As filed Pursuant to Rule 424(b)(3)
under the Securities Act of 1933
Registration No. 333-103504
[Seasons Triple Elite Logo]
PROSPECTUS
August 2, 2004
ALLOCATED FIXED AND VARIABLE GROUP ANNUITY
issued by
VARIABLE ANNUITY ACCOUNT FIVE
and
AIG SUNAMERICA LIFE ASSURANCE COMPANY
The annuity contract has a variety of investment choices - available fixed
investment options which offer interest rates guaranteed by AIG SunAmerica Life
Assurance Company for different periods of time, Select Portfolios, Focused
Portfolios and Seasons Strategies:
<Table>
SELECT PORTFOLIOS FOCUSED PORTFOLIOS SEASONS STRATEGIES
LARGE CAP GROWTH FOCUS GROWTH GROWTH STRATEGY
LARGE CAP COMPOSITE FOCUS GROWTH AND INCOME (WHICH INVESTS IN STOCK PORTFOLIO, ASSET
LARGE CAP VALUE FOCUS VALUE ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO
MID CAP GROWTH FOCUS TECHNET AND MULTI-MANAGED GROWTH PORTFOLIO)
MID CAP VALUE MODERATE GROWTH STRATEGY
SMALL CAP (WHICH INVESTS IN STOCK PORTFOLIO, ASSET
INTERNATIONAL EQUITY ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO
DIVERSIFIED FIXED INCOME AND MULTI-MANAGED MODERATE GROWTH
CASH MANAGEMENT PORTFOLIO)
BALANCED GROWTH STRATEGY
(WHICH INVESTS IN STOCK PORTFOLIO, ASSET
ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO
AND MULTI-MANAGED INCOME/EQUITY
PORTFOLIO)
CONSERVATIVE GROWTH STRATEGY
(WHICH INVESTS IN STOCK PORTFOLIO, ASSET
ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO
AND MULTI-MANAGED INCOME PORTFOLIO)
</Table>
all of which invest in the underlying portfolios of
SEASONS SERIES TRUST
which is managed by:
<Table>
SELECT PORTFOLIOS FOCUSED PORTFOLIOS SEASONS STRATEGIES
AIG GLOBAL INVESTMENT CORP. AIG SUNAMERICA ASSET MANAGEMENT CORP. AIG SUNAMERICA ASSET MANAGEMENT CORP.
AIG SUNAMERICA ASSET MANAGEMENT CORP. AMERICAN CENTURY INVESTMENT JANUS CAPITAL MANAGEMENT LLC.
GOLDMAN SACHS ASSET MANAGEMENT, L.P. MANAGEMENT, INC. PUTNAM INVESTMENT MANAGEMENT, L.L.C.
GOLDMAN SACHS ASSET MANAGEMENT INT'L BAMCO, INC. T. ROWE PRICE ASSOCIATES, INC.
JANUS CAPITAL MANAGEMENT LLC. RCM CAPITAL MANAGEMENT, LLC WELLINGTON MANAGEMENT COMPANY, LLP.
LORD ABBETT & CO. LLC. FRED ALGER MANAGEMENT, INC.
T. ROWE PRICE ASSOCIATES, INC. HARRIS ASSOCIATES L.P.
WELLINGTON MANAGEMENT COMPANY, LLP. J.P. MORGAN INVESTMENT
MANAGEMENT INC.
MARSICO CAPITAL
MANAGEMENT, LLC.
SALOMON BROTHERS ASSET
MANAGEMENT INC.
THIRD AVENUE MANAGEMENT LLC.
THORNBURG INVESTMENT MANAGEMENT, INC.
</Table>
You can put your money into any one or all of the Select Portfolios, Focused
Portfolios, and Seasons Strategies and/or available fixed investment options.
Please read this prospectus carefully before investing and keep it for your
future reference. It contains important information you should know about the
Seasons Triple Elite Variable Annuity.
To learn more about the annuity offered by this prospectus, you can obtain a
copy of the Statement of Additional Information ("SAI") dated August 2, 2004.
The SAI has been filed with the Securities and Exchange Commission ("SEC") and
can be considered part of this prospectus.
The table of contents of the SAI appears below in this prospectus. For a free
copy of the SAI, call us at 800/445-SUN2 or write our Annuity Service Center at,
P.O. Box 54299, Los Angeles, California 90054-0299.
A registration statement has been filed with the SEC under the Securities Act of
1933 relating to the contract. This prospectus does not contain all the
information in the registration statement as permitted by SEC regulations. The
omitted information can be obtained from the SEC's principal office in
Washington, D.C., upon payment of a prescribed fee.
In addition, the SEC maintains a website (http://www.sec.gov) that contains the
SAI, materials incorporated by reference and other information filed
electronically with the SEC.
ANNUITIES INVOLVE RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL, AND ARE NOT A
DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. THEY ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
AIG SunAmerica Life's Annual Report on Form 10-K for the year ended December 31,
2003, and its quarterly report on Form 10-Q for the quarter ended March 31, 2004
are incorporated herein by reference.
All documents or reports filed by AIG SunAmerica Life under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") after the effective date of this prospectus are also
incorporated by reference. Statements contained in this prospectus and
subsequently filed documents which are incorporated by reference or deemed to be
incorporated by reference are deemed to modify or supersede documents
incorporated herein by reference.
AIG SunAmerica Life files its Exchange Act documents and reports, including its
annual and quarterly reports on Form 10-K and Form 10-Q, electronically pursuant
to EDGAR under CIK No. 0000006342.
AIG SunAmerica Life is subject to the informational requirements of the
Securities and Exchange Act of 1934 (as amended). We file reports and other
information with the SEC to meet those requirements. You can inspect and copy
this information at SEC public facilities at the following locations:
WASHINGTON, DISTRICT OF COLUMBIA
450 Fifth Street, N.W., Room 1024
Washington, D.C. 20549
CHICAGO, ILLINOIS
500 West Madison Street
Chicago, IL 60661
NEW YORK, NEW YORK
233 Broadway
New York, NY 10048
To obtain copies by mail, contact the Washington, D.C. location. After you pay
the fees as prescribed by the rules and regulations of the SEC, the required
documents are mailed.
Registration statements under the Securities Act of 1933, as amended, related to
the contracts offered by this prospectus are on file with the SEC. This
prospectus does not contain all of the information contained in the registration
statements and exhibits. For further information regarding the separate account,
AIG SunAmerica Life and its general account, the Variable Portfolios and the
contract, please refer to the registration statements and exhibits.
The SEC also maintains a website (http:// www.sec.gov) that contains the SAI,
materials incorporated by reference and other information filed electronically
with the SEC by AIG SunAmerica Life.
AIG SunAmerica Life will provide without charge to each person to whom this
prospectus is delivered, upon written or oral request, a copy of the documents
incorporated by reference. Requests for these documents should be directed to
AIG SunAmerica Life's Annuity Service Center, as follows:
AIG SunAmerica Life
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Telephone Number: (800) 445-SUN2
SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION
Indemnification for liabilities arising under the Securities Act of 1933 (the
"1933 Act") is provided to AIG SunAmerica Life's officers, directors and
controlling persons. The SEC has advised that it believes such indemnification
is against public policy under the 1933 Act and unenforceable. If a claim for
indemnification against such liabilities (other than for AIG SunAmerica Life's
payment of expenses incurred or paid by its directors, officers or controlling
persons in the successful defense of any legal action) is asserted by a
director, officer or controlling person of AIG SunAmerica Life in connection
with the securities registered under this prospectus, AIG SunAmerica Life will
submit to a court with jurisdiction to determine whether the indemnification is
against public policy under the 1933 Act. AIG SunAmerica Life will be governed
by final judgment of the issue. However, if in the opinion of AIG SunAmerica
Life's counsel this issue has been determined by controlling precedent, AIG
SunAmerica Life will not submit the issue to a court for determination.
2
TABLE OF CONTENTS
<Table>
GLOSSARY.................................................... 4
HIGHLIGHTS.................................................. 5
FEE TABLES.................................................. 6
Maximum Owner Transaction Expenses....................... 6
Transfer Fee............................................. 6
Contract Maintenance Fee................................. 6
Separate Account Annual Expenses......................... 6
Additional Optional Feature Fees......................... 6
Portfolio Expenses of Variable Portfolios................ 6
MAXIMUM AND MINIMUM EXPENSE EXAMPLES........................ 7
THE SEASONS TRIPLE ELITE VARIABLE ANNUITY................... 8
PURCHASING A SEASONS TRIPLE ELITE VARIABLE ANNUITY.......... 9
Allocation of Purchase Payments.......................... 9
Accumulation Units....................................... 10
Free Look................................................ 10
Exchange Offers.......................................... 10
INVESTMENT OPTIONS.......................................... 10
Variable Portfolio....................................... 11
Select and Focused Portfolios.......................... 11
Portfolio Operation.................................... 12
Seasons Strategies..................................... 12
Seasons Strategy Rebalancing........................... 12
Fixed Investment Options................................. 14
Dollar Cost Averaging Fixed Accounts..................... 14
Transfers During the Accumulation Phase.................. 15
Dollar Cost Averaging Program............................ 16
Asset Allocation Rebalancing Program..................... 17
Return Plus Program...................................... 17
Voting Rights............................................ 18
Substitution............................................. 18
ACCESS TO YOUR MONEY........................................ 18
Free Withdrawal Provision................................ 18
Systematic Withdrawal Program............................ 20
Minimum Contract Value................................... 20
Qualified Contract Owners................................ 20
OPTIONAL LIVING BENEFITS.................................... 20
Seasons Income Rewards Feature........................... 20
Seasons Promise Feature.................................. 24
DEATH BENEFIT............................................... 26
Standard Death Benefit................................... 28
Optional Seasons Estate Advantage........................ 28
Optional Earnings Advantage.............................. 29
Spousal Continuation..................................... 31
EXPENSES.................................................... 32
Separate Account Charges................................. 32
Withdrawal Charges....................................... 32
Investment Charges....................................... 33
Contract Maintenance Fee................................. 33
Transfer Fee............................................. 33
Optional Seasons Income Rewards Fee...................... 33
Optional Seasons Promise Fee............................. 34
Optional Seasons Estate Advantage Fee.................... 34
Optional Earnings Advantage Fee.......................... 34
Premium Tax.............................................. 34
Income Taxes............................................. 34
Reduction or Elimination of Charges and Expenses, and
Additional Amounts Credited............................ 34
INCOME OPTIONS.............................................. 35
Annuity Date............................................. 35
Income Options........................................... 35
Allocation of Annuity Payments........................... 36
Transfers During the Income Phase........................ 37
Deferment of Payments.................................... 37
TAXES....................................................... 37
Annuity Contracts in General............................. 37
Tax Treatment of Distributions--Non-Qualified
Contracts.............................................. 37
Tax Treatment of Distributions--Qualified Contracts...... 38
Minimum Distributions.................................... 38
Tax Treatment of Death Benefits.......................... 38
Contracts Owned by a Trust or Corporation................ 38
Gifts, Pledges and/or Assignments of a Contract.......... 38
Diversification and Investor Control..................... 38
PERFORMANCE................................................. 40
OTHER INFORMATION........................................... 40
AIG SunAmerica Life...................................... 40
The Separate Account..................................... 41
The General Account...................................... 41
Payments in Connection with Distribution of the
Contract............................................... 41
Administration........................................... 42
Legal Proceedings........................................ 42
Ownership................................................ 42
Independent Registered Public Accounting Firm............ 42
Registration Statement................................... 42
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.... 42
APPENDIX A--CONDENSED FINANCIAL INFORMATION................. A-1
APPENDIX B--DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION... B-1
APPENDIX C--SEASONS INCOME REWARDS EXAMPLES................. C-1
APPENDIX D--MARKET VALUE ADJUSTMENT......................... D-1
</Table>
3
GLOSSARY
We have capitalized some of the technical terms used in this prospectus. To help
you understand these terms, we define them in this glossary.
ACCUMULATION PHASE--The period during which you invest money in your contract.
ACCUMULATION UNITS--A measurement we use to calculate the value of the variable
portion of your contract during the Accumulation Phase.
ANNUITANT(S)--The person(s) on whose life (lives) we base annuity payments.
ANNUITY DATE--The date on which annuity payments are to begin, as selected by
you.
ANNUITY UNITS--A measurement we use to calculate the amount of annuity payments
you receive from the variable portion of your contract during the Income Phase.
BENEFICIARY(IES)--The person(s) designated to receive any benefits under the
contract if you or the Annuitant dies.
COMPANY--AIG SunAmerica Life Assurance Company, AIG SunAmerica Life, we, us, the
issuer of this annuity contract. Only "AIG SunAmerica Life" is a capitalized
term in the prospectus.
INCOME PHASE--The period during which we make annuity payments to you.
IRS--The Internal Revenue Service.
LATEST ANNUITY DATE--Your 95th birthday or 10th contract anniversary whichever
is later.
NON-QUALIFIED (CONTRACT)--A contract purchased with after-tax dollars. In
general, these contracts are not under any pension plan, specially sponsored
program or individual retirement account ("IRA").
PURCHASE PAYMENTS--The money you give us to buy the contract, as well as any
additional money you give us to invest in the contract after you own it.
QUALIFIED (CONTRACT)--A contract purchased with pretax dollars. These contracts
are generally purchased under a pension plan, specially sponsored program or
individual retirement account ("IRA").
VARIABLE PORTFOLIO(S)--Refers collectively to the Select Portfolios, Focused
Portfolios and/or Seasons Strategies. The underlying investment portfolios may
be referred to as underlying funds.
4
HIGHLIGHTS
- --------------------------------------------------------------------------------
The Seasons Triple Elite Variable Annuity is a contract between you and AIG
SunAmerica Life. It is designed to help you invest on a tax-deferred basis and
meet long-term financial goals. There are minimum Purchase Payment amounts
required to purchase a contract. Purchase Payments may be invested in the Select
Portfolios, Focused Portfolios and/or pre-allocated Seasons Strategies
("Variable Portfolios") and available fixed account options. Like all deferred
annuities, the contract has an Accumulation Phase and an Income Phase. During
the Accumulation Phase, you invest money in your contract. The Income Phase
begins when you start receiving income payments from your annuity to provide for
your retirement.
FREE LOOK: You may cancel your contract within 10 days after receiving it (or
whatever period is required in your state), we will cancel the contract without
charging a withdrawal charge. You will receive whatever your contract is worth
on the day that we receive your request. The amount refunded may be more or less
than your original Purchase Payment. We will return your original Purchase
Payment if required by law. See PURCHASING A SEASONS TRIPLE ELITE VARIABLE
ANNUITY in the prospectus.
EXPENSES: There are fees and charges associated with the contract. Each year, we
deduct a $35 contract maintenance fee from your contract, which is currently
waived for contracts of $50,000 or more. We also deduct insurance charges, which
equal 1.55% annually of the average daily value of your contract allocated to
the Variable Portfolios. These are investment charges on amounts invested in the
Variable Portfolios. If you elect optional features available under the contract
we may charge additional fees for these features. A separate withdrawal charge
schedule applies to each Purchase Payment. The amount of the withdrawal charge
declines over time. After a Purchase Payment has been made in the contract for
three complete years, withdrawal charges no longer apply to that portion of the
Purchase Payment. See the FEE TABLE, PURCHASING A SEASONS TRIPLE ELITE VARIABLE
ANNUITY and EXPENSES in the prospectus.
ACCESS TO YOUR MONEY: You may withdraw money from your contract during the
Accumulation Phase. If you do so, earnings are deemed to be withdrawn first. You
will pay income tax on earnings and untaxed contributions when you withdraw
them. Payment received during the Income Phase are considered partly a return of
your original investment. A federal tax penalty may apply if you make
withdrawals before age 59 1/2. As noted above, a withdrawal charge may apply.
See ACCESS TO YOUR MONEY and TAXES in the prospectus.
DEATH BENEFITS: A death benefit feature is available under the contract to
protect your Beneficiaries in the event of your death during the Accumulation
Phase. Optional enhanced death benefits are also available. See DEATH BENEFITS
in the prospectus.
INCOME OPTIONS: When you are ready to begin taking income, you can choose to
receive income payments on a variable basis, fixed basis or a combination of
both. You may also choose from five different options, including an option for
income that you cannot outlive. See INCOME OPTIONS in the prospectus.
Please read the prospectus carefully for more detailed information regarding
these and other features and benefits of the contract, as well as the risks of
investing.
INQUIRIES: If you have questions about your contract call your financial
representative or contact us at AIG SunAmerica Life Annuity Service Center P.O.
Box 54299 Los Angeles, California 90054-0299. Telephone Number: (800) 445-SUN2.
AIG SUNAMERICA LIFE OFFERS SEVERAL DIFFERENT VARIABLE ANNUITY PRODUCTS TO MEET
THE DIVERSE NEEDS OF OUR INVESTORS. EACH PRODUCT MAY PROVIDE DIFFERENT FEATURES
AND BENEFITS OFFERED AT DIFFERENT FEES, CHARGES AND EXPENSES. WHEN WORKING WITH
YOUR FINANCIAL REPRESENTATIVE TO DETERMINE THE BEST PRODUCT TO MEET YOUR NEEDS
YOU SHOULD CONSIDER, AMONG OTHER THINGS, WHETHER THE FEATURES OF THIS CONTRACT
AND THE RELATED FEES PROVIDE THE MOST APPROPRIATE PACKAGE TO HELP MEET YOUR
LONG-TERM RETIREMENT SAVINGS GOALS.
Please read the prospectus carefully for more detailed information regarding
these and other features and benefits of the contract, as well as the risks of
investing.
5
FEE TABLES
- --------------------------------------------------------------------------------
THE FOLLOWING DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY AT THE TIME THAT
YOU BUY THE CONTRACT, SURRENDER THE CONTRACT, OR TRANSFER CASH VALUE BETWEEN
INVESTMENT OPTIONS.
MAXIMUM OWNER TRANSACTION EXPENSES
<Table>
MAXIMUM WITHDRAWAL CHARGES
(as a percentage of each Purchase Payment)(1)... 7%
</Table>
TRANSFER FEE
No charge for the first 15 transfers each contract year; thereafter, the fee is
$25 ($10 in Pennsylvania and Texas) per transfer
THE FOLLOWING DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY PERIODICALLY
DURING THE TIME THAT YOU OWN THE CONTRACT, NOT INCLUDING UNDERLYING PORTFOLIO
FEES AND EXPENSES WHICH ARE OUTLINED IN THE NEXT SECTION.
CONTRACT MAINTENANCE FEE
$35 ($30 in North Dakota) which is currently waived if contract value $50,000 or
more
SEPARATE ACCOUNT ANNUAL EXPENSES
(deducted daily as a percentage of your average daily net asset value)
<Table>
Mortality and Expense Risk Fees.............. 1.40%
Distribution Expense Fee..................... 0.15%
Optional Seasons Estate Advantage Fee(2)..... 0.15%
Optional Earnings Advantage Fee(3)........... 0.25%
-----
Total Separate Account Annual Expenses....... 1.95%
=====
</Table>
ADDITIONAL OPTIONAL FEATURE FEES
You may elect either the Seasons Income Rewards or Seasons Promise feature
described below.
OPTIONAL SEASONS INCOME REWARDS FEE
(Calculated as a percentage of your Purchase Payments received in the first 90
days less withdrawals)
<Table>
<Caption>
ANNUALIZED
CONTRACT YEAR FEE(6)
- ------------- ----------
0-7....................................... 0.65%
8+........................................ 0.45%
</Table>
OPTIONAL SEASONS PROMISE FEE(4)
(Calculated as a percentage of your contract value minus Purchase Payments
received after the 90th day since you purchased your contract)
<Table>
<Caption>
ANNUALIZED
CONTRACT YEAR(5) CHARGE(5)
- ---------------- ----------
0-5....................................... 0.65%
6-10...................................... 0.45%
11+....................................... none
</Table>
(1) Withdrawal Charge Schedule as a percentage of each Purchase Payment)
declines over 3 years as follows
<Table>
YEARS:...................................................... 1 2 3 4+
7% 6% 6% 0%
</Table>
(2) Seasons Estate Advantage feature is optional and if elected, the fee is an
annualized charge that is deducted daily from your contract value.
(3) Earnings Advantage, an enhanced death benefit feature, which is described
more fully in the prospectus is optional and if elected, the fee is an
annualized charge that is deducted daily from daily net asset value. The
Earnings Advantage can only be elected if the Seasons Estate Advantage is
also elected.
(4) The Seasons Promise feature is optional and if elected, the fee is
calculated as a percentage of your contract value minus Purchase Payments
received after the 90th day since you purchased your contract. The fee is
deducted from your contract value at the end of the first contract quarter
and quarterly thereafter.
(5) If you are a resident of Washington or Oregon, the following charges apply:
0.65% for Years 0-7, 0.30% for Years 8-10, and no charge for Years 11+.
(6) The Seasons Income Rewards feature is optional and if elected, the fee is
generally calculated as a percentage of your Purchase Payment received in
the first 90 days less withdrawals. The fee is deducted from your contract
at the end of the first quarter following election and quarterly thereafter.
THE NEXT ITEM SHOWS THE MINIMUM AND MAXIMUM TOTAL OPERATING EXPENSES CHARGED BY
THE UNDERLYING PORTFOLIOS OF THE TRUSTS BEFORE ANY WAIVERS OR REIMBURSEMENTS
THAT YOU MAY PAY PERIODICALLY DURING THE TIME YOU OWN THE CONTRACT. MORE DETAIL
CONCERNING THE TRUSTS' FEES AND EXPENSES IS CONTAINED IN THE PROSPECTUS FOR EACH
OF THE TRUSTS. PLEASE READ THEM CAREFULLY BEFORE INVESTING.
PORTFOLIO EXPENSES
<Table>
<Caption>
TOTAL ANNUAL TRUST OPERATING EXPENSES MINIMUM MAXIMUM
------------------------------------- ------- -------
(expenses that are deducted from underlying portfolios of
the Trusts, including management fees, other expenses and
12b-1 fees if applicable)................................... 0.92% 2.17%
</Table>
6
MAXIMUM AND MINIMUM EXPENSE EXAMPLES
- --------------------------------------------------------------------------------
These Examples are intended to help you compare the cost of investing in the
contract with the cost of investing in other variable annuity contracts. These
costs include owner transaction expenses, contract maintenance fees, separate
account annual expense, fees for optional features and expenses for the
underlying portfolios of the Trusts.
The Examples assume that you invest $10,000 in the contract for the time periods
indicated; that your investment has a 5% return each year; and that the maximum
and minimum fees and expenses of the underlying portfolios of the Trust are
reflected. Although your actual costs may be higher or lower, based on these
assumptions, your costs at the end of the stated period would be:
MAXIMUM EXPENSE EXAMPLES
(assuming maximum separate account annual expenses of 1.95%, including Seasons
Estate Advantage (with Earnings Advantage) and investment in an underlying
portfolio with total expenses of 2.17%)
(1) If you surrender your contract at the end of the applicable time period and
you elect the optional Seasons Estate Advantage (with Earnings Advantage)
(0.40%) and Seasons Income Rewards (0.65% in years 0-7, and 0.45% in years
8-10) features:
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
$1,182 $2,050 $2,421 $4,807
</Table>
(2) If you annuitize your contract at the end of the applicable time period:
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
$374 $1,138 $1,920 $3,967
</Table>
(3) If you do not surrender your contract and you elect the optional Seasons
Estate Advantage (with Earnings Advantage) (0.40%) and Seasons Income
Rewards (0.65% in years 0-7, and 0.45% in years 8-10) features:
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
$482 $1,450 $2,421 $4,807
</Table>
MINIMUM EXPENSE EXAMPLES
(assuming minimum separate account annual expenses of 1.55% and investment in an
underlying portfolio with total expenses of 0.92%)
(1) If you surrender your contract at the end of the applicable time period and
you do not elect any optional features:
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
$955 $1,385 $1,340 $2,856
</Table>
(2) If you annuitize your contract at the end of the applicable time period:
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
$250 $770 $1,316 $2,806
</Table>
(3) If you do not surrender your contract and do not elect any optional
features:
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
$255 $785 $1,340 $2,856
</Table>
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you will
incur directly and indirectly by investing in the contract. The Example
reflects owner transaction expenses, separate account expenses including
optional benefit fees in some examples and investment portfolio expenses by
Variable Portfolios. We converted the contract administration charge to a
percentage (0.05%). The actual impact of the administration charge may differ
from this percentage and may be waived for contract values over $50,000.
Additional information on the portfolio company fees can be found in the
Trust prospectus located behind this prospectus.
2. In addition to the stated assumptions, the Examples also assume separate
account charges as indicated and that no transfer fees were imposed. Although
premium taxes may apply in certain states, they are not reflected in the
Examples.
3. Examples reflecting application of optional features and benefits use the
highest fees and charges at which those features are being offered. If you
elected the Seasons Promise program, instead of the Seasons Income Rewards
program, your expenses would be lower than those shown in these tables. The
fee for the Seasons Income Rewards and Seasons Promise features are not
calculated as a percentage of your daily net asset value, but on other
calculations more fully described in the prospectus. The examples above
reflect fees for the Seasons Income Rewards Program through 10 years of
contract ownership. The fee will continue to be assessed as long as the
Withdrawal Benefit Base is greater than zero.
4. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
CONDENSED FINANCIALS APPEAR IN APPENDIX A OF THIS PROSPECTUS.
7
THE SEASONS TRIPLE ELITE VARIABLE ANNUITY
- --------------------------------------------------------------------------------
An annuity is a contract between you and an insurance company. You are the owner
of the contract. The contract provides three main benefits:
- Tax Deferral: You do not pay taxes on your earnings from the annuity
until you withdraw them.
- Death Benefit: If you die during the Accumulation Phase, the insurance
company pays a death benefit to your Beneficiary.
- Guaranteed Income: If elected, you receive a stream of income for your
lifetime, or another available period you select.
Tax-qualified retirement plans (e.g., IRAs, 401(k) or 403(b) plans) defer
payment of taxes on earnings until withdrawn. If you are considering funding a
tax-qualified retirement plan with an annuity, you should know that an annuity
does not provide any additional tax deferral treatment of earnings beyond the
treatment provided by the tax-qualified retirement plan itself. However,
annuities do provide other features and benefits which may be valuable to you.
You should fully discuss this decision with your financial representative.
This annuity was developed to help you contribute to your retirement savings.
This annuity works in two stages, the Accumulation Phase and the Income Phase.
Your contract is in the Accumulation Phase during the period when you make
payments into the contract. The Income Phase begins when you request that we
start making payments to you out of the money accumulated in your contract.
The contract is called a "variable" annuity because it allows you to invest in
variable investment portfolios which we call Variable Portfolios. The Variable
Portfolios are similar to mutual funds, in that they have specific investment
objectives and their performance varies. You can gain or lose money if you
invest in these Variable Portfolios. The amount of money you accumulate in your
contract depends on the performance of the Variable Portfolios in which you
invest.
The contract may also offer fixed account options for varying time periods.
Fixed account options earn interest at a rate set and guaranteed by AIG
SunAmerica Life. If available and you allocate money to the fixed account
options, the amount of money that accumulates in your contract depends on the
total interest credited to the particular fixed account option(s) in which you
are invested.
For more information on Variable Portfolios and fixed account options available
under this contract, SEE INVESTMENT OPTIONS BELOW.
AIG SunAmerica Life issues the Seasons Triple Elite Variable Annuity. When you
purchase a Seasons Triple Elite Variable Annuity, a contract exists between you
and AIG SunAmerica Life. The Company is a stock life insurance company organized
under the laws of the state of Arizona. Its principal place of business is 1
SunAmerica Center, Los Angeles, California 90067. The Company conducts life
insurance and annuity business in the District of Columbia and all states except
New York. AIG SunAmerica Life is an indirect, wholly owned subsidiary of
American International Group, Inc., a Delaware corporation. Seasons Triple Elite
Variable Annuity may not currently be available in all states. Please check with
your financial representative regarding availability in your state.
This annuity is designed for investors whose personal circumstances allow for a
long-term investment time horizon, to assist in contributing to retirement
savings. As a function of the Internal Revenue Code ("IRC"), you may be assessed
a 10% federal tax penalty on any withdrawal made prior to your reaching age
59 1/2. Additionally, this contract provides that you will be charged a
withdrawal charge on each Purchase Payment withdrawn if that Purchase Payment
has not been invested in this contract for at least 3 years. Because of the
potential penalty, you should fully discuss all of the benefits and risks of
this contract with your financial adviser prior to purchase.
8
PURCHASING A SEASONS TRIPLE ELITE
VARIABLE ANNUITY
- --------------------------------------------------------------------------------
An initial Purchase Payment is the money you give us to buy a contract. Any
additional money you give us to invest in the contract after purchase is a
subsequent Purchase Payment.
This chart shows the minimum initial and subsequent Purchase Payments permitted
under your contract. These amounts depend upon whether a contract is Qualified
or Non-qualified for tax purposes.
<Table>
<Caption>
MINIMUM
SUBSEQUENT MINIMUM SUBSEQUENT
MINIMUM INITIAL PURCHASE PURCHASE PAYMENT--
PURCHASE PAYMENT PAYMENT-- AUTOMATIC PAYMENT PLAN
---------------- ---------------- ----------------------
Qualified $ 2,000 $250 $100
Non-qualified $10,000 $500 $100
</Table>
We reserve the right to require Company approval prior to accepting Purchase
Payments greater than $1,000,000. For contracts owned by a non-natural owner, we
reserve the right to require prior Company approval to accept Purchase Payments
greater than $250,000. Subsequent Purchase Payments that would cause total
Purchase Payments in all contracts issued by AIG SunAmerica Life and First
SunAmerica Life Insurance Company, an affiliate of AIG SunAmerica Life, to the
same owner to exceed these limits may also be subject to Company pre-approval.
For any contracts subject to these dollar amount reservations, we further
reserve the right to limit the death benefit amount payable in excess of
contract value at the time we receive all required paperwork and satisfactory
proof of death. Any limit on the maximum death benefit payable would be mutually
agreed upon by you and the Company prior to purchasing the contract. We reserve
the right to change the amount at which pre-approval is required, at any time.
Once you have contributed at least the minimum initial Purchase Payment, you can
establish an automatic payment plan that allows you to make subsequent Purchase
Payments of as little as $100.
In addition, we may not issue a contract to anyone age 86 or older. In general,
we will not issue a Qualified contract to anyone who is age 70 1/2 or older,
unless they certify to us that the minimum distribution required by the federal
tax code is being made.
We allow spouses to jointly own this contract. However, the age of the older
spouse is used to determine the availability of any age driven benefits. The
addition of a joint owner after the contract has been issued in contingent upon
prior review and approval by the Company. If we learn of a misstatement of age,
we reserve the right to fully pursue our remedies including termination of the
contract and/or revocation of any age-driven benefit.
You may assign this contract before beginning the Income Phase by sending us a
written request for an assignment. Your rights and those of any other person
with rights under this contract will be subject to the assignment. WE RESERVE
THE RIGHT TO NOT RECOGNIZE ASSIGNMENTS IF IT CHANGES THE RISK PROFILE OF THE
OWNER OF THE CONTRACT, AS DETERMINED IN OUR SOLE DISCRETION. Please see the
Statement of Additional Information for details on the tax consequences of an
assignment.
ALLOCATION OF PURCHASE PAYMENTS
We invest your Purchase Payments in the fixed accounts, Variable Portfolios
according to your instructions. If we receive a Purchase Payment without
allocation instructions, we will invest the money according to your last
allocation instructions. Purchase Payments are applied to your contract based
upon the value of the variable investment option next determined after receipt
of your money. SEE INVESTMENT OPTIONS BELOW.
In order to issue your contract, we must receive your completed application
and/or Purchase Payment allocation instructions and any other required paperwork
at our Annuity Service Center. We allocate your initial Purchase Payment within
two days of receiving it. If we do not have complete information necessary to
issue your contract, we will contact you. If we do not have the information
necessary to issue your contract within 5 business days we will:
- Send your money back to you; or
- Ask your permission to keep your money until we get the information
necessary to issue the contract.
9
ACCUMULATION UNITS
The value of the variable portion of your contract will go up or down depending
upon the investment performance of the Variable Portfolios you select. In order
to keep track of the value of your contract, we use a unit of measure called an
Accumulation Unit which works like a share of a mutual fund. During the Income
Phase, we call them Annuity Units.
An Accumulation Unit value is determined each day that the New York Stock
Exchange ("NYSE") is open. We base the number of units you receive on the unit
value of the variable investment option as of the date we receive your money, if
we receive it before 1:00 p.m. Pacific Time (PT) and on the next day's unit
value if we receive your money after 1:00 p.m. PT. We calculate an Accumulation
Unit for each Variable Portfolios after the NYSE closes each day. We do this by:
1. determining the total value of money invested in a particular Variable
Portfolio;
2. subtracting from that amount any asset-based charges and any other
charges such as taxes we have deducted; and
3. dividing this amount by the number of outstanding Accumulation Units.
EXAMPLE:
We receive a $25,000 Purchase Payment from you on Wednesday. You allocate
the money to the Focus Growth Portfolio. We determine that the value of an
Accumulation Unit for the Focus Growth Portfolio is $11.10 when the NYSE
closes on Wednesday. We then divide $25,000 by $11.10 and credit your
contract on Wednesday night with 2,252.2523 Accumulation Units for the
Focus Growth Portfolio.
FREE LOOK
You may cancel your contract within ten days after receiving it (or longer if
required by state law). We call this a "free look." To cancel, you must mail the
contract along with your free look request to Our Annuity Service Center at P.O.
Box 54299, Los Angeles, California 90054-0299.
If you decide to cancel your contract during the free look period, generally, we
will refund to you the value of your contract on the day we receive your
request. The amount refunded to you may be more or less than your original
investment.
Certain states require us to return your Purchase Payments upon a free look
request. Additionally, all contracts issued as an IRA require the full return of
Purchase Payments upon a free look. With respect to those contracts, we reserve
the right to put your money in the Cash Management investment option during the
free look period and will allocate your money according to your instructions at
the end of the applicable free look period. Currently, we do not put your money
in the Cash Management investment option during the free look period unless you
allocate your money to it. If your contract was issued in a state requiring
return of Purchase Payments or as an IRA and you cancel your contract during the
free look period, we return the greater of (1) your Purchase Payments; or (2)
the value of your contract. At the end of the free look period, we allocate your
money according to your instructions.
EXCHANGE OFFERS
From time to time, we may offer to allow you to exchange an older variable
annuity issued by AIG SunAmerica Life or one of its affiliates, for a newer
product with more current features and benefits, also issued by AIG SunAmerica
Life or one of its affiliates. Such an Exchange Offer will be made in accordance
with the applicable state and federal securities and insurance rules and
regulations. We will explain the specific terms and conditions of any such
Exchange Offer at the time the offer is made.
INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
The contract offers variable investment options which we call Variable
Portfolios, and fixed investment options. We designed the contract to meet your
varying investment needs over time. You can achieve this by using the Variable
Portfolios alone or in concert with the fixed investment options. The Variable
Portfolios are only available through
10
the purchase of certain insurance contracts. A mixture of your investment in the
Variable Portfolios and fixed account options may lower the risk associated with
investing only in a variable investment option.
VARIABLE PORTFOLIOS
Each of the variable investment options of the contract invests in underlying
portfolios of Seasons Series Trust. AIG SAAMCo, an affiliate of AIG SunAmerica
Life, manages Seasons Series Trust. AIG SAAMCo has engaged sub-advisers to
provide investment advice for certain of the underlying investment portfolios.
YOU SHOULD READ THE PROSPECTUS FOR THE SEASONS SERIES TRUST CAREFULLY BEFORE
INVESTING. THE TRUST PROSPECTUS WHICH IS ATTACHED HERETO CONTAINS DETAILED
INFORMATION ABOUT THE UNDERLYING INVESTMENT PORTFOLIOS INCLUDING INVESTMENT
OBJECTIVE AND RISK FACTORS.
SELECT AND FOCUSED PORTFOLIOS
The contract offers nine Select Portfolios, each with a distinct investment
objective, utilizing a disciplined investing style to achieve its objective.
Each Select Portfolio invests in an underlying investment portfolio of the
Seasons Series Trust. Except for the Cash Management portfolio, each underlying
portfolio is multi-managed by a team of three money managers. One component of
the underlying portfolios is an unmanaged component that tracks a particular
target index or subset of an index. The other two components are actively
managed. The unmanaged component of each underlying portfolio is intended to
balance some of the risks associated with an actively traded portfolio.
The contract also currently offers four Focused Portfolios. Each multi-managed
Focused Portfolio offers you at least three different professional managers, one
of which may be AIG SAAMCo, and each of which advises a separate portion of the
Focused Portfolio. Each manager actively selects a limited number of stocks that
represent their best stock selections. This approach to investing results in a
more concentrated portfolio, which will be less diversified than the Select
Portfolios, and may be subject to greater market risks.
Each Select and Focused Portfolio and the respective managers are:
<Table>
SELECT PORTFOLIOS FOCUSED PORTFOLIOS
LARGE CAP GROWTH MID CAP GROWTH INTERNATIONAL EQUITY FOCUS GROWTH
AIG Global AIGGIC AIGGIC Fred Alger Management,
Investment Corp. T. Rowe Price Goldman Sachs Asset Inc. ("Alger")
("AIGGIC") Wellington Management Int'l Marsico Capital
Goldman Sachs Asset Management Lord Abbett Management, LLC.
Management, L.P. ("Marsico")
("GSAM") MID CAP VALUE DIVERSIFIED FIXED INCOME Salomon Brothers Asset
Janus Capital AIGGIC AIGGIC Management ("Salomon")
Management LLC. GSAM AIG SAAMCo
("Janus") Lord Abbett & Wellington Management FOCUS GROWTH & INCOME
Co. LLC.("Lord Harris Associates L.P.
LARGE CAP COMPOSITE Abbett") CASH MANAGEMENT ("Harris")
AIGGIC AIG SAAMCo Thornburg Investment
AIG SunAmerica Asset SMALL CAP Management, Inc.
Management Corp. AIGGIC Marsico
Corporation ("AIG AIG SAAMCo
SAAMCo") Lord Abbett FOCUS VALUE
T. Rowe Price Third Avenue Management
Associates, Inc. LLC.
("T. Rowe Price") J.P. Morgan Investment
Management, Inc. ("J.P.
LARGE CAP VALUE Morgan")
AIGGIC American Century
T. Rowe Price Investment Management,
Wellington Inc. ("American Century")
Management Company,
LLP. ("Wellington FOCUS TECHNET
Management") AIG SAAMCo
BAMCo
RCM Capital Management,
LLC ("Dresdner")
</Table>
11
PORTFOLIO OPERATION
Each Select and Focused Portfolio is designed to meet a distinct investment
objective facilitated by the management philosophy of three different money
managers (except for the Cash Management portfolio). Generally, the Purchase
Payments received for allocation to each Select or Focused Portfolio will be
allocated equally among the three managers for that Select and Focused
Portfolio. Each quarter AIG SAAMCo will evaluate the asset allocation between
the three managers of each Select or Focused Portfolio. If AIG SAAMCo determines
that the assets have become significantly unequal in allocation among the
managers, then the incoming cash flows may be redirected in an attempt to
stabilize the allocations. Generally, existing Select and Focused Portfolio
assets will not be rebalanced. However, we reserve the right to do so in the
event that it is deemed necessary and not adverse to the interests of contract
owners invested in the Select and Focused Portfolios.
SEASONS STRATEGIES
The contract offers four multi-manager variable investment Seasons Strategies,
each with a different investment objective. We designed the Seasons Strategies
utilizing an asset allocation approach to meet your investment needs over time,
considering factors such as your age, goals and risk tolerance. However, each
Seasons Strategy is designed to achieve different levels of growth over time.
Each Seasons Strategy invests in three underlying investment portfolios of the
Seasons Series Trust. The allocation of money among these investment portfolios
varies depending on the objective of the Seasons Strategy.
The underlying investment portfolios of Seasons Series Trust in which the
Seasons Strategies invest include the Asset Allocation: Diversified Growth
Portfolio, the Stock Portfolio and the Multi-Managed Growth, Multi-Managed
Moderate Growth, Multi-Managed Income/Equity and Multi-Managed Income Portfolios
(the "Multi-Managed Portfolios").
The Asset Allocation: Diversified Growth Portfolio is managed by Putnam. The
Stock Portfolio is managed by T. Rowe Price. All of the Multi-Managed Portfolios
include the same three basic investment components: a growth component managed
by Janus, a balanced component managed by AIG SAAMCo and a fixed income
component managed by Wellington, LLP. The Growth Seasons Strategy and the
Moderate Growth Seasons Strategy also have an aggressive growth component which
AIG SAAMCo manages. The percentage that any one of these components represents
in each Multi-Managed Portfolio varies in accordance with the investment
objective.
Each Seasons Strategy uses an investment approach based on asset allocation.
This approach is achieved by each Seasons Strategy investing in distinct
percentages in three specific underlying funds of the Seasons Series Trust. In
turn, the underlying funds invest in a combination of domestic and international
stocks, bonds and cash. Based on the percentage allocation to each specific
underlying fund and each underlying fund's investment approach, each Seasons
Strategy initially has a neutral asset allocation mix of stocks, bonds and cash.
SEASONS STRATEGY REBALANCING
Each Seasons Strategy is designed to meet its investment objective by allocating
a portion of your money to three different investment portfolios. At the
beginning of each quarter a rebalancing occurs among the underlying funds to
realign each Seasons Strategy with its distinct percentage investment in the
three underlying funds. This rebalancing is designed to help maintain the
neutral asset allocation mix for each Seasons Strategy. The pie charts on the
following pages demonstrate:
- the neutral asset allocation mix for each Seasons Strategy; and
- the percentage allocation in which each Seasons Strategy invests.
On the first business day of each quarter (or as close to such date as is
administratively practicable) your money will be allocated among the various
investment portfolios according to the percentages set forth on the following
pages. Additionally, within each Multi-Managed Portfolio, your money will be
rebalanced among the various components. We also reserve the right to rebalance
any Seasons Strategy more frequently if rebalancing is deemed necessary and not
adverse to the interests of contract owners invested in such Seasons Strategy.
Rebalancing a Seasons Strategy may involve shifting a portion of assets out of
underlying investment portfolios with higher returns into underlying investment
portfolios with relatively lower returns.
12
<Table>
GROWTH STRATEGY MODERATE GROWTH STRATEGY
GOAL: Long-term growth of capital, allocating its assets GOAL: Growth of capital through investments in equities,
primarily to stocks. This Seasons Strategy may be best with a secondary objective of conservation of principal by
suited for those with longer periods to invest. allocating more of its assets to bonds than the Growth
Strategy. This Seasons Strategy may be best suited for those
Target Asset Allocation: nearing retirement years but still earning income.
Stocks 80% Bonds 15% Cash 5% Target Asset Allocation:
[GROWTH STRATEGY PIE CHART] Stocks 70% Bonds 25% Cash 5%
[MODERATE GROWTH PIE CHART]
</Table>
<Table>
BALANCED GROWTH STRATEGY CONSERVATIVE GROWTH STRATEGY
GOAL: Focuses on conservation of principal by investing GOAL: Capital preservation while maintaining some
in a more balanced weighting of stocks and bonds, with a potential for growth over the long term. This Seasons Strategy
secondary objective of seeking a high total return. This may be best suited for those with lower investment risk
Seasons Strategy may be best suited for those approaching tolerance.
retirement and with less tolerance for investment risk.
Target Asset Allocation:
Target Asset Allocation:
Stocks 42% Bonds 53% Cash 5%
Stocks 55% Bonds 40% Cash 5%
[CONSERVATIVE GROWTH PIE CHART]
[BALANCED GROWTH PIE CHART]
</Table>
13
FIXED INVESTMENT OPTIONS
Your contract may offer Fixed Account Guarantee Periods ("FAGP") to which you
may allocate certain Purchase Payments or contract value. Available guarantee
periods may be for different lengths of time (such as 1, 3 or 5 years) and may
have different guaranteed interest rates, as noted below. We guarantee the
interest rate credited to amounts allocated to any available FAGP and that the
rate will never be less than the minimum guaranteed interest rate as specified
in your contract. Once established, the rates for specified payments do not
change during the guarantee period. We determine the FAGPs offered at any time
in our sole discretion and we reserve the right to change the FAGPs that we make
available at any time, unless state law requires us to do otherwise. Please
check with your financial representative to learn if any FAGPs are currently
offered.
There are three interest rate scenarios for money allocated to the FAGPs. Each
of these rates may differ from one another. Once declared, the applicable rate
is guaranteed until the corresponding guarantee period expires. Under each
scenario your money may be credited a different rate of interest as follows:
- INITIAL RATE: The rate credited to any portion of the initial Purchase
Payment allocated to a FAGP.
- CURRENT RATE: The rate credited to any portion of the subsequent Purchase
Payments allocated to a FAGP.
- RENEWAL RATE: The rate credited to money transferred from a FAGP or a
Variable Portfolio into a FAGP and to money remaining in a FAGP after
expiration of a guarantee period.
When a FAGP ends, you may leave your money in the same FAGP or you may
reallocate your money to another FAGP or to the Variable Portfolios. If you want
to reallocate your money, you must contact us within 30 days after the end of
the current interest guarantee period and instruct us as to where you would like
the money invested. WE DO NOT CONTACT YOU. IF WE DO NOT HEAR FROM YOU, YOUR
MONEY WILL REMAIN IN THE SAME FAGP WHERE IT WILL EARN INTEREST AT THE RENEWAL
RATE THEN IN EFFECT FOR THAT FAGP.
If you purchased your contract prior to August 2, 2004 and you take money out of
any available multi-year FAGP, before the end of the guarantee period, we make
an adjustment to your contract. We refer to the adjustment as a market value
adjustment ("MVA"). The MVA reflects any difference in the interest rate
environment between the time you place your money in the FAGP and the time when
you withdraw or transfer that money. This adjustment can increase or decrease
your contract value. Generally, if interest rates drop between the time you put
your money into a FAGP and the time you take it out, we credit a positive
adjustment to your contract. Conversely, if interest rates increase during the
same period, we post a negative adjustment to your contract. You have 30 days
after the end of each guarantee period to reallocate your funds without
incurring any MVA. APPENDIX D shows how we calculate and apply the MVA.
If available, you may systematically transfer interest earned in available FAGPs
into any of the Variable Portfolios on certain periodic schedules offered by us.
These systematic transfers do not count toward the 15 free transfers per
contract year and are not subject to a MVA. You may change or terminate these
systematic transfers by contacting our Annuity Service Center. Check with your
financial representative regarding the current availability of this service.
All FAGPs may not be available in all states. We reserve the right to refuse any
Purchase Payment to available FAGPs if we are crediting a rate equal to the
minimum guaranteed interest rate specified in your contract. We may also offer
the specific Dollar Cost Averaging Fixed Accounts ("DCAFA"). The rules,
restrictions and operation of the DCAFAs may differ from the standard FAGPs
described above, see DOLLAR COST AVERAGING PROGRAM BELOW for more details.
DOLLAR COST AVERAGING FIXED ACCOUNTS
You may invest initial and/or subsequent Purchase Payments in the DCA fixed
accounts ("DCAFA"), if available. The minimum Purchase Payment that you must
invest for the 6-month DCAFA is $600 and $1,200 for the 12-month DCAFA, if such
accounts are available. Purchase Payments less than these minimum amounts will
automatically be allocated to the Variable Portfolios ("target account(s)")
according to your instructions to us or your current allocation on file. DCAFAs
also credit a fixed rate of interest but are specifically designed to facilitate
14
a dollar cost averaging program. Interest is credited to amounts allocated to
the DCAFAs while your investment is transferred to the Variable Portfolios over
certain specified time frames. The interest rates applicable to the DCAFA may
differ from those applicable to any available FAGPs but will never be less than
the minimum annual guaranteed interest rate as specified in your contract.
However, when using a DCAFA the annual interest rate is paid on a declining
balance as you systematically transfer your investment to the Variable
Portfolios. Therefore, the actual effective yield will be less than the annual
crediting rate. We determine the DCAFAs offered at any time in our sole
discretion and we reserve the right to change to DCAFAs that we make available
at any time, unless state law requires us to do otherwise. See DOLLAR COST
AVERAGING PROGRAM BELOW for more information.
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase you may transfer funds between the Variable
Portfolios and/or any available fixed account options. Funds already in your
contract cannot be transferred into the DCA fixed accounts. You must transfer at
least $100 per transfer. If less than $100 remains in any Variable Portfolio
after a transfer, that amount must be transferred as well. We will process any
transfer request as of the day we receive it in good order if the request is
received before the New York Stock Exchange ("NYSE") closes, generally at 1:00
p.m. Pacific Time. If the transfer request is received after the NYSE closes,
the request will be processed on the next business day.
This product is not designed for professional organizations or individuals
engaged in trading strategies that seek to benefit from short term price
fluctuations or price irregularities by making programmed transfers, frequent
transfers or transfers that are large in relation to the total assets of the
underlying portfolio in which the Variable Portfolios invest. These types of
trading strategies can be disruptive to the underlying portfolios in which the
Variable Portfolios invest and thereby potentially harmful to investors.
In connection with our efforts to control harmful trading, we may monitor your
trading activity. If we determine, in our sole discretion, that your transfer
patterns among the Variable Portfolios and/or available fixed accounts reflect a
potentially harmful trading strategy, we reserve the right to take action to
protect other investors. Such action may include, but may not be limited to,
restricting the way you can request transfers among the Variable Portfolios,
imposing penalty fees on such trading activity, and/or otherwise restricting
transfer capability in accordance with state and federal rules and regulations.
We will notify you, in writing, if we determine in our sole discretion that we
must terminate your transfer privileges. Some of the factors we may consider
when determining our transfer policies and/or other transfer restrictions may
include, but are not limited to:
- the number of transfers made in a defined period;
- the dollar amount of the transfer;
- the total assets of the Variable Portfolio involved in the transfer;
- the investment objectives of the particular Variable Portfolios involved
in your transfers; and/or
- whether the transfer appears to be part of a pattern of transfers to take
advantage of short-term market fluctuations or market inefficiencies.
Subject to our rules, restrictions and policies, you may request transfers of
your account value between the Variable Portfolios and/or the available fixed
account options by telephone or through AIG SunAmerica's website
(http://www.aigsunamerica.com) or in writing by mail or facsimile. For most
products use the following sentences: we allow 15 free transfers per contract
per year. We charge $25 ($10 in Pennsylvania and Texas) for each additional
transfer in any contract year. Transfers resulting from your participation in
the DCA or Asset Rebalancing programs do not count against your 15 free
transfers per contract year.
All transfer requests in excess of 5 transfers within a rolling six-month
look-back period must be submitted by United States Postal Service first-class
mail ("U.S. Mail") for twelve months from the date of your 5th transfer request.
For example, if you made a transfer on February 15, 2004 and within the previous
six months (from August 15, 2003 forward) you made 5 transfers including the
February 15th transfer, then all transfers made for twelve months after February
15, 2004 must be submitted by U.S. Mail (from February 16, 2004 through February
15, 2005). Transfer requests sent by same day mail, overnight mail or courier
services will not be
15
accepted. Transfer requests required to be submitted by U.S. Mail can only be
cancelled by a written request sent by U.S. Mail. Transfers resulting from your
participation in the DCA or Asset Rebalancing programs are not included for the
purposes of determining the number of transfers for the U.S. Mail requirement.
We may accept transfers by telephone or the Internet unless you tell us not to
on your contract application. When receiving instructions over the telephone or
the Internet, we follow appropriate procedures to provide reasonable assurance
that the transactions executed are genuine. Thus, we are not responsible for any
claim, loss or expense from any error resulting from instructions received over
the telephone or the Internet. If we fail to follow our procedures, we may be
liable for any losses due to unauthorized or fraudulent instructions.
For information regarding transfers during the Income Phase, SEE INCOME OPTIONS
BELOW. We reserve the right to modify, suspend, waive or terminate these
transfer provisions at any time.
DOLLAR COST AVERAGING PROGRAM
The Dollar Cost Averaging ("DCA") program allows you to invest gradually in the
Variable Portfolios. Under the program you systematically transfer a set dollar
amount or percentage of portfolio value from one Variable Portfolio or DCAFAs
(source account) to any other Variable Portfolio (target account). Transfers may
occur on certain periodic schedules such as monthly or weekly and count against
your 15 free transfers per contract year. You may change the frequency to other
available options at any time by notifying us in writing. The minimum transfer
amount under the DCA program is $100 per transaction, regardless of the source
account.
We may also offer DCAFAs exclusively to facilitate the DCA program for a
specified time period. The DCAFAs only accept new Purchase Payments. You cannot
transfer money already in your contract into the DCAFAs. If you allocate new
Purchase Payments into a DCAFA, we transfer all your money into the Variable
Portfolios over the selected time period at an offered frequency. You cannot
change the option once selected. The minimum Purchase Payment that you must
invest for the 6-month DCAFA is $600 and $1,200 for the 12-month DCAFA, if such
accounts are available. Purchase Payments less than these minimum amounts will
automatically be allocated to the target account(s) according to your
instructions to us or your current allocation instructions on file.
You may terminate the DCA program at any time. If money remains in the DCAFAs,
we transfer the remaining money according to your instructions or to your
current allocation on file. Upon termination of the DCA program, if money
remains in the DCA fixed accounts, we transfer the remaining money to the same
target account(s) as previously designated, unless we receive different
instructions from you. Transfers resulting from a termination of this program do
not count towards your 15 free transfers.
The DCA program is designed to lessen the impact of market fluctuations on your
investment. However, we cannot ensure that you will make a profit. When you
elect the DCA program, you are continuously investing in securities regardless
of fluctuating price levels. You should consider your tolerance for investing
through periods of fluctuating price levels.
Currently, we do not charge a fee for participation in the DCA program.
We reserve the right to modify, suspend or terminate this program at any time.
16
EXAMPLE:
Assume that you want to gradually move $750 each quarter from the Cash
Management Portfolio to the Mid-Cap Value Select Portfolio over six months.
You set up Dollar Cost Averaging and purchase Accumulation Units at the
following values:
<Table>
<Caption>
MONTH ACCUMULATION UNIT UNITS PURCHASED
- --------------------- ----------------- ---------------
1 $ 7.50 100
2 $ 5.00 150
3 $10.00 75
4 $ 7.50 100
5 $ 5.00 150
6 $ 7.50 100
</Table>
You paid an average price of only $6.67 per Accumulation Unit over six
quarters, while the average market price actually was $7.08. By investing
an equal amount of money each month, you automatically buy more
Accumulation Units when the market price is low and fewer Accumulation
Units when the market price is high. This example is for illustrative
purposes only.
ASSET ALLOCATION REBALANCING PROGRAM
Earnings in your contract may cause the percentage of your investment in each
investment option to differ from your original allocations. The Automatic Asset
Rebalancing Program addresses this situation. At your election, we periodically
rebalance your investments in the Variable Portfolios to return your allocations
to their original percentages. Asset rebalancing typically involves shifting a
portion of your money out of an investment option with a higher return into an
investment option with a lower return. At your request, rebalancing occurs on a
quarterly, semi-annual or annual basis. Transfers made as a result of
rebalancing do not count against your 15 free transfers for the contract year.
We reserve the right to modify, suspend or terminate this program at any time.
Currently, there is no charge for participating in this program.
RETURN PLUS PROGRAM
The Return Plus Program, available if we are offering multi-year FAGPs, allows
you to invest in one or more of the Variable Portfolios without putting your
principal at direct risk. The program accomplishes this by allocating your
investment strategically between the fixed investment options (other than the
DCA fixed accounts) and the Variable Portfolios you select. You decide how much
you want to invest and approximately when you want a return of principal. We
calculate how much of your Purchase Payment to allocate to the particular fixed
investment option to ensure that it grows to an amount equal to your total
principal invested under this program. We invest the rest of your principal in
the Variable Portfolios of your choice.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to allocate a portion of your initial Purchase Payment
of $100,000 to the fixed investment option. You want the amount allocated
to the fixed investment option to grow to $100,000 in 3 years. If the
3-year fixed investment option is offering a 3% interest rate, we will
allocate $91,514 to the 3-year fixed investment option to ensure that this
amount will grow to $100,000 at the end of the 3-year period. The remaining
$8,486 may be allocated among the Variable Portfolios, as determined by
you, to provide opportunity for greater growth.
17
VOTING RIGHTS
AIG SunAmerica Life is the legal owner of the Seasons Series Trust shares.
However, when an underlying portfolio solicits proxies in conjunction with a
vote of shareholders, we must obtain your instructions on how to vote those
shares. We vote all of the shares we own in proportion to your instructions.
This includes any shares we own on our own behalf. Should we determine that we
are no longer required to comply with these rules, we will vote the shares in
our own right.
SUBSTITUTION
We may amend your contract due to changes to the Variable Portfolios offered
under your contract. For example, we may offer new Variable Portfolios, delete
Variable Portfolios, or stop accepting allocations and/or investments in a
particular Variable Portfolio. We may move assets and or re-direct future
premium allocations from one Variable Portfolio to another if we receive
investor approval through a proxy vote or SEC approval for a fund substitution.
This would occur if a Variable Portfolio is no longer an appropriate investment
for the contract, for reason such as continuing substandard performance, or for
changes to the portfolio manager, investment objectives, risks and strategies,
or federal or state laws. The new Variable Portfolio offered may have different
fees and expenses. You will be notified of any upcoming proxies or substitutions
that affect your Variable Portfolio choices.
ACCESS TO YOUR MONEY
- --------------------------------------------------------------------------------
You can access money in your contract in two ways:
- by making a partial or total withdrawal, and/or;
- by receiving income payments during the Income Phase. SEE INCOME OPTIONS
BELOW.
Generally, we deduct a withdrawal charge applicable to any total or partial
withdrawal and a MVA if a partial withdrawal comes from multi-year fixed
investment options prior to the end of a guarantee period. If you withdraw your
entire contract value, we also deduct any applicable premium taxes and a
contract maintenance fee. SEE EXPENSES BELOW. We calculate charges due on a
total withdrawal on the day after we receive your request and other required
paper work. We return your contract value less any applicable fees and charges.
The minimum partial withdrawal amount is $1,000. We require that the total
account balance left in any contract be at least $500 after the withdrawal. You
must send a written withdrawal request to our Annuity Service Center. Unless you
provide us with different instructions, partial withdrawals will be made in
equal amounts from each Variable Portfolios and the fixed investment option in
which your contract is invested. Withdrawals from available fixed investment
options prior to the end of the guarantee period may result in a MVA.
We may be required to suspend or postpone the payment of a withdrawal for any
period of time when: (1) the NYSE is closed (other than customary weekend and
holiday closings); (2) trading with the NYSE is restricted; (3) an emergency
exists such that disposal of or determination of the value of shares of the
Portfolios is not reasonably practicable; (4) the SEC, by order, so permits for
the protection of contract owners.
Additionally, we reserve the right to defer payments for a withdrawal from a
fixed investment option. Such deferrals are limited to no longer than six
months.
FREE WITHDRAWAL PROVISION
Your contract provides for a free withdrawal amount each year. A free withdrawal
amount is the portion of your account that we allow you to take out each year
without being charged a surrender penalty. However, upon a future full surrender
of your contract any previous free withdrawals would be subject to a surrender
charge, if any is applicable at the time of the full surrender (except in the
state of Washington).
Purchase Payments, above and beyond the amount of your free withdrawal amount,
that are withdrawn prior to the end of the third year will result in your paying
a penalty in the form of a surrender charge. The amount of the
18
charge and how it applies are discussed more fully below. SEE EXPENSES BELOW.
You should consider, before purchasing this contract, the effect this charge
will have on your investment if you need to withdraw more money than the free
withdrawal amount. You should fully discuss this decision with your financial
representative.
To determine your free withdrawal amount and your withdrawal charge, we refer to
two special terms. These are penalty free earnings and the total invested
amount.
The penalty-free earnings portion of your contract is simply your account value
less your total invested amount. The total invested amount is the total of all
Purchase Payments you have made into the contract less portions of some prior
withdrawals you made. The portions of prior withdrawals that reduce your total
invested amount are as follows:
- - Free withdrawals in any year that were in excess of your penalty-free earnings
and were based on the part of the total invested amount that was no longer
subject to withdrawal charges at the time of the withdrawal, and
- - Any prior withdrawals (including withdrawal charges on those withdrawals) of
the total invested amount on which you already paid a surrender penalty.
When you make a withdrawal, we assume that it is taken from penalty-free
earnings first, then from the total invested amount on a first-in, first-out
basis. This means that you can also access your Purchase Payments which are no
longer subject to a withdrawal charge before those Purchase Payments which are
still subject to the withdrawal charge.
During the first year after we issue your contract your free withdrawal amount
is the greater of (1) your penalty-free earnings; and (2) if you are
participating in the Systematic Withdrawal program, a total of 10% of your total
invested amount. If you are a Washington resident, you may withdraw during the
first contract year, the greater of (1); (2); or (3) interest earnings from the
amounts allocated to the fixed account options, not previously withdrawn.
After the first contract year, your free withdrawal amount is (1) your
penalty-free earnings and any portion of your total invested amount no longer
subject to withdrawal charge or (2) 10% of the portion of your total invested
amount that has been in your contract for at least one year. If you are a
Washington resident, your maximum free withdrawal amount, after the first
contract year, is the greater of (1); (2); or (3) interest earnings from amounts
allocated to the fixed account options, not previously withdrawn.
We calculate charges due on a total withdrawal on the day after we receive your
request and your contract. We return to you your contract value less any
applicable fees and charges.
The withdrawal charge percentage is determined by the age of the Purchase
Payment remaining in the contract at the time of the withdrawal. For the purpose
of calculating the withdrawal charge, any prior Free Withdrawal is not
subtracted from the total Purchase Payments still subject to withdrawal charges.
For example, you make an initial Purchase Payment of $100,000. For purposes of
this example we will assume a 0% growth rate over the life of the contract, no
election of Seasons Estate Advantage, Earnings Advantage or Income Protector
options and no subsequent Purchase Payments. In contract year 2, you take out
your maximum free withdrawal of $10,000. After that free withdrawal your
contract value is $90,000. In contract year 3 you request a full surrender of
your contract. We will apply the following calculation,
A-(B x C)=D, where:
A=Your contract value at the time of your request for surrender ($90,000)
B=The amount of your Purchase Payments still subject to withdrawal charge
($100,000)
C=The withdrawal charge percentage applicable to the age of each Purchase
Payment (6%)[B x C=$6,000]
D=Your full surrender value ($84,000)
Under most circumstances, the partial withdrawal minimum is $1,000. We require
that the value left in any investment option be at least $100, after the
withdrawal. You must send a written withdrawal request. Unless you provide us
with different instructions, partial withdrawals will be made pro rata from each
Variable Portfolio and the fixed account option in which your contract is
invested.
19
Under certain Qualified plans, access to the money in your contract may be
restricted. Additionally, withdrawals made prior to age 59 1/2 may result in a
10% federal penalty tax. SEE TAXES BELOW.
We may be required to suspend or postpone the payment of a withdrawal for any
period of time when: (1) the NYSE is closed (other than a customary weekend and
holiday closings); (2) trading with the NYSE is restricted; (3) an emergency
exists such that disposal of or determination of the value of shares of the
Variable Portfolios is not reasonably practicable; (4) the SEC, by order, so
permits for the protection of contract owners.
Additionally, we reserve the right to defer payments for a withdrawal from a
fixed account option. Such deferrals are limited to no longer than six months.
SYSTEMATIC WITHDRAWAL PROGRAM
During the Accumulation Phase, you may elect to receive periodic income payments
under the systematic withdrawal program. Under the program, you may choose to
take monthly, quarterly, semi-annual or annual payments from your contract.
Electronic transfer of these funds to your bank account is also available. The
minimum amount of each withdrawal is $100 ($250 for Oregon). There must be at
least $500 remaining in your contract at all times. Withdrawals may be taxable
and a 10% federal penalty tax may apply if you are under age 59 1/2. There is no
additional charge for participating in this program.
The program is not available to everyone. Please check with our Annuity Service
Center, which can provide the necessary enrollment forms. We reserve the right
to modify, suspend or terminate this program at any time.
MINIMUM CONTRACT VALUE
Where permitted by state law, we may terminate your contract if both of the
following occur: (1) your contract is $500 or less as a result of withdrawals;
and (2) you have not made any Purchase Payments during the past three years. We
will provide you with sixty days written notice. At the end of the notice
period, we will distribute the contract's remaining value to you, less any
applicable charges.
QUALIFIED CONTRACT OWNERS
Certain Qualified plans restrict and/or prohibit your ability to withdraw money
from your contract. SEE TAXES BELOW for a more detailed explanation.
OPTIONAL LIVING BENEFITS
- --------------------------------------------------------------------------------
YOU MAY ELECT ONE OF THE OPTIONAL LIVING BENEFITS DESCRIBED BELOW. THESE
FEATURES ARE DESIGNED TO PROTECT A PORTION OF YOUR INVESTMENT IN THE EVENT YOUR
CONTRACT VALUE DECLINES DUE TO UNFAVORABLE INVESTMENT PERFORMANCE DURING THE
ACCUMULATION PHASE AND BEFORE A DEATH BENEFIT IS PAYABLE. PLEASE SEE THE
DESCRIPTIONS BELOW FOR DETAILED INFORMATION.
SEASONS INCOME REWARDS FEATURE
WHAT IS SEASONS INCOME REWARDS?
Seasons Income Rewards is an optional feature subject to state availability. If
you elect this feature, for which you will be charged an annualized fee, you are
guaranteed to receive withdrawals over a minimum number of years that in total
equals at least the initial Purchase Payment adjusted for withdrawals, even if
the contract value falls to zero. Seasons Income Rewards may offer protection in
the event your contract value declines due to unfavorable investment
performance.
HOW CAN I ELECT THE FEATURE?
You may elect the feature only at the time of contract issue and must choose
either Option 1 or Option 2. The date you elect the feature (which is also the
contract issue date) is your BENEFIT EFFECTIVE DATE. The earliest you may begin
taking withdrawals under the benefit after a specified waiting period is the
BENEFIT AVAILABILITY DATE.
20
You cannot elect the feature if you are age 81 or older on the Benefit Effective
Date. Generally, once you elect the feature, it cannot be cancelled. The Seasons
Income Rewards has rules and restrictions that are discussed more fully below.
Seasons Income Rewards cannot be elected if you elect the Seasons Promise
feature. Seasons Income Rewards may not be available in your state or through
the broker-dealer with which your financial representative is affiliated. Please
check with your financial representative for availability.
HOW IS THE BENEFIT CALCULATED?
There are several components that comprise the integral aspects of this benefit.
In order to determine the benefit's value at any point in time, we calculate
each of the components as described below. We calculate Eligible Purchase
Payments, Withdrawal Benefit Base, Step-Up Amount and Stepped-Up Benefit Base.
First, we determine the ELIGIBLE PURCHASE PAYMENTS according to the table below.
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------
TIME ELAPSED SINCE PERCENTAGE OF ELIGIBLE
BENEFIT EFFECTIVE DATE PURCHASE PAYMENTS
- -----------------------------------------------------------------------------------------------------
0-90 Days 100%
- -----------------------------------------------------------------------------------------------------
91 Days + 0%
- -----------------------------------------------------------------------------------------------------
</Table>
Second, we determine the WITHDRAWAL BENEFIT BASE ("WBB"). THE WBB is used to
calculate the amount of total guaranteed withdrawals and the annual maximum
withdrawal amount available under the benefit. On the Benefit Availability Date,
the WBB equals the sum of all Eligible Purchase Payments, reduced for any
withdrawals in the same proportion that the withdrawal reduced the contract
value on the date of the withdrawal.
Third, we determine a STEP-UP AMOUNT, if any, which is calculated as a specified
percentage of the WBB on the Benefit Availability Date. For contracts issued on
or after May 19, 2004, you will not receive a Step-Up Amount if you make any
withdrawals prior to the Benefit Availability Date. The Step-Up Amount is not
considered a Purchase Payment and cannot be used in calculating any other
benefits, such as the death benefits, contract values or annuitization value.
Fourth, we determine the STEPPED-UP BENEFIT BASE ("SBB") which is the total
amount available for withdrawal under the benefit and is used to calculate the
minimum time period over which you may take withdrawals under the benefit. The
SBB equals the WBB plus the Step-Up Amount.
Fifth, we determine the MAXIMUM ANNUAL WITHDRAWAL AMOUNT ("MAWA") which is a
stated percentage of the WBB.
Finally, we determine the MINIMUM WITHDRAWAL PERIOD ("MWP") which is the minimum
period at any point in time over which you may take withdrawals under the
benefit. The MWP is calculated by dividing the SBB by the MAWA.
The table below is a summary of the two Seasons Income Rewards options we are
offering as applicable on the Benefit Availability Date:
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------
MWP*
STEP-UP MAWA (IF MAWA TAKEN
BENEFIT AVAILABILITY DATE AMOUNT* PERCENTAGE EACH YEAR)
- --------------------------------------------------------------------------------------------------------------------
3 years following Benefit Effective
Option 1 Date 10% of WBB 10% of WBB 11 years
- --------------------------------------------------------------------------------------------------------------------
5 years following Benefit Effective
Option 2 Date 20% of WBB 10% of WBB 12 years
- --------------------------------------------------------------------------------------------------------------------
</Table>
* You will not receive a Step-Up Amount if you take a withdrawal prior to the
Benefit Availability Date. The MWP will be 10 years if you do not receive a
Step-Up Amount.
21
WHAT IS THE FEE FOR SEASONS INCOME REWARDS?
The annualized Seasons Income Rewards fee will be assessed against the WBB and
deducted quarterly from your contract value, starting on the first quarter
following the Benefit Effective Date and ending upon the termination of the
benefit. If your contract value falls to zero before the benefit has been
terminated, the fee will no longer be assessed. We will not assess the quarterly
fee if you surrender or annuitize before the end of the quarter.
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------
TIME ELAPSED SINCE THE
BENEFIT EFFECTIVE DATE ANNUALIZED FEE
- -----------------------------------------------------------------------------------------------------
0-7 years 0.65% of WBB
- -----------------------------------------------------------------------------------------------------
8+ years 0.45% of WBB
- -----------------------------------------------------------------------------------------------------
</Table>
WHAT IS THE EFFECT OF WITHDRAWALS ON SEASONS INCOME REWARDS?
The benefit amount, MAWA and MWP may change over time as a result of withdrawal
activity. Withdrawals after the Benefit Availability Date equal to or less than
the MAWA generally reduce the benefit by the amount of the withdrawal.
Withdrawals in excess of the MAWA may reduce the benefit based on the relative
size of the withdrawal in relation to the contract value at the time of the
withdrawal. This means if investment performance is down and contract value is
reduced, withdrawals greater than the MAWA will result in a greater reduction of
the benefit. We further explain the impact of withdrawals and the effect on each
component of Seasons Income Rewards through the calculations below:
CONTRACT VALUE: Any withdrawal reduces the contract value by the amount of the
withdrawal.
WBB: Withdrawals prior to the Benefit Availability Date reduce the WBB in the
same proportion that the contract value was reduced at the time of the
withdrawal and eliminate any Step-Up Amount.
Withdrawals after the Benefit Availability Date will not reduce the WBB until
the sum of withdrawals exceeds the Step-Up Amount. Thereafter, any withdrawal or
portion thereof that exceeds the Step-Up Amount will reduce the WBB as follows:
If the withdrawal does not cause total withdrawals in the Benefit Year to exceed
the MAWA, the WBB will be reduced by the amount of the withdrawal. If the
withdrawal causes total withdrawals in the Benefit Year to exceed the MAWA, the
WBB is reduced to the lesser of (a) or (b), where:
a. is the WBB immediately prior to the withdrawal minus the amount of the
withdrawal, or;
b. is the WBB immediately prior to the withdrawal minus the portion of the
withdrawal that makes total withdrawals in that Benefit Year equal to
the current MAWA, and further reduced proportionately by the same
amount by which the contract value is reduced by the remaining portion
of the withdrawal.
SBB: Since withdrawals prior to the Benefit Availability Date eliminate any
Step-Up Amount, the SBB will be equal to the WBB if you take withdrawals prior
to the Benefit Availability Date.
After the Benefit Availability Date, any withdrawal that does not cause total
withdrawals in a Benefit Year to exceed the MAWA will reduce the SBB by the
amount of the withdrawal. After the Benefit Availability Date, any withdrawal
that causes total withdrawals in a Benefit Year to exceed the MAWA (in that
Benefit Year) reduces the SBB to the lesser of (a) or (b), where:
a. is the SBB immediately prior to the withdrawal minus the amount of the
withdrawal, or;
b. is the SBB immediately prior to the withdrawal minus the amount of the
withdrawal that makes total withdrawals in that Benefit Year equal to
the current MAWA, and further reduced proportionately by the same
amount by which the contract value is reduced by the remaining portion
of the withdrawal.
MAWA: If the sum of withdrawals in a Benefit Year does not exceed the MAWA for
that Benefit Year, the MAWA does not change for the next Benefit Year.
22
If total withdrawals in a Benefit Year exceed the MAWA, the MAWA will be
recalculated at the start of the next Benefit Year. The new MAWA will equal the
SBB on that Benefit Year anniversary divided by the MWP on that Benefit Year
Anniversary. The new MAWA may be lower than your previous MAWAs.
MWP: After each withdrawal a new MWP is calculated. If total withdrawals in a
Benefit Year are less than or equal to MAWA the new MWP equals the SBB after the
withdrawal divided by the current MAWA.
During any Benefit Year in which the sum of withdrawals exceeds the MAWA, the
new MWP equals the MWP calculated at the end of the prior Benefit Year reduced
by one year.
APPENDIX C PROVIDES EXAMPLES OF THE EFFECTS OF WITHDRAWALS ON THE SEASONS INCOME
REWARDS FEATURE.
WHAT HAPPENS IF MY CONTRACT VALUE IS REDUCED TO ZERO?
If the contract value is zero but the SBB is greater than zero, a benefit
remains payable under Seasons Income Rewards feature. While a benefit is payable
under Seasons Income Rewards until the SBB is reduced to zero, the contract is
terminated when the contract value equals zero. At such time, except for Seasons
Income Rewards, all benefits of the contract are terminated. In that event, you
may not make subsequent Purchase Payments. Therefore, under adverse market
conditions, withdrawals under the benefit may reduce the contract value to zero,
thereby eliminating any death benefit or future income payments.
To receive your remaining Seasons Income Rewards benefit, you may select one of
the following options:
a. lump sum distribution of the present value of the total remaining
guaranteed withdrawals; or
b. the current MAWA, paid equally on a quarterly, semi-annual or annual
frequency as selected by you until the SBB equals zero; or
c. any payment option mutually agreeable between you and us.
If you do not select a payment option, the remaining benefit will be paid as the
current MAWA on a quarterly basis.
WHAT HAPPENS TO SEASONS INCOME REWARDS UPON A SPOUSAL CONTINUATION?
A spousal beneficiary of the original owner may elect to continue or cancel
Seasons Income Rewards and its accompanying fee. The Benefit Effective Date,
Benefit Availability Date, WBB, SBB and any other corresponding component of the
feature will not change as a result of a spousal continuation. A Continuation
Contribution is not considered an Eligible Purchase Payment for purposes of
determining the benefit. SEE SPOUSAL CONTINUATION BELOW.
CAN MY NON-SPOUSAL BENEFICIARY ELECT TO RECEIVE ANY REMAINING WITHDRAWALS UNDER
SEASONS INCOME REWARDS UPON MY DEATH?
If the SBB is greater than zero when the original owner dies, a non-spousal
beneficiary may elect to continue receiving any remaining withdrawals under the
benefit. The Benefit Effective Date, Benefit Availability Date, WBB, SBB and any
other corresponding component of the feature will not change. If a contract
value remains, the fee for the benefit will continue to be assessed. Electing to
receive the remaining withdrawals will terminate any death benefit payable to
the non-spousal beneficiary.
CAN SEASONS INCOME REWARDS BE CANCELED?
Once you elect the feature, you may not cancel it. The feature automatically
terminates upon the occurrence of one of the following:
1. Withdrawals in excess of MAWA in any Benefit Year reduce the SBB by 50%
or more; or
2. SBB is equal to zero; or
3. Annuitization of the contract; or
23
4. Full Surrender of the contract; or
5. Death benefit is paid; or
6. Upon a spousal continuation, the Continuing Spouse elects not to
continue the contract with the feature.
We reserve the right to terminate this feature if withdrawals in excess of MAWA
in any Benefit Year reduce the SBB by 50% or more.
IMPORTANT INFORMATION
The Seasons Income Rewards may not guarantee an income stream based on all
Purchase Payments made into your contract nor does it guarantee any investment
gains. This feature also does not guarantee lifetime income payments. If you
plan to make subsequent Purchase Payments over the life of your contract, which
are not considered Eligible Purchase Payments under the feature, Seasons Income
Rewards does not guarantee a withdrawal of those subsequent Purchase Payments.
You may never need to rely on Seasons Income Rewards if your contract performs
within a historically anticipated range. However, past performance is no
guarantee of future results.
Withdrawals under the benefit are treated like any other withdrawal for the
purpose of reducing the contract value, free withdrawal amounts and any other
benefits under the contract.
If you need to take withdrawals or are required to take minimum required
distributions ("MRD") under the Internal Revenue Code ("IRC") from this contract
prior to the Benefit Availability Date, you should know that withdrawals may
negatively impact the value of Seasons Income Rewards. You will not receive a
Step-up Amount if you take withdrawal, before the Benefit Availability Date. See
EFFECT OF WITHDRAWAL ON SEASONS INCOME REWARDS above. Any withdrawals taken
under this benefit or under the contract, may be subject to a 10% IRS tax
penalty if you are under age 59 1/2 at the time of the withdrawal. For
information about how the benefit is treated for income tax purposes, you should
consult a qualified tax advisor concerning your particular circumstances.
The Seasons Income Rewards cannot be elected if you elect the Seasons Promise
feature. We reserve the right to limit the maximum WBB to $1 million. Seasons
Income Rewards may not be available in your state or through the broker-dealer
with which your financial representative is affiliated. Please check with your
financial representative for availability.
For prospectively issued contracts, we reserve the right to limit the investment
options available under the contract if you elect Seasons Income Rewards. We
reserve the right to modify, suspend or terminate Seasons Income Rewards (in its
entirety or any component) at any time for prospectively issued contracts.
SEASONS PROMISE FEATURE
WHAT IS SEASONS PROMISE?
The Seasons Promise is an optional feature of your variable annuity. If you
elect this feature, for which you will be charged an annualized fee, at the end
of applicable waiting period your contract will be worth at least the amount of
your initial Purchase Payment (less adjustments for withdrawals). The Seasons
Promise may offer protection in the event that your contract value declines due
to unfavorable investment performance in your contract. You may only elect the
Seasons Promise feature if you are under age 86.
If you elect the Seasons Promise, at the end of the applicable waiting period we
will evaluate your contract to determine if a Seasons Promise benefit is payable
to you. The applicable waiting period is ten full contract years from your
contract issue date. The last day in the waiting period is your benefit date,
the date on which we will calculate any Seasons Promise benefit payable to you.
HOW CAN I ELECT THE FEATURE?
You may only elect this feature at the time your contract is issued, so long as
the applicable waiting period prior to receiving the benefit ends before your
latest Annuity Date. You can elect this feature on your contract application.
24
The effective date for this feature will be your contract issue date. Seasons
Promise is not available if you elect the Seasons Income Rewards. SEE SEASONS
INCOME REWARDS ABOVE.
The Seasons Promise feature may not be available in your state or through the
broker-dealer with which your financial representative is affiliated. Please
check with your financial representative for availability.
CAN SEASONS PROMISE BE CANCELLED?
Generally, this feature and its corresponding charge cannot be cancelled or
terminated prior to the end of the waiting period. The feature terminates
automatically following the end of the waiting period. In addition, the Seasons
Promise will no longer be available and no benefit will be paid if a death
benefit is paid or if the contract is fully surrendered or annuitized before the
end of the waiting period.
HOW IS THE BENEFIT CALCULATED?
The Seasons Promise is a one-time adjustment to your contract value in the event
that your contract value at the end of the waiting period is less than the
guaranteed amount. The amount of the benefit payable to you, if any, at the end
of the waiting period will be based upon the amount of your initial Purchase
Payment and may also include certain portions of subsequent Purchase Payments
contributed to your contract over specified periods of time, as follows:
<Table>
<Caption>
PERCENTAGE OF PURCHASE PAYMENTS INCLUDED IN THE
TIME ELAPSED SINCE EFFECTIVE DATE SEASONS PROMISE BENEFIT CALCULATION
- --------------------------------- -----------------------------------------------
0-90 days 100%
91+ days 0%
</Table>
The Seasons Promise benefit calculation is equal to your Seasons Promise Base,
as defined below, minus your Contract Value on the benefit date. If the
resulting amount is positive, you will receive a benefit under the feature. If
the resulting amount is negative, you will not receive a benefit. Your Seasons
Promise Base is equal to (a) minus (b) where:
(a) is the Purchase Payments received on or after the effective date
multiplied by the applicable percentages in the table above, and;
(b) is an adjustment for all withdrawals and applicable fees and charges
made subsequent to the effective date, in an amount proportionate to
the amount by which the withdrawal decreased the contract value at
the time of the withdrawal.
We will allocate any benefit amount contributed to the contract value on the
benefit date to the Cash Management portfolio. Any Seasons Promise benefit paid
is not considered a Purchase Payment for purposes of calculating other benefits.
Benefits based on earnings, such as Earnings Advantage, will continue to define
earnings as the difference between contract value and Purchase Payments adjusted
for withdrawals. For information about how the benefit is treated for income tax
purposes, you should consult a qualified tax advisor for information concerning
your particular circumstances.
WHAT IS THE FEE FOR SEASONS PROMISE?
Seasons Promise is an optional feature. If elected, you will incur an additional
charge for this feature. The annualized charge will be deducted from your
contract value on a quarterly basis throughout the waiting period, beginning at
the end of the first contract quarter following the effective date of the
feature and up to and including
25
on the benefit date. Once the feature is terminated, as discussed above, the
charge will no longer be deducted. We will also not assess the quarterly fee if
you surrender or annuitize before the end of the quarter.
<Table>
<Caption>
OPTION 1
CONTRACT YEAR ANNUALIZED FEE*
- ------------- ---------------
0-5 0.65%
6-10 0.45%
11+ None
</Table>
- ---------------
* As a percentage of your contract value minus Purchase Payments received after
the 90th day since the purchase of your contract. The amount of this charge is
subject to change at any time for prospectively issued contracts.
WHAT HAPPENS TO SEASONS PROMISE UPON A SPOUSAL CONTINUATION?
If your qualified spouse chooses to continue this contract upon your death, this
benefit cannot be terminated. The effective date, the waiting period and the
corresponding benefit payment date will not change as a result of a spousal
continuation. SEE SPOUSAL CONTINUATION BELOW.
IMPORTANT INFORMATION
The Seasons Promise feature may not guarantee a return of all of your Purchase
Payments. If you plan to add subsequent Purchase Payments over the life of your
contract, you should know that the Seasons Promise would not protect the
majority of those payments.
Since the Seasons Promise feature may not guarantee a return of all Purchase
Payments at the end of the waiting period, it is important to realize that
subsequent Purchase Payments made into the contract may decrease the value of
the Seasons Promise benefit. For example, if near the end of the waiting period
your Seasons Promise Base is greater than your contract value, and you then make
a subsequent Purchase Payment that causes your Contract Value to be larger than
your Seasons Promise Base on your benefit date, you will not receive any benefit
even though you have paid for the Seasons Promise feature throughout the waiting
period. You should discuss subsequent Purchase Payments with your financial
representative as such activity may reduce the value of this Seasons Promise
benefit.
We reserve the right to modify, suspend or terminate the Seasons Promise feature
(in its entirety or any component) at any time for prospectively issued
contracts.
DEATH BENEFIT
- --------------------------------------------------------------------------------
If you die during the Accumulation Phase of your contract, we pay a death
benefit to your Beneficiary. At the time you purchase your contract, you must
select one of the two death benefits options described below. Once selected, you
cannot change your death benefit option. You should discuss the available
options with your financial representative to determine which option is best for
you.
We do not pay the death benefit if you die after you switch to the Income Phase.
However, if you die during the Income Phase, your Beneficiary receives any
remaining guaranteed income payments in accordance with the income option you
selected. SEE INCOME OPTIONS BELOW.
You designate your Beneficiary to receive any death benefit payments. You may
change the Beneficiary at any time, unless you previously made an irrevocable
Beneficiary designation.
We calculate and pay the death benefit when we receive all required paperwork
and satisfactory proof of death. We consider the following satisfactory proof of
death:
1. a certified copy of the death certificate; or
2. a certified copy of a decree of a court of competent jurisdiction as to
the finding of death; or
3. a written statement by a medical doctor who attended the deceased at the
time of death; or
26
4. any other proof satisfactory to us.
If the Annuitant dies before the annuity payments begin, you can name a new
Annuitant. If no Annuitant is named within 30 days, you will become the
Annuitant. However, if the owner is a non-natural person (for example, a trust),
then the death of the Annuitant will be treated as the death of the owner, no
new Annuitant may be named and the death benefit will be paid.
If the Beneficiary is the spouse of a deceased owner, he or she can elect to
continue the Contract. SEE SPOUSAL CONTINUATION BELOW.
If a Beneficiary does not elect a specific form of pay out within 60 days of our
receipt of all required paperwork and satisfactory proof of death, we pay a lump
sum death benefit to the Beneficiary.
The death benefit may be paid immediately in the form of a lump sum payment or
paid under one of the available Income Options. PLEASE SEE INCOME OPTIONS BELOW.
A Beneficiary may also elect to continue the contract and take the death benefit
amount in a series of payments based upon the Beneficiary's life expectancy
under the Extended Legacy program described below, subject to the applicable
Internal Revenue Code distribution requirements. Payments must begin under the
selected Income Option or the Extended Legacy program no later than the first
anniversary of your death for non-qualified contracts or December 31st of the
year following the year of your death for IRAs. Your Beneficiary cannot
participate in the Extended Legacy program if your Beneficiary has already
elected another settlement option. Beneficiaries who do not begin taking
payments within these specified time periods will not be eligible to elect an
Income Option or participate in the Extended Legacy program.
EXTENDED LEGACY PROGRAM AND BENEFICIARY CONTINUATION OPTIONS
The Extended Legacy program can allow a Beneficiary to take the death benefit
amount in the form of income payments over a longer period of time with the
flexibility to withdraw more than the IRS required minimum distribution if they
wish. The contract continues in the original owner's name for the benefit of the
Beneficiary. The Extended Legacy program allows the Beneficiary to take
distributions in the form of a series of payments similar to the required
minimum distributions under an IRA. Generally, IRS required minimum
distributions must be made at least annually over a period not to exceed the
Beneficiary's life expectancy as determined in the calendar year after your
death. A Beneficiary may withdraw all or a portion of the contract value at any
time, name their own beneficiary to receive any remaining unpaid interest in the
contract in the event of their death and make transfers among investment
options. If the contract value is less than the death benefit amount as of the
date we receive satisfactory proof of death and all required paperwork, we will
increase the contract value by the amount which the death benefit exceeds
contract value. Participation in the program may impact certain features of the
contract that are detailed in the Death Claim Form. Please see your financial
representative for additional information.
Alternatively to the Extended Legacy program, the Beneficiary may also elect to
receive the death benefit under a 5-year option. The Beneficiary may take
withdrawals as desired, but the entire contract value must be distributed by the
fifth anniversary of your death for Non-qualified contracts or by December 31st
of the year containing the fifth anniversary of your death for IRAs. For IRAs,
the five-year option is not available if the date of death is after the required
beginning date for distributions (April 1 of the year following the year the
owner reaches the age of 70 1/2).
Please consult your tax advisor regarding tax implications and your particular
circumstances.
DEFINED TERMS
The term Net Purchase Payment is used frequently in explaining these death
benefit options. Net Purchase Payments is an on-going calculation. It does not
represent a contract value.
We define Net Purchase Payments as Purchase Payments less an Adjustment for each
withdrawal. If you have not taken any withdrawals from your contract, Net
Purchase Payments equals total purchase payments into your contract. To
calculate the Adjustment amount for the first withdrawal made under the
contract, we determine the percentage by which the withdrawal reduced the
contract value. For example, a $10,000 withdrawal from a
27
$100,000 contract is a 10% reduction in value. This percentage is calculated by
dividing the amount of each withdrawal (and any applicable fees and charges) by
the contract value immediately before taking the withdrawal. The resulting
percentage is then multiplied by the amount of the total Purchase Payments and
subtracted from the amount of the total Purchase Payments on deposit at the time
of the withdrawal. The resulting amount is the initial Net Purchase Payment.
To arrive at the Net Purchase Payment calculation for subsequent withdrawals, we
determine the percentage by which the contract value is reduced by taking the
amount of the withdrawal in relation to the contract value immediately before
taking the withdrawal. We then multiply the Net Purchase Payment calculation as
determined prior to the withdrawal, by this percentage. We subtract that result
from the Net Purchase Payment calculation as determined prior to the withdrawal
to arrive at all subsequent Net Purchase Payment calculations.
The term "withdrawals" as used in describing the death benefit options below is
defined as withdrawals and the fees and charges applicable to those withdrawals.
IF YOU PURCHASED YOUR CONTRACT ON OR ABOUT AUGUST 2, 2004, SUBJECT TO STATE
AVAILABILITY, THE FOLLOWING DEATH BENEFIT PROVISIONS APPLY:
STANDARD DEATH BENEFIT
If your contract is issued prior to your 83rd birthday, the standard death
benefit on your contract is the greater of:
1. Contract Value; or
2. Net Purchase Payments received prior to your 86th birthday.
If your contract is issued on or after your 83rd birthday but prior to your 86th
birthday, the standard death benefit on your contract is the greater of:
1. Contract Value; or
2. The lesser of:
a. Net Purchase Payments received prior to your 86th birthday; or
b. 125% of Contract Value
OPTIONAL SEASONS ESTATE ADVANTAGE
For an additional fee, you may elect one of the Seasons Estate Advantage
benefits below, which can provide greater protection for your beneficiaries. If
you elect one of the Seasons Estate Advantage benefits, you must choose either
Option 1 or Option 2 at the time you purchase your contract and you cannot
change your election thereafter at anytime. The fee for the Seasons Estate
Advantage benefit is 0.15% of the average daily ending value of the assets you
have allocated to the Variable Portfolios.
OPTION 1 - PURCHASE PAYMENT ACCUMULATION OPTION
If the contract is issued prior to your 75th birthday, the death benefit is the
greatest of:
1. Contract value; or
2. Net Purchase Payments, compounded at 3% annual growth rate to the earlier
of the 75th birthday or the date of death, plus Net Purchase Payments
received after the 75th birthday but prior to the 86th birthday or date of
death; or
3. Contract value on the seventh contract anniversary, reduced for
withdrawals since the seventh contract anniversary in the same proportion
that the contract value was reduced on the date of such withdrawal, plus
Net Purchase Payments received between the seventh contract anniversary
but prior to the 86th birthday.
The Purchase Payment Accumulation Option can only be elected prior to your 75th
birthday.
28
OPTION 2 - MAXIMUM ANNIVERSARY VALUE OPTION
If the contract is issued prior to your 83rd birthday, the death benefit is the
greatest of:
1. Contract value; or
2. Net Purchase Payments received prior to your 86th birthday; or
3. Maximum anniversary value on any contract anniversary prior to your 83rd
birthday. The anniversary values equal the contract value on a contract
anniversary plus any Purchase Payments since that anniversary but prior to
your 86th birthday; and reduced for any withdrawals since that contract
anniversary in the same proportion that the withdrawal reduced the
contract value on the date of the withdrawal.
The Maximum Anniversary option may only be elected prior to your 83rd birthday
(81st birthday if elected with Earnings Advantage benefit).
If you are age 90 or older at the time of death and selected the Maximum
Anniversary Value Option, the death benefit will be equal to the contract value.
Accordingly, you will not get any benefit from this option if you are age 90 or
older at the time of your death.
OPTIONAL EARNINGS ADVANTAGE
The Earnings Advantage benefit, if elected, may increase your death benefit
amount. In order to elect the Earnings Advantage, you must have also elected one
of the optional Seasons Estate Advantage benefits described above. If you have
earnings in your contract at the time of death, we will add a percentage of
those earnings (the "Earnings Advantage Percentage"), subject to a maximum
dollar amount (the "Maximum Earnings Advantage Percentage"), to the death
benefit payable. The contract year of your death will determine the Earnings
Advantage Percentage and the Maximum Earnings Advantage Percentage.
The table below provides the details if you are age 69 or younger at the time we
issue your contract:
<Table>
<Caption>
- ------------------------------------------------------------------------------------------
EARNINGS ADVANTAGE
CONTRACT YEAR OF DEATH PERCENTAGE MAXIMUM EARNINGS ADVANTAGE PERCENTAGE
- ------------------------------------------------------------------------------------------
Years 0-4 25% of earnings 40% of Net Purchase Payments
- ------------------------------------------------------------------------------------------
Years 5-9 40% of earnings 65% of Net Purchase Payments*
- ------------------------------------------------------------------------------------------
Years 10+ 50% of earnings 75% of Net Purchase Payments*
- ------------------------------------------------------------------------------------------
</Table>
If you are between your 70th and 81st birthdays at the time we issue your
contract the table below shows the available Earnings Advantage benefit:
<Table>
<Caption>
- ------------------------------------------------------------------------------------------
EARNINGS ADVANTAGE
CONTRACT YEAR OF DEATH PERCENTAGE MAXIMUM EARNINGS ADVANTAGE PERCENTAGE
- ------------------------------------------------------------------------------------------
All Contract Years 25% of earnings 40% of Net Purchase Payments*
- ------------------------------------------------------------------------------------------
</Table>
* Purchase Payments received after the 5th contract anniversary must remain in
the contract for at least 6 full months to be included as part of Net Purchase
Payments for the purpose of the Maximum Earnings Advantage calculation.
What is the Contract Year of Death?
Contract Year of Death is the number of full 12 month periods beginning with the
date your contract is issued and ending on the date of death.
What is the Earnings Advantage Percentage Amount?
We determine the amount of the Earnings Advantage benefit, based on a percentage
of the earnings in your contract at the time of your death. For the purpose of
this calculation, earnings equals contract value minus Net
29
Purchase Payments as of the date of death. If the earnings amount is negative,
no Earnings Advantage amount will be added.
What is the Maximum Earnings Advantage Amount?
The Earnings Advantage is subject to a maximum dollar amount. The maximum
Earnings Advantage amount is equal to a percentage of your Net Purchase
Payments.
You must elect Earnings Advantage at the time of contract application. Once
elected, you may not terminate or change this election.
We assess a 0.25% fee for Earnings Advantage. On a daily basis we deduct this
annual charge from the average daily ending value of the assets you have
allocated to the Variable Portfolios.
Earnings Advantage is not available if you are age 81 or older at the time we
issue your contract. Furthermore, a Continuing Spouse cannot benefit from
Earnings Advantage if he/she is age 81 or older on the Continuation Date. SEE
SPOUSAL CONTINUATION BELOW. The Earnings Advantage is not payable after the
latest Annuity Date. You may pay for the Earnings Advantage and your beneficiary
may never receive the benefit if you live past the latest Annuity Date. SEE
INCOME OPTIONS BELOW.
Earnings Advantage may not be available in your state or through the
broker-dealer with which your financial representative is affiliated. See your
financial representative for information regarding availability.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE EARNINGS ADVANTAGE
BENEFIT (IN ITS ENTIRETY OR ANY COMPONENT AT ANY TIME) AT ANY TIME FOR
PROSPECTIVELY ISSUED CONTRACTS.
IF YOU PURCHASED YOUR CONTRACT PRIOR TO AUGUST 2, 2004, THE FOLLOWING DEATH
BENEFIT PROVISIONS APPLY:
STANDARD DEATH BENEFIT
The Standard Death Benefit on your contract, is the greater of:
1. Net Purchase Payments compounded at a 3% annual growth rate from the date
of issue until the earlier of age 75 or the date of death, plus any
Purchase Payments recorded after the earlier of age 75 or the date of
death; and reduced for any withdrawals (and fees and charges applicable to
those withdrawals) recorded after the earlier of age 75 or the date of
death, in the same proportion that the withdrawal reduced the contract
value on the date of the withdrawal.
2. the contract value on the date we receive all required paperwork and
satisfactory proof of death.
OPTIONAL SEASONS ESTATE ADVANTAGE DEATH BENEFIT(S)
For an additional fee, you may elect one of the Seasons Estate Advantage death
benefits which can provide greater protection for your beneficiaries. You must
chose between Option 1 and Option 2 at the time you purchase your contract and
you cannot change your election at any time. The Seasons Estate Advantage death
benefit is not available if you are age 81 or older at the time of contract
issue. The fee for Seasons Estate Advantage death benefit is 0.15% of the
average daily ending value of the assets you have allocated to the Variable
Portfolios.
OPTION 1 - 5% ACCUMULATION OPTION --
The Death Benefit is the greater of:
a. the contract value on the date we receive all required paperwork and
satisfactory proof of death; or
b. Net Purchase Payments compounded to the earlier of your 80th birthday or
the date of death, at a 5% annual growth rate, plus any Purchase Payments
recorded after the 80th birthday or the date of death; and reduced for any
withdrawals (and fees and charges applicable to those withdrawals)
recorded after the
30
80th birthday or the date of death, in the same proportion that the
withdrawal reduced the contract value on the date of the withdrawal, up to
a maximum benefit of two times the Net Purchase Payments made over the
life of your contract.
If you die after your latest Annuity Date and you selected the 5%
Accumulation Option, any death benefit payable under the contract will be
the Standard Death Benefit as described above. Therefore, your beneficiary
will not receive any benefit from Seasons Estate Advantage. This option
may not be available in your state. Check with your investment
representative regarding availability.
OPTION 2 - MAXIMUM ANNIVERSARY VALUE OPTION --
The Death Benefit is the greatest of:
a. Net Purchase Payments; or
b. the contract value on the date we receive all required paperwork and
satisfactory proof of death; or
c. the maximum anniversary value on any contract anniversary prior to your
81st birthday. The anniversary value equals the contract value on a
contract anniversary increased by any Purchase Payments recorded after
that anniversary; and reduced for any withdrawals (and fees and charges
applicable to those withdrawals) recorded after the anniversary, in the
same proportion that the withdrawal reduced the contract value on the date
of the withdrawal.
If you are age 90 or older at the time of death and you had selected the
Maximum Anniversary Value Option, the death benefit will be equal to the
contract value on the date we receive all required paperwork and
satisfactory proof of death. Thus, you will not receive the advantage of
the Maximum Anniversary Value Option if you are over age 80 at the time of
contract issue or if you are 90 or older at the time of your death. This
option may not be available in your state. Check with your investment
representative regarding availability.
SPOUSAL CONTINUATION
If you are the original owner of the contract and the Beneficiary is your
spouse, your spouse may elect to continue the contract after your death. The
spouse becomes the new owner ("Continuing Spouse"). Generally, the contract and
its elected features, if any, remain the same. The Continuing Spouse is subject
to the same fees, charges and expenses applicable to the original owner of the
contract. A spousal continuation can only take place upon the death of the
original owner of the contract.
To the extent that the Continuing Spouse invests in the Variable Portfolios or
the available multi-year FAGPs, they will be subject to investment risk as was
the original owner.
Upon a spouse's continuation of the contract, we will contribute to the contract
value an amount by which the death benefit that would have been paid to the
beneficiary upon the death of the original owner exceeds the contract value
("Continuation Contribution"), if any. We calculate the Continuation
Contribution as of the date of the original owner's death. We will add the
Continuation Contribution as of the date we receive both the Continuing Spouse's
written request to continue the contract and proof of death of the original
owner in a form satisfactory to us ("Continuation Date"). The Continuation
Contribution is not considered a Purchase Payment for the purposes of any other
calculations except as explained in Appendix B.
Generally, the age of the Continuing Spouse on the Continuation Date and on the
date of the Continuing Spouse's death will be used in determining any future
death benefits under the Contract.
The Continuing Spouse, generally, cannot change any contract provisions as the
new owner. However, on the Continuation Date, the Continuing Spouse may
terminate the original owner's election of the Earnings Advantage benefit. We
will terminate the Earnings Advantage benefit if the Continuing Spouse is age 81
or older on the Continuation Date. If the Earnings Advantage benefit is
terminated or if the Continuing Spouse dies after the latest Annuity Date, no
benefit will be payable under the feature.
31
SEE APPENDIX B FOR A DISCUSSION OF THE DEATH BENEFIT CALCULATIONS AFTER A
SPOUSAL CONTINUATION.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION
PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME FOR PROSPECTIVELY
ISSUED CONTRACTS.
EXPENSES
- --------------------------------------------------------------------------------
There are charges and expenses associated with your contract. These charges and
expenses reduce your investment return. We will not increase the contract
maintenance fee or withdrawal charges under your contract. However, the
investment charges under your contract may increase or decrease. Some states may
require that we charge less than the amounts described below.
SEPARATE ACCOUNT CHARGES
The Company deducts a mortality and expense risk charge in the amount of 1.55%,
annually of the value of your contract invested in the Variable Portfolios. We
deduct the charge daily. This charge compensates the Company for the mortality
and expense risk and the costs of contract distribution assumed by the Company.
Generally, the mortality risks assumed by the Company arise from its contractual
obligations to make income payments after the Annuity Date and to provide a
death benefit. The expense risk assumed by the Company is that the costs of
administering the contracts and the Separate Account will exceed the amount
received from the administrative fees and charges assessed under the contract.
If these charges do not cover all of our expenses, we will pay the difference.
Likewise, if these charges exceed our expenses, we will keep the difference.
WITHDRAWAL CHARGES
During the Accumulation Phase you may make withdrawals from your contract.
However, a withdrawal charge may apply. We apply a withdrawal charge upon an
early withdrawal against each Purchase Payment you put into the contract. The
withdrawal charge equals a percentage of the Purchase Payment you take out of
the contract. The contract does provide a free withdrawal amount every year. SEE
ACCESS TO YOUR MONEY ABOVE. The withdrawal charge percentage declines each year
a Purchase Payment is in the contract, as follows:
WITHDRAWAL CHARGE
<Table>
<Caption>
YEAR 1 2 3 4+
- ----------------- --- --- --- ---
Withdrawal Charge 7% 6% 6% 0%
</Table>
After a Purchase Payment has been in the contract for three complete years, the
withdrawal charge no longer applies to that Purchase Payment. When calculating
the withdrawal charge, we treat withdrawals as coming first from the Purchase
Payments that have been in your contract the longest. However, for tax purposes,
your withdrawals are considered earnings first, then Purchase Payments.
Whenever possible, we deduct the withdrawal charge from the money remaining in
your contract from each of your investment options on a pro-rata basis. If you
withdraw all of your contract value, we deduct any applicable withdrawal charges
from the amount withdrawn. We will not assess a withdrawal charge for money
withdrawn to pay a death benefit or to pay contract fees or charges. We do not
currently assess a withdrawal charge upon election to receive income payments
from your contract. Withdrawals made prior to age 59 1/2 may result in tax
penalties. SEE TAXES BELOW.
32
INVESTMENT CHARGES
Investment Management Fees
Charges are deducted from the assets of the investment portfolios underlying the
Variable Portfolios for the advisory and other expenses of the portfolios. SEE
FEE TABLES ABOVE.
Service Fees
Portfolio shares are all subject to fees imposed under a servicing plan adopted
by the Seasons Series Trust pursuant to Rule 12b-1 under the Investment Company
Act of 1940. This service fee of 0.15%, which is also known as a 12b-1 fee is
used generally to pay financial intermediaries for services provided over the
life of the contract. SEE FEE TABLES ABOVE.
FOR MORE DETAILED INFORMATION ON THESE INVESTMENT CHARGES, REFER TO THE
PROSPECTUS FOR THE SEASONS SERIES TRUST, ATTACHED.
CONTRACT MAINTENANCE FEE
During the Accumulation Phase, we subtract a contract maintenance fee from your
account once per year. This charge compensates us for the cost of contract
administration. If your contract value is $50,000 or more on your contract
anniversary date, we are currently waiving this charge. This waiver is subject
to change without notice. We will deduct the $35 ($30 in North Dakota) contract
maintenance fee on a pro-rata basis from your account value on your contract
anniversary. In the states of Pennsylvania, Texas and Washington a contract
maintenance fee will be deducted pro-rata from the Variable Portfolios in which
you are invested, only. If you withdraw your entire contract value, we deduct
the fee from that withdrawal.
TRANSFER FEE
We currently permit 15 free transfers between investment options each contract
year. We charge you $25 for each additional transfer that contract year ($10 in
Pennsylvania and Texas). SEE INVESTMENT OPTIONS ABOVE.
OPTIONAL SEASONS INCOME REWARDS FEE
The annualized Seasons Income Rewards fee is calculated as a percentage of your
Withdrawal Benefit Base. The fee will be assessed and deducted periodically from
your contract value, starting on the first quarter following the Benefit
Effective Date and ending upon the termination of the benefit. If your contract
falls to zero before the benefit has been terminated, the fee will no longer be
assessed.
<Table>
<Caption>
TIME ELAPSED SINCE
BENEFIT EFFECTIVE DATE ANNUALIZED FEE
- ---------------------- --------------
0-7 years 0.65%
8+ years 0.45%
</Table>
33
OPTIONAL SEASONS PROMISE FEE
The fee for the Seasons Promise feature is as follows:
<Table>
<Caption>
CONTRACT YEAR ANNUALIZED FEE*
- ------------- ---------------
0-5 0.65%
6-10 0.45%
11+ none
</Table>
The fee is calculated as a percentage of your contract value minus Purchase
Payments received after the 90th day since you purchased your contract. The fee
is deducted at the end of the first contract quarter and quarterly thereafter
from your contract value. The amount of this charge is subject to change at any
time for prospectively issued contracts.
* The annual fee for Washington or Oregon Residents is 0.65% for Years 0-7,
0.30% for Years 8-10, and no charge for Years 11+.
OPTIONAL SEASONS ESTATE ADVANTAGE FEE
We charge 0.15% for the Seasons Estate Advantage feature. On a daily basis, we
deduct this charge from the average daily ending value of the assets you have
allocated to the Variable Portfolios.
OPTIONAL EARNINGS ADVANTAGE FEE
We charge 0.25% for the Earnings Advantage feature. On a daily basis, we deduct
this charge from the average daily ending value of the assets you have allocated
to the Variable Portfolios. Further, if you elect both Seasons Estate Advantage
and Earnings Advantage, the combined charge will be 0.40% of the average daily
ending value of the assets you have allocated to the Variable Portfolios.
PREMIUM TAX
Certain states charge the Company a tax on the premiums you pay into the
contract ranging from 0.0% to 3.5%. We deduct these premium tax charges from
your contract when applicable. Currently, we deduct the charge for premium taxes
when you fully surrender or annuitize the contract. In the future, we may assess
this deduction at the time you put Purchase Payment(s) into the contract or upon
payment of a death benefit.
INCOME TAXES
We do not currently deduct income taxes from your contract. We reserve the right
to do so in the future.
REDUCTION OR ELIMINATION OF CHARGES AND EXPENSES, AND ADDITIONAL AMOUNTS
CREDITED
Sometimes sales of the contracts to groups of similarly situated individuals may
lower our administrative and/or sales expenses. We reserve the right to reduce
or waive certain charges and expenses when this type of sale occurs. In
addition, we may also credit additional interest to policies sold to such
groups. We determine which groups are eligible for such treatment. Some of the
criteria we evaluate to make a determination are: size of the group; amount of
expected Purchase Payments; relationship existing between us and prospective
purchaser; nature of the purchase; length of time a group of contracts is
expected to remain active; purpose of the purchase and whether that purpose
increases the likelihood that our expenses will be reduced; and/or any other
factors that we believe indicate that administrative and/or sales expenses may
be reduced.
AIG SunAmerica Life may make such a determination regarding sales to its
employees, it affiliates' employees and employees of currently contracted
broker-dealers; its registered representatives and immediate family members of
all of those described.
We reserve the right to change or modify any such determination or the treatment
applied to a particular group, at any time.
34
INCOME OPTIONS
- --------------------------------------------------------------------------------
ANNUITY DATE
During the Income Phase, the money in your Contract is used to make regular
income payments to you. You may switch to the Income Phase any time after your
second contract anniversary. You select the month and year in which you want
income payments to begin. The first day of that month is the Annuity Date. You
may change your Annuity Date, so long as you do so at least seven days before
the income payments are scheduled to begin. Once you begin receiving income
payments, you cannot change your Income Option. Except as discussed under Option
5, once you begin receiving income payments, you cannot otherwise access your
money through a withdrawal or surrender. Other pay out options may be available.
Contact our Annuity Service Center for more information.
Income payments must begin on or before your 95th birthday or on your tenth
contract anniversary, whichever occurs later. If you do not choose an Annuity
Date, your income payments will automatically begin on this date (latest Annuity
Date.) Certain states may require your income payments to start earlier.
If the Annuity Date is past your 85th birthday, your contract could lose its
status as an annuity under Federal tax laws. This may cause you to incur adverse
tax consequences. In addition, certain Qualified contracts require you to take
minimum distributions after you reach age 70 1/2. SEE TAXES BELOW.
INCOME OPTIONS
Currently, this Contract offers five Income Options. Other income options may be
available. Please check with the Annuity Service Center for details. If you
elect to receive income payments but do not select an option, your income
payments will be made in accordance with Option 4 for a period of 10 years. For
income payments selected for joint lives, we pay according to Option 3.
We base our calculation of income payments on the life of the Annuitant and the
annuity rates set forth in your contract. As the contract owner, you may change
the Annuitant at any time prior to the Annuity Date. You must notify us if the
Annuitant dies before the Annuity Date and then designate a new Annuitant.
OPTION 1 - LIFE INCOME ANNUITY
This option provides income payments for the life of the Annuitant. Income
payments stop when the Annuitant dies.
OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY
This option provides income payments for the life of the Annuitant and for the
life of another designated person. Upon the death of either person, we will
continue to make income payments during the lifetime of the survivor. Income
payments stop whenever the survivor dies.
OPTION 3 - JOINT AND 100% SURVIVOR LIFE ANNUITY WITH 10 OR 20 YEAR PERIOD
CERTAIN
This option is similar to Option 2 above, with an additional guarantee of
payments for at least 10 or 20 years. If the Annuitant and the Survivor die
before all of the payments have been made, the remaining payments are made to
the Beneficiary under your contract.
OPTION 4 - LIFE ANNUITY WITH 10 OR 20 YEAR PERIOD CERTAIN
This option is similar to Option 1 above. In addition, this option provides a
guarantee that income payments will be made for at least 10 or 20 years. You
select the number of years. If the Annuitant dies before all guaranteed income
payments are made, the remaining income payments go to the Beneficiary under
your contract.
35
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
This option provides income payments for a guaranteed period ranging from 5 to
30 years. If the Annuitant dies before all the guaranteed income payments are
made, the remaining income payments are made to the Beneficiary under your
contract. Additionally, if variable income payments are elected under this
option, you (or the Beneficiary under the contract if the Annuitant dies prior
to all guaranteed payments being made) may redeem the contract value (in full or
in part) after the Annuity Date. The amount available upon such redemption would
be the discounted present value of any remaining guaranteed payments. The value
of an Annuity Unit, regardless of the option chosen, takes into account the
mortality and expense risk charge. Since Option 5 does not contain an element of
mortality risk, no benefit is derived from this charge.
We make income payments on a monthly, quarterly, semi-annual or annual basis.
You instruct us to send you a check or to have the payments direct deposited
into your bank account. If state law allows, we distribute annuities with a
contract value of $5,000 or less in a lump sum. Also, if the selected income
option results in annuity payments of less than $50 per payment, we may decrease
the frequency of the payments, state law allowing.
ALLOCATION OF ANNUITY PAYMENTS
You can choose income payments that are fixed, variable or both. If payments are
fixed, AIG SunAmerica Life guarantees the amounts of each payment. If the
payments are variable, the amounts are not guaranteed. They will go up and/or
down based upon the performance of the Variable Portfolios in which you invest.
FIXED OR VARIABLE INCOME PAYMENTS
If at the date when income payments begin you are invested in the Variable
Portfolios only, your income payments will be variable. If your money is only in
fixed accounts at that time, your income payments will be fixed in amount. If
you are invested in both fixed and variable options at the time you begin the
Income Phase, a portion of your income payments will be fixed and a portion will
be variable.
INCOME PAYMENTS
Your income payments will vary if you are invested in the Variable Portfolios
after the Annuity date depending on four factors:
- for life options, your age when payments begin, and in most states, if a
Non-qualified contract, your gender; and
- the value of your contract in the Variable Portfolios on the Annuity
Date,
- the 3.5% assumed investment rate for variable income payments used in the
annuity table for the contract, and;
- the performance of the Variable Portfolios in which you are invested
during the time you receive income payments.
If you are invested in both the fixed account options and the Variable
Portfolios after the Annuity Date, the allocation of funds between the fixed
accounts and Variable Portfolios also impacts the amount of your annuity
payments.
The value of variable income payments, if elected, is based on an assumed
interest rate ("AIR") of 3.5% compounded annually. Variable income payments
generally increase or decrease from one income payment date to the next based
upon the performance of the applicable Variable Portfolios. If the performance
of the Variable Portfolios selected is equal to the AIR, the income payments
will remain constant. If performance of Variable Portfolios is greater than the
AIR, the income payments will increase and if it is less than the AIR, the
income payments will decline.
36
TRANSFERS DURING THE INCOME PHASE
During the Income Phase, one transfer per month is permitted between the
Variable Portfolios. No other transfers are allowed during the Income Phase.
DEFERMENT OF PAYMENTS
We may defer making fixed payments for up to six months, or less if required by
law. Interest is credited to you during the deferral period. SEE ALSO ACCESS TO
YOUR MONEY ABOVE FOR A DISCUSSION OF WHEN PAYMENTS FROM A VARIABLE PORTFOLIO MAY
BE SUSPENDED OR POSTPONED.
Please read the Statement of Additional Information, available upon request, for
a more detailed discussion of the income options.
TAXES
- --------------------------------------------------------------------------------
NOTE: THE BASIC SUMMARY BELOW ADDRESSES BROAD FEDERAL TAXATION MATTERS, AND
GENERALLY DOES NOT ADDRESS STATE TAXATION ISSUES OR QUESTIONS. IT IS NOT TAX
ADVICE. WE CAUTION YOU TO SEEK COMPETENT TAX ADVICE ABOUT YOUR OWN
CIRCUMSTANCES. WE DO NOT GUARANTEE THE TAX STATUS OF YOUR ANNUITY. TAX LAWS
CONSTANTLY CHANGE; THEREFORE, WE CANNOT GUARANTEE THAT THE INFORMATION CONTAINED
HEREIN IS COMPLETE AND/OR ACCURATE. WE HAVE INCLUDED AN ADDITIONAL DISCUSSION
REGARDING TAXES IN THE SAI.
ANNUITY CONTRACTS IN GENERAL
The Internal Revenue Code ("IRC") provides for special rules regarding the tax
treatment of annuity contracts. Generally, taxes on the earnings in your annuity
contract are deferred until you take the money out. Qualified retirement
investments that satisfy specific tax and ERISA requirements automatically
provide tax deferral regardless of whether the underlying contract is an
annuity, a trust, or a custodial account. Different rules apply depending on how
you take the money out and whether your contract is Qualified or Non-Qualified.
If you do not purchase your contract under a pension plan, a specially sponsored
employer program or an individual retirement account, your contract is referred
to as a Non-Qualified contract. A Non-Qualified contract receives different tax
treatment than a Qualified contract. In general, your cost in a Non-Qualified
contract is equal to the Purchase Payments you put into the contract. You have
already been taxed on the cost basis in your contract.
If you purchase your contract under a pension plan, a specially sponsored
employer program or as an individual retirement account, your contract is
referred to as a Qualified contract. Examples of qualified plans or arrangements
are: Individual Retirement Accounts ("IRAs"), Roth IRAs, Tax-Sheltered Annuities
(referred to as 403(b) contracts), plans of self-employed individuals (often
referred to as H.R.10 Plans or Keogh Plans) and pension and profit sharing
plans, including 401(k) plans. Typically, for employer plans and tax-deductible
IRA contributions, you have not paid any tax on the Purchase Payments used to
buy your contract and therefore, you have no cost basis in your contract.
However, you normally will have cost basis in a Roth IRA, and you may have cost
basis in a traditional IRA or in another Qualified Contract.
TAX TREATMENT OF DISTRIBUTIONS--NON-QUALIFIED CONTRACTS
If you make a partial or total withdrawal from a Non-Qualified contract, the IRC
treats such a withdrawal as first coming from the earnings and then as coming
from your Purchase Payments. Purchase payments made prior to August 14, 1982,
however, are an important exception to this general rule, and for tax purposes
are treated as being distributed before the earnings on those contributions. If
you annuitize your contract, a portion of each income payment will be
considered, for tax purposes, to be a return of a portion of your Purchase
Payment(s). Any portion of each income payment that is considered a return of
your Purchase Payment will not be taxed. Withdrawn earnings are treated as
income to you and are taxable. The IRC provides for a 10% penalty tax on any
earnings that are withdrawn other than in conjunction with the following
circumstances: (1) after reaching age 59 1/2; (2) when paid to your Beneficiary
after you die; (3) after you become disabled (as defined in the IRC); (4) when
37
paid in a series of substantially equal installments made for your life or for
the joint lives of you and your Beneficiary; (5) under an immediate annuity; or
(6) which are attributable to Purchase Payments made prior to August 14, 1982.
TAX TREATMENT OF DISTRIBUTIONS--QUALIFIED CONTRACTS (INCLUDING GOVERNMENTAL
457(b) ELIGIBLE DEFERRED COMPENSATION PLANS)
Generally, you have not paid any taxes on the Purchase Payments used to buy a
Qualified contract. As a result, with certain limited exceptions, any amount of
money you take out as a withdrawal or as income payments is taxable income. In
the case of certain Qualified contracts, the IRC further provides for a 10%
penalty tax on any taxable withdrawal or income payment paid to you other than
in conjunction with the following circumstances: (1) after reaching age 59 1/2;
(2) when paid to your Beneficiary after you die; (3) after you become disabled
(as defined in the IRC); (4) in a series of substantially equal installments,
made for your life or for the joint lives of you and your Beneficiary, that
begins after separation from service with the employer sponsoring the plan; (5)
to the extent such withdrawals do not exceed limitations set by the IRC for
deductible amounts paid during the taxable year for medical care; (6) to fund
higher education expenses (as defined in the IRC; only from an IRA); (7) to fund
certain first-time home purchase expenses (only from an IRA); (8) when you
separate from service after attaining age 55 (does not apply to an IRA); (9)
when paid for health insurance, if you are unemployed and meet certain
requirements; and (10) when paid to an alternate payee pursuant to a qualified
domestic relations order. This 10% penalty tax does not apply to withdrawals or
income payments from governmental 457(b) eligible deferred compensation plans,
except to the extent that such withdrawals or income payments are attributable
to a prior rollover to the plan (or earnings thereon) from another plan or
arrangement that was subject to the 10% penalty tax.
The IRC limits the withdrawal of an employee's voluntary Purchase Payments from
a Tax-Sheltered Annuity (TSA). Withdrawals can only be made when an owner: (1)
reaches age 59 1/2; (2) severs employment with the employer; (3) dies; (4)
becomes disabled (as defined in the IRC); or (5) experiences a financial
hardship (as defined in the IRC). In the case of hardship, the owner can only
withdraw Purchase Payments. Additional plan limitations may also apply. Amounts
held in a TSA annuity contract as of December 31, 1988 are not subject to these
restrictions. Qualifying transfers of amounts from one TSA contract to another
TSA contract under section 403(b) or to a custodial account under section
403(b)(7), and qualifying transfers to a state defined benefit plan to purchase
service credits, are not considered distributions, and thus are not subject to
these withdrawal limitations. If amounts are transferred from a custodial
account described in Code section 403(b)(7) to this contract the transferred
amount will retain the custodial account withdrawal restrictions.
Withdrawals from other Qualified Contracts are often limited by the IRC and by
the employer's plan.
MINIMUM DISTRIBUTIONS
Generally, the IRC requires that you begin taking annual distributions from
qualified annuity contracts by April 1 of the calendar year following the later
of (1) the calendar year in which you attain age 70 1/2 or (2) the calendar year
in which you separate from service from the employer sponsoring the plan. If you
own an IRA, you must begin taking distributions when you attain age 70 1/2
regardless of when you separate from service from the employer sponsoring the
plan. If you own more than one TSA, you may be permitted to take your annual
distributions in any combination from your TSAs. A similar rule applies if you
own more than one IRA. However, you cannot satisfy this distribution requirement
for your TSA contract by taking a distribution from an IRA, and you cannot
satisfy the requirement for your IRA by taking a distribution from a TSA.
You may be subject to a surrender charge on withdrawals taken to meet minimum
distribution requirements, if the withdrawals exceed the contract's maximum
penalty free amount.
Failure to satisfy the minimum distribution requirements may result in a tax
penalty. You should consult your tax advisor for more information.
You may elect to have the required minimum distribution amount on your contract
calculated and withdrawn each year under the automatic withdrawal option. You
may select monthly, quarterly, semiannual, or annual withdrawals
38
for this purpose. This service is provided as a courtesy and we do not guarantee
the accuracy of our calculations. Accordingly, we recommend you consult your tax
advisor concerning your required minimum distribution. You may terminate your
election for automated minimum distribution at any time by sending a written
request to our Annuity Service Center. We reserve the right to change or
discontinue this service at any time.
The IRS issued new regulations, effective January 1, 2003, regarding required
minimum distributions from qualified annuity contracts. One of the regulations
requires that the annuity contract value used to determine required minimum
distributions include the actuarial value of other benefits under the contract,
such as optional death benefits. This regulation does not apply to required
minimum distributions made under an irrevocable annuity income option. We are
currently awaiting further clarification from the IRS on this regulation,
including how the value of such benefits is determined. You should discuss the
effect of these new regulations with your tax advisor.
TAX TREATMENT OF DEATH BENEFITS
Any death benefits paid under the contract are taxable to the Beneficiary. The
rules governing the taxation of payments from an annuity contract, as discussed
above, generally apply whether the death benefits are paid as lump sum or
annuity payments. Estate taxes may also apply.
Certain enhanced death benefits may be purchased under your contract. Although
these types of benefits are used as investment protection and should not give
rise to any adverse tax effects, the IRS could take the position that some or
all of the charges for these death benefits should be treated as a partial
withdrawal from the contract. In that case, the amount of the partial withdrawal
may be includible in taxable income and subject to the 10% penalty if the owner
is under 59 1/2.
If you own a Qualified contract and purchase these enhanced death benefits, the
IRS may consider these benefits "incidental death benefits." The IRC imposes
limits on the amount of the incidental death benefits allowable for Qualified
contracts. If the death benefit(s) selected by you are considered to exceed
these limits, the benefit(s)could result in taxable income to the owner of the
Qualified contract. Furthermore, the IRC provides that the assets of an IRA
(including a Roth IRA) may not be invested in life insurance, but may provide,
in the case of death during the Accumulation Phase, for a death benefit payment
equal to the greater of Purchase Payments or Contract Value. This contract
offers death benefits, which may exceed the greater of Purchase Payments or
Contract Value. If the IRS determines that these benefits are providing life
insurance, the contract may not qualify as an IRA (including Roth IRAs). You
should consult your tax advisor regarding these features and benefits prior to
purchasing a contract.
CONTRACTS OWNED BY A TRUST OR CORPORATION
A Trust or Corporation ("Non-Natural Owner") that is considering purchasing this
contract should consult a tax advisor. Generally, the IRC does not treat a
Non-Qualified contract owned by a non-natural owner as an annuity contract for
Federal income tax purposes. The non-natural owner pays tax currently on the
contract's value in excess of the owner's cost basis. However, this treatment is
not applied to a contract held by a trust or other entity as an agent for a
natural person nor to contracts held by Qualified Plans. See the SAI for a more
detailed discussion of the potential adverse tax consequences associated with
non-natural ownership of a non-qualified annuity contract.
GIFTS, PLEDGES AND/OR ASSIGNMENTS OF A CONTRACT
If you transfer ownership of your Non-Qualified contract to a person other than
your spouse (or former spouse incident to divorce) as a gift you will pay
federal income tax on the contract's cash value to the extent it exceeds your
cost basis. The recipient's cost basis will be increased by the amount on which
you will pay federal taxes. In addition, the IRC treats any assignment or pledge
(or agreement to assign or pledge) of any portion of a Non-Qualified contract as
a withdrawal. See the SAI for a more detailed discussion regarding potential tax
consequences of gifting, assigning, or pledging a Non-Qualified contract.
The IRC prohibits Qualified annuity contracts including IRAs from being
transferred, assigned or pledged as security for a loan. This prohibition,
however, generally does not apply to loans under an employer-sponsored plan
39
(including loans from the annuity contract) that satisfy certain requirements,
provided that: (a) the plan is not an unfunded deferred compensation plan; and
(b) the plan funding vehicle is not an IRA.
DIVERSIFICATION AND INVESTOR CONTROL
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity. We believe that the management of the
Underlying Funds monitors the Funds so as to comply with these requirements. To
be treated as a variable annuity for tax purposes, the underlying investments
must meet these requirements.
The diversification regulations do not provide guidance as to the circumstances
under which you, and not the Company, would be considered the owner of the
shares of the Variable Portfolios under your Non-Qualified Contract, because of
the degree of control you exercise over the underlying investments. This
diversification requirement is sometimes referred to as "investor control." It
is unknown to what extent owners are permitted to select investments, to make
transfers among Variable Portfolios or the number and type of Variable
Portfolios owners may select from. If any guidance is provided which is
considered a new position, then the guidance should generally be applied
prospectively. However, if such guidance is considered not to be a new position,
it may be applied retroactively. This would mean that you, as the owner of the
Non-qualified Contract, could be treated as the owner of the underlying Variable
Portfolios. Due to the uncertainty in this area, we reserve the right to modify
the contract in an attempt to maintain favorable tax treatment.
These investor control limitations generally do not apply to Qualified
Contracts, which are referred to as "Pension Plan Contracts" for purposes of
this rule, although the limitations could be applied to Qualified Contracts in
the future.
PERFORMANCE
- --------------------------------------------------------------------------------
From time to time we will advertise the performance of the Variable Portfolios.
Any such performance results are based on historical earnings and are not
intended to indicate future performance.
We advertise the Cash Management Portfolio's yield and effective yield. In
addition, the other Variable Portfolios advertise total return, gross yield and
yield-to-maturity. These figures represent past performance of the Variable
Portfolios. These performance numbers do not indicate future results.
When we advertise performance for periods prior to the date the contracts were
first issued, we derive the figures from the performance of the corresponding
portfolios for the Trusts, if available. We modify these numbers to reflect
charges and expenses as if the Variable Portfolio was in existence during the
period stated in the advertisement. Figures calculated in this manner do not
represent actual historic performance of the particular Variable Portfolios.
We may show performance of each Variable Portfolios in comparison to various
appropriate indices and the performance of other similar variable annuity
products with similar objectives as reported by such independent reporting
services as Morningstar, Inc., Lipper Analytical Services, Inc. and the Variable
Annuity Research Data Service ("VARDS").
OTHER INFORMATION
- --------------------------------------------------------------------------------
AIG SUNAMERICA LIFE
AIG SunAmerica Life is a stock life insurance company originally organized under
the laws of the state of California in April, 1965. On January 1, 1996, AIG
SunAmerica Life redomesticated under the laws of the state of Arizona.
AIG SunAmerica Life and its affiliates, SunAmerica Life Insurance Company, First
SunAmerica Life Insurance Company, AIG SAAMCo and the AIG Advisors Group, Inc.
(comprising six wholly owned broker-dealers and
40
two investment advisors), specialize in retirement savings and investment
products and services. Business focuses include fixed and variable annuities,
mutual funds and broker-dealer services.
THE SEPARATE ACCOUNT
AIG SunAmerica Life originally established a separate account, Variable Annuity
Account Five (the "Separate Account"), under Arizona law on July 8, 1996. The
Separate Account is registered with the SEC as a unit investment trust under the
Investment Company Act of 1940, as amended.
AIG SunAmerica Life owns the assets in the Separate Account. However, the assets
in the Separate Account are not chargeable with liabilities arising out of any
other business conducted by AIG SunAmerica Life. Income gains and losses
(realized and unrealized) resulting from assets in the Separate Account are
credited to or charged against the Separate Account without regard to other
income, gains or losses of AIG SunAmerica Life. Assets in the Separate Account
are not guaranteed by AIG SunAmerica Life.
THE GENERAL ACCOUNT
Money allocated to the fixed account options goes into AIG SunAmerica Life's
general account. The general account consists of all of AIG SunAmerica Life's
assets other than assets attributable to a separate account. All of the assets
in the general account are chargeable with the claims of any AIG SunAmerica Life
contract holders as well as all of its creditors. The general account funds are
invested as permitted under state insurance laws.
PAYMENTS IN CONNECTION WITH DISTRIBUTION OF THE CONTRACT
PAYMENTS TO BROKER-DEALERS
Registered representatives of broker-dealers sell the contract. We pay
commissions to the broker-dealers for the sale of your contract ("Contract
Commissions"). There are different structures by which a broker-dealer can
choose to have their Contract Commissions paid. For example, as one option, we
may pay upfront Contract Commission, only, that may be up to a maximum 8% of
each Purchase Payment you invest (which may include promotional amounts).
Another option may be a lower upfront Contract Commission on each Purchase
Payment, with a trail commission of up to a maximum 1.50% of contract value,
annually. We pay Contract Commissions directly to the broker-dealer with whom
your registered representative is affiliated. Registered representatives may
receive a portion of these amounts we pay in accordance with any agreement in
place between the registered representative and his/her broker-dealer firm.
We (or our affiliates) may pay broker-dealers or permitted third parties cash or
non-cash compensation, including reimbursement of expenses incurred in
connection with the sale of these contracts. These payments may be intended to
reimburse for specific expenses incurred or may be based on sales, certain
assets under management or longevity of assets invested with us. For example, we
may pay additional amounts in connection with contracts that remain invested
with us for a particular period of time. We enter into such arrangements in our
discretion and we may negotiate customized arrangements with firms, including
affiliated and non-affiliated broker-dealers based on various factors.
Promotional incentives may change at any time.
We do not deduct these amounts directly from your Purchase Payments. We
anticipate recovering these amounts from the fees and charges collected under
the contract. Certain compensation payments may increase our cost of doing
business in a particular firm and may result in higher contractual fees and
charges if you purchase your contract through such a firm. SEE EXPENSES ABOVE.
AIG SunAmerica Capital Services, Inc., Harborside Financial Center, 3200 Plaza
5, Jersey City, NJ 07311-4992, distributes the contracts. AIG SunAmerica Capital
Services, an affiliate of AIG SunAmerica Life, is a registered broker-dealer
under the Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc. No underwriting fees are paid in connection with the
distribution of the contracts.
41
PAYMENTS WE RECEIVE
In addition to amounts received pursuant to established 12b-1 Plans, we may
receive compensation of up to 0.60% from the investment advisers, subadvisers or
their affiliates of certain of the underlying Trusts and/or portfolios for
services related to the availability of the underlying portfolios in the
contract. Furthermore, certain advisers and/or subadvisers may offset the costs
we incur for training to support sales of the underlying funds in the contract.
ADMINISTRATION
We are responsible for the administrative servicing of your contract. Please
contact our Annuity Service Center at 1-800-445-SUN2, if you have any comment,
question or service request.
We send out transaction confirmations and quarterly statements. During the
Accumulation Phase, you will receive confirmation of transactions within your
contract. Transactions made pursuant to contractual or systematic agreements,
such as dollar cost averaging, may be confirmed quarterly. Purchase Payments
received through the automatic payment plan or a salary reduction arrangement,
may also be confirmed quarterly. For other transactions, we send confirmations
immediately. It is your responsibility to review these documents carefully and
notify us of any inaccuracies immediately. We investigate all inquiries. To the
extent that we believe we made an error, we retroactively adjust your contract,
provided you notify us within 30 days of receiving the transaction confirmation
or quarterly statement. Any other adjustments we deem warranted are made as of
the time we receive notice of the error.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Separate Account. AIG
SunAmerica Life engages in various kinds of routine litigation. In management's
opinion, these matters are not material in relation to the financial position of
the Company. A purported class action captioned NIKITA Mehta, as Trustee of the
N.D. Mehta Living Trust vs. AIG SunAmerica Life Assurance Company, Case 04L0199,
was filed on April 5, 2004 in the Circuit Court, Twentieth Judicial District in
St. Clair County, Illinois. The lawsuit alleges certain improprieties in
conjunction with alleged market timing activities. The probability of any
particular outcome cannot be reasonably estimated at this time.
OWNERSHIP
The Seasons Triple Elite Variable Annuity is a Flexible Payment Group Deferred
Annuity contract. We issue a group contract to a contract holder for the benefit
of the participants in the group. As a participant in the group, you will
receive a certificate which evidences your ownership. As used in this
prospectus, the term contract refers to your certificate. In some states, a
Flexible Payment Individual Modified Guaranteed and Variable Deferred Annuity
contract is available instead. Such a contract is identical to the contract
described in this prospectus, with the exception that we issue it directly to
the owner.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The consolidated financial statements of AIG SunAmerica Life Assurance Company
at December 31, 2003 and 2002 and for each of the three years in the period
ended December 31, 2003, and the financial statements of Variable Annuity
Account Five at April 30, 2004, and for each of the two years in the period
ended April 30, 2004, are incorporated herein by reference in this prospectus in
reliance on the reports of PricewaterhouseCoopers LLP, independent registered
public accounting firm, given on the authority of said firm as experts in
auditing and accounting.
REGISTRATION STATEMENT
A registration statement has been filed with the SEC under the Securities Act of
1933 relating to the contract. This prospectus does not contain all the
information in the registration statement as permitted by SEC regulations. The
omitted information can be obtained from the SEC's principal office in
Washington, D.C., upon payment of a prescribed fee.
42
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
Additional information concerning the operations of the separate account is
contained in a Statement of Additional Information ("SAI"), which is available
without charge upon written request addressed to us at our Annuity Service
Center, P.O. Box 54299, Los Angeles, California 90054-0299 or by calling (800)
445-SUN2. The contents of the SAI are tabulated below.
<Table>
Separate Account............................................ 3
General Account............................................. 3
Performance Data............................................ 3
Annuity Payments............................................ 6
Income Protector Feature for Contracts Issued Prior to
August 2, 2004............................................ 6
Annuity Unit Values......................................... 6
Taxes....................................................... 9
Distribution of Contracts................................... 14
Financial Statements........................................ 14
</Table>
43
APPENDIX A - CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
<Table>
<Caption>
INCEPTION TO FISCAL YEAR FISCAL YEAR
STRATEGIES 4/30/02 ENDING 4/30/03 ENDING 4/30/04
- --------------------------------------------------- ------------ -------------- --------------
- ---------------------------------------------------------------------------------------------------
Growth (Inception Date: 12/10/01)
Beginning AUV.................................... (a) 15.202 14.480 12.807
(b) 15.202 14.469 12.731
Ending AUV....................................... (a) 14.480 12.807 14.964
(b) 14.469 12.731 14.816
Ending Number of AUs............................. (a) 34,143 204,828 644,613
(b) 19,273 112,268 304,735
- ---------------------------------------------------------------------------------------------------
Moderate Growth (Inception Date: 12/10/01)
Beginning AUV.................................... (a) 14.827 14.158 12.808
(b) 14.827 14.125 12.728
Ending AUV....................................... (a) 14.158 12.808 14.673
(b) 14.125 12.728 14.522
Ending Number of AUs............................. (a) 83,099 378,604 1,028,643
(b) 68,214 371,335 566,832
- ---------------------------------------------------------------------------------------------------
Balanced Growth (Inception Date: 12/10/01)
Beginning AUV.................................... (a) 14.159 13.679 12.837
(b) 14.159 13.699 12.801
Ending AUV....................................... (a) 13.679 12.837 14.332
(b) 13.699 12.801 14.234
Ending Number of AUs............................. (a) 91,728 477,296 910,818
(b) 64,966 173,393 276,721
- ---------------------------------------------------------------------------------------------------
Conservative Growth (Inception Date: 12/10/01)
Beginning AUV.................................... (a) 13.662 13.528 13.111
(b) 13.662 13.515 13.046
Ending AUV....................................... (a) 13.528 13.111 14.297
(b) 13.515 13.046 14.169
Ending Number of AUs............................. (a) 22,358 383,364 620,786
(b) 25,766 223,464 283,856
- ---------------------------------------------------------------------------------------------------
</Table>
AUV-Accumulation Unit Value
AU-Accumulation Units
(a) Without election of Estate Advantage
(b) With election of Estate Advantage
A-1
<Table>
<Caption>
INCEPTION TO FISCAL YEAR FISCAL YEAR
FOCUSED PORTFOLIOS 4/30/02 ENDING 4/30/03 ENDING 4/30/04
- --------------------------------------------------- ------------ -------------- --------------
- ---------------------------------------------------------------------------------------------------
Focus Growth (Inception Date: 12/10/01)
Beginning AUV.................................... (a) 6.898 6.590 5.585
(b) 6.898 6.571 5.547
Ending AUV....................................... (a) 6.590 5.585 7.135
(b) 6.571 5.547 7.058
Ending Number of AUs............................. (a) 12,042 220,869 394,736
(b) 16,100 41,931 134,662
- ---------------------------------------------------------------------------------------------------
Focus Growth & Income (Inception Date: 12/10/01)
Beginning AUV.................................... (a) 8.377 8.546 7.465
(b) 8.377 8.515 7.408
Ending AUV....................................... (a) 8.546 7.465 9.029
(b) 8.515 7.408 8.923
Ending Number of AUs............................. (a) 3,960 113,993 288,051
(b) 10,118 27,407 84,532
- ---------------------------------------------------------------------------------------------------
Focus Value (Inception Date: 12/10/01)
Beginning AUV.................................... (a) 11.042 10.687 9.366
(b) 11.042 10.654 9.298
Ending AUV....................................... (a) 10.687 9.366 12.186
(b) 10.654 9.298 12.050
Ending Number of AUs............................. (a) 1,916 103,476 178,808
(b) 15,685 50,214 107,110
- ---------------------------------------------------------------------------------------------------
Focus TechNet (Inception Date: 12/10/01)
Beginning AUV.................................... (a) 4.447 3.305 2.802
(b) 4.447 3.295 2.782
Ending AUV....................................... (a) 3.305 2.802 4.290
(b) 3.295 2.782 4.243
Ending Number of AUs............................. (a) 18,283 133,469 211,211
(b) 13,502 61,135 127,591
- ---------------------------------------------------------------------------------------------------
</Table>
AUV-Accumulation Unit Value
AU-Accumulation Units
(a) Without election of Estate Advantage
(b) With election of Estate Advantage
A-2
<Table>
<Caption>
INCEPTION TO FISCAL YEAR FISCAL YEAR
SELECT PORTFOLIOS 4/30/02 ENDING 4/30/03 ENDING 4/30/04
- --------------------------------------------------- ------------ -------------- --------------
- ---------------------------------------------------------------------------------------------------
Large-Cap Growth (Inception Date: 12/10/01)
Beginning AUV.................................... (a) 8.809 7.945 6.809
(b) 8.809 7.928 6.767
Ending AUV....................................... (a) 7.945 6.809 8.092
(b) 7.928 6.767 8.010
Ending Number of AUs............................. (a) 13,659 226,901 411,518
(b) 9,172 57,652 101,828
- ---------------------------------------------------------------------------------------------------
Large-Cap Composite (Inception Date: 12/10/01)
Beginning AUV.................................... (a) 9.427 8.878 7.448
(b) 9.427 8.881 7.419
Ending AUV....................................... (a) 8.878 7.448 8.809
(b) 8.881 7.419 8.739
Ending Number of AUs............................. (a) 1,625 73,580 127,075
(b) 4,540 18,823 39,152
- ---------------------------------------------------------------------------------------------------
Large-Cap Value (Inception Date: 12/10/01)
Beginning AUV.................................... (a) 11.667 11.035 9.202
(b) 11.667 10.998 9.134
Ending AUV....................................... (a) 11.035 9.202 11.350
(b) 10.998 9.134 11.221
Ending Number of AUs............................. (a) 11,012 234,656 424,460
(b) 7,302 56,584 99,957
- ---------------------------------------------------------------------------------------------------
Mid-Cap Growth (Inception Date: 12/10/01)
Beginning AUV.................................... (a) 12.464 12.246 10.279
(b) 12.464 12.243 10.235
Ending AUV....................................... (a) 12.246 10.279 13.777
(b) 12.243 10.235 13.663
Ending Number of AUs............................. (a) 6,322 144,167 246,667
(b) 5,370 35,880 87,902
- ---------------------------------------------------------------------------------------------------
Mid-Cap Value (Inception Date: 12/10/01)
Beginning AUV.................................... (a) 14.322 14.768 12.416
(b) 14.322 14.735 12.337
Ending AUV....................................... (a) 14.768 12.416 16.264
(b) 14.735 12.337 16.095
Ending Number of AUs............................. (a) 3,389 102,439 206,069
(b) 5,208 46,297 81,425
- ---------------------------------------------------------------------------------------------------
Small-Cap (Inception Date: 12/10/01)
Beginning AUV.................................... (a) 10.301 10.507 8.121
(b) 10.301 10.477 8.065
Ending AUV....................................... (a) 10.507 8.121 10.409
(b) 10.477 8.065 10.296
Ending Number of AUs............................. (a) 5,767 150,877 285,099
(b) 5,097 43,578 112,078
- ---------------------------------------------------------------------------------------------------
</Table>
AUV-Accumulation Unit Value
AU-Accumulation Units
(a) Without election of Estate Advantage
(b) With election of Estate Advantage
A-3
<Table>
<Caption>
INCEPTION TO FISCAL YEAR FISCAL YEAR
SELECT PORTFOLIOS 4/30/02 ENDING 4/30/03 ENDING 4/30/04
- --------------------------------------------------- ------------ -------------- --------------
- ---------------------------------------------------------------------------------------------------
International Equity (Inception Date: 12/10/01)
Beginning AUV.................................... (a) 7.896 7.764 5.826
(b) 7.896 7.786 5.820
Ending AUV....................................... (a) 7.764 5.826 7.802
(b) 7.786 5.820 7.763
Ending Number of AUs............................. (a) 3,862 271,634 568,336
(b) 261 22,345 95,197
- ---------------------------------------------------------------------------------------------------
Diversified Fixed Income (Inception Date: 12/10/01)
Beginning AUV.................................... (a) 10.767 10.648 11.434
(b) 10.767 10.621 11.361
Ending AUV....................................... (a) 10.648 11.434 11.366
(b) 10.621 11.361 11.248
Ending Number of AUs............................. (a) 6,446 380,308 613,423
(b) 1,259 174,520 191,971
- ---------------------------------------------------------------------------------------------------
Cash Management (Inception Date: 12/10/01)
Beginning AUV.................................... (a) 10.855 10.856 10.758
(b) 10.855 10.829 10.690
Ending AUV....................................... (a) 10.856 10.758 10.609
(b) 10.829 10.690 10.500
Ending Number of AUs............................. (a) 1,727 285,550 214,224
(b) 456 55,443 95,446
- ---------------------------------------------------------------------------------------------------
</Table>
AUV-Accumulation Unit Value
AU-Accumulation Units
(a) Without election of Estate Advantage
(b) With election of Estate Advantage
A-4
APPENDIX B - DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION
- --------------------------------------------------------------------------------
IF YOU PURCHASED YOUR CONTRACT ON OR ABOUT AUGUST 2, 2004, THE DEATH BENEFITS
FOLLOWING SPOUSAL CONTINUATION ARE AS FOLLOWS:
Capitalized terms used in this Appendix have the same meaning as they have in
the prospectus.
The term "Continuation Net Purchase Payment" is used frequently to describe the
death benefit options payable to the beneficiary of the Continuing Spouse. We
define Continuation Net Purchase Payment as Net Purchase Payments made as of the
Continuation Date. For the purpose of calculating Continuation Net Purchase
Payments, the amount that equals the contract value on the Continuation Date,
including the Continuation Contribution is considered a Purchase Payment. If the
Continuing Spouse makes no additional Purchase Payments or withdrawal,
Continuation Net Purchase Payments equals the contract value on the Continuation
Date, including the Continuation Contribution.
The term "withdrawals" as used in describing the death benefit options below is
defined as withdrawals and any fees and charges applicable to those withdrawals.
The following details the death benefit options and Earnings Advantage benefit
upon the Continuing Spouse's death.
The death benefit we will pay the Continuing Spouse's Beneficiary varies
depending on the death benefit option elected by the original owner of the
contract and the age of the Continuing Spouse on the Continuation Date.
A. DEATH BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH:
1. STANDARD DEATH BENEFIT
If the original owner of the contract elected the standard death benefit and the
Continuing Spouse is age 82 or younger on the Continuation Date, then upon the
death of the Continuing Spouse, the death benefit will be the greater of:
a. Contract value; or
b. Contract value on the Continuation Date plus any Continuation Net
Purchase Payments received prior to the Continuing Spouse's 86th
birthday.
If the Continuing Spouse is age 83-85 on the Continuation Date, the death
benefit will be the greater of:
a. Contract value; or
b. The lesser of:
(1) Contract value on the Continuation Date plus Continuation Net Purchase
Payments received prior to the Continuing Spouse's 86th birthday; or
(2) 125% of the contract value.
If the Continuing Spouse is age 86 and older on the Continuation Date, the death
benefit is equal to contract value.
2. PURCHASE PAYMENT ACCUMULATION OPTION
If the original owner of the contract elected the Purchase Payment Accumulation
Option, and the Continuing Spouse is age 74 or younger on the Continuation Date,
then upon the death of the Continuing Spouse, the death benefit will be the
greatest of:
a. Contract value; or
b. Contract value on the Continuation Date plus Continuation Net Purchase
Payments, compounded at 3% annual growth rate, to the earlier of the
Continuing Spouse's 75th birthday or date of death; plus any
Continuation Net Purchase Payment received after the Continuing Spouse's
75th birthday to the earlier of the Continuing Spouse's 86th birthday or
date of death; or
B-1
c. Contract value on the seventh contract anniversary (based on the
original contract issue date), reduced for withdrawals since the seventh
contract anniversary in the same proportion that the contract value was
reduced on the date of each such withdrawal that occurs after the
seventh contract anniversary, plus Net Purchase Payments received
between the seventh contract anniversary date but prior to the
Continuing Spouse's 86th birthday.
If the Continuing Spouse is age 75-82 on the Continuation Date and the
Continuing Spouse dies prior to his/her 86th birthday, then the death benefit
will be the greatest of:
a. Contract value; or
b. Contract value on the Continuation Date plus any Continuation Net
Purchase Payments received prior to the Continuing Spouse's 86th
birthday; or
c. Maximum anniversary value on any contract anniversary that occurred
after the Continuation Date, but prior to the Continuing Spouse's 83rd
birthday. The anniversary value for any year is equal to the contract
value on the applicable contract anniversary date, plus any Net Purchase
Payments received since that anniversary date but prior to the
Continuing Spouse's 86th birthday, and reduced for any Gross Withdrawals
since that contract anniversary in the same proportion that the
withdrawal reduced the contract value on the date of such withdrawal.
If the Continuing Spouse is age 83-85 on the Continuation Date, the death
benefit will be the Standard Death Benefit described above and the fee for the
Purchase Payment Accumulation option will no longer be deducted as of the
Continuation Date.
3. MAXIMUM ANNIVERSARY VALUE OPTION
If the original owner of the contract elected the Maximum Anniversary Option,
and the Continuing Spouse is age 82 or younger on the Continuation Date and the
Continuing Spouse dies prior to his/her 86th birthday, then upon the death of
the Continuing Spouse, the death benefit will be the greatest of:
a. Contract value; or
b. Contract value on the Continuation Date plus Continuation Net Purchase
Payments received prior to the Continuing Spouse's 86th birthday; or
c. Maximum anniversary value on any contract anniversary that occurred
after the Continuation Date, but prior to the Continuing Spouse's 83rd
birthday. The anniversary value for any year is equal to the contract
value on the applicable contract anniversary date after the Continuation
Date, plus any Continuation Net Purchase Payments received since that
anniversary date but prior to the Continuing Spouse's 86th birthday, and
reduced for any Gross Withdrawals since that contract anniversary in the
same proportion that the withdrawal reduced the contract value on the
date of withdrawal.
If the Continuing Spouse is age 83-85 on the Continuation Date, the death
benefit will be the Standard Death Benefit described above and the fee for the
Maximum Anniversary Value option will no longer be deducted as of the
Continuation Date.
If the Continuing Spouse is age 86 or older on the Continuation Date or on the
date of death, the death benefit under both the Purchase Payment Accumulation
and Maximum Anniversary options is equal to the contract value.
B. THE EARNINGS ADVANTAGE BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH:
The Earnings Advantage benefits may increase the death benefit amount. The
Earnings Advantage is only available if the original owner elected Earnings
Advantage, and it has not been terminated. If the Continuing Spouse had earnings
in the contract at the time of his/her death, we will add a percentage of those
earnings (the "Earnings Advantage Percentage"), subject to a maximum dollar
amount (the "Maximum Earnings Advantage Percentage"), to the death benefit
payable, based on the number of years the Continuing Spouse has held the
contract since the
B-2
Continuation Date. The Earnings Advantage, if any, is added to the death benefit
payable under the Purchase Payment Accumulation or the Maximum Anniversary
option.
On the Continuation Date, if the Continuing Spouse is 69 or younger and a
Continuation Contribution is added, the table below shows the available Earnings
Advantage benefit:
<Table>
<Caption>
- -------------------------------------------------------------------------------------------
EARNINGS ADVANTAGE
CONTRACT YEAR OF DEATH PERCENTAGE MAXIMUM EARNINGS ADVANTAGE AMOUNT
- -------------------------------------------------------------------------------------------
Years 0-4 25% of Earnings 40% of Continuation Net Purchase Payments
- -------------------------------------------------------------------------------------------
Years 5-9 40% of Earnings 65% of Continuation Net Purchase Payments*
- -------------------------------------------------------------------------------------------
Years 10+ 50% of Earnings 75% of Continuation Net Purchase Payments*
- -------------------------------------------------------------------------------------------
</Table>
On the Continuation Date, if the Continuing Spouse is between your 70th and 81st
birthdays and a Continuation Contribution is added, table below shows the
available Earnings Advantage benefit:
<Table>
<Caption>
- ------------------------------------------------------------------------------------------
EARNINGS ADVANTAGE
CONTRACT YEAR OF DEATH PERCENTAGE MAXIMUM EARNINGS ADVANTAGE AMOUNT
- ------------------------------------------------------------------------------------------
All Contract Years 25% of Earnings 40% of Continuation Net Purchase Payments*
- ------------------------------------------------------------------------------------------
</Table>
* PURCHASE PAYMENTS RECEIVED AFTER THE 5TH ANNIVERSARY OF THE CONTINUATION DATE
MUST REMAIN IN THE CONTRACT FOR AT LEAST 6 FULL MONTHS TO BE INCLUDED AS PART
OF THE CONTINUATION NET PURCHASE PAYMENTS FOR THE PURPOSE OF THE MAXIMUM
EARNINGS ADVANTAGE PERCENTAGE CALCULATION.
If a Continuation Contribution is not added on the Continuation Date, the
Continuing Spouse's age as of the original contract issue date is used to
calculate the Earnings Advantage, if any.
What is the Contract Year of Death?
Contract Year of Death is the number of full 12 month periods starting on the
Continuation Date and ending on the Continuing Spouse's date of death.
What is the Earnings Advantage amount?
We determine the Earnings Advantage amount based upon a percentage of earnings
in the contract at the time of the Continuing Spouse's death. For the purpose of
this calculation, earnings are defined as (1) minus (2) where:
(1) equals the contract value on the Continuing Spouse's date of death;
(2) equals the Continuation Net Purchase Payment(s).
What is the Maximum Earnings Advantage amount?
The Earnings Advantage is subject to a maximum dollar amount. The Maximum
Earnings Advantage amount is a percentage of the Continuation Net Purchase
Payments.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION
PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME WITH RESPECT TO
PROSPECTIVELY ISSUED CONTRACTS.
IF YOU PURCHASED YOUR CONTRACT PRIOR TO AUGUST 2, 2004, THE DEATH BENEFITS ARE
AS FOLLOWS:
The term "Continuation Net Purchase Payment" is used frequently to describe the
death benefit options payable to the beneficiary of a Continuing Spouse. We
define Continuation Net Purchase Payment as Net Purchase Payments made as of the
Continuation Date plus any Purchase Payments recorded after the Continuation
Date; and reduced for any withdrawals recorded after the Continuation Date, in
the same proportion that the withdrawal reduced the contract value on the date
of the withdrawal. For the purposes of calculating Continuation Net Purchase
Payments, the amount that equals the contract value on the Continuation Date,
including the Continuation Contribution is considered a Purchase Payment. If the
Continuing Spouse makes no additional Purchase Payments or withdrawals,
Continuation Net Purchase Payments equal the contract value on the Continuation
Date, including the
B-3
Continuation Contribution. All other capitalized terms have the meanings defined
in the glossary and/or prospectus.
STANDARD DEATH BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH
I. If the Standard Death Benefit is applicable upon the Continuing Spouse's
death and a Continuation Contribution was made we will pay the beneficiary
the greater of:
1. Continuation Net Purchase Payments compounded at a 3% annual growth rate
from the Continuation Date until the earlier of age 75 or the date of
death of the Continuing Spouse, plus any Purchase Payments recorded after
the earlier of age 75 or the date of death of the Continuing Spouse; and
reduced for any withdrawals recorded after the earlier of age 75 or the
date of death, in the same proportion that the withdrawal reduced the
contract value on the date of the withdrawal.
2. The contract value on the date we receive all required paperwork and
satisfactory proof of death.
II. If the Standard Death Benefit is applicable upon the Continuing Spouse's
death and no Continuation Contributions was made, we will pay the
beneficiary the greater of:
1. Net Purchase Payments compounded at a 3% annual growth rate from the date
of issue until the earlier of age 75 or the date of death, plus any
Purchase Payments recorded after the earlier of age 75 or the date of
death; and reduced for any withdrawals recorded after the earlier of age
75 or the date of death, in the same proportion that the withdrawal
reduced the contract value on the date of withdrawal.
2. The contract value on the date we receive all required paperwork and
satisfactory proof of death.
SEASONS ESTATE ADVANTAGE DEATH BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH
If Seasons Estate Advantage is applicable upon the Continuing Spouse's death, we
will pay the Beneficiary the applicable death benefit under Option 1 or 2.
OPTION 1 - 5% ACCUMULATION:
I. If the 5% Accumulation Option is selected and a Continuation Contribution
was made the death benefit is the greater of:
a. The contract value on the date we receive all required paperwork and
satisfactory proof of the Continuing Spouse's death; or
b. Continuation Net Purchase Payments made from the Continuation Date
including the Continuation Contribution, compounded to the earlier of the
Continuing Spouse's 80th birthday or the date of death at a 5% annual
growth rate, plus any Purchase Payments recorded after the 80th birthday
or the date of death; and reduced for any withdrawals recorded after the
80th birthday or the date of death, in the same proportion that the
withdrawal reduced the contract value on the date of the withdrawal, up to
a maximum benefit of two times the Continuation Net Purchase Payments.
II. If 5% Accumulation Option is selected and no Continuation Contribution was
made:
a. The contract value on the date we receive all required paperwork and
satisfactory proof of Continuing Spouse's death; or
b. Net Purchase Payments made from the date of issue compounded to the
earlier of the Continuing Spouse's 80th birthday or the date of death at a
5% annual growth rate, plus any Purchase Payments recorded after the 80th
birthday or the date of death; and reduced for any withdrawals recorded
after the 80th birthday or the date of death, in the same proportion that
the withdrawal reduced the contract value on the date of the withdrawal,
up to a maximum of two times the Net Purchase Payments.
If the Continuing Spouse dies after the latest Annuity Date and the 5%
Accumulation option applied, any death benefit payable under the contract will
be the Standard Death Benefit as described above. The Continuing Spouse's
beneficiary will not receive any benefit from Seasons Estate Advantage.
B-4
OPTION 2 - MAXIMUM ANNIVERSARY VALUE:
III. If the Maximum Anniversary Value option is selected and if the Continuing
Spouse is younger than age 90 at the time of death and a Continuation
Contribution was made, the death benefit is the greatest of:
a. Continuation Net Purchase Payments; or
b. The contract value on the date we receive all required paperwork and
satisfactory proof of the Continuing Spouse's death; or
c. The maximum anniversary value on any contract anniversary (of the original
issue date) occurring after the Continuation Date but prior to the
Continuing Spouse's 81st birthday. The anniversary value equals the value
on the contract anniversary plus any Purchase Payments recorded after that
anniversary; and reduced for any withdrawals recorded after that
anniversary, in the same proportion that the withdrawal reduced the
contract value on the date of the withdrawal.
IV. If the Maximum Anniversary Value option is selected and no Continuation
Contribution was made the death benefit is the greatest of:
a. Net Purchase Payments; or
b. The contract value on the date we receive all required paperwork and
satisfactory proof of the Continuing Spouse's death; or
c. The maximum anniversary value on any contract anniversary (of the original
issue date) occurring after the issue date but before the Continuing
Spouse's 81st birthday. The anniversary value equals the value on the
contract anniversary plus any Purchase Payments recorded after that
anniversary; and reduced for any withdrawals recorded after that
anniversary, in the same proportion that the withdrawal reduced the
contract value on the date of the withdrawal.
If the Continuing Spouse is age 90 or older at the time of death and the Maximum
Anniversary Value option applied, the death benefit will be equal to the
contract value at the time we receive all required paperwork and satisfactory
proof of death. The Continuing Spouse's beneficiary will not receive any benefit
from Seasons Estate Advantage. However, the Continuing Spouse's beneficiary may
still receive a benefit from Earnings Advantage if the date of death is prior to
the latest annuity date.
EARNINGS ADVANTAGE BENEFIT FOR SPOUSAL CONTINUATION:
The Earnings Advantage benefit may increase the death benefit amount. The
Earnings Advantage benefit is only available if the original owner elected
Earnings Advantage and it has not been discontinued or terminated. If the
Continuing Spouse had earnings in the contract at the time of his/her death, we
will add a percentage of those earnings (the "Earnings Advantage Percentage"),
subject to a maximum dollar amount (the "Maximum Earnings Advantage
Percentage"), to the death benefit payable.
The Contract Year of Death (from Continuation Date forward) will determine the
Earnings Advantage Percentage and the Maximum Earnings Advantage amount, as set
forth below:
<Table>
<Caption>
- ------------------------------------------------------------------------------------------
EARNINGS ADVANTAGE
CONTRACT YEAR OF DEATH PERCENTAGE MAXIMUM EARNINGS ADVANTAGE PERCENTAGE
- ------------------------------------------------------------------------------------------
Years 0-4 25% of earnings 25% of Continuation Net Purchase Payments
- ------------------------------------------------------------------------------------------
Years 5-9 40% of earnings 40% of Continuation Net Purchase Payments*
- ------------------------------------------------------------------------------------------
Years 10+ 50% of earnings 50% of Continuation Net Purchase Payments*
- ------------------------------------------------------------------------------------------
</Table>
* Purchase Payments received after the 5th contract anniversary must remain in
the contract for at least six full months at the time of your death to be
included as part of continuation Net Purchase Payments for purposes of the
Maximum Earnings Advantage calculation.
B-5
What is the Contract Year of Death?
Contract Year of Death is the number of full 12 month periods starting on the
Continuation Date and ending on the Continuing Spouse's date of death.
What is the Earnings Advantage amount?
We determine the Earnings Advantage amount based upon a percentage of earnings
in the contract at the time of the Continuing Spouse's death. For the purpose of
this calculation, earnings are defined as (1) minus (2) where
(1) equals the contract value on the Continuing Spouse's date of death;
(2) equals the Continuation Net Purchase Payment(s).
What is the Maximum Earnings Advantage amount?
The Earnings Advantage amount is subject to a maximum. The Maximum Earnings
Advantage amount is a percentage of the Continuation Net Purchase Payments.
The Earnings Advantage benefit will only be paid if the Continuing Spouse's date
of death is prior to the latest Annuity Date.
WE RESERVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE SPOUSAL CONTINUATION
PROVISION (IN ITS ENTIRETY OR ANY COMPONENT) AT ANY TIME.
B-6
APPENDIX C - SEASONS INCOME REWARDS EXAMPLES
- --------------------------------------------------------------------------------
The examples below describe how the Seasons Income Rewards benefit is calculated
in different situations:
EXAMPLE 1 - CALCULATION OF BENEFIT
Assume you elect Seasons Income Rewards option 2 and you invest a single
Purchase Payment of $100,000. If you make no additional Purchase Payments and no
withdrawals, your WBB is $100,000 on the Benefit Availability Date. Your SBB
equals WBB plus the Step-Up Amount ($100,000 + (20% X $100,000) = $120,000).
Your MAWA as of the Benefit Availability Date is 10% of your WBB ($100,000 X 10%
= $10,000). The MWP is equal to the SBB divided by the MAWA which is 12 years
($120,000/$10,000). Therefore, you may take $120,000 in withdrawals of up to
$10,000 annually over a minimum of 12 years on or after the Benefit Availability
Date.
EXAMPLE 2 - IMPACT OF WITHDRAWALS PRIOR TO THE BENEFIT AVAILABILITY DATE:
Assume you elect Seasons Income Rewards option 2 and you invest a single
Purchase Payment of $100,000. You make a withdrawal of $11,000 prior to the
Benefit Availability Date. Prior to the withdrawal, your contract value is
$110,000. You make no other withdrawals before the Benefit Availability Date.
Immediately following the withdrawal, your WBB is recalculated by first
determining the proportion by which your contract value was reduced by the
withdrawal ($11,000/$110,000 = 10%). Next, we reduce your WBB by the percentage
by which the contract value was reduced by the withdrawal ($100,000 -- (10% X
100,000) = $90,000). Since the Step-Up Amount is zero because a withdrawal was
made prior to the Benefit Availability Date, your SBB on the Benefit
Availability Date equals your WBB. Therefore, the SBB also equals $90,000. Your
MAWA is 10% of the WBB on the Benefit Availability Date ($90,000). This equals
$9,000. Therefore, you may take withdrawals of up to $9,000 annually over a
minimum of 10 years ($90,000/$9,000 = 10).
EXAMPLE 3 - IMPACT OF WITHDRAWALS LESS THAN OR EQUAL TO MAWA AFTER THE BENEFIT
AVAILABILITY DATE:
Assume you elect Seasons Income Rewards option 2 and you invest a single
Purchase Payment of $100,000. You make a withdrawal of $7,500 during the first
year after the Benefit Availability Date. Because the withdrawal is less than or
equal to your MAWA ($10,000), your SBB ($120,000) is reduced by the total dollar
amount of the withdrawal ($7,500). Your new SBB equals $112,500. Your MAWA
remains $10,000. Your new MWP following the withdrawal is equal to the new SBB
divided by your current MAWA, ($112,500/$10,000). Therefore, you may take
withdrawals of up to $10,000 over a minimum of 11 years and 3 months.
EXAMPLE 4 - IMPACT OF WITHDRAWALS IN EXCESS OF MAWA AFTER THE BENEFIT
AVAILABILITY DATE:
Assume you elect Seasons Income Rewards option 2 and you invest a single
Purchase Payment of $100,000. Your WBB is $100,000 and your SBB is $120,000. You
make a withdrawal of $15,000 during the first year after the Benefit
Availability Date. Your contract value is $125,000 at the time of the
withdrawal. Because the withdrawal is greater than your MAWA ($10,000), we
recalculate your SBB ($120,000) by taking the lesser of two calculations. For
the first calculation, we deduct the amount of the withdrawal from the SBB
($120,000 -- $15,000 = $105,000). For the second calculation, we deduct the
amount of the MAWA from the SBB ($120,000 -- $10,000 = $110,000). Next, we
calculate the excess portion of the withdrawal ($5,000) and determine the
proportion by which the contract value was reduced by the excess portion of the
withdrawal. ($5,000/$125,000 = 4%). Finally we reduce $110,000 by that
proportion (4%) which equals $105,600. Your SBB is the lesser of these two
calculations or $105,000. The MWP following the withdrawal is equal to the MWP
at the end of the prior year (12 years) reduced by one year (11 years). Your
MAWA is your SBB divided by your MWP ($105,000/11) which equals $9,545.45.
C-1
APPENDIX D - MARKET VALUE ADJUSTMENT ("MVA")
- --------------------------------------------------------------------------------
Multi-year FAGPs subject to an MVA are only available if you purchased your
contract prior to August 2, 2004.
The information in this Appendix applies only if you take money out of a FAGP
(with a duration longer than 1 year) before the end of the guarantee period.
We calculate the MVA by doing a comparison between current rates and the rate
being credited to you in the FAGP. For the current rate we use a rate being
offered by us for a guarantee period that is equal to the time remaining in the
FAGP from which you seek withdrawal (rounded up to a full number of years). If
we are not currently offering a guarantee period for that period of time, we
determine an applicable rate by using a formula to arrive at a number based on
the interest rates currently offered for the two closest periods available.
Where the MVA is negative, we first deduct the adjustment from any money
remaining in the FAGP. If there is not enough money in the FAGP to meet the
negative deduction, we deduct the remainder from your withdrawal. Where the MVA
is positive, we add the adjustment to your withdrawal amount. If a withdrawal
charge applies, it is deducted before the MVA calculation. The MVA is assessed
on the amount withdrawn less any withdrawal charges.
The MVA is computed by multiplying the amount withdrawn, transferred or taken
under an income option by the following factor:
[(1+I/(1+J+L)] to the power of (N/12) - 1
where:
I is the interest rate you are earning on the money invested in
the FAGP;
J is the interest rate then currently available for the period of
time equal to the number of years remaining in the term you initially agreed to
leave your money in the FAGP;
N is the number of full months remaining in the term you initially
agreed to leave your money in the FAGP; and
L is 0.005 (Some states require a different value. Please see your
contract.)
We do not assess an MVA against withdrawals from an FAGP under the following
circumstances:
- If a withdrawal is made within 30 days after the end of a guarantee
period;
- If a withdrawal is made to pay contract fees and charges;
- To pay a death benefit; and
- Upon beginning an income option, if occurring on the Latest Annuity Date.
EXAMPLES OF THE MVA
The purpose of the examples below is to show how the MVA adjustments are
calculated and may not reflect the Guarantee periods available or Surrender
Charges applicable under your contract.
The examples below assume the following:
(1) You made an initial Purchase Payment of $10,000 and allocated it
to a FAGP at a rate of 5%;
(2) You make a partial withdrawal of $4,000 when 1 1/2 years (18
months) remain in the term you initially agreed to leave your money in the
FAGP (N=18);
(3) You have not made any other transfers, additional Purchase
Payments, or withdrawals; and
(4) Your contract was issued in a state where L = 0.005.
D-1
POSITIVE ADJUSTMENT, NO WITHDRAWAL CHARGE APPLIES
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 1-year FAGP is 3.5% and the 3-year FAGP is 4.5%. By
linear interpolation, the interest rate for the remaining 2 years (1 1/2 years
rounded up to the next full year) in the contract is calculated to be 4%. No
withdrawal charge is reflected in this example, assuming that the Purchase
Payment withdrawn falls within the free look amount.
The MVA factor is
= [(1+I/(1+J+0.005)] to the power of (N/12) - 1
= [(1.05)/(1.04+0.005)] to the power of (18/12) - 1
= (1.004785) to the power of (1.5) - 1
= 1.007186 - 1
= + 0.007186
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 X (+0.007186) = +$28.74
$28.74 represents the positive MVA that would be added to the withdrawal.
NEGATIVE ADJUSTMENT, NO WITHDRAWAL CHARGE APPLIES
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 1-year FAGP is 5.5% and the 3-year FAGP is 6.5%. By
linear interpolation, the interest rate for the remaining 2 years (1 1/2 years
rounded up to the next full year) in the contract is calculated to be 6%. No
withdrawal charge is reflected in this example, assuming that the Purchase
Payment withdrawn falls with the free withdrawal amount.
The MVA factor is
= [(1+I/(1+J+0.005)] to the power of (N/12) - 1
= [(1.05)/(1.06+0.005)] to the power of (18/12) - 1
= (0.985915) to the power of (1.5) - 1
= 0.978948 - 1
= - 0.021052
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 X (-0.021052) = -$84.21
$84.21 represents the negative MVA that will be deducted from the money
remaining in the 3-year FAGP.
POSITIVE ADJUSTMENT, WITHDRAWAL CHARGE APPLIES
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 1-year FAGP is 3.5% and the 3-year FAGP is 4.5%. By
linear interpolation, the interest rate for the remaining 2 years (1 1/2 years
rounded up to the next full year) in the contract is calculated to be 4%. A
withdrawal charge of 6% is reflected in this example, assuming that the Purchase
Payment withdrawn exceeds the free withdrawal amount.
The MVA factor is
= [(1+I)/(1+J+0.005)] to the power of (N/12) - 1
= [(1.05)/(1.04+0.005)] to the power of (18/12) - 1
= (1.004785) to the power of (1.5) - 1
= 1.007186 - 1
= + 0.007186
D-2
The requested withdrawal amount, less the withdrawal charge ($4,000 -- 6% =
$3,760) is multiplied by the MVA factor to determine the MVA:
$3,760 X (+0.007186) = +$27.02
$27.02 represents the positive MVA that would be added to the withdrawal.
NEGATIVE ADJUSTMENT, WITHDRAWAL CHARGE APPLIES
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 1-year FAGP is 5.5% and the 3-year FAGP is 6.5%. By
linear interpolation, the interest rate for the remaining 2 years (1 1/2 years
rounded up to the next full year) in the contract is calculated to be 6%. A
withdrawal charge of 6% is reflected in this example, assuming that the Purchase
Payment withdrawn exceeds the free withdrawal amount.
The MVA factor is
= [(1+I/(1+J+0.005)] to the power of (N/12) - 1
= [(1.05)/(1.06+0.005)] to the power of (18/12) - 1
= (0.985915) to the power of (1.5) - 1
= 0.978948 - 1
= - 0.021052
The requested withdrawal amount, less the withdrawal charge ($4,000 -- 6% =
$3,760) is multiplied by the MVA factor to determine the MVA:
$3,760 X (-0.021052) = -$79.16
$79.16 represents the negative MVA that would be deducted from the withdrawal.
D-3
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Please forward a copy (without charge) to the Seasons Triple Elite Variable
Annuity Statement of Additional Information to:
(Please print or type and fill in all information.)
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Name
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Address
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City/State/Zip
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Date: ____________ Signed: ______________________________________
Return to: AIG SunAmerica Life Insurance Company, Annuity Service Center, P.O.
Box 52499, Los Angeles, California 90054-0299
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