<PAGE>
As Filed with the Securities and Exchange Commission on February 3, 2000
REGISTRATION NO. 333-82957
811-05846
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM N-4
POST-EFFECTIVE AMENDMENT NO. 1
TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
AND
AMENDMENT NO. 22 TO
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 /X/
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT F
(Exact Name of Registrant)
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Name of Depositor)
ONE SUN LIFE EXECUTIVE PARK
WELLESLEY HILLS, MASSACHUSETTS 02481
(Address of Depositor's Principal Executive Offices)
DEPOSITOR'S TELEPHONE NUMBER: (781) 237-6030
EDWARD M. SHEA, ASSISTANT VICE PRESIDENT AND SENIOR COUNSEL
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
ONE COPLEY PLACE
BOSTON, MASSACHUSETTS 02116
(Name and Address of Agent for Service)
COPIES OF COMMUNICATIONS TO:
JOAN E. BOROS, ESQ.
JORDEN BURT BOROS CICCHETTI BERENSON & JOHNSON LLP
1025 THOMAS JEFFERSON STREET, N.W.
SUITE 400 EAST
WASHINGTON, D.C. 20007-0805
Approximate Date of Proposed Public Offering: Upon the date of effectiveness
or as soon thereafter as practicable.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration shall thereafter become effective in accordance with Section
8(a) of the Securities Act of 1933 or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to said
Section 8(a) may determine.
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
Attached hereto and made a part hereof is the Prospectus dated April __,
2000 for Futurity Accolade Variable and Fixed Annuity.
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
APRIL , 2000
PROFILE
FUTURITY ACCOLADE
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 ACCOLADE ANNUITY
The Futurity Accolade 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 35 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. In addition, your Contract will be
credited with extra interest at the time you purchase your Contract.
The Contract is designed to meet your need for investment flexibility.
Over the life of your Contract, you may allocate amounts 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
after your first payment 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 (from 10 to 30), with a cash-out option for variable payments.
We may also agree to other annuity options at 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 $10,000 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. PURCHASE PAYMENT INTEREST
We credit your Contract with interest at a rate of 2% to 5% of each
purchase payments based on the interest rate option you chose when you applied
for your Contract. We may apply another factor at are discretion.
5. 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
V.I. Capital Appreciation Fund Capital Appreciation Series
V.I. Growth Fund Emerging Growth Series
V.I. Growth and Income Fund Government Securities Series
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 ("VIT") Total Return Series
VIT CORE-SM- Large Cap Growth Fund Utilities Series
VIT CORE-SM- Small Cap Equity Fund OCC ACCUMULATION TRUST
VIT CORE-SM- U.S. Equity Fund Equity Portfolio
VIT Growth and Income Fund Managed Portfolio
VIT International Equity Fund Mid Cap Portfolio
J.P. MORGAN SERIES TRUST II Small Cap Portfolio
J.P. Morgan U.S. Disciplined Equity Portfolio SUN CAPITAL ADVISERS TRUST
J.P. Morgan International Opportunities Sun Capital Blue Chip Mid Cap Fund
Portfolio Sun Capital Investors Foundation Fund
J.P. Morgan Small Company Portfolio Sun Capital Investment Grade Bond Fund
LORD ABBETT SERIES FUND, INC. Sun Capital Money Market Fund
Growth and Income Portfolio Sun Capital Real Estate Fund
Sun Capital Select Equity Fund
</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.
6. EXPENSES
The charges under the Contracts are as follows:
During the first 5 years of a Contract, we impose an annual Account Fee
equal to $35. After the fifth year, we may change this fee annually, but it will
never exceed $50. During the Income Phase, the annual Account Fee is $35. We
also deduct insurance charges (which include an administrative expense charge)
equal to 1.45% per year of the average daily value of the Contract allocated
among the Sub-Accounts.
2
<PAGE>
If you elect one or more optional death benefit riders, we will deduct an
additional charge per year, depending upon the number of riders you elect, as
follows:
<TABLE>
<CAPTION>
NUMBER OF % OF AVERAGE
RIDERS YOU ELECT DAILY VALUE
- ---------------- ------------
<S> <C>
1 0.15%
2 0.25%
3 0.40%
</TABLE>
No optional death benefit is offered if you are 80 or older at issue.
There are no sales charges when you purchase your Futurity Accolade
Annuity. However, if you withdraw money from your Contract, we will, with
certain exceptions, impose a withdrawal charge. Your Contract allows a "free
withdrawal amount," which you may withdraw before you incur the withdrawal
charge. The rest of your withdrawal is subject to a withdrawal charge equal to a
percentage of each purchase payment you withdraw. Each payment begins a new
seven-year period and moves down a declining surrender charge scale at each
Account Anniversary. Payments received during the current Account Year will be
charged 8%, if withdrawn. On your next scheduled Account Anniversary, that
payment, along with any other payments made during that Account Year, will be
considered to be in their 2nd Account Year and will have an 8% withdrawal
charge. On the next Account Anniversary, these payments will move into their 3rd
Account Year and will have a withdrawal charge of 7%, if withdrawn. This
withdrawal charge decreases according to the number of Account Years the
purchase payment has been held in your Account. The declining scale is as
follows:
<TABLE>
<CAPTION>
NUMBER OF ACCOUNT YEARS
PAYMENT HAS BEEN IN
YOUR CONTRACT WITHDRAWAL CHARGE
- ----------------------- -----------------
<S> <C>
0-1 8%
1-2 8%
2-3 7%
3-4 7%
4-5 6%
5-6 5%
6-7 4%
7+ 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 Account 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 0.56% to 1.55% of the average net assets of the Fund,
depending upon which Fund you have selected. The investment advisers to some of
the Funds have 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
agreements 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 Fund. 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 that earns 5% annually and that you withdraw your
3
<PAGE>
money (1) at the end of one year or (2) at the end of 10 years. For the first
year, the Total Annual Expenses are deducted, as well as withdrawal charges. For
year 10, the example shows the aggregate of all of the annual expenses deducted
for the 10 years, but there is no withdrawal charge.
"Total Annual Insurance Charges" include the insurance charges of 1.45%
(1.30% for mortality and expense risks and 0.15% for administrative expenses)
plus an additional 0.10%, which is used to represent the $35 annual Account Fee
based on an assumed Contract value of $35,000. The actual impact of the Account
Fee may be greater or less than 0.10%, depending upon the value of your
Contract.
<TABLE>
<CAPTION>
EXAMPLES:
TOTAL ANNUAL TOTAL ANNUAL TOTAL TOTAL EXPENSES
INSURANCE SERIES ANNUAL AT END
SUB-ACCOUNT CHARGES EXPENSES EXPENSES 1 YEAR 10 YEARS
- ----------- ---------------- ------------ ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund 1.55%
AIM V.I. Growth Fund 1.55%
AIM V.I. Growth and Income Fund 1.55%
AIM V.I. International Equity Fund 1.55%
Alger American Growth Portfolio 1.55%
Alger American Income and Growth Portfolio 1.55%
Alger American Small Capitalization Portfolio 1.55%
Goldman Sachs VIT CORE-SM- Large Cap Growth Fund 1.55%
Goldman Sachs VIT CORE-SM- Small Cap Equity Fund 1.55%
Goldman Sachs VIT CORE-SM- U.S. Equity Fund 1.55%
Goldman Sachs VIT Growth and Income Fund 1.55%
Goldman Sachs VIT International Equity Fund 1.55%
J.P. Morgan U.S. Disciplined Equity Portfolio 1.55%
J.P. Morgan International Opportunities 1.55%
Portfolio
J.P. Morgan Small Company Portfolio 1.55%
Lord Abbett Growth and Income Portfolio 1.55%
MFS/Sun Life Capital Appreciation Series 1.55%
MFS/Sun Life Emerging Growth Series 1.55%
MFS/Sun Life Government Securities Series 1.55%
MFS/Sun Life High Yield Series 1.55%
MFS/Sun Life Massachusetts Investors Growth 1.55%
Stock Series
MFS/Sun Life Massachusetts Investors Trust 1.55%
Series
MFS/Sun Life New Discovery Series 1.55%
MFS/Sun Life Total Return Series 1.55%
MFS/Sun Life Utilities Series 1.55%
OCC Equity Portfolio 1.55%
OCC Managed Portfolio 1.55%
OCC Mid Cap Portfolio 1.55%
OCC Small Cap Portfolio 1.55%
Sun Capital Blue Chip Mid Cap Fund 1.55%
Sun Capital Investors Foundation Fund 1.55%
Sun Capital Investment Grade Bond Fund 1.55%
Sun Capital Money Market Fund 1.55%
Sun Capital Real Estate Fund 1.55%
Sun Capital Select Equity Fund 1.55%
</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.
7. 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,
4
<PAGE>
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.
Different laws apply if your Contract is issued in Puerto Rico. Under the
tax laws of Puerto Rico, when an annuity payment is made under your Contract,
your Annuitant or any other Payee is required to include as gross income the
portion of each annuity payment equal to 3% of the aggregate purchase payments
you made under the Contract. The amount if any, in excess of the included amount
is excluded from gross income. After an amount equal to the aggregate amount
excluded from gross income has been received, all of the annuity payments are
considered to be taxable income. You should consult with your tax adviser for
specific tax information.
8. ACCESS TO YOUR MONEY
You can withdraw money from your Contract at any time during the
Accumulation Phase. You may withdraw a portion of the value of your Contract in
each year without the imposition of the withdrawal charge -- the amount of all
purchase payments you made prior to the last 7 years and have not withdrawn plus
the greater of (1) your Contract's earnings in the prior Account Year and (2)
10% of all purchase payments you have made in the last 7 years. All other
purchase payments you withdraw will be subject to a withdrawal charge ranging
from 8% to 4%. 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
certain circumstances, we will waive the withdrawal charges for a full or
partial withdrawal when you are confined to an eligible nursing home. 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.
9. PERFORMANCE
If you invest in the Variable Account, the value of your Contract will
increase or decrease depending upon the investment performance of the Fund you
choose. The Sub-Accounts have not been in operation for a full calendar year;
therefore no performance information is provided in this Profile.
10. DEATH BENEFIT
If you die 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.
BASIC DEATH BENEFIT
If you were 85 or younger when we issued your Contract, the death benefit
is the greatest of:
(1) the value of the Contract on the Death Benefit Date;
(2) the amount we would pay in the event of a full surrender of the
Contract on the Death Benefit Date; and
(3) your total purchase payments (adjusted for partial withdrawals)
calculated as of the Death Benefit Date.
If you were 86 or older when we issued your Contract, the death benefit is
equal to the amount set forth in (2) above.
OPTIONAL DEATH BENEFIT RIDERS
Subject to availability in your state, if you are 79 or younger when we
issue your Contract, you may enhance this basic death benefit by electing one or
more of the following optional death benefit
5
<PAGE>
riders: the Maximum Anniversary Account Value Rider, the Earnings Enhancement
Rider, and the 5% Premium Roll-Up Rider.
MAXIMUM ANNIVERSARY ACCOUNT VALUE RIDER
If you elect the Maximum Anniversary Account Value Rider, the death benefit
is the greater of:
- any death benefit amounts payable under (1), (2) or (3) above, or
- your highest Contract value on any Account Anniversary before your 81st
birthday, adjusted for any subsequent purchase payments, partial
withdrawals, and charges made between that Account Anniversary and the
Death Benefit Date.
5% PREMIUM ROLL-UP RIDER
If you elect the 5% Premium Roll-Up Rider, the death benefit is
- the greatest of any death benefit amounts payable under (1), (2) or
(3) above or
- the sum of your total purchase payment plus interest accruals, adjusted
for partial withdrawals.
Under this rider, interest accrues at 5% per year on purchase payments and
transfers to the Variable Account while they remain in the Variable Account. The
5% accruals will continue until the earlier of:
- first day of the month following your 80th birthday or
- the day the death benefit amount under this rider equals twice the total
of the purchase payments and transferred amounts adjusted for
withdrawals.
Net Purchase Payments under this rider will be adjusted for all partial
withdrawals as described in "Calculating the Death Benefit."
EARNINGS ENHANCEMENT RIDER
If you elect the Earnings Enhancement Rider and you are 69 or younger when
we issue your Contract, the death benefit is:
- the greatest of any death benefit amounts payable under (1), (2) or
(3) above plus
- 40% of the lesser of your net purchase payments or your Account Value
minus net purchase payments, calculated as of the Death Benefit Date.
If you elect the Earnings Enhancement Rider, and you are between the ages
of 70 and 79 when we issue your Contract, the death benefit is:
- the greatest of any death benefit amounts payable under (1), (2) or
(3) above plus
- 25% of the lesser of your net purchase payment or your Account Value
minus net purchase payments, calculated as of the Death Benefit Date.
SELECTING MULTIPLE DEATH BENEFIT RIDERS
If you elect more than one death benefit rider, the death benefit will be
calculated as follows:
1) MAXIMUM ANNIVERSARY ACCOUNT VALUE RIDER COMBINED WITH 5% PREMIUM
ROLL-UP RIDER: The death benefit will equal the greater of the death
benefit under the Maximum Anniversary Account Value Rider or the death
benefit under the 5% Premium Roll-Up Rider
2) MAXIMUM ANNIVERSARY ACCOUNT VALUE RIDER COMBINED WITH EARNINGS
ENHANCEMENT RIDER: The death benefit will equal the death benefit under
the Maximum Anniversary Account Value Rider, PLUS the amount calculated
under the Earnings Enhancement Rider. The death benefit
6
<PAGE>
under the Earnings Enhancement Rider is calculated using the Account
Value before the application of the Maximum Anniversary Account Rider.
3) EARNINGS ENHANCEMENT RIDER COMBINED WITH 5% PREMIUM ROLL-UP RIDER: The
death benefit will equal the death benefit under the 5% Premium Roll-Up
Rider, PLUS the amount calculated under the Earnings Enhancement Rider.
The death benefit under the Earnings Enhancement Rider is calculated
using the Account Value before the application of the 5% Premium
Roll-Up Rider.
4) MAXIMUM ANNIVERSARY ACCOUNT VALUE RIDER COMBINED WITH BOTH THE EARNINGS
ENHANCEMENT RIDER AND THE 5% PREMIUM ROLL-UP RIDER: The death benefit
will equal the greater of the death benefit under the Maximum
Anniversary Account Value Rider or the death benefit under the 5%
Premium Roll-Up Rider, PLUS the amount calculated under the Earnings
Enhancement Rider. The death benefit under the Earnings Enhancement
Rider is calculated using the Account Value before the application of
the 5% Premium Roll-Up Rider and that of the Maximum Anniversary
Account Value Rider.
If your spouse is the sole beneficiary, your spouse may elect to continue
this contract, the death benefit amount described above will be your new account
value as of the Death Benefit Date. For purposes of calculating future death
benefits, your age and the original issue date will be used to determine
applicable expense and death benefit amounts.
11. OTHER INFORMATION
PURCHASE PAYMENT INTEREST. We credit your Contract with interest at a rate
of 2% to 5% of each purchase payment based the interest rate option you chose
when you apply for your Contract. We may apply another factor at our discretion.
FREE LOOK. Depending upon applicable state law, if you cancel your
Contract within 10 days after receiving it we will send you the value of your
Contract less any "Adjusted" Purchase Payment Interest 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. However, based upon
applicable state or federal law, we will refund the full amount of any purchase
payment(s) we receive and the "free look" period may be greater than 10 days.
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 a 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 or not 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 or
an acknowledgment of transactions within your Contract, except for those
transactions 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 at the end of that
period.
ADDITIONAL FEATURES. The Futurity Accolade Annuity offers the following
additional convenient features, which you may choose at no extra charge. These
features may be started or discontinued at any time by either you or the Company
with at least thirty days notice.
DOLLAR-COST AVERAGING -- This program lets you invest gradually in up to
12 Sub-Accounts.
7
<PAGE>
ASSET ALLOCATION -- This program rebalances your Account balance 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 monthly, 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 by investing a portion of your investment into a Guarantee
Period, and also allows you to allocate a portion of your investment to one or
more Sub-Accounts.
12. 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 ASSURANCE COMPANY OF CANADA (U.S.)
C/O RETIREMENT PRODUCTS AND SERVICES
P.O. BOX 9133
BOSTON, MASSACHUSETTS 02117
TELEPHONE:
TOLL FREE (888) 786-2435
IN MASSACHUSETTS (617) 348-9600
8
<PAGE>
PROSPECTUS
APRIL , 2000
FUTURITY ACCOLADE
Sun Life Assurance Company of Canada (U.S.) and Sun Life of Canada (U.S.)
Variable Account F offer the flexible payment deferred annuity contracts and
certificates described in this Prospectus to groups and individuals.
You may choose among 35 variable investment options and a range of fixed
options. The variable options are Sub-Accounts in the Variable Account, each of
which invests in shares of one of the following mutual funds or series thereof
(the "Funds").
<TABLE>
<S> <C>
AIM VARIABLE INSURANCE FUNDS, INC. MFS/SUN LIFE SERIES TRUST
V.I. Capital Appreciation Fund Capital Appreciation Series
V.I. Growth Fund Emerging Growth Series
V.I. Growth and Income Fund Government Securities Series
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 ("VIT") Total Return Series
VIT CORE-SM- Large Cap Growth Fund Utilities Series
VIT CORE-SM- Small Cap Equity Fund OCC ACCUMULATION TRUST
VIT CORE-SM- U.S. Equity Fund Equity Portfolio
VIT Growth and Income Fund Managed Portfolio
VIT International Equity Fund Mid Cap Portfolio
J.P. MORGAN SERIES TRUST II Small Cap Portfolio
J.P. Morgan U.S. Disciplined Equity Portfolio SUN CAPITAL ADVISERS TRUST
J.P. Morgan International Opportunities Sun Capital Blue Chip Mid Cap Fund
Portfolio Sun Capital Investors Foundation Fund
J.P. Morgan Small Company Portfolio Sun Capital Investment Grade Bond Fund
LORD ABBETT SERIES FUND, INC. Sun Capital Money Market Fund
Growth and Income Portfolio Sun Capital Real Estate Fund
Sun Capital Select Equity Fund
</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 FUTURITY ACCOLADE ANNUITY AND THE FUNDS.
We have filed a Statement of Additional Information dated April , 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 XX of this Prospectus. You may obtain a copy without charge by
writing to our Annuity Service Mailing Address or by telephoning (888) 786-2435.
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 AT OUR ANNUITY SERVICE MAILING
ADDRESS MEANS RECEIPT AT THE FOLLOWING ADDRESS:
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
C/O RETIREMENT PRODUCTS AND SERVICES
P.O. BOX 9133
BOSTON, MASSACHUSETTS 02117
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Special Terms 5
Expense Summary 5
Summary of Contract Expenses 5
Underlying Fund Annual Expenses 6
Examples 8
The Futurity Accolade Annuity 9
Communicating To Us About Your Contract 10
Sun Life Assurance Company of Canada (U.S.) 10
The Variable Account 11
Variable Account Options: The Funds 11
The Fixed Account 14
The Fixed Account Options: The Guarantee Periods 14
The Accumulation Phase 15
Issuing Your Contract 15
Amount and Frequency of Purchase Payments 15
Allocation of Net Purchase Payments 15
Your Account 16
Your Account Value 16
Purchase Payment Interest 16
Variable Account Value 17
Fixed Account Value 17
Transfer Privilege 18
Waivers; Reduced Charges; Credits; Bonus Guaranteed
Interest Rates 19
Optional Programs 20
Withdrawals, Withdrawal Charge and Market Value Adjustment 21
Cash Withdrawals 21
Withdrawal Charge 22
Types of Withdrawals not Subject to Withdrawal Charge 24
Market Value Adjustment 24
Contract Charges 25
Account Fee 25
Administrative Expense Charge 26
Mortality and Expense Risk Charge 26
Charge for Optional Death Benefit Riders 26
Premium Taxes 26
Fund Expenses 27
Modification in the Case of Group Contracts 27
Death Benefit 27
Amount of Death Benefit 27
The Basic Death Benefit 27
Optional Death Benefit Riders 27
Calculating the Death Benefit 29
Method of Paying Death Benefit 29
Non-Qualified Contracts 30
Selection and Change of Beneficiary 30
Payment of Death Benefit 30
Due Proof of Death 30
The Income Phase -- Annuity Provisions 30
Selection of the Annuitant or Co-Annuitant 31
Selection of the Annuity Commencement Date 31
Annuity Options 32
Selection of Annuity Option 32
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Amount of Annuity Payments 33
Exchange of Variable Annuity Units 34
Account Fee 34
Annuity Payment Rates 34
Annuity Options as Method of Payment for Death Benefit 34
Other Contract Provisions 34
Exercise of Contract Rights 34
Change of Ownership 35
Voting of Fund Shares 35
Periodic Reports 36
Substitution of Securities 36
Change in Operation of Variable Account 36
Splitting Units 36
Modification 37
Discontinuance of New Participants 37
Reservation of Rights 37
Right to Return 37
Tax Considerations 38
U.S. Federal Tax Considerations 38
DEDUCTIBILITY OF PURCHASE PAYMENTS 38
PRE-DISTRIBUTION TAXATION OF CONTRACTS 38
DISTRIBUTIONS AND WITHDRAWALS FROM NON-QUALIFIED
CONTRACTS 38
DISTRIBUTION AND WITHDRAWALS FROM QUALIFIED
CONTRACTS 39
WITHHOLDING 39
INVESTMENT DIVERSIFICATION AND CONTROL 39
TAX TREATMENT OF THE COMPANY AND THE VARIABLE
ACCOUNT 40
QUALIFIED RETIREMENT PLANS 40
PENSION AND PROFIT-SHARING PLANS 40
TAX-SHELTERED ANNUITIES 40
INDIVIDUAL RETIREMENT ACCOUNTS 41
ROTH IRAS 41
Puerto Rico Tax Considerations 41
Administration of the Contracts 42
Distribution of the Contracts 42
Performance Information 42
Available Information 43
Incorporation of Certain Documents by Reference 44
Additional Information About the Company 44
Business of the Company
Selected Financial Data
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Capital Resources
Demutualization
Year 2000 Compliance
Sale of Subsidiary
Quantitative and Qualitative Disclosures About Market
Risk
Reinsurance 44
Reserves 44
Investments 45
Competition 45
Employees 45
Properties 45
State Regulation 45
Legal Proceedings 46
Accountants 46
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Financial Statements 46
Table of Contents of Statement of Additional Information 47
Appendix A -- Glossary 49
Appendix B -- Withdrawals, Withdrawal Charges and the Market
Value Adjustment 52
Appendix C -- Calculation of Basic Death Benefit 55
Appendix D -- Calculation of Earnings Enhancement Optional
Death Benefit Rider 56
Appendix E -- Calculation of Death Benefit When All Three
Riders are Selected 57
Appendix F -- Calculation Used to Determine Purchase Payment
Interest 58
</TABLE>
4
<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, where required by state law.
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 complete Account Years Purchase Payment in
Account
0-1..................................................... 8%
1-2..................................................... 8%
2-3..................................................... 7%
3-4..................................................... 7%
4-5..................................................... 6%
5-6..................................................... 5%
6-7..................................................... 4%
7 or more............................................... 0%
Transfer Fee (2)............................................ $ 0
ANNUAL ACCOUNT FEE PER CONTRACT OR CERTIFICATE (3).......... $ 35
VARIABLE ACCOUNT ANNUAL EXPENSES (as a percentage of average
Variable Account assets)
Mortality and Expense Risks Charge........................ 1.30%
Administrative Expense Charge............................. 0.15%
Other Fees and Expenses of the Variable Account........... 0.00%
-----
Total Variable Account Annual Expenses (4).................. 1.45%
</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 Account Years, it may be withdrawn free of the withdrawal charge.
(2) A Market Value Adjustment may be imposed on amounts transferred from or
within the Fixed Account. We reserve the right to impose up to $15 per
transfer.
(3) The Annual Account Fee is $35 in Account Years 1 through 5; thereafter, the
fee may be changed annually, but it may not exceed $50.
(4) An additional charge will apply if you elect one or more of the optional
death benefit riders. For more information, refer to "Charge for Optional
Death Benefit Riders."
5
<PAGE>
UNDERLYING FUND ANNUAL EXPENSES (1)
(AS A PERCENTAGE OF FUND NET ASSETS)
<TABLE>
<CAPTION>
MANAGEMENT FEES OTHER EXPENSES TOTAL FUND ANNUAL
(AFTER (AFTER EXPENSES (AFTER
REIMBURSEMENT)(2) REIMBURSEMENT)(2) REIMBURSEMENT)(2)
----------------- ----------------- -----------------
<S> <C> <C> <C>
AIM V.I. Capital Appreciation Fund......
AIM V.I. Growth Fund....................
AIM V.I. Growth and Income Fund.........
AIM V.I. International Equity Fund......
Alger American Growth Portfolio.........
Alger American Income and Growth
Portfolio..............................
Alger American Small Capitalization
Portfolio..............................
Goldman Sachs VIT CORE-SM- Large Cap
Growth Fund (3)........................
Goldman Sachs VIT CORE-SM- Small Cap
Equity Fund (3)........................
Goldman Sachs VIT CORE-SM- U.S. Equity
Fund (3)...............................
Goldman Sachs VIT Growth and Income
Fund (3)...............................
Goldman Sachs VIT International Equity
Fund (3)...............................
J.P. Morgan U.S. Disciplined Equity
Portfolio (4)..........................
J.P. Morgan International Opportunities
Portfolio (4)..........................
J.P. Morgan Small Company
Portfolio (4)..........................
Lord Abbett Growth and Income
Portfolio..............................
MFS/Sun Life Capital Appreciation
Series.................................
MFS/Sun Life Emerging Growth Series.....
MFS/Sun Life Government Securities
Series.................................
MFS/Sun Life High Yield Series..........
MFS/Sun Life Massachusetts Investors
Growth Stock Series....................
MFS/Sun Life Massachusetts Investors
Trust Series...........................
MFS/Sun Life New Discovery Series (5)...
MFS/Sun Life Total Return Series........
MFS/Sun Life Utilities Series...........
OCC Equity Portfolio (6)................
OCC Managed Portfolio (6)...............
OCC Mid Cap Portfolio (6)...............
OCC Small Cap Portfolio (6).............
Sun Capital Blue Chip Mid Cap
Fund (7)(8)............................
Sun Capital Investors Foundation
Fund (7)(8)............................
Sun Capital Investment Grade Bond
Fund (7)...............................
Sun Capital Money Market Fund (7).......
Sun Capital Real Estate Fund (7)........
Sun Capital Select Equity Fund (7)(8)...
</TABLE>
- ------------------------
(1) The information relating to Fund expenses was provided by the Funds and we
have not indepen-
6
<PAGE>
dently verified it. You should consult the Fund prospectuses for more
information about Fund expenses.
(2) For all Funds except the Sun Capital Blue Chip Mid Cap Fund, the Sun Capital
Investors Foundation Fund and the Sun Capital Select Equity Fund, the
"Management Fees," "Other Expenses" and "Total Fund Annual Expenses" are
based on actual expenses for the fiscal year ended December 31, 1998, net of
any applicable expense reimbursement or waiver. Expense figures shown for
the Sun Capital Blue Chip Mid Cap Fund, the Sun Capital Investors Foundation
Fund and the Sun Capital Select Equity Fund are estimates for 1999, based on
the applicable expense reimbursement waiver; no actual expenses are shown
because these Funds commenced operations in September 1999.
(3) The investment advisers for the Goldman Sachs 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- 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 0.10%, 0.15%, 0.10%, 0.15%, and 0.25% per annum of such
Funds' average daily net assets, respectively. Absent any such waiver or
reimbursement, "Management Fees," "Other Expenses," and "Total Fund Annual
Expenses" for the year ended December 31, 1998 were: 0.75%, 3.17%, and 3.92%
for the Goldman Sachs VIT CORE-SM- Small Cap Equity Fund; 0.70%, 2.13%, and
2.83% for the Goldman Sachs VIT CORE-SM- U.S. Equity Fund; 0.75%, 1.94%, and
2.69% for the Goldman Sachs VIT Growth and Income Fund; and 1.00%, 1.97%,
and 2.97% for the Goldman Sachs VIT International Equity Fund. Estimated
total operating expenses (annualized before expense limitations) for the
Goldman Sachs VIT CORE-SM- Large Cap Growth Fund were 0.70%, 2.17%, and
2.87%, respectively. Fee waivers and expense reimbursements for the Goldman
Sachs Funds may be discontinued at any time.
(4) An affiliate of the adviser has agreed to reimburse the Funds, to the extent
certain expenses exceed the following percentages of the Fund's daily net
assets during 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 % for
the J.P. Morgan U.S. Disciplined Equity Portfolio, % for the J.P. Morgan
International Opportunities Portfolio, and % for the J.P. Morgan Small
Company Portfolio.
(5) The Fund's adviser has agreed to bear the Fund's expenses, excluding
management fees, taxes, extraordinary expenses and brokerage and transaction
costs, in excess of 0.35% of the Fund's average daily net assets. Absent the
fee waiver and/or expense reimbursement, Other Expenses would have been
0.70% and Total Fund Annual Expenses would have been 1.60%. These
arrangements will remain in effect until at least May 1, 2000, absent an
earlier modification by the Fund's Board of Trustees.
(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 Advisors 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 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. Absent any such
waiver or reimbursement, "Management Fees," "Other Expenses" and "Total Fund
Annual Expenses" for the year ended December 31, 1999 were: %, % and
7
<PAGE>
% for the Sun Capital Investment Grade Bond Fund; %, % and % for
the Sun Capital Money Market Fund; and %, % and % for the Sun
Capital Real Estate Fund. Estimated total operating expenses (annualized,
before expense limitations) for the Sun Capital Blue Chip Mid Cap Fund, the
Sun Capital Investors Foundation Fund, and the Sun Capital Select Equity
Fund for the year ending December 31, 1999 are 5.85%, 5.80%, and 5.80%,
respectively. Fee waivers and expense reimbursements for the Sun Capital
Funds may be discontinued at any time after September 1, 2000. 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 assets of
such Fund exceed $300 million.
EXAMPLES
If you surrender your Contract at the end of the applicable time period,
you would pay the following expenses on a $1,000 investment, assuming a 5%
annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund.........................
AIM V.I. Growth Fund.......................................
AIM V.I. Growth and Income Fund............................
AIM V.I. International Equity Fund.........................
Alger American Growth Portfolio............................
Alger American Income and Growth Portfolio.................
Alger American Small Capitalization Portfolio..............
Goldman Sachs VIT CORE-SM- Large Cap Growth Fund...........
Goldman Sachs VIT CORE-SM- Small Cap Equity Fund...........
Goldman Sachs VIT CORE-SM- U.S. Equity Fund................
Goldman Sachs VIT Growth and Income Fund...................
Goldman Sachs VIT International Equity Fund................
J.P. Morgan U.S. Disciplined Equity Portfolio..............
J.P. Morgan International Opportunities Portfolio..........
J.P. Morgan Small Company Portfolio........................
Lord Abbett Growth and Income Portfolio....................
MFS/Sun Life Capital Appreciation Series...................
MFS/Sun Life Emerging Growth Series........................
MFS/Sun Life Government Securities Series..................
MFS/Sun Life High Yield Series.............................
MFS/Sun Life Massachusetts Investors Growth Stock Series...
MFS/Sun Life Massachusetts Investors Trust Series..........
MFS/Sun Life New Discovery Series..........................
MFS/Sun Life Total Return Series...........................
MFS/Sun Life Utilities Series..............................
OCC Equity Portfolio.......................................
OCC Managed Portfolio......................................
OCC Mid Cap Portfolio......................................
OCC Small Cap Portfolio....................................
Sun Capital Blue Chip Mid Cap Fund.........................
Sun Capital Investors Foundation Fund......................
Sun Capital Investment Grade Bond Fund.....................
Sun Capital Money Market Fund..............................
Sun Capital Real Estate Fund...............................
Sun Capital Select Equity Fund.............................
</TABLE>
8
<PAGE>
If you do NOT surrender your Contract, or if you annuitize at the end of
the applicable time period, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund.........................
AIM V.I. Growth Fund.......................................
AIM V.I. Growth and Income Fund............................
AIM V.I. International Equity Fund.........................
Alger American Growth Portfolio............................
Alger American Income and Growth Portfolio.................
Alger American Small Capitalization Portfolio..............
Goldman Sachs VIT CORE-SM- Large Cap Growth Fund...........
Goldman Sachs VIT CORE-SM- Small Cap Equity Fund...........
Goldman Sachs VIT CORE-SM- U.S. Equity Fund................
Goldman Sachs VIT Growth and Income Fund...................
Goldman Sachs VIT International Equity Fund................
J.P. Morgan U.S. Disciplined Equity Portfolio..............
J.P. Morgan International Opportunities Portfolio..........
J.P. Morgan Small Company Portfolio........................
Lord Abbett Growth and Income Portfolio....................
MFS/Sun Life Capital Appreciation Series...................
MFS/Sun Life Emerging Growth Series........................
MFS/Sun Life Government Securities Series..................
MFS/Sun Life High Yield Series.............................
MFS/Sun Life Massachusetts Investors Growth Stock Series...
MFS/Sun Life Massachusetts Investors Trust Series..........
MFS/Sun Life New Discovery Series..........................
MFS/Sun Life Total Return Series...........................
MFS/Sun Life Utilities Series..............................
OCC Equity Portfolio.......................................
OCC Managed Portfolio......................................
OCC Mid Cap Portfolio......................................
OCC Small Cap Portfolio....................................
Sun Capital Blue Chip Mid Cap Fund.........................
Sun Capital Investors Foundation Fund......................
Sun Capital Investment Grade Bond Fund.....................
Sun Capital Money Market Fund..............................
Sun Capital Real Estate Fund...............................
Sun Capital Select Equity Fund.............................
</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.
THE FUTURITY ACCOLADE ANNUITY
Sun Life Assurance Company of Canada (U.S.) (the "Company", "we" or "us")
and Sun Life of Canada (U.S.) Variable Account F (the "Variable Account") offer
the Futurity Accolade Annuity to groups and individuals for use in connection
with their retirement plans. The Contracts are available on a group basis and,
in certain states, may be available on an individual basis. We issue an
Individual Contract directly to the individual owner of the Contract. We issue a
Group Contract to the Owner covering all individuals participating under the
Group Contract. Each individual receives a Certificate that evidences his or her
participation under the Group Contract.
In this Prospectus, unless we state otherwise, we refer to both the owners
of Individual Contracts and participating individuals under Group Contracts as
"Participants" and we address all those Participants as "you"; we use the term
"Contracts" to include Individual Contracts, Group Contracts, and Certificates
issued under Group Contracts. For the purpose of determining benefits under both
9
<PAGE>
Individual Contracts and Group Contracts, we establish an Account for each
Participant, which we will refer to as "your" Account or a "Participant
Account."
The Contract provides a number of important benefits for your retirement
planning. It has an Accumulation Phase, during which you make payments under the
Contract and allocate them to one or more Variable Account or Fixed Account
options, and an Income Phase, during which we make payments based on the amount
you have accumulated. The Contract provides tax deferral, so that you do not pay
taxes on your earnings under the Contract until you withdraw them. It provides a
death benefit if you die during the Accumulation Phase. Finally, if you so
elect, during the Income Phase we will make payments to you or someone else for
life or for another period that you choose.
You choose these benefits on a variable or fixed basis or a combination of
both. When you choose variable investment options or a Variable Annuity option,
your benefits will be responsive to changes in the economic environment,
including inflationary forces and changes in rates of return available from
different types of investments. With these options, you assume all investment
risk under the Contract. When you choose a Guarantee Period in our Fixed Account
or a Fixed Annuity option, we assume the investment risk, except in the case of
early withdrawals in the Accumulation Phase, 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 might not exceed our minimum guaranteed rate, which is 3% per
year, compounded annually.
The Contracts are designed for use in connection with retirement and
deferred compensation plans, some of which qualify for favorable federal income
tax treatment under Sections 401, 403, 408 or 408A of the Internal Revenue Code.
The Contracts are also designed so that they may be used in connection with
certain non-tax-qualified retirement plans, such as payroll savings plans and
such other groups (trusteed or nontrusteed) as may be eligible under applicable
law. We refer to Contracts used with plans that receive favorable tax treatment
as "Qualified Contracts," and all others as "Non-Qualified Contracts."
COMMUNICATING TO US ABOUT YOUR CONTRACT
All materials sent to us, including Purchase Payments, must be sent to our
Annuity Service Mailing Address set forth on the first page of this Prospectus.
For all telephone communications, you must call (888) 786-2435.
Unless this Prospectus states differently, we will consider all materials
sent to us and all telephone communications to be received on the date we
actually receive them at the Annuity Service Mailing Address. However, we will
consider Purchase Payments, withdrawal requests and transfer instructions to be
received on the next Business Day if we receive them (1) on a day that is not a
Business Day or (2) after 4:00 p.m., Eastern Time.
When we specify that notice to us must be in writing, we reserve the
right, in our sole discretion, to accept notice in another form.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
We are a stock life insurance company incorporated under the laws of
Delaware on January 12, 1970. We do business in 48 states, the District of
Columbia, and Puerto Rico, and we have an insurance company subsidiary that does
business in New York. Our Executive Office mailing address is One Sun Life
Executive Park, Wellesley Hills, Massachusetts 02481.
We are an indirect wholly-owned subsidiary of Sun Life Assurance Company
of Canada ("Sun Life (Canada)"). Sun Life (Canada) is a mutual life insurance
company incorporated pursuant to Act of Parliament of Canada in 1865 and
currently transacts business in all of the Canadian provinces and territories,
all U.S. states (except New York), the District of Columbia, Puerto Rico, the
Virgin Islands, Great Britain, Ireland, Hong Kong, Bermuda, the Philippines,
Indonesia, and the Peoples Republic of China.
10
<PAGE>
THE VARIABLE ACCOUNT
We established the Variable Account as a separate account on July 13,
1989, pursuant to a resolution of our Board of Directors. Under Delaware
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 Funds with respect to the shares held by the Variable Account will be
reinvested to purchase additional shares at their net asset value. Deductions
will be made 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. 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 1-888-388-8748 (617-348-9600, IN MASSACHUSETTS) OR WRITING TO SUN LIFE
ASSURANCE COMPANY OF CANADA (U.S.), RETIREMENT PRODUCTS AND SERVICES, P.O. BOX
9133, 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.
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.
11
<PAGE>
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., except for Goldman Sachs International Equity Fund, which
is advised by Goldman Sachs Asset Management International, an affiliate of
Goldman, Sachs & Co.)
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.
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.
12
<PAGE>
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 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.
13
<PAGE>
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 publically 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 all the general assets of the Company
other than those allocated to any separate account. Amounts you allocate to
Guarantee Periods become part of the Fixed Account, and 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 applicable state insurance laws. In general, these laws
permit investments, within specified limits and subject to certain
qualifications, in federal, state and municipal obligations, corporate bonds,
preferred and common stocks, real estate mortgages, real estate and certain
other investments. We intend to invest primarily in investment-grade fixed
income securities (i.e. rated by a nationally recognized rating service within
the four highest grades) or instruments we believe are of comparable quality.
We are not obligated to invest amounts allocated to the Fixed Account
according to any particular strategy, except as may be required by applicable
state insurance laws. You will not have a direct or indirect interest in the
Fixed Account investments.
THE FIXED ACCOUNT OPTIONS:
THE GUARANTEE PERIODS
You may elect one or more Guarantee Period(s) from those we make available
from time to time. We publish Guaranteed Interest Rates for each Guarantee
Period offered. We may change the Guaranteed Interest Rates we offer from time
to time, but no Guaranteed Interest Rate will ever be less than 3% per year,
compounded annually. Also, once we have accepted your allocation to a particular
Guarantee Period, we promise that the Guaranteed Interest Rate applicable to
that allocation will not change for the duration of the Guarantee Period.
We determine Guaranteed Interest Rates in our discretion. We do not have a
specific formula for establishing the rates for different Guarantee Periods. Our
determination will be influenced by the interest rates on fixed income
investments in which we may invest amounts allocated to the Guarantee Periods.
We will also consider other factors in determining these rates, including
regulatory and tax requirements, sales commissions and administrative expenses
borne by us, general economic trends and competitive factors. We cannot predict
the level of future interest rates.
14
<PAGE>
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 option, may be
subject to a Market Value Adjustment, which could decrease or increase the value
of your Account. See "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 die 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 Individual
Contract, we issue the Contract to you. When we accept a Group Contract, we
issue the Contract to the Owner; we issue a Certificate to you as a Participant.
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 $10,000, 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.
15
<PAGE>
YOUR ACCOUNT
When we accept your first Purchase Payment, we establish an Account for
you, which we maintain throughout the Accumulation Phase of your Contract.
YOUR ACCOUNT VALUE
Your Account Value is the sum of the value of the two components of your
Contract: the Variable Account portion of your Contract ("Variable Account
Value") and the Fixed Account portion of your Contract ("Fixed Account Value").
These two components are calculated separately, as described under "Variable
Account Value" and "Fixed Account Value."
PURCHASE PAYMENT INTEREST
We will credit your Contract with interest at the rate you selected when
you applied for the Contract. Currently, we offer two interest rate options:
OPTION A: THE 2% FIVE-YEAR ANNIVERSARY INTEREST OPTION -- Under this
option we will credit your Contract with interest at a rate of 2% of each
Purchase Payment received prior to the first Account Anniversary. In
addition, if you chose this option, we will credit your Contract with
interest at a rate of 2% of the Account Value at the end of every
Fifth-Year Anniversary.
OPTION B: THE 3%, 4%, OR 5% INTEREST OPTION -- Under this option we will
credit your Contract with interest at the following rates:
- 3% of each Purchase Payment if the sum of all Purchase Payments,
reduced by the sum of all withdrawals (your "Net Purchase
Payments"), is less than $100,000 on the day we receive the
Purchase Payment;
- 4% of each Purchase Payment if your Net Purchase Payments is
$100,000 or more but less than $500,000 on the day we receive the
Purchase Payment; and
- 5% of each Purchase Payment if your Net Purchase Payments are
$500,000 or more on the day we receive the Purchase Payment.
If you chose this Option B, there may be an additional credit paid at the
end of the first Account Year. If your Net Purchase Payments at the end of
your first Account Year is greater than or equal to $100,000 but less than
$500,000 and some of your Net Purchase Payment(s) received a credit of 3%
(rather than 4%), then an additional 1% will be paid on the amount of Net
Purchase Payments that received the 3% credit. Similarly, if your Net
Purchase Payments at the end of your first Account Year are greater than
or equal to $500,000 and some of your Purchase Payment(s) received a
credit of either 3% or 4% (rather than 5%), then an additional 2% or 1%
will be paid on the amount of Net Purchase Payments that received a 3%
credit or a 4% credit, respectively.
We credit Purchase Payment Interest during the same Valuation Period in
which we receive the Purchase Payment. We allocate the Purchase Payment Interest
to the Sub-Accounts and/or the Guarantee Periods in the same proportion as the
Net Purchase Payment is allocated. For any additional 1% or 2% interest credit
under Option B or any Five-Year Anniversary credit under Option A, we allocate
the credit on a pro rata basis to all Sub-Accounts and/or Guarantee Periods in
which you are invested, excluding any Guarantee Periods established to support a
dollar-cost averaging program. Any additional interest adjustments will be
credited on your Account Anniversary date. We will deduct the "Adjusted"
Purchase Payment Interest if the Contract is returned during the "free look
period." See "Right to Return" for a description of the free look period and
Adjusted Purchase Payment Interest. For examples of how we calculate Purchase
Payment Interest, see Appendix F.
We may credit Purchase Payment Interest at rates other than those
described above on Contracts sold 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
16
<PAGE>
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.
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 (a "Business
Day"), 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 for each day in the Valuation Period.
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.
17
<PAGE>
CREDITING INTEREST
We credit interest on amounts allocated to a Guarantee Period at the
applicable Guaranteed Interest Rate for the duration of the Guarantee Period.
The Guarantee Period begins the day we apply your allocation and ends when the
number of calendar years (or months if the Guarantee Period is less than one
year) in the Guarantee Period (measured from the end of the calendar month in
which the amount was allocated to the Guarantee Period) have elapsed. The last
day of the Guarantee Period is its Renewal Date. During the Guarantee Period, we
credit interest daily at a rate that yields the Guaranteed Interest Rate on an
annual effective basis.
GUARANTEE AMOUNTS
Each separate allocation you make to a Guarantee Period, together with
interest credited thereon, is called a Guarantee Amount. Each Guarantee Amount
is treated separately for purposes of determining the Market Value Adjustment. A
Guarantee Period that will extend beyond your maximum Annuity Commencement Date
will result in an 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 Renewal
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
Renewal Date, unless before the Renewal Date we receive:
1) written notice from you electing a different Guarantee Period from
among those we then offer or
2) instructions to transfer the Guarantee Amount to one or more
Sub-Accounts, in accordance with the transfer privilege provisions of
the Contract described below.
A Guarantee Amount will not renew into a Guarantee Period that will extend
beyond your Maximum Annuity Commencement Date. We will automatically renew your
amount into the next available Guarantee Period.
EARLY WITHDRAWALS
If you withdraw, transfer, or annuitize an allocation to a Guarantee
Period 30 days prior to the Renewal 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 Fund; and
18
<PAGE>
- 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.
There is usually no charge imposed on transfers; however, we reserve the
right to impose a transfer charge of $15 for each transfer. Transfers out of a
Guarantee Period more than 30 days before the Renewal Date 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 a 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 Participants. 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 Participant, or (2) the transfer
instructions of individual Participants who have executed pre-authorized
transfer forms that are submitted at the same time by market timing firms or
other third parties on behalf of more than one Participant. 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 Participants.
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, 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 Participant, 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."
19
<PAGE>
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 (including a portion of the Purchase
Payment Interest) 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 (excluding
Purchase Payment Interest).
No Market Value Adjustment (either positive or negative) will apply to
amounts automatically transferred from the Fixed Account under the dollar-cost
averaging program. However, 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. In general, since you
transfer the same dollar amount to the variable investment options at set
intervals, dollar-cost averaging allows you to purchase more Variable
Accumulation Units (and, indirectly, more 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. We do not allow transfers into any of the Guarantee
Periods.
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. Sun Capital Advisers' Asset Allocation Committee will direct the
allocations. By your election of an asset allocation program, you thereby
authorize us to automatically reallocate your Account Value 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
20
<PAGE>
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 or Interest Out Programs.
Under the Systematic Withdrawal Program, you determine the amount and
frequency of regular withdrawals you would like to receive from your Fixed
and/or Variable Account Value and we will effect them automatically. Under the
Interest Out Program, we will automatically pay 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 as income
and subject to a 10% federal tax penalty. Under the Systematic Withdrawal
Program, a Market Value Adjustment may be applicable upon withdrawal. You should
consult your 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 FUTURES PROGRAM
Under this program, we divide your Purchase Payment and Purchase Payment
Interest between the Fixed Account and the Variable Account. For the Fixed
Account portion, you choose a Guarantee Period from among those we offer. We
then allocate to that Guarantee Period the portion of your Purchase Payment and
Purchase Payment Interest 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 and Purchase Payment Interest will be invested in the Sub-Accounts of
your choice. At the end of the Guarantee Period, you will be guaranteed the
amount of your Purchase Payment and Purchase Payment Interest (assuming no
withdrawals), plus you will have the benefit, if any, of the investment
performance of the Sub-Accounts you have chosen.
WITHDRAWALS, WITHDRAWAL CHARGE AND MARKET VALUE ADJUSTMENT
CASH WITHDRAWALS
REQUESTING A WITHDRAWAL
At any time during the Accumulation Phase you may withdraw in cash all or
any portion of your Account Value. To make a withdrawal, you must send us a
written request at our Annuity Service Mailing Address. Your request must
specify whether you want to withdraw the entire amount of your Account or, if
less, the amount you wish to 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). Withdrawals
also may have adverse federal income tax consequences, including a 10% penalty
tax. See "Federal Tax Status." You should carefully consider these tax
consequences before requesting a cash withdrawal.
FULL WITHDRAWALS
If you request a full withdrawal, we calculate the amount we will pay you
as follows. We start with the total value of your Account at the end of the
Valuation Period during which we receive your
21
<PAGE>
withdrawal request; we deduct the Account Fee for the Account 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 adjust 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 Account 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 and choose to defer payment under the Investment Company Act of
1940 and applicable state 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 a
Fund or to determine the value of the net assets of a Fund, because an
emergency exists; or
- when an SEC order permits us to defer payment for the protection of
Participants.
We also may defer payment of amounts you withdraw from the Fixed Account
for up to 6 months from the date we receive your withdrawal request. We do not
pay interest on the amount of any payments we defer.
WITHDRAWAL RESTRICTIONS FOR QUALIFIED PLANS
If yours is a Qualified Contract, you should carefully check the terms of
the plan for limitations and restrictions on cash withdrawals.
Special restrictions apply to withdrawals from Contracts used for Section
403(b) annuities. See "Tax Considerations -- Tax Sheltered Annuities."
WITHDRAWAL CHARGE
We do not deduct any sales charge from your Purchase Payments when they
are made. However, we may impose a withdrawal charge (known as a "contingent
deferred sales charge") on certain amounts you withdraw. We impose this charge
to defray some of our expenses related to the sale of the Contracts, such as
commissions we pay to agents, the cost of sales literature, and other
promotional costs and transaction expenses.
22
<PAGE>
FREE WITHDRAWAL AMOUNT
In each Account Year you may withdraw a portion of your Account Value --
which we call the "free withdrawal amount" -- before incurring the withdrawal
charge. For any year, the free withdrawal amount is equal to the amount of all
Purchase Payments made before the last 7 Account Years that you have not
previously withdrawn, plus the greater of:
(1) your Contract's earnings (defined below) during the prior Account
Year; and
(2) 10% of the amount of all Purchase Payments you have made during the
last 7 Account Years, including the current Account Year.
Any portion of the "free withdrawal amount" that you do not use in an
Account Year is not cumulative; that is, it will not be carried forward or
available for use in future years.
Your Contract's earnings during the prior Account Year are equal to:
(a) the difference between your Account Value at the end of the prior
Account Year and your Account Value at the beginning of the prior
Account Year, minus
(b) any Purchase Payments made during the prior Account Year, plus
(c) any partial withdrawals and charges taken during the prior Account
Year.
For an example of how we calculate the free withdrawal amount, refer to
Appendix B.
WITHDRAWAL CHARGE ON PURCHASE PAYMENTS
If you withdraw more than the free withdrawal amount in any Account Year,
we consider the excess amount to be withdrawn first from Payments that you have
not previously withdrawn. We impose the withdrawal charge on the amount of these
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 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 Payments not previously
withdrawn, is not subject to the withdrawal charge.
ORDER OF WITHDRAWAL
When you make a withdrawal, we consider the oldest Purchase Payment that
you have not already withdrawn to be withdrawn first, then the next oldest, and
so forth. Once all Purchase Payments are withdrawn, the balance withdrawn is
considered to be accumulated value.
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 Account 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 seven-year period and moves
down a declining surrender charge scale at each Account Anniversary. Payments
received during the current Account Year will be charged 8%, if withdrawn. On
your next scheduled Account Anniversary, that payment, along with any other
payments made during that Account Year, will be considered to be in their 2nd
Account Year and will have an 8% withdrawal charge. On the next Account
Anniversary, these payments will move into their 3rd Account Year and will have
a withdrawal charge of 7%, if
23
<PAGE>
withdrawn. This withdrawal charge decreases according to the number of Account
Years the purchase payment has been held in your Account. The declining scale is
as follows:
<TABLE>
<CAPTION>
NUMBER OF
ACCOUNT YEARS
PAYMENT HAS BEEN WITHDRAWAL
IN YOUR CONTRACT CHARGE
- ---------------- ----------
<S> <C>
0-1 8%
1-2 8%
2-3 7%
3-4 7%
4-5 6%
5-6 5%
6-7 4%
7+ 0%
</TABLE>
For example, the percentage applicable to withdrawals of a payment that
has been in an account for more than 2 Account Years but less than 3 will be 7%
regardless of the issue date of the Contract.
The withdrawal charge will never be greater than 8% of the excess of
Purchase Payments you make under the Contract over the "free withdrawal amount,"
as defined above.
For a Group Contract, we may modify the withdrawal charges and limits,
upon notice to the Owner of the Group Contract. However, any modification will
apply only to Accounts established after the date of the modification.
For additional examples of how we calculate withdrawal charges, see
Appendix B.
TYPES OF WITHDRAWALS NOT SUBJECT TO WITHDRAWAL CHARGE
If approved in your state, we will waive the withdrawal charge for a full
or partial withdrawal if
- at least one year has passed since we issued your Contract and
- you are confined to an eligible nursing home and have been confined
there for at least the preceding 180 days, or any shorter period
required by your state.
An "eligible nursing home" means a licensed hospital or licensed skilled
or intermediate care nursing facility at which medical treatment is available on
a daily basis and daily medical records are kept for each patient. You must
provide us evidence of confinement in the form we determine.
For each Qualified Contract, the free withdrawal amount in any Account
Year will be the greater of the free withdrawal amount described above and any
amounts required to be withdrawn to comply with the minimum distribution
requirement of the Internal Revenue Code. This waiver of the withdrawal charge
applies only to the portion of the required minimum distribution attributable to
that Qualified Contract.
We do not impose the withdrawal charge on amounts you apply to provide an
annuity, amounts we pay as a death benefit, except under the Cash Surrender
method, 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 is considered a withdrawal, 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
24
<PAGE>
credited during your current Account 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 + b
</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;
N is the number of complete months remaining in your Guarantee Period; and
b is a factor that currently is 0% but that in the future we may increase
to up to 0.25%. Any increase would be applicable only to Participants who
purchase their Contracts after the date of that increase.
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.
No Market Value Adjustment will apply to Contracts issued in the states of
California, Maryland, Oregon, Texas and Washington.
CONTRACT CHARGES
ACCOUNT FEE
Each year during the Accumulation Phase of your Contract we will deduct
from your Account an Account Fee of $35 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 Account Anniversary. In Account
Years 1 through 5, the Account Fee is $35. After Account Year 5, we may change
the Account Fee each year, but the Account Fee will never exceed $50. 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 Account Anniversary.
We will not charge the Account Fee if:
(1) your Account has been allocated only to the Fixed Account during the
applicable Account Year; or
25
<PAGE>
(2) your Account Value is more than $100,000 on your Account Anniversary.
If you make a full withdrawal of your Account, we will deduct the full
amount of the Account Fee at the time of the withdrawal. In addition, on the
Annuity Commencement Date we will deduct a pro rata portion of the Account Fee
to reflect the time elapsed between the last Account Anniversary and the day
before the Annuity Commencement Date.
After the Annuity Commencement Date, we will deduct an annual Account Fee
of $35 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 expenses we
incur in administering the Contracts, the Accounts and the Variable Account that
are not covered by the Account Fee.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge from the assets of the
Variable Account at an effective annual rate equal to 1.30% during both the
Accumulation Phase and the Income Phase. The mortality risk we assume arises
from our contractual obligation to continue to make annuity payments to each
Annuitant, regardless of how long the Annuitant lives and regardless of how long
all Annuitants as a group live. This obligation assures each Annuitant that
neither the longevity of fellow Annuitants nor an improvement in life expectancy
generally will have an adverse effect on the amount of any annuity payment
received under the contract. The mortality risk also arises from our contractual
obligation to pay a death benefit upon the death of the participant prior to the
Annuity Commencement Date. The expense risk we assume is the risk that the
Account Fee and administrative expense charge we assess under the Contracts may
be insufficient to cover the actual total administrative expenses we incur. If
the amount of the charge is insufficient to cover the mortality and expense
risks, we will bear the loss. If the amount of the charge is more than
sufficient to cover the risks, we will make a profit on the charge. We may use
this profit for any proper corporate purpose, including the payment of marketing
and distribution expenses for the Contracts.
CHARGES FOR OPTIONAL DEATH BENEFIT RIDERS
If you have elected an optional death benefit rider, we will deduct a
charge from the assets of the Variable Account based upon the number of riders
you have elected.
<TABLE>
<CAPTION>
NUMBER OF % OF
RIDERS YOU AVERAGE
ELECT DAILY VALUE
- ---------- -----------
<S> <C>
1 0.15%
2 0.25%
3 0.40%
</TABLE>
PREMIUM TAXES
Some states and local jurisdictions impose a premium tax on us that is
equal to a specified percentage of the Purchase Payments you make. In many
states there is no premium tax. We believe that the amounts of applicable
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.
26
<PAGE>
FUND EXPENSES
There are fees and charges deducted from each Fund. These fees and
expenses are described in the Funds' prospectuses and Statements of Additional
Information.
MODIFICATION IN THE CASE OF GROUP CONTRACTS
For Group Contracts, we may modify the Account Fee, the administrative
expense charge and the mortality and expense risk charge upon notice to Owners.
However, such modification will apply only with respect to Participant Accounts
established after the effective date of the modification.
DEATH BENEFIT
If you die 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,
we will pay the death benefit in one sum to your estate. We do not pay a death
benefit if you die during the Income Phase. However, the Beneficiary will
receive any payments provided under an Annuity Option that is in effect.
AMOUNT OF DEATH BENEFIT
To calculate the amount of your death benefit, we use a "Death Benefit
Date." The Death Benefit Date is the date we receive proof of your death in an
acceptable form ("Due Proof of Death") if you have elected a death benefit
payment method before your death and it remains effective. Otherwise, the Death
Benefit Date is the later of the date we receive Due Proof of Death or the date
we receive the Beneficiary's election of either payment method or, if the
Beneficiary is your spouse, Contract continuation. If we do not receive the
Beneficiary's election within 60 days after we receive Due Proof of Death, we
reserve the right to provide a lump sum to your Beneficiary.
The amount of the death benefit is determined as of the Death Benefit
Date.
THE BASIC DEATH BENEFIT
In general, if you were 85 or younger on your Contract Date (the date we
accepted your first Purchase Payment), 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. The amount we would pay if you had surrendered your entire Account on
the Death Benefit Date;
3. Your total Purchase Payments (adjusted for partial withdrawals as
described in "Calculating the Death Benefit") as of the Death Benefit
Date.
For examples of how to calculate this basic death benefit, see
Appendix C.
If you were 86 or older on your Contract Date, the death benefit is equal
to amount (2) above. Because this amount will reflect any applicable withdrawal
charges and market value adjustment, it may be less than your Account Value.
OPTIONAL DEATH BENEFIT RIDERS
Subject to availability in your state, you may enhance the basic death
benefit by electing one or more of the following optional death benefit riders.
You must make your election before the date on which your Contract becomes
effective. You will pay a charge for each optional death benefit rider you
elect. For a description of these charges, see "Charges for Optional Death
Benefit Riders." The Maximum Anniversary Account Value Rider, the 5% Premium
Roll-Up Rider, and the Earnings Enhancement Riders are available only if your
are younger than 80 on the Contract Date. Any optional death benefit election
may not be changed after the Contract is issued. For a complete description of
how the death benefits under the riders are calculated, see "Calculating the
Death Benefit."
27
<PAGE>
MAXIMUM ANNIVERSARY ACCOUNT VALUE RIDER
Under this rider, the death benefit will be the greater of:
- any of the death benefit amounts payable under options (1), (2) or
(3) under the basic death benefit, above; or
- your highest Account Value on any Account Anniversary before your 81st
birthday, adjusted for any subsequent Purchase Payments, partial
withdrawals and charges made between that Account Anniversary and the
Death Benefit Date.
5% PREMIUM ROLL-UP RIDER
Under this rider, the death benefit will be the greater of:
- any of the death benefit amounts payable under options (1), (2) or
(3) under the basic death benefit, above, or
- the sum of your total Purchase Payments plus interest accruals,
adjusted for partial withdrawals.
Under this rider, interest accrues at 5% per year on Purchase Payments and
transfers to the Variable Account while they remain in the Variable Account. The
5% interest accruals will continue until the earlier of:
- the first day of the month following your 80th birthday or
- the day the death benefit amount under this rider equals twice the
total of the Purchase Payments and transferred amounts, adjusted for
withdrawals.
EARNINGS ENHANCEMENT RIDER
Under this rider, if you are 69 or younger on your Contract Date, the
death benefit will be:
- the greatest of any of the death benefit amounts payable under options
(1), (2) or (3) under the basic death benefit, above, plus
- 40% of the lesser of your net Purchase Payments or your Account Value
minus net Purchase Payments, calculated as of the Death Benefit Date.
If you are between the ages of 70 and 79 on your Contract Date, the death
benefit will be:
- the greatest of any of the death benefit amounts payable under options
(1), (2) or (3) under the basic death benefit, above, plus
- 25% of the lesser of your net Purchase Payments or your Account Value
minus net Purchase Payments, calculated as of the Death Benefit Date.
Net Purchase Payments under this rider will be adjusted for all partial
withdrawals as described in "Calculating the Death Benefit." For examples of how
the death benefit is calculated under the Earnings Enhancement Rider, see
Appendix D.
SELECTING MULTIPLE DEATH BENEFIT RIDERS
If you elect more than one death benefit rider, the death benefit will be
calculated as follows:
1) MAXIMUM ANNIVERSARY ACCOUNT VALUE RIDER COMBINED WITH 5% PREMIUM
ROLL-UP RIDER: The death benefit will equal the greater of the death
benefit under the Maximum Anniversary Account Value Rider or the
death benefit under the 5% Premium Roll-Up Rider.
2) MAXIMUM ANNIVERSARY ACCOUNT VALUE RIDER COMBINED WITH EARNINGS
ENHANCEMENT RIDER: The death benefit will equal the death benefit
under the Maximum Anniversary Account Value Rider, PLUS the amount
calculated under the Earnings Enhancement Rider. The
28
<PAGE>
death benefit under the Earnings Enhancement Rider is calculated
using the Account Value before the application of the Maximum
Anniversary Account Rider.
3) EARNINGS ENHANCEMENT RIDER COMBINED WITH 5% PREMIUM ROLL-UP
RIDER: The death benefit will equal the death benefit under the 5%
Premium Roll-Up Rider, PLUS the amount calculated under the Earnings
Enhancement Rider. The death benefit under the Earnings Enhancement
Rider is calculated using the Account Value before the application
of the 5% Premium Roll-Up Rider.
4) MAXIMUM ANNIVERSARY ACCOUNT VALUE RIDER, THE 5% PREMIUM ROLL-UP
RIDER AND THE EARNINGS ENHANCEMENT RIDER: The death benefit will
equal the GREATER of the death benefit under the Maximum Anniversary
Account Value Rider or the death benefit under the 5% Premium
Roll-Up Rider, PLUS the amount calculated under the Earnings
Enhancement Rider. The death benefit under the Earnings Enhancement
Rider is calculated using the Account Value before the application
of the 5% Premium Roll-Up Rider and the Maximum Anniversary Account
Value Rider.
SPOUSAL CONTINUANCE
If your spouse is your Beneficiary, upon your death your spouse may elect to
continue the Contract as the Participant, rather than receive the death benefit
amount. In that case, we will not pay a death benefit, but the Contract's
Account Value will be equal to your Contract's death benefit amount, as defined
under the basic death benefit or any rider you have selected. All Contract
provisions, including any riders you have selected, will continue as if your
spouse had purchased the Contract on the Death Benefit Date with a value equal
to the death benefit amount. For purposes of calculating death benefits and
expenses from that date forward, the surviving spouse's age on the original
effective date of the Contract will be used.
CALCULATING THE DEATH BENEFIT
In calculating the death benefit amount payable under option 3 of the
basic death benefit or any of the optional death benefit riders, any partial
withdrawals will reduce the death benefit amount to an amount equal to the death
benefit amount immediately before the withdrawal multiplied by the ratio of the
Account Value immediately after the withdrawal to the Account Value immediately
before the withdrawal.
If the death benefit is the amount payable under options (2) or (3) of the
basic death benefit or under any of the optional death benefit riders, your
Account Value will be increased by the excess, if any, of that amount over
option (1) of the basic death benefit. 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). If your
spouse, as the named Beneficiary, elects to continue the Contract after your
death, your spouse may transfer any such Fixed Account portion back 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 your death, the
Beneficiary may elect either a single cash payment or an annuity. If the
Beneficiary is the Owner's spouse, the Beneficiary may elect to continue the
Contract. These elections are made by sending us a completed election form,
which we will provide. If we do not receive the Beneficiary's election within 60
days after we receive Due Proof of Death, we will pay the death benefit in a
single cash payment.
29
<PAGE>
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.
NON-QUALIFIED CONTRACTS
If your Contract is a Non-Qualified Contract, special distribution rules
apply to the payment of the death benefit. The amount of the death benefit must
be distributed 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" within the meaning of Section
72(s) of the Internal Revenue Code, with payments beginning no later than one
year after your death.
The person you have named as Beneficiary under your Contract, if any, will
be the "designated beneficiary." If the named Beneficiary is not living and no
contingent beneficiary has been named, 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 Participant. 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. To understand what happens when your spouse continues
the Contract, refer the section on "Spousal Continuance," above.
During the Income Phase, if the Annuitant dies, the remaining value of the
Annuity Option in place must be distributed at least as rapidly as the method of
distribution under that option.
If the Participant is not a natural person, these distribution
rules apply on a change in, or the death of, either 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.
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 the following as proof of any person's death:
- an original certified copy of an official death certificate;
- an original certified copy of a decree of a court of competent
jurisdiction as to the finding of death; or
- any other proof we find satisfactory.
THE INCOME PHASE -- ANNUITY PROVISIONS
During the Income Phase, we make regular monthly payments to the
Annuitant.
30
<PAGE>
The Income Phase of your Contract begins with the Annuity Commencement
Date. On that date, we apply your Account Value, adjusted as described below,
under the Annuity Option or Options you have selected, and we make the first
payment.
Once the Income Phase begins no lump sum settlement option or cash
withdrawals are permitted, except pursuant to Annuity Option D, Monthly Payments
for a Specified Period Certain, as described below under the heading "Annuity
Options," and you cannot change the Annuity Option selected. You may request a
full withdrawal before the Annuity Commencement Date, which will be subject to
all charges applicable on withdrawals. See "Withdrawals, Withdrawal Charge and
Market Value Adjustment."
SELECTION OF THE ANNUITANT OR CO-ANNUITANT
You select the Annuitant in your Application. The Annuitant is the person
who receives payments during the Income Phase and on whose life these payments
are based. In your Contract, the Annuity Options refer to the Annuitant as the
"Payee." If you name someone other than yourself as Annuitant and the Annuitant
dies before the Income Phase, you become the Annuitant.
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 both the Annuitant
and Co-Annuitant die before the Income Phase, you become the Annuitant). 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. If you have not made that designation on the 30th day
before the Annuity Commencement Date, and both the Annuitant and the
Co-Annuitant are still living, the Co-Annuitant will become the Annuitant.
When an Annuity Option has been selected as the method of paying the death
benefit, the Beneficiary is the Payee of the annuity payment.
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
first month following your first Account Anniversary.
- The latest possible Annuity Commencement Date is the first day of the
month following the Annuitant's 95th birthday or, if there is a
Co-Annuitant, the 95th 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).
31
<PAGE>
ANNUITY OPTIONS
We offer the following Annuity Options for payments during the Income
Phase. Each Annuity Option may be selected for a Variable Annuity, a Fixed
Annuity, or a combination of both. We may also agree to other settlement
options, in our discretion.
ANNUITY OPTION A -- LIFE ANNUITY
We provide monthly payments during the lifetime of the Annuitant. Annuity
payments stop when the Annuitant dies. There is no provision for continuation of
any payments to a Beneficiary.
ANNUITY OPTION B -- LIFE ANNUITY WITH 60, 120, 180 OR 240 MONTHLY PAYMENTS
CERTAIN
We make monthly payments during the lifetime of the Annuitant. In
addition, we guarantee that the Beneficiary will receive monthly payments for
the remainder of the period certain, if the Annuitant dies during that period.
The election of a longer period results in smaller monthly payments. If no
Beneficiary is designated, we pay the discounted value of the remaining payments
in one sum to the Annuitant's estate. The Beneficiary may also elect to receive
the discounted value of the remaining payments in one sum. The discount rate for
a Variable Annuity will be the assumed interest rate in effect; the discount
rate for a Fixed Annuity will be based on the interest rate we used to determine
the amount of each payment.
ANNUITY OPTION C -- JOINT AND SURVIVOR ANNUITY
We make monthly payments during the lifetime of the Annuitant and another
person you designate and during the lifetime of the survivor of the two. We stop
making payments when the 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 10 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.
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.
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.
32
<PAGE>
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 Account 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.
- Upon the Annuity Commencement Date, we will exchange your Variable
Annuity Units into Annuitization Units which have an annual mortality
and expense risk charge of 1.45% of your average daily net assets.
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.
33
<PAGE>
EXCHANGE OF VARIABLE ANNUITY UNITS
During the Income Phase, the Annuitant may exchange Annuity Units from one
Sub-Account to another, up to 12 times each Account Year. To make an exchange,
the Annuitant sends us, at our Annuity Service Mailing Address, a written
request stating the number of Annuity Units in the Sub-Account he or she wishes
to exchange and the new Sub-Account for which Annuity Units are requested. The
number of new Annuity Units will be calculated so the dollar amount of an
annuity payment on the date of the exchange would not be affected. To calculate
this number, we use Annuity Unit values for the Valuation Period during which we
receive the exchange request.
Before exchanging Annuity Units from one Sub-Account to another, the
Annuitant should carefully review the Fund prospectus for the investment
objectives and risk disclosure of the Fund into which the Sub-Accounts invest.
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 $35 in equal
amounts from each Variable Annuity payment. We do not deduct the Account Fee
from Fixed Annuity payments.
ANNUITY PAYMENT RATES
The Contract contains Annuity Payment Rates for each Annuity Option
described in this Prospectus. The rates show, for each $1,000 applied, the
dollar amount of: (a) the first monthly Variable Annuity payment based on the
assumed interest rate specified in the applicable Contract (at least 3% per
year, compounded annually); and (b) the monthly Fixed Annuity payment, when this
payment is based on the minimum guaranteed interest rate specified in the
Contract (at least 3% per year, compounded annually). We may change these rates
under Group Contracts for Accounts established after the effective date of such
change (See "Other Contract Provisions -- Modification").
The Annuity Payment Rates may vary according to the Annuity Option elected
and the adjusted age of the Annuitant. The Contract also describes the method of
determining the adjusted age of the Annuitant. The mortality table used in
determining the Annuity Payment Rates for Options A, B and C is the 1983
Individual Annuitant Mortality Table.
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
An Individual Contract belongs to the individual to whom the Contract is
issued. A Group Contract belongs to the Owner. In the case of a Group Contract,
the Owner may expressly reserve all Contract rights and privileges; otherwise,
each Annuitant will be entitled to exercise such rights and privileges. In any
case, such rights and privileges can be exercised 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 Participant prior to
the Annuity Commencement Date, or on the death of the Annuitant after the
Annuity Commencement Date. Such Payee may thereafter exercise such rights and
privileges, if any, of ownership which continue.
34
<PAGE>
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
Participants under a Group Contract; 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 prior to the Annuity Commencement Date; and each Participant, in like
manner, may change the ownership interest in a Contract. 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 or Participant, as appropriate, 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.
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, in the case of a Group Contract where the Owner has
reserved this right. 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, Participants and Payees, as
applicable.
Owners of Qualified Contracts issued on a group basis may be subject to
other voting provisions of the particular plan and of the Investment Company Act
of 1940. Employees who contribute to plans that are funded by the Contracts may
be entitled to instruct the Owners as to how to instruct us to vote the Fund
shares attributable to their contributions. Such plans may also provide the
additional extent, if any, to which the Owners shall follow voting instructions
of persons with rights under the plans. If no voting instructions are received
from any such person with respect to a particular Participant Account, the Owner
may instruct the Company as to how to vote the number of Fund shares for which
instructions may be given.
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, Participants 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 under Group
Contracts 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 Fund. 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
35
<PAGE>
to the Company is determined by dividing the value of all of the Variable
Accumulation Units of the particular Sub-Account credited to the Participant
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, or such other person
having voting rights, at least once during each Account 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 Fund as may be required
by the Investment Company Act of 1940 and the Securities Act of 1933. We will
also send such statements reflecting transactions in your Account as may be
required by applicable laws, rules and regulations.
Upon request, we will provide you with information regarding fixed and
variable accumulation values.
SUBSTITUTION OF SECURITIES
Shares of any or all 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 registered open-end investment
company or unit investment trust, provided that the substitution has been
approved, if required, by the SEC. 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 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 make appropriate endorsement to the Contract to reflect the
change and take such other action as may be necessary and appropriate to effect
the change.
SPLITTING UNITS
We reserve the right to split or combine the value of Variable
Accumulation Units, Annuity Units or any of them. In effecting any such change
of unit values, strict equity will be preserved and no change will have a
material effect on the benefits or other provisions of the Contract.
36
<PAGE>
MODIFICATION
Upon notice to the Participant, in the case of an Individual Contract, and
the Owner and Participant(s), in the case of a Group Contract (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, Participants, or Payees, as applicable. In the event
of any such modification, we may make appropriate endorsement in the Contract to
reflect such modification.
In addition, upon notice to the Owner, we may modify a Group Contract to
change the withdrawal charges, Account Fees, mortality and expense risk charges,
administrative expense charges, the tables used in determining the amount of the
first monthly variable annuity and fixed annuity payments and the formula used
to calculate the Market Value Adjustment, provided that such modification
applies only to Participant Accounts established after the effective date of
such modification. In order to exercise our modification rights in these
particular instances, we must notify the Owner of such modification in writing.
The notice shall specify the effective date of such modification which must be
at least 60 days following the date we mail notice of modification. All of the
charges and the annuity tables which are provided in the Group Contract prior to
any such modification will remain in effect permanently, unless improved by the
Company, with respect to Participant Accounts established prior to the effective
date of such modification.
DISCONTINUANCE OF NEW PARTICIPANTS
We may limit or discontinue the acceptance of new Applications and the
issuance of new Certificates under a Group Contract by giving 30 days prior
written notice to the Owner. This will not affect rights or benefits with
respect to any Participant Accounts established under such Group Contract prior
to the effective date of such limitation or discontinuance.
RESERVATION OF RIGHTS
We reserve the right, to the extent permitted by law, to: (1) combine any
2 or more variable accounts; (2) add or delete Funds, sub-series thereof or
other investment companies and corresponding Sub-Accounts; (3) add or remove
Guarantee Periods available at any time for election by a Participant; and
(4) restrict or eliminate any of the voting rights of Participants (or Owners)
or other persons who have voting rights as to the Variable Account. Where
required by law, we will obtain approval of changes from Participants or any
appropriate regulatory authority. In the event of any change pursuant to this
provision, we may make appropriate endorsement to the Contract to reflect the
change.
RIGHT TO RETURN
If you are not satisfied with your Contract, you may return it by mailing
or delivering it to us at the Annuity Service Mailing Address on the cover of
this Prospectus within 10 days after it was delivered to you. When we receive
the returned Contract, it will be cancelled and we will refund to you your
Account Value less the Adjusted Purchase Payment Interest. The Adjusted Purchase
Payment Interest that maybe deducted is equal to the lesser of:
- the portion of the Account Value that is attributable to any Purchase
Payment Interest, and
- all Purchase Payment Interest.
This means you receive any gain on Purchase Payment Interest and we bear any
loss. However, if applicable state law requires, we will return the full amount
of any Purchase Payment(s) we received. State law may also require us to give
you a longer "free look" period or allow you to return the Contract to your
sales representative.
37
<PAGE>
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 a
Participant 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 the Contract and the site where your Contract was issued. 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 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.
U.S. FEDERAL TAX CONSIDERATIONS
The following discussion applies only to those Contracts issued in the
United States. For a discussion of tax considerations effecting Contracts issued
in Puerto Rice, see "Puerto Rico Tax Considerations," below.
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, and
Participants under, a Non-Qualified Contract 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 generally 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.
38
<PAGE>
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
Participant's spouse), the Participant 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 Participant or
distributions under an immediate annuity (as defined above), or after age
59 1/2.
DISTRIBUTIONS AND WITHDRAWALS FROM QUALIFIED CONTRACTS
Generally, distributions from a Qualified Contract will constitute fully
taxable ordinary income. Also, a 10% penalty tax will, except in certain
circumstances, apply to distributions prior to age 59 1/2.
Distributions from a Qualified Contract are not subject to current
taxation or a 10% penalty, however, if:
- the distribution is 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 Participant 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 Participant 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 Participant or Payee provides us his or
her taxpayer identification number and instructs us (in the manner prescribed)
not to withhold. The Participant 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
39
<PAGE>
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 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 may therefore use Qualified
Contracts as a funding vehicle for their retirement plans, as a general rule.
TAX-SHELTERED ANNUITIES
Section 403(b) of the Code permits public school employees and employees
of certain types of charitable, educational and scientific organizations
specified in Section 501(c)(3) of the Code to purchase annuity contracts and,
subject to certain limitations, exclude the amount of purchase payments from
gross income for tax purposes. The Code imposes restrictions on cash withdrawals
from Section 403(b) annuities.
If the Contracts are to receive tax deferred treatment, cash withdrawals
of amounts attributable to salary reduction contributions (other than
withdrawals of accumulation account value as of December 31, 1988) may be made
only when the Participant 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 Participant 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.
40
<PAGE>
Under the terms of a particular Section 403(b) plan, the Participant may
be entitled to transfer all or a portion of the Account Value to one or more
alternative funding options. Participants should consult the documents governing
their plan and the person who administers the plan for information as to such
investment alternatives.
INDIVIDUAL RETIREMENT ACCOUNTS
Sections 219 and 408 of the Code permit eligible individuals to contribute
to an individual retirement program, including Simplified Employee Pension
Plans, Employer/Association of Employees Established Individual Retirement
Account Trusts, and Simple Retirement Accounts. Such IRAs are subject to
limitations on contribution levels, the persons who may be eligible, and on the
time when distributions may commence. In addition, certain distributions from
some other types of retirement plans may be placed in an IRA on a tax-deferred
basis. If we sell Contracts for use with IRAs, the Internal Revenue Service or
other agency may impose supplementary information requirements. We will provide
purchasers of the Contracts for such purposes with any necessary information.
You will have the right to revoke the Contract under certain circumstances, as
described in the section of this Prospectus entitled "Right to Return."
ROTH IRAS
Section 408A of the Code permits an individual to contribute to an
individual retirement program called a Roth IRA. Unlike contributions to a
traditional IRA under Section 408 of the Code, contributions to a Roth IRA are
not tax-deductible. Provided certain conditions are satisfied, distributions are
generally tax-free. Like traditional IRAs, Roth IRAs are subject to limitations
on contribution amounts and the timing of distributions. If an individual
converts a traditional IRA into a Roth IRA the full amount of the IRA is
included in taxable income. The Internal Revenue Service and other agencies may
impose special information requirements with respect to Roth IRAs. If and when
we make Contracts available for use with Roth IRAs, we will provide any
necessary information.
PUERTO RICO TAX CONSIDERATIONS
Puerto Rico tax laws with respect to qualified retirement plans described
in this Prospectus vary significantly from those discussed above under "U.S.
Federal Tax Considerations." Although we currently offer the Contract in Puerto
Rico in connection with qualified retirement plans, the text of this Prospectus
under the heading "U.S. Federal Tax Considerations" dealing with such qualified
retirement plans is inapplicable to Puerto Rico and should be disregarded.
The following discussion applies if your Contract is issued in Puerto
Rico.
Under Section 1022 of the Puerto Rico Internal Revenue Code of 1994, as
amended (the "1994 Code"), the Contract offered by this Prospectus is considered
an annuity contract. The 1994 Code provides that no income tax is payable on
increases in value of accumulation shares of annuity units credited to a
variable annuity contract until payments are made to the annuitant or other
payee under such contract.
If any annuity distributions are made under an annuity contract, the
annuitant or other payee will be required to include as gross income the portion
of each payment equal to 3% of the aggregate premiums or other consideration
paid for the annuity. The amount, if any, in excess of the included amount is
excluded from gross income. After an amount equal to the aggregate amount
excluded from gross income has been received, all of the annuity payments are
considered to be taxable income.
In the event payment under a Contract is made in a lump sum, the amount of
the payment would be included in the gross income of the Annuitant or other
Payee to the extent of the Annuitant's aggregate premiums or other consideration
paid.
For further information regarding the income tax consequences of owning a
Contract, you should consult a qualified tax adviser.
41
<PAGE>
ADMINISTRATION OF THE CONTRACTS
We perform certain administrative functions relating to the Contracts,
Participant 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, Participant Account number and type, the
status of each Participant 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
and Certificates; 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 those states where the Contracts may be lawfully
sold. 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 the Company,
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 6.50% of Purchase
Payments. In addition, after the first Account Year, broker-dealers who have
entered into distribution agreements with the Company may receive an annual
renewal commission of no more than 0.50% of the Participant's Account Value. In
addition to commissions, the Company may, from time to time, pay or allow
additional promotional incentives, in the form of cash or other compensation. We
reserve the right to offer these additional incentives only to certain
broker-dealers that sell or are expected to sell during specified time periods
certain minimum amounts of the Contracts or Certificates or other contracts
offered by the Company. Promotional incentives may change at any time.
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 the Sub-Account and
any realized or unrealized gains or losses of the Funds 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 Sub-Account over that period. Standardized Average Annual Total Return
information covers the period since we started offering the Sub-Accounts under
the Futurity products or, if shorter, the life of the Sub-Account.
Non-standardized Average Annual Total Return covers the life of each Fund, which
may predate the Futurity products. 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.
42
<PAGE>
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, the Account Fee, or any Purchase Payment Interest,
although such figures do reflect all recurring charges. If such figures were
calculated to reflect Purchase Payment Interest credited, the calculation would
also reflect any withdrawal charges made. 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 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-Account on a hypothetical basis. To do this, we reflect deductions
of the current Contract fees and charges from the historical performance of the
corresponding Fund.
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 Sun Capital Money Market 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,
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
43
<PAGE>
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 the Secretary, Sun Life Assurance Company of
Canada (U.S.), One Sun Life Executive Park, Wellesley Hills, Massachusetts
02481, telephone (800) 225-3950.
ADDITIONAL INFORMATION ABOUT THE COMPANY
[TO BE PROVIDED BY AMENDMENT]
REINSURANCE
The Company has agreements with Sun Life (Canada) which provide that Sun
Life (Canada) will reinsure the mortality risks of the individual life insurance
contracts previously sold by the Company. Under these agreements, basic death
benefits and supplementary benefits are reinsured on a yearly renewable term
basis and coinsurance basis, respectively. Reinsurance transactions under these
agreements in 1999 had the effect of decreasing net income from operations by
$ .
Effective January 1, 1991 the Company entered into an agreement with Sun
Life (Canada) under which certain individual life insurance contracts issued by
Sun Life (Canada) were reinsured by the Company on a 90% coinsurance basis. Also
effective January 1, 1991, the Company entered into an agreement with Sun Life
(Canada) which provides that Sun Life (Canada) will reinsure the mortality risks
in excess of $500,000 per policy for the individual life insurance contracts
assumed by the Company in the reinsurance agreement described above. Death
benefits are reinsured on a yearly renewable term basis. The life reinsurance
assumed agreement requires the reinsurer to withhold funds in an amount equal to
the reserves assumed. These agreements had the effect of increasing income from
operations by approximately $24,579,000 for the year ended December 31, 1998.
The Company terminated these agreements, effective October 1, 1998, resulting in
an increase in income from operations of $65,679,000, which included a cash
settlement.
The Company has also executed reinsurance agreements with unaffiliated
companies. These agreements provide reinsurance of certain individual life
insurance contracts on a modified coinsurance basis under which all deficiency
reserves are ceded; as well as reinsurance for variable universal life on a
yearly renewable term basis for which the Company has a maximum retention of
$2,000,000.
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 compounded 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.
44
<PAGE>
INVESTMENTS
Of the Company's total assets of $ billion at December 31, 1999, %
($ billion) consisted of unitized and non-unitized separate account assets,
% ($ billion) was invested in bonds and similar securities, % ($
million) was invested in mortgages, % ($ million) was invested in
subsidiaries, % ($ million) was invested in real estate, and the remaining
% ($ million) was invested in cash and other assets.
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. According to a 1999 statistical study, published
by A.M. Best, the Company ranked among North American life insurance
companies based upon total assets as of December 31, 1998. Its ultimate parent
company, Sun Life (Canada), ranked .
EMPLOYEES
The Company and Sun Life (Canada) have entered into a service agreement
which provides that the latter will furnish the Company, as required, with
personnel as well as certain services and facilities on a cost reimbursement
basis. Expenses under this agreement amounted to approximately $_________ in
1999. As of February 28, 2000, the Company had ______ direct employees employed
at its Principal Executive Office in Wellesley Hills, Massachusetts and at its
Retirement Products and Services Division in Boston, Massachusetts.
PROPERTIES
The Company occupies office space owned by it and leased to Sun Life
(Canada), and certain unrelated parties for lease terms not exceeding five
years. Rent received by the Company under the leases amounted to approximately
$ in 1999. The Company also occupies office space which it leases from
unaffiliated parties for various lease terms.
STATE REGULATION
The Company is subject to the laws of the State of Delaware governing life
insurance companies and to regulation by the Commissioner of Insurance of
Delaware. An annual statement is filed with the Commissioner 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 Commissioner or
his agents at any time and a full examination of its operations is conducted at
periodic intervals.
The Company is also subject to the insurance laws and regulations of the
other states and jurisdictions in which it is licensed to operate. The laws of
the various jurisdictions establish supervisory agencies with 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. Each insurance company is required to file detailed
annual reports with supervisory agencies in each of the jurisdictions in which
it does business and its operations and accounts are subject to examination by
such agencies at regular intervals.
In addition, many states regulate affiliated groups of insurers, such as
the Company, its parent and its affiliates, under insurance holding company
legislation. 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 most states, insurers doing business
therein can be assessed (up to prescribed limits) for policyholder losses
incurred by insolvent companies. The amount
45
<PAGE>
of any future assessments of the Company under these laws cannot be reasonably
estimated. However, most of these laws do provide that an assessment may be
excused or deferred if it would threaten an insurer's own financial strength and
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
and our subsidiaries 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
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 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.
[FINANCIAL STATEMENTS TO BE INSERTED BY AMENDMENT]
46
<PAGE>
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
Calculation of Performance Data.............................
Tax Deferred Accumulation...................................
Advertising and Sales Literature............................
Calculations................................................
Example of Variable Accumulation Unit Value Calculation...
Example of Variable Annuity Unit Calculation..............
Example of Variable Annuity Payment Calculation...........
Calculation of Annuity Unit Values........................
Distribution of the Contracts...............................
Designation and Change of Beneficiary.......................
Custodian...................................................
Financial Statements........................................
</TABLE>
47
<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 __, 2000 which is incorporated herein by reference. The
Statement of Additional Information is available upon request and without charge
from Sun Life Assurance Company of Canada (U.S.). To receive a copy, return this
request form to the address shown below or telephone (888) 786-2435.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
To: Sun Life Assurance Company of Canada (U.S.)
c/o Retirement Products and Services
P.O. Box 9133
Boston, Massachusetts 02117
Please send me a Statement of Additional Information for
Futurity Accolade Variable and Fixed Annuity
Sun Life of Canada (U.S.) Variable Account F.
</TABLE>
<TABLE>
<S> <C>
Name ------------------------------------------------------------
Address ------------------------------------------------------------
------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
City -------------------------------- State -------------- Zip -------
</TABLE>
<TABLE>
<S> <C>
Telephone ------------------------------------------------------------
</TABLE>
48
<PAGE>
APPENDIX A
GLOSSARY
The following terms as used in this Prospectus have the indicated
meanings:
ACCOUNT OR PARTICIPANT ACCOUNT: An account established for each
Participant 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.
ACCOUNT YEAR AND ACCOUNT ANNIVERSARY: Your first Account Year is the
period 365 days from the date on which we issued your Contract. Your Account
Anniversary is the last day of an Account Year. Each Account Year after the
first is the 365-day period that begins on your Account Anniversary. For
example, if the Contract Date is on March 12, the first Account Year is
determined from the Contract Date and ends on March 12 of the following year.
Your Account Anniversary is March 12 and all Account Years after the first are
measured from March 12. (If the Anniversary Date falls on a non-business day,
the previous business day will be used.)
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 to whom the first annuity payment is
made. If the Annuitant dies prior to the Annuity Commencement Date, the
Co-Annuitant will become the sole Annuitant. If the Co-Annuitant dies or if no
Co-Annuitant is named, the Participant becomes the Annuitant upon the
Annuitant's death prior to the Annuity Commencement Date. If you have not named
a sole Annuitant on the 30th day before the Annuity Commencement Date and both
the Annuitant and Co-Annuitant are living, the Co-Annuitant will be the sole
Annuitant/Payee during the Income Phase.
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 participation under a Group Contract or
purchase of an Individual Contract.
*BENEFICIARY: Prior to the Annuity Commencement Date, the person or entity
having the right to receive the death benefit and, for Non-Qualified Contracts,
who, in the event of the Participant's death, is the "designated beneficiary"
for purposes of Section 72(s) of the Internal Revenue Code. After the Annuity
Commencement Date, the person or entity having the right to receive any payments
due under the Annuity Option elected, if applicable, upon the death of the
Payee.
BUSINESS DAY: Any day the New York Stock Exchange is open for trading.
CERTIFICATE: The document for each Participant which evidences the
coverage of the Participant under a Group Contract.
COMPANY: Sun Life Assurance Company of Canada (U.S.).
CONTRACT: Any Individual Contract, Group Contract or Certificate issued
under a Group Contract.
CONTRACT DATE: The date on which we issue your Contract. This is called
the "Date of Coverage" in the Contract.
*You specify these items on the Application, and may change them, as we describe
in this Prospectus.
49
<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 one lump sum.
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.
FIFTH-YEAR ANNIVERSARY: The fifth Account Anniversary and each succeeding
Account Anniversary occurring at any five year interval thereafter; for example,
the 10th, 15th, and 20th Account Anniversaries.
FIXED ACCOUNT: The general account of the Company, consisting of all
assets of the Company other than those allocated to a separate account of the
Company.
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.
FUND: A registered management investment company, or series thereof, in
which assets of a Sub-Account may be invested.
GROUP CONTRACT: A Contract issued by the Company on a group basis.
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.
INDIVIDUAL CONTRACT: A Contract issued by the Company on an individual
basis.
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 (NET PAYMENTS): The portion of a Purchase Payment
which remains after the deduction of any applicable premium tax or similar tax.
This is also the term used to describe the total contribution made to the
Contract minus the total withdrawals.
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 Participant'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 Group Contract and in whose name or names the Group 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 Group Contract.
*You specify these items on the Application, and may change them, as we describe
in this Prospectus.
50
<PAGE>
*PARTICIPANT: In the case of an Individual Contract, the owner of the
Contract. In the case of a Group Contract, the person named in the Contract who
is entitled to exercise all rights and privileges of ownership under the
Contract, except as reserved by the Owner. If there are two Participants, the
death benefit is paid upon the death of either Participant.
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 Participant, or on the Annuity Commencement Date.
PURCHASE PAYMENT (PAYMENT): An amount paid to the Company as consideration
for the benefits provided by a Contract.
PURCHASE PAYMENT INTEREST: The amount of extra interest the Company
credits to a Contract at a rate of 2% to 5% of each purchase payment based upon
the size of the investment or Account Value or the interest rate option chosen
at the time of application.
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.
RENEWAL DATE: The last day of a Guarantee Period.
SUB-ACCOUNT: That portion of the Variable Account which invests in shares
of a specific Fund or series of a 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 for trading.
VARIABLE ACCOUNT: Variable Account F 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.
*You specify these items on the Application, and may change them, as we describe
in this Prospectus.
51
<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 three examples of the withdrawal charge resulting from a
full withdrawal of your Account, based on hypothetical Account Values.
<TABLE>
<CAPTION>
PAYMENT
HYPOTHETICAL CUMULATIVE FREE SUBJECT TO WITHDRAWAL WITHDRAWAL
ACCOUNT ACCOUNT ANNUAL ANNUAL WITHDRAWAL WITHDRAWAL CHARGE CHARGE
YEAR VALUE EARNINGS EARNINGS AMOUNT CHARGE PERCENTAGE AMOUNT
-------- ------------ -------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) 1 $41,000 $1,000 $ 1,000 $4,000 $36,000 8.00% $2,880
2 $45,100 $4,100 $ 5,100 $4,000 $36,000 8.00% $2,880
3 $49,600 $4,500 $ 9,600 $4,100 $35,900 7.00% $2,513
(b) 4 $52,100 $2,500 $12,100 $4,500 $35,500 7.00% $2,485
5 $57,300 $5,200 $17,300 $4,000 $36,000 6.00% $2,160
6 $63,000 $5,700 $23,000 $5,200 $34,800 5.00% $1,740
7 $66,200 $3,200 $26,200 $5,700 $34,300 4.00% $1,372
(c) 8 $72,800 $6,600 $32,800 $4,000 $ 0 0.00% $ 0
</TABLE>
(a) The free withdrawal amount in any year is equal to the amount of any
Purchase Payments made prior to the last seven Account Years ("Old
Payments") that were not previously withdrawn plus the greater of (1) the
Contract's earnings during the prior Account Year, and (2) 10% of any
Purchase Payments made in the last seven Account Years ("New Payments"). In
Account Year 1, the free withdrawal amount is $4,000, which equals 10% of
the Purchase Payment of $40,000. On a full withdrawal of $41,000, the amount
subject to a withdrawal charge is $36,000, which equals the New Payments of
$40,000 minus the free withdrawal amount of $4,000.
(b) In Account Year 4, the free withdrawal amount is $4,500, which equals the
prior Account Year's earnings. On a full withdrawal of $52,100, the amount
subject to a withdrawal charge is $35,500.
(c) In Account Year 8, the free withdrawal amount is $4,000, which equals 10% of
the Purchase Payment of $40,000. On a full withdrawal of $72,800, the amount
subject to a withdrawal charge is $0, since equals the New Payments equal
$0.
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 fourth Account Year, and there are a series of four partial
withdrawals made during the fourth Account Year of $4,100, $9,000, $12,000, and
$20,000.
<TABLE>
<CAPTION>
REMAINING
HYPOTHETICAL FREE AMOUNT OF
ACCOUNT WITHDRAWAL WITHDRAWAL
VALUE AMOUNT SUBJECT TO WITHDRAWAL WITHDRAWAL
ACCOUNT BEFORE CUMULATIVE AMOUNT OF BEFORE WITHDRAWAL CHARGE CHARGE
YEAR WITHDRAWAL EARNINGS EARNINGS WITHDRAWAL WITHDRAWAL CHARGE PERCENTAGE AMOUNT
-------- ------------ -------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $41,000 $1,000 $ 1,000 $ 0 $4,000 $ 0 8.00% $ 0
2 $45,100 $4,100 $ 5,100 $ 0 $4,000 $ 0 8.00% $ 0
3 $49,600 $4,500 $ 9,600 $ 0 $4,100 $ 0 7.00% $ 0
(a) 4 $50,100 $ 500 $10,100 $ 4,100 $4,500 $ 0 7.00% $ 0
(b) 4 $46,800 $ 800 $10,900 $ 9,000 $ 400 $ 8,600 7.00% $ 602
(c) 4 $38,400 $ 600 $11,500 $12,000 $ 0 $12,000 7.00% $ 840
(d) 4 $26,800 $ 400 $11,900 $20,000 $ 0 $14,900 7.00% $1,043
</TABLE>
52
<PAGE>
(a) In Account Year 4, the free withdrawal amount is $4,500, which equals the
prior Account Year's earnings. The partial withdrawal amount of $4,100 is
less than the free withdrawal amount, so there is no withdrawal charge.
(b) Since a partial withdrawal of $4,100 was taken, the remaining free
withdrawal amount in Account Year 4 is $4,500 - $4,000 = $400. Therefore,
$400 of the $9,000 withdrawal is not subject to a withdrawal charge, and
$8,600 is subject to a withdrawal charge.
(c) Since the total of the two prior Account Year 4 partial withdrawals
($13,100) is greater than the free withdrawal amount of $4,500, there is no
remaining free withdrawal amount. The entire withdrawal amount of $12,000 is
subject to a withdrawal charge.
(d) Since the total of the three prior Account Year 4 partial withdrawals
($25,100) is greater than the free withdrawal amount of $4,500, there is no
remaining free withdrawal amount. Since the total amount of New Purchase
Payments was $40,000 and $25,100 of New Payments has already been assessed a
surrender charge, only $14,900 of this $20,000 withdrawal comes from
liquidating Purchase Payments. The remaining $5,100 of this withdrawal comes
from liquidating earnings and is not subject to a withdrawal charge.
Note that since all of the Purchase Payments were liquidated by the final
withdrawal of $20,000, the total withdrawal charge for the four Account Year 4
withdrawals is $2,485, which is the same amount that was assessed for a full
liquidation in Account Year 4 in the example on the previous page. Any
additional Account Year 4 withdrawals in the example shown on this page would
come from the liquidating of earnings and would not be subject to 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 + b
</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 Account 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
and the b factor is zero.
<TABLE>
<C> <C> <S> <C> <C> <C> <C>
N/12
1 + I
The MVA factor = ( -------- ) - 1
1 + J + b
</TABLE>
<TABLE>
<C> <C> <S> <C> <C> <C> <C>
24/12
1 + .06
= ( ------ ) - 1
1 + .08
2
= (.981) - 1
= .963 - 1
= - .037
</TABLE>
53
<PAGE>
The value of the Guarantee Amount less interest credited to the Guarantee
Amount in the current Account 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
and the b factor is zero.
<TABLE>
<C> <C> <S> <C> <C> <C> <C>
N/12
1 + I
The MVA factor = ( -------- ) -1
1 + J + b
</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 interested credit to the Guarantee
Amount in the current Account 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.
54
<PAGE>
APPENDIX C
CALCULATION OF BASIC DEATH BENEFIT
EXAMPLE 1:
Assume a Purchase Payment of $60,000.00 is made on the Contract Date and
an additional Purchase Payment of $40,000.00 is made one year later. Assume that
all of the money is invested in the Variable Sub-Accounts, that no Withdrawals
are made and that the Account Value on the Death Benefit Date is $80,000.00. The
calculation of the Death Benefit to be paid is as follows:
<TABLE>
<CAPTION>
The Basic Death Benefit is the greatest of:
<S> <C> <C>
Account Value = $ 80,000.00
Cash Surrender Value = $ 74,400.00
Purchase Payments = $100,000.00
The Basic Death Benefit would therefore be: $100,000.00
</TABLE>
EXAMPLE 2:
Assume a Purchase Payment of $60,000.00 is made on the Contract Date and
an additional Purchase Payment of $40,000.00 is made one year later. Assume that
all of the money is invested in the Variable Sub-Accounts and that the Account
Value is $80,000.00 just prior to a $20,000.00 withdrawal. The Account Value on
the Death Benefit Date is $60,000.00.
<TABLE>
<S> <C> <C>
The Basic Death Benefit is the greatest of:
Account Value = $60,000.00
Cash Surrender Value = $55,200.00
Adjusted Purchase Payments* = $75,000.00
The Basic Death Benefit would therefore be: $75,000.00
*Adjusted Purchase Payments can be calculated as follows:
Payments X (Account Value after withdrawal / Account Value before withdrawal)
$100,000.00 X ($60,000.00/$80,000.00)
</TABLE>
55
<PAGE>
APPENDIX D
CALCULATION OF EARNINGS ENHANCEMENT OPTIONAL DEATH BENEFIT
EXAMPLE 1:
Assume a Purchase Payment of $60,000.00 is made on the Contract Date and
an additional Purchase Payment of $40,000.00 is made one year later. Assume that
all of the money is invested into the Variable Sub-Accounts, no withdrawals are
made and the Account Value on the Death Benefit Date is $150,000.00. In
addition, this Contract was issued prior to the owner's 70th birthday. The
calculation of the Basic Death Benefit to be paid is as follows:
<TABLE>
<CAPTION>
The Basic Death Benefit is the greatest of:
<S> <C> <C>
Account Value = $150,000.00
Cash Surrender Value = $ 72,800.00
Adjusted Purchase Payments = $100,000.00
The Basic Death Benefit would therefore be: $150,000.00
The rider benefit can be calculated as follows:
The lesser of:
Adjusted Purchase payments = $100,000.00
Account Value - adjusted Purchase Payments $ 50,000.00
Amount to use to determine rider benefit: $ 50,000.00
The amount to be paid on the rider benefit = $ 50,000.00 X 40% = $20,000.00
</TABLE>
The total Death Benefit would be the Basic Benefit plus the Optional Death
Benefit Rider a Purchase Payment of $60,000.00 is made on the Contract Date and
an additional Purchase Payment of $40,000.00 is made one year later. Assume that
all of the money is invested into the Variable Sub-Accounts, no withdrawals are
made and the Account Value on the Death Benefit Date is $150,000.00. In
addition, this Contract was issued prior to the owner's 70th birthday. The
calculation of the Basic Death Benefit to be paid is as follows:
<TABLE>
<S> <C>
The total Death Benefit would be the Basic Benefit plus the
Optional.
$150,000.00 + $20,000.00 = $170,000.00
</TABLE>
EXAMPLE 2:
Assume a Purchase Payment of $60,000.00 is made on the Contract Date and
an additional Purchase Payment of $40,000.00 is made one year later. Assume that
all of the money is invested in the Variable Sub-Accounts and that the Account
Value is $150,000.00 just prior to a $20,000.00 withdrawal. The Account Value on
the Death Benefit Date is $130,000.00.
<TABLE>
<S> <C> <C>
The Basic Death Benefit is the greatest of:
Account Value = $130,000.00
Cash Surrender Value = $123,600.00
Adjusted Purchase Payments* = $ 86,666.67
The Basic Death Benefit would therefore be: $130,000.00
*Adjusted Purchase Payments can be calculated as follows:
Payments X (Account Value after withdrawal / Account Value before withdrawal)
$100,000.00 X ($130,000.00/$150,000.00)
The rider benefit can be calculated as follows:
The lesser of:
Adjusted Purchase payments = $ 86,666.67
Account Value - adjusted Purchase Payments $ 43,333.33
Amount to use to determine rider benefit: $ 43,333.33
The amount to be paid on the rider benefit = $ 43,333.33 X 40% = $17,333.33
</TABLE>
The total Death Benefit would be the amount paid on the Basic Death
Benefit plus the amount paid on the Earnings Enhancement Optional Death Benefit
Rider: $130,000.00 + $17,333.33 = $147,333.33
56
<PAGE>
APPENDIX E
CALCULATION OF DEATH BENEFIT WHEN ALL THREE DEATH BENEFITS RIDERS ARE SELECTED
Assume a Purchase Payment of $100,000.00 is made on the Contract Date, no
additional Purchase Payments or withdrawals are made and all of the money is
invested in the Variable Sub-Accounts. In addition, on the Death Benefit Date
the Account Value is $150,000.00, the value of the Purchase Payment accumulated
at 5% until the Death Benefit Date is $160,000.00 and that the Maximum Account
Anniversary Value is $170,000.00. The calculation of the death benefit to be
paid is as follows:
<TABLE>
<S> <C> <C>
The Death Benefit Amount will be the greatest of:
Account Value = $150,000.00
Cash Surrender Value = $142,800.00
Total of adjusted Purchase Payments = $100,000.00
5% Premium Roll-Up Rider = $160,000.00
Maximum Account Anniversary Value Rider = $170,000.00
The Death Benefit Amount would therefore be: $170,000.00
~ PLUS ~
The Earnings Enhancement Rider benefit is calculated as follows:
The lesser of:
Adjusted Purchase payments = $100,000.00
Account Value - adjusted Purchase Payments $ 50,000.00
Amount to use to determine this rider benefit: $ 50,000.00
The amount to be paid on the rider benefit = $ 50,000.00 X 40% = $20,000.00
</TABLE>
The total Death Benefit would be the amount paid on the Maximum Account
Anniversary Rider plus the amount paid on the Earnings Enhancement Rider:
$170,000.00 + $20,000.00 = $190,000.00
57
<PAGE>
APPENDIX F
CALCULATION FOR PURCHASE PAYMENT INTEREST (BONUS CREDIT)
EXAMPLE 1:
IF YOU SELECT OPTION A, the 2% Bonus Option, we will credit Purchase
Payment Interest on all Purchase Payments made during the first Account Year. On
each fifth Account Anniversary, we will credit additional Purchase Payment
Interest of 2% based on your Account Value, illustrated below:
Initial Purchase Payment of $50,000.00 receives 2% Purchase Payment
Interest of $1,000.00
Subsequent Purchase Payment in the first Account Year of $20,000.00
receives 2% Purchase Payment Interest of $400.00
Suppose the Account had not gained any earnings or interest during the
first five years and the Account Value is $71,400.00 (sum of all Purchase
Payments and Purchase Payment Interest), we will credit your account with an
additional 2% equal to $1,428.00
Using the same Purchase Payments as above, suppose your value on the fifth
anniversary is $74,970.00. We will credit your account with an additional 2% of
Purchase Payment Interest equal to $1,499.40.
This 2% Purchase Payment Interest will occur on every fifth Account
Anniversary (i.e., 5th, 10th, 15th).
EXAMPLE 2: OPTION B WITH NO WITHDRAWALS
IF YOU SELECT OPTION B, the 3% Bonus option the amount we will credit to
your contract depends on the size of your Net Purchase Payments. The scale is as
follow:
<TABLE>
<S> <C>
Net Purchase Payments less than $100,000.00 will receive 3%
Net Purchase Payments between $100,000.00 through
$499,999.99 will receive 4%
Net Purchase Payments greater than or equal to $500,000.00
will receive 5%
</TABLE>
Therefore, if your initial investment is $50,000.00, your Purchase Payment
Interest will equal 3% of $50,000, or $1500.00.
If you make additional payments that cause your total Net Purchase
Payments to exceed $100,000.00, those Purchase Payments will receive either a 4%
or 5% bonus, using the above scale. As an example:
Initial Purchase Payment of $50,000.00 will receive 3% Purchase Payment
Interest. A second Purchase Payment of $80,000.00 will result in Net
Purchase Payments of $130,000.00. Thus, the $80,000.00 will receive
Purchase Payment Interest of 4% equal to $3,200.00.
Suppose a third Purchase Payment of $400,000.00 is made. This will bring
the Net Purchase Payments to $530,000.00. This $400,000.00 will receive
Purchase Payment Interest of 5% equal to $20,000.00.
This account now has total Net Purchase Payments of $530,000.00 and total
Purchase Payment Interest of $24,700.00.
In addition to the Purchase Payment Interest paid at time of each payment,
we will review your first Account Anniversary to ensure that all Net Purchase
Payments received the Purchase Payment Interest as described in the above scale.
Using the above scenario as an example, upon the first Account Anniversary, we
will credit your Account an additional $1800.00 which is equal to:
<TABLE>
<S> <C> <C>
Total Net Purchase Payments of $530,000.00 X 5% = $26,500.00
Total Purchase Payment Interest received = $24,700.00
----------
First Account Anniversary Adjustment = $ 1,800.00
</TABLE>
58
<PAGE>
EXAMPLE 3: OPTION B WITH A WITHDRAWAL.
Using the same example as above, suppose that before the first Account
Anniversary a withdrawal of $20,000.00 was taken. The annual Purchase Payment
Interest adjustment would be calculated as follows:
Because your Net Purchase Payments are $510,000.00 ($530,000.00 -
$20,000.00 withdrawal), your Purchase Payment Interest on all Net Purchase
Payments should be 5%.
<TABLE>
<S> <C>
Your initial Payment of $50,000.00 received 3%
Your second Payment of $80,000.00 received 4%
Your third Payment of $400,000.00 received the 5%
</TABLE>
Your first two payments minus the withdrawal will receive additional
Purchase Payment Interest. This will bring your total Net Purchase Payments up
to 5%.
<TABLE>
<S> <C> <C>
$50,000.00 X 2% = $1,000.00
$80,000.00 - $20,000.00 = $60,000.00 X 1% = $ 600.00
Total credit due = $1,600.00
</TABLE>
On your First Account Anniversary we will credit your Account with an
additional Purchase Payment Interest of $1600.00.
59
<PAGE>
<TABLE>
<S> <C>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
MAILING ADDRESS
C/O RETIREMENT PRODUCTS AND SERVICES
P.O. BOX 9133
BOSTON, MASSACHUSETTS 02117
TELEPHONE:
Toll Free (888) 786-2435
In Massachusetts: (617) 348-9600
GENERAL DISTRIBUTOR
Clarendon Insurance Agency, Inc.
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
AUDITORS
200 Berkeley Street
Boston, Massachusetts 02116
</TABLE>
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF
ADDITIONAL INFORMATION
Attached hereto and made a part hereof is the Statement of Additional
Information dated April __, 2000 for Futurity Accolade Variable and Fixed
Annuity.
<PAGE>
APRIL __, 2000
FUTURITY ACCOLADE
VARIABLE AND FIXED ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT F
TABLE OF CONTENTS
Calculation of Performance Data ............................................. 2
Tax Deferred Accumulation.................................................... 9
Advertising and Sales Literature ............................................10
Calculations ................................................................13
Example of Variable Accumulation Unit Value Calculation.................13
Example of Variable Annuity Unit Calculation ...........................13
Example of Variable Annuity Payment Calculation ........................13
Calculation of Annuity Values ..........................................13
Distribution of the Contracts ...............................................13
Designation and Change of Beneficiary .......................................14
Custodian ...................................................................14
Financial Statements ........................................................14
The Statement of Additional Information sets forth information
which may be of interest to prospective purchasers of Futurity Accolade
Variable and Fixed Annuity Contracts (the "Contracts") issued by Sun Life
Assurance Company of Canada (U.S.) (the "Company") in connection with Sun
Life of Canada (U.S.) Variable Account F (the "Variable Account") which is
not included in the Prospectus dated April __, 2000. This Statement of
Additional Information should be read in conjunction with the Prospectus, a
copy of which may be obtained without charge from the Company at its Annuity
Service Mailing Address, c/o Sun Life Assurance Company of Canada (U.S.),
Retirement Products and Services, P.O. Box 9133, Boston, Massachusetts 02117,
or by telephoning (617) 348-9600 or (888) 786-2435.
The terms used in this Statement of Additional Information have the
same meanings as in the Prospectus.
- --------------------------------------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE PURCHASERS ONLY IF PRECEDED OR ACCOMPANIED BY A
CURRENT PROSPECTUS.
<PAGE>
-2-
CALCULATION OF PERFORMANCE DATA
AVERAGE ANNUAL TOTAL RETURN:
The table below shows, for various Sub-Accounts of the Variable
Account, the Average Annual Total Return for the stated periods (or shorter
period indicated in the note below), based upon a hypothetical initial
Purchase Payment of $1,000, calculated in accordance with the formula set out
after the table. For purposes of determining the investment results in this
table, the actual investment performance of each Fund is reflected from the
date the Fund commenced operations ("Inception"), although the Contracts have
been offered only since September, 1999. No information is shown for the
Funds that have not commenced operations or that have been in operation for
less than one year.
The Securities and Exchange Commission defines "standardized" total
return information to mean Average Annual Total Return, based on a
hypothetical initial purchase payment of $1,000 and calculated in accordance
with the formula set forth after the table, but presented only for periods
subsequent to the commencement of the offering of the Futurity annuities.
Since as of the date of the Prospectus the Company has been offering the
Futurity annuities for less than a year, no standardized total return
information is currently provided. Standardized total return information will
be provided after the Sub-Accounts have been in operation for one year.
AVERAGE ANNUAL TOTAL RETURN
PERIOD ENDING DECEMBER 31, 1999
<TABLE>
<CAPTION> 10 YEAR FUND
1 YEAR 3 YEAR 5 YEAR OR INCEPTION
PERIOD PERIOD PERIOD LIFE(1) DATE
------ ------ ------ ------- -------------------
<S> <C> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund May 5, 1993
AIM V.I. Growth Fund May 5, 1993
AIM V.I. Growth and Income Fund May 2, 1994
AIM V.I. International Equity Fund May 5, 1993
Alger American Growth Portfolio January 1, 1989
Alger American Income and Growth Portfolio November 15, 1988
Alger American Small Capitalization Portfolio September 21, 1988
Goldman Sachs VIT CORE-SM- Large Cap Growth Fund February 13, 1998
Goldman Sachs VIT CORE-SM- Small Cap Equity Fund February 13, 1998
Goldman Sachs VIT CORE-SM- U.S. Equity Fund February 13, 1998
Goldman Sachs VIT Growth and Income Fund January 12, 1998
Goldman Sachs VIT International Equity Fund January 12, 1998
J.P. Morgan U.S. Disciplined Equity Portfolio (2) January 3, 1995
J.P. Morgan International Opportunities Portfolio (2) January 3, 1995
J.P. Morgan Small Company Portfolio (2) January 3, 1995
Lord Abbett Growth and Income Portfolio December 1, 1989
MFS/Sun Life Capital Appreciation Series June 12, 1985
MFS/Sun Life Emerging Growth Series May 1, 1995
MFS/Sun Life Government Securities Series June 12, 1985
MFS/Sun Life High Yield Series June 12, 1985
MFS/Sun Life Utilities Series November 16, 1993
MFS/Sun Life New Discovery Series May 5, 1998
MFS/Sun Life Massachusetts Investors Growth Series May 1, 1998
MFS/Sun Life Total Return Series May 16, 1988
MFS/Sun Life Massachusetts Investors Trust December 5, 1986
OCC Equity Portfolio (3) August 1, 1988
OCC Managed Portfolio (3) August 1, 1988
OCC Mid Cap Portfolio February 9, 1998
OCC Small Cap Portfolio (3) August 1, 1988
SunCap Investment Grade Bond Fund December 7, 1998
SunCap Money Market Fund December 7, 1998
SunCap Real Estate Fund December 7, 1998
</TABLE>
(1) From commencement of investment operations.
(2) From January 3, 1995 (commencement of operations) to December 31, 1996,
Chubb Investment Advisory Corporation ("Chubb Investment Advisory"), a
wholly owned subsidiary of Chubb Life Insurance Company of America,
served as each of these Fund's investment manager, and Morgan Guaranty
Trust Company of New York, an affiliate of J.P. Morgan Investment
Management Inc. ("J.P. Morgan") served as such Fund's sub-investment
adviser. Effective January 1, 1997, J.P. Morgan began serving as each
Fund's investment adviser.
(3) On September 16, 1994, an investment company then called Quest for Value
Accumulation Trust (the "Old Trust") was effectively divided into two
investment funds, the Old Trust and the OCC Accumulation Trust, at which
time the OCC Accumulation Trust commenced operations. The total net
assets for each of the Equity, Managed and Small Cap Portfolios
immediately after the transaction were $86,789,755, $682,601,380, and
$139,812,573, respectively, with respect to the Old Trust, and for each
of the Equity, Managed and Small Cap Portfolios, $3,764,598,
$51,345,102, and $8,129,274, respectively, with respect to the OCC
Accumulation Trust. The Equity, Managed and Small Cap Portfolios
commenced operations on August 1, 1998. For the period prior to September
16, 1994, the performance figures above for each of the Equity, Managed,
and Small Cap Portfolios reflect the performance of the corresponding
Portfolios of the Old Trust.
The length of the period and the last day of each period used in the
above table are set out in the table heading and in the footnotes above. The
Average Annual Total Return for each period was determined by finding the
average annual compounded rate of return over each period that would equate the
initial amount invested to the ending redeemable value for that period, in
accordance with the following formula:
<PAGE>
-3-
n
P(l + T) = ERV
Where: P = a hypothetical initial Purchase Payment of $1,000
T = average annual total return for the period
n = number of years
ERV = redeemable value (as of the end of the period) of a
hypothetical $1,000 Purchase Payment made at the beginning of
the 1-year, 5-year, or 10-year period (or fractional portion
thereof)
The formula assumes that: 1) all recurring fees have been deducted from the
Participant's Account; 2) all applicable non-recurring Contract charges are
deducted at the end of the period, and 3) there will be a full surrender at the
end of the period.
The $35 annual Account Fee will be allocated among the Sub-Accounts so
that each Sub-Account's allocated portion of the Account Fee is proportional to
the percentage of the number of Individual Contracts and Certificates that have
amounts allocated to that Sub-Account. Because the impact of Account Fees on a
particular Contract may differ from those assumed in the computation due to
differences between actual allocations and the assumed ones, the total return
that would have been experienced by an actual Contract over these same time
periods may have been different from that shown above.
ADDITIONAL NON-STANDARDIZED INVESTMENT PERFORMANCE:
The Variable Account may illustrate its results over various periods
and compare its results to indices and other variable annuities in sales
materials including advertisements, brochures and sports. Such results may be
computed on a "cumulative" and/or "annualized" basis.
"Cumulative" quotations are arrived at by calculating the change in
the Accumulation Unit value of a Sub-Account between the first and last day of
the base period being measured, and expressing the difference as a percentage of
the Accumulation Unit value at the beginning of the base period.
"Annualized" quotations (described in the following table as
"Compound Growth Rate") are calculated by applying a formula which determines
the level rate of return which, if earned over the entire base period, would
produce the cumulative return.
<PAGE>
-4-
<TABLE>
<CAPTION>
NON-STANDARDIZED INVESTMENT PERFORMANCE*
<S> <C>
$10,000 invested in this Fund under a ...would have grown to this amount
Futurity Accolade Contract, this many years ago... on December 31, 1999
</TABLE>
<TABLE>
<CAPTION>
AIM V.I. CAPITAL APPRECIATION FUND AIM V.I. GROWTH FUND
Number Cumulative Compound Number Cumulative Compound
of Growth Growth of Growth Growth
Years Periods Amount Rate Rate Years Periods Amount Rate Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/98-12/31/99 1 12/31/98-12/31/99
2 12/31/97-12/31/98 2 12/31/97-12/31/98
3 12/31/96-12/31/98 3 12/31/96-12/31/98
4 12/31/95-12/31/98 4 12/31/95-12/31/98
5 12/31/94-12/31/98 5 12/31/94-12/31/98
Life 05/05/93-12/31/99 Life 05/05/93-12/31/99
<CAPTION>
AIM V.I. GROWTH AND INCOME FUND AIM V.I. INTERNATIONAL EQUITY FUND
Number Cumulative Compound Number Cumulative Compound
of Growth Growth of Growth Growth
Years Periods Amount Rate Rate Years Periods Amount Rate Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/98-12/31/99 1 12/31/98-12/31/99
2 12/31/97-12/31/98 1 12/31/97-12/31/98
3 12/31/96-12/31/98 2 12/31/96-12/31/98
4 12/31/95-12/31/98 3 12/31/95-12/31/98
5 12/31/94-12/31/98 4 12/31/94-12/31/98
5 12/31/93-12/31/98
Life 05/02/94-12/31/99 Life 05/05/93-12/31/99
<CAPTION>
ALGER AMERICAN GROWTH PORTFOLIO ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
Number Cumulative Compound Number Cumulative Compound
of Growth Growth of Growth Growth
Years Periods Amount Rate Rate Years Periods Amount Rate Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/98-12/31/99 1 12/31/98-12/31/99
2 12/31/97-12/31/98 2 12/31/97-12/31/98
3 12/31/96-12/31/98 3 12/31/96-12/31/98
4 12/31/95-12/31/98 4 12/31/95-12/31/98
5 12/31/94-12/31/98 5 12/31/94-12/31/98
10 12/31/89-12/31/99
Life 01/09/89-12/31/99 Life 11/15/88-12/31/99
</TABLE>
* For periods of less than one year, the growth rates listed are not annualized.
<PAGE>
-5-
<TABLE>
<CAPTION>
NON-STANDARDIZED INVESTMENT PERFORMANCE*
<S> <C>
$10,000 invested in this Fund under a ...would have grown to this amount
Futurity Accolade Contract, this many years ago... on December 31, 1999
</TABLE>
<TABLE>
<CAPTION>
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO GOLDMAN SACHS VIT CORE-SM- LARGE CAP GROWTH FUND
Number Cumulative Compound Number Cumulative Compound
of Growth Growth of Growth Growth
Years Periods Amount Rate Rate Years Periods Amount Rate Rate*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/98-12/31/99 1 12/31/98-12/31/99
2 12/31/97-12/31/98
3 12/31/96-12/31/98
4 12/31/95-12/31/98
5 12/31/94-12/31/98
10 12/31/88-12/31/99
Life 09/21/88-12/31/99 Life 02/13/98-12/31/99
<CAPTION>
GOLDMAN SACHS VIT CORE-SM- SMALL CAP EQUITY FUND GOLDMAN SACHS VIT CORE-SM- U.S. EQUITY FUND
Number Cumulative Compound Number Cumulative Compound
of Growth Growth of Growth Growth
Years Periods Amount Rate Rate* Years Periods Amount Rate Rate*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/98-12/31/99 1 12/31/98-12/31/99
Life 02/13/98-12/31/99 Life 02/13/98-12/31/99
<CAPTION>
GOLDMAN SACHS VIT CORE-SM- GROWTH AND INCOME FUND GOLDMAN SACHS VIT INTERNATIONAL EQUITY FUND
Number Cumulative Compound Number Cumulative Compound
of Growth Growth of Growth Growth
Years Periods Amount Rate Rate* Years Periods Amount Rate Rate*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/98-12/31/99 1 12/31/98-12/31/99
Life 01/12/98-12/31/99 Life 01/12/98-12/31/99
<CAPTION>
J.P. MORGAN U.S. DISCIPLINED EQUITY PORTFOLIO J.P. INTERNATIONAL OPPORTUNITIES PORTFOLIO
Number Cumulative Compound Number Cumulative Compound
of Growth Growth of Growth Growth
Years Periods Amount Rate Rate Years Periods Amount Rate Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/98-12/31/99 1 12/31/98-12/31/99
2 12/31/97-12/31/98 $12,154 21.54% 21.54% 2 12/31/97-12/31/98
3 12/31/96-12/31/98 $16,647 66.47% 29.02% 3 12/31/96-12/31/98
4 12/31/95-12/31/98 $18,252 82.52% 22.21% 4 12/31/95-12/31/98
Life 01/03/95-12/31/99 $24,139 141.39% 24.68% Life 01/03/95-12/31/99
</TABLE>
* For periods of less than one year, the growth rates listed are not annualized.
<PAGE>
-6-
<TABLE>
<CAPTION>
NON-STANDARDIZED INVESTMENT PERFORMANCE*
<S> <C>
$10,000 invested in this Fund under a ...would have grown to this amount
Futurity Accolade Contract, this many years ago... on December 31, 1999
</TABLE>
<TABLE>
<CAPTION>
J.P. MORGAN SMALL COMPANY PORTFOLIO LORD ABBETT GROWTH AND INCOME PORTFOLIO
Number Cumulative Compound Number Cumulative Compound
of Growth Growth of Growth Growth
Years Periods Amount Rate Rate Years Periods Amount Rate Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/98-12/31/99 1 12/31/98-12/31/99
2 12/31/97-12/31/98 2 12/31/97-12/31/98
3 12/31/96-12/31/98 3 12/31/96-12/31/98
4 12/31/95-12/31/98 4 12/31/95-12/31/98
5 12/31/94-12/31/98
Life 01/03/95-12/31/99 Life 12/11/89-12/31/99
<CAPTION>
MFS/SUN LIFE CAPITAL APPRECIATION SERIES MFS/SUN LIFE EMERGING GROWTH SERIES
Number Cumulative Compound Number Cumulative Compound
of Growth Growth of Growth Growth
Years Periods Amount Rate Rate Years Periods Amount Rate Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/98-12/31/99 1 12/31/98-12/31/99
2 12/31/97-12/31/98 2 12/31/97-12/31/98
3 12/31/96-12/31/98 3 12/31/96-12/31/98
4 12/31/95-12/31/98 4 12/31/95-12/31/98
5 12/31/94-12/31/98
10 12/31/88-12/31/98
Life 06/12/85-12/31/99 Life 05/01/95-12/31/99
<CAPTION>
MFS/SUN LIFE GOVERNMENT SECURITIES SERIES MFS/SUN LIFE HIGH YIELD SERIES
Number Cumulative Compound Number Cumulative Compound
of Growth Growth of Growth Growth
Years Periods Amount Rate Rate Years Periods Amount Rate Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/98-12/31/99 1 12/31/98-12/31/99
2 12/31/97-12/31/98 $10,717 7.17% 7.17% 2 12/31/97-12/31/98
3 12/31/96-12/31/98 $11,485 14.85% 7.17% 3 12/31/96-12/31/98
4 12/31/95-12/31/98 $11,500 15.00% 4.77% 4 12/31/95-12/31/98
5 12/31/94-12/31/98 $13,333 33.33% 7.46% 5 12/31/94-12/31/98
10 12/31/88-12/31/99 $19,723 97.23% 7.03% 10 12/31/88-12/31/99
Life 06/12/85-12/31/99 $25,328 153.28% 7.09% Life 06/12/85-12/31/99
</TABLE>
* For periods of less than one year, the growth rates listed are not annualized.
<PAGE>
-7-
<TABLE>
<CAPTION>
NON-STANDARDIZED INVESTMENT PERFORMANCE*
<S> <C>
$10,000 invested in this Fund under a ...would have grown to this amount
Futurity Accolade Contract, this many years ago... on December 31, 1999
</TABLE>
<TABLE>
<CAPTION>
MFS/SUN LIFE NEW DISCOVERY SERIES MFS/SUN LIFE TOTAL RETURN SERIES
Number Cumulative Compound Number Cumulative Compound
of Growth Growth of Growth Growth
Years Periods Amount Rate Rate* Years Periods Amount Rate Rate*
<S> <C> <C> <C> <C> <S> <C> <C> <C> <C>
1 12/31/98-12/31/99 1 12/31/98-12/31/99
2 12/31/97-12/31/98
3 12/31/96-12/31/98
4 12/31/95-12/31/98
5 12/31/94-12/31/98
10 12/31/88-12/31/99
Life 05/05/98-12/31/99 Life 05/16/86-12/31/99
<CAPTION>
MFS/SUN LIFE MASSACHUSETTS INVESTORS GROWTH SERIES MFS/SUN LIFE MASSACHUSETTS INVESTORS TRUST SERIES
Number Cumulative Compound Number Cumulative Compound
of Growth Growth of Growth Growth
Years Periods Amount Rate Rate* Years Periods Amount Rate Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/98-12/31/99 1 12/31/98-12/31/99
2 12/31/97-12/31/98
3 12/31/96-12/31/98
4 12/31/95-12/31/98
5 12/31/94-12/31/98
10 12/31/88-12/31/99
Life 05/05/98-12/31/99 Life 12/05/86-12/31/99
</TABLE>
* For periods of less than one year, the growth rates listed are not annualized.
<PAGE>
-8-
<TABLE>
<CAPTION>
NON-STANDARDIZED INVESTMENT PERFORMANCE*
<S> <C>
$10,000 invested in this Fund under a ...would have grown to this amount
Futurity Accolade Contract, this many years ago... on December 31, 1999
</TABLE>
<TABLE>
<CAPTION>
MFS/SUN LIFE UTILITIES SERIES OCC EQUITY PORTFOLIO
Number Cumulative Compound Number Cumulative Compound
of Growth Growth of Growth Growth
Years Periods Amount Rate Rate Years Periods Amount Rate Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/98-12/31/99 1 12/31/98-12/31/99
2 12/31/97-12/31/98 2 12/31/97-12/31/98
3 12/31/96-12/31/98 3 12/31/96-12/31/98
4 12/31/95-12/31/98 4 12/31/95-12/31/98
5 12/31/94-12/31/98 5 12/31/94-12/31/98
10 12/31/88-12/31/98
Life 11/16/93-12/31/99 Life 08/01/88-12/31/99
<CAPTION>
OCC MANAGED PORTFOLIO OCC MID CAP PORTFOLIO
Number Cumulative Compound Number Cumulative Compound
of Growth Growth of Growth Growth
Years Periods Amount Rate Rate Years Periods Amount Rate Rate*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/98-12/31/99 1 12/31/98-12/31/99
2 12/31/97-12/31/98
3 12/31/96-12/31/98
4 12/31/95-12/31/98
5 12/31/94-12/31/98
10 12/31/88-12/31/98
Life 08/01/88-12/31/99 Life 02/09/98-12/31/99
<CAPTION>
OCC SMALL CAP PORTFOLIO SUN CAPITAL INVESTMENT GRADE BOND FUND
Number Cumulative Compound Number Cumulative Compound
of Growth Growth of Growth Growth
Years Periods Amount Rate Rate Years Periods Amount Rate Rate*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/98-12/31/99 1 12/31/98-12/31/99
2 12/31/97-12/31/98
3 12/31/96-12/31/98
4 12/31/95-12/31/98
5 12/31/94-12/31/98
10 12/31/88-12/31/98
Life 08/01/88-12/31/99 Life 12/07/98-12/31/99
<CAPTION>
SUN CAPITAL MONEY MARKET FUND SUN CAPITAL REAL ESTATE FUND
Number Cumulative Compound Number Cumulative Compound
of Growth Growth of Growth Growth
Years Periods Amount Rate Rate* Years Periods Amount Rate Rate*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12/31/98-12/31/99 1 12/31/98-12/31/99
Life 12/07/98-12/31/99 Life 12/07/98-12/31/99
</TABLE>
* For periods of less than one year, the growth rates listed are not annualized.
<PAGE>
-9-
TAX DEFERRED ACCUMULATION
In general, individuals who own annuity contracts are not taxed on
increases in the value of their annuity contracts until some form of
distribution is made under the contract. As a result, the annuity contract
would benefit from tax deferral during the contract's accumulation phase;
this would have the effect of permitting an investment in an annuity contract
to grow more rapidly that a comparable investment under which increases in
value are taxed on a current basis.
In reports or other communications to you or in advertising or sales
materials, we may also describe the effects of tax deferred compounding on
the Variable Account's investment returns under the various Purchase Payment
Interest Options or upon returns in general. We may illustrate these effects
in charts or graphs and from time to time may include comparisons of returns
under the Contracts or in general on a tax deferred basis, with the returns
on a taxable basis. Different tax rates may be assumed. Any such illustrative
chart or graph would show accumulations on an initial investment or Purchase
Payment, assuming a given amount (including the applicable interest credit),
hypothetical gross annual returns compounded annually, and a stated rate of
return. The values shown for the taxable investment would not include any
deduction for management fees or other expenses, but would assume the annual
deduction of federal and state taxes from investment returns. The values
shown for the Contracts in a chart would reflect the deduction of Contract
expenses, such as the 1.30% mortality and expense risk charge, the 0.15%
administrative charge, and the $35 annual Account Fee. In addition, the
values shown would assume that the Participant has not surrendered his or her
Contract or made any partial surrenders until the end of the period shown.
The chart would assume a full surrender at the end of the period shown and
the payment of federal and state taxes, at a rate of not more than 33%, on
the amount in excess of the Purchase Payments.
In developing illustrative tax deferral charts, we will observe these
general principles:
- The assumed rate of earnings will be realistic.
- The illustrative chart will accurately depict the effect of all
fees and charges or provide a narrative that prominently discloses
all fees and charges under the Contract.
- Charts comparing accumulation values for tax-deferred and non-tax-
deferred investments will depict the implications of any surrender.
- A narrative accompanying the chart will prominently disclose that
there may be a 10% tax penalty on a surrender by a Participant who
has not reached age 59 1/2 at the time of surrender.
The rates of return illustrated in any chart would be hypothetical and
are not an estimate or guaranty of performance. Actual tax returns may vary
for among Participants.
<PAGE>
-10-
ADVERTISING AND SALES LITERATURE
As set forth in the Prospectus, the Company may refer to the following
organizations (and others) in its marketing materials:
A.M. BEST'S RATING SYSTEM is designed to evaluate the various factors
affecting the overall performance of an insurance company in order to provide an
opinion as to an insurance company's relative financial strength and ability to
meet its contractual obligations. The procedure includes both a quantitative and
qualitative review of each company.
DUFF & PHELPS CREDIT RATING Company's Insurance Company Claims Paying
Ability Rating is an independent evaluation by a nationally accredited rating
organization of an insurance company's ability to meet its future obligations
under the contracts and products it sells. The rating takes into account both
quantitative and qualitative factors.
LIPPER VARIABLE INSURANCE PRODUCTS PERFORMANCE ANALYSIS SERVICE is a
publisher of statistical data covering the investment company industry in the
United States and overseas. Lipper is recognized as the leading source of data
on open-end and closed-end funds. Lipper currently tracks the performance of
over 5,000 investment companies and publishes numerous specialized reports,
including reports on performance and portfolio analysis, fee and expense
analysis.
STANDARD & POOR'S insurance claims-paying ability rating is an opinion
of an operating insurance company's financial capacity to meet obligations of
its insurance policies in accordance with their terms.
VARDS (Variable Annuity Research Data Service) provides a
comprehensive guide to variable annuity contract features and historical fund
performance. The service also provides a readily understandable analysis of the
comparative characteristics and market performance of funds inclusive in
variable contracts.
MOODY'S Investors Services, Inc.'s insurance claims-paying rating is a
system of rating an insurance company's financial strength, market leadership,
and ability to meet financial obligations. The purpose of Moody's ratings is to
provide investors with a simple system of gradation by which the relative
quality of insurance companies may be noted.
STANDARD & POOR'S INDEX - broad-based measurement of changes in
stock-market conditions based on the average performance of 500 widely held
common stocks; commonly known as the Standard & Poor's 500 (S&P 500). The
selection of stocks, their relative weightings to reflect differences in the
number of outstanding shares, and publication of the index itself are services
of Standard & Poor's Corporation, a financial advisory, securities rating, and
publishing firm. The index tracks 400 industrial company stocks, 20
transportation stocks, 40 financial company stocks, and 40 public utilities.
<PAGE>
-11-
NASDAQ-OTC Price Index - this index is based on the National
Association of Securities Dealers Automated Quotations (NASDAQ) and represents
all domestic over-the-counter stocks except those traded on exchanges and those
having only one market maker, a total of some 3,500 stocks. It is market
valueweighted and was introduced with a base of 100.00 on February 5, 1971.
DOW JONES INDUSTRIAL AVERAGE (DJIA) - price-weighted average of 30
actively traded blue chip stocks, primarily industrials, but including American
Express Company and American Telephone and Telegraph Company. Prepared and
Published by Dow Jones & Company, it is the oldest and most widely quoted of all
the market indicators. The average is quoted in points, not dollars.
MORNINGSTAR, Inc. is an independent financial publisher offering
comprehensive statistical and analytical coverage of open-end and closed-end
funds and variable annuities. This coverage for mutual funds includes, among
other information, performance analysis rankings, risk rankings (e.g.
aggressive, moderate or conservative), and "style box" matrices. Style box
matrices display, for equity funds, the investment philosophy and size of the
companies in which the fund invests and, for fixed-income funds, interest rate
sensitivity and credit quality of the investment instruments.
IBBOTSON ASSOCIATES, Inc. is a consulting firm that provides a variety
of historical data, including total return, capital appreciation and income, on
the stock market as well as other investment asset classes, and inflation. This
information will be used primarily for comparative purposes and to illustrate
general financial planning principles.
In its advertisements and other sales literature for the Variable
Account and the Series Fund, the Company intends to illustrate the advantages of
the Contracts in a number of ways:
DOLLAR COST AVERAGING ILLUSTRATIONS. These illustrations will
generally discuss the price-leveling effect of making regular investments in the
same Sub-Accounts over a period of time, to take advantage of the trends in
market prices of the portfolio securities purchased by those Sub-Accounts.
SYSTEMATIC WITHDRAWAL PROGRAM. A service provided by the Company,
through which a Participant may take any distribution allowed by Internal
Revenue Code Section 401 (a) (9) in the case of Qualified Contracts, or
permitted under Internal Revenue Code Section 72 in the case of Non-Qualified
Contracts, by way of a series of partial withdrawals. Withdrawals under this
program may be fully or partially includible in income and may be subject to
a 10% penalty tax. Consult your tax advisor.
THE COMPANY'S AND THE FUNDS' CUSTOMERS. Sales literature for the
Variable Account and the Funds may refer to the number of clients which they
serve.
THE COMPANY'S ASSETS, SIZE. The Company may discuss its
general financial condition (see, for example, the references to Standard &
Poor's, Duff & Phelps and A.M. Best Company above); it may refer to its assets;
it may also discuss its
<PAGE>
-12-
relative size and/or ranking among companies in the industry or among any
sub-classification of those companies, based upon recognized evaluation
criteria. For example, at December 31, 1997, the Company was the 37th largest
U.S. life insurance company based upon overall assets and its ultimate parent
company, Sun Life Assurance Company of Canada, was the 21st largest.
COMPOUND INTEREST ILLUSTRATIONS. These will emphasize several
advantages of the variable annuity contract. For example, but not by way of
limitation, the literature may emphasize the potential savings through tax
deferral; the potential advantage of the Variable Account over the Fixed
Account; and the compounding effect when a participant makes regular deposits to
his or her account.
The Company may use hypothetical illustrations of the benefits of tax
deferral, including but not limited to the following chart:
The chart below assumes an initial investment of $10,000 which remains
fully invested for the entire time period, an 8% annual return, and a 33%
combined federal and state income tax rate. It compares how three different
investments might fare over 10, 20, and 30 years. The first example illustrates
an investment in a non-tax-deferred account and assumes that taxes are paid
annually out of that account. The second example illustrates how the same
investment would grow in a tax-deferred investment, such as an annuity. And the
third example illustrates the net value of the tax-deferred investment after
paying taxes on the full account value.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
10 YEARS 20 YEARS 30 YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Non-Tax-Deferred Account $16,856 $28,413 $ 47,893
- --------------------------------------------------------------------------------
Tax-Deferred Account $21,589 $46,610 $100,627
- --------------------------------------------------------------------------------
Tax-Deferred Account After $17,765 $34,528 $ 70,720
- --------------------------------------------------------------------------------
Paying Taxes
- --------------------------------------------------------------------------------
</TABLE>
THIS ILLUSTRATION IS HYPOTHETICAL AND DOES NOT REPRESENT THE PROJECTED
PERFORMANCE OF THE FUTURITY ACCOLADE VARIABLE ANNUITY OR ANY OF ITS
INVESTMENT OPTIONS. THE ILLUSTRATION DOES NOT REFLECT THE DEDUCTION OF ANY
CHARGES OR FEES RELATED TO PORTFOLIO MANAGEMENT, MORTALITY AND EXPENSE, OR
ACCOUNT ADMINISTRATION. TAXES ON EARNINGS WITHIN AN ANNUITY ARE DUE UPON
WITHDRAWAL. WITHDRAWALS MAY ALSO BE SUBJECT TO SURRENDER CHARGES AND, IF MADE
PRIOR TO AGE 59 1/2, A 10% FEDERAL PENALTY TAX.
<PAGE>
-13-
CALCULATIONS
EXAMPLE OF VARIABLE ACCUMULATION UNIT VALUE CALCULATION
Suppose the net asset value of a Fund share at the end of the current
valuation period is $18.38; at the end of the immediately preceding valuation
period was $18.32; the Valuation Period is one day; and no dividends or
distributions caused Fund shares to go "ex-dividend" during the current
Valuation Period. $18.38 divided by $18.32 is 1.00327511. Subtracting the one
day risk factor for mortality and expense risks and the administrative
expense charge of .00004002 (the daily equivalent of the current maximum
charge of 1.45% on an annual basis) gives a net investment factor of
1.00323509. If the value of the variable accumulation unit for the
immediately preceding valuation period had been 14.5645672, the value for the
current valuation period would be 14.6116849 (14.5645672 X 1.00323648).
EXAMPLE OF VARIABLE ANNUITY UNIT CALCULATION
Suppose the circumstances of the first example exist, and the value of
an annuity unit for the immediately preceding valuation period had been
12.3456789. If the first variable annuity payment is determined by using an
annuity payment based on an assumed interest rate of 3% per year, the value
of the annuity unit for the current valuation period would be 12.3846153
(12.3456789 X 1.00323509 (the Net Investment Factor) X 0.99991902).
0.99991902 is the factor, for a one day Valuation Period, that neutralizes
the assumed interest rate of 3% per year used to establish the Annuity
Payment Rates found in certain Contracts.
EXAMPLE OF VARIABLE ANNUITY PAYMENT CALCULATION
Suppose that a Participant Account is credited with 8,765.4321 variable
accumulation units of a particular Sub-Account but is not credited with any
fixed accumulation units; that the variable accumulation unit value and the
annuity unit value for the particular Sub-Account for the valuation period
which ends immediately preceding the annuity commencement date are 14.5645672
and 12.3456789 respectively; that the annuity payment rate for the age and
option elected is $6.78 per $1,000; and that the annuity unit value on the
day prior to the second variable annuity payment date is 12.3846153. The
first variable annuity payment would be $865.57 (8,765.4321 X 14.5645672 X
6.78 divided by 1,000). The number of annuity units credited would be
70.1112 ($865.57 divided by 12.3456789) and the second variable annuity
payment would be $868.30 (70.1112 X 12.3846153).
CALCULATION OF ANNUITY VALUES
[TEXT TO COME]
DISTRIBUTION OF THE CONTRACTS
We offer the Contracts on a continuous basis. The Contracts are sold
by licensed insurance agents in those states where the Contracts may be lawfully
sold. 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 and
principal underwriter of the Contracts, Clarendon Insurance Agency, Inc.
("Clarendon"), One Sun Life Executive Park, Wellesley Hills, Massachusetts
02481. Clarendon is a wholly-owned subsidiary of the Company. Clarendon is
registered with the SEC under the Securities Exchange Act of 1934 as
broker-dealer and is a member of the National Association of Securities Dealers,
Inc. Clarendon also acts as the general distributor of certain other annuity
contracts issued by the Company and its wholly-owned subsidiary, Sun Life
Insurance and Annuity Company of New York, and variable life insurance contracts
issued by the Company.
Commissions and other distribution compensation will be paid by the
Company to the selling agents and will not be more than 6.50% of Purchase
Payments. In addition, after the first Account Year, broker-dealers who have
entered into distribution agreements with the Company may receive an annual
renewal commission of no more than 0.50% of the Participant's Account Value. In
addition to commissions, the Company may, from time to time, pay or allow
additional promotional incentives, in the form of cash or other compensation.
The Company reserves the right to offer these additional incentives only to
certain
<PAGE>
-14-
broker-dealers that sell or are expected to sell during specified time
periods certain minimum amounts of the Contracts or Certificates or other
contracts offered by the Company. Promotional incentives may change at any
time. Commissions will not be paid with respect to Participant 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 the Prospectus under the heading "Waivers; Reduced Charges;
Credits; Bonus Guaranteed Interest Rates."
DESIGNATION AND CHANGE OF BENEFICIARY
The Beneficiary designation in the Application will remain in effect
until changed.
Subject to the rights of an irrevocably designated Beneficiary, you
may change or revoke the designation of Beneficiary by filing the change or
revocation with us in the form we require. The change or revocation will not be
binding on us until we receive it. When we receive it, the change or revocation
will be effective as of the date on which it was signed, but the change or
revocation will be without prejudice to us on account of any payment we make or
any action we take before receiving the change or revocation.
Please refer to the terms of your particular retirement plan and any
applicable legislation for any restrictions on the beneficiary designation.
CUSTODIAN
We are the Custodian of the assets of the Variable Account. We
will purchase Fund shares at net asset value in connection with amounts
allocated to the Sub-Accounts in accordance with your instructions, and we
will redeem Fund shares at net asset value for the purpose of meeting the
contractual obligations of the Variable Account, paying charges relative to
the Variable Account or making adjustments for annuity reserves held in the
Variable Account.
FINANCIAL STATEMENTS
The Financial Statements of Sun Life of Canada (U.S.) Variable
Account F for the year ended December 31, 1999 included in this Statement of
Additional Information have been audited by ____________________________,
independent auditors, as stated in their report appearing herein, and are
included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
<PAGE>
-15-
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
C/O RETIREMENT PRODUCTS AND SERVICES
P.O. BOX 9133
BOSTON, MASSACHUSETTS 02117
TELEPHONE:
Toll Free (888) 786-2435
In Massachusetts (617) 348-9600
GENERAL DISTRIBUTOR
Clarendon Insurance Agency, Inc.
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
AUDITORS
___________________
200 Berkeley Street
Boston, Massachusetts 02116
<PAGE>
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) The following Financial Statements are included in the
Registration Statement:
Included in Part A:
A. Condensed Financial Information - Accumulation Unit Values
(to be filed by amendment).
B. Financial Statements of the Depositor (to be filed
by amendment):
1. Statutory Statements of Admitted Assets,
Liabilities and Capital Stock and Surplus,
December 31, 1999 and 1998;
2. Statutory Statements of Operations, Years Ended
December 31, 1999, 1998 and 1997;
3. Statutory Statements of Changes in Capital Stock
and Surplus, Years Ended December 31, 1999, 1998
and 1997;
4. Statutory Statements of Cash Flow, Years Ended
December 31, 1999, 1998 and 1997;
5. Notes to Statutory Financial Statements; and
6. Independent Auditors' Report.
Included in Part B
A. Financial Statements of the Registrant (to be filed
by amendment):
1. Statement of Condition, December 31, 1999;
2. Statement of Operations, Year Ended December 31,
1999;
3. Statements of Changes in Net Assets, Years Ended
December 31, 1999 and December 31, 1998;
4. Notes to Financial Statements; and
5. Independent Auditors' Report.
(b) The following Exhibits are incorporated in the Registration
Statement by reference unless otherwise indicated:
(1) Resolution of Board of Directors of the depositor
dated December 3, 1985 authorizing the
establishment of the Registrant (Incorporated
herein by reference to Exhibit 1 to the
Registration Statement of the Registrant on Form
N-4, File No. 333-37907, filed on October 14,
1997);
(2) Not Applicable;
(3)(a) Distribution Agreement between the Depositor,
Massachusetts Financial Services Company and
Clarendon Insurance Agency, Inc. (Incorporated
herein by reference to Exhibit 3(a) to
Pre-Effective Amendment No. 1 to the Registration
Statement of the Registrant on Form N-4, File No.
333-37907, filed on January 16, 1998);
(b)(i) Specimen Sales Operations and General Agent
Agreement (Incorporated herein by reference to
Exhibit 3(b)(i) to Pre-Effective Amendment No. 1
to the Registration Statement of the Registrant on
Form N-4, File No. 333-37907, filed on January 16,
1998);
<PAGE>
(b)(ii) Specimen Broker-Dealer Supervisory and Service
Agreement (Incorporated herein by reference to
Exhibit 3(b)(ii) to Pre-Effective Amendment No. 1
to the Registration Statement of the Registrant on
Form N-4, File No. 333-37907, filed on January 16,
1998); and
(b)(iii) Specimen Registered Representatives Agent
Agreement (Incorporated herein by reference to
Exhibit 3(b)(iii) to Pre-Effective Amendment No.
1 to the Registration Statement of the Registrant
on Form N-4, File No. 333-37907, filed on January
16, 1998);
(4)(a)(i) Form of Flexible Payment Combination
Fixed/Variable Group Annuity Contract
(Futurity Accolade) (Incorporated herein by
reference to Pre-Effective Amendment No. 1
to the Registration Statement of the
Registrant on Form N-4, File No. 333-82957,
filed September 29, 1999);
(a)(ii) Form of Flexible Payment Combination Fixed/
Variable Group Annuity Contract (MFS Regatta
Extra) (To be filed by amendment);
(b)(i) Form of Certificate to be
issued in connection with Contract filed as
Exhibit 4(a)(i) (Futurity Accolade)
(Incorporated herein by reference to
Pre-Effective Amendment No. 1 to
the Registration Statement of the
Registrant on Form N-4, File No. 333-82957,
filed September 29, 1999);
(b)(ii) Form of Certificate to be
issued in connection with Contract filed as
Exhibit 4(a)(ii) (MFS Regatta Extra) (To be
filed by amendment);
(c)(i) Form of Flexible Payment Combination
Fixed/Variable Individual Annuity Contract
(Futurity Accolade) (Incorporated herein by
reference to Pre-Effective Amendment No. 1
to the Registration Statement of the
Registrant on Form N-4, File No. 333-82957,
filed September 29, 1999);
(c)(ii) Form of Flexible Payment Combination
Fixed/Variable Individual Annuity Contract
(MFS Regatta Extra) (To be filed by amendment);
(d)(i) Form of Qualified Plan Endorsement*;
(5)(a)(i) Form of Application to be used with
Contract filed as Exhibit 4(a)(i)
(Futurity Accolade) (Incorporated herein by
reference to Pre-Effective Amendment No. 1
to the Registration Statement of the
Registrant on Form N-4, File No. 333-82957,
filed September 29, 1999);
(a)(ii) Form of Application to be used with
Contract filed as Exhibit 4(a)(ii)
(MFS Regatta Extra) (To be filed by amendment);
(b)(i) Form of Application to be used with
Certificate filed as Exhibit 4(b)(i) and
Contract filed as Exhibit 4(c)(i)
(Futurity Accolade) (Incorporated herein by
reference to Pre-Effective Amendment No. 1
to the Registration Statement of the
Registrant on Form N-4, File No. 333-82957,
filed September 29, 1999);
(b)(ii) Form of Application to be used with
Certificate filed as Exhibit 4(b)(ii) and
Contract filed as Exhibit 4(c)(ii)
(MFS Regatta Extra) (To be filed by amendment);
(6) Certificate of Incorporation and By-laws of the
Depositor (Incorporated herein by reference to
Exhibits 3(a) and 3(b), respectively, to the
Registration Statement of the Depositor on Form
S-1, File No. 333-37907, filed on October 14,
1997);
(7) Not Applicable;
(8)(a) Form of Participation Agreement by and between
The Alger American Fund, the Depositor, and
Fred Alger and Company, Incorporated (Filed as
Exhibit 8(a) to Post-Effective Amendment No. 13
to the Registration Statement of the Registrant
on Form N-4, File No. 33-41628, filed April 26,
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 (Filed as Exhibit 8(b)(i) to
Post-Effective Amendment No. 13 to Registrant's
Registration Statement on Form N-4, File No.
33-41628, filed April 26, 1999);
(ii) Form of Amendment No. 1 dated December 14, 1998 to
Participation Agreement filed as Exhibit 8(b)(i)
(Filed as Exhibit 8(b)(ii) to Post-Effective
Amendment No. 13 to Registrant's Registration
Statement on Form N-4, File No. 33-41628, filed
April 26, 1999);
(iii) Form of Amendment No. 2 dated as of March 15, 1999
to Participation Agreement filed as
Exhibit 8(b)(i) (Filed as Exhibit 8(b)(iii) to
Post-Effective Amendment No. 13 to Registrant's
Registration Statement on Form N-4, File No.
33-41628, filed April 26, 1999);
(c) Form of Fund Participation Agreement between
Depositor and J.P. Morgan Services Trust II
(Filed as Exhibit 8(c) to Post-Effective
Amendment No. 13 to Registrant's Registration
Statement on Form N-4, File No. 33-41628, filed
April 26, 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 (Filed as Exhibit 8(d) to Post-Effective
Amendment No. 13 to Registrant's Registration
Statement on Form N-4, File No. 33-41628, filed
April 26, 1999);
(e) Form of Participation Agreement dated February 17,
1998 by and among OCC Accumulation Trust, the
Depositor and OCC Distributors (Filed as Exhibit
8(e) to Post-Effective Amendment No. 13 to
Registrant's Registration Statement on Form N-4,
File No. 33-41628, filed April 26, 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. (Filed as Exhibit
8(f) to Post-Effective Amendment No. 13 to
Registrant's Registration Statement on Form N-4,
File No. 33-41628, filed April 26, 1999);
(g) Form of Participation Agreement dated February 17,
1998 by and among the Depositor, AIM Variable
Insurance Funds, Inc., AIM Distributors, Inc.,
and Clarendon Insurance Agency, Inc.*;
(h) Form of Participation Agreement dated August 18,
1999 by and among the Depositor, Sun Capital
Advisers Trust and Sun Capital Advisers, Inc.*;
(9) Opinion of Counsel as to the legality of the
securities being registered and Consent to its
use (Filed as Exhibit 9 to the Registration
Statement of the Registrant on Form N-4,
File No. 333-82957, filed July 15, 1999);
(10) Consent of Independent Auditors
(To be filed by Amendment);
(11) Financial Statement Schedules I and VI
(Incorporated herein by reference to the
Depositor's Form 10-K Annual Report for the
fiscal year ended December 31, 1999, filed on
________, 2000) (To be filed by Amendment);
(12) Not Applicable;
(13) Schedule for Computation of Performance
Quotations (Incorporated by reference to
Exhibit 13 to Post-Effective Amendment No. 10
to the Registration Statement of the Registrant
on Form N-4, File No. 33-41628, filed on
April 29, 1998);
(14) Not Applicable;
(15)(a) Powers of Attorney (Filed as Exhibit 15 to the
Registration Statement on Form S-6,
File No. 333-94359, filed January 10, 2000)
(b) Power of Attorney of David D. Horn*; and
(16) Organizational Chart*
* Filed herewith
<PAGE>
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Name and Principal Positions and Offices
Business Address with Depositor
---------------- --------------
Donald A. Stewart Chairman and Director
150 King Street West
Toronto, Ontario
Canada M5H 1J9
C. James Prieur President and Director
One Sun Life Executive Park
Wellesley Hills, MA 02481
James A. McNulty, III Senior Vice President
One Sun Life Executive Park and General Manager
Wellesley Hills, MA 02481 and Director
Gregory W. Gee Director
150 King Street West
Toronto, Ontario
Canada M5H 1J9
David D. Horn Director
Strong Road
New Vineyard, ME 04956
Richard B. Bailey Director
63 Atlantic Avenue
Boston, MA 02110
Angus A. MacNaughton Director
c/o Genstar Investment Corporation
555 California Street, Suite 4850
San Francisco, CA 94104
S. Caesar Raboy Director
220 Boylston Street
Boston, MA 02110
<PAGE>
Name and Principal Positions and Offices
Business Address with Depositor
---------------- --------------
Davey Scoon Vice President, Finance and
One Sun Life Executive Park Treasurer
Wellesley Hills, MA 02481
Robert P. Vrolyk Vice President and
One Sun Life Executive Park Actuary
Wellesley Hills, MA 02481
James M.A. Anderson Vice President, Investments
One Sun Life Executive Park
Wellesley Hills, MA 02481
Peter F. Demuth Vice President and Chief Counsel
One Sun Life Executive Park and Assistant Secretary
Wellesley Hills, MA 02481
Ronald J. Fernandes Vice President, Retirement
One Sun Life Executive Park Products and Services
Wellesley Hills, MA 02481
Robert K. Leach Vice President, Finance
One Copley Place and Product, RPS
Boston, MA 02116
Edward J. Ronan Vice President, Retirement
One Copley Place Products and Services
Boston, MA 02116
Ellen B. King Counsel and Secretary
One Sun Life Executive Park
Wellesley Hills, MA 02481
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
No person is directly or indirectly controlled by the Registrant. The
Registrant is a separate account of Sun Life Assurance Company of Canada
(U.S.), a wholly-owned subsidiary of Sun Life of Canada (U.S.) Holdings,
Inc., a wholly-owned subsidiary of Sun Life Assurance Company of Canada -
U.S. Operations Holdings, Inc., which is in turn a wholly-owned subsidiary of
Sun Life Assurance Company of Canada.
The organization chart of Sun Life Assurance Company of Canada is
filed herewith as Exhibit 16.
<PAGE>
None of the companies listed in Exhibit 16 is a subsidiary of the
Registrant; therefore, the only financial statements being filed are those of
Sun Life Assurance Company of Canada (U.S.).
Item 27. NUMBER OF CONTRACT OWNERS
As of January 25, 2000, 241 Futurity Accolade Contracts had been issued
by the Depositor.
Item 28. INDEMNIFICATION
Pursuant to Section 145 of the Delaware Corporation Law, Article 8 of
the By-laws of Sun Life Assurance Company of Canada (U.S.), a copy of which
was filed as Exhibit 3(b) to the Registration Statement of the Depositor on
Form S-1, File No. 33-29851, provides for the indemnification of directors,
officers and employees of Sun Life Assurance Company of Canada (U.S.).
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of Sun Life Assurance Company of Canada (U.S.) pursuant to the certificate of
incorporation, by-laws, or otherwise, Sun Life (U.S.) has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Sun Life (U.S.) of expenses incurred
or paid by a director, officer, controlling person of Sun Life (U.S.) in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, Sun Life (U.S.) will submit to a court of appropriate
jurisdiction the question whether such indemnification by them is against
public policy as expressed in the Act, unless in the opinion of their counsel
the matter has been settled by controlling precedent, and will be governed by
the final adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITERS
(a) Clarendon Insurance Agency, Inc., a wholly-owned subsidiary of Sun
Life Assurance Company of Canada (U.S.), acts as general distributor for the
Registrant, Sun Life of Canada (U.S.) Variable Accounts C, D, E, G, H and I,
Sun Life (N.Y.) Variable Accounts A, B and C, and Money Market Variable
Account, High Yield Variable Account, Capital Appreciation Variable Account,
Government Securities Variable Account, World Governments Variable Account,
Total Return Variable Account, and Managed Sectors Variable Account.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address* with Underwriter
---------------- ----------------
<S> <C>
Anne M. Georges.................... President and Director
Davey Scoon........................ Treasurer and Director
James M.A. Anderson................ Director
Ronald J. Fernandes................ Director
James A. McNulty, III.............. Director
Maura A. Murphy.................... Secretary
Roy P. Creedon..................... Assistant Secretary
Donald E. Kaufman.................. Vice President
Brian Krivitsky.................... Vice President
Cynthia M. Orcutt.................. Vice President
Laurie Lennox...................... Vice President
</TABLE>
- -------------
* The principal business address of all directors and officers of the
principal underwriter except Ms. Georges, Ms. Lennox and Messrs. Fernandes and
Krivitsky is One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481.
The principal business address of Ms. Georges, Ms. Lennox and Messrs. Fernandes
and Krivitsky is One Copley Place, Boston, Massachusetts 02116.
(a) Inapplicable.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder
are maintained, in whole or in part, by Sun Life Assurance Company of Canada
(U.S.) at its offices at One Sun Life Executive Park, Wellesley Hills,
Massachusetts 02481, and One Copley Place, Boston, Massachusetts 02116, or at
the offices of Clarendon Insurance Agency, Inc., at One Sun Life Executive Park,
Wellesley Hills, Massachusetts 02481.
Item 31. MANAGEMENT SERVICES
Not Applicable.
Item 32. UNDERTAKINGS
The registrant hereby undertakes:
(a) to file a post-effective amendment to this Registration Statement as
frequently as is necessary to ensure that the audited financial statements in
the Registration Statement are never more than 16 months old for so long as
payments under the variable annuity Contracts may be accepted;
(b) to include either (1) as part of any application to purchase a Contract
offered by the prospectus, a space that an Applicant can check to request a
Statement of Additional Information, or (2) a post card or simiilar written
communication affixed to or included in the prospectus that the Applicant can
remove to send for a Statement of Additional Information;
(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under SEC Form N-4 promptly upon
written or oral request.
(d) Representation with respect to Section 26(e)of the Investment Company
Act of 1940: Sun Life Assurance Company of Canada (U.S.) represents that the
fees and charges deducted under the Contracts, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by the insurance company.
The registrant is relying on the no-action letter issued by the Division
of Investment Management of the Securities and Exchange Commission to
American Council of Life Insurance, Ref. No. IP-6-88, dated November 28,
1988, the requirements for which have been complied with by the Registrant.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant certifies that it meets all of the requirements
of Securities Act Rule 485 for effectiveness of this Post-Effective Amendment
No. 1 to the Registration Statement and has caused this Post-Effective
Amendment to be signed on its behalf, in the Town of Wellesley Hills, and
Commonwealth of Massachusetts on this 1st day of February, 2000.
<TABLE>
<S> <C> <C>
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT F
(Registrant)
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(Depositor)
By: /s/ C. JAMES PRIEUR
----------------------------
C. James Prieur
President
</TABLE>
Attest: /s/ EDWARD M. SHEA
- --------------------------
Edward M. Shea
Assistant Vice President and Senior Counsel
As required by the Securities Act of 1933, this Registration Statement
has been signed below by the following persons in the capacities with the
Depositor, Sun Life Assurance Company of Canada (U.S.), and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ------------------------------------ --------------
<S> <C> <C>
/s/ C. JAMES PRIEUR President and Director February 1, 2000
- ------------------------------------- (Principal Executive Officer)
C. James Prieur
/s/ DAVEY SCOON Vice President, Finance February 1, 2000
- ------------------------------------- and Treasurer
Davey Scoon (Principal Financial and Accounting Officer)
* /s/ DONALD A. STEWART Chairman and Director February 1, 2000
- -------------------------------------
Donald A. Stewart
/s/ JAMES A. MCNULTY, III Senior Vice President and February 1, 2000
- ------------------------------------- General Manager and Director
James A. McNulty, III
Director
- -------------------------------------
Richard B. Bailey
</TABLE>
* By Edward M. Shea pursuant to Power of Attorney filed as Exhibit 8 to the
Registration Statement on Form S-6 (File No. 333-94359), filed January 10,
2000.
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ------------------------------------ --------------
<S> <C> <C>
* /s/ M. COLYER CRUM Director February 1, 2000
- -------------------------------------
M. Colyer Crum
** /s/ DAVID D. HORN Director February 1, 2000
- -------------------------------------
David D. Horn
* /s/ GREGORY W. GEE Director February 1, 2000
- -------------------------------------
Gregory W. Gee
* /s/ ANGUS A. MACNAUGHTON Director February 1, 2000
- -------------------------------------
Angus A. MacNaughton
*/s/ S. CAESAR RABOY Director February 1, 2000
- -------------------------------------
S. Caesar Raboy
</TABLE>
* By Edward M. Shea pursuant to Power of Attorney filed as Exhibit 8 to
Registration Statement on Form S-6 (File No. 333-94359), filed January 10,
2000.
** By Edward M. Shea pursuant to Power of Attorney filed herewith.
<PAGE>
EXHIBIT INDEX
4(d)(i) Form of Qualified Plan Endorsement
(8)(g) Form of Participation Agreement dated August 18, 1999 by and
among the Depositor, AIM Variable Insurance Funds, Inc.,
A I M Distributors, Inc., and Clarendon Insurance Agency,
Inc.
(8)(h) Form of Participation Agreement dated August 18, 1999 by and
among the Depositor, Sun Capital Advisers Trust and Sun
Capital Advisers, Inc.
(15)(b) Power of Attorney of David D. Horn
(16) Organizational Chart
<PAGE>
QUALIFIED CONTRACT ENDORSEMENT
Sun Life Assurance Company of Canada (U.S.) (the "Company") may make
the combination fixed and variable annuity contracts to which this document
relates available on both an individual and group basis. Accordingly, references
herein to the term "Contracts" shall encompass both contracts issued as
individual contracts and contracts issued as group contracts, together with the
certificates evidencing interests in such group contracts issued to
participating individuals ("Participant(s)") under the group arrangement;
similarly, references herein to "Owner" shall refer, in the case of an
individual Contract, to the person to whom such Contract was issued, and, in the
case of an individual Contract, to the person to whom such Contract was issued,
and, in the case of a group Contract, to the Participant thereunder, unless
otherwise expressly indicated. References herein to "Annuitant" shall, in all
cases, refer to the individual on whose life the Death Benefit is measured under
the provisions of the Contract. Furthermore, references to "Participant" shall,
in all cases, refer to Annuitant, unless otherwise expressly indicated.
If the Contract accompanying this document is a Qualified Contract, the
provisions contained herein shall take precedence, where relevant, over the
basic provisions of the Contract. Any of the provisions herein may be amended by
the Company, or new provisions added, from time to time, to conform a Qualified
Contract to any change in applicable law. In addition, all rights and privileges
of the Contract are further subject to, and may be limited by, the terms of the
qualified retirement plan in connection with which the Contract is issued.
A. PROVISIONS APPLICABLE TO ALL QUALIFIED CONTRACTS
1. A Qualified Contract shall not be transferable and may not be
sold, assigned, discounted or pledged as collateral for a loan or
as security for the performance of any obligation or for any
purpose transferred to any person other than the Company, the
Participant, or the trustee or custodian or other person
exercising ownership rights solely by reason of the terms of the
applicable qualified plan.
2. Distributions under the Contract shall be made in accordance with
the minimum distribution requirements of section 401(a)(9) of the
Internal Revenue Code of 1986, as amended (the "Code"), including
(other than in the case of a Contract that is intended to satisfy
the requirements of section 408A of the Code (a Roth IRA)) the
incidental death benefit requirements of section 401(a)(9)(G) of
the Code and the regulations thereunder, including the minimum
distribution incidental benefit requirement of section
1.401(a)(9)-2 of the Proposed Income Tax Regulations. This section
is intended to comply with these requirements, and shall be
construed in a manner that effectuates this intent.
a) In the case of a Contract that is intended to satisfy the
requirements of section 408 of the Code (an Individual
Retirement Annuity, Simplified Employee Pension Individual
Retirement Annuity or Simple Retirement Plan), the
Required Beginning Date is April 1 of the calendar year
following the calendar year in which the Participant
attains age 70 1/2. In the case of a Contract that is
intended to satisfy the requirements of section 408A of
the Code (a Roth IRA), there is no required beginning
date. In the case of any other Qualified Contract, the
Required Beginning Date is April 1 of the calendar year
following the later of the calendar year in which the
Participant attains age 70 1/2 or, in the case of a
Participant other than a five percent (5%) owner, the
calendar year in which the Participant retires.
b) The entire interest of the Participant must be distributed
not later than the Required Beginning Date or be
distributed, beginning not later than the Required
Beginning Date, (i) over the life of the Participant or
the lives of the Participant and the Beneficiary or (ii)
over a term certain not extending beyond the life
expectancy of the Participant and that of the Beneficiary.
Payments must be made in periodic payments at intervals of
no longer than one year. In addition, payments must be
either nonincreasing or must
1
<PAGE>
increase only as provided in Q&A F-3 of section
1.401(a)(9)-1 of the Proposed Income Tax Regulations.
c) If the Participant dies on or after distribution of his
or her interest has begun, the remaining portion, if any,
of such interest will continue to be distributed at least
as rapidly as under the method of distribution being used
before the Participant's death.
If the Participant dies before distribution of his or her
interest begins, the Participant's entire interest must be
distributed by December 31st of the calendar year
containing the fifth anniversary of the Participant's
death, except to the extent provided in i. or ii. below:
i. If the Participant has a designated Beneficiary,
the designated Beneficiary may elect to receive
payments in substantially equal installments over
the life or life expectancy of the designated
Beneficiary under a permitted settlement option
available under the Contract commencing on or
before December 31st of the calendar year
immediately following the calendar year in which
the Participant died (or such later dates as may
be authorized by the Secretary of the Treasury).
ii. If the designated Beneficiary of the Participant
is the Participant's surviving spouse, the spouse
may elect to receive equal or substantially equal
payments over the life or life expectancy of the
surviving spouse commencing at any date before the
later of (1) December 31st of the calendar year
immediately following the calendar year in which
the Participant died and (2) December 31st of the
calendar year in which the Participant would have
attained age 70 1/2. Such election must be made no
later than the earlier of December 31st of the
calendar year containing the fifth anniversary of
the Participant's death or the date distributions
are required to begin pursuant to the preceding
sentence. If the surviving spouse dies before
payments commence, subsequent payments shall be
made as if the spouse had been the Participant.
d) The term "life expectancy" means the expectation of life as
determined under individual mortality tables approved by
the Department of Treasury on the date when the first
annuity payment is due.
Life expectancies shall be calculated using the expected
return multiple Table V (single life) or Table VI (joint
and last survivor), contained in Section 1.72-9 of the
Income Tax Regulations. Unless otherwise elected by the
Participant (or his or her spouse, in the case of
distributions commencing after the Participant's death) by
the time distributions are required to begin, the life
expectancies of the Participant and his or her spouse
shall be recalculated annually. Such election shall be
irrevocable and shall apply to all subsequent years.
The life expectancy of a non-spouse Beneficiary may not be
recalculated. Instead, if the Participant's life
expectancy is being recalculated, the Beneficiary's life
expectancy will be calculated using the attained age of
such Beneficiary as of such Beneficiary's birthday during
the calendar year in which the Participant attains age
70 1/2, and payments for subsequent years shall be
calculated based on such life expectancy reduced by one for
each calendar year which has elapsed since the calendar year
that such Beneficiary's life expectancy was first
calculated.
e) Distributions under this section 2. are considered to have
begun if distributions are made on account of the
Participant reaching his or her required beginning date or
before the required beginning date distributions
irrevocably commence to the Participant over a period
permitted and in an annuity form acceptable under Section
1.401(a)(9)-1 of the Proposed Income Tax Regulations.
2
<PAGE>
3. The Settlement Options are hereby amended as follows:
a) Any payments under Annuity Option A shall be measured only by
the life of the Participant.
b) Any payments under Annuity Option B or Annuity Option D shall
be made only to the Participant and, upon the Participant's
death, to the Beneficiary; and the guaranteed period cannot
extend beyond the life expectancy of the Participant and that
of the Beneficiary.
c) Any payments under Annuity Option C shall be made only to the
Participant and, upon the Participant's death, to the
designated second person.
B. PROVISIONS APPLICABLE SOLELY TO CONTRACTS ISSUED IN CONNECTION WITH A
PLAN THAT IS INTENDED TO SATISFY THE REQUIREMENTS OF SECTION 401(A) OR
403(A) OF THE CODE (INCLUDING QUALIFIED PLANS COMMONLY REFERRED TO AS
"401(K) PLANS," "H.R. 10 PLANS," OR "KEOGH PLANS")
1. The Participant shall be the applicable participant under the
plan and the Owner of the Contract shall be the trustee or
custodian of the plan (or, in the case of a Contract that is
intended to meet the requirements of section 403(a) of the Code,
the employer or Participant).
2. If the death of the Participant occurs before the Annuity
Commencement Date, the Company shall pay the death benefit
directly to the trustee or such other person exercising ownership
rights, or as otherwise directed by such trustee or other person.
3. To the fullest extent permitted by law, none of the benefits,
payments or proceeds of the Contract shall be subject to any
claim or legal process by a creditor of any Participant or of a
Beneficiary, or in any way alienated, commuted or assigned.
4. If the applicable qualified plan is subject to the requirements
of section 401(a)(11) of the Code (joint and survivor annuity and
preretirement survivor annuity), unless the trustee or custodian
or the plan administrator directs the Company to provide an
annuity under such other settlement option as may be agreed to by
the Company, the settlement option for annuity payments shall be
Annuity Option C, with the survivor benefit to be fifty percent
(50%) of the joint-life annuity payment. In any event, the
Company shall be entitled to rely on the elections and spousal
consents provided to it in determining Beneficiaries, benefits
and values under this Contract.
5. Any refund of Purchase Payments (other than those attributable to
excess contributions) will be applied, before the close of the
calendar year following the year of the refund, toward the
payment of future Purchase Payments or the purchase of additional
benefits.
3
<PAGE>
C. PROVISIONS APPLICABLE SOLELY TO ANNUITIES THAT ARE INTENDED TO
SATISFY THE REQUIREMENTS OF SECTION 403(B) OF THE CODE (TAX-DEFERRED
ANNUITY CONTRACTS)
1. The Participant shall be the applicable participant under the
arrangement. The Owner shall be the Participant in the case of an
individual Contract and the employer in the case of a group
Contract.
2. The Participant's entire interest in the Contract is
nonforfeitable, except for failure to pay future Purchase
Payments.
3. Purchase Payments on behalf of any individual for a calendar year
that are made pursuant to a salary reduction agreement shall not
exceed $7,000 or the then applicable limitation under section
402(g) of the Code.
4. If a Participant or Beneficiary informs the Company in writing
that the Participant or Beneficiary has received from another
tax-deferred annuity a distribution that satisfies, in whole or
in part, the minimum distribution requirements of section
401(a)(9) of the Code with respect to this Contract, the Company
shall treat such distribution as satisfying, in whole or in part
(whichever is applicable), the provisions of this Contract
implementing those requirements. The preceding sentence shall
apply only to the extent permitted by applicable law, and shall
apply only to a Participant or Beneficiary who has not begun to
receive annuity payments under an Annuity Option.
5. Distributions attributable to Purchase Payments made pursuant to
a salary reduction agreement may be made only as the result of
the Participant's attaining age 59 1/2, separation from service,
death, disability (as defined in section 72(m)(7) of the Code) or
in the case of hardship (but no income attributable to such
Purchase Payments may be distributed in the case of a hardship
distribution).
6. If a Participant, surviving spouse or alternate payee named in a
qualified domestic relations order is entitled to receive an
"eligible rollover distribution" (within the meaning of Section
402(c)(4) of the Code) under the Contract, at the election of the
recipient a direct rollover of the taxable portion of the
distribution shall be made to another tax-deferred annuity or an
individual retirement account or annuity that is an "eligible
retirement plan" with respect to the Contract (within the meaning
of Section 401(a)(31)(D) of the Code).
D. PROVISIONS APPLICABLE SOLELY TO ANNUITIES THAT ARE INTENDED TO SATISFY
THE REQUIREMENTS OF SECTION 408 OR SECTION 408A OF THE CODE (IRAs, SEP
IRAs, SIMPLE RETIREMENT PLANS, AND ROTH IRAs)
1. The Participant shall be the applicable participant under the
plan.
2. The Contract is established for the exclusive benefit of the
Participant and their beneficiaries, and in the case of a group
Contract the benefit allocable to each Participant shall be
accounted for separately.
3. The Participant's entire interest in the Contract is
nonforfeitable.
4. No Purchase Payment will be accepted unless it is in cash.
5. In the case of a Contract that is intended to satisfy the
requirements of section 408(b) or 408A of the Code (an Individual
Retirement Annuity or Roth IRA), the annual Purchase Payments on
behalf of any Participant shall not exceed $2,000 or the then
applicable limitation for the Participant under section 408(b) or
408A. The preceding sentence shall not apply in the case of a
rollover contribution described in section 402(c), 403(a)(4),
403(b)(8), 408(d)(3), or
4
<PAGE>
408A(c)(6) of the Code. Any commission paid by the Participant to
an insurance agent to purchase the Contract is treated as a
Purchase Payment for purposes of the $2,000 limitation.
In the case of a Contract that is intended to satisfy the
requirements of section 408(k) of the Code (a Simplified Employee
Pension Individual Retirement Annuity), the $2,000 limitation
shall be increased to $30,000 or the then applicable limitation
under section 408(k) of the Code, but the only contributions
accepted shall be contributions under the Simplified Employee
Pension plan and rollovers or transfers from another Simplified
Employee Pension Individual Retirement Account or Annuity. In the
case of a Contract that is intended to satisfy the requirements
of section 408(p) of the Code (a Simple Retirement Plan), the
$2,000 limitation shall be increased to the sum of $6,000 or the
then applicable limitation under section 408(p) of the Code and
the employer contributions required under that section, but the
only contributions accepted shall be contributions under the
Simple Retirement Plan and rollovers or transfers from another
Simple Retirement Plan.
6. The initial Purchase Payment under the Contract must be equal to
at least the applicable minimum amount required under the
Contract, and each subsequent Purchase Payment must also equal
the minimum amount established under the Contract for subsequent
payments. Thus, a contribution that does not meet the established
minimum thresholds because of applicable tax law limits may not
be accepted as a Purchase Payment.
7. Any refund of Purchase Payments (other than those attributable to
excess contributions) will be applied, before the close of the
calendar year following the year of the refund, toward the
payment of future Purchase Payments or the purchase of additional
benefits.
8. If a Contract is intended to qualify as an individual retirement
annuity, and the Participant or Beneficiary informs the Company
in writing that the Participant or Beneficiary has received from
another individual retirement account or individual retirement
annuity a distribution that satisfies, in whole or in part, the
minimum distribution requirements of section 401(a)(9) of the
Code with respect to the Contract, the Company shall treat such
distribution as satisfying, in whole or in part (whichever is
applicable), the provisions of the Contract implementing those
requirements. Similarly, if a Contract is intended to qualify as
a Roth IRA, and the Participant or Beneficiary informs the
Company in writing that the Participant or Beneficiary has
received from another Roth IRA a distribution that satisfies, in
whole or in part, the minimum distribution requirements of
section 401(a)(9) of the Code with respect to the Contract, the
Company shall treat such distribution as satisfying, in whole or
in part, (whichever is applicable), the provisions of the
Contract implementing those requirements. This paragraph shall
apply only to the extent permitted by applicable law, and shall
apply only to a Participant or Beneficiary who has not begun to
receive annuity payments under an Annuity Option.
9. No prohibition shall be imposed on withdrawals from a Contract
that is intended to satisfy the requirements of section 408(k) of
the Code (a Simplified Employee Pension Individual Retirement
Annuity).
10. If the Company serves as a designated financial institution
within the meaning of section 408(p)(7) of the Code, a
Participant may elect during the 60-day election period in
section 408(p)(5)(C) of the Code to transfer all contributions
made on his or her behalf during the subsequent calendar year and
all future calendar years to another individual retirement
account or annuity without cost or penalty in accordance with
section 408(d)(3)(G).
11. The Participant agrees to provide the Company with information
necessary for the Company to prepare any reports required under
sections 408(i), 408(I), and 408A(e)(3)(E) of the Code and
section 1.408-5 and 1.408-6 of the Income Tax Regulations.
5
<PAGE>
12. The term "qualified plan" when used herein or in the Contract
shall be deemed to include a Roth IRA.
E. PROVISIONS APPLICABLE SOLELY TO CONTRACTS HELD BY GOVERNMENTAL
EMPLOYERS THAT ARE INTENDED TO SATISFY THE REQUIREMENTS OF SECTION
457(G) OF THE CODE
1. The Participant shall be the applicable participant under the
plan and the Owner of the Contract shall be the trustee or
custodian of the plan (if any) or the employer.
2. If the death of the Participant occurs before the Annuity
Commencement Date, the Company shall pay the death benefit
directly to the trustee or such other person exercising ownership
rights, or as otherwise directed by such trustee or other person.
F. PROVISIONS APPLICABLE SOLELY TO TERMINAL FUNDING ANNUITIES
1. The Participant shall be the applicable participant under the
plan. The Owner of the group Contract shall be the trustee or
custodian of the plan, or the employer or Participant if the
Contract is intended to meet the requirements of section 403(a)
of the Code, or the Participant if the Contract has been
distributed to the Participant.
2. If the death of the Participant occurs before the Annuity
Commencement Date, the Company shall pay the death benefit
directly to the trustee or such other person exercising ownership
rights, or as otherwise directed by such trustee or other person.
3. The Participant's entire interest in the Contract is
nonforfeitable.
4. To the fullest extent permitted by law, none of the benefits,
payments or proceeds of the Contract shall be subject to any
claim or legal process by a creditor of any Participant or of a
Beneficiary, or in any way alienated, commuted or assigned.
5. If the applicable qualified retirement plan is subject to the
requirements of section 401(a)(11) of the Code (joint and
survivor annuity and preretirement survivor annuity), unless the
trustee or custodian or the plan administrator directs the
Company to provide an annuity under such other settlement option
as may be agreed to by the Company, the settlement option for
annuity payments shall be Annuity Option C, with the survivor
benefit to be fifty percent (50%) of the joint-life annuity
payment. Notwithstanding the preceding sentence, the Company
shall be entitled to rely on the elections and spousal consents
provided to it in determining benefits and values under this
Contract.
6. The Company shall provide such other settlement options as may be
agreed to by the Company in order for the Contract to comply with
the requirements of section 411 of the Code (accrual and vesting
requirements).
7. If a withdrawal is taken, redeposits will not be permitted.
6
<PAGE>
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
AIM DISTRIBUTORS, INC.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.),
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
CLARENDON INSURANCE AGENCY, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
DESCRIPTION PAGE
- ----------- ----
<S> <C>
Section 1. Available Funds..............................................2
1.1 Availability.............................................2
1.2 Addition, Deletion or Modification of Funds..............2
1.3 No Sales to the General Public...........................2
Section 2. Processing Transactions......................................2
2.1 Timely Pricing and Orders................................2
2.2 Timely Payments..........................................3
2.3 Applicable Price.........................................3
2.4 Dividends and Distributions..............................4
2.5 Book Entry...............................................4
Section 3. Costs and Expenses...........................................4
3.1 General..................................................4
3.2 Parties To Cooperate.....................................4
Section 4. Legal Compliance.............................................4
4.1 Tax Laws.................................................4
4.2 Insurance and Certain Other Laws.........................7
4.3 Securities Laws..........................................7
4.4 Notice of Certain Proceedings and Other Circumstances....9
4.5 Sun Life To Provide Documents; Information About AVIF....9
4.6 AVIF To Provide Documents; Information About Sun Life...10
Section 5. Mixed and Shared Funding....................................11
5.1 General.................................................11
5.2 Disinterested Directors.................................12
5.3 Monitoring for Material Irreconcilable Conflicts........12
5.4 Conflict Remedies.......................................13
5.5 Notice to Sun Life......................................14
5.6 Information Requested by Board of Directors.............14
5.7 Compliance with SEC Rules...............................14
5.8 Other Requirements......................................14
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION PAGE
- ----------- ----
<S> <C> <C> <C>
Section 6. Termination.................................................15
6.1 Events of Termination...................................15
6.2 Notice Requirement for Termination......................16
6.3 Funds To Remain Available...............................17
6.4 Survival of Warranties and Indemnifications.............17
6.5 Continuance of Agreement for Certain Purposes...........17
Section 7. Parties To Cooperate Respecting Termination.................17
Section 8. Assignment..................................................17
Section 9. Notices.....................................................18
Section 10. Voting Procedures..........................................18
Section 11. Foreign Tax Credits........................................19
Section 12. Indemnification............................................19
12.1 Of AVIF and AIM by Sun Life and Clarendon...............19
12.2 Of Sun Life and Clarendon by AVIF and AIM...............21
12.3 Effect of Notice........................................23
12.4 Successors..............................................24
Section 13. Applicable Law.............................................24
Section 14. Execution in Counterparts..................................24
Section 15. Severability...............................................24
Section 16. Rights Cumulative..........................................24
Section 17. Headings...................................................24
Section 18. Confidentiality............................................24
Section 19. Trademarks and Fund Names..................................25
Section 20. Parties to Cooperate.......................................26
Section 21. Access to Information by Sun Life..........................26
</TABLE>
ii
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 17th day of February,
1998 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a
Maryland corporation ("AVIF"); AIM Distributors, Inc., a Delaware corporation
("AIM"); Sun Life Assurance Company of Canada (U.S.), a Delaware life
insurance company ("Sun Life"), on behalf of itself and each of its
segregated asset accounts listed in Schedule A hereto, as the parties hereto
may amend from time to time (each, an "Account," and collectively, the
"Accounts"); and Clarendon Insurance Agency, Inc. ("Clarendon"), a
Massachusetts corporation, a subsidiary of Sun Life and the principal
underwriter of the Contracts (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of nine separate series ("Series"),
shares ("Shares") of each of which are registered under the Securities Act of
1933, as amended (the "1933 Act") and are currently sold to one or more
separate accounts of life insurance companies to fund benefits under variable
annuity contracts and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A
hereto as the Parties hereto may amend from time to time (each a "Fund";
reference herein to "AVIF" includes reference to each Fund, to the extent the
context requires) available for purchase by the Accounts; and
WHEREAS, Sun Life will be the issuer of certain variable annuity
contracts ("Contracts") as set forth on Schedule A hereto, as the Parties
hereto may amend from time to time, which Contracts (hereinafter collectively,
the "Contracts"), if required by applicable law, will be registered under the
1933 Act; and
WHEREAS, Sun Life will fund the Contracts through the Accounts, each of
which may be divided into two or more subaccounts ("Subaccounts"; reference
herein to an "Account" includes reference to each Subaccount thereof to the
extent the context requires); and
WHEREAS, Sun Life will serve as the depositor of the Accounts, each of
which is registered as a unit investment trust investment company under the
1940 Act (or exempt therefrom), and the security interests deemed to be
issued by the Accounts under the Contracts will be registered as securities
under the 1933 Act (or exempt therefrom); and
1
<PAGE>
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, Sun Life intends to purchase Shares of one or more of the Funds
on behalf of the Accounts to fund the Contracts; and
WHEREAS, Clarendon is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
AVIF will make Shares of each Fund available to Sun Life for purchase
and redemption at net asset value and with no sales charges, subject to the
terms and conditions of this Agreement. The Board of Directors of AVIF may
refuse to sell Shares of any Fund to any person, or suspend or terminate the
offering of Shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of
the Directors acting in good faith and in light of their fiduciary duties
under federal and any applicable state laws, such action is deemed in the
best interests of the shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein
shall include a reference to any such additional Fund. Schedule A, as amended
from time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
AVIF represents and warrants that no Shares of any Fund have been or
will be sold to the general public.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its designated agent will use its best efforts to provide Sun
Life with the net asset value per Share for each Fund by 5:30 p.m. Central
Time on each Business Day. As used herein, "Business Day" shall mean any day
on which (i) the New York Stock Exchange is open for
2
<PAGE>
regular trading, (ii) AVIF calculates the Fund's net asset value, and (iii)
Sun Life is open for business.
(b) Sun Life will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit values
and to process transactions that receive that same Business Day's Account
unit values. Sun Life will perform such Account processing the same Business
Day, and will place corresponding orders to purchase or redeem Shares with
AVIF by 9:00 a.m. Central Time the following Business Day; PROVIDED, however,
that AVIF shall provide additional time to Sun Life in the event that AVIF is
unable to meet the 5:30 p.m. Central Time stated in paragraph (a) immediately
above. Such additional time shall be equal to the additional time that AVIF
takes to make the net asset values available to Sun Life.
(c) With respect to payment of the purchase price by Sun Life and of
redemption proceeds by AVIF, Sun Life and AVIF shall net purchase and
redemption orders with respect to each Fund and shall transmit one net
payment per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines), Sun Life shall be entitled
to an adjustment to the number of Shares purchased or redeemed to reflect the
correct net asset value per Share. Any material error in the calculation of
reporting of net asset value per Share, dividend or capital gain information
shall be reported promptly upon discovery to Sun Life.
2.2 TIMELY PAYMENTS.
Sun Life will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m. Central Time on the same day as the order
for Shares is placed, to the extent practicable. AVIF will wire payment for
net redemptions to an account designated by Sun Life by 1:00 p.m Central Time
on the same day as the Order is placed, to the extent practicable, but in any
event within five (5) calendar days after the date the order is placed in
order to enable Sun Life to pay redemption proceeds within the time specified
in Section 22(e) of the 1940 Act or such shorter period of time as may be
required by law.
2.3 APPLICABLE PRICE.
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions under
Contracts (collectively, "Contract transactions") and that Sun Life receives
prior to the close of regular trading on the New York Stock Exchange on a
Business Day will be executed at the net asset values of the appropriate
Funds next computed after receipt by AVIF or its designated agent of the
orders. For purposes of this Section 2.3(a), Sun Life shall be the designated
agent of AVIF for receipt of orders relating to Contract transactions on each
Business Day and receipt by such designated agent shall constitute receipt by
AVIF; PROVIDED that AVIF receives notice of such orders by 9:00 a.m. Central
Time on the next following Business Day or such later time as computed in
accordance with Section 2.1(b) hereof. AVIF will acknowledge and verify
receipt of such orders by 12:00 p.m. Central Time on each business day on
which orders are received.
3
<PAGE>
(b) All other Share purchases and redemptions by Sun Life will be
effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such
orders will be irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
AVIF will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to Sun Life of any income
dividends or capital gain distributions payable on the shares of any Fund.
Sun Life hereby elects to reinvest all dividends and capital gains
distributions in additional Shares of the corresponding Fund at the
ex-dividend date net asset values until Sun Life otherwise notifies
AVIF in writing, it being agreed by the Parties that the ex-dividend date and
the payment date with respect to any dividend or distribution will be the
same Business Day. Sun Life reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash.
2.5 BOOK ENTRY.
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to Sun Life. Shares ordered from AVIF will be
recorded in an appropriate title for Sun Life, on behalf of its Account, as
directed by Sun Life.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided in Schedule C, attached hereto
and made a part hereof, each Party will bear all expenses incident to its
performance under this Agreement.
3.2 PARTIES TO COOPERATE.
Each party agrees to cooperate with the others, as applicable, in
arranging to print, mail and/or deliver, in a timely manner, combined or
coordinated prospectuses or other materials of AVIF and the Accounts. Except
as otherwise specifically provided herein, each Party will bear all expenses
incident to its performance under this Agreement.
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) AVIF represents and warrants that each Fund currently qualified as a
regulated investment company ("RIC") under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and represents that it will
qualify and maintain qualification of each Fund as a RIC.
4
<PAGE>
AVIF will notify Sun Life immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might not so
qualify in the future.
(b) AVIF represents that it will comply and maintain each Fund's
compliance with the diversification requirements set forth in Section 817(h)
of the Code and Section 1.817-5(b) of the regulations under the Code. AVIF
will notify Sun Life immediately upon having a reasonable basis for believing
that a Fund has ceased to so comply or that a Fund might not so comply in the
future. In the event of a breach of this Section 4.1(b) by AVIF, it will
take all reasonable steps to adequately diversify the Fund so as to achieve
compliance within the grace period afforded by Section 1.817-5 of the
regulations under the Code.
(c) Notwithstanding Section 12.2 of this Agreement, Sun Life agrees that
if the Internal Revenue Service ("IRS") asserts in writing in connection
with any governmental audit or review of Sun Life or, to Sun Life's
knowledge, of any Participant, that any Fund has failed to comply with the
diversification requirements of Subchapter M or Section 817(h) of the Code or
Sun Life otherwise becomes aware of any facts that could give rise to any
claim against AVIF or its affiliates as a result of such a failure or alleged
failure:
(i) Sun Life shall promptly notify AVIF of such assertion or
potential claim (subject to the confidentiality provisions of
Section 18 as to any Participant);
(ii) Sun Life shall consult with AVIF as to how minimize any
liability that may arise as a result of such failure or
alleged failure;
(iii) Sun Life shall, in good faith and to the extent not
inconsistent with its fiduciary duties to its Contract
owners, use its best efforts to minimize any liability of AVIF
or its affiliates resulting from such failure, including,
without limitation, demonstrating, pursuant to Treasury
Regulations Section 1.817-5(a)(2), to the Commissioner of the
IRS that such failure was inadvertent;
(iv) Sun Life shall permit AVIF, its affiliates and their legal
and accounting advisors to participate, at their sole
expense, in any conferences, settlement discussions or other
administrative or judicial proceeding or contests (including
judicial appeals thereof) with the IRS, any Participant or
any other claimant regarding any claims that could give rise
to liability to AVIF or its affiliates as a result of such a
failure or alleged failure; PROVIDED, however, that Sun Life
will retain control of the conduct of such conferences,
discussions, proceedings, contests or appeals;
(v) any written materials to be submitted by Sun Life to the IRS,
any Participant or any other claimant in connection with any
of the foregoing proceedings or contests (including, without
limitation, any such materials to be submitted to the IRS
pursuant to Treasury Regulations Section 1.817-5(a)(2), (a)
shall be provided by Sun Life to AVIF (together with any
supporting information or analysis); subject to the
confidentiality provisions of Section 18, at least ten
5
<PAGE>
(10) business days or such shorter period to which the
Parties hereto agree prior to the day on which such proposed
materials are to be submitted, and (b) shall not be submitted
by Sun Life to any such person without the express written
consent of AVIF which shall not be unreasonably withheld;
PROVIDED, that in any event, each Party shall use its best
efforts to make, as promptly as possible, the submissions to
the Commissioner of the IRS contemplated by paragraph
(c)(iii) above;
(vi) Sun Life shall provide AVIF or its affiliates and their
accounting and legal advisors with such cooperation as AVIF
shall reasonably request (including, without limitation, by
permitting AVIF and its accounting and legal advisors to
review the relevant books and records of Sun Life) in order to
facilitate review by AVIF or its advisors of any written
submissions provided to it pursuant to the preceding clause
or its assessment of the validity or amount of any claim
against its arising from such a failure or alleged failure.
(vii) Sun Life shall not with respect to any claim of the IRS or
any Participant that would give rise to a claim against
AVIF or its affiliates (a) compromise or settle any claim,
(b) accept any adjustment on audit, or (c) forego any
allowable administrative or judicial appeals, without the
express written consent of AVIF or its affiliates, which
shall not be unreasonably withheld, PROVIDED, that after
exhausting all administrative remedies, in the event of an
adverse judicial decision, Sun Life shall either (a) appeal
such decision, PROVIDED, that to the extent requested by Sun
Life, AVIF or its affiliates provides an opinion of
independent counsel to the effect that a reasonable basis
exists for taking such appeal, in which case the costs of
such appeal shall be borne equally by the Parties hereto,
or (b) permit AVIF and its affiliates to act in the name of
Sun Life and to control the conduct of such appeal pursuant
to the last paragraph of this Section 4.1(c), in which case
the costs of such appeal shall be borne by AVIF or its
affiliates pursuant to that paragraph; and
(viii) AVIF and its affiliates shall have no liability as a result
of such failure or alleged failure if Sun Life fails to
comply with any of the foregoing clauses (i) through (vii),
and such failure could be shown to have materially
contributed to the liability.
Should AVIF or any of its affiliates refuse to give its written consent
to any compromise or settlement of any claim or liability hereunder, Sun life
may, in its discretion, authorize AVIF or its affiliates to act in the name
of Sun Life in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative or judicial appeals
thereof, and in that event AVIF or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so
authorized to control; PROVIDED, that in no event shall Sun life have any
liability resulting from AVIF's refusal to accept the proposed settlement or
compromise with respect to any failure to comply with the requirements of
Subchapter M or Section 817(h) of the Code
6
<PAGE>
caused by AVIF. As used in this Agreement, the term "affiliates" shall have
the same meaning as "affiliated person" as defined in Section 2(a)(3) of the
1940 Act.
(d) AVIF agrees to cooperate with Sun Life with respect to the matters
described in paragraphs (c)(i) through (vii) above. AVIF further agrees that
it shall provide or cause to be provided to Sun Life, on a quarterly basis,
written confirmation of each Fund's compliance with the diversification
requirements of Subchapter M and Section 817(h) of the Code.
(e) Sun Life represents and warrants that the Contracts currently are
and will be treated as annuity contracts or life insurance contracts under
applicable provisions of the Code and that it will maintain such treatment;
Sun Life will notify AVIF immediately upon having a reasonable basis for
believing that any of the Contracts have ceased to be so treated or that they
might not be so treated in the future.
(f) Sun Life represents and warrants that each Account is a "segregated
asset account" and that interests in each Account are offered exclusively
through the purchase of or transfer into a "variable contract," within the
meaning or such terms under Section 817 of the Code and the regulations
thereunder. Sun Life will continue to meet such definitional requirements,
and it will notify AVIF immediately upon having a reasonable basis for
believing that such requirements have ceased to be met or that they might not
be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) AVIF will use its best efforts to comply with any applicable state
insurance laws or regulations, to the extent specifically requested by Sun
Life, including, the furnishing of information not otherwise available to Sun
Life which is required by state insurance law to enable Sun Life to obtain
the authority needed to issue the Contracts in any applicable state.
(b) Sun Life represents and warrants that (i) it is an insurance company
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power, authority and legal right to
execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains
each Account as a segregated asset account under Delaware law and the
regulations thereunder, and (iii) the Contracts comply in all material
respects with all other applicable federal and state laws and regulations.
(c) AVIF represents and warrants that it is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Maryland and has full power, authority, and legal right to execute,
deliver, and perform its duties and comply with its obligations under this
Agreement.
4.3 SECURITIES LAWS.
(a) Sun Life represents and warrants that (i) interests in each Account
pursuant to the Contracts will be registered under the 1933 Act to the extent
required by the 1933 Act, (ii) the
7
<PAGE>
Contracts will be duly authorized for issuance and sold in compliance with
all applicable federal and state laws, including, without limitation, the
1933 Act, the 1934 Act, the 1940 Act and Delaware law, (iii) each Account is
and will remain registered under the 1940 Act, to the extent required by the
1940 act, (iv) each Account does and will comply in all material respects
with the requirements of the 1940 Act and the rules thereunder, to the extent
required, (v) each Account's 1933 Act registration statement relating to the
Contracts, together with any amendments thereto, will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder, (vi) Sun Life will amend the registration statement for its
Contracts under the 1933 Act and for its Accounts under the 1940 Act from
time to time as required in order to effect the continuous offering of its
Contracts or as may otherwise be required by applicable law, and (vii) each
Account Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to this
Agreement will be registered under the 1933 Act to the extent required by the
1933 Act and duly authorized for issuance and sold in compliance with
Maryland law, (ii) AVIF is and will remain registered under the 1940 Act to
the extent required by the 1940 Act, (iii) AVIF will amend the registration
statement for its Shares under the 1933 Act and itself under the 1940 Act
from time to time as required in order to effect the continuous offering of
its Shares, (iv) AVIF does and will comply in all material respects with the
requirements of the 1940 Act and the rules thereunder, (v) AVIF's 1933 Act
registration statement, together with any amendments thereto, will at all
times comply in all material respects with the requirements of the 1933 Act
and rules thereunder, and (vi) AVIF's Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale in
accordance with the laws of any state or other jurisdiction if and to the
extent reasonably deemed advisable by AVIF.
(d) AVIF currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule
12b-1, AVIF undertakes to have its Board of Directors, a majority of whom are
not "interested" persons of the Fund, formulate and approve any plan under
Rule 12b-1 to finance distribution expenses.
(e) AVIF represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access
to the funds and/or securities of the Fund are and continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit
of the Fund in an amount not less than the minimal coverage as required
currently by Rule 17g-(1) of the 1940 Act or related provisions as may be
promulgated from time to time. The aforesaid bond includes coverage for
larceny and embezzlement and is issued by a reputable bonding company.
8
<PAGE>
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) AFIF will immediately notify Sun Life of (i) the issuance by any
court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to AVIF's registration statement under the 1933
Act or AVIF Prospectus, (ii) any request by the SEC for any amendment to such
registration statement or AVIF Prospectus that may affect the offering of
Shares of AVIF, (iii) the initiation of any proceedings for that purpose or
for any other purpose relating to the registration or offering of AVIF's
Shares, or (iv) any other action or circumstances that may prevent the lawful
offer or sale of Shares of any Fund in any state or jurisdiction, including,
without limitation, any circumstances in which (a) such Shares are not
registered and, in all material respects, issued and sold in accordance with
applicable state and federal law, or (b) such law precludes the use of such
Shares as an underlying investment medium of the Contracts issued or to be
issued by Sun Life. AVIF will make every reasonable effort to prevent the
issuance, with respect to any Fund, of any such stop order, cease and desist
order or similar order and, if any such order is issued, to obtain the
lifting thereof at the earliest possible time.
(b) Sun Life will immediately notify AVIF of (i) the issuance by any
court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to each Account's registration statement under the
1933 Act relating to the Contracts or each Account Prospectus, (ii) any
request by the SEC for any amendment to such registration statement or
Account Prospectus that may affect the offering of Shares of AVIF, (iii) the
initiation of any proceedings for that purpose or for any other purpose
relating to the registration or offering of each Account's interests pursuant
to the Contracts, or (iv) any other action or circumstances that may prevent
the lawful offer or sale of said interests in any state or jurisdiction,
including, without limitation, any circumstances in which said interests
are not registered and, in all material respects, issued and sold in
accordance with applicable state and federal law. Sun Life will make every
reasonable effort to prevent the issuance of any such stop order, cease and
desist or similar order and, if any such order is issued, to obtain the
lifting thereof at the earliest possible time.
4.5 SUN LIFE TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF.
(a) Sun Life will provide to AVIF or its designated agent at least one
(1) complete copy of all SEC registration statements, Account Prospectuses,
reports, any preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to each Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) Sun Life will provide to AVIF or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which AVIF or any of its affiliates is named, at least ten (10)
Business Days prior to its use or such shorter period as the Parties hereto
may, from time to time, agree upon. No such material shall be used if AVIF or
its designated agent objects to such use within ten (10) Business Days after
receipt of such material or such shorter period as the Parties hereto may,
from time to time, agree upon. AVIF hereby designates AIM as the entity to
receive such sales literature, until such time as AVIF appoints another
designated agent by giving notice to Sun Life in the manner required by
Section 9 hereof.
9
<PAGE>
(c) Neither Sun Life nor any of its affiliates, will give any
information or make any representations or statements on behalf of or
concerning AVIF or its affiliates in connection with the sale of the
Contracts other than (i) the information or representations contained in the
registration statement, including the AVIF Prospectus contained therein,
relating to Shares, as such registration statement and AVIF Prospectus may be
amended from time to time; or (ii) in reports or proxy materials for AVIF; or
(iii) in published reports for AVIF that are in the public domain and
approved by AVIF for distribution; or (iv) in sales literature or other
promotional material approved by AVIF, except with the express written
permission of AVIF.
(d) Sun Life shall adopt and implement procedures reasonably designed
to ensure that information concerning AVIF and its affiliates that is intended
for use only by brokers or agents selling the Contracts (I.E., information
that is not intended for distribution to Participants) ("broker only
materials") is so used, and neither AVIF nor any of its affiliates shall be
liable for any losses, damages or expenses relating to the improper use of
such broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature
or other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media, (E.G., on-line networks such as the Internet or other
electronic messages), sales literature (I.E., any written communication
distributed or made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form letters,
seminar texts, reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all agents
or employees, registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials and any other material
constituting sales literature or advertising under the NASD rules, the 1933
Act or the 1940 Act.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT SUN LIFE.
(a) AVIF will provide to Sun Life at least one (1) complete copy of all
SEC registration statements, AVIF Prospectuses, statements of additional
information reports, any preliminary and final proxy material, applications
for exemptions, exemptive orders, requests for no-action letters, and all
amendments to any of the above, that relate to AVIF or the Shares of a Fund,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) AVIF will provide to Sun Life or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which Sun Life, or any of its respective affiliates is named, or
that refers to the Contracts, at least ten (10) Business Days prior to its
use or such shorter period as the Parties hereto may, from time to time,
agree upon. No such material shall be used if Sun Life or its designated
agent objects to such use within ten (10) Business Days after receipt of such
material or such shorter period as the Parties hereto may, from time to time,
agree upon. Sun Life shall receive all such sales literature until such time
as it appoints a designated agent by giving notice to AVIF in the manner
required by Section 9 hereof.
10
<PAGE>
(c) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning Sun Life,
each Account, or the Contracts other than (i) the information or
representations contained in the registration statement, including each
Account Prospectus contained therein, relating to the Contracts, as such
registration statement and Account Prospectus may be amended from time to
time; or (ii) in published reports for the Account or the Contracts that are
in the public domain and approved by Sun Life for distribution; or (iii) in
sales literature or other promotional material approved by Sun Life or its
Affiliates, except with the express written permission of Sun Life.
(d) AVIF shall cause its principal underwriter to adopt and implement
procedures reasonably designed to ensure that information concerning Sun
Life, and its respective affiliates that is intended for use only by brokers
or agents selling the Contracts (I.E., information that is not intended for
distribution to Participants) ("broker only materials") is so used, and
neither Sun Life, nor any of its respective affiliates shall be liable for
any losses, damages or expenses relating to the improper use of such broker
only materials.
(e) For purposes of this Section 4.6, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine,
or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public
media, (E.G., on-line networks such as the Internet or other electronic
messages), sales literature (I.E., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or
published article)), educational or training materials or other
communications distributed or made generally available to some or all agents
or employees, registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials and any other material
constituting sales literature or advertising under the NASD rules, the 1933
Act or the 1940 Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
The SEC has granted an order to AVIF exempting it from certain
provisions of the 1940 Act and rules thereunder so that AVIF may be available
for investment by certain other entities, including, without limitation,
separate accounts funding variable annuity contracts or variable life
insurance contracts, separate accounts of insurance companies unaffiliated
with Sun Life, and trustees of qualified pension and retirement plans
(collectively, "Mixed and Shared Funding"). The Parties recognize that the
SEC has imposed terms and conditions for such orders that are substantially
identical to many of the provisions of this Section 5. Sections 5.2 through
5.8 below shall apply pursuant to such an exemptive order granted to AVIF.
AVIF hereby notifies Sun Life that, in the event that AVIF implements Mixed
and Shared Funding, it may be appropriate to include in the prospectus
pursuant to which a Contract is offered disclosure regarding the potential
risks of Mixed and Shared Funding.
11
<PAGE>
5.2 DISINTERESTED DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not
interested persons of AVIF within the meaning of Section 2(a)(19) of the 1940
Act and the Rules thereunder and as modified by any applicable orders of the
SEC, except that if this condition is not met by reason of the death,
disqualification, or bona fide resignation of any director, then the
operation of this condition shall be suspended (a) for a period of forty-five
(45) days if the vacancy or vacancies may be filled by the Board; (b) for a
period of sixty (60) days if a vote of shareholders is required to fill the
vacancy or vacancies; or (c) for such longer period as the SEC may prescribe
by order upon application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
AVIF agrees that its Board of Directors will monitor for the existence of
any material irreconcilable conflict between the interests of the
Participants in all separate accounts of life insurance companies utilizing
AVIF ("Participating Insurance Companies"), including each Account, and
participants in all qualified retirement and pension plans investing in AVIF
("Participating Plans"). Sun Life agrees to inform the Board of Directors of
AVIF of the existence of or any potential for any such material
irreconcilable conflict of which it is aware. The concept of a "material
irreconcilable conflict" is not defined by the 1940 Act or the rules
thereunder, but the Parties recognize that such a conflict may arise for a
variety of reasons, including, without limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance, tax
or securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract Participants or by Participants
of different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive
orders of the type referred to in Section 5.1 hereof, Sun Life will assist
the Board of Directors in carrying out its responsibilities by providing the
Board of Directors with all information reasonably necessary for the Board of
Directors to consider any issue raised, including information as to a
decision by Sun
12
<PAGE>
Life to disregard voting instructions of Participants. Sun Life's
responsibilities in connection with the foregoing shall be carried out with a
view only to the interests of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members
of the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, Sun Life will, if it is a
Participating Insurance Company for which a material irreconcilable conflict
is relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict,
which steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the
Accounts from AVIF or any Fund and reinvesting such assets in
a different investment medium, including another Fund of AVIF,
or submitting the question whether such segregation should be
implemented to a vote of all affected Participants and, as
appropriate, segregating the assets of any particular group
(E.G., annuity Participants, life insurance Participants or all
Participants) that votes in favor of such segregation, or
offering to the affected Participants the option of making
such a change; and
(ii) establishing a new registered investment company of the type
defined as a "management company" in Section 4(3) of the 1940
Act or a new separate account that is operated as a management
company.
(b) If the material irreconcilable conflict arises because of Sun
Life's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority vote,
Sun Life may be required, at AVIF's election, to withdraw each Account's
investment in AVIF or any Fund. No charge or penalty will be imposed as a
result of such withdrawal. Any such withdrawal must take place within six (6)
months after AVIF gives notice to Sun Life that this provision is being
implemented, and until such withdrawal AVIF shall continue to accept and
implement orders by Sun Life for the purchase and redemption of Shares of
AVIF.
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to Sun Life conflicts with
the majority of other state regulators, then Sun Life will withdraw each
Account's investment in AVIF within six (6) months after AVIF's Board of
Directors informs Sun Life that it has determined that such decision has
created a material irreconcilable conflict, and until such withdrawal AVIF
shall continue to accept and implement orders by Sun Life for the purchase
and redemption of Shares of AVIF. No charge or penalty will be imposed as a
result of such withdrawal.
(d) Sun Life agrees that any remedial action taken by it in resolving
any material irreconcilable conflict will be carried out at its expense and
with a view only to the interests of Participants.
13
<PAGE>
(e) For purposes hereof, a majority of the Disinterested Directors
will determine whether or not any proposed action adequately remedies any
material irreconcilable conflict. In no event, however, will AVIF or any of
its affiliates be required to establish a new funding medium for any
Contracts. Sun Life will not be required by the terms hereof to establish a
new funding medium for any Contracts if an offer to do so has been declined
by vote of a majority of Participants materially adversely affected by the
material irreconcilable conflict.
5.5 NOTICE TO SUN LIFE.
AVIF will promptly make known in writing to Sun Life the Board of
Directors' determination of the existence of material irreconcilable
conflict, a description of the facts that give rise to such conflict and the
implications of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
Sun Life and AVIF (or its investment adviser) will at least annually
submit to the Board of Directors of AVIF such reports, materials or data as
the Board of Directors may reasonably request so that the Board of Directors
may fully carry out the obligations imposed upon it by the provisions hereof
or any exemptive order granted by the SEC to permit Mixed and Shared Funding,
and said reports, materials and data will be submitted at any reasonable time
deemed appropriate by the Board of Directors. All reports received by the
Board of Directors of potential or existing conflicts, and all Board of
Directors actions with regard to determining the existence of a conflict,
notifying Participating Insurance Companies and Participating Plans of a
conflict, and determining whether any proposed action adequately remedies a
conflict, will be properly recorded in the minutes of the Board of Directors
or other appropriate records, and such minutes or other records will be made
available to the SEC upon request.
5.7 COMPLIANCE WITH SEC RULES.
If, at any time during which AVIF is serving as an investment medium for
variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to Mixed and Shared Funding, AVIF agrees that it will comply with the
terms and conditions thereof and that the terms of this Section 5 shall be
deemed modified if and only to the extent required in order also to comply
with the terms and conditions of such exemptive relief that is afforded by
any of said rules that are applicable.
5.8 OTHER REQUIREMENTS.
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in
substance the same provisions as are set forth in Sections 4.1(b), 4.1(d),
4.3(a), 4.4(b), 4.5(a), 5, and 10 of this Agreement.
14
<PAGE>
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of any party, with or without cause with respect to
the Fund, upon one (1) year's advance written notice to the other parties,
or, if later, upon receipt of any required exemptive relief from the SEC,
unless otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings
against Sun Life or its affiliates by the NASD, the SEC, any state insurance
regulator or any other regulatory body regarding Sun Life's obligations under
this Agreement or related to the sale of the Contracts, the operation of each
Account, or the purchase of Shares, if, in each case, AVIF reasonably
determines that such proceedings, or the facts on which such proceedings
would be based, have a material likelihood of imposing material adverse
consequences on the Fund with respect to which the Agreement is to be
terminated; or
(c) at the option of Sun Life upon institution of formal proceedings
against AVIF, its principal underwriter, or its investment adviser by the
NASD, the SEC, or any state insurance regulator or any other regulatory body
regarding AVIF's obligations under this Agreement or related to the operation
or management of AVIF or the purchase of AVIF Shares, if in each case, Sun
Life reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on Sun Life, or the Subaccount corresponding to the Fund
with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares
are not registered and, in all material respects, issued and sold in
accordance with any applicable federal or state law, or (ii) such law
precludes the use of such Shares as an underlying investment medium of the
Contracts issued or to be issued by Sun Life; or
(e) upon termination of the corresponding Subaccount's investment in
the Fund pursuant to Section 5 hereof; or
(f) at the option of Sun Life if the Fund ceases to qualify as a RIC
under Subchapter M of the Code or under successor or similar provisions, or
if Sun Life reasonably believes that the Fund may fail to so qualify; or
(g) at the option of Sun Life if the Fund fails to comply with
Section 817(h) of the Code or with successor or similar provisions, or if Sun
Life reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by Sun Life cease to
qualify as annuity contracts or life insurance contracts under the Code
(other than by reason of the Fund's noncompliance with Section 817(h) or
Subchapter M of the Code) or if interests in an Account under
15
<PAGE>
the Contracts are not registered, where required, and, in all material
respects, are not issued or sold in accordance with any applicable federal or
state law; or
(i) upon another Party's material breach of any provision of this
Agreement; or
(j) at the option of Sun Life or AVIF upon receipt of any necessary
regulatory approvals and/or the vote of the Contract owners having an
interest in the account (or any Subaccount) to substitute the shares of
another investment for the corresponding AVIF Shares in accordance with the
terms of the Contracts for which those Shares had been selected to serve as
the underlying investment media. Sun Life will give thirty (30) days' prior
written notice to AVIF of the date of any proposed vote or other action taken
to replace the AVIF Shares; or
(k) at the option of Sun Life, if Sun Life determines in its sole
judgment exercised in good faith, that either AVIF or AVIF's investment
adviser has suffered a material adverse change in its business, operations or
financial condition since the date of this Agreement or is the subject of
material adverse publicity which is likely to have a material adverse impact
upon the business and operations of Sun Life; or
(l) at the option of AVIF, if AVIF determines in its sole judgment
exercised in good faith, that Sun Life has suffered a material adverse change
in its business, operations or financial condition since the date of this
Agreement or is the subject of material adverse publicity which is likely to
have a material adverse impact upon the business and operations of AVIF.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other
Party to this Agreement of its intent to terminate, and such notice shall set
forth the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at
least ninety (90) days in advance of the effective date of termination unless
a shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written
notice shall be given as soon as possible within twenty-four (24) hours after
the terminating Party learns of the event causing termination to be required.
16
<PAGE>
6.3 FUNDS TO REMAIN AVAILABLE.
Notwithstanding any termination of this Agreement, AVIF will, at the
option of Sun Life, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate investments
in the Fund (as in effect on such date), redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments
under the Existing Contracts. The parties agree that this Section 6.3 will
not apply to any terminations under Section 5 and the effect of such
terminations will be governed by Section 5 of this Agreement.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of this
Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund pursuant
to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof,
this Agreement shall nevertheless continue in effect as to any Shares of that
Fund that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date
as of which an Account owns no Shares of the affected Fund or a date (the
"Final Termination Date") six (6) months following the Initial Termination
Date, except that Sun Life may, by written notice shorten said six (6) month
period in the case of a termination pursuant to Sections 6.1(d), 6.1(f),
6.1(g), 6.1(h) or 6.1(i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to
one another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to
Section 6.1(a), the termination date specified in the notice of termination.
Such steps may include combining the affected Account with another Account,
substituting other mutual fund shares for those of the affected Fund, or
otherwise terminating participation by the Contracts in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
17
<PAGE>
SECTION 9. NOTICES
Notices and communications required or permitted by Section 9 hereof
will be given by means mutually acceptable to the Parties concerned. Each
other notice or communication required or permitted by this Agreement will be
given to the following persons at the following addresses and facsimile
numbers, or such other persons, addresses or facsimile numbers as the Party
receiving such notices or communications may subsequently direct in writing:
AIM VARIABLE INSURANCE FUNDS, INC.
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
CLARENDON INSURANCE AGENCY, INC.
One Copley Place, Suite 200
Boston, Massachusetts 02116
Facsimile: (617) 348-1586
Attn: Margaret Hankard, Esq.
Senior Associate Counsel
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3 hereof,
Sun Life will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be
extended and will solicit voting instructions from Participants. Sun Life
will vote Shares in accordance with timely instructions received from
Participants. Sun Life will vote Shares that are (a) not attributable to
Participants to whom pass-through voting privileges are extended, or
(b) attributable to Participants, but for which no timely instructions have
been received, in the same proportion as Shares for which said instructions
have been received from Participants, so long as and to the extent that the
SEC continues to interpret the 1940 Act to require pass through voting
privileges for Participants. Neither Sun Life nor any of its affiliates will
in any way recommend action in connection with or oppose or interfere with
the solicitation of proxies for the Shares held for such Participants. Sun
Life reserves the right to vote shares held in any Account in its own right,
to the extent permitted by law. Sun Life shall be responsible for assuring
that each of its Accounts holding Shares calculates voting privileges in a
manner consistent with that of other Participating Insurance Companies in the
manner required by the Mixed and Shared Funding exemptive order obtained by
AVIF. AVIF will notify Sun Life of any changes of interpretations or
amendments to Mixed and Shared Funding exemptive order it has obtained. AVIF
will comply with all provisions
18
<PAGE>
of the 1940 Act requiring voting by shareholders, and in particular, AVIF
either will provide for annual meetings (except insofar as the SEC may
interpret Section 16 of the 1940 Act not to require such meetings) or will
comply with Section 16(c) of the 1940 Act (although AVIF is not one of the
trusts described in Section 16(c) of that Act) as well as with Sections 16(a)
and, if and when applicable, 16(b). Further, AVIF will act in accordance with
the SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors and with whatever rules the SEC may
promulgate with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with Sun Life concerning any decision
to elect or not to elect pursuant to Section 853 of the Code to pass through
the benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF AVIF AND AIM BY SUN LIFE AND CLARENDON.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c),
below, Sun Life and Clarendon agree to indemnify and hold harmless AVIF, its
affiliates, and each person, if any, who controls AVIF or its affiliates
within the meaning of Section 15 of the 1933 Act and each of their respective
directors and officers, (collectively, the "Indemnified Parties" for purposes
of this Section 12.1) against any and all losses, costs, expenses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of Sun Life and Clarendon) or actions in respect thereof (including,
to the extent reasonable, legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise; PROVIDED, the Account owns shares of the Fund and insofar as such
losses, costs, expenses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's
1933 Act registration statement, any Account Prospectus, the
Contracts, or sales literature or advertising for the Contracts
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading; PROVIDED, that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to Sun Life or
Clarendon by or on behalf of AVIF or AIM for use in any Account's
1933 Act registration statement, any Account Prospectus, the
Contracts, or sales literature or advertising or otherwise for
use in connection with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing); or
19
<PAGE>
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing, not supplied for
use therein by or on behalf of Sun Life, Clarendon or their
respective affiliates and on which such persons have reasonably
relied) or the negligent, illegal or fraudulent conduct of Sun
Life, Clarendon or their respective affiliates or persons under
their control (including, without limitation, their employees and
"Associated Persons," as that term is defined in paragraph (m) of
Article I of the NASD's By-Laws), in connection with the sale or
distribution of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933
Act registration statement, AVIF Prospectus, sales literature or
advertising of AVIF, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading if such a statement or
omission was made in reliance upon and in conformity with
information furnished to AVIF or its affiliates by or on behalf
of Sun Life, Clarendon or their respective affiliates for use in
AVIF's 1933 Act registration statement, AVIF Prospectus, sales
literature or advertising of AVIF, or any amendment or supplement
to any of the foregoing; or
(iv) arise as a result of any failure by Sun Life or Clarendon to
perform the obligations, provide the services and furnish the
materials required of them under the terms of this Agreement, or
any material breach of any representation and/or warranty made by
Sun Life or Clarendon in this Agreement or arise out of or result
from any other material breach of this Agreement by Sun Life or
Clarendon; or
(v) arise as a result of failure by the Contracts issued by Sun Life
to qualify as annuity contracts or life insurance contracts under
the Code, otherwise than by reason of any Fund's failure to
comply with Subchapter M or Section 817(h) of the Code.
(b) Neither Sun Life nor Clarendon shall be liable under this
Section 12.1 with respect to any losses, costs, expenses, claims, damages,
liabilities or actions to which an Indemnified Party would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance by that Indemnified Party of its duties or by reason of that
Indemnified Party's reckless disregard of obligations or duties (i) under
this Agreement, or (ii) to AVIF.
(c) Neither Sun Life nor Clarendon shall be liable under this
Section 12.1 with respect to any action against an Indemnified Party unless
AVIF or AIM shall have notified Sun Life and Clarendon in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but
20
<PAGE>
failure to notify Sun Life and Clarendon of any such action shall not relieve
Sun Life and Clarendon from any liability which they may have to the
Indemnified Party against whom such action is brought otherwise than on
account of this Section 12.1. Except as otherwise provided herein, in case
any such action is brought against an Indemnified Party, Sun Life and
Clarendon shall be entitled to participate, at their own expense, in the
defense of such action and also shall be entitled to assume the defense
thereof, with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from Sun Life
or Clarendon to such Indemnified Party of Sun Life's or Clarendon's election
to assume the defense thereof, the Indemnified Party will cooperate fully
with Sun Life and Clarendon and shall bear the fees and expenses of any
additional counsel retained by it, and neither Sun Life nor Clarendon will be
liable to such Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof, other than reasonable costs of
investigation.
12.2 OF SUN LIFE AND CLARENDON BY AVIF AND AIM.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), below, AVIF and AIM agree to indemnify and hold harmless Sun Life,
Clarendon, their respective affiliates, and each person, if any, who controls
Sun Life, Clarendon or their respective affiliates within the meaning of
Section 15 of the 1933 Act and each of their respective directors and
officers, (collectively, the "Indemnified Parties" for purposes of this
Section 12.2) against any and all losses, costs, expenses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
AVIF and/or AIM) or actions in respect thereof (including, to the extent
reasonable, legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law, or otherwise;
PROVIDED, the Account owns shares of the Fund and insofar as such losses,
costs, expenses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933
Act registration statement, AVIF Prospectus or sales literature
or advertising of AVIF (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading; PROVIDED, that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with
information furnished to AVIF or its affiliates by or on behalf
of Sun Life, Clarendon or their respective affiliates for use
in AVIF's 1933 Act registration statement, AVIF Prospectus, or
in sales literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration statement,
any Account Prospectus, sales literature or advertising for the
Contracts, or any amendment or supplement to any of the
foregoing, not
21
<PAGE>
supplied for use therein by or on behalf of AVIF or AIM or
their affiliates and on which such persons have reasonably
relied) or the negligent, illegal or fraudulent conduct of AVIF
or AIM or their affiliates or persons under its control
(including, without limitation, their employees and "Associated
Persons" as that term is defined in Section (n) of Article I
of the NASD By-Laws), in connection with the sale or
distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any
Account's 1933 Act registration statement, any Account
Prospectus, sales literature or advertising covering the
Contracts, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading, if such statement or
omission was made in reliance upon and in conformity with
information furnished to Sun Life, Clarendon or their
respective affiliates by or on behalf of AVIF or AIM for use in
any Account's 1933 Act registration statement, any Account
Prospectus, sales literature or advertising covering the
Contracts, or any amendment or supplement to any of the
foregoing; or
(iv) arise as a result of any failure by AVIF to perform the
obligations, provide the services and furnish the materials
required of it under the terms of this Agreement, or any
material breach of any representation and/or warranty made by
AVIF in this Agreement or arise out of or result from any other
material breach of this Agreement by AVIF.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e) hereof, AVIF and AIM agree to indemnify and hold harmless the
Indemnified Parties from and against any and all losses, claims, damages,
liabilities (including amounts paid in settlement thereof with, the written
consent of AVIF and/or AIM) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses) to which the Indemnified Parties
may become subject directly or indirectly under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or actions
directly or indirectly result from or arise out of the failure of any Fund to
operate as a regulated investment company in compliance with (i) Subchapter M
of the Code and regulations thereunder, or (ii) Section 817(h) of the Code
and regulations thereunder, including, without limitation, any income taxes
and related interest and penalties, rescission charges, liability under state
law to Participants asserting liability against Sun Life pursuant to the
Contracts, the costs of any ruling and closing agreement or other settlement
with the IRS, and the cost of any substitution by Sun Life of Shares of
another investment company or portfolio for those of any adversely affected
Fund as a funding medium for each Account that Sun Life reasonably deems
necessary or appropriate as a result of the noncompliance.
(c) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any losses, costs, expenses, claims, damages, liabilities or
actions to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance by
that Indemnified Party of its duties or by reason of such Indemnified Party's
reckless
22
<PAGE>
disregard of its obligations or duties (i) under this Agreement, or (ii) to
Sun Life, Clarendon, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified
Party shall have notified AVIF and/or AIM in writing within a reasonable time
after the summons or other first legal process giving information of the
nature of the action shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify AVIF or AIM of any such action
shall not relieve AVIF or AIM from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on
account of this Section 12.2. Except as otherwise provided herein, in case
any such action is brought against an Indemnified Party, AVIF and/or AIM will
be entitled to participate, at its own expense, in the defense of such action
and also shall be entitled to assume the defense thereof (which shall
include, without limitation, the conduct of any ruling request and closing
agreement or other settlement proceeding with the IRS), with counsel approved
by the Indemnified Party named in the action, which approval shall not be
unreasonably withheld. After notice from AVIF and/or AIM to such Indemnified
Party of AVIF's or AIM's election to assume the defense thereof, the
Indemnified Party will cooperate fully with AVIF and AIM and shall bear the
fees and expenses of any additional counsel retained by it, and AVIF will not
be liable to such Indemnified Party under this Agreement for any legal or
other expenses subsequently incurred by such Indemnified Party independently
in connection with the defense thereof, other than reasonable costs of
investigation.
(e) In no event shall either AVIF or AIM be liable under the
indemnification provisions contained in this Agreement to any individual or
entity, including, without limitation, Sun Life, Clarendon or any other
Participating Insurance Company or any Participant, with respect to any
losses, claims, damages, liabilities or expenses that arise out of or result
from (i) a breach of any representation, warranty, and/or covenant made by
Sun Life or Clarendon hereunder or by any Participating Insurance Company
under an agreement containing substantially similar representations,
warranties and covenants; (ii) the failure by Sun Life or any Participating
Insurance Company to maintain its segregated asset account (which invests in
any Fund) as a legally and validly established segregated asset account under
applicable state law and as a duly registered unit investment trust under the
provisions of the 1940 Act (unless exempt therefrom); or (iii) the failure by
Sun Life or any Participating Insurance Company to maintain its variable
annuity or life insurance contracts (with respect to which any Fund serves as
an underlying funding vehicle) as annuity contracts or life insurance
contracts under applicable provisions of the Code.
12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Sections 12.1(c) or 12.2(d) above of participation in or
control of any action by the indemnifying Party will in no event be deemed to
be an admission by the indemnifying Party of liability, culpability or
responsibility, and the indemnifying Party will remain free to contest
liability with respect to the claim among the Parties or otherwise.
23
<PAGE>
12.4 SUCCESSORS.
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will
not be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, that the Parties are entitled to under
federal and state laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
SECTION 18. CONFIDENTIALITY
AVIF acknowledges that the identities of the customers of Sun Life or
any of its affiliates (collectively, the "Sun Life Protected Parties" for
purposes of this Section 18), information maintained regarding those
customers, and all computer programs and procedures or other information
developed by the Sun Life Protected Parties or any of their employees or
agents in connection with Sun Life's performance of its duties under this
Agreement are the valuable property of the Sun Life Protected Parties. AVIF
agrees that if it comes into possession of any list or compilation of the
identities of or other information about the Sun Life Protected Parties'
customers,
24
<PAGE>
or any other information or property of the Sun Life Protected Parties, other
than such information as may be independently developed or compiled by AVIF
from information supplied to it by the Sun Life Protected Parties' customers
who also maintain accounts directly with AVIF, AVIF will hold such
information or property in confidence and refrain from using, disclosing or
distributing any of such information or other property except: (a) with Sun
Life's prior written consent; or (b) as required by law or judicial process.
Sun Life acknowledges that the identities of the customers of AVIF or any of
its affiliates (collectively, the "AVIF Protected Parties" for purposes of
this Section 18), information maintained regarding those customers, and all
computer programs and procedures or other information developed by the AVIF
Protected Parties or any of their employees or agents in connection with
AVIF's performance of its duties under this Agreement are the valuable
property of the AVIF Protected Parties. Sun Life agrees that if it comes into
possession of any list or compilation of the identities of or other
information about the AVIF Protected Parties' customers or any other
information or property of the AVIF Protected Parties, other than such
information as may be independently developed or compiled by Sun Life from
information supplied to it by the AVIF Protected Parties' customers who also
maintain accounts directly with Sun Life, Sun Life will hold such information
or property in confidence and refrain from using, disclosing or distributing
any of such information or other property except: (a) with AVIF's prior
written consent; or (b) as required by law or judicial process. Each party
acknowledges that any breach of the agreements in this Section 18 would
result in immediate and irreparable harm to the other parties for which there
would be no adequate remedy at law and agree that in the event of such a
breach, the other parties will be entitled to equitable relief by way of
temporary and permanent injunctions, as well as such other relief as any
court of competent jurisdiction deems appropriate.
SECTION 19. TRADEMARKS AND FUND NAMES
(a) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of
AVIF, owns all right, title and interest in and to the name, trademark and
service mark "AIM" and such other tradenames, trademarks and service marks as
may be set forth on Schedule B, as amended from time to time by written
notice from AIM to Sun Life (the "AIM licensed marks" or the "licensor's
licensed marks") and is authorized to use and to license other persons to use
such marks. Sun Life and its affiliates are hereby granted a non-exclusive
license to use the AIM licensed marks in connection with Sun Life's
performance of the services contemplated under this Agreement, subject to the
terms and conditions set forth in this Section 19.
(b) The grant of license to Sun Life and its affiliates (the
"licensee") shall terminate automatically upon termination of this Agreement.
Upon automatic termination, the licensee shall cease to use the licensor's
licensed marks, except that Sun Life shall have the right to continue to
service any outstanding Contracts bearing any of the AIM licensed marks. Upon
AIM's elective termination of this license, Sun Life and its affiliates shall
immediately cease to issue any new annuity or life insurance contracts
bearing any of the AIM licensed marks and shall likewise cease any activity
which suggests that it has any right under any of the AIM licensed marks or
that it has any association with AIM, except that Sun Life shall have the
right to continue to service outstanding Contracts bearing any of the AIM
licensed marks and to use AIM licensed marks in such materials as may be
necessary for filing with any regulatory authority where required by law or
regulation or to enable Sun Life to quote performance to existing Contract
owners.
25
<PAGE>
(c) The licensee shall obtain the prior written approval of the
licensor for the public release by such licensee of any materials bearing the
licensor's licensed marks. The licensor's approvals shall not be unreasonably
withheld and may be obtained in connection with approval of sales materials
as provided in Section 4.5(b) hereof (i.e., approvals obtained under
Section 4.5 hereof shall be deemed approval pursuant to this Section 19).
(d) During the term of this grant of license, a licensor may request
that a licensee submit samples of any materials bearing any of the licensor's
licensed marks which were previously approved by the licensor but, due to
changed circumstances, the licensor may wish to reconsider. If, on
reconsideration, or on initial review, respectively, any such samples fail to
meet with the written approval of the licensor, then the licensee shall
immediately cease distributing such disapproved materials, upon receiving
notice of such failure by the licensor. The licensor's approval shall not be
unreasonably withheld, and the licensor, when requesting reconsideration of a
prior approval, shall assume the reasonable expenses of withdrawing and
replacing such disapproved materials. The licensee shall obtain the prior
written approval of the licensor for the use of any new materials developed
to replace the disapproved materials, in the manner set forth above.
(e) The licensee hereunder: (i) acknowledges and stipulates, based
upon the representations of the licensor set forth herein and without making
any independent inquiry thereof, that, to the best of the knowledge of the
licensee, the licensor's licensed marks are valid and enforceable trademarks
and/or service marks; (ii) acknowledges and stipulates that such licensee
does not own the licensor's licensed marks and claims no rights therein other
than as a licensee under this Agreement; (iii) agrees never to contend
otherwise in legal proceedings or in other circumstances; and (iv)
acknowledges and agrees that the use of the licensor's licensed marks
pursuant to this grant of license shall inure to the benefit of the licensor.
SECTION 20. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and
all appropriate governmental authorities (including, without limitation, the
SEC, the NASD and state insurance regulators) and will permit each other and
such authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
SECTION 21. ACCESS TO INFORMATION BY SUN LIFE
During ordinary business hours, AVIF shall afford Sun Life, directly or
through its authorized representatives, reasonable access to all files,
books, records and other materials of AVIF (except for confidential or
proprietary materials) which directly relate to transactions arising in
connection with this Agreement and to make available appropriate personnel
familiar with such items for the purpose of explaining the form and content
of such items. This Section 21 shall survive the termination of this
Agreement.
----------------------------------------------------------------
26
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their names and on their behalf by and through their duly
authorized officers signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ Nancy L. Martin By: /s/ Robert H. Graham
------------------------ ---------------------------
Nancy L. Martin Name: Robert H. Graham
Assistant Secretary -----------------------
Title: President
-----------------------
A I M DISTRIBUTORS, INC.
Attest: /s/ Nancy L. Martin By: /s/ Michael J. Cemo
------------------------ ---------------------------
Nancy L. Martin Name: Michael J. Cemo
Assistant Secretary -----------------------
Title: President
-----------------------
SUN LIFE ASSURANCE COMPANY OF CANADA
(U.S.), on behalf of itself and its
separate accounts
Attest: /s/ Margaret Sears Mead By: /s/ Robert K. Leach
------------------------ ---------------------------
Name: Margaret Sears Mead Name: Robert K. Leach
------------------------ -------------------------
Title: Assistant Vice President Title: Vice President
and Secretary ------------------------
------------------------
CLARENDON INSURANCE AGENCY, INC.
Attest: /s/ Roy P. Creedon By: /s/ Jane Mancini
------------------------ ---------------------------
Name: Roy P. Creedon Name: Jane Mancini
------------------------ -------------------------
Title: Secretary Title: President
------------------------ ------------------------
27
<PAGE>
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
- - AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. CAPITAL APPRECIATION FUND
AIM V.I. GROWTH FUND
AIM V.I. GROWTH AND INCOME FUND
AIM V.I. INTERNATIONAL
SEPARATE ACCOUNTS UTILIZING THE FUNDS
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT F
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
FUTURITY VARIABLE ANNUITY CONTRACT
28
<PAGE>
SCHEDULE B
- - AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. Growth and Income Fund
AIM V.I. International
- - AIM and Design
[AIM LOGO]
29
<PAGE>
SCHEDULE C
EXPENSE ALLOCATIONS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
SUN LIFE AVIF/AIM
- ---------------------------------------------------------------------------------------------------
<S> <C>
preparing and filing the Account's registration preparing and filing the Fund's registration
statement statement
- ---------------------------------------------------------------------------------------------------
text composition for Account prospectuses and text composition for Fund prospectuses and
supplements supplements
- ---------------------------------------------------------------------------------------------------
text alterations of prospectuses (Account) and text alterations of prospectuses (Fund) and
supplements (Account) supplements (Fund)
- ---------------------------------------------------------------------------------------------------
printing Account and Fund prospectuses and a camera ready Fund prospectus
supplements
- ---------------------------------------------------------------------------------------------------
text composition and printing Account SAIs (if text composition and printing Fund SAIs
any)
- ---------------------------------------------------------------------------------------------------
mailing and distributing Account SAIs (if any) to mailing and distributing Fund SAIs to policy
policy owners upon request by policy owners owners upon request by policy owners
- ---------------------------------------------------------------------------------------------------
mailing and distributing prospectuses (Account and
Fund) and supplements (Account and Fund) to policy
owners of record as required by or appropriate
under the Federal Securities Laws and to
prospective purchasers
- ---------------------------------------------------------------------------------------------------
text composition (Account), printing, mailing, text composition and printing of annual and
and distributing annual and semi-annual reports semi-annual reports (Fund)
for Account
- ---------------------------------------------------------------------------------------------------
text composition, printing, mailing, distributing, text composition, printing, mailing,
and tabulation of proxy statements and voting distributing and tabulation of proxy statements
instruction solicitation materials to policy and voting instruction solicitation materials
owners with respect to proxies related to the to policy owners with respect to proxies
Account related to the Fund
- ---------------------------------------------------------------------------------------------------
preparation, printing and distributing sales
material and advertising relating to the Funds,
insofar as such materials relate to the Contracts
and filing such materials with and obtaining
approval from, the SEC, the NASD, any state
insurance regulatory authority, and any other
appropriate regulatory authority, to the extent
required
- ---------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
PARTICIPATION AGREEMENT
Among
SUN CAPITAL ADVISERS TRUST,
SUN CAPITAL ADVISERS, INC.
and
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
THIS AMENDED AND RESTATED AGREEMENT, made and entered into this 18th day
of August, 1999 by and among SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
(hereinafter the "Company"), on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may
be amended from time to time (each such account hereinafter referred to as
the "Account"), SUN CAPITAL ADVISERS TRUST, a Delaware business trust
(hereinafter the "Fund"), and SUN CAPITAL ADVISERS, INC. (hereinafter the
"Adviser"), a Delaware corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as (i) the investment vehicle for
certain qualified pension or retirement plans ("Qualified Plans") and (ii) the
investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts (collectively, the
"Variable Insurance Products") to be offered by insurance companies which
have entered into participation agreements with the Fund and the Adviser
(hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interests in the Fund are divided into several
series of shares (each designated a "Portfolio"), each representing the
interest in a particular managed portfolio of securities and other assets; and
<PAGE>
WHEREAS, the Fund has received an order from the Securities and Exchange
Commission, dated April 20, 1999 (File No. 812-23793) that grants
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of Sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold
to and held by variable annuity and variable life insurance separate accounts
of both affiliated and unaffiliated life insurance companies and to Qualified
Plans (hereinafter the "Mixed and Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an Investment Adviser under
the Investment Advisers Act of 1940 and any applicable state securities law;
and
WHEREAS, the Company has registered or will register certain variable
life insurance and variable annuity contracts ("Contracts") under the 1933
Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set
aside and invest assets attributable to one or more variable life insurance
or variable annuity contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on
behalf of each Account to fund certain of the Contracts.
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Adviser agree as follows:
2
<PAGE>
ARTICLE I. SALE OF FUND SHARES
1.1. The Fund agrees to sell to the Company those shares of the Fund
which each Account orders, executing such orders on a daily basis at the net
asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1, the
Company shall be the designee of the Fund for receipt of such orders from
each Account and receipt by such designee shall constitute receipt by the
Fund; provided that the Fund receives notice of such order by 9:00 a.m.
Eastern time on the next following Business Day. "Business Day" shall mean
any day on which the New York Stock Exchange is open for trading and on which
the Fund calculates its net asset value pursuant to the rules of the
Securities and Exchange Commission (the "Commission").
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value
pursuant to rules of the Commission, and the Fund shall use reasonable
efforts to calculate such net asset value on each day which the New York
Stock Exchange is open for trading. Notwithstanding the foregoing, the Board
of Trustees of the Fund (hereinafter the "Board") may refuse to sell shares
of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interest of the shareholders
of such Portfolio.
1.3. The Fund and the Adviser agree that shares of the Fund will be sold
only to Participating Insurance Companies and their separate accounts and
certain Qualified Plans, in accordance with the terms of the Mixed and Shared
Funding Exemptive Order. No shares of any Portfolio will be sold to the
general public.
3
<PAGE>
1.4. The Fund will not sell Fund shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Articles I, III, V, and VII of this Agreement is in effect to govern
such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt
by the Fund or its designee of the request for redemption. For purposes of
this Section 1.5, the Company shall be the designee of the Fund for receipt
of requests for redemption from each Account and receipt by such designee
shall constitute receipt by the Fund; provided that the Fund receives notice
of such request for redemption by 9:00 a.m. Eastern time on the next
following Business Day.
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in
accordance with the provisions of such prospectus.
1.7. The Company shall pay for Fund shares by 11:00 a.m. Eastern time on
the next Business Day after an order to purchase Fund shares is made in
accordance with the provisions of Section 1.1 hereof. Payment shall be in
federal funds transmitted by wire.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for
each Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio.
The Company reserves the right to revoke
4
<PAGE>
this election and to receive all such income dividends and capital gain
distributions in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practicable after the net asset value per share is calculated (normally
6:30 p.m. Eastern time) and shall use its best efforts to make such net asset
value per share available by 7:00 p.m. Eastern time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act; that the Contracts will be issued and sold
in compliance in all material respects with all applicable Federal and State
laws and that the sale of the Contracts shall comply in all material respects
with state insurance suitability requirements. The Company further represents
and warrants that it is an insurance company duly organized and in good
standing under applicable law and that it has legally and validly established
each Account prior to any issuance or sale thereof as a segregated asset
account under Section 2932 of the Delaware Insurance Code and has registered
or, prior to any issuance or sale of the Contracts, will register each
Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Delaware and
all applicable federal and state securities laws and that the Fund is and
shall remain registered under the 1940 Act. The Fund shall amend the
Registration Statement for its shares under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of
its shares. The Fund shall register and qualify the shares for sale in
accordance with
5
<PAGE>
the laws of the various states if and to the extent deemed advisable by the
Fund or the Adviser.
2.3. The Fund represents that it intends to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code"), and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so
qualify in the future.
2.4. The Company represents that each Account is properly treated as a
"segregated asset account" for purposes of Treasury Regulation Section
1.817-5(f), that the Contracts are currently treated as endowment, annuity or
life insurance contracts under applicable provisions of the Code and that it
will maintain such treatment and that it will notify the Fund and the Adviser
immediately upon having a reasonable basis for believing that any Account or
Contract has ceased to be so treated or might not be so treated in the future.
2.5. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various
states except that the Fund and the Adviser represent that their respective
operations are and shall at all times remain in material compliance with
applicable laws of the State of Delaware to the extent required to perform
this Agreement.
2.6. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Delaware and that it does and will
comply in all material respects with the 1940 Act.
2.7. The Adviser represents and warrants that the Adviser is and shall
remain duly registered as an investment adviser in all material respects
under all applicable federal and state securities laws and that the Adviser
shall perform its obligations for
6
<PAGE>
the Fund in compliance in all material respects with applicable state and
federal securities laws.
2.8. The Fund and Adviser represent and warrant that all of their
directors, officers, employees, investment advisers, and other individuals/
entities dealing with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the minimal
coverage as required currently by Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid Bond shall
include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.9. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities
dealing with the money and/or securities of the Fund are and shall continue
to be at all times covered by a blanket fidelity bond or similar coverage for
the benefit of the Fund, in an amount not less than the minimal coverage as
required currently by entities subject to the requirements of Rule 17g-1 of
the 1940 Act or related provisions as may be promulgated from time to time.
The aforesaid Bond shall include coverage for larceny and embezzlement and
shall be issued by a reputable bonding company.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Fund or the Adviser shall provide the Company, (at the
Company's expense), with as many copies of the Fund's current prospectus as
the Company may reasonably request for distribution, at the Company's
expense, to prospective Contract owners and applicants. The Fund or the
Adviser shall provide the Company, at the Fund's or the Adviser's expense,
with as many copies of the Fund's prospectus as necessary for distribution,
at the Company's expense, to existing Contract owners. If requested by the
Company in lieu thereof, the Fund shall provide such documentation
7
<PAGE>
(including a final "camera ready" or diskette copy of the new prospectus as
set in type at the Fund's expense) and other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
prospectus for the Fund is amended) to have the prospectus for the Contracts
and the Fund's prospectus printed together in one document, in which case the
Fund will bear its reasonable share of expenses, as described above,
allocated based on the proportionate number of pages of the Fund's portion of
the document.
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Adviser (or in the Fund's
discretion, the Prospectus shall state that such Statement is available from
the Fund), and the Adviser (or the Fund), at its expense, shall provide a
copy of such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners. The Company will distribute this proxy
material and tabulate the votes at the Fund's or the Adviser's expense.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received
from Contract owners; and
(iii) vote Fund shares for which no instructions have been received
in the same proportion as Fund shares of such Portfolio for
which instructions have been received:
so long as and to the extent that the Commission continues to interpret the
1940 Act to require pass-through voting privileges for owners of Variable
Insurance Products. The
8
<PAGE>
Company reserves the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law. Participating
Insurance Companies shall be responsible for assuring that each of their
separate accounts participating in the Fund calculates voting privileges in a
manner consistent with this Section and with each other.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund, the Adviser or one of their respective affiliates
is named, at least fifteen Business Days prior to its use. No such material
shall be used if the Fund or its designee objects to such use within fifteen
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the
Fund, or in sales literature or other promotional material approved by the
Fund or its designee or by the Adviser, except with the permission of the
Fund or the Adviser or the designee of either.
4.3. The Fund and the Adviser, or its designee, shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its
use. No such material shall be used if the Company or its designee object to
such use within fifteen Business Days after receipt of such material.
9
<PAGE>
4.4. The Fund and the Adviser shall not give any information or make any
representations on behalf of the Company or concerning the Company, each
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as
such registration statement and prospectus may be amended or supplemented
from time to time, or in published reports for each Account which are in the
public domain or approved by the Company for distribution to Contract owners,
or in sales literature or other promotional material approved by the Company
or its designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Fund or
its shares, contemporaneously with the filing of such document with the
Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the Commission or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as materials published, or designed for use in, a newspaper, magazine,
or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public
media), sales literature (I.E., any written communication distributed or made
generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or
10
<PAGE>
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees, and registration
statements, prospectuses, Statements of Additional Information, shareholder
reports, and proxy materials.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Adviser shall pay no fee or other compensation to the
Company under this Agreement, except that: (a) if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Adviser may make payments to the Company for the Contracts
if and in amounts agreed to by the Adviser in writing; and (b) the Adviser
may make payments out of existing fees otherwise payable to the Adviser, past
profits of the Adviser or other resources available to the Adviser, to the
extent permitted by law.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with
applicable federal law and, if and to the extent deemed advisable by the
Fund, in accordance with applicable state laws prior to their sale. The Fund
shall bear the expenses for the cost of registration and qualification of the
Fund's shares; preparation and filing of the Fund's prospectus and
registration statement, proxy materials and reports; setting the prospectus
in type; setting in type and printing the proxy materials and reports to
shareholders (including, if so elected, the costs of printing a prospectus
that constitutes an annual report); the preparation of all statements and
notices required by any federal or state law; and all other expenses set
forth in Article III of this Agreement.
11
<PAGE>
ARTICLE VI. DIVERSIFICATION
6.1. Each Portfolio of the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation Section 1.817-5, relating
to the diversification requirements for variable annuity, endowment, or life
insurance contracts, to the extent such requirements apply to the Portfolio's
investments pursuant to Treasury Regulation Section 1.817-5(f), and any
amendments or other modifications to such Section or Regulations.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict among the interests of the contract owners of all
separate accounts investing in the Fund and determine what action is to be
taken. An irreconcilable material conflict may arise for a variety of
reasons, including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretive letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial decision
in any relevant proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting instructions given by
variable annuity contract owners, variable life insurance contract owners and
Plan trustees; (f) a decision by an insurer to disregard the voting
instructions of contract owners; or (g) if applicable, a decision by a
Qualified Plan to disregard the voting instructions of Plan participants. The
Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company and the Adviser will assist the
Board in carrying out
12
<PAGE>
its responsibilities under the Mixed and Shared Funding Exemptive Order by
providing the Board with all information reasonably necessary for the Board
to consider any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Board whenever contract owner voting
instructions are disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees that a material irreconcilable conflict exists,
the Company and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority
of the disinterested trustees), take whatever steps are necessary to remedy
or eliminate the irreconcilable material conflict, up to and including:
(1) withdrawing the assets allocable to some or all of the separate accounts
from the Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the
Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected Contract owners and, as appropriate,
segregating the assets of any appropriate group (I.E., annuity contract
owners, life insurance contract owners, or variable contract owners of one or
more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected contract owners the option of making
such a change; and (2) establishing a new registered management investment
company or series thereof or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote,
the Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the
Board. No charge or penalty will be imposed as a result of the
13
<PAGE>
withdrawal. Any such withdrawal and termination must take place within six (6)
months after the Fund gives written notice that this provision is being
implemented, and until the end of that six (6) month period the Adviser and
Fund shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six (6) months after the Board informs the
Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal
and termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Until the end of the foregoing six (6)
month period, the Adviser and Fund shall continue to accept and implement
orders by the Company for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether
any proposed action adequately remedies any irreconcilable material conflict,
but in no event will the Fund be required to establish a new funding medium
for the Contracts. The Company shall not be required by Section 7.3 to
establish a new funding medium for the contracts if an offer to do so has
been (a) declined by vote of a majority of Contract owners materially
adversely affected by the irreconcilable material conflict or (b) pursuant to
governing Qualified Plan documents and applicable law, the Qualified Plan
makes the decision without a vote of its participants. In the event that the
Board determines that any proposed action does not adequately remedy any
irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Fund and terminate this
14
<PAGE>
Agreement within six (6) months after the Board informs the Company in
writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any
such material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agree to indemnify and hold harmless the Fund and
each of its directors and officers and each person, if any, who controls the
Fund or the Adviser within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise; insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement or prospectus for the Contract or
contained in the Contracts or sales literature for the Contracts
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading; provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Company by
or on behalf of the Fund for use in the
15
<PAGE>
Registration Statement or prospectus for the Contracts or in the
Contracts or sales literature (or any amendment or supplement)
or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the
Fund not supplied the Company, or persons under its control) or
wrongful conduct of the Company or persons under its control,
with respect to the sale or distribution of the Contracts or
Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment
thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statement therein not
misleading if such a statement or omission was made in reliance
upon information furnished to the Fund by or on behalf of the
Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement by the Company, as limited by and in accordance with
the provisions of Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may
arise from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified
16
<PAGE>
Party's duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement or to the Fund, whichever is
applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Company
of any such claim shall not relieve the Company from any liability which it
may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, the Company shall be
entitled to participate, at its own expense, in the defense of such action.
The Company also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Company to such party of the Company's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Company will not be liable to such
party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operations of
the Fund.
8.2. INDEMNIFICATION BY THE ADVISER
8.2(a). The Adviser agree to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties"
17
<PAGE>
for purposes of this Section 8.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Adviser) or litigation (including legal and other expenses),
to which the Indemnified Parties may become subject under any statute, at
common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement or prospectus or sales literature of the
Fund (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Adviser or
Fund by or on behalf of the Company specifically for use in the
Registration Statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied the Adviser or persons under its control)
or wrongful conduct of the Fund or Adviser or persons under its
control, with respect to the sale or distribution of the
Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement,
prospectus, or sales literature
18
<PAGE>
covering the Contracts or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statement or statements therein not misleading, if such
statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on
behalf of the Fund specifically for inclusion therein; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure of any Portfolio, whether
unintentional or in good faith or otherwise, to invest in a
manner that complies with the diversification requirements
specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Adviser; as limited by and in
accordance with the provisions of Sections 8.2(b) and 8.2(c)
hereof.
8.2(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by reason
of such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason
of such Indemnified Party's reckless disregard of obligations or duties under
this Agreement or to each Company or Account, whichever, is applicable.
8.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been
19
<PAGE>
served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify the Adviser of any such claim shall not relieve the Adviser from any
liability which it may have to the Indemnified Party against whom such action
is brought otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties, the Adviser
will be entitled to participate, at its own expense, in the defense thereof.
The Adviser also shall be entitled to assume the defense thereof with counsel
satisfactory to the party named in the action. After notice from the Adviser
to such party of the Adviser's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Adviser will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
8.2(d). The Company agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the
Contracts or the operation of each Account.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Commission may grant (including, but not limited to, the Mixed and Shared
Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
20
<PAGE>
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon one-year advance written
notice to the other parties unless otherwise agreed in a separate written
agreement among the parties; or
(b) at the option of the Company if shares of the Portfolios
delineated in Schedule B are not reasonably available to meet the
requirements of the Contracts as determined by the Company within ten (10)
days of notice by Company to Fund of such fact; or
(c) at the option of the Fund upon institution of formal
proceedings against the Company by the NASD, the Commission, the insurance or
securities commission or division of any state or other regulatory body
regarding the Company's duties under this Agreement or related to the sale of
the Contracts, the administration of the Contracts, the operation of the
Account, or the purchase of the Fund shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund by the NASD, the Commission, or any state
securities or insurance department or any other regulatory body; or
(e) at the option of the Company or the Fund upon receipt of
any necessary regulatory approvals and/or the vote of the contract owners
having an interest in the Account (or any subaccount) to substitute the
shares of another investment company for the corresponding Portfolio shares
of the Fund in accordance with the terms of the Contracts for which those
Portfolio shares had been selected to serve as the underlying investment
media. The Company will give thirty (30) days' prior written notice to the
Fund of the date of any proposed vote or other action taken to replace the
Fund's Shares; or
21
<PAGE>
(f) at the option of the Company or the Fund upon a determination
by a majority of the Fund Board, or a majority of the disinterested Fund
Board members, that an irreconcilable material conflict exists from the
Company's continued investment in the Fund; or
(g) at the option of the Company if any Portfolio of the Fund
ceases to qualify as a Regulated Investment Company under Subchapter M of the
Internal Revenue Code, or under any successor or similar provision, or if the
Company reasonably believes that the Portfolio may fail to so qualify; or
(h) at the option of the Company if any Portfolio of the Fund
fails to meet the diversification requirements specified in Article VI hereof;
or
(i) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
(j) at the option of the Company, if the Company determines in its
sole judgment exercised in good faith, that either the Fund or the Adviser
has suffered a material adverse change in its business, operations or
financial condition since the date of this Agreement or is the subject of
material adverse publicity which is likely to have a material adverse impact
upon the business and operations of the Company; or
(k) at the option of the Fund or Adviser, if the Fund or Adviser
respectively, shall determine in its sole judgment exercised in good faith,
that the Company has suffered a material adverse change in its business,
operations or financial condition since the date of this Agreement or is the
subject to material adverse publicity which is likely to have a material
adverse impact upon the business and operations of the Fund or Adviser; or
(l) at the option of the Fund or Adviser in the event any of the
Contracts are not issued or sold in accordance with applicable federal and/or
state law or if any Account or Contract ceased to qualify as annuity
contracts or life insurance
22
<PAGE>
contracts, as applicable, under the Code or if the Fund or Adviser reasonably
believes the Account or Contract may fail to so qualify.
10.2 NOTICE REQUIREMENT
(a) In the event that any termination of this Agreement is based
upon the provisions of Article VII such prior written notice shall be given
in advance of the effective date of termination as required by such
provisions.
(b) In the event that any termination of this Agreement is based
upon the provisions of Sections 10.1(b) - (d) or 10.1(g) - (i), prompt
written notice of the election to terminate this Agreement for cause shall be
furnished by the party terminating the Agreement to the non-terminating
parties, with said termination to be effective: (x) upon receipt of such
notice by the non-terminating parties in the case of terminations based on
Sections 10.1(b) - (d); or (y) in the event of terminations based on Sections
10.1(g) - (i) if the breaching party has not cured such breach.
(c) In the event that any termination of this Agreement is based
upon the provisions of Sections 10.1(j) or 10.1(k), prior written notice of
the election to terminate this Agreement for cause shall be furnished by the
party terminating this Agreement to the non-terminating parties. Such prior
written notice shall be given by the party terminating this Agreement to the
non-terminating parties at least 30 days before the effective date of
termination.
(d) In the event than any termination of this Agreement is based
upon the provisions of Section 10.1(l), termination shall be effective
immediately upon such occurrence without notice.
10.3. It is understood and agreed that the right to terminate this
Agreement pursuant to Section 10.1(a) may be exercised for any reason or for
no reason.
10.4 EFFECT OF TERMINATION
(a) Notwithstanding any termination of this Agreement pursuant to
Section 10.1 of this Agreement, the Fund may, at its option, or in the event of
23
<PAGE>
termination of this Agreement by the Fund or the Adviser pursuant to Section
10.1(a) of this Agreement, the Company may require the Fund and the Adviser
to continue to make available additional shares of the Fund for so long after
the termination of this Agreement as the Fund or the Company, if the Company
is so requiring, desires pursuant to the terms and conditions of this
Agreement as provided in paragraph (b) below for all Contracts in effect on
the effective date of termination of this Agreement (hereinafter referred to
as "Existing Contracts"). Specifically, without limitation, if the Fund so
elects to make available additional shares of the Fund, pursuant to
instructions from the owners of the Existing Contracts, the Company shall be
permitted to reallocate investments in the Fund, redeem investments in the
Fund and/or invest in the Fund upon the making by such owners of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.4 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of
this Agreement.
(b) In the event of a termination of this agreement pursuant to
Section 10.1 of this Agreement, the Fund shall promptly notify the Company
whether the Fund will continue to make available shares of the Fund after such
termination, except that, with respect to a termination by the Fund or the
Adviser pursuant to Section 10.1(a) of this Agreement, the Company shall
promptly notify the Fund whether it wishes the Fund to continue to make
available additional shares of the Fund. If shares of the Fund continue to be
made available after such termination, the provisions of this Agreement shall
be remain in effect except for Section 10.1(a) and thereafter the Fund or the
Company may terminate the Agreement, as so continued pursuant to this Section
10.4 upon written notice to the other party, such notice to be for a period
that is reasonable under the circumstances.
10.5. Except as necessary to implement contract owner initiated or
approved transactions, or as required by state insurance laws or regulations,
the Company shall
24
<PAGE>
not redeem Fund shares attributable to the Contracts (as opposed to Fund
shares attributable to the Company's assets), and the Company shall not
prevent contract owners from allocating payments to a Portfolio that was
otherwise available under the Contracts, until 90 days after the Company
shall have notified the Fund or Adviser of its intention to do so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify
in writing to the other party.
If to the Fund:
Sun Capital Advisers Trust
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
Attn: Maura A. Murphy, Esq.
If to the Company:
Sun Life Assurance Company of Canada (U.S.)
One Copley Place
Boston, Massachusetts 02116
Attn: Edward M. Shea, Esq.
If to the Adviser:
Sun Capital Advisers, Inc.
One Sun Life Executive Park
Wellesley Hills, Massachusetts 02481
Attn: Maura A. Murphy, Esq.
ARTICLE XII. MISCELLANEOUS
12.1. All persons dealing with the Fund must look solely to the property
of the Fund, or in the case of a claim relating to a Portfolio, the assets of
that Portfolio for the
25
<PAGE>
enforcement of any claims against the Fund as neither the Board, officers,
agents or shareholders assume any personal liability for obligations entered
into on behalf of the Fund. No Portfolio shall be subject to liability for the
obligations of any other Portfolio.
12.2. Except as otherwise required by law, legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except
as permitted by this Agreement shall not disclose, disseminate or utilize
such names and addresses and other confidential information until such time
as it may come into the public domain without the express written consent of
the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provision hereof
or otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Commission, the NASD and state insurance regulators) and shall permit such
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
26
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified above.
Sun Life Assurance Company of Canada (U.S.)
By: ___________________________________
Robert P. Vrolyk
Title: Vice President and Actuary
By: ___________________________________
Edward M. Shea
Title: Assistant Vice President
SUN CAPITAL ADVISERS TRUST
By: ___________________________________
James M.A. Anderson
Title: President
SUN CAPITAL ADVISERS,INC
By: ___________________________________
James M.A. Anderson
Title: President
By: ___________________________________
Maura A. Murphy
Title: Secretary
27
<PAGE>
SCHEDULE A
Sun Life Assurance Company of Canada (U.S.)
on behalf of its segregated accounts
ACCOUNT DATE OF ORGANIZATION
------- --------------------
Separate Account F July 13, 1989
Separate Account G July 25, 1996
Separate Account I December 1, 1998
1
<PAGE>
SCHEDULE B
SUN CAPITAL ADVISERS TRUST
Sun Capital Money Market Fund
Sun Capital Investment Grade Bond Fund
Sun Capital Investors Foundation Fund
Sun Capital Select Equity Fund
Sun Capital Blue Chip Mid Cap Fund
Sun Capital Real Estate Fund
2
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that David D. Horn, whose signature
appears below, constitutes and appoints Edward M. Shea, Sandra DaDalt, Ellen
B. King, Peter F. Demuth, C. James Pricur, and James A. McNulty, III, and
each of them, his attorneys-in-fact, each with the power of substitution, for
him in any and all capacities, to sign:
(i) the Registration Statements on Form S-6 of Sun Life Assurance
Company of (U.S.) Variable Account I, to be filed with the
Securities and Exchange Commission on or about January 6, 2000,
and any amendments thereto.
(ii) any Registration Statements under the Securities Act of 1933 and
the Investment Company Act of 1940 of any of Sun Life of Canada
(U.S.) Variable Account C, Sun Life of Canada (U.S.) Variable
Account D, Sun Life of Canada (U.S.) Variable Account F, Sun Life
of Canada (U.S.) Variable Account G, and Sun Life of Canada (U.S.)
Variable Account I or any other variable account established by
Sun Life Assurance Company of Canada (U.S.) (the "Company"), and
(iii) any and all instruments, including applications for exemptions
from such Acts, which said attorneys-in-fact deem necessary and
advisable to enable the Company or any variable account of the
Company to comply with the Securities Act of 1933, as amended,
the Investment Company Act of 1940, as amended, and the rules and
regulations and requirements of the Securities and Exchange
Commission in respect thereof;
and to file the same, with exhibits thereto, and other amendments in
connection therewith with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact or his
substitute or substitutes may do or cause to be done by virtue hereof.
/s/ DAVID D. HORN
------------------------
David D. Horn
Dated: January 9, 2000
<PAGE>
ORGANIZATIONAL CHART
<TABLE>
<CAPTION>
<S> <C>
SUN LIFE ASSURANCE COMPANY OF CANADA
- -------------------------------------------------------------------------------------------------------------------------------
|
|
SUN LIFE OF CANADA
UK HOLDINGS plc
(United Kingdom)
|
|
|-------------------------------------------------------------------------------------------------------
| | | |
| | | |
CONFEDERATION SUN LIFE OF CANADA SLC FINANCIAL SUN LIFE ASSURANCE
U.K. HOLDINGS plc (UK) GROUP SERVICES SERVICES (U.K.) COMPANY OF CANADA
(England and Wales) LIMITED LIMITED (U.K.) LIMITED
| (England and Wales) (England and Wales) (England and Wales)
| Management services Holding company |
| | |
| | |
| | |
CONFEDERATION | SUN LIFE OF CANADA
LIFE INSURANCE | INDEPENDENT LIMITED
COMPANY (U.K.) | (England and Wales)
LIMITED | Financial adviser
(England and Wales) |
| |
| |
|---------------------------------------------| |----------------|-------------------------|
| | |90% |10% | |
| | | | | |
SLC POOLED SLC PENSION CONFEDERATION SUN BANK PLC CONFEDERATION
PENSIONS LIMITED INVESTMENT CAPITAL CORP. (England and Wales) PROPERTY SERVICES
(England and Wales) MANAGEMENT LIMITED plc | LIMITED
(England and Wales) (England and Wales) | (England and Wales)
(Inactive and in (Inactive) | Estate agency
liquidation) | franchising
|
|----------------------------------------------------------------------------------------------|
| | | | |
| | | | |
CONFEDERATION CONFEDERATION EXETER TRUST SUN BANK PRIMETT PROPERTY
MORTGAGE SERVICES MORTGAGE SERVICES LIMITED OFFSHORE LTD. MANAGEMENT LIMITED
(UK) LIMITED LIMITED (England and Wales) (Offshore) (England and Wales)
(England and Wales) (England and Wales) Banking
|
|
|
|----------------------------------|
| |
| |
EXETER TRUST EXETER TRUST SUNEXETER
FINANCIAL INSURANCE LIMITED
SERVICES LIMITED ----- SERVICES LIMITED (England and Wales)
(England and Wales) (England and Wales) Non-trading
Leasing Non-trading
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SUN LIFE ASSURANCE COMPANY OF CANADA
- -------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------
|
|
SLC ASSET
MANAGEMENT LIMITED
(England and Wales)
|
|
|------------------------------------------------------------------|
| |
| |
SUN LIFE OF CANADA LANGBOURN PROPERTY
UNIT MANAGERS INVESTMENT SERVICES
LIMITED (SLOCUM) LIMITED
(England and Wales) (England and Wales)
Unit trusts manager |
| |
| |
| |------------------------------------------|------------------------|
| | | | |
| | | | |
SUN LIFE OF CANADA LANGBOURN COURTS NOMINEES EAGLE NOMINEES MARE NOMINEES
NOMINEES LIMITED FINANCIAL LIMITED LIMITED LIMITED
(SLOCNOM) SERVICES LIMITED (England and Wales) (England and Wales) (England and Wales)
(England and Wales) (England and Wales) Nominee Nominee Nominee
Unit trust nominee Financial, services services services
investment and
advisory services
|
|
|----------------------------------------|
| |
| |
BROAD STREET BUCKINGHAM
MALL LIMITED ESTATE
(England and Wales) (GENERAL PARTNER)
Management services LIMITED
(England and Wales)
Management services
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SUN LIFE ASSURANCE COMPANY OF CANADA
- ----------------------------------------------------------------------------------------------------------------------------------
| | | | | | | |
| SPECTRUM UNITED McLEAN BUDDEN | SUN LIFE OF CANADA THE STORMONT | 258256 HOLDINGS
| HOLDINGS, INC. LIMITED (60%) | GROUP ASSURANCE ELECTRIC LIGHT & | LIMITED (50%)
| (Canada) (Canada) | COMPANY POWER COMPANY | (Ontario)
| | Investment counsel, | (Inactive and (Ontario) | Investment
| | Portfolio management | to be dissolved) Holding company | vehicle
| | and mutual | | | (Inactive)
| | fund dealer | | |
| | | | |
| |----------------------| | | |
| | | | | |
| SPECTRUM UNITED SUNETCO 1245792 THE GLENGARRY AND SUN LIFE FINANCIAL
| MUTUAL FUNDS INC. INVESTMENT ONTARIO, INC. STORMONT RAILWAY SERVICES OF
| (Canada) SERVICES, INC. (Ontario) COMPANY (71.3%) CANADA, INC.
| | (Canada) Holding (Canada) Holding Company
| | Mutual fund dealer company Railway Company (Inactive)
| | | |
| |29.4% 29.4%| 41.2%|
| |-----------------------------------------|
| |
| |
| SUN LIFE FINANCIAL
| HOLDINGS INC.
| (Ontario)
| |
| |
| |
|-----| |----------------------|---------------------------|
16% | |11% | |
| | | |
CENTURY 21 REAL SUN LIFE TRUST SUN LIFE
ESTATE CANADA COMPANY SECURITIES INC.
LTD. (27%) (Canada) (Canada)
(Canada) | |
| |
| |
SUN LIFE SAVINGS T.E. FINANCIAL
AND MORTGAGE CONSULTANTS LTD.
CORPORATION (33%)
(Canada) (Canada)
|
|
T.E. INVESTMENT
COUNSEL
(Canada)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SUN LIFE ASSURANCE COMPANY OF CANADA
- -------------------------------------------------------------------------------------------------------------------------------
| | | | | | | | | | | |
279906 | PANORAMA | RIVERSIDE TERRACE | S. & M. | 169086 | ASSURE HEALTH |
ONTARIO | APARTMENTS | (OTTAWA) LIMITED | DEVELOPMENTS | CANADA LIMITED | INC. (12%) |
LIMITED | LTD. | (Ontario) | LTD. | (Canada) | (Canada) |
(50%) | (Alberta) | Real estate | (British | Real estate | Health services |
(Ontario) | Real estate | management | Columbia) | holding | |
Investment | management | | Real estate | | |
vehicle | | | management | | |
| | | | | |
| | | | | |
PREFERRED CANADIAN CANADIAN AMAULICO AMAULICO FIRST REAL
VISION INSURERS INSURERS LTD. FUND LTD. PROPERTIES
SERVICES CAPITAL CAPITAL (Canada) (Canada) LIMITED (17.5%)
INC. (20%) CORPORATION I CORPORATION II Oil & gas Oil & gas (Ontario)
(Canada) (19.05%) (21.43%) holding holding Real estate
Vision services (Ontario) (Ontario) company company holding
|-----------------------------------------------------------|-----------------------------------------
| |
| |
SUN LIFE OF CANADA SUN LIFE OF CANADA
(U.S.) CAPITAL (U.S.) HOLDINGS
TRUST I GENERAL PARTNER, INC.
(Delaware) (Delaware)
Trustee to General partner
institutional |
investors |
|------|----------------------------------------------------|
| | |
| | |
|* |* |----------------|---------------------|-------------------------|---------------
SUN LIFE OF CANADA SUN LIFE OF SUN BENEFIT SUN LIFE INSURANCE
(U.S.) LIMITED CANADA (U.S.) SERVICES AND ANNUITY COMPANY
PARTNERSHIP I DISTRIBUTORS, COMPANY, INC. OF NEW YORK
(Delaware) INC. (Delaware) (New York)
(Delaware) Pension
Broker-dealer brokerage and
| administrative
| services
|
|
SUNESCO INSURANCE
AGENCY, INC.
(Massachusetts)
</TABLE>
- -------------------------------------------------------------------------------
* The sole general partner of Sun Life of Canada (U.S.) Limited Partnership I
(the "Limited Partnership") is Sun Life of Canada (U.S.) Holdings General
Partner, Inc. (the "General Partner"). The General Partner holds approximately
10% of the economic interest in the Limited Partnership, while Sun Life of
Canada (U.S.) Capital Trust I holds approximately 90% of the economic interest
in the Limited Partnership.
- -------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SUN LIFE ASSURANCE COMPANY OF CANADA
- -------------------------------------------------------------------------------------------------------------------------------
| | | |
SUN LIFE OF SUN LIFE SUN CANADA SUN LIFE OF CANADA
CANADA REINSURANCE ASSURANCE FINANCIAL CO. (INTERNATIONAL)
HOLDINGS (U.S.), INC. COMPANY OF (Delaware) LIMITED
| CANADA - U.S. Private (Bermuda)
| OPERATIONS placement
| HOLDINGS, INC. offeror
| (Delaware)
| |
| |----------------------------------------------------------------------------------
| |
SUN LIFE OF CANADA SUN LIFE OF CANADA
REINSURANCE (U.S.) HOLDINGS, INC.
COMPANY (U.S.) (Delaware)
|
|
|
- ------------------------------------------------------------|
| |
| |
SUN LIFE ASSURANCE SUN LIFE OF CANADA
COMPANY OF CANADA (U.S.) REINSURANCE (BARBADOS) LIMITED
(Delaware) (Barbados)
| reinsurance
|
- -----------------------------------------------------------------------------------------------------------------|
| | | | | | |
| SUN CAPITAL | CLARENDON SUN LIFE OF CANADA SUN LIFE FINANCIAL SUN LIFE INFORMATION
| ADVISERS, INC. | INSURANCE (U.S.) SPE 97-1, SERVICES LIMITED SERVICES IRELAND
| (Delaware) | AGENCY, INC. INC. (Bermuda) LIMITED
| | (Massachusetts) (Delaware) Off-shore (Republic of Ireland)
| | Limited purpose administrative Off-shore technology
| | entity services
| |
| |
SUN LIFE FINANCE SUN FINANCIAL
CORPORATION GROUP ADVISERS, INC.
(Inactive) (Inactive)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SUN LIFE ASSURANCE COMPANY OF CANADA
- -------------------------------------------------------------------------------------------------------------------------------
| | | | |
| | | | |
SUN LIFE OF CANADA SUN LIFE ASSURANCE PT ASURANSI SLC SERVICES |
INTERNATIONAL COMPANY OF CANADA SUN LIFE PERU S.A. (90%) | SEE
ASSURANCE LIMITED (BARBADOS) LIMITED INDONESIA (80%) (Peru) |
(Barbados) (Barbados) (Indonesia) Advisory services | 1245792
Life insurance (Inactive) | Ontario, Inc.
company | |--------- (Ontario)
99.99%| 0.01%| Holding
- ---------------------------------| | | company
| SUN LIFE
| INVERSIONES S.A.
SUN LIFE OF CANADA (Chile)
(U.S.) FINANCIAL Holding company
SERVICES HOLDINGS, INC. |
(Delaware) |
| |
| |
MASSACHUSETTS ADMINISTRADORA
FINANCIAL SERVICES DE FONDOS DE
COMPANY PENSIONES CUPRUM S.A.
(80.1%) (31.7%)
(Delaware) (Chile)
| Pension fund
| administrator
|
|----------------------|-----------------|------------------|------------------|-------------------|---------------------
| | | | | |
| | | | | |
MFS FUND MFS RETIREMENT MFS SERVICE MFS HERITAGE MFS MFS
DISTRIBUTORS, INC. SERVICES, INC. CENTER, INC. TRUST COMPANY INSTITUTIONAL INTERNATIONAL
(Delaware) (Delaware) (Delaware) (New Hampshire) ADVISORS, INC. LTD.
Transfer agent Trustee for (Delaware) (Bermuda)
IRAs and | Offshore funds
qualified | manager and
retirement plans | distributor
| |
| |---------------------|
|--------------| | |
| | |
| | |
MFS INSTITUTIONAL MFS INTERNATIONAL MFS INTERNATIONAL
ADVISORS (AUSTRALIA) (U.K.) LTD. S.C. LTDA.
LTD. (England and Wales) (Brazil)
(Australia) Off-shore funds Offshore marketing
manager and office
distributor
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SUN LIFE ASSURANCE COMPANY OF CANADA
- -------------------------------------------------------------------------------------------------------------------------------
| | |
| | |
SUN LIFE (INDIA) SUN LIFE (INDIA) SUN LIFE (INDIA)
AMC INVESTMENTS INC. DISTRIBUTION SECURITIES
(Canada) INVESTMENTS INC. INVESTMENTS INC.
Holding company (Canada) (Canada)
| Holding company Holding company
| | |
|---------------------| | |
| | | |
BIRLA SUN LIFE BIRLA SUN LIFE BIRLA SUN LIFE BIRLA SUN LIFE
TRUSTEE COMPANY ASSET MANAGEMENT DISTRIBUTION SECURITIES LIMITED
LIMITED (50%) COMPANY LIMITED COMPANY LIMITED (49%)
(India) (50%) (50.001%) (India)
Trustee to (India) (India)
mutual funds |
|
|-----------------------------|
| |
| |
INDIA ADVANTAGE BIRLA CAPITAL
FUND LTD. INTERNATIONAL AMC
(Mauritius) (Mauritius) LTD.
Mutual Funds (Mauritius)
Investment advisors/
managers
- ---------------------------------------------------------------------------------------|
| | | |
| | | |
MFS INTERNATIONAL, LTD. MFS HOLDINGS VERTEX INVESTMENT MASSACHUSETTS INVESTMENT
Investment adviser AUSTRALIA PTY MANAGEMENT, INC. MANAGEMENT CO. LTD.
and distributor LIMITED (Delaware) (Japan)
(Ireland) (Australia)
(Inactive and to |
be dissolved) |
UNITED FUNDS
MANAGEMENT LIMITED
(Australia)
</TABLE>
Companies are wholly-owned unless otherwise indicated.
Companies shown on chart are those in which Sun Life holdings exceed 10% of
voting shares.
