<PAGE>
As filed with the Securities and Exchange Commission on April 28, 1999
REGISTRATION NO.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
--------------
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-2461439
(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:
EDWARD M. SHEA, ASSISTANT VICE PRESIDENT DAVID N. BROWN, ESQ.
AND SENIOR COUNSEL COVINGTON & BURLING
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) 1201 PENNSYLVANIA AVENUE, N.W.
RETIREMENT PRODUCTS AND SERVICES P.O. BOX 7566
ONE COPLEY PLACE WASHINGTON, D.C. 20044
BOSTON, MASSACHUSETTS 02116
(617) 348-9600
(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:
From time to time after the effective date hereof
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, check the following box. /X/
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legal facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
-----------------------------------
Calculation of Registration Fee
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| |
Title of each class | Proposed maximum | Amount of
of securities to be | Aggregate Offering | Registration
registered | Price | Fee
| |
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| |
Fixed Annuity | $100,000,000 | $27,800(1)
Contracts | |
| |
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(1) Pursuant to Rule 457(o) under the Securities Act of 1933, the
registration fee is calculated based on the maximum aggregate offering
price of the securities registered hereby.
------------------------------
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), may determine.
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS
Attached hereto and made a part hereof is the Prospectus dated May 1, 1999.
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
MAY 1, 1999
PROFILE
REGATTA GOLD--NY
VARIABLE AND FIXED
ANNUITY
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS THAT YOU
SHOULD KNOW AND CONSIDER BEFORE PURCHASING THE CONTRACT. THE CONTRACT IS MORE
FULLY DESCRIBED IN THE FULL PROSPECTUS WHICH ACCOMPANIES THIS PROFILE. PLEASE
READ THE PROSPECTUS CAREFULLY.
1. THE REGATTA GOLD--NY ANNUITY
The Regatta Gold--NY Annuity is a flexible payment deferred annuity
contract ("Contract") designed for use in connection with retirement and
deferred compensation plans, some of which may qualify for favorable federal
income tax treatment. The Contract is intended to help you achieve your
retirement savings or other long-term investment goals.
The Contract has two phases: an Accumulation Phase and an Income Phase.
During the Accumulation Phase you make payments into the Contract; any
investment earnings under your Contract accumulate on a tax-deferred basis and
are taxed as income only when withdrawn. During the Income Phase, we make
annuity payments in amounts determined in part by the amount of money you have
accumulated under your Contract during the Accumulation Phase. You choose when
the Income Phase begins.
You may choose among 25 variable investment options and a range of fixed
interest options. For a variable investment return you choose one or more
Sub-Accounts in our Variable Account, each of which invests in shares of a
corresponding series of the MFS/Sun Life Series Trust (collectively, the
"Series") listed in Section 4. The value of any portion of your Contract
allocated to the Sub-Accounts will fluctuate up or down depending on the
performance of the Series you select, and you may experience losses. For a fixed
interest rate, you may choose one or more Guarantee Periods offered in our Fixed
Account, each of which earns its own Guaranteed Interest Rate if you keep your
money in that Guarantee Period for the specified length of time.
The Contract is designed to meet your need for investment flexibility. At
any time you may have amounts allocated among up to 18 of the available variable
and fixed options. Until we begin making annuity payments under your Contract,
you can, subject to certain limitations, transfer money between options up to 12
times each year without a transfer charge or adverse tax consequences.
2. ANNUITY PAYMENTS (THE INCOME PHASE)
Just as you can elect to have your Contract value accumulate on either a
variable or fixed basis, or a combination of both, you can elect to receive
annuity payments on either a variable or fixed basis or both. If you choose to
have any part of your annuity payments come from the Sub-Accounts, the dollar
amount of your annuity payments may fluctuate.
The Contract offers a variety of annuity options. You can select from
among the following methods of receiving either variable or fixed annuity
payments under your Contract: (1) monthly payments continuing for your lifetime
(assuming you are the annuitant); (2) monthly payments for your lifetime, but
with payments continuing to your chosen beneficiary for 5, 10, 15 or 20 years if
you die before the end of the period you have selected; (3) monthly payments for
your lifetime and the life of another person (usually your spouse) you have
chosen; and (4) monthly payments for a specified number of years (between 5 and
30), with a cash-out option for variable payments. You can also select a fixed
payment option where we will hold the amount applied to provide fixed annuity
payments, with interest accrued at the rate we determine from time to time,
which will be at least 3% per year. We may also agree to other annuity options
in our discretion.
Once the Income Phase begins, you cannot change your choice of annuity
payment method.
3. PURCHASING A CONTRACT
You may purchase a Contract for $5,000 or more, under most circumstances.
You may increase the value of your investment by adding $1,000 or more at any
time during the Accumulation Phase. We will not accept a Purchase Payment if
your Account Value is over $1 million, or if the Purchase
<PAGE>
Payment would cause your Account Value to exceed $1 million, unless we have
approved the Payment in advance.
4. ALLOCATION OPTIONS
You can allocate your money among Sub-Accounts investing in the following
Series of the MFS/ Sun Life Series Trust:
<TABLE>
<S> <C>
Bond Series Managed Sectors Series
Capital Appreciation Series Massachusetts Investors Growth Stock Series
Capital Opportunities Series Massachusetts Investors Trust Series
Emerging Growth Series MFS/Foreign & Colonial Emerging Markets Equity Series
Equity Income Series Money Market Series
Global Asset Allocation Series New Discovery Series
Global Governments Series Research Series
Global Growth Series Research Growth and Income Series
Global Total Return Series Research International Series
Government Securities Series Strategic Income Series
High Yield Series Total Return Series
International Growth Series Utilities Series
International Growth and Income
Series
</TABLE>
Market conditions will determine the value of an investment in any Series.
Each Series is described in the Prospectus of the MFS/Sun Life Series Trust.
In addition to these variable options, you may also allocate your money to
one or more of the Guarantee Periods we make available. For each Guarantee
Period, we offer a Guaranteed Interest Rate for the specified length of time.
5. EXPENSES
The charges under the Contracts are as follows:
During the Accumulation Phase, we impose an annual Account Fee of $30.
During the Income Phase, the annual Account Fee is $30 which we deduct from
variable annuity payments. We also deduct insurance charges (which include an
administrative expense charge) equal to 1.40% per year of the average daily
value of the Contract allocated among the Sub-Accounts.
There are no sales charges when you purchase your Regatta Gold--NY
Annuity. However, if you withdraw money from your Contract, we will, with
certain exceptions, impose a withdrawal charge. Your Contract allows a "free
withdrawal amount," which you may withdraw before you incur the withdrawal
charge. The rest of your withdrawal is subject to a withdrawal charge equal to a
percentage of each purchase payment you withdraw and is determined in accordance
with the table below. The percentage varies according to the number of Contract
years the purchase payment has been held in your account, including the year in
which you made the payment, but not the year in which you withdraw it.
<TABLE>
<CAPTION>
NUMBER OF
YEARS IN ACCOUNT WITHDRAWAL CHARGE
- ----------------- -----------------------
<S> <C>
0-1 6%
2-3 5%
4-5 4%
6 3%
7 or more 0%
</TABLE>
If you withdraw, transfer, or annuitize money allocated to a Guarantee
Period more than 30 days before the expiration date of the Guarantee Period, the
amount will be subject to a Market Value Adjustment. This adjustment reflects
the relationship between our current Guaranteed Interest Rates and the
Guaranteed Interest Rate applicable to the amount being withdrawn. Generally, if
your Guaranteed Interest Rate is lower than the relevant current rate, then the
adjustment will decrease your Contract value. Conversely, if your Guaranteed
Interest Rate is higher than the relevant current rate, the adjustment will
increase your Contract value. The Market Value Adjustment will not apply to the
2
<PAGE>
withdrawal of interest credited during the current year, or to transfers as part
of our dollar cost averaging program.
In addition to the charges we impose under the Contract, there are charges
(which include management fees and operating expenses) imposed by each Series,
which range from 0.56% to 1.55% of the average net assets of the Series,
depending upon which Series you have selected. The investment adviser has agreed
to waive or reimburse a portion of expenses for some of the Series; without this
agreement, Series expenses could be higher. Some of these arrangements may be
terminated after one year, or earlier if the Series Funds' Board of Trustees
agrees.
The following chart is designed to help you understand the expenses you
will incur under your Contract, if you invest in one or more of the
Sub-Accounts. The column "Total Annual Expenses" shows the sum of the "Total
Annual Insurance Charges," as defined just above the chart, and the total
expenses (net of any applicable fee waiver and/or expense reimbursement) for
each Series. The next two columns show two examples of the expenses, in dollars,
you would pay under a Contract. The examples assume that you invested $1,000 in
a Contract which earns 5% annually and that you withdraw your money (1) at the
end of one year or (2) at the end of 10 years. For the first year, the Total
Annual Expenses are deducted, as well as withdrawal charges. For year 10, the
example shows the aggregate of all of the annual expenses deducted for the 10
years, but there is no withdrawal charge.
"Total Annual Insurance Charges" include the insurance charges of 1.40%,
plus an additional 0.10%, which is used to represent the $30 annual Account Fee
based on an assumed Contract value of $30,000. The actual impact of the Account
Fee may be greater or less than 0.10%, depending upon the value of your
Contract.
<TABLE>
<CAPTION>
EXAMPLES:
TOTAL ANNUAL TOTAL ANNUAL TOTAL TOTAL EXPENSES
INSURANCE SERIES ANNUAL AT END
SUB-ACCOUNT CHARGES EXPENSES EXPENSES 1 YEAR 10 YEARS
- -------------------------------------------------- --------------- ------------- -------- ------ --------
<S> <C> <C> <C> <C> <C>
Bond Series 1.50%
(1.40% + 0.10%) 1.03% 2.53% $81 $287
Capital Appreciation Series 1.50%
(1.40% + 0.10%) 0.77% 2.27% $79 $261
Capital Opportunities Series 1.50%
(1.40% + 0.10%) 0.86% 2.36% $79 $270
Emerging Growth Series 1.50%
(1.40% + 0.10%) 0.78% 2.28% $79 $262
Equity Income Series 1.50%
(1.40% + 0.10%) 1.03% 2.53% $81 $287
Global Asset Allocation Series 1.50%
(1.40% + 0.10%) 0.90% 2.40% $80 $274
Global Governments Series 1.50%
(1.40% + 0.10%) 0.88% 2.38% $80 $272
Global Growth Series 1.50%
(1.40% + 0.10%) 1.01% 2.51% $81 $285
Global Total Return Series 1.50%
(1.40% + 0.10%) 0.93% 2.43% $80 $277
Government Securities Series 1.50%
(1.40% + 0.10%) 0.62% 2.12% $77 $245
High Yield Series 1.50%
(1.40% + 0.10%) 0.82% 2.32% $79 $266
International Growth Series 1.50%
(1.40% + 0.10%) 1.32% 2.82% $84 $315
International Growth and Income Series 1.50%
(1.40% + 0.10%) 1.16% 2.66% $82 $299
Managed Sectors Series 1.50%
(1.40% + 0.10%) 0.80% 2.30% $79 $264
Massachusetts Investors Growth Stock Series 1.50%
(1.40% + 0.10%) 0.97% 2.47% $81 $281
Massachusetts Investors Trust Series 1.50%
(1.40% + 0.10%) 0.59% 2.09% $77 $242
MFS/Foreign & Colonial Emerging Markets Equity 1.50%
Series (1.40% + 0.10%) 1.50% 3.00% $86 $332
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
EXAMPLES:
TOTAL ANNUAL TOTAL ANNUAL TOTAL TOTAL EXPENSES
INSURANCE SERIES ANNUAL AT END
SUB-ACCOUNT CHARGES EXPENSES EXPENSES 1 YEAR 10 YEARS
- -------------------------------------------------- --------------- ------------- -------- ------ --------
<S> <C> <C> <C> <C> <C>
Money Market Series 1.50%
(1.40% + 0.10%) 0.56% 2.06% $77 $239
New Discovery Series 1.50%
(1.40% + 0.10%) 1.28% 2.78% $83 $311
Research Series 1.50%
(1.40% + 0.10%) 0.76% 2.26% $79 $260
Research Growth and Income Series 1.50%
(1.40% + 0.10%) 0.95% 2.45% $80 $279
Research International Series 1.50%
(1.40% + 0.10%) 1.55% 3.05% $86 $336
Strategic Income Series 1.50%
(1.40% + 0.10%) 1.29% 2.79% $84 $312
Total Return Series 1.50%
(1.40% + 0.10%) 0.70% 2.20% $78 $253
Utilities Series 1.50%
(1.40% + 0.10%) 0.86% 2.36% $79 $270
</TABLE>
For more detailed information about Contract fees and expenses, please
refer to the fee table and discussion of Contract charges contained in the full
Prospectus which accompanies this Profile.
6. TAXES
Your earnings are not taxed until you take them out of your Contract. If
you take money out, earnings come out first and are taxed as income. If your
Contract is funded with pre-tax or tax deductible dollars (such as with a
pension or IRA contribution) -- we call this a Qualified Contract -- your entire
withdrawal will be taxable. If you are younger than 59 1/2 when you take money
out, you may be charged a 10% federal penalty tax on the earnings. Annuity
payments during the Income Phase are considered in part a return of your
original investment. That portion of each payment is not taxable except under a
Qualified Contract, in which case the entire payment will be taxable. In all
cases, you should consult with your tax adviser for specific tax information.
7. ACCESS TO YOUR MONEY
You can withdraw money from your Contract at any time during the
Accumulation Phase. You may withdraw a portion of the value of your Contract in
each year without the imposition of the withdrawal charge -- 10% of all payments
you have made in the last 7 years, plus any payment we have held for at least 7
years. All other purchase payments you withdraw will be subject to a withdrawal
charge ranging from 6% to 0%. You may also be required to pay income tax and
possible tax penalties on any money you withdraw.
We do not assess a withdrawal charge upon annuitization or transfers. In
addition, there may be other circumstances under which we may waive the
withdrawal charge.
In addition to the withdrawal charge, amounts you withdraw, transfer or
annuitize from the Fixed Account before your Guarantee Period has ended may be
subject to a Market Value Adjustment.
8. PERFORMANCE
If you invest in one or more Sub-Accounts, the value of your Contract will
increase or decrease depending upon the investment performance of the Series you
choose.
The following chart shows total returns for investment in the variable
options where the corresponding Series has at least one full calendar year of
operations. The returns reflect all charges and deductions of the Series and
Sub-Accounts and deduction of the Annual Account Fee. They do not
4
<PAGE>
reflect deduction of any withdrawal charges or premium taxes. These charges, if
included, would reduce the performance numbers shown. Past performance is not a
guarantee of future results.
<TABLE>
<CAPTION>
CALENDAR YEAR
--------------------------------------------------
SUB-ACCOUNT 1998 1997 1996 1995 1994
---------------------------------------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Bond Series -- -- -- -- --
Capital Appreciation Series 26.83% 21.33% 19.70% 32.51% (5.03)%
Capital Opportunities Series 25.10% 25.73% -- -- --
Emerging Growth Series 31,91% 20.16% 15.38% -- --
Equity Income Series -- -- -- -- --
Global Asset Allocation Series 4.86% 9.24% 14.28% 19.85% --
Global Governments Series 13.77% (2.24)% 3.11% 14.00% (5.91)%
Global Growth Series 12.87% 13.63% 11.44% 14.29% 1.40%
Global Total Return Series 16.61% 11.98% 12.58% 16.19% --
Government Securities Series 7.13% 7.15% 0.11% 15.92% (3.61)%
High Yield Series (0.88)% 11.55% 10.46% 15.32% (3.68)%
International Growth Series 0.41% (3.09)% -- -- --
International Growth and Income Series 19.84% 4.95% 3.33% -- --
Managed Sectors Series 10.62% 23.80% 15.86% 30.34% (3.38)%
Massachusetts Investors Growth Stock
Series -- -- -- -- --
Massachusetts Investors Trust Series 22.03% 30.04% 23.57% 35.44% (2.57)%
MFS/Foreign & Colonial Emerging Markets
Equity Series (31.02)% 8.78% -- -- --
Money Market Series 3.48% 3.52% 3.38% 3.90% 2.17%
New Discovery Series -- -- -- -- --
Research Series 21.82% 19.07% 22.00% 35.44% --
Research Growth and Income Series 20.38% -- -- -- --
Research International Series -- -- -- -- --
Strategic Income Series -- -- -- -- --
Total Return Series 10.10% 20.18% 12.38% 24.93% (3.71)%
Utilities Series 15.86% 30.80% 18.57% 30.48% (6.36)%
</TABLE>
9. DEATH BENEFIT
If the annuitant dies before the Contract reaches the Income Phase, the
beneficiary will receive a death benefit. To calculate the death benefit, we use
a "Death Benefit Date", which is the earliest date we have both due proof of
death and a written request specifying the manner of payment.
The death benefit is the greatest of:
(1) the value of the Contract on the Death Benefit Date;
(2) your total purchase payments minus the sum of partial withdrawals;
(3) the value of the Contract on the most recent 7 year anniversary of the
Contract, adjusted for any subsequent partial withdrawals and charges;
(4) the amount we would pay in the event of a full surrender of the
Contract on the Death Benefit Date; and
(5) the value of the Contract on any Contract Anniversary before the
Annuitant's 81st birthday plus any purchase payments made and adjusted
for partial withdrawals and charges made between that Contract
Anniversary and the Death Benefit Date.
10. OTHER INFORMATION
FREE LOOK. If you cancel your Contract within 10 days after receiving it
we will send you the value of your Contract as of the day we received your
cancellation request (this may be more or less than the original purchase
payment) and we will not deduct a withdrawal charge.
NO PROBATE. In most cases, when you die, the beneficiary will receive the
death benefit without going through probate. However, avoiding probate does not
mean that the beneficiary will not have tax liability as a result of receiving
the death benefit.
WHO SHOULD PURCHASE A CONTRACT? The Contract is designed for those seeking
long-term tax deferred accumulation of assets and annuity features, generally
for retirement or other long-term purposes. The tax-deferred feature is most
attractive to purchasers in high federal and state income tax brackets. You
should note that qualified retirement investments automatically provide tax
deferral
5
<PAGE>
regardless of whether the underlying contract is an annuity. You should not buy
a Contract if you are looking for a short-term investment or if you cannot risk
a decrease in the value of your investment.
CONFIRMATIONS AND QUARTERLY STATEMENTS. You will receive a confirmation of
each transaction within your Contract. On a quarterly basis, you will receive a
complete statement of your transactions over the past quarter and a summary of
your account values during that period.
ADDITIONAL FEATURES. The Regatta Gold--NY Annuity offers the following
additional convenient features, which you may choose at no extra charge.
Dollar Cost Averaging -- This program lets you invest gradually in up to
12 Sub-Accounts.
Asset Allocation -- One or more asset allocation programs may be available
in connection with the Contract.
Systematic Withdrawal and Interest Out Programs -- These programs allow
you to receive quarterly, semi-annual or annual payments during the Accumulation
Phase.
Portfolio Rebalancing Program -- Under this program, we automatically
reallocate your investments in the Sub-Accounts to maintain the proportions you
select. You can elect rebalancing on a quarterly, semi-annual or annual basis.
Secured Future Program -- This program guarantees the return of your
Purchase Payment, and also allows you to allocate a portion of your investment
to one or more variable investment options.
11. INQUIRIES
If you would like more information about buying a Contract, please contact
your broker or registered representative. If you have any other questions,
please contact us at:
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
ANNUITY SERVICE MAILING ADDRESS
80 BROAD STREET
NEW YORK, NEW YORK 10004
TEL: TOLL FREE (800) 447-7569
IN NEW YORK (212) 943-3855
6
<PAGE>
PROSPECTUS
MAY 1, 1999
REGATTA GOLD--NY
Sun Life Insurance and Annuity Company of New York and Sun Life (NY)
Variable Account C offer the flexible payment deferred annuity contracts
described in this Prospectus to individuals.
You may choose among 25 variable investment options and a range of fixed
options. The variable options are Sub-Accounts in the Variable Account. Each
Sub-Account invests in one of the following series of the MFS/Sun Life Series
Trust (the "Series Fund"), a mutual fund advised by our affiliate, Massachusetts
Financial Services Company:
<TABLE>
<S> <C>
Bond Series Managed Sectors Series
Capital Appreciation Series Massachusetts Investors Growth Stock Series
Capital Opportunities Series Massachusetts Investors Trust Series
Emerging Growth Series MFS/Foreign & Colonial Emerging Markets Equity Series
Equity Income Series Money Market Series
Global Asset Allocation Series New Discovery Series
Global Governments Series Research Series
Global Growth Series Research Growth and Income Series
Global Total Return Series Research International Series
Government Securities Series Strategic Income Series
High Yield Series Total Return Series
International Growth Series Utilities Series
International Growth and Income
Series
</TABLE>
The fixed account options are available for specified time periods, called
Guarantee Periods, and pay interest at a guaranteed rate for each period.
THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE SERIES
FUND. PLEASE READ THIS PROSPECTUS AND THE SERIES FUND PROSPECTUS CAREFULLY
BEFORE INVESTING AND KEEP THEM FOR FUTURE REFERENCE. THEY CONTAIN IMPORTANT
INFORMATION ABOUT THE REGATTA GOLD--NY ANNUITY AND THE SERIES FUND.
We have filed a Statement of Additional Information dated May 1, 1999 (the
"SAI") with the Securities and Exchange Commission (the "SEC"), which is
incorporated by reference in this Prospectus. The table of contents for the SAI
is on page 60 of this Prospectus. You may obtain a copy without charge by
writing to our Annuity Service Mailing Address or by telephoning (800) 447-7569
or (212) 943-3855. In addition, the SEC maintains a website (http://www.sec.gov)
that contains this Prospectus, the SAI, material incorporated by reference, and
other information regarding companies that file with the SEC.
THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
ANY REFERENCE IN THIS PROSPECTUS TO RECEIPT BY US MEANS RECEIPT AT THE FOLLOWING
ADDRESS:
ANNUITY SERVICE MAILING ADDRESS, C/O SUN LIFE INSURANCE AND ANNUITY COMPANY
OF NEW YORK, 80 BROAD STREET, NEW YORK, NEW YORK 10004.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Special Terms 4
Expense Summary 4
Summary of Contract Expenses 4
Series Fund Annual Expenses 5
Examples 6
Condensed Financial Information 7
The Regatta Gold--NY Annuity 7
Communicating to Us About Your Contract 7
Sun Life Insurance and Annuity Company of New York 8
The Variable Account 8
Variable Account Options: The MFS/Sun Life Series Trust 8
The Fixed Account 10
The Fixed Account Options: The Guarantee Periods 11
The Accumulation Phase 11
Issuing Your Contract 11
Amount and Frequency of Purchase Payments 11
Allocation of Net Purchase Payments 12
Your Account 12
Your Account Value 12
Variable Account Value 12
Fixed Account Value 13
Transfer Privilege 14
Waivers; Reduced Charges; Credits; Bonus Guaranteed Interest Rates 15
Optional Programs 15
Withdrawals, Withdrawal Charge and Market Value Adjustment 16
Cash Withdrawals 16
Withdrawal Charge 18
Market Value Adjustment 19
Contract Charges 20
Account Fee 20
Administrative Expense Charge 21
Mortality and Expense Risk Charge 21
Premium Taxes 21
Series Fund Expenses 21
Death Benefit 21
Amount of Death Benefit 21
Method of Paying Death Benefit 22
Selection and Change of Beneficiary 22
Payment of Death Benefit 23
Due Proof of Death 23
The Income Phase -- Annuity Provisions 23
Selection of the Annuitant or Co-Annuitant 23
Selection of the Annuity Commencement Date 23
Annuity Options 24
Selection of Annuity Option 25
Amount of Annuity Payments 25
Exchange of Variable Annuity Units 26
Account Fee 26
Annuity Payment Rates 26
Annuity Options as Method of Payment for Death Benefit 27
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Other Contract Provisions 27
Exercise of Contract Rights 27
Change of Ownership 27
Death of Owner 27
Voting of Series Fund Shares 28
Periodic Reports 29
Substitution of Securities 29
Change in Operation of Variable Account 29
Splitting Units 29
Modification 29
Right to Return 30
Federal Tax Status 30
Introduction 30
Deductibility of Purchase Payments 30
Pre-Distribution Taxation of Contracts 30
Distributions and Withdrawals from Non-Qualified Contracts 31
Distribution and Withdrawals from Qualified Contracts 31
Withholding 31
Purchase of Immediate Annuity Contract and Deferred Annuity Contract 32
Investment Diversification and Control 32
Tax Treatment of the Company and the Variable Account 32
Qualified Retirement Plans 32
Pension and Profit-Sharing Plans 32
Tax-Sheltered Annuities 33
Individual Retirement Accounts 33
Roth IRAs 33
Administration of the Contracts 34
Distribution of the Contracts 34
Performance Information 34
Available Information 35
Incorporation of Certain Documents by Reference 36
Additional Information About the Company 36
Business of the Company 36
Management's Discussion and Analysis of Financial Condition and Results of Operations 37
Year 2000 Compliance 37
Quantitative and Qualitative Disclosure About Market Risk 38
Competition 40
Employees 40
Properties 40
State Regulation 40
Legal Proceedings 41
Accountants 41
Financial Statements 41
Table of Contents of Statement of Additional Information 60
Appendix A -- Glossary 62
Appendix B -- Condensed Financial Information -- Accumulation Unit Values 65
Appendix C -- Withdrawals, Withdrawal Charges and the Market Value Adjustment 67
</TABLE>
3
<PAGE>
SPECIAL TERMS
Your Contract is a legal document that uses a number of specially defined
terms. We explain most of the terms that we use in this Prospectus in the
context where they arise, and some are self-explanatory. In addition, for
convenient reference, we have compiled a list of these terms in the Glossary
included at the back of this Prospectus as Appendix A. If, while you are reading
this Prospectus, you come across a term that you do not understand, please refer
to the Glossary for an explanation.
EXPENSE SUMMARY
The purpose of the following table is to help you understand the costs and
expenses that you will bear directly and indirectly under a Contract WHEN YOU
ALLOCATE MONEY TO THE VARIABLE ACCOUNT. The table reflects expenses of the
Variable Account as well as of each Series of the Series Fund. The table should
be considered together with the narrative provided under the heading "Contract
Charges" in this Prospectus, and with the Series Fund's prospectus. In addition
to the expenses listed below, we may deduct premium taxes.
SUMMARY OF CONTRACT EXPENSES
<TABLE>
<S> <C>
TRANSACTION EXPENSES
Sales Load Imposed on Purchase Payments............................................ $ 0
Deferred Sales Load (as a percentage of Purchase Payments withdrawn) (1)
Number of Account Years Purchase Payment in Account
0-1............................................................................ 6%
2-3............................................................................ 5%
4-5............................................................................ 4%
6.............................................................................. 3%
7 or more...................................................................... 0%
Transfer Fee (2)................................................................... $ 0
ANNUAL ACCOUNT FEE per Contract.................................................... $ 30
VARIABLE ACCOUNT ANNUAL EXPENSES (as a percentage of average Variable Account
assets)
Mortality and Expense Risk Charge................................................ 1.25%
Administrative Expense Charge.................................................... 0.15%
Other Fees and Expenses of the Variable Account.................................. 0.00%
-----
Total Variable Account Annual Expenses............................................. 1.40%
</TABLE>
- ------------------------
(1) A portion of your Account may be withdrawn each year without imposition of
any withdrawal charge, and after a Purchase Payment has been in your Account
for 7 Contract Years it may be withdrawn free of the withdrawal charge.
(2) A Market Value Adjustment may be imposed on amounts transferred from or
within the Fixed Account.
4
<PAGE>
SERIES FUND ANNUAL EXPENSES (1)
(AS A PERCENTAGE OF SERIES FUND NET ASSETS)
<TABLE>
<CAPTION>
OTHER TOTAL FUND
MANAGEMENT EXPENSES(2) EXPENSES
FEES (AFTER REIMBURSEMENT) (AFTER REIMBURSEMENT)
--------------- ------------------------ ------------------------
<S> <C> <C> <C>
Bond Series (3)................................... 0.60% 0.43% 1.03%
Capital Appreciation Series....................... 0.73% 0.04% 0.77%
Capital Opportunities Series...................... 0.75% 0.11% 0.86%
Emerging Growth Series............................ 0.72% 0.06% 0.78%
Equity Income Series (3).......................... 0.75% 0.28% 1.03%
Global Asset Allocation Series.................... 0.75% 0.15% 0.90%
Global Governments Series......................... 0.75% 0.13% 0.88%
Global Growth Series.............................. 0.90% 0.11% 1.01%
Global Total Return Series........................ 0.75% 0.18% 0.93%
Government Securities Series...................... 0.55% 0.07% 0.62%
High Yield Series................................. 0.75% 0.07% 0.82%
International Growth Series....................... 0.98% 0.34% 1.32%
International Growth and Income Series............ 0.98% 0.18% 1.16%
Managed Sectors Series............................ 0.74% 0.06% 0.80%
Massachusetts Investors Growth Stock Series....... 0.75% 0.22% 0.97%
Massachusetts Investors Trust Series.............. 0.55% 0.04% 0.59%
MFS/Foreign & Colonial Emerging Markets Equity
Series........................................... 1.25% 0.25% 1.50%
Money Market Series............................... 0.50% 0.06% 0.56%
New Discovery Series (3).......................... 0.90% 0.38% 1.28%
Research Series................................... 0.70% 0.06% 0.76%
Research Growth and Income Series................. 0.75% 0.20% 0.95%
Research International Series (3)................. 1.00% 0.55% 1.55%
Strategic Income Series (3)....................... 0.75% 0.54% 1.29%
Total Return Series............................... 0.65% 0.05% 0.70%
Utilities Series.................................. 0.75% 0.11% 0.86%
</TABLE>
- --------------------------
(1) The information relating to Series Fund expenses was provided by the Series
Fund and we have not independently verified it. You should consult the
Series Fund prospectus for more information about Series Fund expenses.
(2) Each Series has an expense offset arrangement which reduces the Series'
custodian fee based upon the amount of cash maintained by the Series with
its custodian and dividend disbursing agent, and may enter into such other
arrangements and directed brokerage arrangements (which would also have the
effect of reducing the Series' expenses). Any such fee reductions are not
reflected under "Other Expenses."
(3) "Other Expenses" and "Total Fund Expenses" are based on actual expenses for
the fiscal year ended December 31, 1998, net of any expense reimbursement
and/or fee waiver. MFS has agreed to bear the expenses of certain of the
Series (excluding management fees, taxes, extraordinary expenses and
brokerage and transaction costs) in excess of the following annual
percentage of such Series' average daily net assets:
<TABLE>
<S> <C>
Bond Series..................................................... 0.40%
Equity Income Series............................................ 0.25%
New Discovery Series............................................ 0.35%
Research International Series................................... 0.50%
Strategic Income Series......................................... 0.50%
</TABLE>
Without taking into account the fee waiver and/or expense reimbursement,
expenses for these Series would have been as follows: Bond Series -- Other
Expenses 0.47% and Total Fund Expenses 1.07%; Equity Income Series -- Other
Expenses 0.76% and Total Fund Expenses 1.51%; New Discovery Series -- Other
Expenses 0.70% and Total Fund Expenses 1.60%; Research International Series
-- Other Expenses 2.86% and Total Fund Expenses 3.86%; and Strategic Income
Series -- Other Expenses 0.67% and Total Fund Expenses 1.42%.
These arrangements will remain in effect until at least May 1, 2000, absent
earlier modification by the Series Fund's Board of Trustees.
5
<PAGE>
EXAMPLES
If you surrender your Contract at the end of the applicable time period,
you would pay the following expenses on a $1,000 investment, assuming a 5%
annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Bond Series............................................................... $ 81 $ 118 $ 160 $ 287
Capital Appreciation Series............................................... $ 79 $ 110 $ 147 $ 261
Capital Opportunities Series.............................................. $ 79 $ 113 $ 152 $ 270
Emerging Growth Series.................................................... $ 79 $ 110 $ 148 $ 262
Equity Income Series...................................................... $ 81 $ 118 $ 160 $ 287
Global Asset Allocation Series............................................ $ 80 $ 114 $ 154 $ 274
Global Governments Series................................................. $ 80 $ 113 $ 153 $ 272
Global Growth Series...................................................... $ 81 $ 117 $ 159 $ 285
Global Total Return Series................................................ $ 80 $ 115 $ 155 $ 277
Government Securities Series.............................................. $ 77 $ 106 $ 140 $ 245
High Yield Series......................................................... $ 79 $ 112 $ 150 $ 266
International Growth Series............................................... $ 84 $ 126 $ 173 $ 315
International Growth and Income Series.................................... $ 82 $ 121 $ 166 $ 299
Managed Sectors Series.................................................... $ 79 $ 111 $ 149 $ 264
Massachusetts Investors Growth Stock Series............................... $ 81 $ 116 $ 157 $ 281
Massachusetts Investors Trust Series...................................... $ 77 $ 105 $ 139 $ 242
MFS/Foreign & Colonial Emerging Markets Equity Series..................... $ 86 $ 131 $ 182 $ 332
Money Market Series....................................................... $ 77 $ 104 $ 137 $ 239
New Discovery Series...................................................... $ 83 $ 125 $ 172 $ 311
Research Series........................................................... $ 79 $ 110 $ 147 $ 260
Research Growth and Income Series......................................... $ 80 $ 115 $ 156 $ 279
Research International Series............................................. $ 86 $ 132 $ 184 $ 336
Strategic Income Series................................................... $ 84 $ 125 $ 172 $ 312
Total Return Series....................................................... $ 78 $ 108 $ 144 $ 253
Utilities Series.......................................................... $ 79 $ 113 $ 152 $ 270
</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:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Bond Series............................................................... $ 26 $ 79 $ 135 $ 287
Capital Appreciation Series............................................... $ 23 $ 71 $ 122 $ 261
Capital Opportunities Series.............................................. $ 24 $ 74 $ 126 $ 270
Emerging Growth Series.................................................... $ 23 $ 71 $ 122 $ 262
Equity Income Series...................................................... $ 26 $ 79 $ 135 $ 287
Global Asset Allocation Series............................................ $ 24 $ 75 $ 128 $ 274
Global Governments Series................................................. $ 24 $ 74 $ 127 $ 272
Global Growth Series...................................................... $ 25 $ 78 $ 134 $ 285
Global Total Return Series................................................ $ 25 $ 76 $ 130 $ 277
Government Securities Series.............................................. $ 22 $ 66 $ 114 $ 245
High Yield Series......................................................... $ 24 $ 72 $ 124 $ 266
International Growth Series............................................... $ 29 $ 87 $ 149 $ 315
International Growth and Income Series.................................... $ 27 $ 83 $ 141 $ 299
Managed Sectors Series.................................................... $ 23 $ 72 $ 123 $ 264
Massachusetts Investors Growth Stock Series............................... $ 25 $ 77 $ 132 $ 281
Massachusetts Investors Trust Series...................................... $ 21 $ 65 $ 112 $ 242
MFS/Foreign & Colonial Emerging Markets Equity Series..................... $ 30 $ 93 $ 158 $ 332
Money Market Series....................................................... $ 21 $ 65 $ 111 $ 239
New Discovery Series...................................................... $ 28 $ 86 $ 147 $ 311
Research Series........................................................... $ 23 $ 71 $ 121 $ 260
Research Growth and Income Series......................................... $ 25 $ 76 $ 131 $ 279
Research International Series............................................. $ 31 $ 94 $ 160 $ 336
Strategic Income Series................................................... $ 28 $ 87 $ 147 $ 312
Total Return Series....................................................... $ 22 $ 69 $ 118 $ 253
Utilities Series.......................................................... $ 24 $ 74 $ 126 $ 270
</TABLE>
THE EXAMPLES SHOULD NOT BE CONSIDERED TO BE REPRESENTATIONS OF PAST OR
FUTURE EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LOWER THAN THOSE SHOWN.
6
<PAGE>
CONDENSED FINANCIAL INFORMATION
Historical information about the value of the units we use to measure the
variable portion of your Contract ("Variable Accumulation Units") is included in
the back of this Prospectus as Appendix B.
THE REGATTA GOLD--NY ANNUITY
Sun Life Insurance and Annuity Company of New York (the "Company", "we" or
"us") and Sun Life (NY) Variable Account C (the "Variable Account") offer the
Regatta Gold--NY Annuity on an individual basis in connection with retirement
plans. We issue an individual Contract to each Owner.
In this Prospectus, unless we state otherwise, we address Owners of
Contracts as "you". For the purpose of determining benefits under the Contracts,
we establish an Account for each Owner, which we will refer to as "your"
Account.
The Contract provides a number of important benefits for your retirement
planning. It has an Accumulation Phase, during which you make payments under the
Contract and allocate them to one or more Variable Account or Fixed Account
options, and an Income Phase, during which we make payments based on the amount
you have accumulated. The Contract provides tax deferral, so that you do not pay
taxes on your earnings under the Contract until you withdraw them. It provides a
death benefit if the Annuitant dies during the Accumulation Phase. Finally, if
you so elect, during the Income Phase we will make payments to you or someone
else for life or for another period that you choose.
You choose these benefits on a variable or fixed basis or a combination of
both. When you choose variable investment options or a Variable Annuity option,
your benefits will be responsive to changes in the economic environment,
including inflationary forces and changes in rates of return available from
different types of investments. With these options, you assume all investment
risk under the Contract. When you choose a Guarantee Period in our Fixed Account
or a Fixed Annuity option, we assume the investment risk, except in the case of
early withdrawals, where you bear the risk of unfavorable interest rate changes.
You also bear the risk that the interest rates we will offer in the future and
the rates we will use in determining your Fixed Annuity may not exceed our
minimum guaranteed rate, which is 3% per year, compounded annually.
The Contracts are designed for use in connection with personal retirement
and deferred compensation plans, some of which qualify for favorable federal
income tax treatment under Sections 401, 403, 408 or 408A of the Internal
Revenue Code. The Contracts are also designed so that they 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. We refer to Contracts used with plans that receive
favorable tax treatment as "Qualified Contracts," and all others as
"Non-Qualified Contracts."
COMMUNICATING TO US ABOUT YOUR CONTRACT
All materials sent to us, including Purchase Payments, must be sent to our
Annuity Service Mailing Address set forth on the first page of this Prospectus.
For all telephone communications, you must call (800) 447-7569 or (212)
943-3855.
Unless this Prospectus states differently, we will consider all materials
sent to us and all telephone communications to be received on the date we
actually receive them at the Annuity Service Mailing Address. However, we will
consider Purchase Payments, withdrawal requests and transfer instructions to be
received on the next Business Day if we receive them (1) on a day that is not a
Business Day or (2) after 4:00 p.m., Eastern Time.
When we specify that notice to us must be in writing, we reserve the
right, in our sole discretion, to accept notice in another form.
7
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
We are a stock life insurance company incorporated under the laws of New
York on May 25, 1983. We do business exclusively in New York. Our Home Office
mailing address is 80 Broad Street, New York, New York 10004.
We are a wholly-owned subsidiary of Sun Life Assurance Company of Canada
(U.S.) ("Sun Life (U.S.)"), a stock life insurance company incorporated in
Delaware. Sun Life (U.S.) is a direct wholly-owned subsidiary of Sun Life
Assurance Company of Canada (Sun Life (Canada)), a mutual life insurance company
incorporated pursuant to Act of Parliament of Canada in 1865, which currently
transacts business in all of the Canadian provinces and territories, all U.S.
states (except New York), the District of Columbia, Puerto Rico, the Virgin
Islands, Great Britain, Ireland, Hong Kong, Bermuda and the Philippines.
THE VARIABLE ACCOUNT
We established the Variable Account as a separate account on October 18,
1985, pursuant to a resolution of our Board of Directors. Under New York
insurance law and 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
other variable annuity contracts that provide benefits that 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 we conduct, all obligations arising under the
Contracts, including the promise to make annuity payments, are general corporate
obligations of the Company.
The assets of the Variable Account are divided into Sub-Accounts. Each
Sub-Account invests exclusively in shares of a specific Series of the MFS/Sun
Life Series Trust (the "Series Fund"). All amounts allocated to the Variable
Account will be used to purchase Series Fund shares as designated by you 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.
VARIABLE ACCOUNT OPTIONS:
THE MFS/SUN LIFE SERIES TRUST
The MFS/Sun Life Series Trust (the "Series Fund") is an open-end
management investment company registered under the Investment Company Act of
1940. Our affiliate Massachusetts Financial Services Company ("MFS") serves as
the investment adviser to the Series Fund.
The Series Fund is composed of 26 independent portfolios of securities,
each of which has separate investment objectives and policies. Shares of the
Series Fund are issued in 26 Series, each corresponding to one of the
portfolios. The Contracts provide for investment by the Sub-Accounts in shares
of the 25 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.
BOND SERIES will primarily seek as high a level of current income as is
believed to be consistent with prudent investment risk; its secondary
objective is to seek to protect shareholders' capital.
CAPITAL APPRECIATION SERIES will seek to maximize capital appreciation by
investing in securities of all types, with major emphasis on common stocks.
CAPITAL OPPORTUNITIES SERIES will seek capital appreciation.
EMERGING GROWTH SERIES will seek long-term growth of capital.
8
<PAGE>
EQUITY INCOME SERIES will primarily seek reasonable income by investing
mainly in income producing securities; its secondary objective is to seek
capital appreciation.
GLOBAL ASSET ALLOCATION SERIES (formerly, World Asset Allocation Series)
will seek total return over the long term through investments in 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).
GLOBAL GOVERNMENTS SERIES (formerly, World Governments Series) will seek to
provide moderate current income, preservation of capital and growth of
capital by investing in debt obligations that are issued or guaranteed as
to principal and interest by either (i) the U.S. Government, its agencies,
authorities, or instrumentalities, or (ii) the governments of foreign
countries (to the extent that the Series' adviser believes that the higher
yields available from foreign government securities are sufficient to
justify the risks of investing in these securities).
GLOBAL GROWTH SERIES (formerly, World Growth Series) 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.
GLOBAL TOTAL RETURN SERIES (formerly, World Total Return Series) 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.
GOVERNMENT SECURITIES SERIES will seek current income and preservation of
capital by investing in U.S. Government and U.S. Government-related
securities.
HIGH YIELD SERIES will seek high current income and capital appreciation by
investing primarily in certain lower rated or unrated securities (possibly
with equity features) of U.S. and foreign issuers (also known as "junk
bonds").
INTERNATIONAL GROWTH SERIES will seek capital appreciation.
INTERNATIONAL GROWTH AND INCOME SERIES will seek capital appreciation and
current income.
MANAGED SECTORS SERIES will seek capital appreciation by varying the
weighting of its portfolio among 13 industry sectors.
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES will seek to provide long-term
growth of capital and future income rather than current income.
MASSACHUSETTS INVESTORS TRUST SERIES (formerly, Conservative Growth Series)
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.
MFS/FOREIGN & COLONIAL EMERGING MARKETS EQUITY SERIES will seek capital
appreciation.
MONEY MARKET SERIES will seek maximum current income to the extent
consistent with stability of principal by investing exclusively in money
market instruments maturing in less than 13 months.
NEW DISCOVERY SERIES will seek capital appreciation.
RESEARCH SERIES will seek to provide long-term growth of capital and future
income.
RESEARCH GROWTH AND INCOME SERIES will seek to provide long-term growth of
capital, current income and growth of income.
RESEARCH INTERNATIONAL SERIES will seek capital appreciation.
9
<PAGE>
STRATEGIC INCOME SERIES will seek to provide high current income by
investing in fixed income securities and will seek to take advantage of
opportunities to realize significant capital appreciation while maintaining
a high level of current income.
TOTAL RETURN SERIES will seek primarily to obtain above-average income
(compared to a portfolio entirely invested in equity securities) consistent
with prudent employment of capital; its secondary objective is to take
advantage of opportunities for growth of capital and income since many
securities offering a better than average yield may also possess growth
potential.
UTILITIES SERIES 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 of both domestic and foreign companies in the
utilities industry.
The Series Fund pays fees to MFS for its services pursuant to investment
advisory agreements. MFS also serves as investment adviser to each of the funds
in the MFS Family of Funds, and to certain other investment companies
established by MFS and/or us. MFS Institutional Advisers, Inc., a wholly-owned
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.
We undertake no obligation in this regard.
MFS has retained Foreign & Colonial Management Limited ("FCM") and its
subsidiary, Foreign & Colonial Emerging Markets Limited ("FCEM"), as
sub-advisers to manage the MFS/Foreign & Colonial Emerging Markets Equity Series
and to manage the assets of the Global Growth Series.
MFS may serve as the investment adviser to other mutual funds which have
similar investment goals and principal investment policies and risks as the
Series, and which may be managed by a Series' portfolio manager(s). While a
Series may have many similarities to these other funds, its investment
performance will differ from their investment performance. This is due to a
number of differences between a Series and these similar products, including
differences in sales charges, expense ratios and cash flows.
The Series Fund also offers its shares to other separate accounts
established by the Company and Sun Life (U.S.) in connection with variable
annuity and variable life insurance contracts. Although we do not anticipate any
disadvantages to this arrangement, there is a possibility that a material
conflict may arise between the interests of the Variable Account and one or more
of the other separate accounts investing in the Series Fund. A conflict may
occur due to differences in tax laws affecting the operations of variable life
and variable annuity separate accounts, or some other reason. We and the Series
Fund's Board of Trustees will monitor events for such conflicts, and, in the
event of a conflict, we will take steps necessary to remedy the conflict,
including withdrawal of the Variable Account from participation in the Series
which is involved in the conflict or substitution of shares of other Series or
other mutual funds.
MORE COMPREHENSIVE INFORMATION ABOUT THE SERIES FUND AND THE MANAGEMENT,
INVESTMENT OBJECTIVES, POLICIES, RESTRICTIONS, EXPENSES AND POTENTIAL RISKS OF
EACH SERIES MAY BE FOUND IN THE ACCOMPANYING CURRENT PROSPECTUS OF THE SERIES
FUND. YOU SHOULD READ THE SERIES FUND PROSPECTUS CAREFULLY BEFORE INVESTING. THE
SERIES FUND'S STATEMENT OF ADDITIONAL INFORMATION IS AVAILABLE BY CALLING
1-800-752-7215.
THE FIXED ACCOUNT
The Fixed Account is made up of those assets of the Company that are
allocated to a non-unitized separate account established in conformance with New
York law. Amounts you allocate to Guarantee Periods become part of the Fixed
Account. Any obligation of the Fixed Account will be paid first from those
assets allocated to the Fixed Account and the excess, if any, will be paid from
the general account of the Company. Assets in the Fixed Account are available to
fund the claims of all classes of our customers, including claims for benefits
under the Contracts.
10
<PAGE>
We will invest the assets of the Fixed Account in those assets we choose
that are allowed by the laws of the State of New York. 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. We intend to invest primarily in investment-grade fixed
income securities (i.e., rated by a nationally recognized rating service within
the four highest grades) or instruments we believe are of comparable quality. We
are 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. You will not have a direct or indirect interest in the Fixed Account
investments.
THE FIXED ACCOUNT OPTIONS:
THE GUARANTEE PERIODS
You may elect one or more Guarantee Period(s) from those we make available
from time to time. We publish Guaranteed Interest Rates for each Guarantee
Period offered. We may change the Guaranteed Interest Rates we offer from time
to time, but no Guaranteed Interest Rate will ever be less than 3% per year,
compounded annually. Also, once we have accepted your allocation to a particular
Guarantee Period, we promise that the Guaranteed Interest Rate applicable to
that allocation will not change for the duration of the Guarantee Period.
We determine Guaranteed Interest Rates in our discretion. We do not have a
specific formula for establishing the rates for different Guarantee Periods. Our
determination will be influenced by the interest rates on fixed income
investments in which we may invest amounts allocated to the Guarantee Periods.
We will also consider other factors in determining these rates, including
regulatory and tax requirements, sales commissions and administrative expenses
borne by us, general economic trends and competitive factors. We cannot predict
the level of future interest rates.
We may from time to time in our discretion offer interest rate specials
for new Purchase Payments that are higher than the rates we are then offering
for renewals or transfers.
Early withdrawals from your allocation to a Guarantee Period, including
cash withdrawals, transfers, and commencement of an annuity, may be subject to a
Market Value Adjustment, which could decrease or increase the value of your
Account. See "Cash Withdrawals, Withdrawal Charge, and Market Value Adjustment."
THE ACCUMULATION PHASE
During the Accumulation Phase of your Contract, you make payments into
your Account, and your earnings accumulate on a tax-deferred basis. The
Accumulation Phase begins with our acceptance of your first Purchase Payment and
ends the Business Day before your Annuity Commencement Date. The Accumulation
Phase will end sooner if you surrender your Contract or if the Annuitant dies
before the Annuity Commencement Date.
ISSUING YOUR CONTRACT
When you purchase a Contract, a completed Application and the initial
Purchase Payment are sent to us for acceptance. When we accept an Application,
we issue the Contract to you, as the Owner.
We will credit your initial Purchase Payment to your Account within two
business days of receiving your completed Application. If your Application is
not complete, we will notify you. If we do not have the necessary information to
complete the Application within 5 business days, we will send your money back to
you or ask your permission to retain your Purchase Payment until the Application
is made complete. Then we will apply the Purchase Payment within 2 business days
of when the Application is complete.
11
<PAGE>
AMOUNT AND FREQUENCY OF PURCHASE PAYMENTS
The amount of Purchase Payments may vary; however, we will not accept an
initial Purchase Payment of less than $5,000, and each additional Purchase
Payment must be at least $1,000, unless we waive these limits. In addition, we
will not accept a Purchase Payment if your Account Value is over $1 million, or
if the Purchase Payment would cause your Account Value to exceed $1 million,
unless we have approved the Payment in advance. Within these limits, you may
make Purchase Payments at any time during the Accumulation Phase.
ALLOCATION OF NET PURCHASE PAYMENTS
You may allocate your Purchase Payments among the different Sub-Accounts
and Guarantee Periods we offer, but any allocation to a Guarantee Period must be
at least $1,000. At any time, you may have amounts allocated among up to 18 of
the available options.
In your Application, you may specify the percentage of each Purchase
Payment to be allocated to each Sub-Account or Guarantee Period. These
percentages are called your allocation factors. You may change the allocation
factors for future Payments by sending us written notice of the change, on our
required form. We will use your new allocation factors for the first Purchase
Payment we receive with or after we have received notice of the change, and for
all future Purchase Payments, until we receive another change notice.
Although it is currently not our practice, we may deduct applicable
premium or similar taxes from your Purchase Payments. See "Contract Charges --
Premium Taxes." In that case, we will credit your Net Purchase Payment, which is
the Purchase Payment minus the amount of those taxes.
YOUR ACCOUNT
When we accept your first Purchase Payment, we establish an Account for
you, which we maintain throughout the Accumulation Phase of your Contract.
YOUR ACCOUNT VALUE
Your Account Value is the sum of the value of the two components of your
Contract: the Variable Account portion of your Contract ("Variable Account
Value") and the Fixed Account portion of your Contract ("Fixed Account Value").
These two components are calculated separately, as described below.
VARIABLE ACCOUNT VALUE
VARIABLE ACCUMULATION UNITS
In order to calculate your Variable Account Value, we use a measure called
a Variable Accumulation Unit for each Sub-Account. Your Variable Account Value
is the sum of your Account Value in each Sub-Account, which is the number of
your Variable Accumulation Units for that Sub-Account times the value of each
Unit.
VARIABLE ACCUMULATION UNIT VALUE
The value of each Variable Accumulation Unit in a Sub-Account reflects the
net investment performance of that Sub-Account. We determine that value once on
each day that the New York Stock Exchange is open for trading, at the close of
trading, which is currently 4:00 p.m., Eastern Time. We also may determine the
value of Variable Accumulation Units of a Sub-Account on days the Exchange is
closed if there is enough trading in securities held by that Sub-Account to
materially affect the value of the Variable Accumulation Units. Each day we make
a valuation is called a "Business Day." The period that begins at the time
Variable Accumulation Units are valued on a Business Day and ends at that time
on the next Business Day is called a Valuation Period. On days other than
Business Days, the value of a Variable Accumulation Unit does not change.
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<PAGE>
To measure these values, we use a factor -- which we call the Net
Investment Factor-- which represents the net return on the Sub-Account's assets.
At the end of any Valuation Period, the value of a Variable Accumulation Unit
for a Sub-Account is equal to the value of that Sub-Account's Variable
Accumulation Units at the end of the previous Valuation Period, multiplied by
the Net Investment Factor. We calculate the Net Investment Factor by dividing
(1) the net asset value of a Series share held in the Sub-Account at the end of
that Valuation Period, plus the per share amount of any dividend or capital
gains distribution made by that Series during the Valuation Period, by (2) the
net asset value per share of the Series share at the end of the previous
Valuation Period; we then deduct a factor representing the mortality and expense
risk charge and administrative expense charge. See "Contract Charges."
For a hypothetical example of how we calculate the value of a Variable
Accumulation Unit, see the Statement of Additional Information.
CREDITING AND CANCELING VARIABLE ACCUMULATION UNITS
When we receive an allocation to a Sub-Account, either from a Net Purchase
Payment or a transfer of Account Value, we credit that amount to your Account in
Variable Accumulation Units. Similarly, we cancel Variable Accumulation Units
when you transfer or withdraw amounts from a Sub-Account, or when we deduct
certain charges under the Contract. We determine the number of Units credited or
canceled by dividing the dollar amount by the Variable Accumulation Unit value
for that Sub-Account at the end of the Valuation Period during which the
transaction or charge is effective.
FIXED ACCOUNT VALUE
Your Fixed Account value is the sum of all amounts allocated to Guarantee
Periods, either from Net Purchase Payments, transfers or renewals, plus interest
credited on those amounts, and minus withdrawals, transfers out of Guarantee
Periods, and any deductions for charges under the Contract taken from your Fixed
Account Value.
CREDITING INTEREST
We credit interest on amounts allocated to a Guarantee Period at the
applicable Guaranteed Interest Rate for the duration of the Guarantee Period.
The Guarantee Period begins the day we apply your allocation and ends when the
number of calendar years (or months if the Guarantee Period is less than one
year) in the Guarantee Period (measured from the end of the calendar month in
which the amount was allocated to the Guarantee Period) have elapsed. The last
day of the Guarantee Period is its Expiration Date. During the Guarantee Period,
we credit interest daily at a rate that yields the Guaranteed Interest Rate on
an annual effective basis.
GUARANTEE AMOUNTS
Each separate allocation you make to a Guarantee Period, together with
interest credited thereon, is called a Guarantee Amount. Each Guarantee Amount
is treated separately for purposes of determining the Market Value Adjustment.
RENEWALS
We will notify you in writing between 45 and 75 days before the Expiration
Date for any Guarantee Amount. A new Guarantee Period of the same duration will
begin automatically for that Guarantee Amount on the first day following the
Expiration Date, unless before the Expiration Date we receive (1) written notice
from you electing a different Guarantee Period from among those we then offer or
(2) instructions to transfer all or some of the Guarantee Amount to one or more
Sub-Accounts, in accordance with the transfer privilege provisions of the
Contract. Each new allocation to a Guarantee Period must be at least $1,000
unless it is equal to the entire Guarantee Amount being transferred.
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<PAGE>
EARLY WITHDRAWALS
If you withdraw, transfer, or annuitize an allocation to a Guarantee
Period before the Expiration Date, we will apply a Market Value Adjustment to
the transaction. This could result in an increase or decrease of your Account
Value, depending on interest rates at the time. You bear the risk that you will
receive less than your principal if the Market Value Adjustment applies.
TRANSFER PRIVILEGE
PERMITTED TRANSFERS
During the Accumulation Phase, you may transfer all or part of your
Account Value to one or more Sub-Accounts or Guarantee Periods then available,
subject to the following restrictions:
- you may not make more than 12 transfers in any Account Year;
- the amount transferred from a Sub-Account must be at least $1,000
unless you are transferring your entire balance in that Sub-Account;
- your Account Value remaining in a Sub-Account must be at least $1,000;
- the amount transferred from a Guarantee Period must be the entire
Guarantee Amount, except for transfers of interest credited during the
current Account Year;
- at least 30 days must elapse between transfers to or from Guarantee
Periods;
- transfers to or from Sub-Accounts are subject to terms and conditions
that may be imposed by the Series Fund; and
- we impose additional restrictions on market timers, which are further
described below.
These restrictions do not apply to transfers made under an approved dollar
cost averaging program.
Transfers out of a Guarantee Period more than 30 days before expiration of
the period will be subject to the Market Value Adjustment described below. Under
current law there is no tax liability for transfers.
REQUESTS FOR TRANSFERS
You may request transfers in writing or by telephone. The telephone
transfer privilege is available automatically, and does not require your written
election. We will require personal identifying information to process a request
for transfer made by telephone. We will not be liable for following instructions
communicated by telephone that we reasonably believe are genuine.
If we receive your transfer request before 4:00 p.m. Eastern Time on a
Business Day, it will be effective that day. Otherwise, it will be effective the
next Business Day.
MARKET TIMERS
The Contracts are not designed for professional market timing
organizations or other entities using programmed and frequent transfers. If you
wish to employ such strategies, you should not purchase a Contract. Accordingly,
transfers may be subject to restrictions if exercised by a market timing firm or
any other third party authorized to initiate transfer transactions on behalf of
multiple Owners. In imposing such restrictions, we may, among other things, not
accept (1) the transfer instructions of any agent acting under a power of
attorney on behalf of more than one Owner, or (2) the transfer instructions of
individual Owners who have executed preauthorized transfer forms that are
submitted at the same time by market timing firms or other third parties on
behalf of more than one Owner. We will not impose these restrictions unless our
actions are reasonably intended to prevent the use of such transfers in a manner
that will disadvantage or potentially impair the Contract rights of other
Owners.
In addition, the Series Fund has reserved the right to temporarily or
permanently refuse exchange requests from the Variable Account if, in MFS'
judgment, a Series would be unable to invest
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<PAGE>
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. We also reserve the right, for similar reasons, to refuse
or delay exchange requests involving transfers to or from the Fixed Account.
WAIVERS; REDUCED CHARGES; CREDITS; BONUS GUARANTEED INTEREST RATES
We may reduce or waive the withdrawal charge or Account Fee, credit
additional amounts, or grant bonus Guaranteed Interest Rates in certain
situations. These situations may include sales of Contracts (1) where selling
and/or maintenance costs associated with the Contracts are reduced, such as the
sale of several Contracts to the same Owner, sales of large Contracts, and
certain group sales, and (2) to officers, directors and employees of the Company
or its affiliates, registered representatives and employees of broker-dealers
with a current selling agreement with the Company and affiliates of such
representatives and broker-dealers, employees of affiliated asset management
firms, and persons who have retired from such positions ("Eligible Employees")
and immediate family members of Eligible Employees. Eligible Employees and their
immediate family members may also purchase a Contract without regard to minimum
Purchase Payment requirements. For other situations in which withdrawal charges
may be waived, see "Withdrawals, Withdrawal Charge and Market Value Adjustment."
OPTIONAL PROGRAMS
DOLLAR COST AVERAGING
Dollar cost averaging allows you to invest gradually, over time, in up to
12 Sub-Accounts. You may select a dollar cost averaging program at no extra
charge by allocating a minimum of $1,000 to a designated Sub-Account or to a
Guarantee Period we make available in connection with the program. Amounts
allocated to the Fixed Account under the program will earn interest at a rate
declared by the Company for the Guarantee Period you select. Each month or
quarter, as you select, we will transfer the same amount automatically to one or
more Sub-Accounts that you choose, up to a maximum of 12 Sub-Accounts. The
program continues until your Account Value allocated to the program is depleted
or you elect to stop the program. The final amount transferred from the Fixed
Account will include all interest earned.
Only Purchase Payments may be allocated to a dollar cost averaging
program. Previously applied amounts may not be transferred to a dollar cost
averaging program.
No Market Value Adjustment (either positive or negative) will apply to
amounts automatically transferred from the Fixed Account under the dollar cost
averaging program, except that if you discontinue or alter the program prior to
completion, amounts remaining in the Fixed Account will be transferred to the
Money Market Series Sub-Account, unless you instruct us otherwise, and the
Market Value Adjustment will be applied. Any new allocation of a Purchase
Payment to the program will be treated as commencing a new dollar cost averaging
program and is subject to the $1,000 minimum.
The main objective of a dollar cost averaging program is to minimize the
impact of short-term price fluctuations on Account Value. Since you transfer the
same dollar amount to the variable investment options at set intervals, dollar
cost averaging allows you to purchase more Variable Accumulation Units (and,
indirectly, more Series Fund shares) when prices are low and fewer Variable
Accumulation Units (and, indirectly, fewer Series Fund shares) when prices are
high. Therefore, you may achieve a lower average cost per Variable Accumulation
Unit over the long term. A dollar cost averaging program allows you to take
advantage of market fluctuations. However, it is important to understand that a
dollar cost averaging program does not assure a profit or protect against loss
in a declining market.
ASSET ALLOCATION
One or more asset allocation programs may be available in connection with
the Contracts, at no extra charge. Asset allocation is the process of investing
in different asset classes -- such as equity
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funds, fixed income funds, and money market funds -- depending on your personal
investment goals, tolerance for risk, and investment time horizon. By spreading
your money among a variety of asset classes, you may be able to reduce the risk
and volatility of investing, although there are no guarantees, and asset
allocation does not insure a profit or protect against loss in a declining
market.
Currently, you may select one of three asset allocation models, each of
which represents a combination of Sub-Accounts with a different level of risk.
The available models are the conservative asset allocation model, the moderate
asset allocation model, and the aggressive asset allocation model. Each model
allocates a different percentage of Account Value to Sub-Accounts investing in
the various asset classes, with the conservative model allocating the lowest
percentage to Sub-Accounts investing in the stock asset class and the aggressive
model allocating the highest percentage to the equity asset class. These models,
as well as the terms and conditions of the asset allocation program, are fully
described in a separate brochure. Additional programs may be available in the
future.
If you elect an asset allocation program, we will automatically allocate
your Purchase Payments among the Sub-Accounts represented in the model you
choose. By your election of an asset allocation program, you thereby authorize
us to automatically reallocate your Account Value on a quarterly basis to
reflect the current composition of the model you have selected, without further
instruction, until we receive notification that you wish to terminate the
program, or choose a different model.
SYSTEMATIC WITHDRAWAL AND INTEREST OUT PROGRAMS
If you have an Account Value of $10,000 or more, you may select our
Systematic Withdrawal Program or Interest Out Program.
Under the Systematic Withdrawal Program, you determine the amount and
frequency of regular withdrawals you would like to receive from your Fixed
and/or Variable Account Value and we will effect them automatically. Under the
Interest Out Program, we will automatically pay to you or reinvest interest
credited for all Guarantee Periods you have chosen. You may change or stop
either program at any time, by written notice to us. Withdrawals may be included
in income and subject to a 10% federal tax penalty, as well as all charges and
any Market Value Adjustment applicable upon withdrawal. You should consult your
tax adviser before choosing these options.
PORTFOLIO REBALANCING PROGRAM
Under the Portfolio Rebalancing Program, we transfer funds among the
Sub-Accounts to maintain the percentage allocation you have selected among these
Sub-Accounts. At your election, we will make these transfers on a quarterly,
semi-annual or annual basis.
Portfolio Rebalancing does not permit transfers to or from any Guarantee
Period.
SECURED FUTURE PROGRAM
Under this program, we divide your Purchase Payment between the Fixed
Account and the Variable Account. For the Fixed Account portion, you choose a
Guarantee Period from among those we offer, and we allocate to that Guarantee
Period the portion of your Purchase Payment necessary so that at the end of the
Guarantee Period, your Fixed Account allocation, including interest, will equal
the entire amount of your original Purchase Payment. The remainder of the
original Purchase Payment will be invested in Sub-Accounts of your choice. At
the end of the Guarantee Period, you will be guaranteed the amount of your
Purchase Payment (assuming no withdrawals), plus you will have the benefit, if
any, of the investment performance of the Sub-Accounts you have chosen.
WITHDRAWALS, WITHDRAWAL CHARGE AND MARKET VALUE ADJUSTMENT
CASH WITHDRAWALS
REQUESTING A WITHDRAWAL
At any time during the Accumulation Phase you may withdraw in cash all or
any portion of your Account Value. To make a withdrawal, you must send us a
written request at our Annuity Service
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Mailing Address. Your request must specify whether you want to withdraw the
entire amount of your Account or, if less, the amount you wish to withdraw.
All withdrawals may be subject to a withdrawal charge (see "Withdrawal
Charge" below) and withdrawals from your Fixed Account Value also may be subject
to a Market Value Adjustment (see "Market Value Adjustment" below). Upon request
we will notify you of the amount we would pay in the event of a full or partial
withdrawal. Withdrawals also may have adverse federal income tax consequences,
including a 10% penalty tax (see "Federal Tax Status"). You should carefully
consider these tax consequences before requesting a cash withdrawal.
FULL WITHDRAWALS
If you request a full withdrawal, we calculate the amount we will pay you
as follows: We start with the total value of your Account at the end of the
Valuation Period during which we receive your withdrawal request; we deduct the
Account Fee for the Contract Year in which the withdrawal is made; we add or
subtract the amount of any Market Value Adjustment applicable to your Fixed
Account Value; and finally, we deduct any applicable withdrawal charge.
A full withdrawal results in the surrender of your Contract, and
cancellation of all rights and privileges under your Contract.
PARTIAL WITHDRAWALS
If you request a partial withdrawal, we will pay you the actual amount
specified in your request and then reduce the value of your Account by deducting
the amount paid, adding or deducting any Market Value Adjustment applicable to
amounts withdrawn from the Fixed Account, and deducting any applicable
withdrawal charge.
You may specify the amount you want withdrawn from each Sub-Account and/or
Guarantee Amount to which your Account is allocated. If you do not so specify,
we will deduct the total amount you request pro rata, based on your allocations
at the end of the Valuation Period during which we receive your request.
If you request a partial withdrawal that would result in your Account
Value being reduced to an amount less than the Account Fee for the Contract Year
in which you make the withdrawal, we will treat it as a request for a full
withdrawal.
TIME OF PAYMENT
We will pay you the applicable amount of any full or partial withdrawal
within 7 days after we receive your withdrawal request, except in cases where we
are permitted to defer payment under the Investment Company Act of 1940 and New
York insurance law. Currently, we may defer payment of amounts you withdraw from
the Variable Account only for the following periods:
- when the New York Stock Exchange is closed (except weekends and
holidays) or when trading on the New York Stock Exchange is restricted;
- when it is not reasonably practical to dispose of securities held by
the Series Fund or to determine the value of the net assets of the
Series Fund, because an emergency exists; or
- when an SEC order permits us to defer payment for the protection of
Owners
We also may defer payment of amounts you withdraw from the Fixed Account for up
to 6 months from the date we receive your withdrawal request. We do not pay
interest on the amount of any payments we defer.
WITHDRAWAL RESTRICTIONS FOR QUALIFIED PLANS
If yours is a Qualified Contract, you should carefully check the terms of
the plan for limitations and restrictions on cash withdrawals.
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Special restrictions apply to withdrawals from Contracts used for Section
403(b) annuities. See "Federal Tax Status -- Tax-Sheltered Annuities."
WITHDRAWAL CHARGE
We do not deduct any sales charge from your Purchase Payments when they
are made. However, we may impose a withdrawal charge (known as a "contingent
deferred sales charge") on certain amounts you withdraw. We impose this charge
to defray some of our expenses related to the sale of the Contracts, such as
commissions we pay to agents, the cost of sales literature, and other
promotional costs and transaction expenses.
The withdrawal charge will never be greater than 6% of the aggregate
amount of Purchase Payments you make under the Contract.
FREE WITHDRAWAL AMOUNT
In each Contract Year, you may withdraw a portion of your Account Value --
which we will call the "free withdrawal amount" -- before incurring the
withdrawal charge. For any year, the free withdrawal amount is equal to (1) 10%
of the amount of all Purchase Payments you have made during the last 7 Contract
Years, including the current Contract Year (the "Annual Withdrawal Allowance"),
plus (2) the amount of all Purchase Payments made before the last 7 Contract
Years that you have not previously withdrawn. Any portion of the Annual
Withdrawal Allowance that you do not use in an Contract Year is cumulative; that
is, it is carried forward and available for use in future years.
For convenience, we refer to Purchase Payments made during the last 7
Contract Years (including the current Contract Year) as "New Payments," and all
Purchase Payments made before the last 7 Contract Years as "Old Payments."
For example, assume you wish to make a withdrawal from your Contract in
Contract Year 10. You made an initial Purchase Payment of $10,000 in Contract
Year 1, you made one additional Purchase Payment of $8,000 in Contract Year 8,
and you have made no previous withdrawals. Your Account Value in Contract Year
10 is $35,000. The free withdrawal amount for Contract Year 10 is $19,400,
calculated as follows:
- $800, which is the Annual Withdrawal Allowance for Contract Year 10
(10% of the $8,000 Purchase Payment made in Account Year 8, the only
New Payment); plus
- $8,600, which is the total of the unused Annual Withdrawal Allowances
of $1,000 for each of Contract Years 1 through 7 and $800 for each of
Contract Years 8 and 9 that are carried forward and available for use
in Contract Year 10; plus
- $10,000, which is the amount of all Old Payments that you have not
previously withdrawn.
WITHDRAWAL CHARGE ON PURCHASE PAYMENTS
If you withdraw more than the free withdrawal amount in any Contract Year,
we consider the excess amount to be withdrawn first from New Payments that you
have not previously withdrawn. We impose the withdrawal charge on the amount of
these New Payments. Thus, the maximum amount on which we will impose the
withdrawal charge in any year will never be more than the total of all New
Payments that you have not previously withdrawn.
The amount of your withdrawal, if any, that exceeds the total of the free
withdrawal amount plus the aggregate amount of all New Payments not previously
withdrawn, is not subject to the withdrawal charge.
ORDER OF WITHDRAWAL
New Payments are withdrawn on a first-in first-out basis until all New
Payments have been withdrawn. For example, assume the same facts as in the
example above. In Contract Year 10 you wish to withdraw $25,000. We attribute
the withdrawal first to the free withdrawal amount of $19,400, which
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is not subject to the withdrawal charge. The remaining $5,600 is withdrawn from
the Purchase Payment made in Contract Year 8 (the only New Payment) and is
subject to the withdrawal charge. The $2,400 balance of the Contract Year 8
Purchase Payment will remain in your Account. If you make a subsequent $5,000
withdrawal in Contract Year 10, $2,400 of that amount will be withdrawn from the
remainder of the Contract Year 8 Purchase Payment and will be subject to the
withdrawal charge. The other $2,600 of your withdrawal (which exceeds the amount
of all New Payments not previously withdrawn) will not be subject to the
withdrawal charge.
CALCULATION OF WITHDRAWAL CHARGE
We calculate the amount of the withdrawal charge by multiplying the
Purchase Payments you withdraw by a percentage. The percentage varies according
to the number of Contract Years the Purchase Payment has been held in your
Account, including the year in which you made the Payment, but not the year in
which you withdraw it. The applicable percentages are as follows:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACT YEARS PERCENTAGE
- --------------- ---------------
<S> <C>
0-1 6%
2-3 5%
4-5 4%
6 3%
7 or more 0%
</TABLE>
For example, again using the same facts as in the example above, the
percentage applicable to the withdrawals in Account Year 10 of Purchase Payments
made in Contract Year 8 would be 5%, because the number of Contract Years the
Purchase Payments have been held in your Account would be two.
For additional examples of how we calculate withdrawal charges, see
Appendix C.
TYPES OF WITHDRAWALS NOT SUBJECT TO WITHDRAWAL CHARGE
We do not impose a withdrawal charge on withdrawals from the Accounts of
(a) our employees, (b) employees of our affiliates, or (c) licensed insurance
agents who sell the Contracts. We also may waive withdrawal charges with respect
to Purchase Payments derived from the surrender of other annuity contracts we
issue.
We do not impose the withdrawal charge on amounts you apply to provide an
annuity, amounts we pay as a death benefit, or amounts you transfer among the
Sub-Accounts, between the Sub-Accounts and the Fixed Account, or within the
Fixed Account.
MARKET VALUE ADJUSTMENT
We will apply a market value adjustment if you withdraw or transfer
amounts from your Fixed Account Value more than 30 days before the end of the
applicable Guarantee Period. For this purpose, using Fixed Account Value to
provide an annuity and distributions made on the death of the Owner are
considered withdrawals, and the Market Value Adjustment will apply. However, we
will not apply the Market Value Adjustment to automatic transfers to a
Sub-Account from a Guarantee Period as part of our dollar cost averaging
program.
We apply the Market Value Adjustment separately to each Guarantee Amount
in the Fixed Account, that is to each separate allocation you have made to a
Guarantee Period together with interest credited on that allocation. However, we
do not apply the adjustment to the amount of interest credited during your
current Account Year. Any withdrawal from a Guarantee Amount is attributed first
to such interest.
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A Market Value Adjustment may decrease, increase or have no effect on your
Account Value. This will depend on changes in interest rates since you made your
allocation to the Guarantee Period and the length of time remaining in the
Guarantee Period. In general, if the Guaranteed Interest Rate we currently
declare for Guarantee Periods equal to the balance of your Guarantee Period (or
your entire Guarantee Period for Guarantee Periods of less than one year) is
higher than your Guaranteed Interest Rate, the Market Value Adjustment is likely
to decrease your Account Value. If our current Guaranteed Interest Rate is
lower, the Market Value Adjustment is likely to increase your Account Value.
We determine the amount of the Market Value Adjustment by multiplying the
amount that is subject to the adjustment by the following formula:
<TABLE>
<S> <C>
N/12
1 + I
( -------- ) -1
1 + J
</TABLE>
where:
I is the Guaranteed Interest Rate applicable to the Guarantee Amount from
which you withdraw, transfer or annuitize;
J is the Guaranteed Interest Rate we declare at the time of your
withdrawal, transfer or annuitization for Guarantee Periods equal to the length
of time remaining in the Guarantee Period applicable to your Guarantee Amount,
rounded to the next higher number of complete years, for Guarantee Periods of
one year or more. For any Guarantee Periods of less than one year, J is the
Guaranteed Interest Rate we declare at the time of your withdrawal, transfer or
annuitization for a Guarantee Period of the same length as your Guarantee
Period. If, at that time, we do not offer the applicable Guarantee Period we
will use an interest rate determined by straight-line interpolation of the
Guaranteed Interest Rates for the Guarantee Periods we do offer; and
N is the number of complete months remaining in your Guarantee Period.
We will apply the Market Value Adjustment to the amount being withdrawn
after deduction of any Account Fee, if applicable, but before we impose any
withdrawal charge on the amount withdrawn.
For examples of how we calculate the Market Value Adjustment, see Appendix
C.
CONTRACT CHARGES
ACCOUNT FEE
Each year during the Accumulation Phase of your Contract we will deduct
from your Account an Account Fee of $30 to help cover the administrative
expenses we incur related to the issuance of Contracts and the maintenance of
Accounts. We deduct the Account Fee on each Contract Anniversary, which is the
anniversary of the first day of the month after we issue your Contract. We
deduct the Account Fee pro rata from each Sub-Account and each Guarantee Amount,
based on the allocation of your Account Value on your Contract Anniversary.
We will not charge you the Account Fee if:
(1) your Account has been allocated only to the Fixed Account during the
applicable Account Year; or
(2) your Account Value is more than $75,000 on your Account Anniversary.
If you make a full withdrawal of your Account, we will deduct the full
amount of the Account Fee at the time of the withdrawal. In addition, on the
Annuity Commencement Date we will deduct a pro rata portion 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, we will deduct an annual Account Fee
of $30 in the aggregate in equal amounts from each Variable Annuity payment we
make during the year. We do not deduct any fee from Fixed Annuity payments.
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ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge from the assets of the Variable
Account at an annual effective rate equal to 0.15% during both the Accumulation
Phase and the Income Phase. This charge is designed to reimburse expenses we
incur in administering the Contracts, the Accounts and the Variable Account that
are not covered by the Account Fee.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense charge from the assets of the Variable
Account at an effective annual rate equal to 1.25% during both the Accumulation
Phase and the Income Phase. The mortality risk we assume arises from our
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 obligation assures each Annuitant that neither
the longevity of fellow Annuitants nor an improvement in life expectancy
generally will have an adverse effect on the amount of any annuity payment
received under the contract. The expense risk we assume is the risk that the
Account Fee and administrative expense charge we assess under the Contracts may
be insufficient to cover the actual total administrative expenses we incur. If
the amount of the charge is insufficient to cover the mortality and expense
risks, we will bear the loss. If the amount of the charge is more than
sufficient to cover the risks, we will make a profit on the charge. We may use
this profit for any proper corporate purpose, including the payment of marketing
and distribution expenses for the Contracts.
PREMIUM TAXES
In New York there currently is no premium tax. However, if an Owner or
Payee is not a New York State resident, a premium tax may be imposed, depending
on where the Owner or Payee resides. We believe that the amounts of such premium
taxes currently range from 0% to 3.5%. You should consult a tax adviser to find
out if your state imposes a premium tax and the amount of any tax.
In order to reimburse us for the premium tax we may pay on Purchase
Payments, our policy is to deduct the amount of such taxes from the amount you
apply to provide an annuity at the time of annuitization. However, we reserve
the right to deduct the amount of any applicable tax from your Account at any
time, including at the time you make a Purchase Payment or make a full or
partial withdrawal. We do not make any profit on the deductions we make to
reimburse premium taxes.
SERIES FUND EXPENSES
There are fees and charges deducted from each Series of the Series Fund.
These fees and expenses are described in the Series Fund's Prospectus and
Statement of Additional Information.
DEATH BENEFIT
If the Annuitant dies during the Accumulation Phase, we will pay a death
benefit to your Beneficiary, using the payment method elected -- a single cash
payment or one of our Annuity Options. (If you have named more than one
Annuitant, the death benefit will be payable after the death of the last
surviving of the Annuitants.) If the Beneficiary is not living on the date of
death, we will pay the death benefit in one sum to you or, if you were the
Annuitant, to your estate. We do not pay a death benefit if the Annuitant dies
during the Income Phase. However, the Beneficiary will receive any payments
provided under an Annuity Option that is in effect.
If your spouse is your Beneficiary, upon your death (if you are the
Annuitant) your spouse may elect to continue the Contract as the Owner, rather
than receive the death benefit. In that case, the death benefit provision's of
the Contract will not apply until the death of your spouse. See "Other Contract
Provisions -- Death of Owner."
AMOUNT OF DEATH BENEFIT
To calculate the amount of your death benefit, we use a "Death Benefit
Date." The Death Benefit Date is the date we receive proof of the Annuitant's
death in an acceptable form ("Due Proof
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of Death") if you have elected a death benefit payment method before the
Annuitant's death and it remains effective. Otherwise, the Death Benefit Date is
the later of the date we receive Due Proof of Death or the date we receive
either the Beneficiary's election of payment method, or if you were the
Annuitant and the Beneficiary is your spouse, the Beneficiary's election to
continue the Contract. If we do not receive the Beneficiary's election within 60
days after we receive Due Proof of Death, the Death Benefit Date will be the
last day of the 60 day period.
The amount of the death benefit is determined as of the Death Benefit
Date.
The death benefit will be the greatest of the following amounts:
1. Your Account Value for the Valuation Period during which the Death
Benefit Date occurs;
2. Your total Purchase Payments minus the sum of partial withdrawals;
3. Your Account Value on the Seven-Year Anniversary immediately before
the Death Benefit Date, adjusted for subsequent Purchase Payments and
partial withdrawals and charges made between the Seven-Year
Anniversary and the Death Benefit Date;
4. The amount we would pay if you had surrendered your entire Account on
the Death Benefit Date; and
5. Your highest Account Value on any Contract Anniversary before the
Annuitant's 81st birthday, adjusted for partial withdrawals and
charges made between that Contract Anniversary and the Death Benefit
Date.
If the death benefit we pay is amount (2), (3), (4), or (5), your Account
Value will be increased by the excess, if any, of that amount over amount (1).
Any such increase will be allocated to the Sub-Accounts in proportion to your
Account Value in those Sub-Accounts on the Death Benefit Date. Also, any portion
of this new Account Value attributed to the Fixed Account will be transferred to
the Money Market Series Sub-Account (without the application of a Market Value
Adjustment). The Beneficiary may then transfer to the Fixed Account and begin a
new Guarantee Period.
METHOD OF PAYING DEATH BENEFIT
The death benefit may be paid in a single cash payment or as an annuity
(either fixed, variable or a combination), under one or more of our Annuity
Options. We describe the Annuity Options in this Prospectus under "Income Phase
- -- Annuity Provisions."
During the Accumulation Phase, you may elect the method of payment for the
death benefit. If no such election is in effect on the date of the Annuitant's
death, the Beneficiary may elect either a single cash payment or an annuity. If
you were the Annuitant and the Beneficiary is your spouse, the Beneficiary may
elect to continue the Contract. These elections are made by sending us a
completed election form, which we will provide. If we do not receive the
Beneficiary's election within 60 days after we receive Due Proof of Death, we
will pay the death benefit in a single cash payment.
If we pay the death benefit in the form of an Annuity Option, the
Beneficiary becomes the Annuitant under the terms of that Annuity Option.
Neither you nor the Beneficiary may exercise rights that would adversely
affect the treatment of the Contract as an annuity contract under the Internal
Revenue Code. (See "Other Contract Provisions -- Death of Owner.")
SELECTION AND CHANGE OF BENEFICIARY
You select your Beneficiary in your Application. You may change your
Beneficiary at any time by sending us written notice on our required form,
unless you previously made an irrevocable Beneficiary designation. A new
Beneficiary designation is not effective until we record the change.
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PAYMENT OF DEATH BENEFIT
Payment of the death benefit in cash will be made within 7 days of the
Death Benefit Date, except if we are permitted to defer payment in accordance
with the Investment Company Act of 1940. If an Annuity Option is elected, the
Annuity Commencement Date will be the first day of the second calendar month
following the Death Benefit Date, and your Account will remain in effect until
the Annuity Commencement Date.
DUE PROOF OF DEATH
We accept the following as proof of any person's 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 we find satisfactory.
THE INCOME PHASE -- ANNUITY PROVISIONS
During the Income Phase, we make regular monthly payments to your
Annuitant.
The Income Phase of your Contract begins with the Annuity Commencement
Date. On that date, we apply your Account Value, adjusted as described below,
under the Annuity Option or Options you have selected, and we make the first
payment.
Once the Income Phase begins, no lump sum settlement option or cash
withdrawals are permitted, except pursuant to Annuity Option D, Monthly Payments
for a Specified Period Certain, as described below under the heading "Annuity
Options," and you cannot change the Annuity Option selected. You may request a
full withdrawal before the Annuity Commencement Date, which will be subject to
all charges applicable on withdrawals. See "Cash Withdrawals, Withdrawal Charge
and Market Value Adjustment."
SELECTION OF THE ANNUITANT OR CO-ANNUITANT
You select the Annuitant in your Application. The Annuitant is the person
who receives payments during the Income Phase and on whose life these payments
are based. In your Contract, the Annuity Options refer to the Annuitant as the
"Payee."
In a Non-Qualified Contract, if you name someone other than yourself as
Annuitant, you may also select a Co-Annuitant, who will become the new Annuitant
if the original Annuitant dies before the Income Phase. If you have named both
an Annuitant and a Co-Annuitant, you may designate one of them to become the
sole Annuitant as of the Annuity Commencement Date, if both are living at that
time.
When an Annuity Option has been selected as the method of paying the death
benefit, the Beneficiary is the Annuitant.
SELECTION OF THE ANNUITY COMMENCEMENT DATE
You select the Annuity Commencement Date in your Application. The
following restrictions apply to the date you may select:
- The earliest possible Annuity Commencement date is the first day of the
second month following your Contract Date.
- The latest possible Annuity Commencement Date is the first day of the
month following the Annuitant's 90th birthday or, if there is a
Co-Annuitant, the 90th birthday of the younger of the Annuitant and
Co-Annuitant.
- The Annuity Commencement Date must always be the first day of a month.
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You may change the Annuity Commencement Date from time to time by sending
us written notice, with the following additional limitations:
- We must receive your notice at least 30 days before the current Annuity
Commencement Date.
- The new Annuity Commencement Date must be at least 30 days after we
receive the notice.
There may be other restrictions on your selection of the Annuity
Commencement Date imposed by your retirement plan or applicable law. In most
situations, current law requires that for a Qualified Contract certain minimum
distributions must commence no later than April 1 following the year the
Annuitant reaches age 70 1/2 (or, for Qualified Contracts other than IRAs, no
later than April 1 following the year the Annuitant retires, if later than the
year the Annuitant reaches age 70 1/2).
ANNUITY OPTIONS
We offer the following Annuity Options for payments during the Income
Phase. Each Annuity Option may be selected for either a Variable Annuity, a
Fixed Annuity, or a combination of both, except that Option E is available only
for a Fixed Annuity. We may also agree to other settlement options, in our
discretion.
ANNUITY OPTION A -- LIFE ANNUITY
We provide monthly payments during the lifetime of the Annuitant. Annuity
payments stop when the Annuitant dies. There is no provision for continuation of
any payments to a Beneficiary.
ANNUITY OPTION B -- LIFE ANNUITY WITH 60, 120, 180 OR 240 MONTHLY PAYMENTS
CERTAIN
We make monthly payments during the lifetime of the Annuitant. In
addition, we guarantee that the Beneficiary will receive monthly payments for
the remainder of the period certain, if the Annuitant dies during that period.
The election of a longer period results in smaller monthly payments. If no
Beneficiary is designated, we pay the discounted value of the remaining payments
in one sum to the Annuitant's estate. The Beneficiary may also elect to receive
the discounted value of the remaining payments in one sum. The discount rate for
a Variable Annuity will be the assumed interest rate in effect; the discount
rate for a Fixed Annuity will be based on the interest rate we used to determine
the amount of each payment.
ANNUITY OPTION C -- JOINT AND SURVIVOR ANNUITY
We make monthly payments during the lifetime of the Annuitant and another
person you designate and during the lifetime of the survivor of the two. We stop
making payments when the last survivor dies. There is no provision for
continuance of any payments to a Beneficiary.
*ANNUITY OPTION D -- MONTHLY PAYMENTS FOR A SPECIFIED PERIOD CERTAIN
We make monthly payments for a specified period of time from 5 to 30
years, as you elect. If payments under this option are paid on a variable
annuity basis, the Annuitant may elect to receive in one sum the discounted
value of the remaining payments, less any applicable withdrawal charge. The
discount rate for this purpose will be the assumed interest rate in effect. If
the Annuitant dies during the period selected, the remaining payments are made
as described under Annuity Option B.
*ANNUITY OPTION E -- FIXED PAYMENTS
We hold the portion of your Adjusted Account Value selected for this
option at interest, and make fixed payments in such amounts and at such times
(over a period of at least five years) as you and we may agree. We continue
making payments until the amount we hold is exhausted. The final payment will be
for the remaining balance and may be less than the previous installments. We
will credit interest yearly on the amount remaining unpaid at a rate we
determine from time to time, but
- ------------------------
* The election of this Annuity Option may result in the imposition of a penalty
tax.
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never less than 3% per year (or a higher rate if specified in your Contract),
compounded annually. We may change the rate at any time, but will not reduce it
more frequently than once each calendar year. If the Annuitant dies before all
payments have been made, the Beneficiary may elect to receive the remaining
payments or the unpaid balance in one lump sum.
SELECTION OF ANNUITY OPTION
You select one or more of the Annuity Options, which you may change from
time to time during the Accumulation Phase, as long as we receive your selection
or change in writing at least 30 days before the Annuity Commencement Date. If
we have not received your written selection on the 30th day before the Annuity
Commencement Date, we will provide Annuity Option B, for a life annuity with 120
monthly payments certain. If there is more than one Annuitant living on the
Annuity Commencement Date because you have named a Co-Annuitant, we will provide
Annuity Option C with a 50% survivor benefit and the Co-Annuitant as the
designated second person.
You may specify the proportion of your Adjusted Account Value you wish to
provide a Variable Annuity or a Fixed Annuity. Under a Variable Annuity, the
dollar amount of payments will vary, while under a Fixed Annuity, the dollar
amount of payments will remain the same. If you do not specify a Variable
Annuity or a Fixed Annuity, your Adjusted Account Value will be divided between
Variable Annuities and Fixed Annuities in the same proportions as your Account
Value was divided between the Variable and Fixed Accounts on the Annuity
Commencement Date. You may allocate your Adjusted Account Value applied to a
Variable Annuity among the Sub-Accounts, or we will use your existing
allocations.
There may be additional limitations on the options you may elect under
your particular retirement plan or applicable law.
REMEMBER THAT THE ANNUITY OPTIONS MAY NOT BE CHANGED ONCE ANNUITY PAYMENTS
BEGIN.
AMOUNT OF ANNUITY PAYMENTS
ADJUSTED ACCOUNT VALUE
The Adjusted Account Value is the amount we apply to provide a Variable
Annuity and/or a Fixed Annuity. We calculate Adjusted Account Value by taking
your Account Value on the Business Day just before the Annuity Commencement Date
and making the following adjustments:
- We deduct a proportional amount of the Account Fee, based on the
fraction of the current Contract Year that has elapsed;
- If applicable, we apply the Market Value Adjustment to your Account
Value in the Fixed Account, which may result in a deduction, an
addition, or no change; and
- We deduct any applicable premium tax or similar tax if not previously
deducted.
VARIABLE ANNUITY PAYMENTS
Variable Annuity payments may vary each month. We determine the dollar
amount of the first payment using the portion of your Adjusted Account Value
applied to a Variable Annuity and the Annuity Payment Rates in your Contract,
which are based on an assumed interest rate of 3% per year, compounded annually.
See "Annuity Payment Rates."
To calculate the remaining payments, we convert the amount of the first
payment into Annuity Units for each Sub-Account; we determine the number of
those Annuity Units by dividing the portion of the first payment attributable to
the Sub-Account by the Annuity Unit Value of that Sub-Account for the Valuation
Period ending just before the Annuity Commencement Date. This number of Annuity
Units for each Sub-Account will remain constant (unless the Annuitant requests
an exchange of Annuity Units). However, the dollar amount of the next Variable
Annuity payment -- which is the sum of the number of Annuity Units for each
Sub-Account times its Annuity Unit Value for the Valuation
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Period ending just before the date of the payment -- will increase, decrease, or
remain the same, depending on the net investment return of the Sub-Accounts.
If the net investment return of the Sub-Accounts selected is the same as
the assumed interest rate of 3%, compounded annually, the payments will remain
level. If the net investment return exceeds the assumed interest rate, payments
will increase and, conversely, if it is less than the assumed interest rate,
payments will decrease.
Please refer to the Statement of Additional Information for more
information about calculating Variable Annuity Units and Variable Annuity
payments, including examples of these calculations.
FIXED ANNUITY PAYMENTS
Fixed Annuity payments are the same each month. We determine the dollar
amount of each Fixed Annuity payment using the fixed portion of your Adjusted
Account Value and the applicable Annuity Payment Rates. These will be either (1)
the rates in your Contract, which are based on a minimum guaranteed interest
rate of 3% per year, compounded annually, or (2) new rates we have published and
are using on the Annuity Commencement Date, if they are more favorable. See
"Annuity Payment Rates."
MINIMUM PAYMENTS
If your Adjusted Account Value is less than $2,000, or the first annuity
payment for any Annuity Option is less than $20, we will pay the Adjusted
Account Value to the Annuitant in one payment.
EXCHANGE OF VARIABLE ANNUITY UNITS
During the Income Phase, the Annuitant may exchange Annuity Units from one
Sub-Account to another, up to 12 times each Account Year. To make an exchange,
the Annuitant sends us, at our Annuity Service Mailing Address, a written
request stating the number of Annuity Units in the Sub-Account he or she wishes
to exchange and the new Sub-Account for which Annuity Units are requested. The
number of new Annuity Units will be calculated so the dollar amount of an
annuity payment on the date of the exchange would not be affected. To calculate
this number, we use Annuity Unit values for the Valuation Period during which we
receive the exchange request.
We permit only exchanges among Sub-Accounts. No exchanges to or from a
Fixed Annuity are permitted.
ACCOUNT FEE
During the Income Phase, we deduct the annual Account Fee of $30 in equal
amounts from each Variable Annuity Payment. We do not deduct the Account Fee
from Fixed Annuity payments.
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 specified in the applicable Contract (at least 3% per
year, compounded annually); and (b) the monthly Fixed Annuity payment, when this
payment is based on the minimum guaranteed interest rate specified in the
Contract (at least 3% per year, compounded annually).
The Annuity Payment Rates may vary according to the Annuity Option elected
and the adjusted age of the Annuitant. The Contract also describes the method of
determining the adjusted age of the Annuitant. The mortality table used in
determining the Annuity Payment Rates for Options A, B and C is the 1983
Individual Annuitant Mortality Table.
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ANNUITY OPTIONS AS METHOD OF PAYMENT FOR DEATH BENEFIT
You or your Beneficiary may also select one or more Annuity Options to be
used in the event of the death of the Annuitant before the Income Phase, as
described under the "Death Benefit" section of this Prospectus. In that case,
your Beneficiary will be the Annuitant. The Annuity Commencement Date will be
the first day of the second month beginning after the Death Benefit Date.
OTHER CONTRACT PROVISIONS
EXERCISE OF CONTRACT RIGHTS
A Contract belongs to the individual to whom the Contract is issued. All
Contract rights and privileges can be exercised by the Owner without the consent
of the Beneficiary (other than an irrevocably designated Beneficiary) or any
other person. Such rights and privileges may be exercised only during the
lifetime of the Annuitant before the Annuity Commencement Date, except as the
Contract otherwise provides.
The Annuitant becomes the Payee on and after the Annuity Commencement
Date. The Beneficiary becomes the Payee on the death of the Annuitant. Such
Payee 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 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 or custodian of an individual retirement account plan qualified under
Section 408 of the Internal Revenue Code for the benefit of the Owner; or (5) as
otherwise permitted from time to time by laws and regulations governing the
retirement or deferred compensation plans for which a Qualified Contract may be
issued. Subject to the foregoing, a Qualified Contract may not be sold,
assigned, transferred, discounted or pledged as collateral for a loan or as
security for the performance of an obligation or for any other purpose to any
person other than the Company.
The Owner of a Non-Qualified Contract may change the ownership of the
Contract during the lifetime of the Annuitant and prior to the Annuity
Commencement Date.
A change of ownership will not be binding on us until we receive written
notification. When we receive such notification, 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 us on account of any payment we make or any
action we take before receiving the change. If you change the Owner of a
Non-Qualified Contract, you will become immediately liable for the payment of
taxes on any gain realized under the Contract prior to the change of ownership,
including possible liability for a 10% federal excise tax.
DEATH OF OWNER
If your Contract is a Non-Qualified Contract and you die prior to the
Annuitant and before the Annuity Commencement Date, special distribution rules
apply. In that case, the death benefit amount (as determined under "Amount of
Death Benefit" in this Prospectus using the date we receive Due Proof of your
Death as the Death Benefit Date), must be distributed to your "designated
beneficiary," within the meaning of Section 72(s) of the Internal Revenue Code,
either (1) as a lump sum within 5 years after your death or (2) if in the form
of an annuity, over a period not greater than the life or expected life of the
designated beneficiary, with payments beginning no later than one year after
your death.
The person you have named a Beneficiary under your Contract, if any, will
be the "designated beneficiary." If the named Beneficiary is not living, the
Annuitant automatically becomes the designated beneficiary.
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If the designated beneficiary is your surviving spouse, your spouse may
continue the Contract in his or her own name as Owner. To make this election,
your spouse must give us written notification within 60 days after we receive
Due Proof of Death. The special distribution rules will then apply on the death
of your spouse.
If you were the Annuitant as well as the Owner, your surviving spouse (if
the designated beneficiary) may elect to be named as both Owner and Annuitant
and continue the Contract; in that case, we will not pay a death benefit and the
Account Value will not be increased to reflect the death benefit calculation.
The special distribution rules will then apply on the death of your spouse. If
your spouse does not make that election, the death benefit provisions of the
Contract will apply, subject to the condition that any annuity option elected
complies with the special distribution requirements described above. In all
other cases where you are the Annuitant, the death benefit provisions of the
Contract control.
If you are the Annuitant and you die during the Income Phase, the
remaining value of the Annuity Option in place must be distributed at least as
rapidly as the method of distribution under the option.
If the Owner is not a natural person, these distribution rules apply on a
change in, or the death of, any Annuitant or Co-Annuitant.
Payments made in contravention of these special rules would adversely
affect the treatment of the Contracts as annuity contracts under the Internal
Revenue Code. Neither you nor the Beneficiary may exercise rights that would
have that effect.
If yours is a Qualified Contract, any distributions upon your death will
be subject to the laws and regulations governing the particular retirement or
deferred compensation plan in connection with which the Qualified Contract was
issued.
VOTING OF SERIES FUND SHARES
We will vote Series Fund shares held by the Sub-Accounts at meetings of
shareholders of the Series Fund or in connection with similar solicitations, but
will follow voting instructions received from persons having the right to give
voting instructions. During the Accumulation Phase, you will have the right to
give voting instructions. During the Income Phase, the Payee -- that is the
Annuitant or Beneficiary entitled to receive benefits -- is the person having
such voting rights. We will vote any shares attributable to us and Series Fund
shares for which no timely voting instructions are received in the same
proportion as the shares for which we receive instructions from Owners and
Payees, as applicable.
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, or any duty to inquire as to the instructions received or the
authority of Owners or others, as applicable, 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 10 days prior to each meeting of the
shareholders of the Series Fund. We will determine the number of Series Fund
shares as to which each such person is entitled to give instructions as of the
record date set by the Series Fund for such meeting, which is expected to be 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 Owner 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 with respect to the
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particular Payee 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 we will send you at least once during each
Contract Year, a statement showing the number, type and value of Accumulation
Units credited to your Account and the Fixed Accumulation Value of your Account,
which statement shall be accurate as of a date not more than 2 months previous
to the date of mailing. These periodic statements contain important information
concerning your transactions with respect to a Contract. It is your obligation
to review each such statement carefully and to report to us, at the address or
telephone number provided on the statement, any errors or discrepancies in the
information presented therein within 60 days of the date of such statement.
Unless we receive notice of any such error or discrepancy from you within such
period, we may not be responsible for correcting the error or discrepancy.
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.
We will also send such statements reflecting transactions in your Account as may
be required by applicable laws, rules and regulations.
Upon request, we will provide you with information regarding fixed and
variable accumulation values.
SUBSTITUTION OF SECURITIES
Shares of any or all Series of the Series Fund may not always be available
for investment under the Contract. We may add or delete Series or other
investment companies as variable investment options under the Contracts. We may
also substitute for the shares held in any Sub-Account shares of another Series
or shares of another registered open-end investment company or unit investment
trust, provided that the substitution has been approved, if required, by the SEC
and the Superintendent of Insurance of the State of New York. In the event of
any substitution pursuant to this provision, we may make appropriate endorsement
to the Contract to reflect the substitution.
CHANGE IN OPERATION OF VARIABLE ACCOUNT
At our election and subject to the prior approval of the Superintendent of
Insurance of the State of New York and 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 SEC.
In the event of any change in the operation of the Variable Account pursuant to
this provision, we may, subject to the prior approval of the Superintendent of
Insurance of the State of New York, 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
We reserve 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 the Payee(s) during the Income Phase), we 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;
(ii) is necessary to assure continued qualification of the Contract under the
Internal
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Revenue Code or other federal or state laws relating to retirement annuities or
annuity contracts; (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"); (iv) provides additional Variable Account and/or fixed accumulation
options; or (v) as may otherwise be in the best interests of Owners or Payees,
as applicable. In the event of any such modification, we may make appropriate
endorsement in the Contract to reflect such modification.
RIGHT TO RETURN
If you are not satisfied with your Contract, you may return it by mailing
or delivering it to us at the Annuity Service Mailing Address on the cover of
this Prospectus within 10 days after it was delivered to you. When we receive
the returned Contract, it will be cancelled and we will refund to you your
Account Value at the end of the Valuation Period during which we received it.
If you are establishing an Individual Retirement Account ("IRA"), the
Internal Revenue Code requires that we give you a disclosure statement
containing certain information about the Contract and applicable legal
requirements. We must give you this statement on or before the date the IRA is
established. If we give you the disclosure statement before the seventh day
preceding the date the IRA is established, you will not have any right of
revocation under the Code. If we give you the disclosure statement at a later
date, then you may give us a notice of revocation at any time within 7 days
after your Contract Date. Upon such revocation, we will refund your Purchase
Payment(s). This right of revocation with respect to an IRA is in addition to
the return privilege set forth in the preceding paragraph. We allow an Owner
establishing an IRA a "ten day free-look," notwithstanding the provisions of the
Internal Revenue Code.
FEDERAL TAX STATUS
INTRODUCTION
This section describes general federal income tax consequences based upon
our understanding of current federal tax laws. Actual federal tax consequences
may vary depending on, among other things, the type of retirement plan with
which you use a Contract. Also, Congress has the power to enact legislation
affecting the tax treatment of annuity contracts, and such legislation could
apply retroactively to Contracts that you purchased before the date of
enactment. We do not make any guarantee regarding the federal, state, or local
tax status of any Contract or any transaction involving any Contract. You should
consult a qualified tax professional for advice before purchasing a Contract or
executing any other transaction (such as a rollover, distribution, withdrawal or
payment) involving a Contract.
DEDUCTIBILITY OF PURCHASE PAYMENTS
For federal income tax purposes, Purchase Payments made under
Non-Qualified Contracts are not deductible.
PRE-DISTRIBUTION TAXATION OF CONTRACTS
Generally, an increase in the value of a Contract will not give rise to
tax, prior to distribution.
However, corporate (or other non-natural person) Owners of Non-Qualified
Contracts incur current tax, regardless of distribution, on Contract value
increases. Such current taxation does not apply, though, to (i) immediate
annuities, which the Internal Revenue Code (the "Code") defines as a single
premium contract with an annuity commencement date within one year of the date
of purchase, or (ii) any Contract that the non-natural person holds as agent for
a natural person (such as where a bank or other entity holds a Contract as
trustee under a trust agreement).
The Internal Revenue Service could assert that Owners under both Qualified
Contracts and Non-Qualified Contracts annually receive a taxable deemed
distribution equal to the cost of any life insurance benefit under the Contract.
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You should note that qualified retirement investments automatically
provide tax deferral regardless of whether the underlying contract is an
annuity.
DISTRIBUTIONS AND WITHDRAWALS FROM NON-QUALIFIED CONTRACTS
The Account Value will include an amount attributable to Purchase
Payments, the return of which is not taxable, and an amount attributable to
investment earnings, the return of which is taxable at ordinary income rates.
The relative portions of a distribution that derive from nontaxable Purchase
Payments and taxable investment earnings depend upon the timing of the
distribution.
If you withdraw less than your entire Account Value under a Non-Qualified
Contract before the Annuity Commencement Date, you must treat the withdrawal
first as a return of investment earnings. You may treat only withdrawals in
excess of the amount of the Account Value attributable to investment earnings as
a return of Purchase Payments. Account Value amounts assigned or pledged as
collateral for a loan will be treated as if withdrawn from the Contract.
If a Payee receives annuity payments under a Non-Qualified Contract after
the Annuity Commencement Date, however, the Payee treats a portion of each
payment as a nontaxable return of Purchase Payments. In general, the nontaxable
portion of such a payment bears the same ratio to the total payment as the
Purchase Payments bear to the Payee's expected return under the Contract. The
remainder of the payment constitutes a taxable return of investment earnings.
Once the Payee has received nontaxable payments in an amount equal to total
Purchase Payments, all future distributions constitute fully taxable ordinary
income. If the Annuitant dies before the Payee recovers the full amount of
Purchase Payments, the Payee may deduct an amount equal to unrecovered Purchase
Payments.
Upon the transfer of a Non-Qualified Contract by gift (other than to the
Owner's spouse), the Owner must treat an amount equal to the Account Value minus
the total amount paid for the Contract as income.
A penalty tax of 10% may apply to taxable cash withdrawals and lump-sum
payments from Non-Qualified Contracts. This penalty will not apply in certain
circumstances, such as distributions pursuant to the death of the Owner or
distributions under an immediate annuity (as defined above), or after age
59 1/2.
DISTRIBUTIONS AND WITHDRAWALS FROM QUALIFIED CONTRACTS
Generally, distributions from a Qualified Contract will constitute fully
taxable ordinary income. Also, a 10% penalty tax will, except in certain
circumstances, apply to distributions prior to age 59 1/2.
Distributions from a Qualified Contract are not subject to current
taxation or a 10% penalty, however, if:
- the distribution is not a hardship distribution or part of a series of
payments for life or for a specified period of 10 years or more (an
"eligible rollover distribution"), and
- the Owner or Payee rolls over the distribution (with or without
actually receiving the distribution) into a qualified retirement plan
eligible to receive the rollover.
Only you or your spouse may elect to roll over a distribution to an
eligible retirement plan.
WITHHOLDING
In the case of an eligible rollover distribution (as defined above) from a
Qualified Contract (other than from a Contract issued for use with an individual
retirement account), we (or the plan administrator) must withhold and remit to
the U.S. Government 20% of the distribution, 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; however, only you or your spouse may
elect a direct rollover. In the case of a distribution from (i) a Non-Qualified
Contract, (ii) a Qualified Contract issued for use with an individual retirement
account, or (iii) a Qualified Contract where the distribution is not an
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eligible rollover distribution, we will withhold and remit to the U.S.
Government a part of the taxable portion of each distribution unless, prior to
the distribution, the Owner or Payee provides us his or her taxpayer
identification number and instructs us (in the manner prescribed) not to
withhold. The Owner or Payee may credit against his or her federal income tax
liability for the year of distribution any amounts that we (or the plan
administrator) withhold.
PURCHASE OF IMMEDIATE ANNUITY CONTRACT AND DEFERRED ANNUITY CONTRACT
You should consider the following information only if you intend to
purchase an immediate annuity contract and a deferred annuity contract together.
We understand that the Treasury Department might reconsider the tax treatment of
annuity payments under an immediate annuity contract (as defined above)
purchased together with a deferred annuity contract. We believe that any adverse
change in the existing tax treatment of such immediate annuity contracts would
not apply to Contracts issued before the Treasury Department announces the
change. However, there can be no assurance that the Treasury Department will not
apply any such change retroactively.
INVESTMENT DIVERSIFICATION AND CONTROL
The Treasury Department has issued regulations that prescribe investment
diversification requirements for mutual fund series underlying nonqualified
variable contracts. Contracts must comply with these regulations to qualify as
annuities for federal income tax purposes. Contracts that do not meet the
guidelines are subject to current taxation on annual increases in value. We
believe that each Series of the Series Fund complies with these regulations. The
preamble to the regulations states that the Internal Revenue Service may
promulgate guidelines under which an owner's excessive control over investments
underlying the contract will preclude the contract from qualifying as an annuity
for federal tax purposes. We cannot predict whether such guidelines, if in fact
promulgated, will be retroactive. We will take any action (including
modification of the Contract and/or the Variable Account) necessary to comply
with any retroactive guidelines.
TAX TREATMENT OF THE COMPANY AND THE VARIABLE ACCOUNT
As a life insurance company under the Code, we will record and report
operations of the Variable Account separately from other operations. The
Variable Account will not, however, constitute a regulated investment company or
any other type of taxable entity distinct from our other operations. We will not
incur tax on the income of the Variable Account (consisting primarily of
interest, dividends, and net capital gains) if we use this income to increase
reserves under Contracts participating in the Variable Account.
QUALIFIED RETIREMENT PLANS
You may use Qualified Contracts with several types of qualified retirement
plans. Because tax consequences will vary with the type of qualified retirement
plan and the plan's specific terms and conditions, we provide below only brief,
general descriptions of the consequences that follow from using Qualified
Contracts in connection with various types of qualified retirement plans. We
stress 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 of the Qualified Contracts that you are using. These terms and conditions
may include restrictions on, among other things, ownership, transferability,
assignability, contributions and distributions. Owners, Payees, Beneficiaries,
and administrators of qualified retirement plans should consider, with the
guidance of a tax adviser, whether the death benefit payable under the Contract
affects the qualified status of their retirement plan.
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
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those of self-employed individuals. Self-employed persons may therefore use
Qualified Contracts as a funding vehicle for their retirement plans, as a
general rule.
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. The Code imposes restrictions on cash withdrawals
from Section 403(b) annuities.
If the Contracts are to receive tax deferred treatment, cash withdrawals
of amounts attributable to salary reduction contributions (other than
withdrawals of accumulation account value as of December 31, 1988) may be made
only when the Owner attains age 59 1/2, separates from service with the
employer, dies or becomes disabled (within the meaning of Section 72(m)(7) of
the Code). These restrictions apply to (i) any post-1988 salary reduction
contributions, (ii) any growth or interest on post-1988 salary reduction
contributions, and (iii) any growth or interest on pre-1989 salary reduction
contributions that occurs on or after January 1, 1989. It is permissible,
however, to withdraw post-1988 salary reduction contributions in cases of
financial hardship. While the Internal Revenue Service has not issued specific
rules defining financial hardship, we expect 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
Contracts. Under certain circumstances the 10% tax penalty will not apply if the
withdrawal is for medical expenses.
Under the terms of a particular Section 403(b) plan, the Owner may be
entitled to transfer all or a portion of the Account Value to one or more
alternative funding options. Owners should consult the documents governing their
plan and the person who administers the plan for information as to such
investment alternatives.
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, Employer/Association of Employees Established Individual Retirement
Account Trusts, and Simple Retirement Accounts. Such IRAs are subject to
limitations on contribution levels, 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 in an IRA on a tax-deferred
basis. If we sell Contracts for use with IRAs, the Internal Revenue Service or
other agency may impose supplementary information requirements. We will provide
purchasers of the Contracts for such purposes with any necessary information.
You will have the right to revoke the Contract under certain circumstances, as
described in the section of this Prospectus entitled "Right to Return."
ROTH IRAS
Section 408A of the Code permits an individual to contribute to an
individual retirement program called a Roth IRA. Unlike contributions to a
traditional IRA under Section 408 of the Code, contributions to a Roth IRA are
not tax-deductible. Provided certain conditions are satisfied, distributions are
generally tax-free. Like traditional IRAs, Roth IRAs are subject to limitations
on contribution amounts and the timing of distributions. If an individual
converts a traditional IRA into a Roth IRA, the full amount of the IRA is
included in taxable income. The Internal Revenue Service and other agencies may
impose special information requirements with respect to Roth IRAs. If and when
we make Contracts available for use with Roth IRAs, we will provide any
necessary information.
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ADMINISTRATION OF THE CONTRACTS
We perform certain administrative functions relating to the Contracts,
Owner Accounts, 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, Owner Account number and type, the status of each Owner
Account and other pertinent information necessary to the administration and
operation of the Contracts; processing Applications, Purchase Payments,
transfers and full and partial withdrawals; 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.
DISTRIBUTION OF THE CONTRACTS
We offer the Contracts on a continuous basis. The Contracts are 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"), One
Sun Life Executive Park, Wellesley Hills, Massachusetts 02481. Clarendon, a
wholly-owned subsidiary of our parent company, Sun Life (U.S.), is registered
with the SEC under the Securities Exchange Act of 1934 as a broker-dealer and is
a member of the National Association of Securities Dealers, Inc.
Commissions and other distribution compensation will be paid by the
Company to the selling agents and will not be more than 7.10% of Purchase
Payments. In addition, after the first Contract Year, broker-dealers who have
entered into distribution agreements with the Company may receive an annual
renewal commission of no more than 1.00% of the Owner's Account Value.
Commissions will not be paid with respect to Accounts 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, or of immediate family
members of such employees or persons. In addition, commissions may be waived or
reduced in connection with certain transactions described in this Prospectus
under the heading "Waivers; Reduced Charges; Credits; Bonus Guaranteed Interest
Rates." During 1996, 1997 and 1998, approximately $217,000, $532,000 and
$468,300, respectively, was paid to and retained by Clarendon in connection with
the distribution of the Contracts.
PERFORMANCE INFORMATION
From time to time the Variable Account may publish reports to
shareholders, sales literature and advertisements containing performance
information relating to the Sub-Accounts. This information may include
standardized and non-standardized "Average Annual Total Return," "Cumulative
Growth Rate" and "Compound Growth Rate." The Government Securities Series
Sub-Account and the High Yield Series Sub-Account may also advertise "yield."
The Money Market Series Sub-Account may advertise "yield" and "effective yield."
Average Annual Total Return measures the net income of the variable option
and any realized or unrealized gains or losses of the Series in which it
invests, over the period stated. Average Annual Total Return figures are
annualized and represent the average annual percentage change in the value of an
investment in a variable option over that period. Standardized Average Annual
Total Return information covers the period after we started offering the Regatta
products in New York or, if shorter, the life of the Series. Non-standardized
Average Annual Total Return covers the life of each Series, which may predate
the Regatta New York product. Cumulative Growth Rate represents the cumulative
change in the value of an investment in the variable option for the period
stated, and is arrived at by calculating the change in the Accumulation Unit
Value of a variable option between the first and the last day of the period
being measured. The difference is expressed as a percentage of the Accumulation
Unit Value at the beginning of the base period. "Compound Growth Rate" is an
annualized measure, calculated by applying a formula that determines the level
of return which, if earned over the entire period, would produce the cumulative
return.
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Average Annual Total Return figures assume an initial purchase payment of
$1,000 and reflect all applicable withdrawal and Contract charges. The
Cumulative Growth Rate and Compound Growth Rate figures that we advertise do not
reflect withdrawal charges or the Account Fee, although they reflect all
recurring charges. Results calculated without withdrawal and/or certain Contract
charges will be higher. We may also use other types of rates of return that do
not reflect withdrawal and Contract charges.
The performance figures used by the Variable Account are based on the
actual historical performance of the Series Fund for the specified periods, and
the figures are not intended to indicate future performance. For periods before
the date the Contracts became available, we calculate the performance
information for the Sub-Account on a hypothetical basis. To do this, we reflect
deductions of the current Contract fees and charges from the historical
performance of the corresponding series.
Yield is a measure of the net dividend and interest income earned over a
specific one month or 30-day period (7-day period for the Money Market Series
Sub-Account), expressed as a percentage of the value of the Sub-Account's
Accumulation Units. Yield is an annualized figure, which means that we assume
that the Sub-Account generates the same level of net income over a one-year
period and compound that income on a semi-annual basis. We calculate the
effective yield for the Money Market Series Sub-Account similarly, but include
the increase due to assumed compounding. The Money Market Series Sub-Account's
effective yield will be slightly higher than its yield as a result of its
compounding effect.
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
information on performance and our computations is set forth in the Statement of
Additional Information.
The Company may also advertise the ratings and other information assigned
to it by independent industry ratings organizations. Some of these organizations
are A.M. Best, Moody's Investor's Service, Standard and Poor's Insurance Rating
Services, and Duff and Phelps. Each year, A.M. Best reviews the financial status
of thousands of insurers, culminating in the assignment of Best's rating. These
ratings reflect A.M. Best's current opinion of the relevant financial strength
and operating performance of an insurance company in comparison to the norms of
the life/health industry. Best's ratings range from A++ to F. Standard and
Poor's and Duff and Phelps' ratings measure the ability of an insurance company
to meet its obligations under insurance policies it issues. These two ratings do
not measure the insurance company's ability to meet non-policy obligations.
Ratings in general do not relate to the performance of the Sub-Accounts.
We may also advertise endorsements from organizations, individuals or
other parties that recommend the Company or the Contracts. We may occasionally
include in advertisements (1) comparisons of currently taxable and tax deferred
investment programs, based on selected tax brackets; or (2) discussions of
alternative investment vehicles and general economic conditions.
AVAILABLE INFORMATION
The Company and the Variable Account have filed with the SEC registration
statements under the Securities Act of 1933 relating to the Contracts. This
Prospectus does not contain all of the information contained in the registration
statements and their exhibits. For further information regarding the Variable
Account, the Company and the Contracts, please refer to the registration
statements and their exhibits.
In addition, the Company is subject to the informational requirements of
the Securities Exchange Act of 1934. We file reports and other information with
the SEC to meet these requirements. You can inspect and copy this information
and our registration statements at the SEC's public reference facilities at the
following locations: WASHINGTON, D.C. -- 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549; CHICAGO, ILLINOIS -- 500 West Madison Street, Chicago,
IL 60661; NEW YORK, NEW YORK -- 7 World Trade Center, 13th Floor, New York, NY
10048. The Washington, D.C. office will
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also provide copies by mail for a fee. You may also find these materials on the
SEC's website (http://www.sec.gov).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1998 filed with the SEC is incorporated by reference in this Prospectus. Any
statement contained in a document we incorporate by reference is deemed modified
or superceded to the extent that a later filed document, including this
Prospectus, shall modify or supercede that statement. Any statement so modified
or superceded shall not be deemed, except as so modified or superceded, to
constitute 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 this Prospectus). Requests for
such document should be directed to Steven I. Rosenthal, Assistant Vice
President, 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.
ADDITIONAL INFORMATION ABOUT THE COMPANY
BUSINESS OF THE COMPANY
We are engaged in the sale of individual variable life insurance and
individual and group fixed and variable annuities. These contracts are sold in
both the tax qualified and non-tax qualified markets. These products are
distributed through individual insurance agents, insurance brokers and
registered broker-dealers.
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 on page 42.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
---------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
(IN $ THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues
Premiums, annuity deposits and other revenue $ $ 139,469 $ 83,711 $ 85,446 $ 75,997
Net investment income 6,718 9,344 13,019 19,204 22,698
----------- ----------- ----------- ----------- -----------
148,813 96,730 104,650 98,695
----------- ----------- ----------- ----------- -----------
Benefits and expenses
Policyholder benefits 97,787 62,591 59,695 47,708
Other expenses 45,538 29,358 41,557 45,146
----------- ----------- ----------- ----------- -----------
143,325 91,949 101,252 92,854
----------- ----------- ----------- ----------- -----------
Income from operations before federal income tax
expense 8,768 5,488 4,781 3,398 5,841
Federal income tax (excluding tax on capital
losses) 2,070 2,315 1,939 2,447 1,017
----------- ----------- ----------- ----------- -----------
Income from operations after federal income tax
expense and before realized capital losses 6,698 3,173 2,842 951 4,824
Net realized capital gains (losses) less capital
gains tax (13) 183 (439) (21) (469)
----------- ----------- ----------- ----------- -----------
Net Income $ 6,685 $ 3,356 $ 2,403 $ 930 $ 4,355
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Total Assets $ $ 624,099 $ 518,033 $ 520,169 $ 503,982
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The Company had net income of $6,685,000 for 1998 as compared to
$3,356,000 for 1997. The increase in net income between years was due directly
to higher earnings in the annuity and group disability businesses and an
over-accrued federal income tax provision at December 31, 1997, offset by lower
earnings from group life insurance. The increase in annuity income was primarily
due to higher fee income from market appreciation on separate account assets and
lower reserve strain from lower fixed annuity sales in 1998. The increase in
group health income was due directly to lower group accident and health reserves
from more favorable long term disability claims experience, while group life
earnings declined primarily from increased claims experience and higher reserves
offset by higher premium income.
YEAR 2000 COMPLIANCE
During the fourth quarter of 1996, Sun Life (Canada) began a comprehensive
analysis of its information technology ("IT") and non-IT systems, including its
hardware, software, data, data feed products, and internal and external
supporting services, to ensure the ability of these systems to correctly process
date calculations through the year 2000 and beyond. Sun Life (Canada) created a
full-time Year 2000 project team in early 1997 to manage this endeavor across
the Company. This team, which works with dedicated personnel from all business
units and with the legal and audit departments, reports directly to the
Company's senior management on a monthly basis. In addition, Sun Life (Canada)'s
Year 2000 project is periodically reviewed by internal and external auditors.
To date, all relevant systems have been identified and their components
inventoried, needed resolutions have been documented, timelines and project
plans have been developed, remediation and testing are in process. Over 90% of
the components have been remediated, tested and are certified as Year 2000
compliant. The majority of the remaining components are in the testing phase and
will be certified over the course of the year.
In mid-1997, the project team contacted all key vendors to obtain either
their certification for the products and services provided or their plan to make
those products and services compliant. Approximately 95% of these vendors have
responded and the project team has reviewed the responses, validated and
conducted tests with the vendors where appropriate. In addition, the project
team continues to work with critical business partners, such as third-party
administrators, investment property managers, investment mortgage
correspondents, and others, with the goal that these partners will continue to
be able to support the Company's objective of assuring Year 2000 compliance.
Non-IT applications, including building security, HVAC systems, and other
such systems, will be tested. Compliant client server and mainframe environments
have been built which allow for testing of critical dates such as December 31,
1999, January 1, 2000, February 28, 2000, February 29, 2000 and March 1, 2000
without impact to current production.
Although the Company expects all critical systems to be Year 2000
compliant before the end of 1999, there can be no assurance that this result
will be completely achieved. Factors giving rise to this uncertainty include
possible loss of technical resources to perform the work, failure to identify
all susceptible systems, non-compliance by third-parties whose systems and
operations affect the Company, and other similar uncertainties. A possible
worst-case scenario might include one or more of the Company's significant
systems being non-compliant. Such a scenario could result in material disruption
to the Company's operations. Consequences of such disruptions could include,
among other possibilities, the inability to update customers' accounts, process
payments and other financial transactions; and report accurate data to
management, customers, regulators, and others. Consequences also could include
business interruptions or shutdowns, reputational harm, increased scrutiny by
regulators, and litigation related to Year 2000 issues. Such potential
consequences, depending on their nature and duration, could have a material
impact on the Company's results of operations and financial position.
In order to mitigate the risks to the Company of material adverse
operational or financial impacts from failure to achieve planned Year 2000
compliance, Sun Life (Canada) has established
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contingency planning at the business unit and corporate levels. Each business
unit has ranked its applications as being of high, medium or low business risk
to ensure that the most critical are addressed first. The business units also
have developed alternate plans of action where possible, and established dates
for the alternate plans to be enacted. On the corporate level, Sun Life (Canada)
is in the process of enhancing its business continuation plan, by identifying
minimum requirements for facilities, computing, staffing, and other factors; and
it is developing a plan to support those requirements.
As of year-end 1998, the Company expended, cumulatively, approximately
$222,000 on its Year 2000 effort, and it expects to incur a further $70,000 on
this effort in 1999.
CAUTIONARY STATEMENT
The Private Securities Litigation Reform Act of 1995 defines forward
looking statements as statements not based on historical fact. This Prospectus
includes forward looking statements by the Company. These statements relate to
such topics as to Year 2000 compliance, volume growth, market share, and
financial goals. It is important to understand that these forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those that the statements anticipate.
These risks and uncertainties may concern, among other things:
- The Company's ability to identify and address Year 2000 issues
successfully, in a timely manner, and at reasonable cost. They also may
concern the ability of the Company's vendors, suppliers, other service
providers, and customers to successfully address their own Year 2000
issues in a timely manner.
- Heightened competition, particularly in terms of price, product features,
and distribution capability, which could constrain the Company's growth
and profitability.
- Changes in interest rates and market conditions.
- Regulatory and legislative developments.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
This discussion covers market risks associated with investment portfolios
that support the Company's general account liabilities. This discussion does not
cover market risks associated with those investment portfolios that support
separate account products. For these products, the policyholder, rather than the
Company, assumes these market risks.
GENERAL
The assets of the general account are available to support general account
liabilities. For purposes of managing these assets in relation to these
liabilities, the company notionally segments these assets by product or by
groups of products. The Company manages each segment's assets based on an
investment policy statement that it has established for that segment. The policy
statement discusses the segment's liability characteristics and liquidity
requirements, provides cash flow estimates, and sets targets for asset mix,
duration, and quality. Each quarter, investment and business unit managers
review these policy statements to ensure that the policies remain appropriate,
taking into account each segment's liability characteristics.
TYPES OF MARKET RISKS
The Company's stringent underwriting standards and practices have resulted
in high-quality portfolios and have the effect of limiting credit risk. It is
the Company's policy, for example, not to purchase below-investment-grade
securities. Also, as a matter of investment policy, the Company assumes no
foreign currency or commodity risk; nor does it assume equity price risk except
to the extent that it holds real estate in its portfolios. The management of
interest rate risk exposure is discussed below.
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INTEREST RATE RISK MANAGEMENT
The Company's fixed interest rate liabilities are primarily supported by
well diversified portfolios of fixed interest investments. All of these fixed
interest investments are held for other than trading purposes and can include
publicly issued and privately placed bonds and commercial mortgage loans. Public
bonds can include Treasury bonds, corporate bonds, and money market instruments.
The Company's fixed income portfolios also hold securitized assets, including
mortgage-backed securities (MBS) and asset-backed securities. These securities
are subject to the same standards applied to other portfolio investments,
including relative value criteria and diversification guidelines. In portfolios
backing interest-sensitive liabilities, the Company's policy is to limit MBS
holdings to less than 10% of total portfolio assets. In all portfolios, the
Company restricts MBS investments to pass-through securities issued by U.S.
government agencies and to collateralized mortgage obligations, which are
expected to exhibit relatively low volatility. The Company does not engage in
leveraged transactions and it does not invest in the more speculative forms of
these instruments such as the interest-only, principal-only, inverse floater, or
residual tranches.
Changes in the level of domestic interest rates affect the market value of
fixed interest assets and liabilities. Segments whose liabilities mainly arise
from the sale of products containing interest rate guarantees for certain terms
are sensitive to changes in interest rates. In these segments, the Company uses
"immunization" strategies, which are specifically designed to minimize the loss
from wide fluctuations in interest rates. The Company supports these strategies
using analytical and modeling software acquired from outside vendors.
Significant features of the Company's immunization models include:
- an economic or market value basis for both assets and liabilities;
- an option pricing methodology;
- the use of effective duration and convexity to measure interest rate
sensitivity;
- the use of "key rate durations" to estimate interest rate exposure at
different parts of the yield curve and to estimate the exposure to
non-parallel shifts in the yield curve.
The Company's Interest Rate Risk Committee meets monthly. After reviewing
duration analyses, market conditions and forecasts, the Committee develops
specific asset management strategies for the interest-sensitive portfolios.
These strategies may involve managing to achieve small intentional mismatches,
either in terms of total effective duration or for certain key rate durations,
between the liabilities and related assets of particular segments. The Company
manages these mismatches to a tolerance range of plus or minus 0.5.
Liabilities categorized as financial instruments and held in the Company's
general account at December 31, 1998 had a fair value of $29.2 million. Fixed
income investments supporting those liabilities had a fair value of $82.3
million at that date. The Company performed a sensitivity analysis on these
interest-sensitive liabilities and assets at December 31, 1998. The analysis
showed that if there were an immediate increase of 100 basis points in interest
rates, the fair value of the liabilities would show a net decrease of $.7
million and the corresponding assets would show a net decrease of $2.4 million.
The Company produced these estimates using computer models. Since these
models reflect assumptions about the future, they contain an element of
uncertainty. For example, the models contain assumptions about future
policyholder behavior and asset cash flows. Actual policyholder behavior and
asset cash flows could differ from what the models show. As a result, the
models' estimates of duration and market values may not reflect what actually
will occur. The models are further limited by the fact that they do not provide
for the possibility that management action could be taken to mitigate adverse
results. The Company believes that this limitation is one of conservatism; that
is, it will tend to cause the models to produce estimates that are generally
worse than one might actually expect, all other things being equal.
39
<PAGE>
Based on its processes for analyzing and managing interest rate risk, the
Company believes its exposure to interest rate changes will not materially
affect its near-term financial position, results of operations, or cash flows.
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.
EMPLOYEES
As of December 31, 1998, the Company had 30 direct employees who are
employed at its Home Office.
PROPERTIES
The Company owns no properties.
The Company leases two separate facilities for its annuity operations and
group sales offices. On February 24, 1999, the Company terminated the lease
associated with its annuity operations office as it intends to consolidate the
functions performed at this facility with its parent company, Sun Life (U.S.).
The group sales office lease is scheduled to expire in July 1999.
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 lst 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, these laws do
provide that an assessment may be excused or deferred if it would threaten an
insurer's own financial strength and many 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.
40
<PAGE>
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Variable Account. We
are engaged in various kinds of routine litigation which, in management's
judgment, is not of material importance to our respective total assets or
material with respect to the Variable Account.
ACCOUNTANTS
The financial statements of the Variable Account for the year ended
December 31, 1998 included in the Statement of Additional Information and the
statutory financial statements of the Company for the years ended December 31,
1998, 1997 and 1996 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 report of such firm given upon their
authority as experts in accounting and auditing.
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 financial statements of the Variable Account for the year ended
December 31, 1998 are included in the Statement of Additional Information.
------------------------
41
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
STATUTORY STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND
CAPITAL STOCK AND SURPLUS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
ADMITTED ASSETS
General Account Assets:
Bonds $ 57,916,869 $ 61,703,336
Mortgage loans on real estate 17,657,672 25,787,001
Properties acquired in satisfaction
of debt 1,755,854 --
Policy loans 625,023 636,277
Cash and short-term investments 5,928,556 10,120,237
Life insurance premiums and annuity
considerations due and uncollected 667,087 791,011
Accident and health premiums due and
unpaid 156,493 158,858
Investment income due and accrued 780,020 1,083,939
Other assets 183,602 497,790
------------ ------------
General account assets 85,671,176 100,778,449
Separate Account Assets:
Unitized 527,942,310 406,430,585
Non-unitized 100,064,243 116,889,545
------------ ------------
Total Admitted Assets $713,677,729 $624,098,579
------------ ------------
------------ ------------
LIABILITIES, CAPITAL STOCK AND SURPLUS
General Account Liabilities:
Aggregate reserve for life policies
and contracts $ 22,578,780 $ 22,374,626
Aggregate reserve for accident and
health policies 7,830,000 7,414,000
Policy and contract claims 2,174,704 1,912,737
Liability for premium and other
deposit funds 20,807,840 31,341,254
Interest maintenance reserve 830,941 885,581
Commissions to agents due or accrued 374,826 521,106
General expenses due or accrued 369,524 415,105
Transfers from Separate Accounts due
or accrued (15,992,081) (7,224,058)
Taxes, licenses and fees due or
accrued 64,813 114,986
Federal income taxes due or accrued 700,000 1,000,000
Asset valuation reserve 1,047,787 1,346,335
Payable to parent, subsidiaries and
affiliates 1,218,745 1,266,475
Other liabilities 684,361 810,594
------------ ------------
General account liabilities 42,690,240 62,178,741
Separate Account Liabilities:
Unitized 527,751,720 406,249,110
Non-unitized 100,064,243 116,889,545
------------ ------------
Total liabilities 670,506,203 585,317,396
------------ ------------
CAPITAL STOCK AND SURPLUS
Capital Stock--Par value $1,000;
authorized issued and outstanding;
2,000 shares 2,000,000 2,000,000
------------ ------------
Gross paid in and contributed
surplus 29,500,000 29,500,000
Group life contingency reserve fund 812,391 180,457
Unassigned funds 10,859,135 7,100,726
------------ ------------
Total Surplus 41,171,526 36,781,183
------------ ------------
Capital stock and surplus 43,171,526 38,781,183
------------ ------------
Total liabilities, capital stock and
surplus $713,677,729 $624,098,579
------------ ------------
------------ ------------
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
42
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-Owned Subsidiary of Sun Life Assurance Company Of Canada (U.S.))
STATUTORY STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
INCOME:
Premiums and annuity considerations $ 16,979,974 $ 16,013,160 $ 10,880,575
Deposit-type funds 84,013,114 115,692,429 67,770,004
Net investment income 6,397,852 8,824,668 12,313,903
Amortization of interest maintenance
reserve 319,812 519,001 704,763
Net gain from operations from
Separate Accounts 9,115 8,743 8,101
Income from fees associated with
investment management,
administration and contract
guarantees from Separate Accounts 6,262,374 4,707,296 3,591,170
Other income 1,179,261 657,755 701,242
------------ ------------ ------------
Total Income 115,161,502 146,423,052 95,969,758
------------ ------------ ------------
BENEFITS AND EXPENSES:
Death benefits 6,237,281 4,916,746 2,881,367
Annuity benefits 5,758,805 5,439,091 7,175,995
Disability benefits and benefits
under accident and health policies 1,094,851 939,635 464,615
Surrender benefits and other fund
withdrawals 73,863,143 79,016,904 114,578,203
Interest on policy or contract funds 101,516 75,069 83,323
Increase in aggregate reserves for
life and accident and health
policies and contracts 620,154 5,199,040 1,550,701
Decrease in liability for premium
and other deposit funds (10,533,414) (30,405,893) (67,996,389)
------------ ------------ ------------
Total Benefits 77,142,336 65,180,592 58,737,815
Commissions on premiums and annuity
considerations (direct business
only) 4,850,390 5,582,738 3,047,358
General insurance expenses 7,017,562 7,687,478 6,093,131
Insurance taxes, licenses and fees,
excluding federal income taxes 709,440 788,386 729,244
Net transfers to Separate Accounts 16,673,071 61,695,832 22,581,654
------------ ------------ ------------
Total Benefits and Expenses 106,392,799 140,935,026 91,189,202
------------ ------------ ------------
Net gain from operations before
federal income taxes 8,768,703 5,488,026 4,780,556
Federal income taxes incurred
(excluding tax on capital gains) 2,070,545 2,315,259 1,938,734
------------ ------------ ------------
Net gain from operations after
federal income taxes and before
realized capital gains 6,698,158 3,172,767 2,841,822
Net realized capital (losses) gains
less capital gains tax and
transferred to the interest
maintenance reserve (13,249) 183,262 (439,101)
------------ ------------ ------------
NET INCOME $ 6,684,909 $ 3,356,029 $ 2,402,721
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
43
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-Owned Subsidiary of Sun Life Assurance Company Of Canada (U.S.))
STATUTORY STATEMENTS OF CHANGES IN CAPITAL STOCK AND SURPLUS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Capital and surplus, beginning of year $38,781,183 $34,802,643 $31,964,414
----------- ----------- -----------
Net income 6,684,909 3,356,029 2,402,721
Change in net unrealized capital gains 359,000 138,000 702,000
Change in nonadmitted assets and related
items 47,886 (14,391) 32,888
Change in asset valuation reserve 298,548 498,902 (299,380)
Dividend to stockholder (3,000,000) -- --
----------- ----------- -----------
Net change in capital and surplus for
the year 4,390,343 3,978,540 2,838,229
----------- ----------- -----------
Capital and surplus, end of year $43,171,526 $38,781,183 $34,802,643
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
44
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
STATUTORY STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash Provided
Premiums, annuity considerations and
deposit funds received $101,168,181 $138,347,877 $ 82,896,939
Net investment income 6,731,025 9,707,801 14,106,521
Fees associated with investment
management, administration and
contract guarantees from Separate
Accounts 6,262,374 4,707,296 3,591,170
Fee income 1,179,261 657,755 701,242
------------ ------------ ------------
Total receipts 115,340,841 153,420,729 101,295,872
------------ ------------ ------------
Benefits paid 86,793,629 122,170,301 128,975,968
Insurance expenses and taxes paid 12,819,426 13,540,362 9,712,774
Net cash transfers to separate
accounts 25,441,094 41,721,173 25,804,874
Federal income tax payments (excluding
tax on capital gains) 2,370,545 1,715,259 2,909,899
------------ ------------ ------------
Total payments 127,424,694 179,147,095 167,403,515
------------ ------------ ------------
Net cash from operations (12,083,853) (25,726,366) (66,107,643)
------------ ------------ ------------
Proceeds from long-term investments
sold, matured or repaid (after
deducting taxes on capital gains of
$135,651 for 1998, $222,860 for 1997
and ($112,405) for 1996) 37,410,774 59,132,310 86,583,714
Other cash provided 813,054 325,543 4,654,856
------------ ------------ ------------
Total cash provided 38,223,828 59,457,853 91,238,570
------------ ------------ ------------
Cash applied
Cost of long-term investments acquired (26,671,265) (27,369,138) (28,654,582)
Other cash applied (3,660,391) (857,106) (166,107)
------------ ------------ ------------
Total cash applied (30,331,656) (28,226,244) (28,820,689)
------------ ------------ ------------
Net change in cash and short-term
investments (4,191,681) 5,505,243 (3,689,762)
Cash and short-term investments:
Beginning of year 10,120,237 4,614,994 8,304,756
------------ ------------ ------------
End of year $ 5,928,556 $ 10,120,237 $ 4,614,994
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
45
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Sun Life Insurance and Annuity Company of New York (the "Company") is
incorporated as a life insurance company and is currently engaged in the sale of
individual fixed and variable annuities, group life and group long-term
disability insurance. The parent company, Sun Life Assurance Company of Canada
(U.S.) ("Sun Life of Canada (U.S.)"), is ultimately a wholly-owned subsidiary of
Sun Life Assurance Company of Canada ("Sun Life (Canada)"), a mutual life
insurance company.
The Company, which is domiciled in the State of New York, prepares its financial
statements in accordance with statutory accounting practices prescribed or
permitted by the Insurance Department of the State of New York. Prescribed
accounting practices include a variety of publications of the National
Association of Insurance Commissioners ("NAIC"), as well as New York State laws,
regulations and general administrative rules. Permitted accounting practices
encompass all accounting practices not so prescribed. The permitted accounting
practices adopted by the Company are not material to the financial statements.
Prior to 1996, statutory accounting practices were recognized by the insurance
industry and the accounting profession as generally accepted accounting
principles ("GAAP") for mutual life insurance companies and stock life insurance
companies wholly owned by mutual life insurance companies. In April of 1993, the
Financial Accounting Standards Board ("FASB") issued an interpretation (the
"Interpretation") which became effective in 1996 that has changed the previous
practice of mutual life insurance companies (and stock life insurance companies
that are wholly owned subsidiaries of mutual life insurance companies) with
respect to utilizing statutory basis financial statements for general purposes,
in that it will no longer allow such financial statements to be described as
having been prepared in conformity with GAAP. Consequently, these financial
statements prepared in conformity with statutory accounting practices as
described above, vary from and are not intended to present the Company's
financial position, results of operations or cash flow in conformity with GAAP.
(See Note 17 for further discussion relative to the Company's basis of financial
statement presentation.) The effects on the financial statements of the
variances between the statutory basis of accounting and GAAP, although not
reasonably determinable, are presumed to be material.
INVESTED ASSETS
Bonds are carried at cost adjusted for amortization of premium or accrual of
discount. Mortgage loans acquired at a premium or discount are carried at
amortized values and other mortgage loans at the amounts of the unpaid balances.
Real estate investments are carried at the lower of cost, adjusted for
accumulated depreciation, or appraised value less encumbrances. Short-term
investments are carried at amortized cost which approximates fair value.
Depreciation of buildings and improvements is calculated using the straight-line
method over the estimated useful life of the property, generally three to
sixteen years.
POLICY AND CONTRACT RESERVES
The reserves for group life insurance, group long-term disability insurance and
annuity contracts, developed by accepted actuarial methods, have been
established and maintained on the basis of published mortality and morbidity
tables using assumed interest rates and valuation methods that will provide
reserves at least as great as those required by law and contract provisions.
INCOME AND EXPENSES
For group life, group long-term disability and annuity contracts, premiums are
recognized as revenues over the premium paying period, whereas commissions and
other costs applicable to the acquisition of new business are charged to
operations as incurred.
46
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
SEPARATE ACCOUNTS
The Company has established unitized separate accounts applicable to individual
qualified and nonqualified variable annuity contracts.
Assets and liabilities of the separate accounts, representing net deposits and
accumulated net investment earnings less fees, held primarily for the benefit of
contract holders, are shown as separate captions in the statutory financial
statements. Assets held in the separate accounts are carried at market values as
determined by the quoted market prices of the underlying investments.
The Company has also established a nonunitized separate account for amounts
allocated to the fixed portion of a certain combination fixed/variable deferred
annuity contracts. The assets of this account are available to fund general
account liabilities and general account assets are available to fund liabilities
of this account.
Gains (losses) from mortality experience and investment experience of the
separate accounts, not applicable to contract owners, are transferred to (from)
the general account. Accumulated gains (losses) that have not been transferred
are recorded as payable (receivable) to (from) the general account. Transfers
from separate accounts due or accrued amounted to $15,992,000 in 1998 and
$7,224,000 in 1997.
CHANGES IN ACCOUNTING PRINCIPLES AND REPORTING
In March 1998, the National Association of Insurance Commissioners adopted the
Codification of Statutory Accounting Principles ("Codification"). The
Codification, which is intended to standardize regulatory accounting and
reporting for the insurance industry, is proposed to be effective January 1,
2001. However, statutory accounting principles will continue to be established
by individual state laws and permitted practices and it is uncertain when, or
if, the State of New York will require adoption of the Codification for the
preparation of statutory financial statements. The Company has not finalized the
quantification of the effects of Codification on its statutory financial
statements.
OTHER
Preparation of the financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses. Actual results could differ from those estimates.
Certain 1997 and 1996 amounts have been reclassified to conform to amounts as
presented in 1998.
47
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
2. BONDS
Investments in debt securities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
---------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------- ---------- ----------- --------
(IN 000'S)
<S> <C> <C> <C> <C>
Long-term bonds:
United States Government and
government agencies and
authorities $16,153 $ 319 $(31) $16,441
Public utilities 11,353 213 (16) 11,550
Transportation 2,553 19 -- 2,572
Finance 6,260 122 (9) 6,373
All other corporate bonds 21,598 430 (37) 21,991
-------- ---------- --- --------
Total long-term bonds 57,917 1,103 (93) 58,927
Short-term bonds -- U.S. Treasury
Bills, bankers acceptances and
commercial paper 5,258 -- -- 5,258
-------- ---------- --- --------
$63,175 $1,103 $(93) $64,185
-------- ---------- --- --------
-------- ---------- --- --------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------- ---------- ---------- --------
(IN 000'S)
<S> <C> <C> <C> <C>
Long-term bonds:
United States Government and
government agencies and
authorities $15,005 $ 311 -$- $15,316
Foreign governments 523 16 -- 539
Public utilities 12,126 341 -- 12,467
Finance 4,026 80 -- 4,106
All other corporate bonds 30,023 696 (16) 30,703
-------- ---------- --- --------
Total long-term bonds 61,703 1,444 (16) 63,131
Short-term bonds -- U.S. Treasury
Bills, bankers acceptances and
commercial paper 9,406 -- -- 9,406
-------- ---------- --- --------
$71,109 $1,444 $(16) $72,537
-------- ---------- --- --------
-------- ---------- --- --------
</TABLE>
48
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
2. BONDS (CONTINUED)
The amortized cost and estimated fair value of debt securities at December 31,
1998 by contractual maturity are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call and/or prepayment penalties.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ------------
(IN 000'S)
<S> <C> <C>
Maturities are:
Due in one year or less $18,463 $ 18,549
Due after one year through five
years 19,429 19,827
Due after five years through ten
years 11,328 11,421
Due after ten years 8,434 8,803
--------- ------------
Subtotal 57,654 58,600
Mortgage-backed securities 5,521 5,585
--------- ------------
$63,175 $ 64,185
--------- ------------
--------- ------------
</TABLE>
Proceeds from sales and maturities of investments in debt securities during
1998, 1997 and 1996 were $29,068,000, $42,986,000 and $76,431,000, respectively.
Gross gains of $407,000, $395,000 and $537,000 and gross losses of $2,000,
$40,000 and $183,000 were realized on such sales during 1998, 1997 and 1996,
respectively.
A bond, included above, with an amortized cost of approximately $404,000 and
$408,000 at December 31, 1998 and 1997, respectively, was on deposit with the
Superintendent of Insurance of the State of New York as required by law.
3. MORTGAGE LOANS
The Company invests in commercial first mortgage loans throughout the United
States. The Company monitors the condition of the mortgage loans in its
portfolio. In those cases where mortgages have been restructured, appropriate
allowances for losses have been made. In those cases where, in management's
judgment, the mortgage loans' values are impaired, appropriate losses are
recorded.
The following table shows the geographic distribution of the mortgage loan
portfolio at December 31:
<TABLE>
<CAPTION>
1998 1997
------- -------
(IN 000'S)
<S> <C> <C>
California $ 3,421 $ 4,672
Florida 777 3,313
Massachusetts 1,090 2,556
New York 2,868 4,375
Ohio 1,291 1,308
All other 8,211 9,563
------- -------
$17,658 $25,787
------- -------
------- -------
</TABLE>
As of December 31, 1998, the Company has no restructured mortgage loans. As of
December 31, 1997, the Company had restructured loans totaling $960,000 against
which there were allowances for losses of $250,000.
The Company has made no commitments of mortgage loans on real estate into the
future.
49
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
4. INVESTMENT GAINS (LOSSES)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1998 1997 1996
----- ----- -----
(IN 000'S)
<S> <C> <C> <C>
Realized capital gains (losses):
Bonds $ 7 $ (99) $ 237
Mortgage loans (8) (6) (676)
Real estate (12) 288 --
----- ----- -----
$ (13) $ 183 $(439)
----- ----- -----
----- ----- -----
Changes in unrealized capital gains on
mortgage loans $ 359 $ 138 $ 702
----- ----- -----
----- ----- -----
</TABLE>
Realized capital gains and losses on bonds and mortgages which relate to changes
in levels of interest rate risk are charged or credited to an interest
maintenance reserve ("IMR") and amortized into income over the remaining
contractual life of the security sold. The gross realized capital gains credited
to the IMR were $408,000, $355,000 and $354,000 in 1998, 1997 and 1996,
respectively. All gains are transferred net of applicable income taxes.
5. NET INVESTMENT INCOME
Net investment income consisted of the following for:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1998 1997 1996
------- ------- -------
(IN 000'S)
<S> <C> <C> <C>
Interest income from bonds $ 4,570 $ 5,622 $ 8,576
Interest income from mortgage loans 1,926 3,279 4,252
Real estate investment income 22 483 376
Other investment income (loss) 125 170 (93)
------- ------- -------
Gross investment income 6,643 9,554 13,111
Investment expenses 245 729 797
------- ------- -------
Net investment income $ 6,398 $ 8,825 $12,314
------- ------- -------
------- ------- -------
</TABLE>
6. REINSURANCE
The Company has agreements with Sun Life (Canada) which provide that Sun Life
(Canada) will reinsure the mortality and morbidity risks of the group life
insurance contracts and group long-term disability contracts issued by the
Company. Under these agreements, basic death benefits and long-term disability
benefits are reinsured on a yearly renewable term basis. The agreements provide
that Sun Life (Canada) will reinsure the mortality risks in excess of $50,000
per policy for group life insurance contracts and $4,000 per policy per month
for the group long-term disability contracts ceded by the Company. For the year
ended December 31, 1997 and 1996, the agreements provided that Sun Life (Canada)
would reinsure $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 (decreasing) income from operations by $(771,000),
$139,000 and $(500,000) for the years ended December 31, 1998, 1997, and 1996,
respectively.
The group life and long-term disability reinsurance agreements require that the
reinsurer provide funds in amounts equal to the reserves ceded.
50
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
6. REINSURANCE (CONTINUED)
The following are summarized pro forma results of operations of the Company for
the years ended December 31, 1998, 1997 and 1996 before the effect of
reinsurance transactions with Sun Life (Canada).
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1998 1997 1996
-------- -------- --------
(IN 000'S)
<S> <C> <C> <C>
Income:
Premiums, annuity deposits and other
revenues $105,728 $142,915 $ 85,947
Net investment income 6,718 9,343 13,019
-------- -------- --------
Subtotal 112,446 152,258 98,966
Benefits and expenses:
Policyholder benefits 79,918 101,371 64,328
Other expenses 22,988 45,538 29,357
-------- -------- --------
Subtotal 102,906 146,909 93,685
-------- -------- --------
Income from operations $ 9,540 $ 5,349 $ 5,281
-------- -------- --------
-------- -------- --------
</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, 1998
(IN 000'S)
% OF TOTAL
AMOUNT -
--------
<S> <C> <C>
Subject to discretionary withdrawal:
--with market value adjustment $ 98,744 15.18
--at book value less surrender charges
(surrender charge > 5%) 7,108 1.09
--at book value (mimimal or no charge
or adjustment) 523,814 80.54
Not subject to discretionary withdrawal
provision 20,709 3.19
-------- ----------
Total annuity actuarial reserves and
deposit liabilities $650,375 100.00
-------- ----------
-------- ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
(IN 000'S)
AMOUNT % OF TOTAL
-------- ----------
<S> <C> <C>
Subject to discretionary withdrawal:
--with market value adjustment $120,764 21.37
--at book value less surrender charges
(surrender charge > 5%) 13,811 2.45
--at book value (mimimal or no charge
or adjustment) 410,484 72.65
Not subject to discretionary withdrawal
provision 19,972 3.53
-------- ----------
Total annuity actuarial reserves and
deposit liabilities $565,031 100.00
-------- ----------
-------- ----------
</TABLE>
8. SEGMENT INFORMATION
The Company offers financial products and services such as fixed and variable
annuities, group life insurance and group long-term disability protection.
Within these areas, the Company conducts business principally in two operating
segments and maintains a corporate surplus segment to provide for the capital
needs of the various operating segments and to engage in other financing related
activities.
51
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
8. SEGMENT INFORMATION (CONTINUED)
The Retirement Products and Services ("RPS") segment markets and administers
individual variable and fixed annuity products, including market value adjusted
annuities, while the Group Insurance segment markets and administers group life
insurance and group long-term disability products.
The following amounts pertain to the various business segments:
<TABLE>
<CAPTION>
TOTAL
FEDERAL GENERAL
TOTAL TOTAL PRETAX INCOME ACCOUNT
REVENUES EXPENDITURES INCOME TAXES ASSETS
-------------- -------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
1998:
RPS $ 97,936,000 $ 92,889,000 $ 5,047,000 $ 449,000 $ 36,148,000
Group Insurance 15,155,000 13,251,000 1,904,000 654,000 14,685,000
Corporate Surplus 2,071,000 253,000 1,818,000 968,000 34,838,000
-------------- -------------- ------------ ------------ --------------
Total: $ 115,162,000 $ 106,393,000 $ 8,769,000 $ 2,071,000 $ 85,671,000
-------------- -------------- ------------ ------------ --------------
-------------- -------------- ------------ ------------ --------------
1997:
RPS $ 130,926,000 $ 127,120,000 $ 3,806,000 $ 1,803,000 $ 43,799,000
Group Insurance 12,623,000 13,791,000 (1,168,000) (406,000) 10,706,000
Corporate Surplus 2,874,000 24,000 2,850,000 918,000 46,273,000
-------------- -------------- ------------ ------------ --------------
Total: $ 146,423,000 $ 140,935,000 $ 5,488,000 $ 2,315,000 $ 100,778,000
-------------- -------------- ------------ ------------ --------------
-------------- -------------- ------------ ------------ --------------
1996:
RPS $ 84,260,000 $ 83,271,000 $ 989,000 $ 547,000 $ 88,745,000
Group Insurance 8,494,000 7,875,000 619,000 116,000 7,820,000
Corporate Surplus 3,216,000 43,000 3,173,000 1,276,000 30,182,000
-------------- -------------- ------------ ------------ --------------
Total: $ 95,970,000 $ 91,189,000 $ 4,781,000 $ 1,939,000 $ 126,747,000
-------------- -------------- ------------ ------------ --------------
-------------- -------------- ------------ ------------ --------------
</TABLE>
9. RETIREMENT PLANS
The Company participates with Sun Life (Canada) and Sun Life of Canada (U.S.) in
a noncontributory defined benefit pension plan covering essentially all
employees. The benefits are based on years of service and compensation.
The funding policy for the pension plan is to contribute an amount which at
least satisfies the minimum amount required by ERISA; the plan is currently
fully funded. The Company is charged for its share of the pension cost based
upon its covered participants. Pension plan assets consist principally of a
variable accumulation fund contract held in a separate account of Sun Life
(Canada).
The Company's share of the group's accrued pension cost at December 31, 1998,
1997 and 1996 was $275,000, $211,000 and $178,000, respectively. The Company's
share of net periodic pension cost was $65,000, $33,000 and $81,000 for the
years ended December 31, 1998, 1997 and 1996, respectively.
The Company also participates with Sun Life (Canada), Sun Life of Canada (U.S.)
and certain affiliates in a 401(k) savings plan for which substantially all
employees are eligible. The Company matches, up to specified amounts, employees'
contributions to the plan. Employer contributions were $30,000, $28,000 and
$27,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
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 STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
9. RETIREMENT PLANS (CONTINUED)
OTHER POSTRETIREMENT BENEFIT PLANS
In addition to pension benefits, the Company provides certain health, dental
and life insurance benefits ("postretirement benefits") for retired employees
and dependents. Substantially all employees may become eligible for these
benefits if they reach normal retirement age while working for the Company, or
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 ("SFAS") No. 106, "Employer's Accounting for Postretirement 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
services. 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 $455,000 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 $6,000, $16,000, and $8,000 for the years ended December
31, 1998, 1997 and 1996, respectively. The Company's postretirement health,
dental and life insurance benefits currently are not funded.
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 STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
9. RETIREMENT PLANS (CONTINUED)
The following table sets forth the change in the pension and other
postretirement benefit plans' benefit obligations and assets as well as the
plans' funded status reconciled with the amount shown in the Company's statutory
financial statements at December 31:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
1998 1997 1998 1997
---------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 79,684 $ 70,848 $ 9,845 $ 9,899
Service cost 4,506 4,251 240 306
Interest cost 6,452 5,266 673 725
Amendments -- 1,000 -- --
Actuarial (gain) loss 21,975 -- 308 (801)
Benefits paid (1,825) (1,681) (647) (284)
---------- ---------- ---------- ---------
Benefit obligation at end of year $ 110,792 $ 79,684 $ 10,419 $ 9,845
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
The Company's share:
Benefit obligation at beginning of year $ 269 $ 239 $ 89 $ 83
Benefit obligation at end of year 515 269 21 89
Change in plan assets:
Fair value of plan assets at beginning of year $ 136,610 $ 122,807 $ -- $ --
Actual return on plan assets 16,790 15,484 -- --
Employer contribution -- -- 647 284
Benefits paid (1,825) (1,681) (647) (284)
---------- ---------- ---------- ---------
Fair value of plan assets at end of year $ 151,575 $ 136,610 $ -- $ --
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
Funded status $ 40,783 $ 56,926 $ (10,419) $ (9,845)
Unrecognized net actuarial gain (loss) (2,113) (18,147) 586 257
Unrecognized transition (asset) obligation (24,674) (26,730) 185 230
Unrecognized prior service cost 7,661 8,241 -- --
---------- ---------- ---------- ---------
Prepaid (accrued) benefit cost $ 21,657 $ 20,290 $ (9,648) $ (9,358)
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
The Company's share of accrued benefit cost $ (275) $ (211) $ (41) $ (35)
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
Weighted-average assumptions as of December 31:
Discount rate 6.75% 7.50% 6.75% 7.50%
Expected return on plan assets 8.00% 7.50% N/A N/A
Rate of compensation increase 4.50% 4.50% N/A N/A
</TABLE>
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 STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
9. RETIREMENT PLANS (CONTINUED)
For measurement purposes, a 10.1% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 1998 (5.7% for dental benefits).
The rates were assumed to decrease gradually to 5% for 2005 and remain at that
level thereafter.
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
1998 1997 1998 1997
---------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Components of net periodic benefit cost:
Service cost $ 4,506 $ 4,251 $ 239 $ 306
Interest cost 6,452 5,266 673 725
Expected return on plan assets (10,172) (9,163) -- --
Amortization of transition (asset) obligation (2,056) (2,056) 45 45
Amortization of prior service cost 580 517 -- --
Recognized net actuarial (gain) loss (677) (789) (20) 71
---------- --------- --------- ---------
Net periodic benefit cost $ (1,367) $ (1,974) $ 937 $ 1,147
---------- --------- --------- ---------
---------- --------- --------- ---------
The Company's share of net periodic benefit cost $ 64 $ 33 $ 6 $ 16
---------- --------- --------- ---------
---------- --------- --------- ---------
</TABLE>
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage-point change in assumed
health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1-PERCENTAGE-POINT 1-PERCENTAGE-POINT
INCREASE DECREASE
------------------- -------------------
(IN 000'S)
<S> <C> <C>
Effect on total of service and interest cost components $ 210 $ (170)
Effect on postretirement benefit obligation $ 2,026 $ (1,697)
</TABLE>
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, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
----------------------------- -----------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------------- ------------ -------------- ------------
(IN 000'S)
<S> <C> <C> <C> <C>
ASSETS:
Bonds $ 63,175 $ 64,185 $ 71,109 $ 72,537
Mortgages 17,658 18,157 25,787 26,557
LIABILITIES:
Individual annuities $ 29,724 $ 29,212 $ 40,479 $ 38,177
</TABLE>
The major methods and assumptions used in estimating the fair values of
financial instruments are as follows:
The fair values of short-term bonds are estimated to be the amortized cost. The
fair values of long-term bonds which are publicly traded are based upon market
prices or dealer quotes.For privately placed bonds, fair values are estimated
using prices for publicly traded bonds of similar credit risk, maturity,
repayment and liquidity characteristics.
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 STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
10. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The fair values of the Company's general account reserves and liabilities under
investment-type contracts (insurance and annuity contracts that do not involve
mortality or morbidity risks) are estimated using discounted cash flow analyses
or surrender values. Those contracts that are deemed to have short-term
guarantees have a carrying amount equal to the estimated market value.
The fair values of mortgages are estimated by discounting future cash flows
using current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities. 11. Statutory
Investment Valuation Reserves: The asset valuation reserve ("AVR") provides a
reserve for losses from investments in bonds, mortgage loans, real-estate and
other invested assets with related increases or decreases being recorded
directly to surplus.
Realized capital gains and losses on bonds and mortgages which relate to changes
in levels of interest rate risk are charged or credited to an 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>
1998 1997
-------------- --------------
AVR IMR AVR IMR
------ ------ ------ ------
(IN 000'S) (IN 000'S)
<S> <C> <C> <C> <C>
Balance, beginning of year $1,346 $ 886 $1,845 $1,174
Net realized capital (losses) gains, net
of tax (13) 265 183 231
Amortization of net investment gains -- (320) -- (519)
Unrealized investment gains 359 -- 138 --
Required by formula (644) -- (820) --
------ ------ ------ ------
Balance, end of year $1,048 $ 831 $1,346 $ 886
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
12. LIABILITY FOR UNPAID CLAIMS AND CLAIM ADJUSTMENT EXPENSES
Activity in the liability for unpaid claims and claim adjustment expense is
summarized below (in 000's).
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Balance, January 1 $10,239 $ 6,129 $ 4,320
Claims incurred 8,491 9,008 5,061
Claims paid (6,960) (4,898) (3,252)
------- ------- -------
Balance, December 31 $11,770 $10,239 $ 6,129
------- ------- -------
------- ------- -------
</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, 1998 and 1997, the unpaid claim and claim adjustment
liability for these contracts is included in Policy Reserves.
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 STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
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
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 $2,506,000, $1,938,000 and $2,797,000 during 1998, 1997 and 1996,
respectively.
14. LEASE COMMITMENTS
The Company leases two separate facilities for its annuity operations and group
sales offices. Both leases commenced in March 1994. On February 24, 1999, the
Company terminated its lease at the 80 Broad Street location as it intends to
consolidate the functions performed at this facility with its parent company,
Sun Life of Canada (U.S.) (See Note 18 for further discussion). The group sales
office lease is scheduled to expire in July 1999. Consequently, the Company has
no future lease commitments to report. Rent expense under these leases in 1998,
1997 and 1996 amounted to $344,000, $348,000 and $336,000, respectively.
15. MANAGEMENT AND SERVICE CONTRACTS
The Company has agreements with Sun Life (Canada) which provide that Sun Life
(Canada) will furnish to the Company, as requested, personnel as well as certain
investment, actuarial and administrative services on a cost reimbursement basis.
Expenses under these agreements amounted to approximately $1,037,000 in 1998,
$1,155,000 in 1997 and $1,866,000 in 1996.
16. RISK-BASED CAPITAL
Effective December 31, 1993, the NAIC adopted risk-based capital requirements
for life insurance companies. The risk-based capital requirements provide a
method for measuring the minimum acceptable amount of adjusted capital that a
life insurer should have, as determined under statutory accounting practices,
taking into account the risk characteristics of its investments and products.
The Company has met the minimum risk-based capital requirements at December 31,
1998 and 1997.
17. ACCOUNTING POLICIES AND PRINCIPLES
The financial statements of the Company have been prepared on the basis of
statutory accounting practices which, prior to 1996, were considered by the
insurance industry and the accounting profession to be in accordance with GAAP
for mutual life insurance companies. The primary differences between statutory
accounting and GAAP are described as follows. Statutory accounting practices do
not recognize the following assets or liabilities which are reflected under
GAAP; deferred acquisition costs, deferred federal income taxes and statutory
non admitted assets. AVR and IMR are established under statutory accounting
practices but not under GAAP. Methods for calculating real estate depreciation
and investment valuation allowances differ under statutory accounting practices
and GAAP. Premiums for investment-type products are recognized as income for
statutory purposes and as deposits to policyholders' accounts for GAAP.
Because the Company's management uses financial information prepared in
conformity with accounting policies generally accepted in Canada in the normal
course of business, the management of the Company has determined that the cost
of complying with Statement No. 120 would exceed the benefits that the Company,
or the users of its financial statements, would experience. Consequently, the
Company has elected not to apply such standards in the preparation of these
statutory financial statements.
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 STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
18. SUBSEQUENT EVENT
Subsequent to December 31, 1998, the Company announced its intention to
consolidate the customer service and accounting functions, currently performed
at its office at 80 Broad Street in New York, New York, with its parent company,
Sun Life of Canada (U.S.), based in Wellesley Hills, Massachusetts. A plan to
transfer these operations, effective July 1, 1999, was presented to the New York
State Insurance Department on February 8, 1999, and is currently undergoing
review. The Company will maintain its corporate home office in the State of New
York and will continue to offer individual annuity, group life and group
disability products to residents of New York. This action is expected to improve
operating efficiencies and achieve greater economies of scale. As a result of
this event, the Company will be terminating approximately 18 employees and is
expecting to incur severance related costs ranging between $250,000 and
$490,000. In addition, the expense associated with terminating its lease at the
80 Broad Street facility will total approximately $77,000.
58
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
We have audited the accompanying statutory statements of admitted assets,
liabilities and capital stock and surplus of Sun Life Insurance and Annuity
Company of New York ("the Company") as of December 31, 1998 and 1997, and the
related statutory statements of operations, changes in capital stock and
surplus, and cash flow for each of the three years in the period ended December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described more fully in Notes 1 and 17 to the financial statements, the
Company prepared these financial statements using accounting practices
prescribed or permitted by the Insurance Department of the State of New York,
which is a comprehensive basis of accounting other than generally accepted
accounting principles. The effects on the financial statements of the
differences between the statutory basis of accounting and generally accepted
accounting principles, although not reasonably determinable, are presumed to be
material.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the admitted assets, liabilities and capital stock and
surplus of Sun Life Insurance and Annuity Company of New York as of December 31,
1998 and 1997, and the results of its operations and its cash flow for each of
the three years in the period ended December 31, 1998 on the basis of accounting
described in Notes 1 and 17.
However, because of the differences between the two bases of accounting referred
to in the second preceding paragraph, in our opinion, the statutory financial
statements referred to above do not present fairly, in conformity with generally
accepted accounting principles, the financial position of Sun Life Insurance and
Annuity Company of New York as of December 31, 1998 and 1997 or the results of
its operations or its cash flow for each of the three years in the period ended
December 31, 1998.
As management has stated in Note 17, because the Company's management uses
financial information prepared in accordance with accounting principles
generally accepted in Canada in the normal course of business, the management of
Sun Life Insurance and Annuity Company of New York has determined that the cost
of complying with Statement No. 120, Accounting and Reporting by Mutual Life
Insurance Enterprises and by Insurance Enterprises for Certain Long-Duration
Participating Contracts, would exceed the benefits that the Company, or the
users of its financial statements would experience. Consequently, the Company
has elected not to apply such standards in the preparation of these financial
statements.
DELOITTE & TOUCHE LLP
February 4, 1999
(except for Note 18 for which the date is March 25, 1999.)
59
<PAGE>
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
Calculation of Performance Data -- Average Annual Total Return.......................
Non-Standardized Investment Performance..............................................
Advertising and Sales Literature.....................................................
Calculations.........................................................................
Example of Variable Accumulation Unit Value Calculation............................
Example of Variable Annuity Unit Calculation.......................................
Example of Variable Annuity Payment Calculation....................................
Calculation of Annuity Unit Values.................................................
Distribution of the Contracts........................................................
Designation and Change of Beneficiary................................................
Custodian............................................................................
Financial Statements.................................................................
</TABLE>
60
<PAGE>
This Prospectus sets forth information about the Contracts and the
Variable Account that a prospective purchaser should know before investing.
Additional information about the Contracts and the Variable Account has been
filed with the Securities and Exchange Commission in a Statement of Additional
Information dated May 1, 1999 which is incorporated herein by reference. The
Statement of Additional Information is available upon request and without charge
from Sun Life Insurance and Annuity Company of New York. To receive a copy,
return this request form to the address shown below or telephone (212) 943-3855
or (800) 447-7569.
- --------------------------------------------------------------------------------
To: Sun Life Insurance and Annuity Company of New York
Annuity Service Mailing Address:
80 Broad Street
New York, New York 10004
Please send me a Statement of Additional Information for
Regatta Gold -- NY Variable and Fixed Annuity
Sun Life (N.Y.) Variable Account C.
Name
- --------------------------------------------------------------
Address
- --------------------------------------------------------------
-------------------------------------------------------------------------
City
- ------------------------------------ State
- -------------- Zip
- -------
Telephone
- ----------------------------------------------------------------
61
<PAGE>
APPENDIX A
GLOSSARY
The following terms as used in this Prospectus have the indicated
meanings:
ACCOUNT OR OWNER ACCOUNT: An account established for each Owner to which
Net Purchase Payments are credited.
ACCOUNT VALUE: The Variable Accumulation Value, if any, plus the Fixed
Accumulation Value, if any, of your Account for any Valuation Period.
ACCUMULATION PHASE: The period before the Annuity Commencement Date and
during the lifetime of the Annuitant during which you make Purchase Payments
under the Contract. This is called the "Accumulation Period" in the Contract.
ANNUITANT: The person or persons named in the Application and whose life
the first annuity payment is to be made. In a Non-Qualified Contract, if you
name someone other than yourself as Annuitant, you may also name a Co-Annuitant.
If you do, all provisions of the Contract based on the death of the Annuitant
will be based on the date of death of the last surviving of the persons named.
By example, if the Annuitant dies prior to the Annuity Commencement Date, the
Co-Annuitant will become the new Annuitant. The death benefit will become due
only on the death before the Annuity Commencement Date of the last surviving
Annuitant and Co-Annuitant named. These persons are referred to collectively in
the Contract as "Annuitants." If you have named both an Annuitant and Co-
Annuitant, you may designate one of them to become the sole Annuitant as of the
Annuity Commencement Date, if both are living at that time.
*ANNUITY COMMENCEMENT DATE: The date on which the first annuity payment
under each Contract is to be made.
*ANNUITY OPTION: The method you choose 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 from the Variable
Account.
APPLICATION: The document signed by you or other evidence acceptable to us
that serves as your application for purchase of a Contract.
*BENEFICIARY: The person or entity having the right to receive the death
benefit and, for Non-Qualified Contracts, who is the "designated beneficiary"
for purposes of Section 72(s) of the Internal Revenue Code.
BUSINESS DAY: Any day the New York Stock Exchange is open for trading or
any other day on which there is enough trading in securities held by a
Sub-Account to materially affect the value of the Variable Accumulation Units.
COMPANY: Sun Life Insurance and Annuity Company of New York.
CONTRACT: A Contract issued by the Company on an individual basis.
CONTRACT DATE: The date on which we issue your Contract. This is called
the "Issue Date" in the Contract.
CONTRACT YEAR AND CONTRACT ANNIVERSARY: Your first Contract Year is the
period of (a) 12 full calendar months plus (b) the part of the calendar month in
which we issue your Contract (if not on the first day of the month), beginning
with the Contract Date. Your Contract Anniversary is the first day immediately
after the end of an Contract Year. Each Contract Year after the first is the 12
calendar month period that begins on your Contract Anniversary. If, for example,
the Contract Date is in March, the first Contract Year will be determined from
the Contract Date but will end on the last
- ------------------------
* You specify these items on the Contract Specifications page, and may change
them, as we describe in this Prospectus.
62
<PAGE>
day of March in the following year; your Contract Anniversary is April 1 and all
Contract Years after the first will be measured from April 1.
DEATH BENEFIT DATE: If you have elected a death benefit payment option
before the Annuitant's death that remains in effect, the date on which we
receive Due Proof of Death. If your Beneficiary elects the death benefit payment
option, the later of (a) the date on which we receive the Beneficiary's election
and (b) the date on which we receive Due Proof of Death. If we do not receive
the Beneficiary's election within 60 days after we receive Due Proof of Death,
the Death Benefit Date will be the last day of the 60 day period and we will pay
the death benefit in cash.
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 assets of the Company which are allocated to a
non-unitized separate account established in conformance with New York law.
FIXED ACCOUNT VALUE: The value of that portion of your Account allocated
to the Fixed Account.
FIXED ANNUITY: An annuity with payments which do not vary as to dollar
amount.
GUARANTEE AMOUNT: Each separate allocation of Account Value to a
particular Guarantee Period (including interest earned thereon).
GUARANTEE PERIOD: The period for which a Guaranteed Interest Rate is
credited.
GUARANTEED INTEREST RATE: The rate of interest we credit on a compound
annual basis during any Guarantee Period.
INCOME PHASE: The period on and after the Annuity Commencement Date and
during the lifetime of the Annuitant during which we make annuity payments under
the Contract.
NET INVESTMENT FACTOR: An index applied to measure the investment
performance of a Sun-Account from one Valuation Period to the next. The Net
Investment Factor may be greater or less than or equal to one.
NET PURCHASE PAYMENT: The portion of a Purchase Payment which remains
after the deduction of any applicable premium tax or similar tax.
NON-QUALIFIED CONTRACT: A Contract used in connection with a retirement
plan that does not receive favorable federal income tax treatment under Sections
401, 403, 408, or 408A of the Internal Revenue Code. The Owner's interest in the
Contract must be owned by a natural person or 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 a Contract and in whose name or names the Contract is issued. The
Owner may designate a trustee or custodian of a retirement plan which meets the
requirements of Section 401, Section 408(c), Section 408(k), Section 408(p) or
Section 408A of the Internal Revenue Code to serve as legal owner of assets of a
retirement plan, but the term "Owner," as used herein, shall refer to the
organization entering into the Contract.
PAYEE: A recipient of payments under a Contract. The term includes an
Annuitant or a Beneficiary who becomes entitled to benefits upon the death of
the Annuitant.
PURCHASE PAYMENT (PAYMENT): An amount paid to the Company as consideration
for the benefits provided by a Contract.
- ------------------------
* You specify these items on the Contract Specifications page, and may change
them, as we describe in this Prospectus.
63
<PAGE>
QUALIFIED CONTRACT: A Contract used in connection with a retirement plan
which may receive favorable federal income tax treatment under Sections 401,
403, 408 or 408A of the Internal Revenue Code of 1986, as amended.
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 Account Anniversaries.
SUB-ACCOUNT: That portion of the Variable Account which invests in shares
of a specific series of the Series Fund.
VALUATION PERIOD: The period of time from one determination of Variable
Accumulation Unit or Annuity Unit values to the next subsequent determination of
these values. Value determinations are made as of the close of the New York
Stock Exchange on each day that the Exchange is open and on other Business Days.
VARIABLE ACCOUNT: Variable Account C of the Company, which is 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
Variable Account Value.
VARIABLE ACCOUNT VALUE: The value of that portion of your Account
allocated to the Variable Account.
VARIABLE ANNUITY: An annuity with payments which vary as to dollar amount
in relation to the investment performance of the Variable Account.
64
<PAGE>
APPENDIX B
CONDENSED FINANCIAL INFORMATION--ACCUMULATION UNIT VALUES
The following information should be read in conjunction with the Variable
Account's financial statements appearing elsewhere in the Statement of
Additional Information, all of which has been audited by Deloitte & Touche LLP,
independent certified public accountants.
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1996* 1997
-------------- ---------
CAPITAL APPRECIATION SERIES
<S> <C> <C>
Unit Value
Beginning of period............................................................................ $ 10.000** $ 11.2208
End of period.................................................................................. $ 11.2208 $ 13.6249
Units outstanding end of period.................................................................. 401,401 933,956
CAPITAL OPPORTUNITIES SERIES
Unit Value
Beginning of period............................................................................ -- $ 10.0000***
End of period.................................................................................. -- $ 10.8511
Units outstanding end of period.................................................................. -- 61,777
EMERGING GROWTH SERIES
Unit Value
Beginning of period............................................................................ $ 10.000** $ 10.5475
End of period.................................................................................. $ 10.5475 $ 12.6847
Units outstanding end of period.................................................................. 335,404 966,583
GLOBAL ASSET ALLOCATION SERIES
Unit Value
Beginning of period............................................................................ $ 10.0000** $ 10.6551
End of period.................................................................................. $ 10.6551 $ 11.6505
Units outstanding end of period.................................................................. 39,223 215,473
GLOBAL GOVERNMENTS SERIES
Unit Value
Beginning of period............................................................................ $ 10.0000** $ 10.2412
End of period.................................................................................. $ 10.2412 $ 10.0221
Units outstanding end of period.................................................................. 30,008 73,436
GLOBAL GROWTH SERIES
Unit Value
Beginning of period............................................................................ $ 10.0000*** $ 10.4190
End of period.................................................................................. $ 10.4190 $ 11.8491
Units outstanding end of period.................................................................. 94,134 324,362
GLOBAL TOTAL RETURN SERIES
Unit Value
Beginning of period............................................................................ $ 10.0000*** $ 10.6202
End of period.................................................................................. $ 10.6202 $ 11.9033
Units outstanding end of period.................................................................. 24,306 181,210
GOVERNMENT SECURITIES SERIES
Unit Value
Beginning of period............................................................................ $ 10.0000** $ 10.2283
End of period.................................................................................. $ 10.2283 $ 10.9695
Units outstanding end of period.................................................................. 40,062 168,798
HIGH YIELD SERIES
Unit Value
Beginning of period............................................................................ $ 10.0000** $ 10.5902
End of period.................................................................................. $ 10.5092 $ 11.8237
Units outstanding end of period.................................................................. 109,992 482,767
INTERNATIONAL GROWTH SERIES
Unit Value
Beginning of period............................................................................ $ 10.0000** $ 10.2062
End of period.................................................................................. $ 10.2062 $ 10.7213
Units outstanding end of period.................................................................. 56,408 188,749
INTERNATIONAL GROWTH AND INCOME SERIES
Unit Value
Beginning of period............................................................................ $ 10.0000** $ 10.2062
End of period.................................................................................. $ 10.2062 $ 9.3612
Units outstanding end of period.................................................................. -- 9,227
<CAPTION>
1998
---------
CAPITAL APPRECIATION SERIES
<S> <C>
Unit Value
Beginning of period............................................................................ $ 13.6249
End of period.................................................................................. $ 17.2946
Units outstanding end of period.................................................................. 1,387,198
CAPITAL OPPORTUNITIES SERIES
Unit Value
Beginning of period............................................................................ $ 10.8511
End of period.................................................................................. $ 13.5854
Units outstanding end of period.................................................................. 245,193
EMERGING GROWTH SERIES
Unit Value
Beginning of period............................................................................ $ 12.6847
End of period.................................................................................. $ 16.7445
Units outstanding end of period.................................................................. 1,482,470
GLOBAL ASSET ALLOCATION SERIES
Unit Value
Beginning of period............................................................................ $ 11.6505
End of period.................................................................................. $ 12.2289
Units outstanding end of period.................................................................. 267,873
GLOBAL GOVERNMENTS SERIES
Unit Value
Beginning of period............................................................................ $ 10.0221
End of period.................................................................................. $ 11.4123
Units outstanding end of period.................................................................. 90,226
GLOBAL GROWTH SERIES
Unit Value
Beginning of period............................................................................ $ 11.8491
End of period.................................................................................. $ 13.3854
Units outstanding end of period.................................................................. 402,319
GLOBAL TOTAL RETURN SERIES
Unit Value
Beginning of period............................................................................ $ 11.9033
End of period.................................................................................. $ 13.8923
Units outstanding end of period.................................................................. 334,013
GOVERNMENT SECURITIES SERIES
Unit Value
Beginning of period............................................................................ $ 10.9695
End of period.................................................................................. $ 11.7627
Units outstanding end of period.................................................................. 483,528
HIGH YIELD SERIES
Unit Value
Beginning of period............................................................................ $ 11.8237
End of period.................................................................................. $ 11.7316
Units outstanding end of period.................................................................. 869,291
INTERNATIONAL GROWTH SERIES
Unit Value
Beginning of period............................................................................ $ 10.7213
End of period.................................................................................. $ 12.8587
Units outstanding end of period.................................................................. 272,201
INTERNATIONAL GROWTH AND INCOME SERIES
Unit Value
Beginning of period............................................................................ $ 9.3612
End of period.................................................................................. $ 9.4088
Units outstanding end of period.................................................................. 41,872
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1996* 1997
-------------- ---------
MANAGED SECTORS SERIES
<S> <C> <C>
Unit Value
Beginning of period............................................................................ $ 10.0000** $ 11.3497
End of period.................................................................................. $ 11.3497 $ 14.0620
Units outstanding end of period.................................................................. 92,171 251,868
MASSACHUSETTS INVESTORS TRUST SERIES
Unit Value
Beginning of period............................................................................ $ 10.000** $ 11.2287
End of period.................................................................................. $ 11.2287 $ 14.6125
Units outstanding end of period.................................................................. 347,210 1,722,218
MFS/FOREIGN & COLONIAL EMERGING MARKETS EQUITY SERIES
Unit Value
Beginning of period............................................................................ -- $ 10.0000***
End of period.................................................................................. -- $ 8.7203
Units outstanding end of period.................................................................. -- 41,861
MONEY MARKET SERIES
Unit Value
Beginning of period............................................................................ $ 10.0000** $ 10.1193
End of period.................................................................................. $ 10.1193 $ 10.4857
Units outstanding end of period.................................................................. 244,386 395,655
RESEARCH SERIES
Unit Value
Beginning of period............................................................................ $ 10.0000** $ 11.1263
End of period.................................................................................. $ 11.1263 $ 13.2588
Units outstanding end of period.................................................................. 386,810 1,478,012
RESEARCH GROWTH AND INCOME SERIES
Unit Value
Beginning of period............................................................................ -- $ 10.0000***
End of period.................................................................................. -- $ 10.7234
Units outstanding end of period.................................................................. -- 59,221
TOTAL RETURN SERIES
Unit Value
Beginning of period............................................................................ $ 10.0000** $ 10.7617
End of period.................................................................................. $ 10.7617 $ 12.9446
Units outstanding end of period.................................................................. 321,897 1,288,455
UTILITIES SERIES
Unit Value
Beginning of period............................................................................ $ 10.0000** $ 11.1898
End of period.................................................................................. $ 11.1898 $ 14.6470
Units outstanding end of period.................................................................. 45,474 187,310
<CAPTION>
1998
---------
MANAGED SECTORS SERIES
<S> <C>
Unit Value
Beginning of period............................................................................ $ 14.0620
End of period.................................................................................. $ 15.5700
Units outstanding end of period.................................................................. 401,019
MASSACHUSETTS INVESTORS TRUST SERIES
Unit Value
Beginning of period............................................................................ $ 14.6125
End of period.................................................................................. $ 17.8458
Units outstanding end of period.................................................................. 2,936,804
MFS/FOREIGN & COLONIAL EMERGING MARKETS EQUITY SERIES
Unit Value
Beginning of period............................................................................ $ 8.7203
End of period.................................................................................. $ 6.0241
Units outstanding end of period.................................................................. 23,240
MONEY MARKET SERIES
Unit Value
Beginning of period............................................................................ $ 10.4857
End of period.................................................................................. $ 10.8609
Units outstanding end of period.................................................................. 921,204
RESEARCH SERIES
Unit Value
Beginning of period............................................................................ $ 13.2588
End of period.................................................................................. $ 16.1649
Units outstanding end of period.................................................................. 2,330,245
RESEARCH GROWTH AND INCOME SERIES
Unit Value
Beginning of period............................................................................ $ 10.7234
End of period.................................................................................. $ 12.9195
Units outstanding end of period.................................................................. 222,849
TOTAL RETURN SERIES
Unit Value
Beginning of period............................................................................ $ 12.9446
End of period.................................................................................. $ 14.2649
Units outstanding end of period.................................................................. 2,154,305
UTILITIES SERIES
Unit Value
Beginning of period............................................................................ $ 14.6470
End of period.................................................................................. $ 16.9849
Units outstanding end of period.................................................................. 529,135
</TABLE>
* From January 1, 1996 to December 31, 1996.
** Unit value on the date of commencement of operations of the respective
Sub-Account.
66
<PAGE>
APPENDIX C
WITHDRAWALS, WITHDRAWAL CHARGES AND THE MARKET VALUE ADJUSTMENT
PART 1: VARIABLE ACCOUNT (THE MARKET VALUE ADJUSTMENT DOES NOT APPLY TO THE
VARIABLE ACCOUNT)
WITHDRAWAL CHARGE CALCULATION:
FULL WITHDRAWAL:
Assume a Purchase Payment of $40,000 is made on the Contract 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 withdrawal of your Account, based on hypothetical Account Values.
<TABLE>
<CAPTION>
HYPOTHETICAL FREE NEW WITHDRAWAL WITHDRAWAL
ACCOUNT ACCOUNT WITHDRAWAL PAYMENTS CHARGE CHARGE
YEAR VALUE AMOUNT WITHDRAWN PERCENTAGE AMOUNT
--------------- ------------ ----------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
(a) 1 $ 41,000 $ 4,000 $ 37,000 6.00% $ 2,220
(b) 3 $ 52,000 $ 12,000 $ 40,000 5.00% $ 2,000
(c) 7 $ 80,000 $ 28,000 $ 40,000 3.00% $ 1,200
(d) 9 $ 98,000 $ 68,000 0 0.00% 0
</TABLE>
(a) The free withdrawal amount in any Account Year is equal to (1) the Annual
Withdrawal Allowance for that year (i.e., 10% of all Purchase Payments made
in the last seven Account Years ("New Payments")); plus (2) any unused
Annual Withdrawal Allowances from previous years; plus (3) any Purchase
Payments made before the last seven Account Years ("Old Payments") not
previously withdrawn. In Account Year 1, the free withdrawal amount is
$4,000 (the Annual Withdrawal Allowance for that year) because there are no
unused Annual Withdrawal Allowances from previous years and no Old Payments.
The $41,000 full withdrawal is attributed first to the $4,000 free
withdrawal amount. The remaining $37,000 is withdrawn from the Purchase
Payment made in Account Year 1 and is subject to the withdrawal charge.
(b) In Account Year 3, the free withdrawal amount is $12,000 (the $4,000 Annual
Withdrawal Allowance for the current year plus the unused $4,000 Annual
Withdrawal Allowances for each of Account Years 1 and 2). The $52,000 full
withdrawal is attributed first to the free withdrawal amount and the
remaining $40,000 is withdrawn from the Purchase Payment made in Account
Year 1.
(c) In Account Year 7, the free withdrawal amount is $28,000 (the $4,000 Annual
Withdrawal Allowance for the current Account Year plus the unused Annual
Withdrawal Allowance of $4,000 for each of Account Years 1 through 6). The
$80,000 full withdrawal is attributed first to the free withdrawal amount.
The next $40,000 is withdrawn from the Purchase Payment made in Account Year
1 and is subject to the withdrawal charge. The remaining $12,000 exceeds the
total of the free withdrawal amount plus all New Payments not previously
withdrawn, so it is not subject to the withdrawal charge.
(d) In Account Year 9, the free withdrawal amount is $68,000, calculated as
follows. There are no Annual Withdrawal Allowances for Account Years 8 or 9
because there are no New Payments in those years. The $40,000 Purchase
Payment made in Account Year 1 is now an Old Payment that constitutes a
portion of the free withdrawal amount. In addition, the unused Annual
Withdrawal Allowances of $4,000 for each of Account Years 1 through 7 are
carried forward and available for use in Account Year 9. The $98,000 full
withdrawal is attributed first to the free withdrawal amount. Because the
remaining $30,000 is not withdrawn from New Payments, this part of the
withdrawal also will not be subject to the withdrawal charge.
PARTIAL WITHDRAWAL:
Assume a single Purchase Payment of $40,000 is made on the Contract Date,
no additional Purchase Payments are made, no partial withdrawals have been taken
prior to the fifth Account Year,
67
<PAGE>
and there are a series of three partial withdrawals made during the fifth
Account Year of $9,000, $12,000, and $15,000.
<TABLE>
<CAPTION>
HYPOTHETICAL PARTIAL FREE NEW WITHDRAWAL WITHDRAWAL
ACCOUNT WITHDRAWAL WITHDRAWAL PAYMENTS CHARGE CHARGE
VALUE AMOUNT AMOUNT WITHDRAWN 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>
(a) In the fifth Account Year, the free withdrawal amount is equal to $20,000
(the $4,000 Annual Withdrawal Allowance for the current year, plus the
unused $4,000 for each of the Account Years 1 through 4). The partial
withdrawal amount ($9,000) is less than the free withdrawal amount so no New
Payments are withdrawn and no withdrawal charge applies.
(b) Since a partial withdrawal of $9,000 was taken, the remaining free
withdrawal amount is equal to $11,000. The $12,000 partial withdrawal will
first be applied against the $11,000 free withdrawal amount. The remaining
$1,000 will be withdrawn from the $40,000 New Payment, incurring a
withdrawal charge of $40.
(c) The free withdrawal amount is zero since the previous partial withdrawals
have already used the free withdrawal amount. The entire partial withdrawal
amount will result in New Payments being withdrawn and will incur a
withdrawal charge.
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 (I).
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>
68
<PAGE>
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
$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.
69
<PAGE>
<TABLE>
<S> <C>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
ANNUITY SERVICE MAILING ADDRESS:
80 BROAD STREET
NEW YORK, NEW YORK 10004
TELEPHONE:
Toll Free (800) 447-7569
In New York (212) 943-3855
GENERAL DISTRIBUTOR
Clarendon Insurance Agency, Inc.
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
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
GOLD-NY-1 5/99
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS.
Item 14. Other Expenses of Issuance and Distribution.
The expenses incurred by the registrant in connection with the
issuance and distribution of the securities registered hereby, other than
underwriting disounts and commissions, are as follows*:
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee................... $27,800
Printing and Engraving................. $ 8,000
Accounting Fees and Expenses........... $10,000
Legal Fees and Expenses................ $10,000
-------
$55,800
</TABLE>
- ----------------
* Except for the SEC Registration Fee, all expenses are estimates.
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
Exhibit
Number Description Method of Filing
- ------- ----------- ----------------
1 Underwriting Agreement *
4 Combination Fixed/
Variable Annuity Contract *
5 Opinion re: Legality Filed herewith
23 Consent of Independent
Certified Public
Accountants Filed herewith
24 Powers of Attorney Filed herewith
* Incorporated by reference from Post-Effective Amendment No. 2 to the
Registration Statement of the Registrant on Form N-4, 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 Hills, Commonwealth of Massachusetts, on
the 28th day of April, 1999.
Sun Life Insurance and Annuity
Company of New York
(Registrant)
By: /s/ C. JAMES PRIEUR
-------------------------
C. James Prieur
President
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
--------- ----- ----
President and
Director
(Principal
/s/ C. JAMES PRIEUR Executive Officer) April 28, 1999
- ----------------------------
C. James Prieur
Vice President,
Controller and
Actuary (Principal
Financial &
/s/ ROBERT P. VROLYK Accounting Officer) April 28, 1999
- ------------------------------
Robert P. Vrolyk
* /s/ DONALD A. STEWART Chairman and April 28, 1998
- ------------------------------ Director
Donald A. Stewart
* /s/ RICHARD B. BAILEY Director April 28, 1999
- ------------------------------
Richard B. Bailey
- -------------------------
* By Edward M. Shea pursuant to Power of Attorney filed herewith.
<PAGE>
Signature Title Date
--------- ----- ----
* /s/ M. COLYER CRUM Director April 28, 1999
- ------------------------------
M. Colyer Crum
* /s/ DAVID D. HORN Director April 28, 1999
- ------------------------------
David D. Horn
* /s/ JOHN G. IRELAND Director April 28, 1999
- ------------------------------
John G. Ireland
* /s/ DONALD B. HENDERSON, Jr. Director April 28, 1999
- ------------------------------
Donald B. Henderson, Jr.
* /s/ JOHN S. LANE Director April 28, 1999
- ------------------------------
John S. Lane
* /s/ ANGUS A. MacNAUGHTON Director April 28, 1999
- ------------------------------
Angus A. MacNaughton
* /s/ JOHN D. McNEIL
- ------------------------------ Director April 28, 1999
John D. McNeil
* /s/ PETER R. O'FLINN Director April 28, 1999
- ------------------------------
Peter R. O'Flinn
* /s/ FIORAVANTE G. PERROTTA Director April 28, 1999
- ------------------------------
Fioravante G. Perrotta
* /s/ RALPH F. PETERS Director April 28, 1999
- ------------------------------
Ralph F. Peters
* /s/ S. CAESAR RABOY
- ------------------------------ Director April 28, 1999
S. Caesar Raboy
* /s/ FREDERICK B. WHITTEMORE Director April 28, 1999
- ------------------------------
Frederick B. Whittemore
- ------------------------
* By Edward M. Shea pursuant to Power of Attorney filed herewith.
<PAGE>
EXHIBIT INDEX
Exhibit
Number
- -------
5 Opinion re: Legality
23 Independent Auditors' Consent
24 Powers of Attorney
<PAGE>
Sun Life Insurance and Annuity Company of New York
80 Broad Street
New York, N.Y. 10004
Re: Registration Statement on Form S-2
Gentlemen and Ladies:
I have acted as counsel to Sun Life Insurance and Annuity Company of New
York (the "Company") in connection with the above-captioned registration
statement (the "Registration Statement") with respect to the registration of
certain annuity contracts (the "Contracts") with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. In giving this
opinion, I have examined the Registration Statement and have examined such
other documents and perceived such questions of Delaware law as I considered
necessary and appropriate. Based on such examination and review it is my
opinion that:
1. The Company is a corporation duly organized and validly existing
under the laws of the state of New York.
2. The Contracts when issued in the manner described in the
Registration Statement will be validly issued and will represent binding
obligations of the Company and the Account under New York law.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to reference this opinion under the caption "Legal
Matters" in the prospectus constituting a part of the Registration Statement.
Very truly yours,
/s/ EDWARD M. SHEA, ESQ.
-------------------------
Edward M. Shea, Esq.
April 28, 1999
<PAGE>
Exhibit 23
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
4, 1999 (except for Note 18 for which the date is March 25, 1999)
accompanying the statutory 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
report dated February 4, 1999 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, 1998.
We also consent to the references to us under the headings "Condensed
Financial Information--Accumulation Unit Values" and "Accountants" in such
Prospectus.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 28, 1999
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Donald B. Henderson, Jr., whose
signature appears below, constitutes and appoints Edward M. Shea, Ellen B.
King, Peter F. Demuth and C. James Prieur, 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/ DONALD B. HENDERSON, JR.
---------------------------
Donald B. Henderson, Jr.
February 4, 1999
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Ralph F. Peters, whose signature
appears below, constitutes and appoints Edward M. Shea, Ellen B. King, Peter
F. Demuth and C. James Prieur, 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/ RALPH F. PETERS
---------------------------
Ralph F. Peters
February 4, 1999
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Peter R. O'Flinn, whose signature
appears below, constitutes and appoints Edward M. Shea, Ellen B. King, Peter
F. Demuth and C. James Prieur, 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/ PETER R. O'FLINN
---------------------------
Peter R. O'Flinn
February 4, 1999
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Frederick B. Whittemore, whose
signature appears below, constitutes and appoints Edward M. Shea, Ellen B.
King, Peter F. Demuth and C. James Prieur, 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/ FREDERICK B. WHITTEMORE
---------------------------
Frederick B. Whittemore
February 4, 1999
<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 Edward M. Shea, Ellen B. King, Peter
F. Demuth and C. James Prieur, 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
February 4, 1999
<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 Edward M. Shea, Ellen B. King, Peter
F. Demuth and C. James Prieur, 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
February 4, 1999
<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 Edward M. Shea, Ellen B. King, Peter
F. Demuth and C. James Prieur, 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
February 4, 1999
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Fioravante G. Perrotta, whose
signature appears below, constitutes and appoints Edward M. Shea, Ellen B.
King, Peter F. Demuth and C. James Prieur, 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/ FIORAVANTE G. PERROTTA
---------------------------
Fioravante G. Perrotta
February 4, 1999
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Donald A. Stewart, whose signature
appears below, constitutes and appoints Edward M. Shea, Ellen B. King, Peter
F. Demuth and C. James Prieur, 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/ DONALD A. STEWART
---------------------------
Donald A. Stewart
February 4, 1999
<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 Edward M. Shea, Ellen B.
King, Peter F. Demuth and C. James Prieur, 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
February 4, 1999
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that S. Caesar Raboy, whose signature
appears below, constitutes and appoints Edward M. Shea, Ellen B. King, Peter
F. Demuth and C. James Prieur, 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/ S. CAESAR RABOY
---------------------------
S. Caesar Raboy
February 4, 1999
<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 Edward M. Shea, Ellen B. King, Peter
F. Demuth and C. James Prieur, 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
February 4, 1999
<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 Edward M. Shea, Ellen B. King, Peter
F. Demuth and C. James Prieur, 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
February 4, 1999
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that C. James Prieur, whose signature
appears below, constitutes and appoints Edward M. Shea, Ellen B. King, Peter
F. Demuth and C. James Prieur, 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/ C. JAMES PRIEUR
---------------------------
C. James Prieur
February 4, 1999
