<PAGE>
As filed with the Securities and Exchange Commission on March 29, 2000
REGISTRATION NO. 333-77281
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 1
TO
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.)
142 EAST 42ND STREET, SUITE 1900, NEW YORK, NEW YORK 10017
(212) 983-6352
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
COPIES TO:
EDWARD M. SHEA, ASSISTANT VICE PRESIDENT JOAN E. BOROS, ESQ.
AND SENIOR COUNSEL JORDAN BURT BOROS CICCHETTI
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) BERENSON & JOHNSON LLP
RETIREMENT PRODUCTS AND SERVICES 1025 THOMAS JEFFERSON STREET, N.W.
ONE COPLEY PLACE SUITE 400 EAST
BOSTON, MASSACHUSETTS 02116 WASHINGTON, D.C. 20007
(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. / /
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS
Attached hereto and made a part hereof is the Prospectus dated April 17, 2000
for each of the following:
Regatta Gold-NY Variable and Fixed Annuity
Futurity-NY Variable and Fixed Annuity
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
APRIL 17, 2000
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
"Funds") 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 Funds 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 as many as 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.
<PAGE>
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 may waive these limits. 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.
4. ALLOCATION OPTIONS
You can allocate your money among Sub-Accounts investing in the following
Funds of the MFS/Sun Life Series Trust:
<TABLE>
<S> <C>
Bond Series International Growth and Income Series
Capital Appreciation Series Managed Sectors Series
Capital Opportunities Series Massachusetts Investors Growth Stock Series
Emerging Growth Series Massachusetts Investors Trust Series
Emerging Markets Equity Series Money Market Series
Equity Income Series New Discovery Series
Global Asset Allocation Series Research Series
Global Governments Series Research Growth and Income Series
Global Growth Series Research International Series
Global Total Return Series Strategic Income Series
Government Securities Series Total Return Series
High Yield Series Utilities Series
International Growth Series
</TABLE>
Market conditions will determine the value of an investment in any Fund.
Each Fund 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 Contract. 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. Each payment begins a new 7-year period and moves down a declining
surrender charge scale at each Contract Anniversary. Payments received during
the current Contract Year will be charged 6% if withdrawn. On your next
scheduled Contract Anniversary, that payment, along with any other payments made
during that Contract Year, will be considered to be in their second Contract
Year and will have a 5% withdrawal charge. On the next Contract Anniversary,
these payments will move into their third Contract Year and will continue to
have a withdrawal charge of 5%, if withdrawn. The
2
<PAGE>
withdrawal charge decreases according to the number of Contract Years the
purchase payment has been in your Account. The declining scale is as follows:
<TABLE>
<CAPTION>
NUMBER OF YEARS
PURCHASE PAYMENT
HAS BEEN IN
YOUR CONTRACT 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
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 Contracts, there are
charges (which include management fees and operating expenses) imposed by each
Fund, which range from 0.57% to 1.60% of the average net assets of the Fund,
depending upon which Funds you have selected. The investment adviser has agreed
to waive or reimburse a portion of expenses for some of the Funds; without this
agreement, Fund expenses could be higher. Some of these arrangements may be
terminated at any time.
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 expense reimbursement and/or fee waiver) 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.
3
<PAGE>
"Total Annual Insurance Charges" of 1.50% as shown in the table below
include the insurance charges of 1.40% of your daily net assets (1.25% for
mortality and expense risks and 0.15% for administrative expenses), 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 FUND ANNUAL AT END
SUB-ACCOUNT CHARGES EXPENSES EXPENSES 1 YEAR 10 YEARS
- ----------- ---------------- ------------ ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Bond Series 1.50% 0.72% 2.22% $78 $255
Capital Appreciation Series 1.50% 0.76% 2.26% $79 $260
Capital Opportunities Series 1.50% 0.84% 2.34% $79 $268
Emerging Growth Series 1.50% 0.75% 2.25% $78 $258
Emerging Markets Equity Series 1.50% 1.60% 3.10% $86 $341
Equity Income Series 1.50% 1.01% 2.51% $81 $285
Global Asset Allocation Series 1.50% 0.89% 2.39% $80 $273
Global Governments Series 1.50% 0.90% 2.40% $80 $274
Global Growth Series 1.50% 1.01% 2.51% $81 $285
Global Total Return Series 1.50% 0.89% 2.39% $80 $273
Government Securities Series 1.50% 0.61% 2.11% $77 $244
High Yield Series 1.50% 0.83% 2.33% $79 $265
International Growth Series 1.50% 1.23% 2.73% $83 $306
International Growth and Income Series 1.50% 1.16% 2.66% $82 $299
Managed Sectors Series 1.50% 0.79% 2.29% $79 $263
Massachusetts Investors Growth Stock Series 1.50% 0.83% 2.33% $79 $267
Massachusetts Investors Trust Series 1.50% 0.59% 2.09% $77 $242
Money Market Series 1.50% 0.57% 2.07% $77 $240
New Discovery Series 1.50% 1.06% 2.56% $81 $290
Research Series 1.50% 0.75% 2.25% $78 $258
Research Growth and Income Series 1.50% 0.86% 2.36% $79 $270
Research International Series 1.50% 1.50% 3.00% $86 $332
Strategic Income Series 1.50% 1.08% 2.58% $82 $291
Total Return Series 1.50% 0.69% 2.19% $78 $252
Utilities Series 1.50% 0.81% 2.31% $79 $265
</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 or transfer 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.
4
<PAGE>
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 Funds you
choose.
The following chart shows total returns for investment in the Sub-Accounts
where the corresponding Fund has at least one full calendar year of operations.
The returns reflect all charges and deductions of the Funds and Sub-Accounts and
deduction of the annual Account Fee. They do not 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 1999 1998 1997 1996 1995 1994
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Bond Series (1.80)% -- -- -- -- --
Capital Appreciation Series 30.79% 26.83% 21.33% 19.70% 32.51% (5.03)%
Capital Opportunities Series 45.58% 25.10% 25.73% -- -- --
Emerging Growth Series 73.38% 31.91% 20.16% 15.38% -- --
Emerging Markets Equity Series 50.38% (31.02)% 8.78% -- -- --
Equity Income Series (1.19)% -- -- -- -- --
Global Asset Allocation Series 16.90% 4.86% 9.24% 14.28% 19.85% --
Global Governments Series (6.51)% 13.77% (2.24)% 3.11% 14.00% (5.91)%
Global Growth Series 65.00% 12.87% 13.63% 11.44% 14.29% 1.40%
Global Total Return Series 6.93% 16.61% 11.98% 12.58% 16.19% --
Government Securities Series (3.29)% 7.13% 7.15% 0.11% 15.92% (3.61)%
High Yield Series 5.36% (0.88)% 11.55% 10.46% 15.32% (3.68)%
International Growth Series 33.44% 0.41% (3.09)% -- -- --
International Growth and Income Series 15.65% 19.84% 4.95% 3.33% -- --
Managed Sectors Series 83.04% 10.62% 23.80% 15.86% 30.34% (3.38)%
Massachusetts Investors Growth Stock Series 25.68% -- -- -- -- --
Massachusetts Investors Trust Series 5.71% 22.03% 30.04% 23.57% 35.44% (2.57)%
Money Market Series 3.23% 3.48% 3.52% 3.38% 3.90% 2.17%
New Discovery Series 60.01% -- -- -- -- --
Research Series 22.43% 21.82% 19.07% 22.00% 35.44% --
Research Growth and Income Series 6.66% 20.38% -- -- -- --
Research International Series 33.89% -- -- -- -- --
Strategic Income Series 1.39% -- -- -- -- --
Total Return Series 1.40% 10.10% 20.18% 12.38% 24.93% (3.71)%
Utilities Series 29.44% 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 highest 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.
5
<PAGE>
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 investment 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 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 do
not wish to risk a decrease in the value of your investment.
CONFIRMATIONS AND QUARTERLY STATEMENTS. You will receive a confirmation of
each transaction within your Contract, except for those programs which are a
part of an automated program such as Dollar-Cost Averaging, Asset Allocation,
Systematic Withdrawal, and/or Portfolio Rebalancing. 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 Contract 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 -- This program rebalances your Account based on the
terms of the program. Different asset allocation models may be available over
the lifetime of the Contract; however, only one program can be in effect at any
one time.
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
P.O. BOX 9141
BOSTON, MASSACHUSETTS 02117
TEL: TOLL FREE (800) 447-7569
6
<PAGE>
PROSPECTUS
APRIL 17, 2000
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 International Growth and Income Series
Capital Appreciation Series Managed Sectors Series
Capital Opportunities Series Massachusetts Investors Growth Stock Series
Emerging Growth Series Massachusetts Investors Trust Series
Emerging Markets Equity Series Money Market Series
Equity Income Series New Discovery Series
Global Asset Allocation Series Research Series
Global Governments Series Research Growth and Income Series
Global Growth Series Research International Series
Global Total Return Series Strategic Income Series
Government Securities Series Total Return Series
High Yield Series Utilities Series
International Growth 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 CONTRACTS AND THE SERIES FUND.
We have filed a Statement of Additional Information dated April 17, 2000
(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 61 of this Prospectus. You may obtain a copy without charge by
writing to us at the address shown below (which we sometimes refer to as our
"Service Address") or by telephoning (800) 447-7569. In addition, the SEC
maintains a website (http://www.sec.gov) that contains the SAI, 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
SERVICE ADDRESS:
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
P.O. BOX 9141
BOSTON MASSACHUSETTS 02117
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Special Terms 4
Expense Summary 4
Summary of Contract Expenses 4
Underlying Fund Annual Expenses 5
Examples 6
Condensed Financial Information 7
The Annuity Contract 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 Funds 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 12
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 17
Cash Withdrawals 17
Withdrawal Charge 18
Market Value Adjustment 20
Contract Charges 21
Account Fee 21
Administrative Expense Charge 21
Mortality and Expense Risk Charge 21
Premium Taxes 21
Fund Expenses 22
Death Benefit 22
Amount of Death Benefit 22
Method of Paying Death Benefit 23
Selection and Change of Beneficiary 23
Payment of Death Benefit 23
Due Proof of Death 23
The Income Phase -- Annuity Provisions 23
Selection of the Annuitant or Co-Annuitant 24
Selection of the Annuity Commencement Date 24
Annuity Options 24
Selection of Annuity Option 25
Amount of Annuity Payments 26
Exchange of Variable Annuity Units 27
Account Fee 27
Annuity Payment Rates 27
Annuity Options as Method of Payment for Death Benefit 27
Other Contract Provisions 27
Exercise of Contract Rights 27
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Change of Ownership 28
Death of Owner 28
Voting of Fund Shares 29
Periodic Reports 29
Substitution of Securities 30
Change in Operation of Variable Account 30
Splitting Units 30
Modification 30
Right to Return 30
Tax Considerations 31
Deductibility of Purchase Payments 31
Pre-Distribution Taxation of Contracts 31
Distributions and Withdrawals from Non-Qualified
Contracts 31
Distribution and Withdrawals from Qualified Contracts 32
Withholding 32
Investment Diversification and Control 32
Tax Treatment of the Company and the Variable Account 32
Qualified Retirement Plans 33
Pension and Profit-Sharing Plans 33
Tax-Sheltered Annuities 33
Individual Retirement Accounts 33
Roth IRAs 34
Administration of the Contracts 34
Distribution of the Contracts 34
Performance Information 34
Available Information 36
Incorporation of Certain Documents by Reference 36
Additional Information About the Company 36
Business of the Company 36
Selected Financial Data 37
Management's Discussion and Analysis of Financial
Condition and Results of Operations 37
Quantitative and Qualitative Disclosure About Market
Risk 38
Reinsurance 40
Reserves 40
Investments 40
Competition 40
Employees 40
Properties 40
State Regulation 41
Legal Proceedings 41
Accountants 41
Financial Statements 41
Table of Contents of Statement of Additional Information 61
Appendix A -- Glossary 63
Appendix B -- Condensed Financial Information --
Accumulation Unit Values 66
Appendix C -- Withdrawals, Withdrawal Charges and the Market
Value Adjustment 69
</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 Fund. The table should be considered
together with the narrative provided under the heading "Contract Charges" in
this Prospectus, and with the Funds' prospectus(es). 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)............................................ $ 15
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) Currently, no fees are imposed upon transfers; however, Market Value
Adjustment may be imposed on amounts transferred from or within the Fixed
Account.
4
<PAGE>
UNDERLYING FUND ANNUAL EXPENSES (1)
(AS A PERCENTAGE OF FUND NET ASSETS)
<TABLE>
<CAPTION>
OTHER TOTAL FUND
MANAGEMENT EXPENSES (2) EXPENSES
FUND FEES (AFTER REIMBURSEMENT) (AFTER REIMBURSEMENT)
- ----------------------------------------- ---------- --------------------- ---------------------
<S> <C> <C> <C>
Bond Series.............................. 0.60% 0.12% 0.72%
Capital Appreciation Series.............. 0.71% 0.05% 0.76%
Capital Opportunities Series............. 0.75% 0.09% 0.84%
Emerging Growth Series................... 0.70% 0.05% 0.75%
Emerging Markets Equity Series........... 1.25% 0.35% 1.60%
Equity Income Series..................... 0.75% 0.26% 1.01%
Global Asset Allocation Series........... 0.75% 0.14% 0.89%
Global Governments Series................ 0.75% 0.15% 0.90%
Global Growth Series..................... 0.90% 0.11% 1.01%
Global Total Return Series............... 0.75% 0.14% 0.89%
Government Securities Series............. 0.55% 0.06% 0.61%
High Yield Series........................ 0.75% 0.08% 0.83%
International Growth Series.............. 0.98% 0.25% 1.23%
International Growth and Income Series... 0.98% 0.18% 1.16%
Managed Sectors Series................... 0.73% 0.06% 0.79%
Massachusetts Investors Growth Stock
Series.................................. 0.75% 0.08% 0.83%
Massachusetts Investors Trust Series..... 0.55% 0.04% 0.59%
Money Market Series...................... 0.50% 0.07% 0.57%
New Discovery Series..................... 0.90% 0.16% 1.06%
Research Series.......................... 0.70% 0.05% 0.75%
Research Growth and Income Series........ 0.75% 0.11% 0.86%
Research International Series............ 1.00% 0.50% 1.50%
Strategic Income Series.................. 0.75% 0.33% 1.08%
Total Return Series...................... 0.65% 0.04% 0.69%
Utilities Series......................... 0.75% 0.06% 0.81%
</TABLE>
- ------------------------
(1) The information relating to Fund expenses was provided by the Funds and we
have not independently verified it. You should consult the Fund
prospectus(es) for more information about Fund expenses.
(2) Each Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund 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 Fund's expenses). Any such fee reductions are not
reflected under "Other Expenses" in the table. Had these fees been taken
into account, "Total Fund Expenses" for certain of the Funds would be as
follows:
<TABLE>
<S> <C>
Bond Series............................................. 0.71%
Capital Appreciation Series............................. 0.75%
Capital Opportunities Series............................ 0.83%
Equity Income Series.................................... 1.00%
Global Asset Allocation Series.......................... 0.88%
Global Growth Series.................................... 1.00%
High Yield Series....................................... 0.82%
New Discovery Series.................................... 1.05%
Research Growth and Income Series....................... 0.85%
Strategic Income Series................................. 1.03%
Utilities Series........................................ 0.80%
</TABLE>
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 an average
contract size of $30,000 and a 5% annual return:
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Bond Series................................................. $78 $109 $145 $255
Capital Appreciation Series................................. $79 $110 $147 $260
Capital Opportunities Series................................ $79 $112 $151 $268
Emerging Growth Series...................................... $78 $110 $146 $258
Emerging Markets Equity Series.............................. $86 $134 $186 $341
Equity Income Series........................................ $81 $117 $159 $285
Global Asset Allocation Series.............................. $80 $114 $153 $273
Global Governments Series................................... $80 $114 $154 $274
Global Growth Series........................................ $81 $117 $159 $285
Global Total Return Series.................................. $80 $114 $153 $273
Government Securities Series................................ $77 $106 $140 $244
High Yield Series........................................... $79 $111 $149 $265
International Growth Series................................. $83 $123 $169 $306
International Growth and Income Series...................... $82 $121 $166 $299
Managed Sectors Series...................................... $79 $111 $148 $263
Massachusetts Investors Growth Stock Series................. $79 $112 $150 $267
Massachusetts Investors Trust Series........................ $77 $105 $139 $242
Money Market Series......................................... $77 $104 $138 $240
New Discovery Series........................................ $81 $118 $161 $290
Research Series............................................. $78 $110 $146 $258
Research Growth and Income Series........................... $79 $113 $152 $270
Research International Series............................... $86 $131 $182 $332
Strategic Income Series..................................... $82 $119 $162 $291
Total Return Series......................................... $78 $108 $143 $252
Utilities Series............................................ $79 $111 $149 $265
</TABLE>
If you do NOT surrender your Contract, or if you annuitize at the end of
the applicable time period, you would pay the following expenses on a $1,000
investment, assuming an average contract size of $30,000 and a 5% annual return:
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Bond Series................................................. $23 $69 $119 $255
Capital Appreciation Series................................. $23 $71 $121 $260
Capital Opportunities Series................................ $24 $73 $125 $268
Emerging Growth Series...................................... $23 $70 $120 $258
Emerging Markets Equity Series.............................. $31 $96 $163 $341
Equity Income Series........................................ $25 $78 $134 $285
Global Asset Allocation Series.............................. $24 $75 $128 $273
Global Governments Series................................... $24 $75 $128 $274
Global Growth Series........................................ $25 $78 $134 $285
Global Total Return Series.................................. $24 $75 $128 $273
Government Securities Series................................ $21 $66 $113 $244
High Yield Series........................................... $23 $72 $124 $265
International Growth Series................................. $28 $85 $144 $306
International Growth and Income Series...................... $27 $83 $141 $299
Managed Sectors Series...................................... $23 $72 $123 $263
Massachusetts Investors Growth Stock Series................. $24 $73 $125 $267
Massachusetts Investors Trust Series........................ $21 $65 $112 $242
Money Market Series......................................... $21 $65 $111 $240
New Discovery Series........................................ $26 $80 $136 $290
Research Series............................................. $23 $70 $120 $258
Research Growth and Income Series........................... $24 $74 $126 $270
Research International Series............................... $30 $93 $158 $332
Strategic Income Series..................................... $26 $80 $137 $291
Total Return Series......................................... $22 $69 $117 $252
Utilities Series............................................ $23 $72 $124 $265
</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 as
Appendix B to this Prospectus.
THE ANNUITY CONTRACT
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
Contract 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 Contract,
we establish an Account for each Owner, which we will refer to as "your"
Account.
Your 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. Your Contract provides tax deferral, so that you do not
pay taxes on your earnings under your 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 Account 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 Contract is 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 Contract is also designed so that it may be used in connection
with certain non-tax-qualified retirement plans, such as payroll savings plans
and such other groups (trusteed or nontrusteed) as may be eligible under
applicable law. 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
Service Address set forth on the first page of this Prospectus. For all
telephone communications, you must call (800) 447-7569.
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 our Service 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 is
located at 122 East 42nd Street, Suite 1900, New York, New York 10017.
We are an indirect wholly-owned subsidiary of Sun Life Assurance Company
of Canada ("Sun Life (Canada)"). Sun Life (Canada) completed its demutualization
on March 22, 2000. As a result of the demutualization, a new holding company,
Sun Life Financial Services of Canada Inc. ("Sun Life Financial"), is now the
ultimate parent of Sun Life (Canada) and the Company. Sun Life Financial, a
corporation organized in Canada, is a reporting company under the Securities
Exchange Act of 1934 with common shares listed on the Toronto, New York, London,
and Manila stock exchanges.
THE VARIABLE ACCOUNT
We established the Variable Account as a separate account on October 18,
1985, pursuant to a resolution of our Board of Directors. The Variable Account
funds the Contract and various other variable annuity and variable life
insurance product contracts which are offered by the Company and other
affiliated and affiliated offerors. These other products may have features,
benefits and charges which are different from those under the Contract.
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. All amounts allocated to the Variable Account will be used to
purchase Fund shares as designated by you at their net asset value. Any and all
distributions made by the Funds 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 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 Fund shares at all times.
VARIABLE ACCOUNT OPTIONS:
THE FUNDS
The Funds are series of the MFS/Sun Life Series Trust (the "Series Fund"),
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 27 independent portfolios of securities,
each of which has separate investment objectives and policies. Shares of the
Series Fund are issued in 27 Funds, each corresponding to one of the portfolios.
The Contracts provide for investment by the Sub-Accounts in shares of the 25
Funds 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.
8
<PAGE>
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.
EMERGING MARKETS EQUITY SERIES (FORMERLY, MFS/FOREIGN & COLONIAL EMERGING
MARKETS EQUITY SERIES) will seek capital appreciation.
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 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 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 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 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 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.
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.
9
<PAGE>
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.
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 Funds pay fees to their investment adviser(s) for its services
pursuant to investment advisory agreements. MFS serves as investment adviser to
the Funds, 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 may serve as the investment adviser to other mutual funds which have
similar investment goals and principal investment policies and risks as the
Funds, and which may be managed by a Fund's portfolio manager(s). While a Fund
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 Fund 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 Fund
which is involved in the conflict or substitution of shares of other Funds or
other mutual funds.
MORE COMPREHENSIVE INFORMATION ABOUT THE SERIES FUND AND THE MANAGEMENT,
INVESTMENT OBJECTIVES, POLICIES, RESTRICTIONS, EXPENSES AND POTENTIAL RISKS OF
EACH FUND MAY BE FOUND IN THE ACCOMPANYING CURRENT FUND PROSPECTUS(ES). YOU
SHOULD READ THE FUND PROSPECTUS(ES) CAREFULLY BEFORE INVESTING. THE STATEMENT OF
ADDITIONAL INFORMATION OF THE FUNDS 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 at 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 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 2
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. Over the life of your Contract, you may allocate amounts among
as many as 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, as
required. 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 taxes 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 2 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 2 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. (The close of trading is
determined by the New York Stock Exchange.) 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.
12
<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 Fund 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 Fund during the Valuation Period, by (2) the net
asset value per share of the Fund 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.
A 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.
Each additional Purchase Payment, transfer or renewal credited to your
Fixed Account value will result in a new Guarantee Period with its own
Expiration Date. Amounts allocated at different times to Guarantee Periods of
the same duration may have different Expiration Dates.
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.
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. A
Guarantee Period that will extend beyond your maximum Annuity Commencement Date
will result in the application of a Market Value Adjustment upon annuitization
or withdrawals. Each new allocation to a Guarantee Period must be at least
$1,000.
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
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<PAGE>
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.
A Guarantee Amount will not renew into a Guarantee Period that will extend
beyond your maximum Annuity Commencement Date. We will automatically renew your
Guarantee Amount into the next available Guarantee Period.
EARLY WITHDRAWALS
If you withdraw, transfer, or annuitize an allocation to a Guarantee
Period more than 30 days prior to 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 or prior to the close of the New York Stock Exchange, 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
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<PAGE>
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 Fund would be unable to invest effectively in accordance with its
investment objective and policies, or would otherwise potentially be adversely
affected. In particular, a pattern of exchanges that coincide with a market
timing strategy may be disruptive to a Fund 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. Previously applied
amounts may not be transferred to a Guarantee Period made available in
connection with this program. 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.
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 Fund investment option under the Contracts, 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 Account investment options at set intervals,
dollar-cost averaging allows you to purchase more Variable Accumulation Units
(and, indirectly, more Fund shares) when prices are low and fewer Variable
Accumulation Units (and, indirectly, fewer Fund shares) when prices are high.
Therefore, you may
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<PAGE>
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 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 equity 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 investment options that participate in the
asset allocation program on a quarterly basis, or as determined by the terms of
the asset allocation progam, 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 our 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
Account Value and/or Variable Account Value and we will effect them
automatically; a Market Value Adjustment may be applicable upon withdrawal.
Under the Interest Out Program, we automatically pay to you, or reinvest,
interest credited for all Guarantee Periods you have chosen. The withdrawals
under these programs are subject to surrender charges. They may also 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.
You may change or stop either program at any time, by written notice to
us.
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
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<PAGE>
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 Service Address. Your request must specify whether you
want to withdraw the entire amount of your Account or, if less, the amount you
wish to receive.
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 income tax consequences, including
a 10% penalty tax (see "Tax Considerations"). 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:
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- 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 Funds or to determine the value of the net assets of the Funds,
because an emergency exists; and
- 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 your Contract is a Qualified Contract, you should carefully check the
terms of your retirement plan for limitations and restrictions on cash
withdrawals.
Special restrictions apply to withdrawals from Contracts used for Section
403(b) annuities. See "Tax Considerations -- Tax-Sheltered Annuities."
When you make a withdrawal, we consider the oldest Purchase Payment that
you have not already withdrawn to be withdrawn first, then the second oldest
Purchase Payments, and so forth. Once all Purchase Payments are withdrawn, the
balance withdrawn is considered to be accumulated value.
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 a 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 Contract 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
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- $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 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. Each Payment begins a new 7-year period and moves down a
declining surrender charge scale at each Contract Anniversary. Payments received
during the first Contract Year will be charged 6% if withdrawn. On your next
scheduled Contract Anniversary, that Payment, along with any other Payments made
during that Contract Year, will be considered to be in their second Contract
Year and will have a 5% withdrawal charge. On the next Contract Anniversary,
these Payments will move into their third Contract Year and will have a
withdrawal charge of 5%, if withdrawn. The withdrawal charge decreases according
to the number of Contract Years the Purchase Payment has been in your Account.
The declining scale is 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 2.
For additional examples of how we calculate withdrawal charges, see
Appendix C.
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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 Contract Year. Any withdrawal from a Guarantee Amount is attributed
first to such interest.
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>
<C> <S> <C> <C> <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.
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CONTRACT CHARGES
ACCOUNT FEE
During the Accumulation Phase of your Contract, we will deduct from your
Account an annual 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. The annual Account Fee
will never exceed $30. We deduct the Account Fee pro rata from each Sub-Account
and each Guarantee Period, 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 Contract Year; or
(2) your Account Value is more than $75,000 on your Contract 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.
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 us for expenses
we incur in administering the Contracts, the Accounts and the Variable Account
that are not covered by the annual Account Fee.
MORTALITY AND EXPENSE RISK CHARGE
During both the Accumulation Phase and the Income Phase, we deduct a
mortality and expense charge from the assets of the Variable Account at an
effective annual rate equal to 1.25%. 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 mortality risk also arises from our contractual
obligation to pay a death benefit upon the death of the Annuitant prior to the
Annuity Commencement Date. The expense risk we assume is the risk that the
annual Account Fee and the 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
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<PAGE>
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.
FUND EXPENSES
There are fees and charges deducted from each Fund. These fees and
expenses are described in the Fund's prospectus and related 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 the Beneficiary is not living on the
date of death of the Annuitant, 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
Contract names more than one Annuitant, we will pay the death benefit after the
death of the last surviving of the Annuitants.
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 provisions 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 the 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 of Death") if you have elected a death
benefit payment method before the death of the Annuitant 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) above, 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 Fund investment option available
under the Contracts (without the application of a Market Value Adjustment). The
Beneficiary may then transfer to the Fixed Account and begin a new Guarantee
Period.
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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 at our
Service Address, 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/Payee 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.
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 any of 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 annuity payments to the
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(s) 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(s) selected. You may request
a full withdrawal before the Annuity Commencement Date, which will be subject to
all charges applicable on withdrawals. See "Withdrawals, Withdrawal Charge and
Market Value Adjustment."
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SELECTION OF THE ANNUITANT OR CO-ANNUITANT
You select the Annuitant in your Application. The Annuitant is the person
who receives annuity payments during the Income Phase and on whose life these
payments are based. In your Contract, the Annuity Option(s) 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 Payee of the annuity payments.
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.
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 Annuity Option E is
available only for a Fixed Annuity. We may also agree to other settlement
options, at 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
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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 income payments are
made as described under Annuity Option B. The election of this Annuity Option
may result in the imposition of a penalty tax.
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 5 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 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. The
election of this Annuity Option may result in the imposition of a penalty tax.
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, you will receive 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.
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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.
- 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 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 Contract Year. To make an exchange,
the Annuitant sends us, at our Service 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
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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.
Before exchanging Annuity Units from one Sub-Account to another, the
Annuitant should carefully review the Fund prospectus(es) for the investment
objectives and risk disclosure of the Funds in which the Sub-Accounts are
invested.
During the Income Phase, 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 Contracts contain 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(s)
elected and the adjusted age of the Annuitant. The Contracts also describe the
method of determining the adjusted age of the Annuitant. The mortality table
used in determining the Annuity Payment Rates for Annuity Options A, B and C is
the 1983 Individual Annuitant Mortality Table.
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 Annuitant's death 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
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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.
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.
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VOTING OF FUND SHARES
We will vote Fund shares held by the Sub-Accounts at meetings of
shareholders of the Funds 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 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 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 Funds. We will determine the number of Fund shares as to
which each such person is entitled to give instructions as of the record date
set by the 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 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 Fund share as of the same date. On or after the Annuity Commencement
Date, the number of 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 particular Payee by the net asset value of a
Fund share as of the same date. After the Annuity Commencement Date, the number
of 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 Funds 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 Funds may not always be available for investment
under the Contract. We may add or delete Funds 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 Fund or shares of another
registered open-end investment company or unit investment trust, provided that
the
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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 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 Contracts.
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 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 our Service Address as shown 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.
TAX CONSIDERATIONS
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, legislation affecting the current tax
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treatment of annuity contracts could be enacted in the future, and 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).
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.
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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 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.
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 reserve the right to modify the Contract
and/or the Variable Account to the extent necessary to comply with any such
guidelines, but cannot assure that such modifications would satisfy 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
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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.
PENSION AND PROFIT-SHARING PLANS
Sections 401(a), 401(k) and 403(a) of the Code permit business employers
and certain associations to establish various types of retirement plans for
employees. The Tax Equity and Fiscal Responsibility Act of 1982 eliminated most
differences between qualified retirement plans of corporations and those of
self-employed individuals. Self-employed persons, as a general rule, may
therefore use Qualified Contracts as a funding vehicle for their retirement
plans.
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."
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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.
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 1997, 1998 and 1999, approximately $532,000, $468,300 and
$237,696, 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." We may also advertise "yield" and/or
"effective yield" for some Sub-Accounts.
Average Annual Total Return measures the net income of a Sub-Account and
any realized or unrealized gains or losses of the Fund 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
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investment in a variable option over that period. Standardized Average Annual
Total Return information covers the period after the Variable Account was
established or, if shorter, the life of the Fund. Non-standardized Average
Annual Total Return covers the life of each Fund, which may predate the Variable
Account. Cumulative Growth Rate represents the cumulative change in the value of
an investment in the Sub-Account for the period stated, and is arrived at by
calculating the change in the Accumulation Unit Value of a Sub-Account 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.
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 annual Account Fee, although such figures do
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 underlying Funds 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-Accounts on a hypothetical basis. To do this, we reflect
deductions of the current Contract fees and charges from the historical
performance of the corresponding Funds.
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
Sub-Account available for investment under the Contract), 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 available Money
Market Sub-Account similarly, but include the increase due to assumed
compounding. The Money Market 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.
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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 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,
1999 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 our Service Address in writing or by
telephone at (800) 447-7569.
ADDITIONAL INFORMATION ABOUT THE COMPANY
BUSINESS OF THE COMPANY
We are engaged in the sale of combination fixed and variable annuity
contracts, group life and group health insurance contracts. These contracts are
sold in both the tax-qualified and non-tax-qualified markets by insurance
agents, some of whom are registered representatives of national and regional
stock brokerage firms and brokers.
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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 YEAR ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues
Premiums, annuity deposits and other
revenue............................... $ 67,081 $108,443 $137,079 $ 83,711 $ 56,678
Net investment income................... 5,425 6,718 9,344 13,019 19,204
-------- -------- -------- -------- --------
72,506 115,161 146,423 96,730 75,882
-------- -------- -------- -------- --------
Benefits and expenses
Policyholder benefits................... 54,892 93,816 126,876 82,079 63,100
Other expenses.......................... 11,828 12,577 14,059 9,870 9,384
-------- -------- -------- -------- --------
66,720 106,393 140,935 91,949 72,484
-------- -------- -------- -------- --------
Income from operations before federal
income tax expense...................... 5,786 8,768 5,488 4,781 3,398
Federal income tax (excluding tax on
capital losses)....................... 1,228 2,070 2,315 1,939 2,447
-------- -------- -------- -------- --------
Income from operations after federal
income tax expense and before realized
capital losses.......................... 4,558 6,698 3,173 2,842 951
Net realized capital gains (losses) less
capital gains tax..................... 152 (13) 183 (439) (21)
-------- -------- -------- -------- --------
Net Income................................ $ 4,710 $ 6,684 $ 3,356 $ 2,403 $ 930
======== ======== ======== ======== ========
Total Assets.............................. $806,006 $713,677 $624,535 $518,319 $524,731
======== ======== ======== ======== ========
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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 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:
- 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.
- The Company's ability to identify and address any remaining 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 any of their own
remaining Year 2000 issues in a timely manner.
RESULTS OF OPERATIONS
The Company had net income of $4,710,000 for 1999 as compared to
$6,685,000 for 1998. The $1,975,000 decrease in net income was due to lower
earnings in both its Wealth Management and Protection segments.
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The decline in Wealth Management income was due primarily to an increase
in operating expenses as a result of the consolidation of the Company's annuity
operation, offset by lower strain from lower than expected annuity sales. During
1999, the Company consolidated its customer service and accounting functions
with its parent company, Sun Life (U.S.). One-time charges incurred in
connection with this consolidation totaled approximately $800,000 and consisted
primarily of: (1) severance and employee benefit costs; (2) termination fee
associated with a lease cancellation and; (3) furniture and equipment
write-offs. The decline in annuity deposit-type funds in the Wealth Management
segment was due to lower sales associated with the Company's dollar cost
averaging ("DCA") program. Under the DCA program deposits are made into the
fixed portion of the Company's market value adjusted combination fixed/variable
annuity contract and receive a more favorable crediting rate for the policy
year. During the year, the fixed deposit is exchanged to the variable portion of
the contract in equal periodic installments. The decline in 1999 DCA sales was
attributable to the Company adhering to the New York State Insurance
Department's (the "Department") request to limit the DCA crediting rate the
Company, and its competitors, could offer. In November 1999, after the
Department issued guidelines to permit New York licensed insurers to offer an
enhanced DCA crediting rate, the Company reintroduced the DCA program. Also
contributing to lower annuity deposit fund sales was the implementation, in
November 1998, of the Department's Regulation 60, which governs replacement
sales.
The decline in Protection income was due to unfavorable group life
mortality experience and higher group health reserves from an increase in group
long-term disability claims experience.
The total capital stock and surplus position of the Company at
December 31, 1999, was $41,346,000. Cash dividends of $6,500,000 million were
paid to its parent company, Sun Life (U.S.) during 1999. The Company's
management considers its surplus position to be adequate.
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.
INTEREST RATE RISK MANAGEMENT
The Company's fixed interest rate liabilities are primarily supported by
well-diversified portfolios of fixed interest rate investments. All of these
fixed interest rate investments are held for other than trading purposes and can
include publicly issued and privately placed bonds and commercial mortgage
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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 rate 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, 1999 had a fair value of $25.7 million. Fixed
income investments supporting those liabilities had a fair value of $73.0
million at that date. The Company performed a sensitivity analysis on these
interest-sensitive liabilities and assets at December 31, 1999. 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 $.6
million and the corresponding assets would show a net decrease of $2.1 million.
By comparison, 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
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<PAGE>
the models to produce estimates that are generally worse than one might actually
expect, all other things being equal.
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.
REINSURANCE
The Company has executed agreements which provide that the parent company
will reinsure risks under certain group life, health, and long-term disability
insurance contracts sold by the Company.
RESERVES
In accordance with the life insurance laws and regulations under which the
Company operates it is obligated to carry on its books, as liabilities,
actuarially determined reserves to meet its obligations on its outstanding
contracts. Reserves are based on mortality tables in general use in the United
States and are computed to equal amounts that, with additions from premiums to
be received, and with interest on such reserves computed annually at certain
assumed rates, will be sufficient to meet the Company's policy obligations at
their maturities or in the event of an insured's death. In the accompanying
Financial Statements these reserves are determined in accordance with statutory
regulations.
INVESTMENTS
The Company maintains investments in bonds and mortgages with cash flows
to match estimated cash flows of its liabilities.
It is the Company's policy to acquire only investment grade securities.
None of the Company's holdings of bonds were rated below investment grade at
December 31, 1999. Publicly traded government and corporate bonds comprised 96%
of the Company's total bonds at December 31, 1999. The Company underwrites
commercial mortgages with a maximum loan to value ratio of 75%, and as a rule
invests only in properties that are almost fully leased. The Company did not
have any mortgage loans in arrears more than 60 days at December 31, 1999.
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, 1999, the Company had 2 direct employees who are
employed at its Home Office.
PROPERTIES
The Company owns no properties. During 1998 and 1997, the Company leased
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 consolidated the functions performed at this facility
with its parent company, Sun Life (U.S.). After the group sales office lease
expired in July 1999, the Company entered a five-year lease for a facility that
combined its group sales office operation and corporate home office.
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
40
<PAGE>
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.
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, 1999 included in the Statement of Additional Information and the
statutory financial statements of the Company for the years ended December 31,
1999, 1998 and 1997 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, 1999 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
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
ADMITTED ASSETS
Bonds $ 59,215,128 $ 57,916,869
Mortgage loans on real estate 8,659,610 17,657,672
Properties acquired in satisfaction of debt -- 1,755,854
Policy loans 537,976 625,023
Cash and short-term investments 6,261,102 5,928,556
Life insurance premiums and annuity considerations due
and uncollected 2,168,135 667,087
Accident and health premiums due and unpaid 579,460 156,493
Receivable from parent and affiliates 621,625 --
Investment income due and accrued 795,075 780,020
Federal income tax recoverable 520,467 --
Other assets 235,655 183,602
------------ ------------
General account assets 79,594,233 85,671,176
Separate account assets
Unitized 632,350,720 527,942,310
Non-unitized 94,061,504 100,064,243
------------ ------------
Total admitted assets $806,006,457 $713,677,729
============ ============
LIABILITIES
Aggregate reserve for life policies and contracts $ 21,762,306 $ 22,578,780
Aggregate reserve for accident and health policies 9,251,000 7,830,000
Policy and contract claims 2,182,472 2,174,704
Liability for premium and other deposit funds 18,048,656 20,807,840
Interest maintenance reserve 553,770 830,941
Commissions to agents due or accrued 449,213 374,826
General expenses due or accrued 580,432 369,524
Transfers from Separate Accounts due or accrued (17,043,885) (15,992,081)
Taxes, licenses and fees due or accrued 100,000 64,813
Federal income taxes due or accrued -- 700,000
Asset valuation reserve 1,210,107 1,047,787
Payable to parent, subsidiaries, and affiliates -- 1,218,745
Other liabilities 1,353,930 684,361
------------ ------------
General account liabilities 38,448,001 42,690,240
Separate account liabilities:
Unitized 632,150,968 527,751,720
Non-unitized 94,061,504 100,064,243
------------ ------------
Total liabilities 764,660,473 670,506,203
------------ ------------
CAPITAL STOCK AND SURPLUS
Common capital stock 2,000,000 2,000,000
------------ ------------
Gross paid in and contributed surplus 29,500,000 29,500,000
Group life contingency reserve fund 1,035,323 812,391
Unassigned funds 8,810,661 10,859,135
------------ ------------
Total surplus 39,345,984 41,171,526
------------ ------------
Capital stock and surplus 41,345,984 43,171,526
------------ ------------
Total Liabilities, Capital Stock and Surplus $806,006,457 $713,677,729
============ ============
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
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
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
INCOME:
Premiums and annuity considerations $ 19,152,409 $ 16,979,974 $ 16,013,160
Deposit-type funds 39,510,208 84,013,114 115,692,429
Net investment income 5,170,881 6,397,852 8,824,668
Amortization of interest maintenance
reserve 254,220 319,812 519,001
Net gain from operations from
Separate Accounts 9,162 9,115 8,743
Income from fees associated with
investment management,
administration and contract
guarantees from Separate Accounts 7,470,958 6,262,374 4,707,296
Other income 938,657 1,179,261 657,755
------------ ------------ ------------
Total Income 72,506,495 115,161,502 146,423,052
------------ ------------ ------------
BENEFITS AND EXPENSES:
Death benefits 7,357,222 6,237,281 4,916,746
Annuity benefits 5,238,282 5,758,805 5,439,091
Disability benefits and benefits
under accident and health policies 1,351,989 1,094,851 939,635
Surrender benefits and other fund
withdrawals 59,018,693 73,863,143 79,016,904
Interest on policy or contract funds 82,760 101,516 75,069
Increase in aggregate reserves for
life and accident and health
policies and contracts 604,526 620,154 5,199,040
Decrease in liability for premium
and other deposit funds (2,759,184) (10,533,414) (30,405,893)
------------ ------------ ------------
Total Benefits 70,894,288 77,142,336 65,180,592
Commissions on premiums and annuity
considerations (direct business
only) 4,712,712 4,850,390 5,582,738
General insurance expenses 6,372,100 7,017,562 7,687,478
Insurance taxes, licenses and fees,
excluding federal income taxes 742,992 709,440 788,386
Net transfers to (from) Separate
Accounts (16,002,095) 16,673,071 61,695,832
------------ ------------ ------------
Total Benefits and Expenses 66,719,997 106,392,799 140,935,026
------------ ------------ ------------
Net gain from operations before
federal income taxes 5,786,498 8,768,703 5,488,026
Federal income taxes incurred
(excluding tax on capital gains) 1,228,004 2,070,545 2,315,259
------------ ------------ ------------
Net gain from operations after
federal income taxes and before
realized capital gains 4,558,494 6,698,158 3,172,767
Net realized capital (losses) gains
less capital gains tax and
transferred to the interest
maintenance reserve 151,678 (13,249) 183,262
------------ ------------ ------------
NET INCOME $ 4,710,172 $ 6,684,909 $ 3,356,029
============ ============ ============
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
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
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Capital and surplus, Beginning of year $43,171,526 $38,781,183 $34,802,643
----------- ----------- -----------
Net income 4,710,172 6,684,909 3,356,029
Change in net unrealized capital gains -- 359,000 138,000
Change in nonadmitted assets and related
items 126,606 47,886 (14,391)
Change in asset valuation reserve (162,320) 298,548 498,902
Dividend to stockholder (6,500,000) (3,000,000) --
----------- ----------- -----------
Net change in capital and surplus for
the year (1,825,542) 4,390,343 3,978,540
----------- ----------- -----------
Capital and surplus, End of year $41,345,984 $43,171,526 $38,781,183
=========== =========== ===========
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
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
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Provided:
Premiums, annuity considerations and
deposit funds received $ 57,235,427 $101,168,181 $138,347,877
Net investment income 5,324,547 6,731,025 9,707,801
Fees associated with investment management,
administration and contract guarantees
from Separate Accounts 7,470,958 6,262,374 4,707,296
Fee income 938,659 1,179,261 657,755
------------ ------------ ------------
Total receipts 70,969,591 115,340,841 153,420,729
------------ ------------ ------------
Benefits paid 73,041,178 86,793,629 122,170,301
Insurance expenses and taxes paid 11,229,543 12,819,426 13,540,362
Net cash transfers to (from) Separate
Accounts (14,950,291) 25,441,094 41,721,173
Federal income tax payments (excluding tax
on capital gains) 1,928,000 2,370,545 1,715,259
------------ ------------ ------------
Total payments 71,248,430 127,424,694 179,147,095
------------ ------------ ------------
Net cash used in operations (278,839) (12,083,853) (25,726,366)
------------ ------------ ------------
Proceeds from long-term investments sold,
matured or repaid (after deducting taxes
on capital gains of $81,675 for 1999,
$135,651 for 1998 and $222,860 for 1997) 47,042,986 37,410,774 59,132,310
Other cash provided 717,427 813,054 325,543
------------ ------------ ------------
Total cash provided 47,760,413 38,223,828 59,457,853
------------ ------------ ------------
Cash Applied:
Cost of long-term investments acquired (37,498,243) (26,671,265) (27,369,138)
Other cash applied (9,650,785) (3,660,391) (857,106)
------------ ------------ ------------
Total cash applied (47,149,028) (30,331,656) (28,226,244)
Net change in cash and short-term investments 332,546 (4,191,681) 5,505,243
Cash and short-term investments:
Beginning of year 5,928,556 10,120,237 4,614,994
------------ ------------ ------------
End of year $ 6,261,102 $ 5,928,556 $ 10,120,237
============ ============ ============
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
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, 1999, 1998 AND 1997
1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Sun Life Insurance and Annuity Company of New York (the "Company") is
incorporated as a life insurance company and is currently engaged in the sale of
individual fixed and variable annuities, group life and group long-term
disability insurance. The parent company, Sun Life Assurance Company of Canada
(U.S.) ("Sun Life (U.S.)"), is ultimately a wholly-owned subsidiary of Sun Life
Assurance Company of Canada ("SLOC)"), a mutual life insurance company.
The Company, which is domiciled in the State of New York, prepares its financial
statements in accordance with statutory accounting practices prescribed or
permitted by the State of New York Insurance Department. Prescribed accounting
practices include practices described in a variety of publications of the
National Association of Insurance Commissioners ("NAIC"), as well as state laws,
regulations and general administrative rules. Permitted accounting practices
encompass all accounting practices not so prescribed. The permitted accounting
practices adopted by the Company are not material to the financial statements.
Prior to 1996, statutory accounting practices were recognized by the insurance
industry and the accounting profession as generally accepted accounting
principles ("GAAP") for mutual life insurance companies and stock life insurance
companies wholly owned by mutual life insurance companies. In April 1993, the
Financial Accounting Standards Board ("FASB") issued an interpretation (the
"Interpretation") that became effective in 1996, which has changed the previous
practice of mutual life insurance companies (and stock life insurance companies
that are wholly owned subsidiaries of mutual life insurance companies) with
respect to utilizing statutory basis financial statements for general purposes,
in that it will no longer allow such financial statements to be described as
having been prepared in conformity with GAAP. Consequently, these financial
statements prepared in conformity with statutory accounting practices as
described above, vary from and are not intended to present the Company's
financial position, results of operations or cash flow in conformity with GAAP.
(See Note 17 for further discussion relative to the Company's basis of financial
statement presentation.) The effects on the financial statements of the
variances between the statutory basis of accounting and GAAP, although not
reasonably determinable, are presumed to be material.
INVESTED ASSETS
Bonds are carried at cost adjusted for amortization of premium or accrual of
discount. Mortgage loans acquired at a premium or discount are carried at
amortized values and other mortgage loans at the amounts of the unpaid balances.
Real estate investments are carried at the lower of cost, adjusted for
accumulated depreciation, or appraised value less encumbrances. Short-term
investments are carried at amortized cost, which approximates fair value.
Depreciation of buildings and improvements is calculated using the straight-line
method over the estimated useful life of the property, generally forty to fifty
years.
POLICY AND CONTRACT RESERVES
The reserves for life insurance and annuity contracts are computed in accordance
with presently accepted actuarial standards, and are based on actuarial
assumptions and methods (including use of
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, 1999, 1998 AND 1997
1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED):
published mortality tables and prescribed interest rates) which produce reserves
at least as great as those required by law and contract provisions.
INCOME AND EXPENSES
For group life, group long-term disability and annuity contracts, premiums are
recognized as revenues over the premium paying period, whereas commissions and
other costs applicable to the acquisition of new business are charged to
operations as incurred.
SEPARATE ACCOUNTS
The Company has established unitized separate accounts applicable to individual
qualified and nonqualified variable annuity contracts.
The Company has also established a nonunitized separate account for amounts
allocated to the fixed portion of a certain combination fixed/variable deferred
annuity contracts. The assets of this account are available to fund general
account liabilities and general account assets are available to fund liabilities
of this account.
Assets and liabilities of the separate accounts, representing net deposits and
accumulated net investment earnings less fees, held primarily for the benefit of
contract holders, are shown as separate captions in the financial statements.
Assets held in the separate accounts are carried at market value as determined
by the quoted market prices of the underlying investments.
Gains (losses) from mortality experience and investment experience of the
separate accounts, not applicable to contract owners, and accrued expense
allowances recognized in reserves are receivable from or payable to the general
account. Accumulated amounts that have not been transferred are recorded as
payable (receivable) to (from) the general account. Transfers from separate
accounts due or accrued amounted to $17,044,000 in 1999 and $15,992,000 in 1998.
CHANGES IN ACCOUNTING PRINCIPLES AND REPORTING
In March 1998, the National Association of Insurance Commissioners adopted the
Codification of Statutory Accounting Principles ("Codification"). The
Codification, which is intended to standardize regulatory accounting and
reporting for the insurance industry, is proposed to be effective January 1,
2001. However, statutory accounting principles will continue to be established
by individual state laws and permitted practices and it is uncertain when, or
if, the State of New York will require adoption of the Codification for the
preparation of statutory financial statements. The Company has not finalized the
quantification of the effects of Codification on its statutory financial
statements.
OTHER
Preparation of the financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses. Actual results could differ from those estimates.
Certain prior year amounts have been reclassified to conform to amounts as
presented in the current year.
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, 1999, 1998 AND 1997
2. BONDS
Investments in debt securities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(IN 000'S)
<S> <C> <C> <C> <C>
Long-term bonds:
United States Government and government
agencies and authorities $ 6,148 $13 $ (171) $ 5,990
Public utilities 8,765 7 (391) 8,381
Transportation 3,521 -- (16) 3,505
Finance 7,742 -- (183) 7,559
All other corporate bonds 33,039 69 (1,379) 31,729
------- --- ------- -------
Total long-term bonds 59,215 89 (2,140) 57,164
Short-term bonds -- U.S. Treasury Bills, bankers
acceptances and commercial paper 6,958 -- -- 6,958
------- --- ------- -------
Total bonds $66,173 $89 $(2,140) $64,122
======= === ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(IN 000'S)
<S> <C> <C> <C> <C>
Long-term bonds:
United States Government and government
agencies and authorities $16,153 $ 319 $(31) $16,441
Public utilities 11,353 213 (16) 11,550
Transportation 2,553 19 -- 2,572
Finance 6,260 122 (9) 6,373
All other corporate bonds 21,598 430 (37) 21,991
------- ------ ---- -------
Total long-term bonds 57,917 1,103 (93) 58,927
Short-term bonds -- U.S. Treasury Bills, bankers
acceptances and commercial paper 5,258 -- -- 5,258
------- ------ ---- -------
Total bonds $63,175 $1,103 $(93) $64,185
======= ====== ==== =======
</TABLE>
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, 1999, 1998 AND 1997
2. BONDS (CONTINUED):
The amortized cost and estimated fair value of debt securities at December 31,
1999 are shown below by contractual maturity.Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call and/or prepayment penalties.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
(IN 000'S)
<S> <C> <C>
Maturities are:
Due in one year or less $12,010 $12,001
Due after one year through five years 21,833 21,766
Due after five years through ten years 19,002 17,447
Due after ten years 6,211 5,873
------- -------
Subtotal 59,056 57,087
Mortgage-backed securities 7,117 7,035
------- -------
Total bonds $66,173 $64,122
======= =======
</TABLE>
Proceeds from sales and maturities of investments in debt securities during
1999, 1998 and 1997 were $35,978,000, $29,068,000 and $42,986,000, gross gains
of $192,000, $407,000 and $395,000 and gross losses of $395,000, $2,000 and
$40,000, respectively.
A bond, included above, with an amortized cost of approximately $405,000 and
$404,000 at December 31, 1999 and 1998, respectively, was on deposit with the
Superintendent of Insurance of the State of New York as required by law.
3. MORTGAGE LOANS
The Company invests in commercial first mortgage loans throughout the United
States. The Company monitors the condition of the mortgage loans in its
portfolio. In those cases where mortgages have been restructured, appropriate
allowances for losses have been made. In those cases where, in management's
judgment, the mortgage loans' values are impaired, appropriate losses are
recorded.
The following table shows the geographical distribution of the mortgage loan
portfolio at December 31:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN 000'S)
<S> <C> <C>
California $ 582 $ 3,421
Florida 733 777
Massachusetts -- 1,090
New York 1,413 2,868
Ohio 1,271 1,291
All other 4,661 8,211
------ -------
$8,660 $17,658
====== =======
</TABLE>
As of December 31, 1999 and 1998, the Company had no restructured mortgage
loans.
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, 1999, 1998 AND 1997
3. MORTGAGE LOANS (CONTINUED):
The Company has no outstanding mortgage loan commitments on real estate.
4. INVESTMENT GAINS (LOSSES)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
-------- -------- --------
(IN 000'S)
<S> <C> <C> <C>
Realized capital gains (losses):
Bonds $ 2 $ 7 $(99)
Mortgage loans (27) (8) (6)
Real estate 177 (12) 288
---- ---- ----
$152 $(13) $183
==== ==== ====
Changes in unrealized capital gains on mortgage loans $-- $359 $138
==== ==== ====
</TABLE>
Realized capital gains and losses on bonds and mortgages which relate to changes
in levels of interest rate risk are charged or credited to an interest
maintenance reserve ("IMR") and amortized into income over the remaining
contractual life of the security sold. The net realized capital gains (losses)
credited to the IMR were $(35,000), $408,000 and $355,000 in 1999, 1998 and
1997, respectively. All gains are transferred net of applicable income taxes.
5. NET INVESTMENT INCOME
Net investment income consisted:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(IN 000'S)
<S> <C> <C> <C>
Interest income from bonds $4,108 $4,570 $5,622
Interest income from mortgage loans 1,370 1,926 3,279
Real estate investment income -- 22 483
Other investment income 43 125 170
------ ------ ------
Gross investment income 5,521 6,643 9,554
Investment expenses 350 245 729
------ ------ ------
Net investment income $5,171 $6,398 $8,825
====== ====== ======
</TABLE>
6. REINSURANCE
The Company has agreements with SLOC which provide that SLOC will reinsure the
mortality and morbidity risks of the group life insurance contracts and group
long-term disability contracts issued by the Company. Under these agreements
basic death benefits and long-term disability benefits are reinsured on a yearly
renewable term basis. The agreements provide that SLOC will reinsure the
mortality risks in excess of $50,000 per policy for group life insurance
contracts and $4,000 per policy per month for the group long-term disability
contracts ceded by the Company. For the years ended December 31, 1998 and 1997,
the agreements provided that SLOC would reinsure $3,000 per policy per month for
the group long-
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, 1999, 1998 AND 1997
6. REINSURANCE (CONTINUED):
term disability contracts ceded by the Company. Reinsurance transactions under
these agreements had the effect of increasing (decreasing) income from
operations by $(169,000), $(771,000) and $139,000 for the years ended
December 31, 1999, 1998, and 1997, respectively.
The group life and long-term disability reinsurance agreements require that the
reinsurer provide funds in amounts equal to the reserves ceded.
The following are summarized pro forma results of operations of the Company for
the years ended December 31, 1999, 1998 and 1997 before the effect of
reinsurance transactions with SLOC:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(IN 000'S)
<S> <C> <C> <C>
Income:
Premiums, annuity deposits and other revenues $71,099 $105,728 $142,915
Net investment income and realized gains 5,323 6,718 9,343
------- -------- --------
Subtotal 76,422 112,446 152,258
------- -------- --------
Benefits and expenses:
Policyholder benefits 74,539 79,918 101,371
Other expenses (4,225) 22,988 45,538
------- -------- --------
Subtotal 70,314 102,906 146,909
------- -------- --------
Income from operations $ 6,108 $ 9,540 $ 5,349
======= ======== ========
</TABLE>
The Company is contingently liable for the portion of the policies reinsured
under each of its existing reinsurance agreements in the event SLOC is unable to
pay their portion of any reinsured claim. Management believes that any liability
from this contingency is unlikely.
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, 1999, 1998 AND 1997
7. WITHDRAWAL CHARACTERISTICS OF ANNUITY ACTUARIAL RESERVES AND DEPOSIT
LIABILITIES
Withdrawal characteristics of general account and separate account annuity
reserves and deposits:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
---------------------
AMOUNT % OF TOTAL
-------- ----------
(IN 000'S)
<S> <C> <C>
Subject to discretionary withdrawal with adjustment:
With market value adjustment $ 90,735 12.2
At book value less surrender charges (surrender charge >
5%) 6,221 0.8
At book value (minimal or no charge or adjustment) 626,008 84.1
Not subject to discretionary withdrawal provision 21,252 2.9
-------- -----
Total annuity actuarial reserves and deposit liabilities $744,216 100.0
======== =====
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
---------------------
AMOUNT % OF TOTAL
-------- ----------
(IN 000'S)
<S> <C> <C>
Subject to discretionary withdrawal:
With market value adjustment $ 98,744 15.2
At book value less surrender charges (surrender charge >
5%) 7,108 1.1
At book value (minimal or no charge or adjustment) 523,814 80.5
Not subject to discretionary withdrawal provision 20,709 3.2
-------- -----
Total annuity actuarial reserves and deposit liabilities $650,375 100.0
======== =====
</TABLE>
8. SEGMENT INFORMATION
The Company offers financial products and services such as fixed and variable
annuities, group life insurance and group long-term disability protection.
Within these areas, the Company conducts business principally in two operating
segments and maintains a corporate segment to provide for the capital needs of
the various operating segments and to engage in other financing related
activities.
The Wealth Management segment markets and administers individual variable and
fixed annuity products, including market value adjusted annuities, while the
Protection segment markets and administers group life insurance and group
long-term disability products.
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, 1999, 1998 AND 1997
8. SEGMENT INFORMATION (CONTINUED):
The following amounts pertain to the various business segments:
<TABLE>
<CAPTION>
FEDERAL TOTAL
TOTAL TOTAL PRETAX INCOME GENERAL ACCOUNT
REVENUES EXPENDITURES INCOME TAXES ASSETS
------------ ------------ ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
1999:
Wealth Management $ 53,466,000 $ 50,636,000 $ 2,830,000 $ 155,000 $ 37,356,000
Protection 16,550,000 15,914,000 636,000 237,000 17,025,000
Corporate 2,490,000 170,000 2,320,000 836,000 25,213,000
------------ ------------ ----------- ---------- ------------
Total: $ 72,506,000 $ 66,720,000 $ 5,786,000 $1,228,000 $ 79,594,000
============ ============ =========== ========== ============
1998:
Wealth Management 97,936,000 92,889,000 5,047,000 449,000 36,148,000
Protection 15,155,000 13,251,000 1,904,000 654,000 14,685,000
Corporate 2,071,000 253,000 1,818,000 968,000 34,838,000
------------ ------------ ----------- ---------- ------------
Total: $115,162,000 $106,393,000 $ 8,769,000 $2,071,000 $ 85,671,000
============ ============ =========== ========== ============
1997:
Wealth Management 130,926,000 127,120,000 3,806,000 1,803,000 43,799,000
Protection 12,623,000 13,791,000 (1,168,000) (406,000) 10,706,000
Corporate 2,874,000 24,000 2,850,000 918,000 46,273,000
------------ ------------ ----------- ---------- ------------
Total: $146,423,000 $140,935,000 $ 5,488,000 $2,315,000 $100,778,000
============ ============ =========== ========== ============
</TABLE>
9. RETIREMENT PLANS
The Company participates with SLOC and Sun Life (U.S.) in a noncontributory
defined benefit pension plan covering essentially all employees. The benefits
are based on years of service and compensation.
The funding policy for the pension plan is to contribute an amount, which at
least satisfies the minimum amount required by ERISA; currently the plan is
fully funded. The Company is charged for its share of the pension cost based
upon its covered participants. Pension plan assets consist principally of
separate accounts of SLOC.
The Company's share of the group's accrued pension cost at December 31, 1999,
1998 and 1997 was $338,000, $275,000 and $211,000, respectively. The Company's
share of net periodic pension cost was $63,000, $65,000 and $33,000 for the
years ended December 31, 1999, 1998 and 1997, respectively.
The Company also participates with SLOC, Sun Life (U.S.) and certain affiliates
in a 401(k) savings plan for which substantially all employees are eligible. The
Company matches, up to specified amounts, employees' contributions to the plan.
Company contributions were $26,000, $30,000 and $28,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.
OTHER POSTRETIREMENT BENEFIT PLANS
In addition to pension benefits, the Company provides certain health, dental and
life insurance benefits ("postretirement benefits") for retired employees and
dependents. Substantially all employees may become eligible for these benefits
if they reach normal retirement age while working for the Company, or
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, 1999, 1998 AND 1997
9. RETIREMENT PLANS (CONTINUED):
retire early upon satisfying an alternate age plus service condition. Life
insurance benefits are generally set at a fixed amount.
The Company records an accrual of the estimated cost of retiree benefit payments
during the years the employee provides services, and amortizes an obligation of
approximately $50,000 over a period of ten years. The Company's cash flows are
not affected by implementation of this standard, but implementation decreased
net income by $9,000, $6,000 and $16,000 for the years ended December 31, 1999,
1998 and 1997, respectively. The Company's postretirement health, dental and
life insurance benefits currently are not funded.
The following table sets forth the change in the pension and other
postretirement benefit plans' benefit obligations and assets as well as the
plans' funded status reconciled with the amount shown in the Company's statutory
financial statements at December 31:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(IN 000'S)
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $110,792 $ 79,684 $ 10,419 $ 9,845
Service cost 5,632 4,506 413 240
Interest cost 6,952 6,452 845 673
Actuarial (gain) loss (21,480) 21,975 1,048 308
Benefits paid (2,376) (1,825) (508) (647)
-------- -------- -------- --------
Benefit obligation at end of year $ 99,520 $110,792 $ 12,217 $ 10,419
======== ======== ======== ========
The Company's share:
Benefit obligation at beginning of year $ 515 $ 269 $ 21 $ 89
Benefit obligation at end of year 577 515 30 21
Change in plan assets:
Fair value of plan assets at beginning of year $151,575 $136,610 $ -- $ --
Actual return on plan assets 9,072 16,790 -- --
Employer contribution -- -- 508 647
Benefits paid (2,376) (1,825) (508) (647)
-------- -------- -------- --------
Fair value of plan assets at end of year $158,271 $151,575 $ -- $ --
======== ======== ======== ========
Funded status $ 58,752 $ 40,783 $(12,217) $(10,419)
Unrecognized net actuarial gain (loss) (20,071) (2,113) 1,469 586
Unrecognized transition obligation (asset) (22,617) (24,674) 140 185
Unrecognized prior service cost 7,081 7,661 -- --
-------- -------- -------- --------
Prepaid (accrued) benefit cost $ 23,145 $ 21,657 $(10,608) $ (9,648)
======== ======== ======== ========
</TABLE>
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, 1999, 1998 AND 1997
9. RETIREMENT PLANS (CONTINUED):
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(IN 000'S)
<S> <C> <C> <C> <C>
The Company's share of accrued
benefit cost $ (338) $ (275) $ (50) $ (41)
======== ======== ======= =======
Weighted-average assumptions as of
December 31:
Discount rate 7.50% 6.75% 7.50% 6.75%
Expected return on plan assets 8.75% 8.00% N/A N/A
Rate of compensation increase 4.50% 4.50% N/A N/A
Components of net periodic benefit cost:
Service cost $ 5,632 $ 4,506 $ 413 $ 239
Interest cost 6,952 6,452 845 673
Expected return on plan assets (12,041) (10,172) -- --
Amortization of transition obligation (asset) (2,056) (2,056) 45 45
Amortization of prior service cost 580 580 -- --
Recognized net actuarial (gain) loss (554) (677) 164 (20)
-------- -------- ------- -------
Net periodic benefit cost $ (1,487) $ (1,367) $ 1,467 $ 937
======== ======== ======= =======
The Company's share of net periodic
benefit cost $ 63 $ 65 $ 9 $ 6
======== ======== ======= =======
</TABLE>
For measurement purposes, a 10.9% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 1999 (5.6% for dental benefits).
The rates were assumed to decrease gradually to 5% for 2005 and remain at that
level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage-point change in assumed
health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1-PERCENTAGE-POINT 1-PERCENTAGE-POINT
INCREASE DECREASE
------------------ ------------------
(IN 000'S)
<S> <C> <C>
Effect on total of service and interest cost components $ 288 $ (518)
Effect on postretirement benefit obligation $2,754 $(2,279)
</TABLE>
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, 1999, 1998 AND 1997
10. FAIR VALUE OF FINANCIAL STATEMENTS
The following table presents the carrying amounts and fair values of the
Company's financial instruments at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---------------------------- ----------------------------
CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT FAIR VALUE
--------------- ---------- --------------- ----------
(IN 000'S)
<S> <C> <C> <C> <C>
ASSETS:
Bonds (including short-term) $66,173 $64,122 $63,175 $64,185
Mortgages 8,660 8,876 17,658 18,157
Policy loans 538 538 625 625
LIABILITIES:
Individual annuities $26,561 $25,696 $29,724 $29,212
</TABLE>
The major methods and assumptions used in estimating the fair values of
financial instruments are as follows:
The fair values of short-term bonds are estimated to be the amortized cost. The
fair values of long-term bonds which are publicly traded are based upon market
prices or dealer quotes. For privately placed bonds, fair values are estimated
by taking into account prices for publicly traded bonds of similar credit risk,
maturity, repayment and liquidity characteristics.
The fair values of mortgages are estimated by discounting future cash flows
using current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
The fair values of policy loans approximate carrying amounts.
The fair values of the Company's general account insurance reserves and
liabilities under investment-type contracts (insurance and annuity contracts
that do not involve mortality or morbidity risks) are estimated using discounted
cash flow analyses or surrender values. Those contracts that are deemed to have
short-term guarantees have a carrying amount equal to the estimated fair value.
11. STATUTORY INVESTMENT VALUATION RESERVES
The asset valuation reserve ("AVR") provides a reserve for losses from
investments in bonds, mortgage loans, real-estate and other invested assets with
related increases or decreases being recorded directly to surplus.
Realized capital gains and losses on bonds and mortgages which relate to changes
in levels of interest rate risk are charged or credited to an Interest
Maintenance Reserve and amortized into income over the remaining contractual
life of the security sold.
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, 1999, 1998 AND 1997
11. STATUTORY INVESTMENT VALUATION RESERVES (CONTINUED):
The table shown below presents changes in the major elements of the AVR and IMR:
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
AVR IMR AVR IMR
-------- -------- -------- --------
(IN 000'S)
<S> <C> <C> <C> <C>
Balance, beginning of year $1,048 $831 $1,346 $886
Net realized capital (losses) gains, net of tax 152 (21) (13) 265
Amortization of net investment gains -- (256) -- (320)
Unrealized investment gains -- -- 359 --
Required by formula 10 -- (644) --
------ ---- ------ ----
Balance, end of year $1,210 $554 $1,048 $831
====== ==== ====== ====
</TABLE>
12. LIABILITY FOR UNPAID CLAIMS AND CLAIM ADJUSTMENT EXPENSES
Activity in the liability for unpaid claims and claim adjustment expense is
summarized below (in 000's).
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Balance, January 1 $11,770 $10,239 $ 6,129
Claims incurred 10,700 8,491 9,008
Claims paid (8,751) (6,960) (4,898)
------- ------- -------
Balance, December 31 $13,719 $11,770 $10,239
======= ======= =======
</TABLE>
The information presented above includes unpaid benefit claims and claim
adjustment expenses for the group life and group long-term disability contracts.
As of December 31, 1999 and 1998, the unpaid claims and claim adjustment
liability for these contracts is included in aggregate reserves.
13. FEDERAL INCOME TAXES
The Company files a consolidated federal income tax return with Sun Life (U.S.)
and other affiliates. Federal income taxes are calculated as if the Company
filed a return as a separate company. No provision is recognized for timing
differences, which may exist between financial statement and taxable income.
Such differences include reserves, depreciation and accrual of market discount
on bonds. The Company made cash payments to Sun Life (U.S.) of $2,521,000,
$2,506,000 and $1,938,000 during 1999, 1998 and 1997, respectively.
14. LEASE COMMITMENTS
Prior to 1999, the Company leased two separate facilities for its annuity
operations and group sales offices. Both leases commenced in March 1994. During
1999, the Company terminated its lease at its annuity operations facility as it
consolidated the functions performed at this facility with its parent company,
Sun Life (U.S.). The group sales office lease expired in July 1999 and was
renewed in August 1999 for a five year term. The total lease obligations are
$1,098,000 through the end of the lease term. Rent expense under these leases in
1999, 1998 and 1997 amounted to $426,000, $344,000, and $348,000, respectively.
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, 1999, 1998 AND 1997
15. TRANSACTIONS WITH AFFILIATES
The Company has agreements with SLOC which provide that SLOC will furnish to the
Company, as requested, personnel as well as certain investment, actuarial and
administrative services on a cost reimbursement basis. Expenses under these
agreements amounted to approximately $2,045,000 in 1999, $1,037,000 in 1998 and
$1,155,000 in 1997.
Cash dividends may be paid out of that part of the Company's available and
accumulated surplus funds, which was derived from realized net operating profits
of its business and realized capital gain. A cash dividend otherwise lawful may
be paid out of such earned surplus even though total surplus is at the time less
than previously contributed or paid-in surplus. No cash dividend shall be paid
to stockholder unless a notice of the intention of the Board of Directors to
declare such dividend and the amount thereof shall have been filed with the
Superintendent of Insurance of the State of New York not less than thirty days
in advance of such proposed declaration, nor if the Superintendent within thirty
days after such filing gives written notice to the Company of his disapproval of
such payment. Stock dividends may be paid out of any available surplus funds.
The maximum amount of dividends, which can be paid by the Company without prior
approval of the Insurance Commissioner of the State of New York, is subject to
restrictions relating to statutory surplus. A dividend in the amount of
$3,000,000 was declared and paid during 1998 by the Company to Sun Life (U.S.).
In 1999, a dividend in the amount of $6,500,000 was declared, approved by the
Board of Directors, and paid by the Company to Sun Life (U.S.).
16. RISK-BASED CAPITAL
Effective December 31, 1993, the NAIC adopted risk-based capital requirements
for life insurance companies. The risk-based capital requirements provide a
method for measuring the minimum acceptable amount of adjusted capital that a
life insurer should have, as determined under statutory accounting practices,
taking into account the risk characteristics of its investments and products.
The Company has met the minimum risk-based capital requirements at December 31,
1999 and 1998.
17. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for monetary and punitive damages have
been asserted. Although there can be no assurances, at the present time the
Company does not anticipate that the ultimate liability arising from such
pending or threatened litigation, after consideration of provisions made for
potential losses and costs of defense, will have a material adverse effect on
the financial condition or operating results of the Company.
Under insurance guaranty fund laws in each state, the District of Columbia and
Puerto Rico, insurers licensed to do business can be assessed by state insurance
guaranty associations for certain obligations of insolvent insurance companies
to policyholders and claimants. Recent regulatory actions against certain large
life insurers encountering financial difficulty have prompted various state
insurance guaranty associations to begin assessing life insurance companies for
the deemed losses. Most of these laws do provide, however, that an assessment
may be excused or deferred if it would threaten an insurer's solvency and
further provide annual limits on such assessments. Part of the assessments paid
by the Company and its subsidiaries pursuant to these laws may be used as
credits for a portion of the associated premium taxes.
58
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
17. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED):
The Company incurred guaranty fund assessments of approximately $26,000,
$114,000, and $99,000 in 1999, 1998 and 1997, respectively.
18. ACCOUNTING POLICIES AND PRINCIPLES
The financial statements of the Company have been prepared on the basis of
statutory accounting practices which, prior to 1996, were considered by the
insurance industry and the accounting profession to be in accordance with GAAP
for mutual life insurance companies. The primary differences between statutory
accounting and GAAP are described as follows. Statutory accounting practices do
not recognize the following assets or liabilities, which are reflected under
GAAP: deferred acquisition costs, deferred federal income taxes and statutory
non admitted assets. AVR and IMR are established under statutory accounting
practices but not under GAAP. Methods for calculating real estate depreciation
and investment valuation allowances differ under statutory accounting practices
and GAAP. Premiums for investment-type products are recognized as income for
statutory purposes and as deposits to policyholders' accounts for GAAP.
Investments in fixed maturity securities classified as available-for-sale are
carried at aggregate fair value with changes in unrealized gains and losses
reported net of taxes in a separate component of stockholder's equity for GAAP
and generally at amortized cost under statutory accounting practices.
19. CONSOLIDATION OF CERTAIN OPERATIONS AND ACCOUNTING FUNCTIONS
Effective July 1, 1999, the Company consolidated its customer service and
accounting functions, formerly performed at its office at 80 Broad Street in New
York, New York, with its parent company, Sun Life (U.S.), based in Wellesley
Hills, Massachusetts. In 1999 the Company incurred one-time charges
approximating $800,000, which consisted primarily of: (1) severance and employee
benefit costs for 18 employees; (2) termination fee associated with canceling
its lease at its annuity operations facility; and (3) furniture and equipment
write-offs.
59
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
We have audited the accompanying statutory statements of admitted assets,
liabilities and capital stock and surplus of Sun Life Insurance and Annuity
Company of New York ("the Company") as of December 31, 1999 and 1998, and the
related statutory statements of operations, changes in capital stock and
surplus, and cash flow for each of the three years in the period ended December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described more fully in Notes 1 and 18 to the financial statements, the
Company prepared these financial statements using accounting practices
prescribed or permitted by the Insurance Department of the State of New York,
which is a comprehensive basis of accounting other than generally accepted
accounting principles. The effects on the financial statements of the
differences between the statutory basis of accounting and generally accepted
accounting principles, although not reasonably determinable, are presumed to be
material.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the admitted assets, liabilities and capital stock and
surplus of Sun Life Insurance and Annuity Company of New York as of
December 31, 1999 and 1998, and the results of its operations and its cash flow
for each of the three years in the period ended December 31, 1999 on the basis
of accounting described in Notes 1 and 18.
However, because of the differences between the two bases of accounting referred
to in the second preceding paragraph, in our opinion, the statutory financial
statements referred to above do not present fairly, in conformity with generally
accepted accounting principles, the financial position of Sun Life Insurance and
Annuity Company of New York as of December 31, 1999 and 1998 or the results of
its operations or its cash flow for each of the three years in the period ended
December 31, 1999.
DELOITTE & TOUCHE LLP
February 10, 2000
60
<PAGE>
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
Calculation of Performance Data
Advertising and Sales Literature
Calculations
Example of Variable Accumulation Unit Value Calculation
Example of Variable Annuity Unit Calculation
Example of Variable Annuity Payment Calculation
Distribution of the Contracts
Designation and Change of Beneficiary
Custodian
Financial Statements
</TABLE>
61
<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 April 17, 2000 which is incorporated herein by reference. The
Statement of Additional Information is available upon request and without charge
from Sun Life Insurance and Annuity Company of New York. To receive a copy,
return this request form to the address shown below or telephone (800) 447-7569.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
To: Sun Life Insurance and Annuity Company of New York
P.O. Box 9141
Boston, Massachusetts 02117
Please send me a Statement of Additional Information for
Regatta Gold-NY Variable and Fixed Annuity
Sun Life (N.Y.) Variable Account C.
</TABLE>
<TABLE>
<S> <C>
Name ------------------------------------------------------------
Address ------------------------------------------------------------
------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
City -------------------------------- State -------------- Zip -------
</TABLE>
<TABLE>
<S> <C>
Telephone ------------------------------------------------------------
</TABLE>
62
<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 on 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 a 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 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.
* You specify these items on the Contract Specifications page, and may change
them, as we described in this Prospectus.
63
<PAGE>
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 Sub-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 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.
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.
* You specify these items on the Contract Specifications page, and may change
them, as we described in this Prospectus.
64
<PAGE>
SEVEN-YEAR ANNIVERSARY: The seventh Contract Anniversary and each
succeeding Contract Anniversary occurring at any seven year interval thereafter;
for example, the 14th, 21st and 28th Contract Anniversaries.
SUB-ACCOUNT: That portion of the Variable Account which invests in shares
of a specific 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.
65
<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 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 1998 1999
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
BOND SERIES
Unit Value:
Beginning of period........................ -- -- -- $ 10.0000**
End of period.............................. -- -- -- $ 9.8200
Units outstanding at end of period........... -- -- -- 2,344
CAPITAL APPRECIATION SERIES
Unit Value:
Beginning of period........................ $10.0000** $ 11.2208 $ 13.6249 $ 17.2946
End of period.............................. $11.2208 $ 13.6249 $ 17.2946 $ 22.6198
Units outstanding at end of period........... 401,401 933,956 1,387,198 1,596,747
CAPITAL OPPORTUNITIES SERIES
Unit Value:
Beginning of period........................ -- $ 10.0000** $ 10.8511 $ 13.5854
End of period.............................. -- $ 10.8511 $ 13.5854 $ 19.7776
Units outstanding at end of period........... -- 61,777 245,193 423,782
EMERGING GROWTH SERIES
Unit Value:
Beginning of period........................ $10.0000** $ 10.5475 $ 12.6847 $ 16.7445
End of period.............................. $10.5475 $ 12.6847 $ 16.7445 $ 29.0322
Units outstanding at end of period........... 335,404 966,583 1,482,470 1,674,168
EMERGING MARKETS EQUITY SERIES
Unit Value:
Beginning of period........................ -- $ 10.0000** $ 8.7203 $ 6.0241
End of period.............................. -- $ 8.7203 $ 6.0241 $ 9.0591
Units outstanding at end of period........... -- 41,861 23,240 28,793
EQUITY INCOME SERIES
Unit Value:
Beginning of period........................ -- -- -- $ 10.0000**
End of period.............................. -- -- -- $ 9.8814
Units outstanding at end of period........... -- -- -- 23,813
GLOBAL ASSET ALLOCATION SERIES
Unit Value:
Beginning of period........................ $10.0000** $ 10.6551 $ 11.6505 $ 12.2289
End of period.............................. $10.6551 $ 11.6505 $ 12.2289 $ 14,2950
Units outstanding at end of period........... 39,223 215,473 267,873 259,810
GLOBAL GOVERNMENTS SERIES
Unit Value:
Beginning of period........................ $10.0000** $ 10.2412 $ 10.0221 $ 11.4123
End of period.............................. $10.2412 $ 10.0221 $ 11.4123 $ 10.6699
Units outstanding at end of period........... 30,008 73,436 90,226 89,314
GLOBAL GROWTH SERIES
Unit Value:
Beginning of period........................ $10.0000** $ 10.4190 $ 11.8491 $ 13.3854
End of period.............................. $10.4190 $ 11.8491 $ 13.3854 $ 22.0804
Units outstanding at end of period........... 94,134 324,362 402,319 509,687
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31,
-----------------------------------------------------
1996* 1997 1998 1999
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
GLOBAL TOTAL RETURN SERIES
Unit Value:
Beginning of period........................ $10.0000** $ 10.6202 $ 11.9033 $ 13.8923
End of period.............................. $10.6202 $ 11.9033 $ 13.8923 $ 14.8545
Units outstanding at end of period........... 24,306 181,210 334,013 310,409
GOVERNMENT SECURITIES SERIES
Unit Value:
Beginning of period........................ $10.0000** $ 10.2283 $ 10.9695 $ 11.7627
End of period.............................. $10.2283 $ 10.9695 $ 11.7627 $ 11.3761
Units outstanding at end of period........... 40,062 168,798 483,528 553,951
HIGH YIELD SERIES
Unit Value:
Beginning of period........................ $10.0000** $ 10.5902 $ 11.8237 $ 11.7316
End of period.............................. $10.5092 $ 11.8237 $ 11.7316 $ 12.3601
Units outstanding at end of period........... 109,992 482,767 869,291 988,547
INTERNATIONAL GROWTH AND INCOME SERIES
Unit Value:
Beginning of period........................ $10.0000** $ 10.2062 $ 9.3612 $ 12.8587
End of period.............................. $10.2062 $ 9.3612 $ 12.8587 $ 14.8716
Units outstanding at end of period........... -- 9,227 41,872 53,996
INTERNATIONAL GROWTH SERIES
Unit Value:
Beginning of period........................ $10.0000** $ 10.2062 $ 10.7213 $ 9.4088
End of period.............................. $10.2062 $ 10.7213 $ 9.4088 $ 12.5550
Units outstanding at end of period........... 56,408 188,749 272,201 246,036
MANAGED SECTORS SERIES
Unit Value:
Beginning of period........................ $10.0000** $ 11.3497 $ 14.0620 $ 15.5700
End of period.............................. $11.3497 $ 14.0620 $ 15.5700 $ 28.4991
Units outstanding at end of period........... 92,171 251,868 401,019 478,856
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
Unit Value:
Beginning of period........................ -- -- -- $ 10.0000**
End of period.............................. -- -- -- $ 12.5684
Units outstanding at end of period........... -- -- -- 275,481
MASSACHUSETTS INVESTORS TRUST SERIES
Unit Value:
Beginning of period........................ $10.0000** $ 11.2287 $ 14.6125 $ 17.8458
End of period.............................. $11.2287 $ 14.6125 $ 17.8458 $ 18.8640
Units outstanding at end of period........... 347,210 1,722,218 2,936,804 3,305,098
MONEY MARKET SERIES
Unit Value:
Beginning of period........................ $10.0000** $ 10.1193 $ 10.4857 $ 10.8609
End of period.............................. $10.1193 $ 10.4857 $ 10.8609 $ 11.2115
Units outstanding at end of period........... 244,386 395,655 921,204 760,178
NEW DISCOVERY SERIES
Unit Value:
Beginning of period........................ -- -- -- $ 10.0000**
End of period.............................. -- -- -- $ 16.0007
Units outstanding at end of period........... -- -- -- 69,746
</TABLE>
67
<PAGE>
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31,
-----------------------------------------------------
1996* 1997 1998 1999
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
RESEARCH SERIES
Unit Value:
Beginning of period........................ $10.0000** $ 11.1263 $ 13.2588 $ 16.1649
End of period.............................. $11.1263 $ 13.2588 $ 16.1649 $ 19.7914
Units outstanding at end of period........... 386,810 1,478,012 2,330,245 2,320,814
RESEARCH GROWTH AND INCOME SERIES
Unit Value:
Beginning of period........................ -- $ 10.0000** $ 10.7234 $ 12.9195
End of period.............................. -- $ 10.7234 $ 12.9195 $ 13.7803
Units outstanding at end of period........... -- 59,221 222,849 283,227
RESEARCH INTERNATIONAL SERIES
Unit Value:
Beginning of period........................ -- -- -- $ 10.0000**
End of period.............................. -- -- -- $ 13.3890
Units outstanding at end of period........... -- -- -- 23,159
STRATEGIC INCOME SERIES
Unit Value:
Beginning of period........................ -- -- -- $ 10.0000**
End of period.............................. -- -- -- $ 10.1388
Units outstanding at end of period........... -- -- -- 23,978
TOTAL RETURN SERIES
Unit Value:
Beginning of period........................ $10.0000** $ 10.7617 $ 12.9446 $ 14.2649
End of period.............................. $10.7617 $ 12.9446 $ 14.2649 $ 14.4646
Units outstanding at end of period........... 321,897 1,288,455 2,154,305 2,196,447
UTILITIES SERIES
Unit Value:
Beginning of period........................ $10.0000** $ 11.1898 $ 14.6470 $ 16.9849
End of period.............................. $11.1898 $ 14.6470 $ 16.9849 $ 21.9857
Units outstanding at end of period........... 45,474 187,310 529,135 616,993
</TABLE>
* From January 1, 1996 to December 31, 1996.
** Unit value on the date of commencement of operations of the respective
Sub-Account.
68
<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 7 Account Years ("New Payments")); plus (2) any unused Annual
Withdrawal Allowances from previous years; plus (3) any Purchase Payments
made before the last 7 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,
69
<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 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>
<C> <C> <S> <C> <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.
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> <C> <S> <C> <C> <C> <C>
N/12
1 + I
The MVA factor = ( -------- ) -1
1 + J
</TABLE>
<TABLE>
<C> <C> <S> <C> <C> <C> <C>
24/12
1 + .06
= ( ------ ) -1
1 + .08
2
= (.981) -1
= .963 -1
= - .037
</TABLE>
70
<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.
<TABLE>
<C> <C> <S> <C> <C> <C> <C>
N/12
1 + I
The MVA factor = ( ----- ) -1
1 + J
</TABLE>
<TABLE>
<C> <C> <S> <C> <C> <C> <C>
24/12
1 + .06
= ( ------ ) -1
1 + .05
2
= (1.010) -1
= 1.019 -1
= - .019
</TABLE>
The value of the Guarantee Amount less interest credited to the Guarantee
Amount in the current Contract Year is multiplied by the MVA factor to determine
the MVA:
($11,910.16 - $674.16) X .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.
71
<PAGE>
<TABLE>
<S> <C>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
P.O. BOX 9141
BOSTON, MASSACHUSETTS 02117
TELEPHONE:
Toll Free (800) 447-7569
GENERAL DISTRIBUTOR
Clarendon Insurance Agency, Inc.
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, Massachusetts 02116
GOLD-NY 4/2000
</TABLE>
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
APRIL 17, 2000
PROFILE
FUTURITY--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 FUTURITY--NY ANNUITY
The Futurity--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 39 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 mutual fund or series thereof (collectively, the "Funds") 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
Funds 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 as many as 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.
<PAGE>
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 may waive these limits. 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.
4. ALLOCATION OPTIONS
You can allocate your money among Sub-Accounts investing in the following
Funds:
<TABLE>
<S> <C>
AIM VARIABLE INSURANCE FUNDS, INC. MFS/SUN LIFE SERIES TRUST
AIM V.I. Capital Appreciation Fund Capital Appreciation Series
AIM V.I. Growth Fund Emerging Growth Series
AIM V.I. Growth and Income Fund Government Securities Series
AIM V.I. International Equity Fund High Yield Series
THE ALGER AMERICAN FUND Massachusetts Investors Growth Stock
Growth Portfolio Series
Income and Growth Portfolio Massachusetts Investors Trust Series
Small Capitalization Portfolio New Discovery Series
GOLDMAN SACHS VARIABLE INSURANCE TRUST Total Return Series
("VIT") Utilities Series
VIT CORE-SM- Large Cap Growth Fund OCC ACCUMULATION TRUST
VIT CORE-SM- Small Cap Equity Fund Equity Portfolio
VIT CORE-SM- U.S. Equity Fund Managed Portfolio
VIT Growth and Income Fund Mid Cap Portfolio
VIT International Equity Fund Small Cap Portfolio
J.P. MORGAN SERIES TRUST II SUN CAPITAL ADVISERS TRUST
J.P. Morgan International Opportunities Sun Capital Blue Chip Mid Cap Fund
Portfolio Sun Capital Investment Grade Bond Fund
J.P. Morgan Small Company Portfolio Sun Capital Investors Foundation Fund
J.P. Morgan U.S. Disciplined Equity Sun Capital Money Market Fund
Portfolio Sun Capital Real Estate Fund
LORD ABBETT SERIES FUND, INC. Sun Capital Select Equity Fund
Growth and Income Portfolio
</TABLE>
Market conditions will determine the value of an investment in any Fund.
Each Fund is described in the relevant Fund prospectus.
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 Contract. 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. Each payment begins a new 7-year period and moves down a declining
surrender charge
2
<PAGE>
scale at each Contract Anniversary. Payments received during the current
Contract Year will be charged 6% if withdrawn. On your next scheduled Contract
Anniversary, that payment, along with any other payments made during the
Contract Year, will be considered to be in their second Contract Year and will
have a 5% withdrawal charge. On the next Contract Anniversary, these payments
will move into their third Contract Year and will have a withdrawal charge of
5%, if withdrawn. The withdrawal charge decreases according to the number of
Contract Years the purchase payment has been in your Account. The declining
scale is as follows:
<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
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 Contracts, there are
charges (which include management fees and operating expenses) imposed by each
Fund, which range from 0.51% to 1.40% of the average net assets of the Fund,
depending upon which Funds 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 at any time.
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" of 1.50% as shown in the table below
include the insurance charges of 1.40% of your daily net assets (1.25% for
mortality and expense risks and 0.15% for adminstrative expenses), 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.
3
<PAGE>
<TABLE>
<CAPTION>
EXAMPLES:
TOTAL ANNUAL TOTAL ANNUAL TOTAL TOTAL EXPENSES
INSURANCE FUND ANNUAL AT END
SUB-ACCOUNT CHARGES EXPENSES EXPENSES 1 YEAR 10 YEARS
- ----------- ------- -------- -------- ------ --------
<S> <C> <C> <C> <C> <C>
AIM V.I. Capital Appreciation
Fund 1.50% 0.73% 2.23% $78 $256
AIM V.I. Growth Fund 1.50% 0.73% 2.23% $78 $256
AIM V.I. Growth and Income Fund 1.50% 0.76% 2.26% $79 $261
AIM V.I. International Equity
Fund 1.50% 0.97% 2.47% $81 $281
Alger American Growth Portfolio 1.50% 0.79% 2.29% $79 $263
Alger American Income and Growth
Portfolio 1.50% 0.70% 2.20% $78 $253
Alger American Small
Capitalization Portfolio 1.50% 0.90% 2.40% $80 $274
Goldman Sachs VIT CORE-SM- Large
Cap Growth Fund 1.50% 0.90% 2.40% $80 $274
Goldman Sachs VIT CORE-SM- Small
Cap Equity Fund 1.50% 1.00% 2.50% $81 $284
Goldman Sachs VIT CORE-SM- U.S.
Equity Fund 1.50% 0.90% 2.40% $80 $274
Goldman Sachs VIT Growth and
Income Fund 1.50% 1.00% 2.50% $81 $284
Goldman Sachs VIT International
Equity Fund 1.50% 1.35% 2.85% $84 $318
J.P. Morgan International
Opportunities Porfolio 1.50% 1.20% 2.70% $83 $303
J.P. Morgan Small Company
Portfolio 1.50% 1.15% 2.65% $82 $298
J.P. Morgan U.S. Disciplined
Equity Portfolio 1.50% 0.85% 2.35% $79 $269
Lord Abbett Growth and Income
Portfolio 1.50% 0.51% 2.01% $76 $234
MFS/Sun Life Capital Appreciation
Series 1.50% 0.76% 2.26% $79 $260
MFS/Sun Life Emerging Growth
Series 1.50% 0.75% 2.25% $78 $258
MFS/Sun Life Government
Securities Series 1.50% 0.61% 2.11% $77 $244
MFS/Sun Life High Yield Series 1.50% 0.83% 2.33% $79 $267
MFS/Sun Life Massachusetts
Investors Growth Stock Series 1.50% 0.83% 2.33% $79 $267
MFS/Sun Life Massachusetts
Investors Trust Series 1.50% 0.59% 2.09% $77 $242
MFS/Sun Life New Discovery Series 1.50% 1.06% 2.56% $81 $290
MFS/Sun Life Total Return Series 1.50% 0.69% 2.19% $78 $252
MFS/Sun Life Utilities Series 1.50% 0.81% 2.31% $79 $265
OCC Equity Portfolio 1.50% 0.91% 2.41% $80 $275
OCC Managed Portfolio 1.50% 0.83% 2.33% $79 $267
OCC Mid Cap Portfolio 1.50% 1.03% 2.53% $81 $287
OCC Small Cap Portfolio 1.50% 0.89% 2.39% $80 $273
Sun Capital Blue Chip Mid Cap
Fund 1.50% 1.00% 2.50% $81 $284
Sun Capital Investment Grade Bond
Fund 1.50% 0.75% 2.25% $78 $258
Sun Capital Investors Foundation
Fund 1.50% 0.90% 2.40% $80 $274
Sun Capital Money Market Fund 1.50% 0.65% 2.15% $78 $248
Sun Capital Real Estate Fund 1.50% 1.25% 2.25% $83 $308
Sun Capital Select Equity Fund 1.50% 0.90% 2.40% $80 $274
</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
4
<PAGE>
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 or transfer 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 Funds you
choose. The Sub-Accounts have not been in operation for a full calendar year;
therefore, no performance information is provided in this Profile.
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 highest 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.
5
<PAGE>
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 investment 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 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 do
not wish to risk a decrease in the value of your investment.
CONFIRMATIONS AND QUARTERLY STATEMENTS. You will receive a confirmation of
each transaction within your Contract, except for those programs which are part
of an automated program such as Dollar-Cost Averaging, Asset Allocation,
Systematic Withdrawal and/or Portfolio Rebalancing. 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 Contract 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 -- This program rebalances your Account based on the
terms of the program. Different asset allocation models may be available over
the lifetime of the Contract; however, only one program can be in effect at any
one time.
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
P.O. BOX 9141
BOSTON, MASSACHUSETTS 02117
TEL: TOLL FREE (800) 282-7073
6
<PAGE>
PROSPECTUS
APRIL 17, 2000
FUTURITY--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 39 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 mutual funds or a series thereof
(the "Funds"):
<TABLE>
<S> <C>
AIM VARIABLE INSURANCE FUNDS, INC. MFS/SUN LIFE SERIES TRUST
AIM V.I. Capital Appreciation Fund Capital Appreciation Series
AIM V.I. Growth Fund Emerging Growth Series
AIM V.I. Growth and Income Fund Government Securities Series
AIM V.I. International Equity Fund High Yield Series
THE ALGER AMERICAN FUND Massachusetts Investors Growth Stock
Growth Portfolio Series
Income and Growth Portfolio Massachusetts Investors Trust Series
Small Capitalization Portfolio New Discovery Series
GOLDMAN SACHS VARIABLE INSURANCE TRUST Total Return Series
("VIT") Utilities Series
VIT CORE-SM- Large Cap Growth Fund OCC ACCUMULATION TRUST
VIT CORE-SM- Small Cap Equity Fund Equity Portfolio
VIT CORE-SM- U.S. Equity Fund Managed Portfolio
VIT Growth and Income Fund Mid Cap Portfolio
VIT International Equity Fund Small Cap Portfolio
J.P. MORGAN SERIES TRUST II SUN CAPITAL ADVISERS TRUST
J.P. Morgan International Opportunities Sun Capital Blue Chip Mid Cap Fund
Portfolio Sun Capital Investment Grade Bond Fund
J.P. Morgan Small Company Portfolio Sun Capital Investors Foundation Fund
J.P. Morgan U.S. Disciplined Equity Sun Capital Money Market Fund
Portfolio Sun Capital Real Estate Fund
LORD ABBETT SERIES FUND, INC. Sun Capital Select Equity Fund
Growth and Income Portfolio
</TABLE>
The fixed account options are available for specified time periods, called
Guarantee Periods, and pay interest at a guaranteed rate for each period.
PLEASE READ THIS PROSPECTUS AND THE FUND PROSPECTUSES CAREFULLY BEFORE
INVESTING AND KEEP THEM FOR FUTURE REFERENCE. THEY CONTAIN IMPORTANT INFORMATION
ABOUT THE CONTRACTS AND THE FUNDS.
We have filed a Statement of Additional Information dated April 17, 2000
(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 62 of this Prospectus. You may obtain a copy without charge by
writing to us at the address shown below (which we sometimes refer to as our
"Service Address") or by telephoning (800) 282-7073. In addition, the SEC
maintains a website (http:// www.sec.gov) that contains 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
SERVICE ADDRESS:
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
P.O. BOX 9141
BOSTON, MASSACHUSETTS 02117
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Special Terms 4
Expense Summary 4
Summary of Contract Expenses 4
Underlying Fund Annual Expenses 5
Examples 7
The Annuity Contract 9
Communicating to Us About Your Contract 9
Sun Life Insurance and Annuity Company of New York 9
Sun Life Assurance Company of Canada (U.S.) 9
The Variable Account 10
Variable Account Options: The Funds 10
The Fixed Account 13
The Fixed Account Options: The Guarantee Periods 14
The Accumulation Phase 14
Issuing Your Contract 14
Amount and Frequency of Purchase Payments 14
Allocation of Net Purchase Payments 15
Your Account 15
Your Account Value 15
Variable Account Value 15
Fixed Account Value 16
Transfer Privilege 17
Waivers; Reduced Charges; Credits; Bonus Guaranteed
Interest Rates 18
Optional Programs 18
Withdrawals, Withdrawal Charge and Market Value Adjustment 20
Cash Withdrawals 20
Withdrawal Charge 21
Market Value Adjustment 23
Contract Charges 23
Account Fee 23
Administrative Expense Charge 24
Mortality and Expense Risk Charge 24
Premium Taxes 24
Fund Expenses 24
Death Benefit 25
Amount of Death Benefit 25
Method of Paying Death Benefit 25
Selection and Change of Beneficiary 26
Payment of Death Benefit 26
Due Proof of Death 26
The Income Phase -- Annuity Provisions 26
Selection of the Annuitant or Co-Annuitant 26
Selection of the Annuity Commencement Date 27
Annuity Options 27
Selection of Annuity Option 28
Amount of Annuity Payments 28
Exchange of Variable Annuity Units 29
Account Fee 30
Annuity Payment Rates 30
Annuity Options as Method of Payment for Death Benefit 30
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Other Contract Provisions 30
Exercise of Contract Rights 30
Change of Ownership 30
Death of Owner 31
Voting of Fund Shares 31
Periodic Reports 32
Substitution of Securities 32
Change in Operation of Variable Account 33
Splitting Units 33
Modification 33
Right to Return 33
Tax Considerations 33
Deductibility of Purchase Payments 34
Pre-Distribution Taxation of Contracts 34
Distributions and Withdrawals from Non-Qualified
Contracts 34
Distribution and Withdrawals from Qualified Contracts 34
Withholding 35
Investment Diversification and Control 35
Tax Treatment of the Company and the Variable Account 35
Qualified Retirement Plans 35
Pension and Profit-Sharing Plans 36
Tax-Sheltered Annuities 36
Individual Retirement Accounts 36
Roth IRAs 36
Administration of the Contracts 37
Distribution of the Contracts 37
Performance Information 37
Available Information 38
Incorporation of Certain Documents by Reference 39
Additional Information About the Company 39
Business of the Company 39
Selected Financial Data 39
Management's Discussion and Analysis of Financial
Condition and Results of Operations 40
Cautionary Statement 40
Results of Operations 40
Quantitative and Qualitative Disclosure About Market
Risk 40
General 41
Types of Market Risks 41
Interest Rate Risk Management 41
Reinsurance 42
Reserves 42
Investments 42
Competition 43
Employees 43
Properties 43
State Regulation 43
Legal Proceedings 44
Accountants 44
Financial Statements 44
Table of Contents of Statement of Additional Information 62
Appendix A -- Glossary 64
Appendix B -- 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 Fund. The table should be considered
together with the narrative provided under the heading "Contract Charges" in
this Prospectus, and with the Funds' prospectuses. 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)............................................ $ 15
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) Currently, no fee is imposed on transfers; however, Market Value Adjustment
may be imposed on amounts transferred from or within the Fixed Account. We
reserve the right to impose up to $15 per transfer.
4
<PAGE>
UNDERLYING FUND ANNUAL EXPENSES (1)
(AS A PERCENTAGE OF FUND NET ASSETS)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER ANNUAL
FEES (AFTER EXPENSES (AFTER EXPENSES (AFTER
FUND REIMBURSEMENT)(2) REIMBURSEMENT)(2) REIMBURSEMENT)(2)
- ---- ----------------- ----------------- -----------------
<S> <C> <C> <C>
AIM V.I. Capital Appreciation Fund............ 0.62% 0.11% 0.73%
AIM V.I. Growth Fund.......................... 0.63% 0.10% 0.73%
AIM V.I. Growth and Income Fund............... 0.61% 0.16% 0.76%
AIM V.I. International Equity Fund............ 0.75% 0.22% 0.97%
Alger American Growth Portfolio............... 0.75% 0.04% 0.79%
Alger American Income and Growth Portfolio.... 0.62% 0.08% 0.70%
Alger American Small Capitalization
Portfolio.................................... 0.85% 0.05% 0.90%
Goldman Sachs VIT CORE-SM- Large Cap Growth
Fund(3)...................................... 0.70% 0.20% 0.90%
Goldman Sachs VIT CORE-SM- Small Cap Equity
Fund(3)...................................... 0.75% 0.25% 1.00%
Goldman Sachs VIT CORE-SM- U.S. Equity
Fund(3)...................................... 0.70% 0.20% 0.90%
Goldman Sachs VIT Growth and Income Fund(3)... 0.75% 0.25% 1.00%
Goldman Sachs VIT International Equity
Fund(3)...................................... 1.00% 0.35% 1.35%
J.P. Morgan International Opportunities
Portfolio(4)................................. 0.60% 0.60% 1.20%
J.P. Morgan Small Company Portfolio(4)........ 0.60% 0.55% 1.15%
J.P. Morgan U.S. Disciplined Equity
Portfolio(4)................................. 0.35% 0.50% 0.85%
Lord Abbett Growth and Income Portfolio....... 0.50% 0.01% 0.51%
MFS/Sun Life Capital Appreciation Series(5)... 0.71% 0.05% 0.76%
MFS/Sun Life Emerging Growth Series........... 0.70% 0.05% 0.75%
MFS/Sun Life Government Securities Series..... 0.55% 0.06% 0.61%
MFS/Sun Life High Yield Series(5)............. 0.75% 0.08% 0.83%
MFS/Sun Life Massachusetts Investors Growth
Stock Series................................. 0.75% 0.08% 0.83%
MFS/Sun Life Massachusetts Investors Trust
Series....................................... 0.55% 0.04% 0.59%
MFS/Sun Life New Discovery Series(5).......... 0.90% 0.16% 1.06%
MFS/Sun Life Total Return Series.............. 0.65% 0.04% 0.69%
MFS/Sun Life Utilities Series(5).............. 0.75% 0.06% 0.81%
OCC Equity Portfolio(6)....................... 0.80% 0.11% 0.91%
OCC Managed Portfolio(6)...................... 0.77% 0.06% 0.83%
OCC Mid Cap Portfolio(6)...................... 0.10% 0.93% 1.03%
OCC Small Cap Portfolio(6).................... 0.80% 0.09% 0.89%
Sun Capital Blue Chip Mid Cap Fund(7)(8)...... 0.80% 0.20% 1.00%
Sun Capital Investment Grade Bond Fund(7)..... 0.60% 0.15% 0.75%
Sun Capital Investors Foundation Fund(7)(8)... 0.75% 0.15% 0.90%
Sun Capital Money Market Fund(7).............. 0.50% 0.15% 0.65%
Sun Capital Real Estate Fund(7)............... 0.95% 0.30% 1.25%
Sun Capital Select Equity Fund(7)(8).......... 0.75% 0.15% 0.90%
</TABLE>
- ------------------------
(1) The information relating to Fund expenses was provided by the Funds and we
have not independently verified it. You should consult the Fund prospectuses
for more information about Fund expenses.
(2) For all Funds, "Management Fees," "Other Expenses" and "Total Fund Annual
Expenses" are based on actual expenses for the fiscal year ended December
31, 1999, net of any applicable expense reimbursement or waiver.
(3) The investment advisers for the Goldman Sachs VIT Funds have voluntarily
agreed to waive or reimburse a portion of the management fees and/or
operating expenses, resulting in a reduction of the total expenses. In
particular, the investment advisers to the Goldman Sachs VIT CORE-SM-
5
<PAGE>
Large Capital Growth Fund, the Goldman Sachs VIT CORE-SM- Small Cap Equity
Fund, the Goldman Sachs VIT CORE-SM- U.S. Equity Fund, the Goldman Sachs VIT
Growth and Income Fund and the Goldman Sachs VIT International Equity Fund
have voluntarily agreed to reduce or limit certain "Other Expenses" of such
Funds (excluding management fees, taxes, interest and brokerage fees,
litigation, indemnification and other extraordinary expenses) to the extent
such expenses exceed 0.20%, 0.25%, 0.20%, 0.25%, and 0.35% per annum of such
Funds' average daily net assets, respectively. The expenses of the Goldman
Sachs VIT Funds are estimated for the fiscal year ended December 31, 2000.
Absent any such waiver or reimbursement, estimated "Management Fees,"
estimated "Other Expenses," and estimated "Total Fund Annual Expenses" for
the year ended December 31, 2000 will be: 0.70%, 0.42%, and 1.12% for the
Goldman Sachs VIT CORE-SM- Large Cap Growth Fund; 0.75%, 0.75% and 1.50% for
the Goldman Sachs VIT CORE-SM- Small Cap Equity Fund; 0.70%, 0.20%, and
0.90% for the Goldman Sachs VIT CORE-SM- U.S. Equity Fund; 0.75%, 0.47%, and
1.22% for the Goldman Sachs VIT Growth and Income Fund; and 1.00%, 0.77%,
and 1.77% for the Goldman Sachs VIT International Equity Fund. Fee waivers
and expense reimbursements for the Goldman Sachs VIT Funds may be
discontinued at any time.
(4) An affiliate of the adviser has agreed to reimburse the Fund to the extent
certain expenses exceed the following percentages of the Fund's average
daily net assets through fiscal year 1999: 0.85% for the J.P. Morgan U.S.
Disciplined Equity Portfolio; 1.20% for the J.P. Morgan International
Opportunities Portfolio, and 1.15% for the J.P. Morgan Small Company
Portfolio. Absent this reimbursement, "Total Fund Annual Expenses" would
have been 0.87% for the J.P. Morgan U.S. Disciplined Equity Portfolio, 1.98%
for the J.P. Morgan International Opportunities Portfolio, and 2.57% for the
J.P. Morgan Small Company Portfolio.
(5) The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent, and may enter into such other
arrangements and directed brokerage arrangement (which would also have the
effect of reducing the Fund's expenses). Any such fee reductions are not
reflected in the table. Had these fees been taken into account, "Total Fund
Annual Expenses" would have been: 0.75% for the MFS/Sun Life Capital
Appreciation Series; 0.82% for the MFS/Sun Life High Yield Series; 1.05% for
the MFS/Sun Life New Discovery Series; and 0.80% for the MFS/Sun Life
Utilities Series.
(6) "Total Fund Annual Expenses" for the OCC Equity Portfolio, the OCC Small Cap
Portfolio, the OCC Managed Portfolio and the OCC Mid Cap Portfolio are
limited contractually by OpCap Advisers so that the Funds' respective
annualized operating expenses (net of expense offsets) do not exceed 1% of
average daily net assets. Absent this limit, "Management Fees", "Other
Expenses" and "Total Fund Annual Expenses" were 0.80%, 3.48%, and 4.28% for
the OCC Mid Cap Portfolio. "Other Expenses" are shown gross of expense
offsets afforded the portfolio, which effectively lowered custody expenses.
(7) The investment adviser for the Sun Capital Funds has voluntarily agreed to
waive or reimburse a portion of the management fees and/or operating
expenses, resulting in a reduction of the total expenses. For the year ended
December 1999, the investment adviser waived all investment advisory fees.
Absent any such waiver or reimbursement, "Management Fees," "Other Expenses"
and "Total Fund Annual Expenses" for the year ended December 31, 1999 were:
0.80%, 3.31%; and 4.11% for the Sun Capital Blue Chip Mid Cap Fund; 2.70%,
1.38%; and 1.98% for the Sun Capital Investment Grade Bond Fund; 0.75%,
4.37%; and 5.12% for the Sun Capital Investors Foundation Fund; 0.50%,
2.20%; and 2.70% for the Sun Capital Money Market Fund; 0.95%, 2.44%; and
3.39% for the Sun Capital Real Estate Fund; and 0.75%, 3.50%; and 4.25% for
the Sun Capital Select Equity Fund. Fee waivers and expense reimbursements
for the Sun Capital Funds may be discontinued at any time after May 1, 2001.
To the extent that the expense ratio of any Fund in the Sun Capital Advisers
Trust falls below the Fund's expense limit, the Fund's adviser reserves the
right to be reimbursed for management fees waived and Fund expenses paid by
it during the prior two years.
(8) The management fee for each of the Sun Capital Blue Chip Mid Cap Fund, the
Sun Capital Investors Foundation Fund, and the Sun Capital Select Equity
Fund decreases to 0.75%, 0.70%; and 0.70%, respectively, as the daily net
assets of each Fund exceed $300 million.
6
<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 an average
Contract size of $30,000 and a 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund.......................... $78 $109 $145 $256
AIM V.I. Growth Fund........................................ $78 $109 $145 $256
AIM V.I. Growth and Income Fund............................. $79 $110 $147 $261
AIM V.I. International Equity Fund.......................... $81 $116 $157 $281
Alger American Growth Portfolio............................. $79 $111 $148 $263
Alger American Income and Growth Portfolio.................. $78 $108 $144 $253
Alger American Small Capitalization Portfolio............... $80 $114 $154 $274
Goldman Sachs VIT CORE-SM- Large Cap Growth Fund............ $80 $114 $154 $274
Goldman Sachs VIT CORE-SM- Small Cap Equity Fund............ $81 $117 $158 $284
Goldman Sachs VIT CORE-SM- U.S. Equity Fund................. $80 $114 $154 $274
Goldman Sachs VIT Growth and Income Fund.................... $81 $117 $158 $284
Goldman Sachs VIT International Equity Fund................. $84 $127 $175 $318
J.P. Morgan International Opportunities Portfolio........... $83 $122 $168 $303
J.P. Morgan Small Company Portfolio......................... $82 $121 $165 $298
J.P. Morgan U.S. Disciplined Equity Portfolio............... $79 $112 $151 $269
Lord Abbett Growth and Income Portfolio..................... $76 $103 $135 $234
MFS/Sun Life Capital Appreciation Series.................... $79 $110 $147 $260
MFS/Sun Life Emerging Growth Series......................... $78 $110 $146 $258
MFS/Sun Life Government Securities Series................... $77 $106 $140 $244
MFS/Sun Life High Yield Series.............................. $79 $112 $150 $267
MFS/Sun Life Massachusetts Investors Growth Stock Series.... $79 $112 $150 $267
MFS/Sun Life Massachusetts Investors Trust Series........... $77 $105 $139 $242
MFS/Sun Life New Discovery Series........................... $81 $118 $161 $290
MFS/Sun Life Total Return Series............................ $78 $108 $143 $252
MFS/Sun Life Utilities Series............................... $79 $111 $149 $265
OCC Equity Portfolio........................................ $80 $114 $154 $275
OCC Managed Portfolio....................................... $79 $112 $150 $267
OCC Mid Cap Portfolio....................................... $81 $118 $160 $287
OCC Small Cap Portfolio..................................... $80 $114 $153 $273
Sun Capital Blue Chip Mid Cap Fund.......................... $81 $117 $158 $284
Sun Capital Investment Grade Bond Fund...................... $78 $110 $146 $258
Sun Capital Investors Foundation Fund....................... $80 $114 $154 $274
Sun Capital Money Market Fund............................... $78 $107 $141 $248
Sun Capital Real Estate Fund................................ $83 $124 $170 $308
Sun Capital Select Equity Fund.............................. $80 $114 $154 $274
</TABLE>
If you do NOT surrender your Contract, or if you annuitize at the end of
the applicable time period, you would pay the following expenses on a $1,000
investment, assuming an average Contract size of $30,000 and a 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund.......................... $23 $70 $119 $256
AIM V.I. Growth Fund........................................ $23 $70 $119 $256
AIM V.I. Growth and Income Fund............................. $23 $71 $122 $261
AIM V.I. International Equity Fund.......................... $25 $77 $132 $281
Alger American Growth Portfolio............................. $23 $72 $123 $263
Alger American Income and Growth Portfolio.................. $22 $69 $118 $253
Alger American Small Capitalization Portfolio............... $24 $75 $128 $274
Goldman Sachs VIT CORE-SM- Large Cap Growth Fund............ $24 $75 $128 $274
Goldman Sachs VIT CORE-SM- Small Cap Equity Fund............ $25 $78 $133 $284
Goldman Sachs VIT CORE-SM- U.S. Equity Fund................. $24 $75 $128 $274
Goldman Sachs VIT Growth and Income Fund.................... $25 $78 $133 $284
Goldman Sachs VIT International Equity Fund................. $29 $88 $150 $318
J.P. Morgan International Opportunities Portfolio........... $27 $84 $143 $303
J.P. Morgan Small Company Portfolio......................... $27 $82 $141 $298
J.P. Morgan U.S. Disciplined Equity Portfolio............... $24 $73 $126 $269
Lord Abbett Growth and Income Portfolio..................... $20 $63 $108 $234
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
MFS/Sun Life Capital Appreciation Series.................... $23 $71 $121 $260
MFS/Sun Life Emerging Growth Series......................... $23 $70 $120 $258
MFS/Sun Life Government Securities Series................... $21 $66 $113 $244
MFS/Sun Life High Yield Series.............................. $24 $73 $125 $267
MFS/Sun Life Massachusetts Investors Growth Stock Series.... $24 $73 $125 $267
MFS/Sun Life Massachusetts Investors Trust Series........... $21 $65 $112 $242
MFS/Sun Life New Discovery Series........................... $26 $80 $136 $290
MFS/Sun Life Total Return Series............................ $22 $69 $117 $252
MFS/Sun Life Utilities Series............................... $23 $72 $124 $265
OCC Equity Portfolio........................................ $24 $75 $129 $275
OCC Managed Portfolio....................................... $24 $73 $125 $267
OCC Mid Cap Portfolio....................................... $26 $79 $135 $287
OCC Small Cap Portfolio..................................... $24 $75 $128 $273
Sun Capital Blue Chip Mid Cap Fund.......................... $25 $78 $133 $284
Sun Capital Investment Grade Bond Fund...................... $23 $70 $120 $258
Sun Capital Investors Foundation Fund....................... $24 $75 $128 $274
Sun Capital Money Market Fund............................... $22 $67 $115 $248
Sun Capital Real Estate Fund................................ $28 $85 $145 $308
Sun Capital Select Equity Fund.............................. $24 $75 $128 $274
</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.
8
<PAGE>
THE ANNUITY CONTRACT
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
Contract 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 Contract,
we establish an Account for each Owner, which we will refer to as "your"
Account.
Your 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. Your Contract provides tax deferral, so that you do not
pay taxes on your earnings under your 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 Account 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 Contract is 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 Contract is also designed so that it may be used in connection
with certain non-tax-qualified retirement plans, such as payroll savings plans
and such other groups (trusteed or nontrusteed) as may be eligible under
applicable law. 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
Service Address set forth on the first page of this Prospectus. For all
telephone communications, you must call (800) 447-7569.
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 our Service 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.
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 is
located at 122 East 42nd Street, Suite 1900, New York, New York 10017.
We are an indirect wholly-owned subsidiary of Sun Life Assurance Company
of Canada ("Sun Life (Canada)"). Sun Life (Canada) completed its demutualization
on March 22, 2000. As a result of the demutualization, a new holding company,
Sun Life Financial Services of Canada Inc. ("Sun Life
9
<PAGE>
Financial"), is now the ultimate parent of Sun Life (Canada) and the Company.
Sun Life Financial, a corporation organized in Canada, is a reporting company
under the Securities Exchange Act of 1934 with common shares listed on the
Toronto, New York, London, and Manila stock exchanges.
THE VARIABLE ACCOUNT
We established the Variable Account as a separate account on October 18,
1985, pursuant to a resolution of our Board of Directors. The Variable Account
funds the Contract and various other variable annuity and variable life
insurance product contracts which are offered by the Company and other
affiliated and unaffiliated offerors. These other products may have features,
benefits and charges which are different from those under the Contract.
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 Fund. All amounts
allocated to the Variable Account will be used to purchase Fund shares as
designated by you at their net asset value. Any and all distributions made by
the 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 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 Fund
shares at all times.
VARIABLE ACCOUNT OPTIONS:
THE FUNDS
The Contract offers Sub-Accounts that invest in a number of Fund options,
which are briefly discussed below. Each Fund is a mutual fund registered under
the Investment Company Act of 1940, or a separate series of shares of such a
mutual fund.
MORE COMPREHENSIVE INFORMATION ABOUT THE FUNDS, INCLUDING A DISCUSSION OF
THEIR MANAGEMENT, INVESTMENT OBJECTIVES, EXPENSES, AND POTENTIAL RISKS, IS FOUND
IN THE CURRENT PROSPECTUSES FOR THE FUNDS (THE "FUND PROSPECTUSES"). THE FUND
PROSPECTUSES SHOULD BE READ IN CONJUNCTION WITH THIS PROSPECTUS BEFORE YOU
INVEST. A COPY OF EACH FUND PROSPECTUS, AS WELL AS A STATEMENT OF ADDITIONAL
INFORMATION FOR EACH FUND, MAY BE OBTAINED WITHOUT CHARGE FROM THE COMPANY BY
CALLING 1-800-282-7073 OR WRITING TO SUN LIFE INSURANCE AND ANNUITY COMPANY OF
NEW YORK, P.O. BOX 9141, BOSTON MASSACHUSETTS 02117.
The Funds currently available are:
AIM VARIABLE INSURANCE FUNDS, INC. (advised by A I M Advisors, Inc.)
AIM V.I. CAPITAL APPRECIATION FUND seeks growth of capital through
investment in common stocks, with emphasis on medium- and small-sized
growth companies.
AIM V.I. GROWTH FUND seeks growth of capital primarily by investing in
seasoned and better capitalized companies considered to have strong
earnings momentum.
AIM V.I. GROWTH AND INCOME FUND seeks growth of capital with a secondary
objective of current income.
10
<PAGE>
AIM V.I. INTERNATIONAL EQUITY FUND seeks to provide long-term growth of
capital by investing in a diversified portfolio of international equity
securities whose issuers are considered to have strong earnings momentum.
THE ALGER AMERICAN FUND (advised by Fred Alger Management, Inc.)
ALGER AMERICAN GROWTH PORTFOLIO seeks long-term capital appreciation by
investing primarily in equity securities of companies which have market
capitalizations of $1 billion or more.
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO seeks primarily to provide a
high level of dividend income by investing in dividend paying equity
securities. Capital appreciation is a secondary objective.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO seeks long-term capital
appreciation. It invests primarily in the equity securities of small
companies with market capitalizations within the range of the Russell 2000
Growth Index or the S&P SmallCap 600 Index.
GOLDMAN SACHS VARIABLE INSURANCE TRUST ("VIT") (advised by Goldman Sachs Asset
Management, a separate business unit of the Investment Management Division of
Goldman, Sachs & Co. ("Goldman Sachs"), except for Goldman Sachs International
Equity Fund, which is advised by Goldman Sachs Asset Management International,
an affiliate of Goldman Sachs)
GOLDMAN SACHS VIT CORE-SM- LARGE CAP GROWTH FUND seeks long-term growth of
capital through a broadly diversified portfolio of equity securities of
large cap U.S. issuers that are expected to have better prospects for
earnings growth than the growth rate of the general domestic economy.
Dividend income is a secondary consideration.
GOLDMAN SACHS VIT CORE-SM- SMALL CAP EQUITY FUND seeks long-term growth of
capital through a broadly diversified portfolio of equity securities of
U.S. issuers which are included in the Russell 2000 Index at the time of
investment.
GOLDMAN SACHS VIT CORE-SM- U.S. EQUITY FUND seeks long-term growth of
capital and dividend income through a broadly diversified portfolio of
large cap and blue chip equity securities representing all major sectors of
the U.S. economy.
GOLDMAN SACHS VIT GROWTH AND INCOME FUND seeks long-term growth of capital
and growth of income through investments in equity securities that are
considered to have favorable prospects for capital appreciation and/or
dividend paying ability.
GOLDMAN SACHS VIT INTERNATIONAL EQUITY FUND seeks long-term capital
appreciation through investments in equity securities of companies that are
organized outside the U.S. or whose securities are principally traded
outside the U.S.
J.P. MORGAN SERIES TRUST II (advised by J.P. Morgan Investment Management Inc.)
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO (formerly, the J.P. Morgan
Equity Portfolio) seeks to provide a high total return from a portfolio of
selected equity securities.
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO seeks to provide a high
total return from a portfolio of equity securities of foreign companies.
J.P. MORGAN SMALL COMPANY PORTFOLIO seeks to provide a high total return
from a portfolio of small company stocks.
LORD ABBETT SERIES FUND, INC. (advised by Lord Abbett & Co.)
GROWTH AND INCOME PORTFOLIO seeks to provide long-term growth of capital
and income without excessive fluctuation in market value.
11
<PAGE>
MFS/SUN LIFE SERIES TRUST (advised by Massachusetts Financial Services Company,
an affiliate of the Company)
CAPITAL APPRECIATION SERIES will seek to maximize capital appreciation by
investing in securities of all types, with major emphasis on common stocks.
EMERGING GROWTH SERIES will seek long-term growth of capital.
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 low rated or unrated fixed income securities
(possibly with equity features) of U.S. and foreign issuers (also known as
"junk bonds").
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 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.
NEW DISCOVERY SERIES will seek capital appreciation.
TOTAL RETURN SERIES will primarily seek 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.
OCC ACCUMULATION TRUST (advised by OpCap Advisors)
EQUITY PORTFOLIO seeks long-term capital appreciation through investment in
a diversified portfolio of equity securities selected on the basis of a
value oriented approach to investing.
MANAGED PORTFOLIO seeks to achieve growth of capital over time through
investment in a portfolio consisting of common stocks, bonds and cash
equivalents, the percentages of which will vary based on the portfolio
manager's assessments of the relative outlook for such investments.
MID CAP PORTFOLIO seeks long-term capital appreciation through investment
in a diversified portfolio of equity securities. The portfolio will invest
primarily in companies with market capitalizations of between $500 million
and $5 billion.
SMALL CAP PORTFOLIO seeks capital appreciation through investment in a
diversified portfolio of equity securities of companies with market
capitalizations of under $1 billion.
SUN CAPITAL ADVISERS TRUST (advised by Sun Capital Advisers, Inc., an affiliate
of the Company; Wellington Management Company, LLP serves as investment
subadviser to Sun Capital Blue Chip Mid Cap Fund, Sun Capital Investors
Foundation Fund and Sun Capital Select Equity Fund)
SUN CAPITAL BLUE CHIP MID CAP FUND seeks long-term capital growth by
investing primarily in a diversified portfolio of common stocks and other
equity securities of U.S. companies with market capitalizations within the
range represented by the Standard & Poor's Mid Cap 400 Index.
SUN CAPITAL INVESTORS FOUNDATION FUND seeks long-term capital growth by
investing primarily in a diversified portfolio of common stocks and other
equity securities of U.S. companies with
12
<PAGE>
market capitalizations generally within the range represented by the
Standard & Poor's 500 Index. Investments are selected using a combination
of fundamental analysis and quantitative tools.
SUN CAPITAL INVESTMENT GRADE BOND FUND seeks high current income consistent
with relative stability of principal by investing at least 80% of its
assets in investment grade bonds. The Fund may invest up to 20% of its
assets in lower rated or unrated bonds (also known as high yield or junk
bonds).
SUN CAPITAL MONEY MARKET FUND seeks to maximize current income, consistent
with maintaining liquidity and preserving capital, by investing exclusively
in high quality U.S. dollar-denominated money market securities.
SUN CAPITAL REAL ESTATE FUND PRIMARILY seeks long-term capital growth and,
secondarily, seeks current income and growth of income. The Fund invests at
least 80% of its assets in securities of real estate investment trusts and
other real estate companies.
SUN CAPITAL SELECT EQUITY FUND seeks long-term capital growth by investing
in 20 to 40 common stocks and other equity securities of large
capitalization U.S. companies selected primarily from the Standard & Poor's
500 Index.
The Funds may also be available to registered separate accounts offering
variable annuity and variable life products of other affiliated and unaffiliated
insurance companies, as well as to the Variable Account and other separate
accounts of the Company. Although we do not anticipate any disadvantages to
this, 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
participating in the Funds. A conflict may occur due to a change in law
affecting the operations of variable life and variable annuity separate
accounts, differences in the voting instructions of the Participants and Payees
and those of other companies, or some other reason. In the event of conflict, we
will take any steps necessary to protect Participants and Payees, including
withdrawal of the Variable Account from participation in the underlying Funds
which are involved in the conflict or substitution of shares of other Funds.
Certain of the investment advisers to the Funds may reimburse us for
administrative costs in connection with administering the Funds as options under
the Contracts. These amounts are not charged to the Funds or Participants, but
are paid from assets of the advisers. Certain Funds may reimburse us from their
assets for distribution costs pursuant to the terms of their Rule 12b-1 plans.
Certain publicly available mutual funds may have similar investment goals
and principal investment policies and risks as one or more of the Funds, and may
be managed by a Fund's portfolio managers(s). While a Fund 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
Fund and these similar products, including differences in sales charges, expense
ratios and cash flows.
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.
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
13
<PAGE>
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 at 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 at 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 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 2
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.
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.
14
<PAGE>
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. Over the life of your Contract, you may allocate amounts among
as many as 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, as
required. 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 taxes 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 2 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 2 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. (The close of trading is
determined by the New York Stock Exchange.) 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.
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 Fund 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 Fund during the Valuation Period, by (2) the net
asset value per share of the Fund 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."
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<PAGE>
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.
A 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.
Each additional Purchase Payment, transfer or renewal credited to your
Fixed Account value will result in a new Guarantee Period with its own
Expiration Date. Amounts allocated at different times to Guarantee Periods of
the same duration may have different Expiration Dates.
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.
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. A
Guarantee Period that will extend beyond your maximum Annuity Commencement Date
will result in the application of a Market Value Adjustment upon annuitization
or withdrawal. Each new allocation to a Guarantee Period must be at least
$1,000.
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.
A Guarantee Amount will not renew into a Guarantee Period that will extend
beyond your Maximum Annuity Commencement Date. We will automatically renew your
Guarantee Amount into the next available Guarantee Period.
EARLY WITHDRAWALS
If you withdraw, transfer, or annuitize an allocation to a Guarantee
Period more than 30 days prior to the Expiration Date, we will apply a Market
Value Adjustment to the transaction. This could
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<PAGE>
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 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 or prior to the close of the New York Stock Exchange, 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, some of the Funds have reserved the right to temporarily or
permanently refuse exchange requests from the Variable Account if, in the
judgment of the Fund's investment adviser, the Fund would be unable to invest
effectively in accordance with its investment objective and policies, or would
otherwise potentially be adversely affected. In particular, a pattern of
exchanges that coincide with a market timing strategy may be disruptive to a
Fund and therefore may be refused. Accordingly,
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<PAGE>
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. Previously applied
amounts may not be transferred to a Guarantee Period made available in
connection with this program. 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.
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
Sun Capital Money Market 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 Account investment options at set intervals,
dollar-cost averaging allows you to purchase more Variable Accumulation Units
(and, indirectly, more Fund shares) when prices are low and fewer Variable
Accumulation Units (and, indirectly, fewer 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 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
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<PAGE>
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 equity 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 investment options that participate in the
asset allocation program on a quarterly basis, or as determined by the terms of
the asset allocation program, 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 our 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
Account Value and/or Variable Account Value and we will effect them
automatically; a Market Value Adjustment may be applicable upon withdrawal.
Under the Interest Out Program, we will automatically pay to you, or reinvest,
interest credited for all Guarantee Periods you have chosen. The withdrawals
under these programs are subject to surrender charges. They may also 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.
You may change or stop either program at any time, by written notice to
us.
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.
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<PAGE>
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 Service Address. Your request must specify whether you
want to withdraw the entire amount of your Account or, if less, the amount you
wish to receive.
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 income tax consequences, including
a 10% penalty tax (see "Tax Considerations"). 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 Funds or to determine the value of the net assets of the Funds,
because an emergency exists; and
- 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.
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<PAGE>
WITHDRAWAL RESTRICTIONS FOR QUALIFIED PLANS
If your Contract is a Qualified Contract, you should carefully check the
terms of your retirement plan for limitations and restrictions on cash
withdrawals.
Special restrictions apply to withdrawals from Contracts used for Section
403(b) annuities. See "Tax Considerations -- Tax-Sheltered Annuities."
When you make a withdrawal, we consider the oldest Purchase Payment that
you have not already withdrawn to be withdrawn first, then the second oldest
Purchase Payments, and so forth. Once all Purchase Payments are withdrawn, the
balance withdrawn is considered to be accumulated value.
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 a 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 Contract 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.
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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 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. Each Payment begins a new 7-year period and moves down a
declining surrender charge scale at each Contract Anniversary. Payments received
during the first Contract Year will be charged 6% if withdrawn. On your next
scheduled Contract Anniversary, that Payment, along with any other Payments made
during that Contract Year, will be considered to be in their second Contract
Year and will have a 5% withdrawal charge. On the next Contract Anniversary,
these Payments will move into their third Contract Year and will have a
withdrawal charge of 5%, if withdrawn. The withdrawal charge decreases according
the the number of Contract Years the Purchase Payment has been in your Account.
The declining scale is 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 2.
For additional examples of how we calculate withdrawal charges, see
Appendix B.
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.
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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 Contract Year. Any withdrawal from a Guarantee Amount is attributed
first to such interest.
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>
<C> <S> <C> <C> <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 B.
CONTRACT CHARGES
ACCOUNT FEE
During the Accumulation Phase of your Contract, we will deduct from your
Account an annual 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. The annual Account Fee
will never exceed $30. We deduct the Account Fee pro rata from each Sub-Account
and each Guarantee Period, based on the allocation of your Account Value on your
Contract Anniversary.
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We will not charge you the Account Fee if:
(1) your Account has been allocated only to the Fixed Account during the
applicable Contract Year; or
(2) your Account Value is more than $75,000 on your Contract 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.
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 us for expenses
we incur in administering the Contracts, the Accounts and the Variable Account
that are not covered by the annual Account Fee.
MORTALITY AND EXPENSE RISK CHARGE
During both the Accumulation Phase and the Income Phase, we deduct a
mortality and expense charge from the assets of the Variable Account at an
effective annual rate equal to 1.25%. 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 mortality risk also arises from our contractual
obligation to pay a death benefit upon the death of the Annuitant prior to the
Annuity Commencement Date. The expense risk we assume is the risk that the
annual Account Fee and the 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.
FUND EXPENSES
There are fees and charges deducted from each Fund. These fees and
expenses are described in the Fund's prospectus and related Statement of
Additional Information.
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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 the Beneficiary is not living on the
date of death of the Annuitant, 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
Contract names more than one Annuitant, we will pay the death benefit after the
death of the last surviving of the Annuitants.
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 provisions 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 the 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 of Death") if you have elected a death
benefit payment method before the death of the Annuitant 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) above, 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 Sun Capital Money Market 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
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Beneficiary may elect to continue the Contract. These elections are made by
sending us at our Service Address, 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/Payee 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.
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 any of 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 annuity payments to the
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(s) 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(s) selected. You may request
a full withdrawal before the Annuity Commencement Date, which will be subject to
all charges applicable on withdrawals. See "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 annuity 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
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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 Payee of the annuity payments.
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.
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 Annuity Option E is
available only for a Fixed Annuity. We may also agree to other settlement
options, at 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.
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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 income payments are
made as described under Annuity Option B. The election of this Annuity Option
may result in the imposition of a penalty tax.
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 5 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 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. The
election of this Annuity Option may result in the imposition of a penalty tax.
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, you will receive 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:
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- 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.
- 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 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 Contract Year. To make an exchange,
the Annuitant sends us, at our Service 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.
Before exchanging Annuity Units from one Sub-Account to another, the
Annuitant should carefully review the relevant Fund prospectuses for the
investment objectives and risk disclosure of the Funds in which the Sub-Accounts
are invested.
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During the Income Phase, 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 Contracts contain 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(s)
elected and the adjusted age of the Annuitant. The Contracts also describe the
method of determining the adjusted age of the Annuitant. The mortality table
used in determining the Annuity Payment Rates for Annuity Options A, B and C is
the 1983 Individual Annuitant Mortality Table.
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 Annuitant's death 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
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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.
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 FUND SHARES
We will vote Fund shares held by the Sub-Accounts at meetings of
shareholders of the Funds 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
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and 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 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 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 Funds. We will determine the number of Fund shares as to
which each such person is entitled to give instructions as of the record date
set by the Funds 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 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 Fund share as of the same date. On or after the Annuity Commencement
Date, the number of 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 particular Payee by the net asset value of a
Fund share as of the same date. After the Annuity Commencement Date, the number
of 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 Funds 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 Funds may not always be available for investment
under the Contract. We may add or delete Funds 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 Fund 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.
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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 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 Contracts.
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 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 our Service Address as shown 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.
TAX CONSIDERATIONS
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, legislation affecting the current tax treatment
of annuity contracts could be enacted in the future and 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
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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).
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.
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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 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.
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 reserve the right to modify the Contract
and/or the Variable Account the extent necessary to comply with any such
guidelines, but cannot assure that such modifications would satisfy 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
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terms and conditions may include restrictions on, among other things, ownership,
transferability, assignability, contributions and distributions.
PENSION AND PROFIT-SHARING PLANS
Sections 401(a), 401(k) and 403(a) of the Code permit business employers
and certain associations to establish various types of retirement plans for
employees. The Tax Equity and Fiscal Responsibility Act of 1982 eliminated most
differences between qualified retirement plans of corporations and those of
self-employed individuals. Self-employed persons, as a general rule, may
therefore use Qualified Contracts as a funding vehicle for their retirement
plans.
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
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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.
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."
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." We may also advertise "yield" and
"effective yield" for some Sub-Accounts.
Average Annual Total Return measures the net income of a Sub-Account and
any realized or unrealized gains or losses of the Fund 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 the Variable Account was established or, if
shorter, the life of the Fund. Non-standardized Average Annual Total Return
covers the life of each Fund, which may predate the Variable Account. Cumulative
Growth Rate represents the cumulative change in the value of an investment in a
Sub-Account for the period stated, and is arrived at by calculating the change
in the Accumulation Unit Value of the Sub-Account 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
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formula that determines the level of return which, if earned over the entire
period, would produce the cumulative return.
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 annual Account Fee, although such figures do
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 underlying Funds 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-Accounts on a hypothetical basis. To do this, we reflect
deductions of the current Contract fees and charges from the historical
performance of the corresponding Funds.
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 Sun Capital Money
Market 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 Sun Capital Money Market
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,
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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 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,
1999 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 our Service Address in writing or by
telephone at (800) 282-7073.
ADDITIONAL INFORMATION ABOUT THE COMPANY
BUSINESS OF THE COMPANY
We are engaged in the sale of combination fixed and variable annuity
contracts, group life and group health insurance contracts. These contracts are
sold in both the tax-qualified and non-tax-qualified markets by insurance
agents, some of whom are registered representatives of national and regional
stock brokerage firms and brokers.
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 __.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(IN $ THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues
Premiums, annuity deposits and other
revenue $ 67,081 $108,443 $137,079 $ 83,711 $ 56,678
Net investment income 5,425 6,718 9,344 13,019 19,204
-------- -------- -------- -------- --------
72,506 115,161 146,423 96,730 75,882
-------- -------- -------- -------- --------
Benefits and expenses
Policyholder benefits 54,892 93,816 126,876 82,079 63,100
Other expenses 11,828 12,577 14,059 9,870 9,384
-------- -------- -------- -------- --------
66,720 106,393 140,935 91,949 72,484
-------- -------- -------- -------- --------
Income from operations before federal
income tax expense 5,786 8,768 5,488 4,781 3,398
Federal income tax (excluding tax on
capital losses) 1,228 2,070 2,315 1,939 2,447
-------- -------- -------- -------- --------
Income from operations after federal
income tax expense and before realized
capital losses 4,558 6,698 3,173 2,842 951
Net realized capital gains (losses) less
capital gains tax 152 (13) 183 (439) (21)
-------- -------- -------- -------- --------
Net Income $ 4,710 $ 6,684 $ 3,356 $ 2,403 $ 930
======== ======== ======== ======== ========
Total Assets $806,006 $713,677 $624,535 $518,319 $524,731
======== ======== ======== ======== ========
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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 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:
- 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.
- The Company's ability to identify and address any remaining 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 any of their own
remaining Year 2000 issues in a timely manner.
RESULTS OF OPERATIONS
The Company had net income of $4,710,000 for 1999 as compared to
$6,685,000 for 1998. The $1,975,000 decrease in net income was due to lower
earnings in both its Wealth Management and Protection segments.
The decline in Wealth Management income was due primarily to an increase
in operating expenses as a result of the consolidation of the Company's annuity
operation, offset by lower strain from lower than expected annuity sales. During
1999, the Company consolidated its customer service and accounting functions
with its parent company, Sun Life (U.S.). One-time charges incurred in
connection with this consolidation totaled approximately $800,000 and consisted
primarily of: (1) severance and employee benefit costs; (2) termination fee
associated with a lease cancellation and; (3) furniture and equipment
write-offs. The decline in annuity deposit-type funds in the Wealth Management
segment was due to lower sales associated with the Company's dollar cost
averaging ("DCA") program. Under the DCA program deposits are made into the
fixed portion of the Company's market value adjusted combination fixed/variable
annuity contract and receive a more favorable crediting rate for the policy
year. During the year, the fixed deposit is exchanged to the variable portion of
the contract in equal periodic installments. The decline in 1999 DCA sales was
attributable to the Company adhering to the New York State Insurance
Department's (the "Department") request to limit the DCA crediting rate the
Company, and its competitors, could offer. In November 1999, after the
Department issued guidelines to permit New York licensed insurers to offer an
enhanced DCA crediting rate, the Company reintroduced the DCA program. Also
contributing to lower annuity deposit fund sales was the implementation, in
November 1998, of the Department's Regulation 60, which governs replacement
sales.
The decline in Protection income was due to unfavorable group life
mortality experience and higher group health reserves from an increase in group
long-term disability claims experience.
The total capital stock and surplus position of the Company at
December 31, 1999, was $41,346,000. Cash dividends of $6,500,000 million were
paid to its parent company, Sun Life (U.S.) during 1999. The Company's
management considers its surplus position to be adequate.
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
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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.
INTEREST RATE RISK MANAGEMENT
The Company's fixed interest rate liabilities are primarily supported by
well-diversified portfolios of fixed interest rate investments. All of these
fixed interest rate 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 rate 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
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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, 1999 had a fair value of $25.7 million. Fixed
income investments supporting those liabilities had a fair value of $73.0
million at that date. The Company performed a sensitivity analysis on these
interest-sensitive liabilities and assets at December 31, 1999. 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 $.6
million and the corresponding assets would show a net decrease of $2.1 million.
By comparison, 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.
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.
REINSURANCE
The Company has executed agreements which provide that the parent company
will reinsure risks under certain group life, health, and long-term disability
insurance contracts sold by the Company.
RESERVES
In accordance with the life insurance laws and regulations under which the
Company operates it is obligated to carry on its books, as liabilities,
actuarially determined reserves to meet its obligations on its outstanding
contracts. Reserves are based on mortality tables in general use in the United
States and are computed to equal amounts that, with additions from premiums to
be received, and with interest on such reserves computed annually at certain
assumed rates, will be sufficient to meet the Company's policy obligations at
their maturities or in the event of an insured's death. In the accompanying
Financial Statements these reserves are determined in accordance with statutory
regulations.
INVESTMENTS
The Company maintains investments in bonds and mortgages with cash flows
to match estimated cash flows of its liabilities.
It is the Company's policy to acquire only investment grade securities.
None of the Company's holdings of bonds were rated below investment grade at
December 31, 1999. Publicly traded government and corporate bonds comprised 96%
of the Company's total bonds at December 31, 1999. The Company underwrites
commercial mortgages with a maximum loan to value ratio of 75%, and as a rule
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<PAGE>
invests only in properties that are almost fully leased. The Company did not
have any mortgage loans in arrears more than 60 days at December 31, 1999.
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, 1999, the Company had 2 direct employees who are
employed at its Home Office.
PROPERTIES
The Company owns no properties. During 1998 and 1997, the Company leased
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 consolidated the functions performed at this facility
with its parent company, Sun Life (U.S.). After the group sales office lease
expired in July 1999, the Company entered a five-year lease for a facility that
combined its group sales office operation and corporate home office.
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.
43
<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, 1999 included in the Statement of Additional Information and the
statutory financial statements of the Company for the years ended December 31,
1999, 1998 and 1997 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, 1999 are included in the Statement of Additional Information. The
financial statements pertain to that portion of the Variable Account to which
Participant's Purchase Payments will be allocated and to which participants in
other contracts currently participating in the Variable Account are allocated.
The Variable Account value of the interest of Owners, Participants, Annuitants,
Payees and Beneficiaries under the Contracts is affected primarily by the
investment results of the Funds. The financial statements of the Variable
Account reflect units outstanding and expenses incurred under other contracts
currently participating in the Variable Account which impose certain contract
charges that are different from those imposed under the Contract.
------------------------
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 ADMITTED ASSETS, LIABILITIES AND
CAPITAL STOCK AND SURPLUS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ADMITTED ASSETS
Bonds $ 59,215,128 $ 57,916,869
Mortgage loans on real estate 8,659,610 17,657,672
Properties acquired in satisfaction of debt -- 1,755,854
Policy loans 537,976 625,023
Cash and short-term investments 6,261,102 5,928,556
Life insurance premiums and annuity considerations due
and uncollected 2,168,135 667,087
Accident and health premiums due and unpaid 579,460 156,493
Receivable from parent and affiliates 621,625 --
Investment income due and accrued 795,075 780,020
Federal income tax recoverable 520,467 --
Other assets 235,655 183,602
------------ ------------
General account assets 79,594,233 85,671,176
Separate account assets
Unitized 632,350,720 527,942,310
Non-unitized 94,061,504 100,064,243
------------ ------------
Total admitted assets $806,006,457 $713,677,729
============ ============
LIABILITIES
Aggregate reserve for life policies and contracts $ 21,762,306 $ 22,578,780
Aggregate reserve for accident and health policies 9,251,000 7,830,000
Policy and contract claims 2,182,472 2,174,704
Liability for premium and other deposit funds 18,048,656 20,807,840
Interest maintenance reserve 553,770 830,941
Commissions to agents due or accrued 449,213 374,826
General expenses due or accrued 580,432 369,524
Transfers from Separate Accounts due or accrued (17,043,885) (15,992,081)
Taxes, licenses and fees due or accrued 100,000 64,813
Federal income taxes due or accrued -- 700,000
Asset valuation reserve 1,210,107 1,047,787
Payable to parent, subsidiaries, and affiliates -- 1,218,745
Other liabilities 1,353,930 684,361
------------ ------------
General account liabilities 38,448,001 42,690,240
Separate account liabilities:
Unitized 632,150,968 527,751,720
Non-unitized 94,061,504 100,064,243
------------ ------------
Total liabilities 764,660,473 670,506,203
------------ ------------
CAPITAL STOCK AND SURPLUS
Common capital stock 2,000,000 2,000,000
------------ ------------
Gross paid in and contributed surplus 29,500,000 29,500,000
Group life contingency reserve fund 1,035,323 812,391
Unassigned funds 8,810,661 10,859,135
------------ ------------
Total surplus 39,345,984 41,171,526
------------ ------------
Capital stock and surplus 41,345,984 43,171,526
------------ ------------
Total Liabilities, Capital Stock and Surplus $806,006,457 $713,677,729
============ ============
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
45
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))
STATUTORY STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
INCOME:
Premiums and annuity considerations $ 19,152,409 $ 16,979,974 $ 16,013,160
Deposit-type funds 39,510,208 84,013,114 115,692,429
Net investment income 5,170,881 6,397,852 8,824,668
Amortization of interest maintenance reserve 254,220 319,812 519,001
Net gain from operations from Separate Accounts 9,162 9,115 8,743
Income from fees associated with investment
management, administration and contract
guarantees from Separate Accounts 7,470,958 6,262,374 4,707,296
Other income 938,657 1,179,261 657,755
------------ ------------ ------------
Total Income 72,506,495 115,161,502 146,423,052
------------ ------------ ------------
BENEFITS AND EXPENSES:
Death benefits 7,357,222 6,237,281 4,916,746
Annuity benefits 5,238,282 5,758,805 5,439,091
Disability benefits and benefits under accident
and health policies 1,351,989 1,094,851 939,635
Surrender benefits and other fund withdrawals 59,018,693 73,863,143 79,016,904
Interest on policy or contract funds 82,760 101,516 75,069
Increase in aggregate reserves for life and
accident and health policies and contracts 604,526 620,154 5,199,040
Decrease in liability for premium and other
deposit funds (2,759,184) (10,533,414) (30,405,893)
------------ ------------ ------------
Total Benefits 70,894,288 77,142,336 65,180,592
Commissions on premiums and annuity
considerations (direct business only) 4,712,712 4,850,390 5,582,738
General insurance expenses 6,372,100 7,017,562 7,687,478
Insurance taxes, licenses and fees, excluding
federal income taxes 742,992 709,440 788,386
Net transfers to (from) Separate Accounts (16,002,095) 16,673,071 61,695,832
------------ ------------ ------------
Total Benefits and Expenses 66,719,997 106,392,799 140,935,026
------------ ------------ ------------
Net gain from operations before federal income
taxes 5,786,498 8,768,703 5,488,026
Federal income taxes incurred (excluding tax on
capital gains) 1,228,004 2,070,545 2,315,259
------------ ------------ ------------
Net gain from operations after federal income
taxes and before realized capital gains 4,558,494 6,698,158 3,172,767
Net realized capital (losses) gains less capital
gains tax and transferred to the interest
maintenance reserve 151,678 (13,249) 183,262
------------ ------------ ------------
NET INCOME $ 4,710,172 $ 6,684,909 $ 3,356,029
============ ============ ============
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
46
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))
STATUTORY STATEMENTS OF CHANGES IN CAPITAL STOCK AND SURPLUS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Capital and surplus, Beginning of year $43,171,526 $38,781,183 $34,802,643
----------- ----------- -----------
Net income 4,710,172 6,684,909 3,356,029
Change in net unrealized capital gains -- 359,000 138,000
Change in nonadmitted assets and related
items 126,606 47,886 (14,391)
Change in asset valuation reserve (162,320) 298,548 498,902
Dividend to stockholder (6,500,000) (3,000,000) --
----------- ----------- -----------
Net change in capital and surplus for
the year (1,825,542) 4,390,343 3,978,540
----------- ----------- -----------
Capital and surplus, End of year $41,345,984 $43,171,526 $38,781,183
=========== =========== ===========
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
47
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.))
STATUTORY STATEMENTS OF CASH FLOW
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash Provided:
Premiums, annuity considerations and
deposit funds received $ 57,235,427 $101,168,181 $138,347,877
Net investment income 5,324,547 6,731,025 9,707,801
Fees associated with investment management,
administration and contract guarantees
from Separate Accounts 7,470,958 6,262,374 4,707,296
Fee income 938,659 1,179,261 657,755
------------ ------------ ------------
Total receipts 70,969,591 115,340,841 153,420,729
------------ ------------ ------------
Benefits paid 73,041,178 86,793,629 122,170,301
Insurance expenses and taxes paid 11,229,543 12,819,426 13,540,362
Net cash transfers to (from) Separate
Accounts (14,950,291) 25,441,094 41,721,173
Federal income tax payments (excluding tax
on capital gains) 1,928,000 2,370,545 1,715,259
------------ ------------ ------------
Total payments 71,248,430 127,424,694 179,147,095
------------ ------------ ------------
Net cash used in operations (278,839) (12,083,853) (25,726,366)
------------ ------------ ------------
Proceeds from long-term investments sold,
matured or repaid (after deducting taxes
on capital gains of $81,675 for 1999,
$135,651 for 1998 and $222,860 for 1997) 47,042,986 37,410,774 59,132,310
Other cash provided 717,427 813,054 325,543
------------ ------------ ------------
Total cash provided 47,760,413 38,223,828 59,457,853
------------ ------------ ------------
Cash Applied:
Cost of long-term investments acquired (37,498,243) (26,671,265) (27,369,138)
Other cash applied (9,650,785) (3,660,391) (857,106)
------------ ------------ ------------
Total cash applied (47,149,028) (30,331,656) (28,226,244)
Net change in cash and short-term investments 332,546 (4,191,681) 5,505,243
Cash and short-term investments:
Beginning of year 5,928,556 10,120,237 4,614,994
------------ ------------ ------------
End of year $ 6,261,102 $ 5,928,556 $ 10,120,237
============ ============ ============
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS.
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
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Sun Life Insurance and Annuity Company of New York (the "Company") is
incorporated as a life insurance company and is currently engaged in the sale of
individual fixed and variable annuities, group life and group long-term
disability insurance. The parent company, Sun Life Assurance Company of Canada
(U.S.) ("Sun Life (U.S.)"), is ultimately a wholly-owned subsidiary of Sun Life
Assurance Company of Canada ("SLOC)"), a mutual life insurance company.
The Company, which is domiciled in the State of New York, prepares its financial
statements in accordance with statutory accounting practices prescribed or
permitted by the State of New York Insurance Department. Prescribed accounting
practices include practices described in a variety of publications of the
National Association of Insurance Commissioners ("NAIC"), as well as state laws,
regulations and general administrative rules. Permitted accounting practices
encompass all accounting practices not so prescribed. The permitted accounting
practices adopted by the Company are not material to the financial statements.
Prior to 1996, statutory accounting practices were recognized by the insurance
industry and the accounting profession as generally accepted accounting
principles ("GAAP") for mutual life insurance companies and stock life insurance
companies wholly owned by mutual life insurance companies. In April 1993, the
Financial Accounting Standards Board ("FASB") issued an interpretation (the
"Interpretation") that became effective in 1996, which has changed the previous
practice of mutual life insurance companies (and stock life insurance companies
that are wholly owned subsidiaries of mutual life insurance companies) with
respect to utilizing statutory basis financial statements for general purposes,
in that it will no longer allow such financial statements to be described as
having been prepared in conformity with GAAP. Consequently, these financial
statements prepared in conformity with statutory accounting practices as
described above, vary from and are not intended to present the Company's
financial position, results of operations or cash flow in conformity with GAAP.
(See Note 17 for further discussion relative to the Company's basis of financial
statement presentation.) The effects on the financial statements of the
variances between the statutory basis of accounting and GAAP, although not
reasonably determinable, are presumed to be material.
INVESTED ASSETS
Bonds are carried at cost adjusted for amortization of premium or accrual of
discount. Mortgage loans acquired at a premium or discount are carried at
amortized values and other mortgage loans at the amounts of the unpaid balances.
Real estate investments are carried at the lower of cost, adjusted for
accumulated depreciation, or appraised value less encumbrances. Short-term
investments are carried at amortized cost, which approximates fair value.
Depreciation of buildings and improvements is calculated using the straight-line
method over the estimated useful life of the property, generally forty to fifty
years.
POLICY AND CONTRACT RESERVES
The reserves for life insurance and annuity contracts are computed in accordance
with presently accepted actuarial standards, and are based on actuarial
assumptions and methods (including use of published mortality tables and
prescribed interest rates) which produce reserves at least as great as those
required by law and contract provisions.
INCOME AND EXPENSES
For group life, group long-term disability and annuity contracts, premiums are
recognized as revenues over the premium paying period, whereas commissions and
other costs applicable to the acquisition of new business are charged to
operations as incurred.
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, 1999, 1998 AND 1997
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.
The Company has also established a nonunitized separate account for amounts
allocated to the fixed portion of a certain combination fixed/variable deferred
annuity contracts. The assets of this account are available to fund general
account liabilities and general account assets are available to fund liabilities
of this account.
Assets and liabilities of the separate accounts, representing net deposits and
accumulated net investment earnings less fees, held primarily for the benefit of
contract holders, are shown as separate captions in the financial statements.
Assets held in the separate accounts are carried at market value as determined
by the quoted market prices of the underlying investments.
Gains (losses) from mortality experience and investment experience of the
separate accounts, not applicable to contract owners, and accrued expense
allowances recognized in reserves are receivable from or payable to the general
account. Accumulated amounts that have not been transferred are recorded as
payable (receivable) to (from) the general account. Transfers from separate
accounts due or accrued amounted to $17,044,000 in 1999 and $15,992,000 in 1998.
CHANGES IN ACCOUNTING PRINCIPLES AND REPORTING
In March 1998, the National Association of Insurance Commissioners adopted the
Codification of Statutory Accounting Principles ("Codification"). The
Codification, which is intended to standardize regulatory accounting and
reporting for the insurance industry, is proposed to be effective January 1,
2001. However, statutory accounting principles will continue to be established
by individual state laws and permitted practices and it is uncertain when, or
if, the State of New York will require adoption of the Codification for the
preparation of statutory financial statements. The Company has not finalized the
quantification of the effects of Codification on its statutory financial
statements.
OTHER
Preparation of the financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses. Actual results could differ from those estimates.
Certain prior year amounts have been reclassified to conform to amounts as
presented in the current year.
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, 1999, 1998 AND 1997
2. BONDS
Investments in debt securities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
(IN 000'S)
<S> <C> <C> <C> <C>
Long-term bonds:
United States Government and government agencies
and authorities $ 6,148 $13 $ (171) $ 5,990
Public utilities 8,765 7 (391) 8,381
Transportation 3,521 -- (16) 3,505
Finance 7,742 -- (183) 7,559
All other corporate bonds 33,039 69 (1,379) 31,729
------- --- ------- -------
Total long-term bonds 59,215 89 (2,140) 57,164
Short-term bonds -- U.S. Treasury Bills, bankers
acceptances and commercial paper 6,958 -- -- 6,958
------- --- ------- -------
Total bonds $66,173 $89 $(2,140) $64,122
======= === ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
(IN 000'S)
<S> <C> <C> <C> <C>
Long-term bonds:
United States Government and government agencies
and authorities $16,153 $ 319 $(31) $16,441
Public utilities 11,353 213 (16) 11,550
Transportation 2,553 19 -- 2,572
Finance 6,260 122 (9) 6,373
All other corporate bonds 21,598 430 (37) 21,991
------- ------ ---- -------
Total long-term bonds 57,917 1,103 (93) 58,927
Short-term bonds -- U.S. Treasury Bills, bankers
acceptances and commercial paper 5,258 -- -- 5,258
------- ------ ---- -------
Total bonds $63,175 $1,103 $(93) $64,185
======= ====== ==== =======
</TABLE>
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, 1999, 1998 AND 1997
2. BONDS (CONTINUED):
The amortized cost and estimated fair value of debt securities at December 31,
1999 are shown below by contractual maturity.Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call and/or prepayment penalties.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
---- ----------
(IN 000'S)
<S> <C> <C>
Maturities are:
Due in one year or less $12,010 $12,001
Due after one year through five years 21,833 21,766
Due after five years through ten years 19,002 17,447
Due after ten years 6,211 5,873
------- -------
Subtotal 59,056 57,087
Mortgage-backed securities 7,117 7,035
------- -------
Total bonds $66,173 $64,122
======= =======
</TABLE>
Proceeds from sales and maturities of investments in debt securities during
1999, 1998 and 1997 were $35,978,000, $29,068,000 and $42,986,000, gross gains
of $192,000, $407,000 and $395,000 and gross losses of $395,000, $2,000 and
$40,000, respectively.
A bond, included above, with an amortized cost of approximately $405,000 and
$404,000 at December 31, 1999 and 1998, respectively, was on deposit with the
Superintendent of Insurance of the State of New York as required by law.
3. MORTGAGE LOANS
The Company invests in commercial first mortgage loans throughout the United
States. The Company monitors the condition of the mortgage loans in its
portfolio. In those cases where mortgages have been restructured, appropriate
allowances for losses have been made. In those cases where, in management's
judgment, the mortgage loans' values are impaired, appropriate losses are
recorded.
The following table shows the geographical distribution of the mortgage loan
portfolio at December 31:
<TABLE>
<CAPTION>
1999 1998
---- ----
(IN 000'S)
<S> <C> <C>
California $ 582 $ 3,421
Florida 733 777
Massachusetts -- 1,090
New York 1,413 2,868
Ohio 1,271 1,291
All other 4,661 8,211
------ -------
$8,660 $17,658
====== =======
</TABLE>
As of December 31, 1999 and 1998, the Company had no restructured mortgage
loans.
The Company has no outstanding mortgage loan commitments on real estate.
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, 1999, 1998 AND 1997
4. INVESTMENT GAINS (LOSSES)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
---- ---- ----
(IN 000'S)
<S> <C> <C> <C>
Realized capital gains (losses):
Bonds $ 2 $ 7 $(99)
Mortgage loans (27) (8) (6)
Real estate 177 (12) 288
---- ---- ----
$152 $(13) $183
==== ==== ====
Changes in unrealized capital gains on mortgage loans $ -- $359 $138
==== ==== ====
</TABLE>
Realized capital gains and losses on bonds and mortgages which relate to changes
in levels of interest rate risk are charged or credited to an interest
maintenance reserve ("IMR") and amortized into income over the remaining
contractual life of the security sold. The net realized capital gains (losses)
credited to the IMR were $(35,000), $408,000 and $355,000 in 1999, 1998 and
1997, respectively. All gains are transferred net of applicable income taxes.
5. NET INVESTMENT INCOME
Net investment income consisted:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
---- ---- ----
(IN 000'S)
<S> <C> <C> <C>
Interest income from bonds $4,108 $4,570 $5,622
Interest income from mortgage loans 1,370 1,926 3,279
Real estate investment income -- 22 483
Other investment income 43 125 170
------ ------ ------
Gross investment income 5,521 6,643 9,554
Investment expenses 350 245 729
------ ------ ------
Net investment income $5,171 $6,398 $8,825
====== ====== ======
</TABLE>
6. REINSURANCE
The Company has agreements with SLOC which provide that SLOC will reinsure the
mortality and morbidity risks of the group life insurance contracts and group
long-term disability contracts issued by the Company. Under these agreements
basic death benefits and long-term disability benefits are reinsured on a yearly
renewable term basis. The agreements provide that SLOC will reinsure the
mortality risks in excess of $50,000 per policy for group life insurance
contracts and $4,000 per policy per month for the group long-term disability
contracts ceded by the Company. For the years ended December 31, 1998 and 1997,
the agreements provided that SLOC would reinsure $3,000 per policy per month for
the group long-term disability contracts ceded by the Company. Reinsurance
transactions under these agreements had the effect of increasing (decreasing)
income from operations by $(169,000), $(771,000) and $139,000 for the years
ended December 31, 1999, 1998, and 1997, respectively.
The group life and long-term disability reinsurance agreements require that the
reinsurer provide funds in amounts equal to the reserves ceded.
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, 1999, 1998 AND 1997
6. REINSURANCE (CONTINUED):
The following are summarized pro forma results of operations of the Company for
the years ended December 31, 1999, 1998 and 1997 before the effect of
reinsurance transactions with SLOC:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
---- ---- ----
(IN 000'S)
<S> <C> <C> <C>
Income:
Premiums, annuity deposits and other revenues $71,099 $105,728 $142,915
Net investment income and realized gains 5,323 6,718 9,343
------- -------- --------
Subtotal 76,422 112,446 152,258
------- -------- --------
Benefits and expenses:
Policyholder benefits 74,539 79,918 101,371
Other expenses (4,225) 22,988 45,538
------- -------- --------
Subtotal 70,314 102,906 146,909
------- -------- --------
Income from operations $ 6,108 $ 9,540 $ 5,349
======= ======== ========
</TABLE>
The Company is contingently liable for the portion of the policies reinsured
under each of its existing reinsurance agreements in the event SLOC is unable to
pay their portion of any reinsured claim. Management believes that any liability
from this contingency is unlikely.
7. WITHDRAWAL CHARACTERISTICS OF ANNUITY ACTUARIAL RESERVES AND DEPOSIT
LIABILITIES
Withdrawal characteristics of general account and separate account annuity
reserves and deposits:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
---------------------
AMOUNT % OF TOTAL
-------- ----------
(IN 000'S)
<S> <C> <C>
Subject to discretionary withdrawal with adjustment:
With market value adjustment $ 90,735 12.2
At book value less surrender charges (surrender charge >
5%) 6,221 0.8
At book value (minimal or no charge or adjustment) 626,008 84.1
Not subject to discretionary withdrawal provision 21,252 2.9
-------- ------
Total annuity actuarial reserves and deposit liabilities $744,216 100.0
======== ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
---------------------
AMOUNT % OF TOTAL
-------- ----------
(IN 000'S)
<S> <C> <C>
Subject to discretionary withdrawal:
With market value adjustment $ 98,744 15.2
At book value less surrender charges (surrender charge >
5%) 7,108 1.1
At book value (minimal or no charge or adjustment) 523,814 80.5
Not subject to discretionary withdrawal provision 20,709 3.2
-------- ------
Total annuity actuarial reserves and deposit liabilities $650,375 100.0
======== ======
</TABLE>
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, 1999, 1998 AND 1997
8. SEGMENT INFORMATION
The Company offers financial products and services such as fixed and variable
annuities, group life insurance and group long-term disability protection.
Within these areas, the Company conducts business principally in two operating
segments and maintains a corporate segment to provide for the capital needs of
the various operating segments and to engage in other financing related
activities.
The Wealth Management segment markets and administers individual variable and
fixed annuity products, including market value adjusted annuities, while the
Protection segment markets and administers group life insurance and group
long-term disability products.
The following amounts pertain to the various business segments:
<TABLE>
<CAPTION>
FEDERAL TOTAL
TOTAL TOTAL PRETAX INCOME GENERAL ACCOUNT
REVENUES EXPENDITURES INCOME TAXES ASSETS
------------ ------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
1999:
Wealth Management $ 53,466,000 $50,636,000 $2,830,000 $ 155,000 $ 37,356,000
Protection 16,550,000 15,914,000 636,000 237,000 17,025,000
Corporate 2,490,000 170,000 2,320,000 836,000 25,213,000
------------ ------------ ---------- ---------- ------------
Total: $ 72,506,000 $66,720,000 $5,786,000 $1,228,000 $ 79,594,000
============ ============ ========== ========== ============
1998:
Wealth Management 97,936,000 92,889,000 5,047,000 449,000 36,148,000
Protection 15,155,000 13,251,000 1,904,000 654,000 14,685,000
Corporate 2,071,000 253,000 1,818,000 968,000 34,838,000
------------ ------------ ---------- ---------- ------------
Total: $115,162,000 $106,393,000 $8,769,000 $2,071,000 $ 85,671,000
============ ============ ========== ========== ============
1997:
Wealth Management 130,926,000 127,120,000 3,806,000 1,803,000 43,799,000
Protection 12,623,000 13,791,000 (1,168,000) (406,000) 10,706,000
Corporate 2,874,000 24,000 2,850,000 918,000 46,273,000
------------ ------------ ---------- ---------- ------------
Total: $146,423,000 $140,935,000 $5,488,000 $2,315,000 $100,778,000
============ ============ ========== ========== ============
</TABLE>
9. RETIREMENT PLANS
The Company participates with SLOC and Sun Life (U.S.) in a noncontributory
defined benefit pension plan covering essentially all employees. The benefits
are based on years of service and compensation.
The funding policy for the pension plan is to contribute an amount, which at
least satisfies the minimum amount required by ERISA; currently the plan is
fully funded. The Company is charged for its share of the pension cost based
upon its covered participants. Pension plan assets consist principally of
separate accounts of SLOC.
The Company's share of the group's accrued pension cost at December 31, 1999,
1998 and 1997 was $338,000, $275,000 and $211,000, respectively. The Company's
share of net periodic pension cost was $63,000, $65,000 and $33,000 for the
years ended December 31, 1999, 1998 and 1997, respectively.
The Company also participates with SLOC, Sun Life (U.S.) and certain affiliates
in a 401(k) savings plan for which substantially all employees are eligible. The
Company matches, up to specified amounts, employees' contributions to the plan.
Company contributions were $26,000, $30,000 and $28,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.
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, 1999, 1998 AND 1997
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.
The Company records an accrual of the estimated cost of retiree benefit payments
during the years the employee provides services, and amortizes an obligation of
approximately $50,000 over a period of ten years. The Company's cash flows are
not affected by implementation of this standard, but implementation decreased
net income by $9,000, $6,000 and $16,000 for the years ended December 31, 1999,
1998 and 1997, respectively. The Company's postretirement health, dental and
life insurance benefits currently are not funded.
The following table sets forth the change in the pension and other
postretirement benefit plans' benefit obligations and assets as well as the
plans' funded status reconciled with the amount shown in the Company's statutory
financial statements at December 31:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
1999 1998 1999 1998
-------- -------- -------- --------
(IN 000'S)
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $110,792 $ 79,684 $ 10,419 $ 9,845
Service cost 5,632 4,506 413 240
Interest cost 6,952 6,452 845 673
Actuarial (gain) loss (21,480) 21,975 1,048 308
Benefits paid (2,376) (1,825) (508) (647)
-------- -------- -------- --------
Benefit obligation at end of year $ 99,520 $110,792 $ 12,217 $ 10,419
======== ======== ======== ========
The Company's share:
Benefit obligation at beginning of year $ 515 $ 269 $ 21 $ 89
Benefit obligation at end of year 577 515 30 21
Change in plan assets:
Fair value of plan assets at beginning of year $151,575 $136,610 $ -- $ --
Actual return on plan assets 9,072 16,790 -- --
Employer contribution -- -- 508 647
Benefits paid (2,376) (1,825) (508) (647)
-------- -------- -------- --------
Fair value of plan assets at end of year $158,271 $151,575 $ -- $ --
======== ======== ======== ========
Funded status $ 58,752 $ 40,783 $(12,217) $(10,419)
Unrecognized net actuarial gain (loss) (20,071) (2,113) 1,469 586
Unrecognized transition obligation (asset) (22,617) (24,674) 140 185
Unrecognized prior service cost 7,081 7,661 -- --
-------- -------- -------- --------
Prepaid (accrued) benefit cost $ 23,145 $ 21,657 $(10,608) $ (9,648)
======== ======== ======== ========
</TABLE>
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, 1999, 1998 AND 1997
9. RETIREMENT PLANS (CONTINUED):
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
1999 1998 1999 1998
-------- -------- -------- --------
(IN 000'S)
<S> <C> <C> <C> <C>
The Company's share of accrued
benefit cost $ (338) $ (275) $ (50) $ (41)
======== ======== ======== =======
Weighted-average assumptions as of
December 31:
Discount rate 7.50% 6.75% 7.50% 6.75%
Expected return on plan assets 8.75% 8.00% N/A N/A
Rate of compensation increase 4.50% 4.50% N/A N/A
Components of net periodic benefit cost:
Service cost $ 5,632 $ 4,506 $ 413 $ 239
Interest cost 6,952 6,452 845 673
Expected return on plan assets (12,041) (10,172) -- --
Amortization of transition obligation (asset) (2,056) (2,056) 45 45
Amortization of prior service cost 580 580 -- --
Recognized net actuarial (gain) loss (554) (677) 164 (20)
-------- -------- -------- -------
Net periodic benefit cost $ (1,487) $ (1,367) $ 1,467 $ 937
======== ======== ======== =======
The Company's share of net periodic
benefit cost $ 63 $ 65 $ 9 $ 6
======== ======== ======== =======
</TABLE>
For measurement purposes, a 10.9% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 1999 (5.6% for dental benefits).
The rates were assumed to decrease gradually to 5% for 2005 and remain at that
level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage-point change in assumed
health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1-PERCENTAGE-POINT 1-PERCENTAGE-POINT
INCREASE DECREASE
------------------ ------------------
(IN 000'S)
<S> <C> <C>
Effect on total of service and interest cost components $ 288 $ (518)
Effect on postretirement benefit obligation $2,754 $(2,279)
</TABLE>
10. FAIR VALUE OF FINANCIAL STATEMENTS
The following table presents the carrying amounts and fair values of the
Company's financial instruments at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---------------------------- ----------------------------
CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT FAIR VALUE
--------------- ---------- --------------- ----------
(IN 000'S)
<S> <C> <C> <C> <C>
ASSETS:
Bonds (including short-term) $66,173 $64,122 $63,175 $64,185
Mortgages 8,660 8,876 17,658 18,157
Policy loans 538 538 625 625
LIABILITIES:
Individual annuities $26,561 $25,696 $29,724 $29,212
</TABLE>
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, 1999, 1998 AND 1997
10. FAIR VALUE OF FINANCIAL STATEMENTS (CONTINUED):
The major methods and assumptions used in estimating the fair values of
financial instruments are as follows:
The fair values of short-term bonds are estimated to be the amortized cost. The
fair values of long-term bonds which are publicly traded are based upon market
prices or dealer quotes. For privately placed bonds, fair values are estimated
by taking into account prices for publicly traded bonds of similar credit risk,
maturity, repayment and liquidity characteristics.
The fair values of mortgages are estimated by discounting future cash flows
using current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
The fair values of policy loans approximate carrying amounts.
The fair values of the Company's general account insurance reserves and
liabilities under investment-type contracts (insurance and annuity contracts
that do not involve mortality or morbidity risks) are estimated using discounted
cash flow analyses or surrender values. Those contracts that are deemed to have
short-term guarantees have a carrying amount equal to the estimated fair value.
11. STATUTORY INVESTMENT VALUATION RESERVES
The asset valuation reserve ("AVR") provides a reserve for losses from
investments in bonds, mortgage loans, real-estate and other invested assets with
related increases or decreases being recorded directly to surplus.
Realized capital gains and losses on bonds and mortgages which relate to changes
in levels of interest rate risk are charged or credited to an Interest
Maintenance Reserve and amortized into income over the remaining contractual
life of the security sold.
The table shown below presents changes in the major elements of the AVR and IMR:
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
AVR IMR AVR IMR
--- --- --- ---
(IN 000'S)
<S> <C> <C> <C> <C>
Balance, beginning of year $1,048 $831 $1,346 $886
Net realized capital (losses) gains, net of tax 152 (21) (13) 265
Amortization of net investment gains -- (256) -- (320)
Unrealized investment gains -- -- 359 --
Required by formula 10 -- (644) --
------ ---- ------ ----
Balance, end of year $1,210 $554 $1,048 $831
====== ==== ====== ====
</TABLE>
12. LIABILITY FOR UNPAID CLAIMS AND CLAIM ADJUSTMENT EXPENSES
Activity in the liability for unpaid claims and claim adjustment expense is
summarized below (in 000's).
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Balance, January 1 $11,770 $10,239 $ 6,129
Claims incurred 10,700 8,491 9,008
Claims paid (8,751) (6,960) (4,898)
------- ------- -------
Balance, December 31 $13,719 $11,770 $10,239
======= ======= =======
</TABLE>
The information presented above includes unpaid benefit claims and claim
adjustment expenses for the group life and group long-term disability contracts.
As of December 31, 1999 and 1998, the unpaid claims and claim adjustment
liability for these contracts is included in aggregate reserves.
58
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
13. FEDERAL INCOME TAXES
The Company files a consolidated federal income tax return with Sun Life (U.S.)
and other affiliates. Federal income taxes are calculated as if the Company
filed a return as a separate company. No provision is recognized for timing
differences, which may exist between financial statement and taxable income.
Such differences include reserves, depreciation and accrual of market discount
on bonds. The Company made cash payments to Sun Life (U.S.) of $2,521,000,
$2,506,000 and $1,938,000 during 1999, 1998 and 1997, respectively.
14. LEASE COMMITMENTS
Prior to 1999, the Company leased two separate facilities for its annuity
operations and group sales offices. Both leases commenced in March 1994. During
1999, the Company terminated its lease at its annuity operations facility as it
consolidated the functions performed at this facility with its parent company,
Sun Life (U.S.). The group sales office lease expired in July 1999 and was
renewed in August 1999 for a five year term. The total lease obligations are
$1,098,000 through the end of the lease term. Rent expense under these leases in
1999, 1998 and 1997 amounted to $426,000, $344,000, and $348,000, respectively.
15. TRANSACTIONS WITH AFFILIATES
The Company has agreements with SLOC which provide that SLOC will furnish to the
Company, as requested, personnel as well as certain investment, actuarial and
administrative services on a cost reimbursement basis. Expenses under these
agreements amounted to approximately $2,045,000 in 1999, $1,037,000 in 1998 and
$1,155,000 in 1997.
Cash dividends may be paid out of that part of the Company's available and
accumulated surplus funds, which was derived from realized net operating profits
of its business and realized capital gain. A cash dividend otherwise lawful may
be paid out of such earned surplus even though total surplus is at the time less
than previously contributed or paid-in surplus. No cash dividend shall be paid
to stockholder unless a notice of the intention of the Board of Directors to
declare such dividend and the amount thereof shall have been filed with the
Superintendent of Insurance of the State of New York not less than thirty days
in advance of such proposed declaration, nor if the Superintendent within thirty
days after such filing gives written notice to the Company of his disapproval of
such payment. Stock dividends may be paid out of any available surplus funds.
The maximum amount of dividends, which can be paid by the Company without prior
approval of the Insurance Commissioner of the State of New York, is subject to
restrictions relating to statutory surplus. A dividend in the amount of
$3,000,000 was declared and paid during 1998 by the Company to Sun Life (U.S.).
In 1999, a dividend in the amount of $6,500,000 was declared, approved by the
Board of Directors, and paid by the Company to Sun Life (U.S.).
16. RISK-BASED CAPITAL
Effective December 31, 1993, the NAIC adopted risk-based capital requirements
for life insurance companies. The risk-based capital requirements provide a
method for measuring the minimum acceptable amount of adjusted capital that a
life insurer should have, as determined under statutory accounting practices,
taking into account the risk characteristics of its investments and products.
The Company has met the minimum risk-based capital requirements at December 31,
1999 and 1998.
17. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for monetary and punitive damages have
been asserted. Although there can be no assurances, at the present time the
Company does not anticipate that the ultimate liability arising from such
pending or threatened litigation, after consideration of provisions made for
potential losses and costs of defense, will have a material adverse effect on
the financial condition or operating results of the Company.
59
<PAGE>
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Wholly-owned Subsidiary of Sun Life Assurance Company of Canada (U.S.))
NOTES TO STATUTORY FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
17. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED):
Under insurance guaranty fund laws in each state, the District of Columbia and
Puerto Rico, insurers licensed to do business can be assessed by state insurance
guaranty associations for certain obligations of insolvent insurance companies
to policyholders and claimants. Recent regulatory actions against certain large
life insurers encountering financial difficulty have prompted various state
insurance guaranty associations to begin assessing life insurance companies for
the deemed losses. Most of these laws do provide, however, that an assessment
may be excused or deferred if it would threaten an insurer's solvency and
further provide annual limits on such assessments. Part of the assessments paid
by the Company and its subsidiaries pursuant to these laws may be used as
credits for a portion of the associated premium taxes. The Company incurred
guaranty fund assessments of approximately $26,000, $114,000, and $99,000 in
1999, 1998 and 1997, respectively.
18. ACCOUNTING POLICIES AND PRINCIPLES
The financial statements of the Company have been prepared on the basis of
statutory accounting practices which, prior to 1996, were considered by the
insurance industry and the accounting profession to be in accordance with GAAP
for mutual life insurance companies. The primary differences between statutory
accounting and GAAP are described as follows. Statutory accounting practices do
not recognize the following assets or liabilities, which are reflected under
GAAP: deferred acquisition costs, deferred federal income taxes and statutory
non admitted assets. AVR and IMR are established under statutory accounting
practices but not under GAAP. Methods for calculating real estate depreciation
and investment valuation allowances differ under statutory accounting practices
and GAAP. Premiums for investment-type products are recognized as income for
statutory purposes and as deposits to policyholders' accounts for GAAP.
Investments in fixed maturity securities classified as available-for-sale are
carried at aggregate fair value with changes in unrealized gains and losses
reported net of taxes in a separate component of stockholder's equity for GAAP
and generally at amortized cost under statutory accounting practices.
19. CONSOLIDATION OF CERTAIN OPERATIONS AND ACCOUNTING FUNCTIONS
Effective July 1, 1999, the Company consolidated its customer service and
accounting functions, formerly performed at its office at 80 Broad Street in New
York, New York, with its parent company, Sun Life (U.S.), based in Wellesley
Hills, Massachusetts. In 1999 the Company incurred one-time charges
approximating $800,000, which consisted primarily of: (1) severance and employee
benefit costs for 18 employees; (2) termination fee associated with canceling
its lease at its annuity operations facility; and (3) furniture and equipment
write-offs.
60
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
We have audited the accompanying statutory statements of admitted assets,
liabilities and capital stock and surplus of Sun Life Insurance and Annuity
Company of New York ("the Company") as of December 31, 1999 and 1998, and the
related statutory statements of operations, changes in capital stock and
surplus, and cash flow for each of the three years in the period ended December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described more fully in Notes 1 and 18 to the financial statements, the
Company prepared these financial statements using accounting practices
prescribed or permitted by the Insurance Department of the State of New York,
which is a comprehensive basis of accounting other than generally accepted
accounting principles. The effects on the financial statements of the
differences between the statutory basis of accounting and generally accepted
accounting principles, although not reasonably determinable, are presumed to be
material.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the admitted assets, liabilities and capital stock and
surplus of Sun Life Insurance and Annuity Company of New York as of
December 31, 1999 and 1998, and the results of its operations and its cash flow
for each of the three years in the period ended December 31, 1999 on the basis
of accounting described in Notes 1 and 18.
However, because of the differences between the two bases of accounting referred
to in the second preceding paragraph, in our opinion, the statutory financial
statements referred to above do not present fairly, in conformity with generally
accepted accounting principles, the financial position of Sun Life Insurance and
Annuity Company of New York as of December 31, 1999 and 1998 or the results of
its operations or its cash flow for each of the three years in the period ended
December 31, 1999.
DELOITTE & TOUCHE LLP
February 10, 2000
61
<PAGE>
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
Calculation of Performance Data
Advertising and Sales Literature
Calculations
Example of Variable Accumulation Unit Value Calculation
Example of Variable Annuity Unit Calculation
Example of Variable Annuity Payment Calculation
Distribution of the Contracts
Designation and Change of Beneficiary
Custodian
Financial Statements
</TABLE>
62
<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 April 17, 2000 which is incorporated herein by reference. The
Statement of Additional Information is available upon request and without charge
from Sun Life Insurance and Annuity Company of New York. To receive a copy,
return this request form to the address shown below or telephone
(800) 282-7073.
- --------------------------------------------------------------------------------
To: Sun Life Insurance and Annuity Company of New York
P.O. Box 9141
Boston, Massachusetts 02117
Please send me a Statement of Additional Information for
Futurity--NY Variable and Fixed Annuity
Sun Life (N.Y.) Variable Account C.
Name
- --------------------------------------------------------------
Address
- --------------------------------------------------------------
-------------------------------------------------------------------------
City
- ------------------------------------
State
- --------------
Zip
- ------
Telephone
- ----------------------------------------------------------------
63
<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 on 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 a 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 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.
* You specify these items on the Contract Specifications page, and may change
them, as we described in this Prospectus.
64
<PAGE>
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 Sub-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 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.
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.
* You specify these items on the Contract Specifications page, and may change
them, as we described in this Prospectus.
65
<PAGE>
SEVEN-YEAR ANNIVERSARY: The seventh Contract Anniversary and each
succeeding Contract Anniversary occurring at any seven year interval thereafter;
for example, the 14th, 21st and 28th Contract Anniversaries.
SUB-ACCOUNT: That portion of the Variable Account which invests in shares
of a specific 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.
66
<PAGE>
APPENDIX B
WITHDRAWALS, WITHDRAWAL CHARGES AND THE MARKET VALUE ADJUSTMENT
PART 1: VARIABLE ACCOUNT (THE MARKET VALUE ADJUSTMENT DOES NOT APPLY TO THE
VARIABLE ACCOUNT)
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 7 Account Years ("New Payments")); plus (2) any unused Annual
Withdrawal Allowances from previous years; plus (3) any Purchase Payments
made before the last 7 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 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>
<C> <C> <S> <C> <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.
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> <C> <S> <C> <C> <C> <C>
N/12
1 + I
The MVA factor = ( -------- ) -1
1 + J
</TABLE>
<TABLE>
<C> <C> <S> <C> <C> <C> <C>
24/12
1 + .06
= ( ------ ) -1
1 + .08
2
= (.981) -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.
<TABLE>
<C> <C> <S> <C> <C> <C> <C>
N/12
1 + I
The MVA factor = ( ----- ) -1
1 + J
</TABLE>
<TABLE>
<C> <C> <S> <C> <C> <C> <C>
24/12
1 + .06
= ( ------ ) -1
1 + .05
2
= (1.010) -1
= 1.019 -1
= - .019
</TABLE>
The value of the Guarantee Amount less interest credited to the Guarantee
Amount in the current Contract Year is multiplied by the MVA factor to determine
the MVA:
($11,910.16 - $674.16) X .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
P.O. BOX 9141
BOSTON, MASSACHUSETTS 02117
TELEPHONE:
Toll Free (800) 282-7073
GENERAL DISTRIBUTOR
Clarendon Insurance Agency, Inc.
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, Massachusetts 02116
</TABLE>
FUTURITY - NY 4/2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS.
Item 14. Other Expenses of Issuance and Distribution.
Not applicable
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
------- -----------
(1) Underwriting Agreement (Incorporated by reference from
Post-Effective Amendment No. 2 to the Registration Statement on
Form N-4, File No. 333-05037)
(4) Combination Fixed/Variable Annuity Contract (Incorporated by
reference from Post-Effective Amendment No. 2 to the
Registration Statement on Form N-4, File No. 333-05037)
(5) Opinion re: Legality (Incorporated by reference from the
Registration Statement on Form S-2, File No. 333-77281, filed
April 28, 1999)
(10)(a) Form of Participation Agreement by and between The Alger
American Fund, the Depositor, and Fred Alger and Company,
Incorporated (Incorporated by reference to Post-Effective
Amendment No. 13 to the Registration Statement on Form N-4,
File No. 33-41628, filed April 23, 1999)
(b)(i) Form of Participation Agreement dated February 17, 1998 by
and between Goldman Sachs Variable, Insurance Trust, Goldman
Sachs & Co. and the Depositor (Incorporated by reference to
Post-Effective Amendment No. 13 to the Registration Statement
on Form N-4, File No. 33-41628, filed April 23, 1999)
(ii) Form of Amendment No. 1 dated December 14, 1998 to
Participation Agreement filed as Exhibit 8(b)(i)
(Incorporated by reference to Post-Effective Amendment No.
13 to the Registration Statement on Form N-4, File
No. 33-41628, filed April 23, 1999)
<PAGE>
(iii) Form of Amendment No. 2 dated as of March 15, 1999 to
Participation Agreement filed as Exhibit 8(b)(i)
(Incorporated by reference to Post-Effective Amendment No.
13 to the Registration Statement on Form N-4, File
No. 33-41628, filed April 23, 1999)
(c) Form of Fund Participation Agreement between Depositor and
J.P. Morgan Services Trust II (Incorporated by reference to
Post-Effective Amendment No. 13 to the Registration
Statement on Form N-4, File No. 33-41628, filed April 23,
1999)
(d) Form of Participation Agreement dated February 17, 1998 by
and among MFS/Sun Life Services Trust, the Depositor and
Massachusetts Financial Services Company (Incorporated by
reference to Post-Effective Amendment No. 13 to the
Registration Statement on Form N-4, File No. 33-41628, filed
April 23, 1999)
(e) Form of Participation Agreement dated February 17, 1998 by
and among OCC Accumulation Trust, the Depositor and OCC
Distributors (Incorporated by reference to Post-Effective
Amendment No. 13 to the Registration Statement on Form N-4,
File No. 33-41628, filed April 23, 1999)
(f) Form of Participation Agreement dated February, 1998 by and
among the Depositor, Warburg Pincus Trust, Warburg Pincus
Asset Management, Inc. and Counsellors Securities, Inc
(Incorporated by reference to Post-Effective Amendment No.
13 to the Registration Statement on Form N-4, File
No. 33-41628, filed April 23, 1999)
(g) Form of Participation Agreement dated February 17, 1998 by
and amomg the Depositor, AIM Variable Insurance Funds, Inc.,
AIM Distributors, Inc., and Claredon Insurance Agency, Inc.;
(Incorporated by reference to Post-Effective Amendment No. 1
to the Registration Statement on Form N-4, File No. 333-82957,
filed February 3, 2000)
(h) Form of Participation Agreement dated August 18, 1999 by and
among the Depositor, Sun Capital Advisers Trust and Sun
Capital Advisers, Inc.;(Incorporated by reference to
Post-Effective Amendment No. 1 to the Registration Statement
on Form N-4, File No. 333-82957, filed February 3, 2000)
(23) Independent Auditors Consent*
(24) Powers of Attorney (Incorporated by reference from
Post-Effective Amendment No. 4 to the Registration Statement
on Form N-4, File No. 333-05037, filed March 29, 2000)
- --------------
* Filed herewith
<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 Amendment No. 1 to the
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 29th day of March, 2000.
Sun Life Insurance and Annuity
Company of New York
(Registrant)
By: /s/ JAMES A. MCNULTY, III
-------------------------
James A. McNulty, III
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ JAMES A. MCNULTY, III President and March 29, 2000
- ---------------------------- Director
James A. McNulty, III (Principal
Executive Officer)
/s/ DAVEY S. SCOON Vice President, March 29, 2000
- ------------------------------ Finance,
Davey S. Scoon Controller and
Treasurer (Principal
Financial &
Accounting Officer)
* /s/ DONALD A. STEWART Chairman and March 29, 2000
- ------------------------------ Director
Donald A. Stewart
/s/ C. JAMES PRIEUR Vice Chairman & March 29, 2000
- ------------------------------ Director
C. James Prieur
* /s/ RICHARD B. BAILEY Director March 29, 2000
- ------------------------------
Richard B. Bailey
- -------------------------
* By Edward M. Shea pursuant to Power of Attorney filed as Exhibit 15 to
Post-Effective Amendment No. 4 to Registration Statement on Form N-4, File
No. 333-05037.
<PAGE>
Signature Title Date
--------- ----- ----
* /s/ GREGORY W. GEE Director March 29, 2000
- ------------------------------
Gregory W. Gee
* /s/ DONALD B. HENDERSON, JR. Director March 29, 2000
- ------------------------------
Donald B. Henderson, Jr.
* /s/ DAVID D. HORN Director March 29, 2000
- ------------------------------
David D. Horn
* /s/ JOHN G. IRELAND Director March 29, 2000
- ------------------------------
John G. Ireland
* /s/ ANGUS A. MacNAUGHTON Director March 29, 2000
- ------------------------------
Angus A. MacNaughton
* /s/ PETER R. O'FLINN Director March 29, 2000
- ------------------------------
Peter R. O'Flinn
* /s/ FIORAVANTE G. PERROTTA Director March 29, 2000
- ------------------------------
Fioravante G. Perrotta
* /s/ RALPH F. PETERS Director March 29, 2000
- ------------------------------
Ralph F. Peters
* /s/ S. CAESAR RABOY Director March 29, 2000
- ------------------------------
S. Caesar Raboy
Director
- ------------------------------
William W. Stinson
* /s/ FREDERICK B. WHITTEMORE Director March 29, 2000
- ------------------------------
Frederick B. Whittemore
- ------------------------
* By Edward M. Shea pursuant to Power of Attorney filed as Exhibit 15 to
Post-Effective Amendment No. 4 to Registration Statement on Form N-4, File
No. 333-05037.
<PAGE>
EXHIBIT INDEX
Exhibit
Number
- -------
23 Independent Auditors' Consent
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the use in Amendment No. 1 to the Registration Statement
(Reg. No. 333-77281) on Form S-2 of Sun Life Insurance and Annuity Company of
New York of our report dated February 10, 2000 accompanying the statutory
financial statements of Sun Life Insurance and Annuity Company of New York,
which includes explanatory paragraphs relating to the use of statutory
accounting practices which differ from generally accepted accounting
principles, appearing in the Prospectus for the Regatta Gold-NY Variable and
Fixed Annuity Contract and in the Prospectus for the Futurity-NY Variable and
Fixed Annuity Contract, which are a part of such Registration Statement, and
to the incorporation by reference of our report dated February 10, 2000
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, 1999, which includes
explanatory paragraphs relating to the use of statutory accounting practices
which differ from generally accepted accounting principles.
We also consent to the references to us under the headings "Condensed
Financial Information--Accumulation Unit Values" and "Accountants" in such
Regatta Gold-NY Prospectus and under the heading "Accountants" in such
Futurity-NY Prospectus.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 29, 2000
