge during a contract year is
equal to 10% of new payments (those payments made in current contract year
or in the six immediately preceding contract years) less any prior partial
withdrawals in that contract year. Any portion of the withdrawal amount
without a charge that is not used in the current Contract Year is carried
forward into future years. In the first contract year 10% of new payments is
$4,000. Therefore, on full surrender $4,000 is withdrawn without a
withdrawal charge and the purchase payment liquidated is $37,000 (account
value less withdrawal amount without a charge). The withdrawal charge amount
is determined by applying the withdrawal charge percentage to the purchase
payment liquidated.
(b) In the third contract year, the withdrawal amount without a withdrawal
charge is equal to $12,000 ($4,000 for the current contract year, plus an
additional $8,000 for contract years 1 & 2 because no partial withdrawals
were taken and the unused withdrawal amount without a charge is carried
forward into future contract years). The withdrawal charge percentage is
applied to the liquidated purchase payment (account value less withdrawal
amount without a charge).
(c) In the seventh contract year, the withdrawal amount without a charge is
equal to $28,000 ($4,000 for the current contract year, plus an additional
$24,000 for contract years 1-6, $4,000 for each contract year because no
partial withdrawals were taken and the unused withdrawal amount without a
charge is carried forward into future contract years). The withdrawal charge
percentage is applied to the liquidated purchase payment (account value less
withdrawal amount without a charge, but not greater than actual purchase
payments).
(d) There is no withdrawal charge on any purchase payment liquidated that has
been in the contract for at least seven years.
PARTIAL WITHDRAWAL:
Assume a Purchase Payment of $40,000 is made on the Issue Date, no
additional Purchase Payments are made, no partial withdrawals have been taken
prior to the fifth contract year, and there are a series of three partial
withdrawals made during the fifth contract year of $9,000, $12,000, and $15,000.
<TABLE>
<CAPTION>
WITHDRAWAL
HYPOTHETICAL PARTIAL AMOUNT PURCHASE WITHDRAWAL WITHDRAWAL
ACCOUNT WITHDRAWAL WITHOUT A PAYMENTS CHARGE CHARGE
VALUE AMOUNT CHARGE LIQUIDATED PERCENTAGE AMOUNT
------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
(a) $64,000 $ 9,000 $20,000 $ 0 4.00% $ 0
(b) $56,000 $12,000 $11,000 $ 1,000 4.00% $ 40
(c) $40,000 $15,000 $ 0 $15,000 4.00% $600
</TABLE>
- ------------------------
71
<PAGE>
(a) The withdrawal amount without a charge during a contract year is equal to
10% of new payments (those payments made in current contract year or in the
six immediately preceding contract years) less any prior partial withdrawals
in that contract year. Any portion of the withdrawal amount without a charge
that is not used in the current contract year is carried forward into future
years. In the fifth contract year, the withdrawal amount without a charge is
equal to $20,000 ($4,000 for the current contract year, plus an additional
$16,000 for contract years 1-4, $4,000 for each contract year because no
partial withdrawals were taken). The partial withdrawal amount ($9,000) is
less than the withdrawal amount without a charge so no purchase payments are
liquidated and no withdrawal charge applies.
(b) Since a partial withdrawal of $9,000 was taken, the remaining withdrawal
amount without a charge is equal to $11,000. The $12,000 partial withdrawal
will first be applied against the $11,000 withdrawal amount without a
charge, and then will liquidate purchase payments of $1,000, incurring a
withdrawal charge of $40.
(c) The withdrawal amount without a charge is zero since the previous partial
withdrawals have already used the withdrawal amount without a charge. The
entire partial withdrawal amount will result in purchase payments being
liquidated and will incur a withdrawal charge. At the beginning of the next
contract year, 10% of purchase payments would be available for withdrawal
requests during that contract year.
PART 2--FIXED ACCOUNT--EXAMPLES OF THE MARKET VALUE ADJUSTMENT (MVA)
The MVA factor is:
<TABLE>
<S> <C>
N/12
1 + I
( ----- ) -1
1 + J
</TABLE>
These examples assume the following:
1) the Guarantee Amount was allocated to a five year Guarantee Period
with a Guaranteed Interest Rate of 6% or .06 (l).
2) the date of surrender is two years from the Expiration Date (N =
24).
3) the value of the Guarantee Amount on the date of surrender is
$11,910.16.
4) the interest earned in the current Contract Year is $674.16.
5) no transfers or partial withdrawals affecting this Guarantee Amount
have been made
6) withdrawal charges, if any, are calculated in the same manner as
shown in the examples in Part 1.
EXAMPLE OF A NEGATIVE MVA:
Assume that on the date of surrender, the current rate (J) is 8% or .08
<TABLE>
<C> <S> <C> <C>
N/12
1 + l
The MVA factor = ( ------ ) -1
1 + J
24/12
1 + .06
= ( ------ ) -1
1 + .08
= (.981)2 -1
= .963 -1
= - .037
</TABLE>
The value of the Guarantee Amount less interest credited to the Guarantee
Amount in the current Contract Year is multiplied by the MVA factor to determine
the MVA
($11,910.16 - $674.16) X (-.037) = -$415.73
72
<PAGE>
-$415.73 represents the MVA that will be deducted from the value of the
Guarantee Amount before the deduction of any withdrawal charge.
For a partial withdrawal of $2,000 from this Guarantee Amount, the MVA would
be ($2,000.00 - $674.16) X (-.037) = -$49.06. -$49.06 represents the MVA that
will be deducted from the partial withdrawal amount before the deduction of any
withdrawal charge.
EXAMPLE OF A POSITIVE MVA:
Assume that on the date of surrender, the current rate (J) is 5% or .05.
N/12
1 + l
The MVA factor = ( ------ ) -1
1 + J
24/12
1 + .06
= ( ------ ) -1
1 + .05
= (1.010)2 -1
= 1.019 -1
= .019
The value of the Guarantee Amount less interest credited to the Guarantee
Amount in the current Contract Year is multiplied by the MVA factor to determine
the MVA
($11,910.16 - $674.16) X .019 = $213.48
$213.48 represents the MVA that would be added to the value of the Guarantee
Amount before the deduction of any withdrawal charge.
For a partial withdrawal of $2,000 from this Guarantee Amount, the MVA would
be ($2,000.00 - $674.16) X .019 = $25.19.
$25.19 represents the MVA that would be added to the value of the partial
withdrawal amount before the deduction of any withdrawal charge.
73
<PAGE>
APPENDIX C
CALCULATION OF PERFORMANCE DATA
AVERAGE ANNUAL TOTAL RETURN:
The table below shows, for various Sub-Accounts of the Variable Account, the
Average Annual Total Return for the stated periods (or shorter period indicated
in the note below), based upon a hypothetical initial Purchase Payment of
$1,000, calculated in accordance with the formula set out below the table. For
purposes of determining these investment results, the actual investment
performance of each Series of the Series Fund is reflected from the date such
Series commenced investment operations ("Inception"), although the Contracts
have been offered only since August, 1996. No information is shown for the
Emerging Growth Series or the MFS/ Foreign & Colonial International Growth and
Income Series as they did not commence operations until 1995 and 1996,
respectively.
AVERAGE ANNUAL TOTAL RETURN
PERIOD ENDING DECEMBER 31, 1995
<TABLE>
<CAPTION>
5 YEAR 10 YEAR
PERIOD PERIOD
OR OR
LIFETIME LIFETIME
1 YEAR OF OF DATE OF
PERIOD SERIES SERIES INCEPTION
------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Capital Appreciation Series............. 26.16% 17.15% 13.83% August 13, 1985
Conservative Growth Series.............. 29.32% 14.08% 10.89%* December 5, 1986
Government Securities Series............ 9.78% 6.78% 7.56% August 12, 1985
High Yield Series....................... 9.32% 15.87% 8.38% August 13, 1985
Managed Sectors Series.................. 24.27% 16.21% 14.64%* May 27, 1988
Money Market Series..................... -1.89% 1.95% 3.77% August 29, 1985
Research Series......................... 29.49% 23.66%* NA November 7, 1994
Total Return Series..................... 18.51% 10.53% 9.84%* May 16, 1988
Utilities Series........................ 24.52% 7.95%* NA November 16, 1993
World Asset Allocation Series........... 13.94% 12.42%* NA November 7, 1994
World Governments Series................ 7.95% 6.44% 7.58%* May 16, 1988
World Growth Series..................... 8.21% 8.18%* NA November 16, 1993
World Total Return Series............... 10.28% 9.26%* NA November 7, 1994
</TABLE>
- ------------------------
*The lifetimes of these series are less than the periods indicated.
The length of the period and the last day of each period used in the above table
are set out in the table heading and in the footnotes above. The Average Annual
Total Return for each period was determined by finding the average annual
compounded rate of return over each period that would equate the initial amount
invested to the ending redeemable value for that period, in accordance with the
following formula:
P(1 + T)n = ERV
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)
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 Account Fee will be allocated among the Sub-Accounts so that
each Sub-Account's allocated portion of the Account Fee is proportional to the
percentage of the number of Contracts that have amounts allocated to that
Sub-Account. Because the impact of Account Fees on a particular Contract may
74
<PAGE>
differ from those assumed in the computation due to differences between actual
allocations and the assumed ones, the total return that would have been
experienced by an actual Contract over these same time periods may have been
different from that shown above.
NON-STANDARDIZED INVESTMENT PERFORMANCE:
The Variable Account may illustrate its results over various periods and
compare its results to indices and other variable annuities in sales materials
including advertisements, brochures and reports. Such results may be computed on
a "cumulative" and/or "annualized" basis.
"Cumulative" quotations are arrived at by calculating the change in the
Accumulation Unit value of a Sub-Account between the first and last day of the
base period being measured, and expressing the difference as a percentage of the
Accumulation Unit value at the beginning of the base period.
"Annualized" quotations (described in the following table as "Compound
Growth Rate") are calculated by applying a formula which determines the level
rate of return which, if earned over the entire base period, would produce the
cumulative return.
75
<PAGE>
NON-STANDARDIZED INVESTMENT PERFORMANCE:
$10,000 INVESTED IN ...WOULD HAVE GROWN TO THIS AMOUNT ON
THIS SUB-ACCOUNT UNDER A DECEMBER 31, 1995*
REGATTA GOLD - NY CONTRACT
THIS MANY YEARS AGO...
<TABLE>
<CAPTION>
CAPITAL APPRECIATION SERIES GOVERNMENT SECURITIES SERIES
---------------------------------------------------- ----------------------------------------------------
NUMBER CUMULATIVE COMPOUND CUMULATIVE COMPOUND
OF GROWTH GROWTH GROWTH GROWTH
YEARS PERIODS AMOUNT RATE RATE PERIODS AMOUNT RATE RATE
- --------- ---------------- ----------- ---------- -------- ---------------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1/1/95-12/31/95 $ 13,261.09 32.61% 32.61% 1/1/95-12/31/95 $ 11,602.40 16.02% 16.02%
2 1/1/94-12/31/95 $ 12,607.48 26.07% 12.28% 1/1/94-12/31/95 $ 11,195.41 11.95% 5.81%
3 1/1/93-12/31/95 $ 14,672.03 46.72% 13.63% 1/1/93-12/31/95 $ 11,998.33 19.98% 6.26%
4 1/1/92-12/31/95 $ 16,379.01 63.79% 13.13% 1/1/92-12/31/95 $ 12,626.96 26.27% 6.00%
5 1/1/91-12/31/95 $ 22,764.42 127.64% 17.88% 1/1/91-12/31/95 $ 14,429.37 44.29% 7.61%
10 1/1/86-12/31/95 $ 37,566.22 275.66% 14.15% 1/1/86-12/31/95 $ 21,307.10 113.07% 7.86%
Life 8/13/85-12/31/95 $ 40,036.86 300.37% 14.29% 8/12/85-12/31/95 $ 22,195.29 121.95% 7.97%
<CAPTION>
HIGH YIELD SERIES MANAGED SECTORS SERIES
---------------------------------------------------- ----------------------------------------------------
NUMBER CUMULATIVE COMPOUND CUMULATIVE COMPOUND
OF GROWTH GROWTH GROWTH GROWTH
YEARS PERIODS AMOUNT RATE RATE PERIODS AMOUNT RATE RATE
- --------- ---------------- ----------- ---------- -------- ---------------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1/1/95-12/31/95 $ 11,542.40 15.42% 15.42% 1/1/95-12/31/95 $ 13,043.79 30.44% 30.44%
2 1/1/94-12/31/95 $ 11,129.15 11.29% 5.49% 1/1/94-12/31/95 $ 12,616.38 26.16% 12.32%
3 1/1/93-12/31/95 $ 12,922.14 29.22% 8.92% 1/1/93-12/31/95 $ 12,947.21 29.47% 8.99%
4 1/1/92-12/31/95 $ 14,658.32 46.58% 10.03% 1/1/92-12/31/95 $ 13,595.93 35.96% 7.98%
5 1/1/91-12/31/95 $ 21,340.76 113.41% 16.37% 1/1/91-12/31/95 $ 21,722.81 117.23% 16.78%
10 1/1/86-12/31/95 $ 22,508.70 125.09% 8.45%
Life 8/13/85-12/31/95 $ 23,253.62 132.54% 8.46% 5/27/88-12/31/95 $ 28,549.99 185.50% 14.80%
<CAPTION>
TOTAL RETURN SERIES WORLD GOVERNMENTS SERIES
---------------------------------------------------- ----------------------------------------------------
NUMBER CUMULATIVE COMPOUND CUMULATIVE COMPOUND
OF GROWTH GROWTH GROWTH GROWTH
YEARS PERIODS AMOUNT RATE RATE PERIODS AMOUNT RATE RATE
- --------- ---------------- ----------- ---------- -------- ---------------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1/1/95-12/31/95 $ 12,503.26 25.03% 25.03% 1/1/95-12/31/95 $ 11,409.59 14.10% 14.10%
2 1/1/94-12/31/95 $ 12,051.68 20.52% 9.78% 1/1/94-12/31/95 $ 10,747.22 7.47% 3.67%
3 1/1/93-12/31/95 $ 13,476.21 34.76% 10.46% 1/1/93-12/31/95 $ 12,601.96 26.02% 8.01%
4 1/1/92-12/31/95 $ 14,402.53 44.03% 9.55% 1/1/92-12/31/95 $ 12,487.47 24.87% 5.71%
5 1/1/91-12/31/95 $ 17,278.31 72.78% 11.56% 1/1/91-12/31/95 $ 14,135.49 41.35% 7.17%
Life 5/16/88-12/31/95 $ 21,257.49 112.57% 10.39% 5/16/88-12/31/95 $ 17,696.01 76.96% 7.77%
<CAPTION>
MONEY MARKET SERIES
----------------------------------------------------
NUMBER CUMULATIVE COMPOUND
OF GROWTH GROWTH
YEARS PERIODS AMOUNT RATE RATE
- --------- ---------------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1/1/95-12/31/95 $10,399.76 4.00% 4.00%
2 1/1/94-12/31/95 $10,635.98 6.36% 3.13%
3 1/1/93-12/31/95 $10,764.77 7.65% 2.49%
4 1/1/92-12/31/95 $10,970.56 9.71% 2.34%
5 1/1/91-12/31/95 $11,445.88 14.46% 2.74%
10 1/1/86-12/31/95 $15,074.48 50.74% 4.19%
Life 8/29/85-12/31/95 $15,301.22 53.01% 4.20%
</TABLE>
76
<PAGE>
NON-STANDARDIZED INVESTMENT PERFORMANCE -- continued:
$10,000 INVESTED IN ...WOULD HAVE GROWN TO THIS AMOUNT ON
THIS SUB-ACCOUNT UNDER A DECEMBER 31, 1995*
REGATTA GOLD - NY CONTRACT
THIS MANY YEARS AGO...
<TABLE>
<CAPTION>
CONSERVATIVE GROWTH SERIES UTILITIES SERIES
---------------------------------------------------- ----------------------------------------------------
NUMBER CUMULATIVE COMPOUND CUMULATIVE COMPOUND
OF GROWTH GROWTH GROWTH GROWTH
YEARS PERIODS AMOUNT RATE RATE PERIODS AMOUNT RATE RATE
- --------- ---------------- ----------- ---------- -------- ---------------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1/1/95-12/31/95 $ 13,554.19 35.54% 35.54% 1/1/95-12/31/95 $ 13,057.79 30.58% 30.58%
2 1/1/94-12/31/95 $ 13,219.27 32.19% 14.98% 1/1/94-12/31/95 $ 12,240.29 22.40% 10.64%
3 1/1/93-12/31/95 $ 14,133.68 41.34% 12.22%
4 1/1/92-12/31/95 $ 14,720.54 47.21% 10.15%
5 1/1/91-12/31/95 $ 19,867.60 98.68% 14.72%
Life 12/5/86-12/31/95 $ 25,953.40 159.53% 11.08% 11/16/93-12/31/95 $ 12,240.29 22.40% 9.99%
<CAPTION>
WORLD GROWTH SERIES RESEARCH SERIES
---------------------------------------------------- ----------------------------------------------------
NUMBER CUMULATIVE COMPOUND CUMULATIVE COMPOUND
OF GROWTH GROWTH GROWTH GROWTH
YEARS PERIODS AMOUNT RATE RATE PERIODS AMOUNT RATE RATE
- --------- ---------------- ----------- ---------- -------- ---------------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1/1/95-12/31/95 $ 11,439.43 14.39% 14.39% 1/1/95-12/31/95 $ 13,554.05 35.54% 35.54%
2 1/1/94-12/31/95 $ 11,611.36 16.11% 7.76%
Life 11/16/93-12/31/95 $ 12,332.08 23.32% 10.38% 11/7/94-12/31/95 $ 13,366.28 33.66% 28.76%
<CAPTION>
WORLD ASSET ALLOCATION SERIES WORLD TOTAL RETURN SERIES
---------------------------------------------------- ----------------------------------------------------
NUMBER CUMULATIVE COMPOUND CUMULATIVE COMPOUND
OF GROWTH GROWTH GROWTH GROWTH
YEARS PERIODS AMOUNT RATE RATE PERIODS AMOUNT RATE RATE
- --------- ---------------- ----------- ---------- -------- ---------------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1/1/95-12/31/95 $ 11,995.32 19.95% 19.95% 1/1/95-12/31/95 $ 11,628.93 16.29% 16.29%
Life 11/7/94-12/31/95 $ 12,039.35 20.39% 17.55% 11/7/94-12/31/95 $ 11,651.64 16.52% 14.24%
</TABLE>
- ------------------------------
*For purposes of determining these investment results, the actual investment
performance of each Series of the Series Fund is reflected from the date such
Series commenced operations, although the Contracts have been offered only
since August, 1996. No information is shown for the Emerging Growth Series or
the MFS/Foreign & Colonial International Growth and Income Series as they did
not commence operations until 1995 and 1996, respectively. The charges imposed
under the Contract against the assets of the Variable Account for mortality and
expense risks and administrative expenses have been deducted. However, the
annual Account Fee is not reflected and these examples do not assume surrender
at the end of the period.
77
<PAGE>
ADVERTISING AND SALES LITERATURE
The Company may refer to the following organizations (and others) in its
marketing materials:
A.M. BEST'S RATING SYSTEM is designed to evaluate the various factors
affecting the overall performance of an insurance company in order to provide an
opinion as to an insurance company's relative financial strength and ability to
meet its contractual obligations. The procedure includes both a quantitative and
qualitative review of each company.
DUFF & PHELPS CREDIT RATING COMPANY's Insurance Company Claims Paying
Ability Rating is an independent evaluation by a nationally accredited rating
organization of an insurance company's ability to meet its future obligations
under the contracts and products it sells. The rating takes into account both
quantitative and qualitative factors.
LIPPER VARIABLE INSURANCE PRODUCTS PERFORMANCE ANALYSIS SERVICE is a
publisher of statistical data covering the investment company industry in the
United States and overseas. Lipper is recognized as the leading source of data
on open-end and closed-end funds. Lipper currently tracks the performance of
over 5,000 investment companies and publishes numerous specialized reports,
including reports on performance and portfolio analysis, fee and expense
analysis.
STANDARD & POOR's insurance claims-paying ability rating is an opinion of an
operating insurance company's financial capacity to meet obligations of its
insurance policies in accordance with their terms.
VARDS (Variable Annuity Research Data Service) provides a comprehensive
guide to variable annuity contract features and historical fund performance. The
service also provides a readily understandable analysis of the comparative
characteristics and market performance of funds inclusive in variable contracts.
STANDARD & POOR'S INDEX--broad-based measurement of changes in stock-market
conditions based on the average performance of 500 widely held common stocks;
commonly known as the Standard & Poor's 500 (S&P 500). The selection of stocks,
their relative weightings to reflect differences in the number of outstanding
shares, and publication of the index itself are services of Standard & Poor's
Corporation, a financial advisory, securities rating, and publishing firm. The
index tracks 400 industrial company stocks, 20 transportation stocks, 40
financial company stocks, and 40 public utilities.
NASDAQ-OTC Price Index--this index is based on the National Association of
Securities Dealers Automated Quotations (NASDAQ) and represents all domestic
over-the-counter stocks except those traded on exchanges and those having only
one market maker, a total of some 3,500 stocks. It is market value-weighted and
was introduced with a base of 100.00 on February 5, 1971.
DOW JONES INDUSTRIAL AVERAGE (DJIA)--price-weighted average of 30 actively
traded blue chip stocks, primarily industrials, but including American Express
Company and American Telephone and Telegraph Company. Prepared and Published by
Dow Jones & Company, it is the oldest and most widely quoted of all the market
indicators. The average is quoted in points, not dollars.
In its advertisements and other sales literature for the Variable Account
and the Series Fund, the Company intends to illustrate the advantages of the
Contracts in a number of ways:
COMPOUND INTEREST ILLUSTRATIONS. These will emphasize several advantages of
the variable annuity contract. For example, but not by way of limitation, the
literature may emphasize the potential savings through tax deferral, the
potential advantage of the Variable Account over the Fixed Account and the
compounding effect when the Owner makes regular Purchase Payments to his or her
Contract.
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.
SYSTEMATIC WITHDRAWAL PROGRAM. A service provided by the Company, through
which the Owner may take any distribution allowed by Code Section 401(a)(9) in
the case of Qualified Contracts, or permitted under Code Section 72 in the case
of Non-Qualified Contracts, by way of a series of partial withdrawals.
Withdrawals under this program may be fully or partially includible in income
and may be subject to a 10% penalty tax. Consult your tax advisor.
THE COMPANY'S ASSETS, SIZE. The Company may discuss its general financial
condition (see, for example, the references to Standard & Poor's, Duff & Phelps
and A.M. Best Company 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.
78
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY
OF NEW YORK
80 BROAD STREET
NEW YORK, NEW YORK 10004
TELEPHONE:
(212) 943-3855
(800) 447-7569
GENERAL DISTRIBUTOR
Clarendon Insurance Agency, Inc.
500 Boylston Street
Boston, Massachusetts 02116
LEGAL COUNSEL
Covington & Burling
1201 Pennsylvania Avenue, N.W.
P.O. Box 7566
Washington, D.C. 20044
AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, Massachusetts 02110
GOLDNY-1 8/96
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS.
Item 14. Other Expenses of Issuance and Distribution.
Securities and Exchange Commission
Registration Fees $34,483
Printing and Engraving 20,000
Accounting Fees and Expenses 1,000
Legal Fees and Expenses 4,000
-------
$59,483
Item 15. Indemnification of Directors and Officers.
Article 5, Section 5.6 of the By-Laws of Sun Life Insurance and Annuity
Company of New York provides for indemnification of directors, officers and
employees as follows:
"The Corporation may by action of the Board of Directors indemnify to
the full extent and in the manner authorized by law any person made or
threatened to be made a party to an action or proceeding, whether criminal,
civil, administrative or investigative, by reason of the fact that he or
she, his or her testator or intestate is or was a director, officer or
employee of the Corporation or serves or served any other enterprise as a
director, officer or employee at the request of the Corporation."
Item 16. Exhibits
Exhibits:
Exhibit
Number Description Method of Filing
- ------- ----------- ----------------
1 Underwriting Agreement *
4 Single Premium Combination Fixed/
Variable Annuity Contract **
5 Opinion re: Legality Filed Herewith
23 Consents of Experts and Counsel
(a) Independent Auditor's
Consent Filed Herewith
(b) Consent of Counsel Filed Herewith
24 Powers of Attorney Filed Herewith
* Incorporated by reference from the Registration Statement of the Registrant
on Form S-1, File No. 33-1079.
** Incorporated by reference from the Registration Statement on Form N-4 of
Sun Life (N.Y.) Variable Account C, File No. 333-05037.
<PAGE>
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and a(1)(ii) do not apply
if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post- effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Sun Life Insurance and Annuity Company of New York, certifies
that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2, and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Wellesley, Commonwealth of Massachusetts, on the
30th day of July, 1996.
Sun Life Insurance and Annuity
Company of New York
(Registrant)
By:* /s/ JOHN D. McNEIL
-------------------------
John D. McNeil
Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Chairman and
Director
(Principal
* /s/ JOHN D. McNEIL Executive Officer) July 30, 1996
- ----------------------------
John D. McNeil
Vice President,
Controller and
Actuary (Principal
Financial &
/s/ ROBERT P. VROLYK Accounting Officer) July 30, 1996
- ------------------------------
Robert P. Vrolyk
* /s/ RICHARD B. BAILEY Director July 30, 1996
- ------------------------------
Richard B. Bailey
- -------------------------
* By Bonnie S. Angus pursuant to Power of Attorney filed herewith.
<PAGE>
Signature Title Date
--------- ----- ----
* /s/ A. KEITH BRODKIN Director July 30, 1996
- ------------------------------
A. Keith Brodkin
* /s/ M. COLYER CRUM Director July 30, 1996
- ------------------------------
M. Colyer Crum
* /s/ JOHN R. GARDNER President and July 30, 1996
- ------------------------------ Director
John R. Gardner
Senior Vice President
* /s/ DAVID D. HORN and Director July 30, 1996
- ------------------------------
David D. Horn
* /s/ JOHN G. IRELAND Director July 30, 1996
- ------------------------------
John G. Ireland
* Director
- ------------------------------
Edward M. Lamont
* /s/ JOHN S. LANE Director July 30, 1996
- ------------------------------
John S. Lane
* /s/ ANGUS A. MacNAUGHTON Director July 30, 1996
- ------------------------------
Angus A. MacNaughton
* Director
- ------------------------------
Fioravante G. Perrotta
* Director
- ------------------------------
Ralph F. Peters
* /s/ PAMELA T. TIMMINS Director July 30, 1996
- ------------------------------
Pamela T. Timmins
- ------------------------
* By Bonnie S. Angus pursuant to Power of Attorney filed herewith.
<PAGE>
EXHIBIT INDEX
Exhibit Page
Number ----
- -------
1 Underwriting Agreement............................ *
4 Single Premium Combination Fixed/
Variable Annuity Contract....................... **
5 Opinion Re: Legality..............................
23(a) Consent of Independent Certified Public
Accountants.....................................
23(b) Consent of Counsel................................
24 Powers of Attorney................................
- --------------------
* Filed with the Registration Statement of the Registrant on Form S-1, File
No. 33-1079.
** Filed with the Registration Statement on Form N-4 of Sun Life (N.Y.)
Variable Account C, File No. 333-05037.
<PAGE>
Sun Life Insurance and Annuity Company of New York
80 Broad Street
New York, New York 10004
Exhibit 5
July 30, 1996
Board of Directors
Sun Life Insurance and Annuity Company of New York
80 Broad Street
New York, New York 10004
Dear Sirs:
Reference is made to the Registration Statement on Form S-2 ("Registration
Statement") to be filed with the Securities and Exchange Commission with
respect to the proposed sale of an indefinite principal amount of flexible
payment combination fixed/variable group annuity contracts ("Contracts") to
be issued with respect to Sun Life Insurance and Annuity Company of New York
("Sun Life (N.Y.)"), a New York corporation. I wish to advise you that I have
reviewed the corporate records of Sun Life (N.Y.) and have examined the
Registration Statement with exhibits and such other documents as I deem
necessary for the purpose of this opinion.
Based upon the foregoing, I am of the opinion that:
(1) Sun Life (N.Y.) is duly organized and in good standing under the laws
of the State of New York and has the authority to issue the Contracts
in all jurisdictions where it is authorized to do an insurance
business and the Contracts have been approved by the appropriate
regulatory authorities; and
(2) The Contracts, as and when issued pursuant to the terms, provisions
and conditions as set forth in the Registration Statement, will be
validly issued and will be legal and binding obligations of Sun Life
(N.Y.) in accordance with their terms.
In this opinion, I have not addressed the question of taxation of the
Contracts.
Very truly yours,
/s/ David D. Horn
- -------------------
David D. Horn, Esq.
Senior Vice President
DDH/clm
<PAGE>
Exhibit 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in the Registration Statement on Form S-2 of Sun
Life Insurance and Annuity Company of New York of our report dated
February 2, 1996 accompanying the financial statements of Sun Life (N.Y.)
Variable Account C and to the use of our report dated February 7, 1996
accompanying the financial statements of Sun Life Insurance and Annuity
Company of New York appearing in the Prospectus, which is a part of such
Registration Statement, and to the incorporation by reference of our
reports dated February 7, 1996 appearing in the Annual Report on Form 10-K
of Sun Life Insurance and Annuity Company of New York for the year ended
December 31, 1995.
We also consent to the references to us under the heading "Accountants"
in such Prospectus.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
July 30, 1996
<PAGE>
Exhibit 23(b)
CONSENT OF COUNSEL
I hereby consent to the reference to me in the Registration Statement on
Form S-2 of Sun Life Insurance and Annuity Company of New York under the
caption "Legal Matters" in the Prospectus contained therein.
DAVID D. HORN, ESQ.
July 30, 1996
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that John D. McNeil, whose signature appears
below, constitutes and appoints Bonnie S. Angus, David D. Horn, Margaret Sears
Mead and David N. Brown, and each of them, his attorneys-in-fact, each with the
power of substitution, for him in any and all capacities, to sign a Registration
Statement on Form S-2 of Sun Life Insurance and Annuity Company of New York, and
any amendments thereto, and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact or his
substitute or substitutes, may do or cause to be done by virtue hereof.
/s/ John D. McNeil
-----------------------------------
John D. McNeil
July 25, 1996
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Robert P. Vrolyk, whose signature
appears below, constitutes and appoints Bonnie S. Angus, David D. Horn,
Margaret Sears Mead and David N. Brown, and each of them, his attorneys-in-fact,
each with the power of substitution, for him in any and all capacities, to sign
a Registration Statement on Form S-2 of Sun Life Insurance and Annuity Company
of New York, and any amendments thereto, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ Robert P. Vrolyk
-----------------------------------
Robert P. Vrolyk
July 25, 1996
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Richard B. Bailey, whose signature
appears below, constitutes and appoints Bonnie S. Angus, David D. Horn,
Margaret Sears Mead and David N. Brown, and each of them, his attorneys-in-fact,
each with the power of substitution, for him in any and all capacities, to sign
a Registration Statement on Form S-2 of Sun Life Insurance and Annuity Company
of New York, and any amendments thereto, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ Richard B. Bailey
-----------------------------------
Richard B. Bailey
July 25, 1996
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that A. Keith Brodkin, whose signature
appears below, constitutes and appoints Bonnie S. Angus, David D. Horn,
Margaret Sears Mead and David N. Brown, and each of them, his attorneys-in-fact,
each with the power of substitution, for him in any and all capacities, to sign
a Registration Statement on Form S-2 of Sun Life Insurance and Annuity Company
of New York, and any amendments thereto, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ A. Keith Brodin
-----------------------------------
A. Keith Brodkin
July 25, 1996
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that M. Colyer Crum, whose signature
appears below, constitutes and appoints Bonnie S. Angus, David D. Horn,
Margaret Sears Mead and David N. Brown, and each of them, his attorneys-in-fact,
each with the power of substitution, for him in any and all capacities, to sign
a Registration Statement on Form S-2 of Sun Life Insurance and Annuity Company
of New York, and any amendments thereto, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ M. Colyer Crum
-----------------------------------
M. Colyer Crum
July 25, 1996
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that John R. Gardner, whose signature
appears below, constitutes and appoints Bonnie S. Angus, David D. Horn,
Margaret Sears Mead and David N. Brown, and each of them, his attorneys-in-fact,
each with the power of substitution, for him in any and all capacities, to sign
a Registration Statement on Form S-2 of Sun Life Insurance and Annuity Company
of New York, and any amendments thereto, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ John R. Gardner
-----------------------------------
John R. Gardner
July 25, 1996
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that David D. Horn, whose signature appears
below, constitutes and appoints Bonnie S. Angus, Margaret Sears Mead and David
N. Brown, and each of them, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign a Registration
Statement on Form S-2 of Sun Life Insurance and Annuity Company of New York,
and any amendments thereto, and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ David D. Horn
-----------------------------------
David D. Horn
July 25, 1996
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that John G. Ireland, whose signature
appears below, constitutes and appoints Bonnie S. Angus, David D. Horn,
Margaret Sears Mead and David N. Brown, and each of them, his attorneys-in-fact,
each with the power of substitution, for him in any and all capacities, to sign
a Registration Statement on Form S-2 of Sun Life Insurance and Annuity Company
of New York, and any amendments thereto, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ John G. Ireland
-----------------------------------
John G. Ireland
July 25, 1996
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that John S. Lane, whose signature
appears below, constitutes and appoints Bonnie S. Angus, David D. Horn,
Margaret Sears Mead and David N. Brown, and each of them, his attorneys-in-fact,
each with the power of substitution, for him in any and all capacities, to sign
a Registration Statement on Form S-2 of Sun Life Insurance and Annuity Company
of New York, and any amendments thereto, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ John S. Lane
-----------------------------------
John S. Lane
July 25, 1996
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Angus A. MacNaughton, whose signature
appears below, constitutes and appoints Bonnie S. Angus, David D. Horn,
Margaret Sears Mead and David N. Brown, and each of them, his attorneys-in-fact,
each with the power of substitution, for him in any and all capacities, to sign
a Registration Statement on Form S-2 of Sun Life Insurance and Annuity Company
of New York, and any amendments thereto, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ Angus A. MacNaughton
-----------------------------------
Angus A. MacNaughton
July 25, 1996
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Pamela T. Timmins, whose signature
appears below, constitutes and appoints Bonnie S. Angus, David D. Horn,
Margaret Sears Mead and David N. Brown, and each of them, his attorneys-in-fact,
each with the power of substitution, for him in any and all capacities, to sign
a Registration Statement on Form S-2 of Sun Life Insurance and Annuity Company
of New York, and any amendments thereto, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ Pamela T. Timmins
-----------------------------------
Pamela T. Timmins
July 25, 1996
