As filed pursuant to Rule 424(b)(3)
Under the Securities Act of 1933
Registration No. 033-87864
[POLARIS PLATINUM II LOGO]
PROSPECTUS
MAY 3, 2004
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Please read this prospectus carefully FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACTS
before investing and keep it for issued by
future reference. It contains AIG SUNAMERICA LIFE ASSURANCE COMPANY
important information about the in connection with
Variable Annuity. VARIABLE SEPARATE ACCOUNT
The annuity has several investment choices -Variable Portfolios listed
To learn more about the annuity below and available fixed account options. The Variable Portfolios are part
offered by this prospectus, you can of the Anchor Series Trust ("AST"), American Funds Insurance Series
obtain a copy of the Statement of ("AFIS"), SunAmerica Series Trust ("SAST"), Lord Abbett Series Fund, Inc.
Additional Information ("SAI") dated ("LASF"), Nations Separate Account Trust ("NSAT") and Van Kampen Life
May 3, 2004. The SAI has been filed Investment Trust ("VKT").
with the Securities and Exchange
Commission ("SEC") and is STOCKS:
incorporated by reference into this MANAGED BY AIG SUNAMERICA ASSET MANAGEMENT CORP.
prospectus. The Table of Contents of - Aggressive Growth Portfolio SAST
the SAI appears in this prospectus. - Blue Chip Growth Portfolio SAST
For a free copy of the SAI, call us - "Dogs" of Wall Street Portfolio* SAST
at (800) 445-SUN2 or write to us at - Growth Opportunities Portfolio SAST
our Annuity Service Center, P.O. Box MANAGED BY ALLIANCEBERNSTEIN
54299, Los Angeles, California - Small & Mid Cap Value Portfolio SAST
90054-0299. MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Alliance Growth Portfolio SAST
In addition, the SEC maintains a - Global Equities Portfolio SAST
website (http://www.sec.gov) that - Growth-Income Portfolio SAST
contains the SAI, materials MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, LLC
incorporated by reference and other - Nations MidCap Growth Portfolio NSAT
information filed electronically with - Nations Small Company Portfolio NSAT
the SEC by AIG SunAmerica Life - Nations Value Portfolio NSAT
Assurance Company. MANAGED BY CAPITAL RESEARCH AND MANAGEMENT COMPANY
- American Funds Global Growth Portfolio AFIS
ANNUITIES INVOLVE RISKS, INCLUDING - American Funds Growth Portfolio AFIS
POSSIBLE LOSS OF PRINCIPAL, AND ARE - American Funds Growth-Income Portfolio AFIS
NOT A DEPOSIT OR OBLIGATION OF, OR MANAGED BY DAVIS ADVISORS
GUARANTEED OR ENDORSED BY, ANY BANK. - Davis Venture Value Portfolio SAST
THEY ARE NOT FEDERALLY INSURED BY THE - Real Estate Portfolio SAST
FEDERAL DEPOSIT INSURANCE MANAGED BY FEDERATED EQUITY MANAGEMENT COMPANY
CORPORATION, THE FEDERAL RESERVE - Federated American Leaders Portfolio* SAST
BOARD OR ANY OTHER AGENCY. MANAGED BY LORD, ABBETT & CO.
- Lord Abbett Series Fund Growth and Income Portfolio LASF
MANAGED BY MARSICO CAPITAL MANAGEMENT, LLC
- Nations Marsico 21st Century Portfolio NSAT
- Nations Marsico Focused Equities Portfolio NSAT
- Nations Marsico Growth Portfolio NSAT
- Nations Marsico International Opportunities Portfolio NSAT
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Massachusetts Investors Trust Portfolio SAST
- MFS Mid-Cap Growth Portfolio SAST
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, LLC
- Emerging Markets Portfolio SAST
- International Growth and Income Portfolio SAST
- Putnam Growth: Voyager SAST
MANAGED BY TEMPLETON INVESTMENT COUNSEL, LLC
- Foreign Value Portfolio SAST
MANAGED BY VAN KAMPEN/VAN KAMPEN ASSET MANAGEMENT
- International Diversified Equities Portfolio SAST
- Technology Portfolio SAST
- Van Kampen LIT Comstock Portfolio, Class II Shares* VKT
- Van Kampen LIT Emerging Growth Portfolio, Class II Shares VKT
- Van Kampen LIT Growth and Income Portfolio, Class II Shares VKT
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Capital Appreciation Portfolio AST
- Growth Portfolio AST
- Natural Resources Portfolio AST
BALANCED:
MANAGED BY AIG SUNAMERICA ASSET MANAGEMENT CORP.
- SunAmerica Balanced Portfolio SAST
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, LLC
- Nations Asset Allocation Portfolio NSAT
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Total Return Portfolio SAST
BONDS:
MANAGED BY AIG SUNAMERICA ASSET MANAGEMENT CORP.
- High-Yield Bond Portfolio SAST
MANAGED BY FEDERATED INVESTMENT MANAGEMENT COMPANY
- Corporate Bond Portfolio SAST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
- Global Bond Portfolio SAST
MANAGED BY MANAGED BY MACKAY SHIELDS LLC
- Nations High Yield Bond Portfolio NSAT
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Government & Quality Bond Portfolio AST
CASH:
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, LLC
- Cash Management Portfolio SAST
* "Dogs" of Wall Street is an equity fund seeking total return. Federated
American Leaders is an equity fund seeking growth of capital and income.
Van Kampen LIT Comstock is an equity fund seeking capital growth and
income.
</Table>
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.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
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AIG SunAmerica Life's Report on Form 10-K for the year ended December 31, 2003,
file no. 033-47472 is 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 supercede documents
incorporated 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 10279
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 above
documents incorporated by reference. Requests for these documents should be
directed to AIG SunAmerica Life's Annuity Service Center, as follows:
AIG SunAmerica Life Assurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Telephone Number: (800) 445-SUN2
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SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION
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Indemnification for liabilities arising under the Securities Act of 1933 (the
"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 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 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
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TABLE OF CONTENTS
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<Table>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................... 2
SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION....
2
GLOSSARY.......................................................... 3
HIGHLIGHTS........................................................ 4
FEE TABLES........................................................ 5
Maximum Owner Transaction Expenses.......................... 5
Contract Maintenance Fee.................................... 5
Separate Account Expenses................................... 5
Optional Feature Fee........................................ 5
Optional Polaris Income Reward Fee.......................... 5
Optional Capital Protector Fee.............................. 5
Portfolio Expenses.......................................... 5
EXAMPLES.......................................................... 6
THE POLARIS PLATINUM II VARIABLE ANNUITY.......................... 7
PURCHASING A POLARIS PLATINUM II VARIABLE ANNUITY................. 7
Allocation of Purchase Payments............................. 8
Accumulation Units.......................................... 8
Free Look................................................... 8
INVESTMENT OPTIONS................................................ 9
Variable Portfolios......................................... 9
American Funds Insurance Series......................... 9
Anchor Series Trust..................................... 9
SunAmerica Series Trust................................. 9
Lord Abbett Series Fund, Inc. .......................... 9
Nations Separate Account Trust.......................... 9
Van Kampen Life Investment Trust........................ 9
Fixed Account Options....................................... 10
Asset Allocation Program.................................... 11
Transfers During the Accumulation Phase..................... 12
Dollar Cost Averaging....................................... 13
Asset Allocation Rebalancing Program........................ 13
Return Plus Program......................................... 14
Voting Rights............................................... 14
Substitution................................................ 14
ACCESS TO YOUR MONEY.............................................. 14
Systematic Withdrawal Program............................... 15
Nursing Home Waiver......................................... 16
Minimum Contract Value...................................... 16
LIVING BENEFIT.................................................... 16
Polaris Income Rewards...................................... 16
Capital Protection.......................................... 19
DEATH BENEFIT..................................................... 20
Purchase Payment Accumulation Option........................ 21
Maximum Anniversary Option.................................. 21
EstatePlus.................................................. 22
Spousal Continuation........................................ 23
EXPENSES.......................................................... 23
Separate Account Charges.................................... 23
Withdrawal Charges.......................................... 24
Investment Charges.......................................... 24
Contract Maintenance Fee.................................... 24
Transfer Fee................................................ 24
Optional Polaris Income Reward Fee.......................... 25
Optional Capital Protector Fee.............................. 25
Optional EstatePlus Fee..................................... 25
Premium Tax................................................. 25
Income Taxes................................................ 25
Reduction or Elimination of Charges and Expenses, and
Additional Amounts Credited................................ 25
INCOME OPTIONS.................................................... 25
Annuity Date................................................ 25
Income Options.............................................. 25
Fixed or Variable Income Payments........................... 26
Income Payments............................................. 26
Transfers During the Income Phase........................... 27
Deferment of Payments....................................... 27
TAXES............................................................. 27
Annuity Contracts in General................................ 27
Tax Treatment of Distributions - Non-qualified Contracts.... 27
Tax Treatment of Distributions - Qualified Contracts........ 27
Minimum Distributions....................................... 28
Tax Treatment of Death Benefits............................. 28
Contracts Owned by a Trust or Corporation................... 29
Gifts, Pledges and/or Assignments of a Non-Qualified
Contract................................................... 29
Diversification and Investor Control........................ 29
PERFORMANCE....................................................... 29
OTHER INFORMATION................................................. 29
AIG SunAmerica Life......................................... 29
The Separate Account........................................ 30
The General Account......................................... 30
Distribution of the Contract................................ 30
Administration.............................................. 30
Legal Proceedings........................................... 31
Ownership................................................... 31
Independent Accountants..................................... 31
Registration Statement...................................... 31
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.......... 31
APPENDIX A - CONDENSED FINANCIALS................................. A-1
APPENDIX B - MARKET VALUE ADJUSTMENTS ("MVA") AND FIXED ADVANTAGE
7 ACCOUNT OPTION................................................. B-1
APPENDIX C - DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION........ C-1
APPENDIX D - POLARIS INCOME REWARDS EXAMPLES...................... D-1
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GLOSSARY
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We have capitalized some of the technical terms used in this prospectus.
To help you understand these terms, we have defined 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 income
payments.
ANNUITY DATE - The date on which income payments are to begin, as
selected by you.
ANNUITY UNITS - A measurement we use to calculate the amount of income
payments you receive from the variable portion of your contract during
the Income Phase.
BENEFICIARY - The person 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 or our, the insurer which issues this contract.
INCOME PHASE - The period during which we make income 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 IRA.
TRUSTS - Refers to the Anchor Series Trust, the American Funds Insurance
Series, the SunAmerica Series Trust, Lord Abbett Series Fund, Inc.,
Nations Separate Account Trust and Van Kampen Life Investment Trust
collectively.
VARIABLE PORTFOLIO(S) - The variable investment options available under
the contract. Each Variable Portfolio has its own investment objective
and is invested in the underlying investments of the Anchor Series Trust,
the American Funds Insurance Series, the SunAmerica Series Trust, Lord
Abbett Series Fund, Inc., Nations Separate Account Trust or Van Kampen
Life Investment Trust. The underlying investment portfolio may be
referred to as Underlying Funds.
</Table>
3
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HIGHLIGHTS
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The Polaris Platinum(II) Variable Annuity is a contract between you and AIG
SunAmerica Life Assurance Company ("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 a variety of variable and 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: If you 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. This amount may be more or less than
your original Purchase Payment. We will return your original Purchase Payment if
required by law. Please see PURCHASING A POLARIS PLATINUM(II) 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 separate account
charges, which equal 1.52% annually of the average daily value of your contract
allocated to the Variable Portfolios. There 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 in the
contract for seven complete years, withdrawal charges no longer apply to that
portion of the Purchase Payment. Please see the FEE TABLE, PURCHASING A POLARIS
PLATINUM(II) 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 taxes on earnings and untaxed contributions when you withdraw
them. Payments 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.
Please see ACCESS TO YOUR MONEY and TAXES in the prospectus.
DEATH BENEFIT: A death benefit feature is available under the contract to
protect your Beneficiaries in the event of your death during the Accumulation
Phase. Please 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 chose from five different income options, including an option
for income that you cannot outlive. Please see INCOME OPTIONS in the prospectus.
INQUIRIES: If you have questions about your contract call your financial
representative or contact us at AIG SunAmerica Life Assurance Company 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 YOU MEET YOUR
LONG-TERM RETIREMENT SAVINGS GOALS.
PLEASE READ THE PROSPECTUS CAREFULLY FOR MORE DETAILED INFORMATION REGARDING
THESEAND OTHER FEATURES AND BENEFITS OF THE CONTRACT, AS WELL AS THE RISKS OF
INVESTING.
4
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FEE TABLES
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THE FOLLOWING DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY AT THE TIME THAT
YOU BUY THE CONTRACT, TRANSFER CASH VALUE BETWEEN INVESTMENT OPTIONS OR
SURRENDER THE CONTRACT. IF APPLICABLE, YOU MAY ALSO BE SUBJECT TO STATE PREMIUM
TAXES.
MAXIMUM OWNER TRANSACTION EXPENSES
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
</Table>
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) 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....................... 1.37%
Distribution Expense Fee.............................. 0.15%
Optional EstatePlus Fee(2)............................ 0.25%
=====
TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES.............. 1.77%
</Table>
ADDITIONAL OPTIONAL FEATURE FEE
You may elect one of the following optional features: Polaris Income Rewards
or Capital Protector described below.
OPTIONAL POLARIS INCOME REWARDS FEE
<Table>
<Caption>
TIME ELAPSED SINCE BENEFIT EFFECTIVE DATE ANNUALIZED FEE(3)
----------------------------------------- -----------------
Years 0-7.......................................... 0.65%
Years 8+........................................... 0.45%
</Table>
OPTIONAL CAPITAL PROTECTOR FEE
<Table>
<Caption>
CONTRACT YEAR ANNUALIZED FEE(4)
------------- -----------------
0-7................................................ 0.50%
8-10............................................... 0.25%
11+................................................ none
</Table>
FOOTNOTES TO THE FEE TABLES:
(1) Withdrawal Charge Schedule (as a percentage of each Purchase Payment)
declines over 7 years as follows
<Table>
YEARS:...................................................... 1 2 3 4 5 6 7 8
7% 6% 5% 4% 3% 2% 1% 0%
</Table>
(2) EstatePlus, an enhanced death benefit feature is optional. If you do not
elect the EstatePlus feature, your total separate account annual expenses
would be 1.52%.
(3) The Polaris Income Rewards feature is optional and if elected, the fee is
generally calculated as a percentage of your Purchase Payments received in
the first 90 days less proportionate withdrawals. The fee is deducted from
your contract at the end of the first quarter following election and
quarterly thereafter.
(4) The Capital Protector 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.
THE FOLLOWING SHOWS THE MINIMUM AND MAXIMUM TOTAL OPERATING EXPENSES CHARGED BY
THE UNDERLYING PORTFOLIOS OF THE TRUSTS BEFORE ANY WAIVERS OR REIMBURSEMENTS
THAT YOU 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 UNDERLYING PORTFOLIO EXPENSES MINIMUM MAXIMUM
- ------------------------------------------ ------- -------
(expenses that are deducted from underlying portfolios of
the Trusts, including management fees, other expenses and
12b-1 fees, if applicable).................................. 0.59% 2.06%
</Table>
5
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MAXIMUM AND MINIMUM EXPENSE EXAMPLES
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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, the contract maintenance fee, separate
account annual expenses, fees for optional features and expenses of 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 Trusts 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 1.77% AND INVESTMENT IN AN
UNDERLYING PORTFOLIO WITH TOTAL EXPENSES OF 2.06%)
(1) If you surrender your contract at the end of the applicable time period and
you elect the optional EstatePlus (0.25%) and Polaris Income Rewards (0.65%
for years 0-7 and 0.45% for years 8+) features:
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------
- -------------------------------------
$1,154 $1,868 $2,591 $4,578
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</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
- -------------------------------------
- -------------------------------------
$360 $1,096 $1,854 $3,843
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- -------------------------------------
</Table>
(3) If you do not surrender your contract and you elect the optional EstatePlus
(0.25%) and Polaris Income Rewards (0.65% for years 0-7 and 0.45% for years
8+) features:
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------
- -------------------------------------
$454 $1,368 $2,291 $4,578
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</Table>
MINIMUM EXPENSE EXAMPLES
(ASSUMING MINIMUM SEPARATE ACCOUNT ANNUAL CHARGES OF 1.52% AND INVESTMENT IN AN
UNDERLYING PORTFOLIO WITH TOTAL EXPENSES OF 0.59%)
(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
- -------------------------------------
- -------------------------------------
$919 $1,176 $1,459 $2,493
- -------------------------------------
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</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
- -------------------------------------
- -------------------------------------
$214 $661 $1,134 $2,441
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- -------------------------------------
</Table>
(3) If you do not surrender your contract and you do not elect any optional
features:
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------
- -------------------------------------
$219 $676 $1,159 $2,493
- -------------------------------------
- -------------------------------------
</Table>
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you would
incur directly and indirectly by investing in the contract. We converted the
contract maintenance fee to a percentage (0.05%). The actual impact of the
contract maintenance fee 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 accompanying Trust prospectuses.
2. In addition to the stated assumptions, the Examples also assume separate
account expenses 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 Capital Protector program, your expenses would be lower than
those shown in these tables. The fee for the Polaris Income Rewards, and
Capital Protector features are not calculated as a percentage of your daily
net asset value but on other calculations more fully described in the
prospectus.
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 FINANCIAL INFORMATION APPEARS IN APPENDIX A OF THIS PROSPECTUS.
6
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THE POLARIS PLATINUM II
VARIABLE ANNUITY
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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: This means that 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 withdrawal. 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 us to start
making income 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 Portfolios which, like mutual funds, have different investment
objectives and performance which 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.
Fixed account options earn interest at a rate set and guaranteed by AIG
SunAmerica Life. If you allocate money to the fixed account options, the amount
of money that accumulates in the contract depends on the total interest credited
to the particular fixed account option(s) in which you invest.
For more information on investment options available under this contract SEE
INVESTMENT OPTIONS BELOW.
This annuity is designed to assist in contributing to retirement savings of
investors whose personal circumstances allow for a long-term investment time
horizon. 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 7 years. Because of these
potential penalties, you should fully discuss all of the benefits and risks of
this contract with your financial representative prior to purchase.
AIG SunAmerica Life issues the Polaris Platinum(II) Variable Annuity. When you
purchase a Polaris Platinum(II) 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. ("AIG"), a Delaware corporation.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
PURCHASING A POLARIS PLATINUM II
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.
The following 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. FOR FURTHER EXPLANATION, SEE TAXES
BELOW.
<Table>
<Caption>
- -----------------------------------------------------------
Minimum
Minimum Initial Subsequent
Purchase Payment Purchase Payment
- -----------------------------------------------------------
Qualified $2,000 $250
- -----------------------------------------------------------
Non-Qualified $5,000 $500
- -----------------------------------------------------------
</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.
7
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 on the
contract issue date. In general, we will not issue a Qualified contract to
anyone who is age 70 1/2 or older, unless it is shown that the minimum
distribution required by the IRS 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 is 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 and variable investment options
according to your instructions. If we receive a Purchase Payment without
allocation instructions, we will invest the money according to your last
allocation instructions. 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.
ACCUMULATION UNITS
When you allocate a Purchase Payment to the Variable Portfolios, we credit your
contract with Accumulation Units of the separate account. We base the number of
Accumulation Units you receive on the unit value of the Variable Portfolio as of
the day we receive your money if we receive it before 1 p.m. Pacific Standard
Time, or on the next business day's unit value if we receive your money after 1
p.m. Pacific Standard Time. The value of an Accumulation Unit goes up and down
based on the performance of the Variable Portfolios.
We calculate the value of an Accumulation Unit each day that the New York Stock
Exchange ("NYSE") is open as follows:
1. We determine the total value of money invested in a particular Variable
Portfolio;
2. We subtract from that amount all applicable contract charges; and
3. We divide this amount by the number of outstanding Accumulation Units.
We determine the number of Accumulation Units credited to your contract by
dividing the Purchase Payment and Payment Enhancement, if applicable, by the
Accumulation Unit value for the specific Variable Portfolio.
EXAMPLE:
We receive a $25,000 Purchase Payment from you on Wednesday. You allocate
the money to the Global Bond Portfolio. We determine that the value of an
Accumulation Unit for the Global Bond 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 2252.2523 Accumulation Units for the
Global Bond Portfolio.
Performance of the Variable Portfolios and expenses under your contract affect
Accumulation Unit values. These factors cause the value of your contract to go
up and down.
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
minus the Free Look Payment Enhancement Deduction, if applicable.
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 Portfolio during the free
look period and will allocate your money according to
8
your instructions at the end of the applicable free look period. Currently, we
do not put your money in the Cash Management Portfolio 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.
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 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
- ----------------------------------------------------------------
- ----------------------------------------------------------------
VARIABLE PORTFOLIOS
The Variable Portfolios invest in shares of the following trusts: Anchor Series
Trust, American Funds Insurance Series, Lord Abbett Series Fund, Inc., Nations
Separate Account Trust, SunAmerica Series Trust and Van Kampen Life Investment
Trust (the "Trusts"). Additional Trusts and/or Variable Portfolios may be
available in the future. The Variable Portfolios are only available through the
purchase of certain insurance contracts. Other Variable Portfolios may be
available to you. Please refer to your contract for additional information.
The Trusts serve as the underlying investment vehicles for other variable
annuity contracts issued by AIG SunAmerica Life, and other
affiliated/unaffiliated insurance companies. Neither AIG SunAmerica Life nor the
Trusts believe that offering shares of the Trusts in this manner disadvantages
you. Each Trust's adviser monitors its Trust for potential conflicts.
The Variable Portfolios along with their respective subadvisers are listed
below:
AMERICAN FUNDS INSURANCE SERIES -- CLASS 2
Capital Research and Management Company provides investment advice for the
American Funds Insurance Series -- Class 2 shares ("AFIS") portfolios. American
Funds Insurance Series contains investment portfolios in addition to those
listed here that are not available for investment under this contract.
ANCHOR SERIES TRUST -- CLASS 3
Wellington Management Company, LLP serves as subadviser to the Anchor Series
Trust portfolios. Anchor Series Trust ("AST") contains investment portfolios in
addition to those listed below which are not available for investment under this
contract.
LORD ABBETT SERIES FUND, INC. -- CLASS VC
Lord Abbett & Co. provides investment advice for the Lord Abbett Series Fund,
Inc. portfolios. Lord Abbett Series Fund, Inc. ("LASF") contains investment
portfolios in addition to those listed below that are not available for
investment under this contract.
NATIONS SEPARATE ACCOUNT TRUST
Various subadvisers provide investment advice for the Nations Separate Account
Trust ("NSAT") portfolios. Nations Separate Account Trust has investment
portfolios in addition to those listed below, which are not available for
investment under the contract.
SUNAMERICA SERIES TRUST -- CLASS 3
Various subadvisers provide investment advice for the SunAmerica Series Trust
portfolios. SunAmerica Series Trust ("SAST") contains investment portfolios in
addition to those listed below which are not available for investment under this
contract.
VAN KAMPEN LIFE INVESTMENT TRUST -- CLASS II
Van Kampen Asset Management Inc. provides investment advice for the Van Kampen
Life Investment Trust ("VKT"). Van Kampen Life Investment Trust has investment
portfolios in addition to those listed here which are not available for
investment under the contract.
STOCKS:
MANAGED BY AIG SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio SAST
- Blue Chip Growth Portfolio SAST
- "Dogs" of Wall Street Portfolio* SAST
- Growth Opportunities Portfolio SAST
MANAGED BY ALLIANCEBERNSTEIN
- Small & Mid Cap Value Portfolio SAST
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Alliance Growth Portfolio SAST
- Global Equities Portfolio SAST
- Growth-Income Portfolio SAST
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, LLC
- Nations MidCap Growth Portfolio NSAT
- Nations Small Company Portfolio NSAT
- Nations Value Portfolio NSAT
MANAGED BY CAPITAL RESEARCH AND MANAGEMENT COMPANY
- American Funds Global Growth Portfolio AFIS
- American Funds Growth Portfolio AFIS
- American Funds Growth-Income Portfolio AFIS
9
MANAGED BY DAVIS ADVISORS
- Davis Venture Value Portfolio SAST
- Real Estate Portfolio SAST
MANAGED BY FEDERATED EQUITY MANAGEMENT COMPANY
- Federated American Leaders Portfolio* SAST
MANAGED BY LORD, ABBETT & CO.
- Lord Abbett Series Fund Growth and Income Portfolio LASF
MANAGED BY MARSICO CAPITAL MANAGEMENT, LLC
- Nations Marsico 21st Century Portfolio NSAT
- Nations Marsico Focused Equities Portfolio NSAT
- Nations Marsico Growth Portfolio NSAT
- Nations Marsico International Opportunities Portfolio NSAT
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Massachusetts Investors Trust Portfolio SAST
- MFS Mid Cap Growth Portfolio SAST
MANAGED BY PUTNAM INVESTMENT MANAGEMENT INC
- Emerging Markets Portfolio SAST
- International Growth and Income Portfolio SAST
- Putnam Growth: Voyager Portfolio SAST
MANAGED BY TEMPLETON INVESTMENT COUNSEL, LLC
- Foreign Value Portfolio SAST
MANAGED BY VAN KAMPEN/VAN KAMPEN ASSET MANAGEMENT
- International Diversified Equities Portfolio+ SAST
- Technology Portfolio+ SAST
- Van Kampen LIT Comstock Portfolio, Class II Shares* VKT
- Van Kampen LIT Emerging Growth Portfolio, Class II Shares VKT
- Van Kampen LIT Growth and Income Portfolio, Class II Shares VKT
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Capital Appreciation Portfolio AST
- Growth Portfolio AST
- Natural Resources Portfolio AST
BALANCED:
MANAGED BY AIG SUNAMERICA ASSET MANAGEMENT CORP.
- SunAmerica Balanced Portfolio SAST
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, LLC
- Nations Asset Allocation Portfolio NSAT
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Total Return Portfolio SAST
BONDS:
MANAGED BY AIG SUNAMERICA ASSET MANAGEMENT CORP.
- High-Yield Bond Portfolio SAST
MANAGED BY FEDERATED INVESTMENT MANAGEMENT
- Corporate Bond Portfolio SAST
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT INT'L
- Global Bond Portfolio SAST
MANAGED BY MACKAY SHIELDS LLC
- Nations High Yield Bond Portfolio NSAT
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Government & Quality Bond Portfolio AST
CASH:
MANAGED BY BANC OF AMERICA CAPITAL MANAGEMENT, LLC
- Cash Management Portfolio SAST
*"Dogs" of Wall Street is an equity fund seeking total return. Federated
American Leaders is an equity fund seeking growth of capital and income. Van
Kampen LIT Comstock is an equity fund seeking capital growth and income.
+ Morgan Stanley Investment Management, Inc., the subadviser for these
portfolios, does business in certain instances using the name Van Kampen.
YOU SHOULD READ THE ACCOMPANYING PROSPECTUSES FOR THE TRUSTS CAREFULLY. THESE
PROSPECTUSES CONTAIN DETAILED INFORMATION ABOUT THE VARIABLE PORTFOLIOS,
INCLUDING EACH VARIABLE PORTFOLIO'S INVESTMENT OBJECTIVE AND RISK FACTORS.
FIXED ACCOUNT 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
10
the same FAGP where it will earn interest at the renewal rate then in effect for
that FAGP.
All FAGPs may not be available in all states. At anytime that we are crediting
the guaranteed minimum interest rate specified in your contract to the fixed
accounts, we reserve the right to restrict transfers and Purchase Payments into
the FAGPs. 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, please 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 instruction on
file. DCAFAs also credit a fixed rate of interest but are specifically designed
to facilitate 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.
ASSET ALLOCATION PROGRAM
PROGRAM DESCRIPTION
The asset allocation program is offered to help you diversify your investment
across various asset classes.
Each of the models is comprised of a carefully selected combination of Variable
Portfolios with allocation amongst the various asset classes based on historical
asset class performance to meet stated investment time horizons and risk
tolerances.
ENROLLING IN THE PROGRAM
You may enroll in the program by selecting the model as well as any program
options on the product application form. If you already own a policy, you must
complete and submit a program election form. You and your financial
representative determine the model most appropriate for you. You may discontinue
investment in the program at any time with a written request, telephone or
internet instructions, subject to our rules.
You may also choose to invest gradually into a model through the dollar cost
averaging program. You may only invest in one model at a time. You may invest in
investment options outside your selected model but only in those Variable
Portfolios that are not utilized in the model you selected. A transfer into or
out of one of the Variable Portfolios in your model, outside of the
specifications in the model will effectively terminate your participation in the
program.
There is no fee for participating in this program.
WITHDRAWALS
You may request withdrawals, as permitted by your contract, which will be taken
proportionately from each of the allocations in the selected model unless
otherwise instructed by you. If you choose to make a non-proportional withdrawal
from the Variable Portfolios in the model, your investment may no longer be
consistent with the model's intended objectives.
Withdrawals may be subject to a withdrawal charge. Withdrawals may be taxable
and a 10% IRS penalty may apply if you are under age 59 1/2.
KEEPING YOUR PROGRAM ON TARGET
REBALANCING
You can elect to have your contract rebalanced quarterly, semi-annually, or
annually to maintain the target asset allocation among the Variable Portfolios
of the model you selected. Only those Variable Portfolios within each model will
be rebalanced. An investment not included in the model can not be rebalanced.
ANNUAL RE-EVALUATION
Each year, on or about March 31, the allocations in every model are re-evaluated
and updated to assure that the investment objectives remain consistent. The
percentage allocations within each model may change and investment options may
be added to or deleted from a model as a result of the annual re-evaluation. We
will automatically rebalance your investment according to the re-evaluated
allocations each year on or about March 31. If you choose not to participate in
the re-evaluation part of this program, you must contact the Annuity Service
Center. Some broker-dealers require that you consent to the re-evaluation each
year and will not allow us to automatically rebalance your contract in
accordance with the re-evaluated models. Please
11
check with your financial representative to determine the protocol for his/her
firm.
IMPORTANT INFORMATION
Using an asset allocation methodology does not guarantee greater or more
consistent returns. Historical market and asset class performance may differ in
the future from the historical performance upon which the models are built.
Also, allocation to a single asset class may outperform a model, so that you
could have been better off in an investment option or options representing a
single asset class than in a model. However, such a strategy involves a greater
degree of risk because of the concentration of like securities in a single asset
class.
The models represent suggested allocations which are provided as general
guidance. You should work with your financial representative to assist you in
determining if one of the models meets your financial needs, investment time
horizon, and is consistent with your risk comfort level. Information concerning
the specific models can be obtained from your financial representative. There is
no fee to participate in the Asset Allocation program.
WE HAVE THE RIGHT TO MODIFY, SUSPEND OR TERMINATE THE ASSET ALLOCATION PROGRAM
AT ANY TIME.
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. 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 request in excess of 15 transfers per contract year must be
submitted in writing by United States Postal Service first-class mail ("U.S.
Mail") until your next contract anniversary. Transfer requests sent by same day
mail, overnight mail or courier services will not be 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.
12
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 (source
account) to any other Variable Portfolio (target account). If available, you may
systematically transfer interest earned on available FAGPs into any of the
Variable Portfolios on certain periodic schedules opened by us. Systematic
transfers maybe started, changed or terminated at any time by calling our
Annuity Service Center.
The minimum transfer amount under the DCA program is $100 per transaction,
regardless of the source account. Fixed account options are not available as
target account for the DCA program. There is no fee for participating in the DCA
program.
We may also offer DCAFAs exclusively to facilitate this program for a specified
period. The DCAFAs only accept new Purchase Payments. You cannot transfer money
already in your contract into these options. If you allocate new Purchase
Payments into a DCAFA, we transfer all your money allocated to that account into
the Variable Portfolios over the selected time period at an offered frequency of
your choosing. You cannot change the frequency 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
instruction on file.
You may terminate the DCA program at any time. If you terminate your DCA program
with money remaining in the DCAFAs, we will transfer the remaining money
according to your instructions or to your current allocation on file. 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.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to gradually move $750 each quarter from the Cash
Management Portfolio to the Aggressive Growth Portfolio over six months.
You set up dollar cost averaging and purchase Accumulation Units at the
following values:
<Table>
<Caption>
---------------------------------------------
ACCUMULATION UNITS
MONTH UNIT 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
months, 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.
AUTOMATIC ASSET 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. There is no fee for participating in the
Asset Rebalancing program.
At your request, rebalancing occurs on a quarterly, semiannual 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.
EXAMPLE:
Assume that you want your initial Purchase Payment split between two
Variable Portfolios. You want 50% in the Corporate Bond Portfolio and 50%
in the Growth Portfolio. Over the next calendar quarter, the bond market
does very well while the stock market performs poorly. At the end of the
calendar quarter, the Corporate Bond Portfolio now represents 60% of your
holdings because it has increased in value and the Growth Portfolio
represents 40% of your holdings. If you had chosen quarterly rebalancing,
on the last day of that quarter, we would sell some of your units in the
13
Corporate Bond Portfolio to bring its holdings back to 50% and use the
money to buy more units in the Growth Portfolio to increase those holdings
to 50%.
RETURN PLUS PROGRAM
The Return Plus Program, available if we are offering FAGPs, allows you to
invest in one or more Variable Portfolios without putting your principal at
direct risk. The program accomplishes this by allocating your investment
strategically between the fixed account options and Variable Portfolios. 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 account 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 Portfolio(s) of your choice. There is no fee for
participating in the Return Plus Program.
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 account option. You want the amount allocated to
the fixed account option to grow to $100,000 in 7 years. If the 7-year
fixed account option is offering a 5% interest rate, we will allocate
$71,069 to the 7-year fixed account option to ensure that this amount will
grow to $100,000 at the end of the 7-year period. The remaining $28,931 may
be allocated among the Variable Portfolios, as determined by you, to
provide opportunity for greater growth.
VOTING RIGHTS
AIG SunAmerica Life is the legal owner of the Trusts' shares. However, when a
Variable 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 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 reasons 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. If you withdraw your entire contract value, we also deduct
applicable premium taxes and a contract maintenance fee. SEE EXPENSES BELOW.
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 seventh or ninth year if you elect to
participate in the Polaris Rewards Program will result in your paying a penalty
in the form of a surrender charge. The amount of the 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
14
- 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 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, you can take out the greater of the following
amounts each year (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.
Although we do not assess a withdrawal charge when you take a 10% penalty-free
withdrawal, we will proportionally reduce the amount of any corresponding
Deferred Payment Enhancement.
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, 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 5 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 (3%)[B x C=$3,000]
D=Your full surrender value ($87,000)
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(s) in which your contract is
invested. IN THE EVENT THAT A PRO RATA PARTIAL WITHDRAWAL WOULD CAUSE THE VALUE
OF ANY VARIABLE PORTFOLIO OR FIXED ACCOUNT INVESTMENT TO BE LESS THAN $100, WE
WILL CONTACT YOU TO OBTAIN ALTERNATE INSTRUCTIONS ON HOW TO STRUCTURE THE
WITHDRAWAL.
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% IRS 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. If you are an Oregon resident, the
minimum withdrawal amount is $250 per withdrawal or an amount equal to your free
withdrawal amount, as described above. There must be at least $500 remaining in
your contract at all times. Withdrawals may be taxable and a 10% IRS penalty tax
may apply if you are under age 59 1/2. There is no additional charge for
participating in this program, although a withdrawal charge and/or MVA may
apply.
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.
15
NURSING HOME WAIVER
If you are confined to a nursing home for 60 days or longer, we may waive the
withdrawal charge and/or market value adjustment on certain withdrawals prior to
the Annuity Date (not available in Texas). The waiver applies only to
withdrawals made while you are in a nursing home or within 90 days after you
leave the nursing home. Your contract prohibits use of this waiver during the
first 90 days after you purchase your contract. In addition, the confinement
period for which you seek the waiver must begin after you purchase your
contract. We will only waive the withdrawal charges on withdrawals or surrenders
of contract value paid directly to the owner, not to a third party or other
financial services company.
In order to use this waiver, you must submit with your withdrawal request, the
following documents: (1) a doctor's note recommending admittance to a nursing
home; (2) an admittance form which shows the type of facility you entered; and
(3) a bill from the nursing home which shows that you met the 60 day confinement
requirement.
MINIMUM CONTRACT VALUE
Where permitted by state law, we may terminate your contract if both of the
following occur: (1) your contract is less than $500 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.
- --------------------------------------------------------------------------------
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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.
POLARIS INCOME REWARDS FEATURE
What is Polaris Income Rewards?
Polaris Income Rewards is an optional feature available only on contracts issued
on or after May 3, 2004 and 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. Polaris 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. You cannot elect the feature if you are age 81 or
older on the Benefit Effective Date or if the Benefit Availability Date is on or
after the Latest Annuity Date. Generally, once you elect the feature, it cannot
be cancelled. Polaris Income Rewards has rules and restrictions that are
discussed more fully below. Polaris Income Rewards cannot be elected if you
elect the Capital Protector feature. SEE CAPITAL PROTECTOR BELOW. Polaris 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 PAYMENT(S) according to the table
below.
<Table>
<Caption>
- -----------------------------------------------------------------
TIME ELAPSED SINCE
BENEFIT EFFECTIVE DATE PERCENTAGE OF ELIGIBLE 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, adjusted for any
withdrawals in the same proportion that the withdrawal reduced the contract
value on the date of the withdrawal. The WBB does not include any payment
enhancements that are offered in association with the Polaris Rewards program.
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 take 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 a STEPPED-UP BENEFIT BASE ("SBB"), which is the total
amount available for withdrawal under the
16
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 Polaris Income Rewards options we are
offering as applicable on the Benefit Availability Date:
<Table>
<Caption>
- -------------------------------------------------------------------
MWP* (IF
BENEFIT MAWA
AVAILABILITY STEP-UP MAWA TAKEN EACH
DATE AMOUNT* PERCENTAGE YEAR)
- -------------------------------------------------------------------
Option 1 3 years following 10% of WBB 10% of WBB 11 years
Benefit Effective
Date
- -------------------------------------------------------------------
Option 2 5 years following 20% of WBB 10% of WBB 12 years
Benefit Effective
Date
- -------------------------------------------------------------------
</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.
What is the fee for Polaris Income Rewards?
The annualized Polaris 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 Polaris 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 Polaris 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.
If total withdrawals in a Benefit Year exceed the MAWA,
17
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 D PROVIDES EXAMPLES OF THE EFFECTS OF WITHDRAWALS ON THE POLARIS 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 Polaris Income Rewards feature. While a benefit is payable
under Polaris Income Rewards until the SBB is reduced to zero, the contract is
terminated when the contract value equals zero. At such time, except for Polaris
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 Polaris 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 Polaris Income Rewards upon a spousal continuation?
A spousal beneficiary of the original owner may elect to continue or cancel
Polaris 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
Polaris 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 Polaris 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. SBB is equal to zero; or
2. Annuitization of the contract; or
3. Full Surrender of the contract; or
4. Death benefit is paid; or
5. Upon a spousal continuation, the Continuing Spouse elects not to
continue the contract with the feature.
We reserve the right to terminate the feature if withdrawals in excess of MAWA
in any Benefit Year reduce the SBB by 50% or more.
Important Information
Polaris 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, Polaris Income Rewards
does not guarantee a withdrawal of those subsequent Purchase Payments. You may
never need to rely on Polaris 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 all other
benefits, features and conditions of your contract.
If you need to take withdrawals or are required to take required minimum
distributions ("RMD") under the Internal Revenue Code ("IRC") from this contract
prior to the Benefit Availability Date, you should know that withdrawals may
18
negatively impact the value of Polaris Income Rewards. As noted above, you will
not receive a Step-Up Amount if you take withdrawals before the Benefit
Availability Date. SEE "WHAT IS THE EFFECT OF WITHDRAWALS ON POLARIS 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.
We reserve the right to limit the maximum WBB to $1 million. For prospectively
issued contracts, we reserve the right to limit the investment options available
under the contract if you elect Polaris Income Rewards. We reserve the right to
modify, suspend or terminate Polaris Income Rewards (in its entirety or any
component) at any time for prospectively issued contracts.
CAPITAL PROTECTOR FEATURE
What is Capital Protector?
The Capital Protector 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 Capital
Protector may offer protection in the event that your contract value declines
due to unfavorable investment performance in your contract.
If you elect the Capital Protector, at the end of the applicable waiting period
we will evaluate your contract to determine if a Capital Protector 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 Capital Protector 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.
The effective date for this feature will be your contract issue date. Capital
Protector is not available if you elect Polaris Income Reward. SEE POLARIS
INCOME REWARDS ABOVE.
The Capital Protector 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 Capital Protector 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 Capital
Protector 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 Capital Protector 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
TIME ELAPSED SINCE INCLUDED IN THE
EFFECTIVE DATE CAPITAL PROTECTOR BENEFIT CALCULATION
- ------------------ -------------------------------------
0-90 days 100%
91+ days 0%
</Table>
The Capital Protector benefit calculation is equal to your Capital Protector
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 Capital
Protector 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 Capital Protector benefit
paid is not considered a Purchase Payment for purposes of calculating other
benefits. Benefits based on earnings, such as EstatePlus, 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 Capital Protector?
Capital Protector 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 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
19
quarterly fee if you surrender or annuitize before the end of the quarter.
<Table>
<Caption>
CONTRACT YEAR ANNUALIZED FEE *
- ------------- ----------------
0-7 0.50%
8-10 0.25%
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 Capital Protector 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 Capital Protector 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 Capital Protector would not protect the
majority of those payments.
Since the Capital Protector 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 Capital Protector benefit. For example, if near the end of the waiting
period your Capital Protector 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 Capital Protector Base on your benefit date, you will not
receive any benefit even though you have paid for the Capital Protector feature
throughout the waiting period. You should discuss subsequent Purchase Payments
with your financial representative as such activity may reduce the value of this
Capital Protector benefit.
We reserve the right to modify, suspend or terminate the capital protector
feature (in its entirety or any component) at any time for prospectively issued
contracts.
We will not assess a fee for any of the Optional Living Benefits upon surrender.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
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 benefit 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 name your Beneficiary. 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
4. any other proof satisfactory to us.
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. Generally, IRS
20
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. Under the Extended Legacy program, 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 as 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).
For information regarding how these payments are treated for tax purposes,
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 $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 option below is
defined as withdrawals and the fees and charges applicable to those withdrawals.
IF YOU PURCHASED YOUR CONTRACT ON OR ABOUT JUNE 1, 2004, SUBJECT TO STATE
AVAILABILITY, THE FOLLOWING DEATH BENEFIT PROVISIONS APPLY:
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
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.
OPTION 2 - MAXIMUM ANNIVERSARY 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.
21
If the contract is issued on or after your 83rd birthday but before your 86th
birthday, the death benefit is 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.
If you are age 90 or older at the time of death and selected the Maximum
Anniversary death benefit, 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.
For contracts in which the aggregate of all Purchase Payments in contracts
issued by AIG SunAmerica Life and/or First SunAmerica Life Insurance Company to
the same owner are in excess of $1,000,000, we reserve the right to limit the
death benefit amount that is in excess of contract value at the time we receive
all 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.
IF YOU PURCHASED YOUR CONTRACT BETWEEN OCTOBER 24, 2001 AND ON OR ABOUT MAY 31,
2004, THE FOLLOWING DEATH BENEFIT PROVISIONS APPLY:
OPTION 1 -- PURCHASE PAYMENT ACCUMULATION OPTION
The death benefit is the greatest of:
1. the contract value at the time we receive all required paperwork and
satisfactory proof of death; or
2. Net Purchase Payments compounded at a 4% annual growth rate until the
date of death (3% growth rate if age 70 or older at the time of contract
issue) plus any Purchase Payments recorded after the date of death; and
reduced for any withdrawals in the same proportion that the withdrawal
reduced contract value on the date of the withdrawal; or
3. the contract value on the seventh contract anniversary, plus any
Purchase Payments since the seventh contract anniversary; and reduced
for any withdrawals since the seventh contract anniversary in the same
proportion that each withdrawal reduced the contract value on the date
of the withdrawal, all compounded at a 4% annual growth rate until the
date of death (3% growth rate if age 70 or older at the time of contract
issue) plus any purchase payments recorded after the date of death; and
reduced for each withdrawal recorded after the date of death in the same
proportion that each withdrawal reduced the contract value on the date
of the withdrawal.
OPTION 2 -- MAXIMUM ANNIVERSARY OPTION
The death benefit is the greatest of:
1. the contract value at the time we receive all required paperwork and
satisfactory proof of death; or
2. Net Purchase Payments; or
3. the maximum anniversary value on any contract anniversary prior to your
81st birthday. The anniversary value equals the contract value on a
contract anniversary plus any Purchase Payments since that contract
anniversary; and reduced for any withdrawals since the contract
anniversary in the same proportion that each withdrawal reduced the
contract value on the date of the withdrawal.
If you are age 90 or older at the time of death and selected the Option 2 death
benefit, the death benefit will be equal to contract value at the time we
receive all required paperwork and satisfactory proof of death. Accordingly, you
do not get the advantage of Option 2 if:
- you are age 81 or older at the time of contract issue; or
- you are age 90 or older at the time of your death.
The death benefit options on contracts issued before October 24, 2001 would be
subject to a different calculation. Please see the Statement of Additional
Information for details.
ESTATEPLUS
The EstatePlus benefit if elected may increase the death benefit amount. If you
have earnings in your contract at the time of death, we will add a percentage of
those earnings (the "EstatePlus Percentage"), subject to a maximum dollar amount
(the "Maximum EstatePlus Amount"), to the death benefit payable. The contract
year of your death will determine the EstatePlus percentage and the Maximum
EstatePlus percentage.
The table below provides the details if you are age 69 or younger at the time we
issue your contract:
<Table>
<Caption>
- -------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS AMOUNT
- -------------------------------------------------------------
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 EstatePlus benefit:
<Table>
<Caption>
- -------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS AMOUNT
- -------------------------------------------------------------
All Contract 25% of Earnings 40% of Net Purchase
Years 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 EstatePlus Amount calculations.
22
We may offer different levels of this benefit based on the number of years you
hold your contract and/or your age at the time of issue.
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 EstatePlus Percentage Amount?
We determine the amount of the EstatePlus 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 Purchase Payments as of
the date of death. If the earnings amount is negative, no EstatePlus amount will
be added.
What is the Maximum EstatePlus Amount?
The EstatePlus benefit is subject to a maximum dollar amount. The maximum
EstatePlus amount is equal to a percentage of your Net Purchase Payments.
You must elect EstatePlus at the time of contract application. Once elected, you
may not terminate or change this election.
We assess a 0.25% fee for EstatePlus. 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.
EstatePlus is not available if you are age 81 or older at the time we issue your
contract. Furthermore, a Continuing Spouse cannot benefit from EstatePlus if
he/she is age 81 or older on the Continuation Date. SEE SPOUSAL CONTINUATION
BELOW. The EstatePlus benefit is not payable after the Latest Annuity Date. You
may pay for the EstatePlus benefit and your beneficiary may never receive the
benefit if you live past the Latest Annuity Date. SEE INCOME OPTIONS BELOW.
EstatePlus 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 ESTATEPLUS BENEFIT (IN
ITS ENTIRETY OR ANY COMPONENT AT ANY TIME) AT ANY TIME FOR PROSPECTIVELY ISSUED
CONTRACTS.
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
MVA fixed accounts, 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 C. SEE APPENDIX C BELOW FOR FURTHER
EXPLANATION OF THE DEATH BENEFIT CALCULATIONS FOLLOWING A SPOUSAL CONTINUATION.
Generally, the Continuing Spouse 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 EstatePlus. We will terminate
EstatePlus if the Continuing Spouse is age 81 or older on the Continuation Date.
If EstatePlus is terminated or if the Continuing Spouse dies after the latest
Annuity Date, no EstatePlus benefit will be payable. 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. SEE APPENDIX C BELOW 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 the insurance and 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 1.52%,
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
23
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. The
separate account charges are expected to result in a profit. Profit may be used
for any legitimate cost or expense including distribution, depending upon market
conditions.
WITHDRAWAL CHARGES
The contract provides a free withdrawal amount every year. SEE ACCESS TO YOUR
MONEY ABOVE. If you take money out in excess of the free withdrawal amount, you
may incur a withdrawal charge. You may also incur a withdrawal charge upon a
full surrender.
We apply a withdrawal charge against each Purchase Payment you put into the
contract. After a Purchase Payment has been in the contract for 7 complete
years, no withdrawal charge applies. The withdrawal charge equals a percentage
of the Purchase Payment you take out of the contract. The withdrawal charge
percentage declines each year a Purchase Payment is in the contract. The two
withdrawal charge schedules are as follows:
WITHDRAWAL CHARGE
<Table>
<Caption>
- -----------------------------------------------------------------------------------------
YEAR 1 2 3 4 5 6 7 8+
- -----------------------------------------------------------------------------------------
WITHDRAWAL
CHARGE 7% 6% 5% 4% 3% 2% 1% 0%
- -----------------------------------------------------------------------------------------
</Table>
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. SEE ACCESS TO YOUR MONEY ABOVE.
Whenever possible, we deduct the withdrawal charge from the money remaining in
your contract. 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 will not assess a withdrawal
charge when you switch to the Income Phase, except when you elect to receive
income payments using the Income Protector feature. If you elect to receive
income payments using the Income Protector feature, we assess the entire
withdrawal charge applicable to Purchase Payments remaining in your contract
when calculating your income benefit base. SEE INCOME OPTIONS BELOW.
Withdrawals made prior to age 59 1/2 may result in tax penalties. SEE TAXES
BELOW.
INVESTMENT CHARGES
INVESTMENT MANAGEMENT FEES
Charges are deducted from your Variable Portfolios for the advisory and other
expenses of the Variable Portfolios. The Fee Tables illustrate these charges and
expenses. For more detailed information on these investment charges, refer to
the accompanying prospectuses for the Trusts.
SERVICE FEES
Shares of certain trusts may be subject to fees imposed under a distribution
and/or servicing plan adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940. For AIG SunAmerica Series Trust ("SAST"), under the
distribution plan which is applicable to all classes of shares, recaptured
brokerage commissions will be used to make payments to SunAmerica Capital
Services, Inc., the SAST's Distributor, to pay for various distribution
activities on behalf of the SAST Portfolios. These distribution fees will not
increase the cost of your investment or affect your return.
In addition, the 0.25% fee applicable to Class II shares of the Van Kampen Life
Investment Trust, Class 2 shares of the American Funds Insurance Series and
Class 3 of the Anchor Series Trust and SunAmerica Series Trust is generally used
to pay financial intermediaries for services provided over the life of your
contract.
For more detailed information on these Investment Charges, refer to the
prospectuses for the underlying portfolios.
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. We deduct the $35 contract maintenance fee ($30 in North Dakota)
from your account value on your contract anniversary. If you withdraw your
entire contract value, we deduct the fee from that withdrawal.
If your contract value is $50,000 or more on your contract anniversary date, we
will waive the charge. This waiver is subject to change without notice.
TRANSFER FEE
Generally, 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
24
Pennsylvania and Texas). SEE INVESTMENT OPTIONS ABOVE.
OPTIONAL POLARIS INCOME REWARDS FEE
The annualized Polaris Income Rewards fee is calculated as a percentage of your
Withdrawal Benefits 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 0.65%
8+ 0.45%
</Table>
OPTIONAL CAPITAL PROTECTOR FEE
The fee for the Capital Protector feature is as follows:
<Table>
<Caption>
CONTRACT YEAR ANNUALIZED CHARGE *
- ------------- -------------------
0-7 0.50%
8-10 0.25%
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.
OPTIONAL ESTATEPLUS FEE
We charge 0.25% for the EstatePlus 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.
PREMIUM TAX
Certain states charge the Company a tax on the premiums you pay into the
contract ranging from 0% to 3.5%. We deduct from your contract these premium tax
charges from your contract where applicable. Currently we deduct the charge for
premium taxes when you take a full withdrawal or begin the Income Phase of 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.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
INCOME OPTIONS
- ----------------------------------------------------------------
- ----------------------------------------------------------------
ANNUITY DATE
During the Income Phase, we use the money accumulated in your contract 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 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 indicated under Option
5 below, once you begin receiving income payments, you cannot otherwise access
your money through a withdrawal or surrender.
Income payments must begin on or before the Latest Annuity Date, which is 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. 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, most 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 payout options may be
available. Contact the Annuity Service Center for more information. 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 based on joint lives, we pay according to Option 3 for a period of 10
years.
25
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 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 when the survivor dies.
OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED
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 guaranteed income payments have been made, the remaining
payments are made to the Beneficiary under your contract.
OPTION 4 - LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED
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.
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 income payments being made) may redeem any remaining
guaranteed variable income payments after the Annuity Date. The amount available
upon such redemption would be the discounted present value of any remaining
guaranteed variable income payments. If provided for in your contract, any
applicable withdrawal charge will be deducted from the discounted value as if
you fully surrendered your contract.
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.
For information regarding Income Options using the Income Protector feature,
please see below. Please read the Statement of Additional Information ("SAI")
for a more detailed discussion of the income options.
FIXED OR VARIABLE INCOME PAYMENTS
You can choose income payments that are fixed, variable or both. Unless
otherwise elected, if at the date when income payments begin you are invested in
the Variable Portfolios only, your income payments will be variable and if your
money is only in fixed accounts at that time, your income payments will be fixed
in amount. Further, if you are invested in both fixed and variable investment
options when income payments begin, your payments will be fixed and variable,
unless otherwise elected. If income payments are fixed, AIG SunAmerica Life
guarantees the amount of each payment. If the income payments are variable the
amount is not guaranteed.
INCOME PAYMENTS
We make income payments on a monthly, quarterly, semiannual or annual basis. You
instruct us to send you a check or to have the payments directly 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 income payments of less than $50 per payment, we may decrease the
frequency of payments, state law allowing.
If you are invested in the Variable Portfolios after the Annuity date, your
income payments vary depending on four things:
- 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; and
- the 3.5% assumed investment rate 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 and
variable options 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,
26
the income payments will increase and if it is less than the AIR, the income
payments will decline.
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.
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TAXES
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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
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
27
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 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.
28
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
(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.
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PERFORMANCE
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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 subaccount 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 Portfolio.
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OTHER INFORMATION
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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
29
Company, AIG SunAmerica Asset Management Corp., and the AIG Advisors Group, Inc.
(comprising seven-wholly owned broker-dealers and 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 established Variable Separate Account ("separate account"),
under Arizona law on January 1, 1996 when it assumed the separate account,
originally established under California law on June 25, 1981. 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.
PAYMENTS WE RECEIVE
In addition to amounts received pursuant to established 12b-1 Plans, we may
receive compensation of up to 0.50% 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
30
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 Polaris Platinum(II) 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 ACCOUNTANTS
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 financial statements of Variable Separate Account at
December 31, 2003 and for each of the two years in the period ended December 31,
2003, are incorporated by reference in this prospectus in reliance on the
reports of PricewaterhouseCoopers LLP, independent accountants, 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.
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TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
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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.............................. 4
Income Payments............................... 12
Income Protector.............................. 13
Annuity Unit Values........................... 13
Death Benefit Options for Contracts Issued
Before October 24, 2001..................... 16
Taxes......................................... 17
Distribution of Contracts..................... 23
Financial Statements.......................... 23
</Table>
31
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APPENDIX A - CONDENSED FINANCIALS
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<Table>
<Caption>
INCEPTION TO FISCAL YEAR
PORTFOLIOS 12/31/02 12/31/03
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Capital Appreciation (Inception Date - 09/30/02)
Beginning AUV....................................... (a) $24.182 $25.794
(b) $24.182 $25.769
Ending AUV.......................................... (a) $25.794 $33.529
(b) $25.769 $33.414
Ending Number of AUs................................ (a) 137,717 1,159,548
(b) 7,742 137,361
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Government and Quality Bond (Inception Date - 09/30/02)
Beginning AUV....................................... (a) $16.370 $16.472
(b) $16.370 $16.443
Ending AUV.......................................... (a) $16.472 $16.588
(b) $16.443 $16.522
Ending Number of AUs................................ (a) 290,385 3,984,131
(b) 50,620 497,760
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Growth (Inception Date - 09/30/02)
Beginning AUV....................................... (a) $19.417 $20.848
(b) $19.417 $20.811
Ending AUV.......................................... (a) $20.848 $26.615
(b) $20.811 $26.501
Ending Number of AUs................................ (a) 65,224 890,267
(b) 7,793 104,691
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Natural Resources (Inception Date - 09/30/02)
Beginning AUV....................................... (a) $13.753 $15.272
(b) $13.753 $15.260
Ending AUV.......................................... (a) $15.272 $22.162
(b) $15.260 $22.091
Ending Number of AUs................................ (a) 3,369 166,767
(b) 3,108 33,063
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Aggressive Growth (Inception Date - 09/30/02)
Beginning AUV....................................... (a) $10.011 $10.077
(b) $10.011 $10.067
Ending AUV.......................................... (a) $10.077 $12.720
(b) $10.067 $12.678
Ending Number of AUs................................ (a) 9,218 142,870
(b) 527 28,027
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Alliance Growth (Inception Date - 09/30/02)
Beginning AUV....................................... (a) $21.881 $21.940
(b) $21.881 $21.905
Ending AUV.......................................... (a) $21.940 $27.122
(b) $21.905 $27.011
Ending Number of AUs................................ (a) 45,029 594,386
(b) 5,469 69,502
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Blue Chip Growth (Inception Date - 09/30/02)
Beginning AUV....................................... (a) $4.530 $4.659
(b) $4.530 $4.646
Ending AUV.......................................... (a) $4.659 $5.769
(b) $4.646 $5.739
Ending Number of AUs................................ (a) 25,770 414,391
(b) 369 40,274
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Cash Management (Inception Date - 09/30/02)
Beginning AUV....................................... (a) $13.025 $13.018
(b) $13.025 $12.985
Ending AUV.......................................... (a) $13.018 $12.878
(b) $12.985 $12.811
Ending Number of AUs................................ (a) 281,453 2,514,514
(b) 94,850 261,745
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Corporate Bond (Inception Date - 09/30/02)
Beginning AUV....................................... (a) $14.394 $14.704
(b) $14.394 $14.702
Ending AUV.......................................... (a) $14.704 $16.174
(b) $14.702 $16.133
Ending Number of AUs................................ (a) 115,713 946,263
(b) 2,563 149,828
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AU - Accumulation Unit
AUV - Accumulation Unit Value
(a) Without election of the optional EstatePlus feature
(b) With election of the optional EstatePlus feature
</Table>
A-1
<Table>
<Caption>
INCEPTION TO FISCAL YEAR
PORTFOLIOS 12/31/02 12/31/03
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Davis Venture Value (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $20.108 $21.460
(b) $20.108 $21.427
Ending AUV........................................... (a) $21.460 $28.069
(b) $21.427 $27.956
Ending Number of AUs................................. (a) 115,086 1,725,140
(b) 25,333 262,216
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"Dogs" of Wall Street (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $8.149 $8.902
(b) $8.149 $8.901
Ending AUV........................................... (a) $8.902 $10.500
(b) $8.901 $10.471
Ending Number of AUs................................. (a) 15,055 263,040
(b) 7,757 66,688
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Emerging Market (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $5.486 $5.958
(b) $5.486 $5.952
Ending AUV........................................... (a) $5.958 $8.933
(b) $5.952 $8.902
Ending Number of AUs................................. (a) 11,000 186,478
(b) 1,832 42,556
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Federated American Leaders (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $11.895 $12.912
(b) $11.895 $12.895
Ending AUV........................................... (a) $12.912 $16.184
(b) $12.895 $16.122
Ending Number of AUs................................. (a) 60,297 226,851
(b) 7,324 27,080
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Foreign Value (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $8.970 $9.407
(b) $8.970 $9.390
Ending AUV........................................... (a) $9.407 $12.463
(b) $9.390 $12.410
Ending Number of AUs................................. (a) 163,234 2,457,488
(b) 12,214 361,907
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Global Bond (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $16.095 $16.324
(b) $16.095 $16.246
Ending AUV........................................... (a) $16.324 $16.611
(b) $16.246 $16.490
Ending Number of AUs................................. (a) 14,628 255,534
(b) 90 37,002
- --------------------------------------------------------------------------------------------------
Global Equities (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $11.708 $12.546
(b) $11.708 $12.519
Ending AUV........................................... (a) $12.546 $15.584
(b) $12.519 $15.468
Ending Number of AUs................................. (a) 7,750 73,506
(b) 13 10,826
- --------------------------------------------------------------------------------------------------
Growth-Income (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $20.102 $20.787
(b) $20.102 $20.749
Ending AUV........................................... (a) $20.787 $25.658
(b) $20.749 $25.549
Ending Number of AUs................................. (a) 52,756 231,147
(b) 877 40,091
- --------------------------------------------------------------------------------------------------
Growth Opportunities (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $3.230 $3.435
(b) $3.230 $3.434
Ending AUV........................................... (a) $3.435 $4.557
(b) $3.434 $4.544
Ending Number of AUs................................. (a) 35,308 269,627
(b) 16,803 71,725
- --------------------------------------------------------------------------------------------------
High-Yield Bond (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $10.951 $11.586
(b) $10.951 $11.563
Ending AUV........................................... (a) $11.586 $14.978
(b) $11.563 $14.910
Ending Number of AUs................................. (a) 23,586 711,066
(b) 5,755 148,009
- --------------------------------------------------------------------------------------------------
AU - Accumulation Unit
AUV - Accumulation Unit Value
(a) Without election of the optional EstatePlus feature
(b) With election of the optional EstatePlus feature
</Table>
A-2
<Table>
<Caption>
INCEPTION TO FISCAL YEAR
PORTFOLIOS 12/31/02 12/31/03
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
International Diversified Equities (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $6.995 $7.170
(b) $6.995 $7.157
Ending AUV........................................... (a) $7.170 $9.286
(b) $7.157 $9.246
Ending Number of AUs................................. (a) 111,291 2,207,499
(b) 13,612 271,169
- --------------------------------------------------------------------------------------------------
International Growth and Income (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $8.000 $8.330
(b) $8.000 $8.343
Ending AUV........................................... (a) $8.330 $11.204
(b) $8.343 $11.198
Ending Number of AUs................................. (a) 103,102 650,379
(b) 1,722 112,450
- --------------------------------------------------------------------------------------------------
MFS Massachusetts Investors Trust (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $14.084 $14.930
(b) $14.084 $14.910
Ending AUV........................................... (a) $14.930 $17.969
(b) $14.910 $17.902
Ending Number of AUs................................. (a) 30,003 545,587
(b) 2,373 81,535
- --------------------------------------------------------------------------------------------------
MFS Mid-Cap Growth (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $6.525 $6.965
(b) $6.525 $6.950
Ending AUV........................................... (a) $6.965 $9.392
(b) $6.950 $9.349
Ending Number of AUs................................. (a) 127,090 1,733,813
(b) 14,748 329,389
- --------------------------------------------------------------------------------------------------
MFS Total Return (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $18.961 $19.853
(b) $18.961 $19.815
Ending AUV........................................... (a) $19.853 $22.797
(b) $19.815 $22.697
Ending Number of AUs................................. (a) 114,386 1,504,372
(b) 17,494 198,694
- --------------------------------------------------------------------------------------------------
Putnam Growth: Voyager (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $13.178 $13.785
(b) $13.178 $13.756
Ending AUV........................................... (a) $13.785 $16.795
(b) $13.756 $16.718
Ending Number of AUs................................. (a) 26,714 91,097
(b) 3,638 14,803
- --------------------------------------------------------------------------------------------------
Real Estate (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $11.543 $11.836
(b) $11.543 $11.824
Ending AUV........................................... (a) $11.836 $16.050
(b) $11.824 $15.993
Ending Number of AUs................................. (a) 21,457 337,695
(b) 5,369 86,289
- --------------------------------------------------------------------------------------------------
Small & Mid Cap Value (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $9.180 $10.122
(b) $9.180 $10.100
Ending AUV........................................... (a) $10.122 $13.588
(b) $10.100 $13.525
Ending Number of AUs................................. (a) 107,425 1,434,738
(b) 10,354 282,420
- --------------------------------------------------------------------------------------------------
SunAmerica Balanced (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $12.518 $12.509
(b) $12.518 $12.492
Ending AUV........................................... (a) $12.509 $14.149
(b) $12.492 $14.093
Ending Number of AUs................................. (a) 8,446 233,499
(b) 12,402 46,635
- --------------------------------------------------------------------------------------------------
Technology (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $1.432 $1.716
(b) $1.432 $1.715
Ending AUV........................................... (a) $1.716 $2.544
(b) $1.715 $2.536
Ending Number of AUs................................. (a) 79,837 1,468,721
(b) 20,700 223,801
- --------------------------------------------------------------------------------------------------
</Table>
<Table>
AU - Accumulation Unit
AUV - Accumulation Unit Value
(a) Without election of the optional EstatePlus feature
(b) With election of the optional EstatePlus feature
</Table>
A-3
<Table>
<Caption>
INCEPTION TO FISCAL YEAR
PORTFOLIOS 12/31/02 12/31/03
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Lord Abbett Series Fund Growth and Income (Inception
Date - 09/30/02)
Beginning AUV........................................ (a) $7.486 $8.180
(b) $7.471 $8.159
Ending AUV........................................... (a) $8.180 $10.556
(b) $8.159 $10.503
Ending Number of AUs................................. (a) 62,903 820,512
(b) 39,318 139,335
- --------------------------------------------------------------------------------------------------
Van Kampen LIT Comstock, Class II Shares (Inception
Date - 09/30/02)
Beginning AUV........................................ (a) $7.298 $8.101
(b) $7.296 $8.094
Ending AUV........................................... (a) $8.101 $10.434
(b) $8.094 $10.399
Ending Number of AUs................................. (a) 73,831 1,500,438
(b) 11,726 247,660
- --------------------------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth, Class II Shares (Inception
Date - 09/30/02)
Beginning AUV........................................ (a) $7.139 $6.916
(b) $7.133 $6.906
Ending AUV........................................... (a) $6.916 $8.654
(b) $6.906 $8.619
Ending Number of AUs................................. (a) 33,388 396,216
(b) 1,754 93,581
- --------------------------------------------------------------------------------------------------
Van Kampen LIT Growth and Income, Class II Shares (Inception
Date - 09/30/02)
Beginning AUV........................................ (a) $8.181 $8.826
(b) $8.180 $8.197
Ending AUV........................................... (a) $8.826 $11.100
(b) $8.197 $11.064
Ending Number of AUs................................. (a) 189,460 2,716,948
(b) 16,825 341,615
- --------------------------------------------------------------------------------------------------
American Funds Global Growth (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $10.000 $10.949
(b) $10.000 $10.936
Ending AUV........................................... (a) $10.949 $14.590
(b) $10.936 $14.537
Ending Number of AUs................................. (a) 92,435 987,076
(b) 12,106 150,027
- --------------------------------------------------------------------------------------------------
American Funds Growth (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $10.000 $10.884
(b) $10.000 $10.876
Ending AUV........................................... (a) $10.884 $14.667
(b) $10.876 $14.621
Ending Number of AUs................................. (a) 179,113 2,448,300
(b) 40,944 389,740
- --------------------------------------------------------------------------------------------------
American Funds Growth-Income (Inception Date - 09/30/02)
Beginning AUV........................................ (a) $10.000 $10.884
(b) $10.000 $10.872
Ending AUV........................................... (a) $10.884 $14.197
(b) $10.872 $14.148
Ending Number of AUs................................. (a) 264,424 3,073,765
(b) 30,474 484,620
- --------------------------------------------------------------------------------------------------
Nations Asset Allocation (Inception Date - 04/07/03)
Beginning AUV........................................ (a) N/A $8.229
(b) N/A $8.200
Ending AUV........................................... (a) N/A $9.608
(b) N/A $9.557
Ending Number of AUs................................. (a) N/A 50,082
(b) N/A 51
- --------------------------------------------------------------------------------------------------
Nations High Yield Bond (Inception Date - 04/07/03)
Beginning AUV....................................... (a) N/A $11.013
(b) N/A $10.964
Ending AUV.......................................... (a) N/A $13.182
(b) N/A $13.100
Ending Number of AUs................................ (a) N/A 154,070
(b) N/A 11,170
- --------------------------------------------------------------------------------------------------
</Table>
<Table>
AU - Accumulation Unit
AUV - Accumulation Unit Value
(a) Without election of the optional EstatePlus feature
(b) With election of the optional EstatePlus feature
</Table>
A-4
<Table>
<Caption>
INCEPTION TO FISCAL YEAR
PORTFOLIOS 12/31/02 12/31/03
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Nations Marsico Focused Equities (Inception
Date - 04/07/03)
Beginning AUV........................................ (a) N/A $7.372
(b) N/A $7.333
Ending AUV........................................... (a) N/A $9.382
(b) N/A $9.315
Ending Number of AUs................................. (a) N/A 371,681
(b) N/A 11,251
- --------------------------------------------------------------------------------------------------
Nations Marsico Growth (Inception Date - 04/07/03)
Beginning AUV........................................ (a) N/A $6.791
(b) N/A $6.760
Ending AUV........................................... (a) N/A $8.602
(b) N/A $8.547
Ending Number of AUs................................. (a) N/A 89,757
(b) N/A 6,744
- --------------------------------------------------------------------------------------------------
Nations Marsico 21st Century (Inception Date - 04/07/03)
Beginning AUV........................................ (a) N/A $7.488
(b) N/A $7.454
Ending AUV........................................... (a) N/A $10.705
(b) N/A $10.636
Ending Number of AUs................................. (a) N/A 13,567
(b) N/A 916
- --------------------------------------------------------------------------------------------------
Nations Marsico International Opportunities (Inception
Date - 04/07/03)
Beginning AUV........................................ (a) N/A $8.569
(b) N/A $8.546
Ending AUV........................................... (a) N/A $11.886
(b) N/A $11.833
Ending Number of AUs................................. (a) N/A 119,127
(b) N/A 7,071
- --------------------------------------------------------------------------------------------------
Nations Mid Cap Growth (Inception Date - 04/07/03)
Beginning AUV........................................ (a) N/A $5.745
(b) N/A $5.332
Ending AUV........................................... (a) N/A $7.295
(b) N/A $6.757
Ending Number of AUs................................. (a) N/A 59.774
(b) N/A 4,127
- --------------------------------------------------------------------------------------------------
Nations Small Company (Inception Date - 04/07/03)
Beginning AUV........................................ (a) N/A $6.885
(b) N/A $6.845
Ending AUV........................................... (a) N/A $9.606
(b) N/A $9.532
Ending Number of AUs................................. (a) N/A 66,928
(b) N/A 4,725
- --------------------------------------------------------------------------------------------------
Nations Value (Inception Date - 04/07/03)
Beginning AUV........................................ (a) N/A $7.226
(b) N/A $7.186
Ending AUV........................................... (a) N/A $9.431
(b) N/A $9.360
Ending Number of AUs................................. (a) N/A 171,341
(b) N/A 9,090
- --------------------------------------------------------------------------------------------------
</Table>
<Table>
AU - Accumulation Unit
AUV - Accumulation Unit Value
(a) Without election of the optional EstatePlus feature
(b) With election of the optional EstatePlus feature
</Table>
A-5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX B - MARKET VALUE ADJUSTMENT ("MVA") AND FIXED ADVANTAGE 7 ACCOUNT
OPTION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Multi-year FAGPs may not be available if you purchase your contract on or after
June 1, 2004. If 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 does not apply to
any available one-year fixed account. 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.
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)](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.
B-1
POSITIVE ADJUSTMENT, NO WITHDRAWAL CHARGE APPLIES
Assume that on the date of withdrawal, the interest rate in effect for a 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)](N/12) - 1
= [(1.05)/(1.04+0.005)](18/12) - 1
= (1.004785)(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)](N/12) - 1
= [(1.05)/(1.06+0.005)](18/12) - 1
= (0.985915)(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)/(I+J+0.005)](N/12) - 1
= [(1.05)/(1.04+0.005)](18/12) - 1
= (1.004785)(1.5) - 1
= 1.007186 - 1
= +0.007186
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.
B-2
The MVA factor is = [(1+I)/(I+J+0.005)](N/12) - 1
= [(1.05)/(1.06+0.005)](18/12) - 1
= (0.985915)(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.
FIXED ADVANTAGE 7 ACCOUNT OPTION
Fixed Advantage 7 is an additional seven-year fixed account option available in
your contract and will generally offer a different interest rate than the other
fixed account options in your contract. Only Purchase Payments made during the
first 90 days following issuance of your contract can be invested in Fixed
Advantage 7. If you inadvertently allocate any Purchase Payments to Fixed
Advantage 7 after the first 90 days of your contract, we will allocate those
funds according to your last Variable Portfolio allocation instructions, unless
we receive different instructions from you. At the end of the 7-year guarantee
period, the entire balance in Fixed Advantage 7 will be automatically
transferred into those funds according to your last Variable Portfolio
allocation instructions, unless we receive different instructions from you. If
your previous instructions did not include allocation to Variable Portfolios, we
will transfer any funds into the Cash Management Variable Portfolio. These
automatic transfers do not count against the number of free annual transfers.
You cannot transfer money out of Fixed Advantage 7 prior to the end of the
7-year guarantee period; however, you may elect to systematically transfer the
interest earned in this account to other Variable Portfolios at any time either
monthly, quarterly, semi-annually or annually. If you make a full or partial
withdrawal from your contract, you will be subject to a market value adjustment
on all funds invested in the multi-year fixed accounts including Fixed Advantage
7 and any applicable surrender charges. See APPENDIX B below.
You will not be subject to a market value adjustment if:
(1) you systematically transfer interest earned to other Variable
Portfolios as part of the DCA program;
(2) a death benefit is paid;
(3) any withdrawal is made to pay fees or charges; or
(4) any amount automatically transferred at the end of the guarantee
period.
FIXED ADVANTAGE 7 MAY NOT BE AVAILABLE IN ALL STATES.
B-3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX C - DEATH BENEFITS FOLLOWING SPOUSAL CONTINUATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capitalized terms used in this Appendix have the same meaning as they have in
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 EstatePlus benefit upon the
Continuing Spouse's death:
The death benefit we will pay to the new Beneficiary chosen by the Continuing
Spouse varies depending on the death benefit option elected by the original
owner of the contract and the age of the Continuing Spouse as of the
Continuation Date.
A. DEATH BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH:
1. Purchase Payment Accumulation Option
If the original owner of the contract elected Option 1, 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;
reduced for any withdrawals and increased by any Continuation Net
Purchase Payments received after the Continuing Spouse's 75th
birthday to the earlier of the Continuing Spouse's 86th birthday or
date of death; or
c. Contract value on the seventh contract anniversary (from the issue
date of the original owner), 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 any
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, 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 Purchase Payments received since that anniversary date prior to
the Continuing Spouse's 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
withdrawal.
If the Continuing Spouse is age 83-85 on the Continuation Date, then
the death benefit will be the greatest 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 or older as of the Continuation
Date and the original owner of the contract elected the Purchase Payment
Accumulation death benefit, the death benefit will be equal to the contract
value.
2. Maximum Anniversary Value Option
If the original owner of the contract elected Option 2, Maximum
Anniversary Option, 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 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
C-1
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 Purchase Payments received since
that anniversary date but prior to the Continuing Spouse's 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 withdrawal.
If the Continuing Spouse is age 83-85 on the Continuation Date, then
the death benefit will be the greater of:
a. Contract value; or
b. the lesser of:
(3) Contract value on the Continuation Date plus any Continuation
Net Purchase Payments received prior to the Continuing Spouse's
86th birthday; or
(4) 125% of the contract value.
If the Continuing Spouse is age 86 or older at the time of death,
under the Maximum Anniversary death benefit, their Beneficiary will receive
only the contract value.
Please see the Statement of Additional Information for a description of the
death benefit calculations following a Spousal Continuation for contracts issued
on or before May 31, 2004.
B. THE ESTATEPLUS BENEFIT PAYABLE UPON CONTINUING SPOUSE'S DEATH:
The EstatePlus benefit may increase the death benefit amount. The EstatePlus
benefit is only available if the original owner elected EstatePlus 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
"EstatePlus Percentage"), subject to a maximum dollar amount (the "Maximum
EstatePlus Percentage"), to the death benefit payable, based on the number of
years the Continuing Spouse has held the contract since the Continuation Date.
The EstatePlus benefit, 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
EstatePlus benefit:
<Table>
<Caption>
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CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS AMOUNT
- -------------------------------------------------------------------
Years (0-4) 25% of Earnings 40% of Continuation Net
Purchase Payments
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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 EstatePlus benefit:
<Table>
<Caption>
- -------------------------------------------------------------------
CONTRACT YEAR ESTATEPLUS MAXIMUM
OF DEATH PERCENTAGE ESTATEPLUS AMOUNT
- -------------------------------------------------------------------
All Contract 25% of Earnings 40% of Continuation Net
Years 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
Estate Plus 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 EstatePlus benefit, 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 EstatePlus amount?
We determine the EstatePlus 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 EstatePlus amount?
The EstatePlus benefit is subject to a maximum dollar amount. The Maximum
EstatePlus 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.
C-2
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APPENDIX D - POLARIS INCOME REWARDS EXAMPLES
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The examples below describe how the Polaris Income Rewards benefit is calculated
in different situations:
EXAMPLE 1:
Assume you elect Polaris 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 Polaris 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 Polaris 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 Polaris 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.
D-1
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Please forward a copy (without charge) of the Polaris Platinum(II) Variable
Annuity Statement of Additional Information to:
(Please print or type and fill in all information.)
------------------------------------------------------------------------
Name
------------------------------------------------------------------------
Address
------------------------------------------------------------------------
City/State/Zip
Date: ------------------------------ Signed: ---------------------------
Return to: AIG SunAmerica Life Assurance Company, Annuity Service Center,
P.O. Box 52499, Los Angeles, California 90054-0299
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