<PAGE> 1
File Nos.33-39888
811-6313
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 15 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No. 16
(Check appropriate box or boxes)
VARIABLE ANNUITY ACCOUNT ONE
(Exact Name of Registrant)
First SunAmerica Life Insurance Company
(Name of Depositor)
733 Third Avenue, 4th Floor
New York, New York 10017
(Address of Depositor's Principal Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (310) 772-6000
Susan L. Harris, Esq.
First SunAmerica Life Insurance Company
c/o SunAmerica Inc.
1 SunAmerica Center
Los Angeles, California 90067-6022
(Name and Address of Agent for Service)
<TABLE>
<CAPTION>
Title of Securities Being Registered
- ---------------- ---------------
<S> <C> <C>
Flexible Payment $
Deferred Annuity
Contracts
</TABLE>
It is proposed that this filing will become effective:
-- immediately upon filing pursuant to paragraph (b) of Rule 485
X on April 1, 1998 pursuant to paragraph (b) of Rule 485
-- 60 days after filing pursuant to paragraph (a) of Rule 485
-- on [date] pursuant to paragraph (a) of Rule 485
<PAGE> 2
VARIABLE ANNUITY ACCOUNT ONE
Cross Reference Sheet
PART A - PROSPECTUS
-------------------
<TABLE>
<CAPTION>
Item Number in Form N-4 Caption
- ----------------------- -------
<S> <C> <C>
1. Cover Page............................. Cover Page
2. Definitions............................ Definitions
3. Synopsis............................... Summary
4. Condensed Financial Information........ Condensed Financial
Information-Accumulation
Unit Values
5. General Description of Registrant, Depositor and
Portfolio Companies................... Description of the
Company and the
Separate Account; Anchor
Series Trust
6. Deductions............................. Contract Charges
7. General Description of
Variable Annuity Contracts............. Description of the
Contracts
8. Annuity Period......................... Annuity Period
9. Death Benefit.......................... Description of the
Contracts; Annuity Period
10. Purchases and Contract Value........... Purchases and Contract
Value
11. Redemptions............................ Purchases and Contract
Value
12. Taxes.................................. Taxes
13. Legal Proceedings...................... Legal Proceedings
14. Table of Contents of Statement
of Additional Information.............. Table of Contents of the
Statement of Additional
Information
</TABLE>
<PAGE> 3
PART B - STATEMENT OF ADDITIONAL INFORMATION
Certain information required in part B of the Registration Statement
has been included within the prospectus forming part of this Registration
Statement; the following cross-references suffixed with a "P" are made by
reference to the captions in the prospectus.
<TABLE>
<CAPTION>
Item Number in Form N-4 Caption
- ----------------------- -------
<S> <C> <C>
15. Cover Page............................. Cover Page
16. Table of Contents...................... Table of Contents
17. General Information and History........ Company
18. Services............................... Not Applicable
19. Purchase of Securities Being Offered... Purchases and Contract
Value(P)
20. Underwriters........................... Distributor
21. Calculation of Performance Data........ Performance Data
22. Annuity Payments....................... Annuity Payments
23. Financial Statements................... Financial Statements
</TABLE>
<PAGE> 4
- --------------------------------------------------------------------------------
FLEXIBLE PAYMENT VARIABLE ANNUITY
CONTRACTS
- --------------------------------------------------------------------------------
ISSUED BY
FIRST SUNAMERICA LIFE INSURANCE COMPANY
IN CONNECTION WITH
VARIABLE ANNUITY ACCOUNT ONE
CORPORATE OFFICE:
733 THIRD AVENUE, 4TH FLOOR
NEW YORK, NEW YORK 10017
<TABLE>
<S> <C>
CORRESPONDENCE ACCOMPANIED ALL OTHER CORRESPONDENCE,
BY PAYMENTS: ADMINISTRATIVE SERVICE CENTER:
P.O. BOX 100357 P.O. BOX 54299
PASADENA, CALIFORNIA 91189-0357 LOS ANGELES, CA 90054-0299
TELEPHONE NUMBER: (800) 99-NYSUN
</TABLE>
The Contracts offered by this Prospectus provide for accumulation of
Contract Values and payment of annuity benefits on a variable basis. The
Contracts are available for both Qualified and Nonqualified Plans. (See
"Taxes").
Purchase Payments under the Contracts may be allocated among the Divisions
of the Separate Account, and/or to the Fixed Account option funded through the
Company's General Account. Each of the eleven Divisions of the Separate Account
described in this Prospectus are invested solely in the shares of one of the
following currently available portfolios of Anchor Series Trust:
<TABLE>
<S> <C>
- - Foreign Securities Portfolio - Multi-Asset Portfolio
- - Capital Appreciation Portfolio - High Yield Portfolio
- - Growth Portfolio - Fixed Income Portfolio
- - Natural Resources Portfolio - Government and Quality Bond Portfolio
- - Growth and Income Portfolio - Money Market Portfolio
- - Strategic Multi-Asset Portfolio
</TABLE>
Additional Portfolios may be made available in the future.
The Fixed Account option pays a fixed rate of interest declared by the
Company for one year from the date amounts are allocated to it.
This Prospectus concisely sets forth the information a prospective investor
ought to know before investing. PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN
IT FOR YOUR FUTURE REFERENCE. Owners bear the complete investment risk for all
Purchase Payments allocated to the Separate Account.
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.
THE CONTRACTS OFFERED BY THIS PROSPECTUS INVOLVE RISK, INCLUDING LOSS OF
PRINCIPAL, AND ARE NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THE CONTRACTS OFFERED BY THIS PROSPECTUS ARE NOT AVAILABLE IN ALL STATES.
A Statement of Additional Information about the variable portion of the
Contracts has been filed with the Commission, as part of the Registration
Statement, and is available without charge upon written or oral request to the
Company at its Administrative Service Center at the address and telephone number
set forth above. The Statement of Additional Information is incorporated herein
by reference. The Table of Contents of the Statement of Additional Information,
dated April 1, 1998, appears on page 28 of this Prospectus.
This Prospectus is dated April 1, 1998.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
DEFINITIONS................................................. 2
SUMMARY..................................................... 4
FEE TABLES.................................................. 6
EXAMPLES.................................................... 7
EXPLANATION OF FEE TABLES AND EXAMPLES...................... 7
CONDENSED FINANCIAL INFORMATION -- ACCUMULATION UNIT
VALUES.................................................... 8
PERFORMANCE DATA............................................ 9
DESCRIPTION OF THE COMPANY AND THE SEPARATE ACCOUNT......... 9
Company................................................. 9
Separate Account........................................ 9
FINANCIAL STATEMENTS........................................ 10
ANCHOR SERIES TRUST......................................... 10
Equity Portfolios....................................... 10
Managed Portfolios...................................... 11
Fixed Income Portfolios................................. 11
Contract Owners in Target '98 Portfolio................. 11
Voting Rights........................................... 12
Substitution of Securities.............................. 12
CONTRACT CHARGES............................................ 12
Mortality and Expense Risk Charge....................... 12
Administrative Charges.................................. 12
Administrative Expense Charge......................... 12
Records Maintenance Charge............................ 13
Sales Charges........................................... 13
Withdrawal Charge..................................... 13
Annuity Charge........................................ 14
Deduction for Separate Account Income Taxes............. 14
Other Expenses.......................................... 14
Waiver or Reduction of Charges, Credit or Bonus
Guaranteed Interest Rates for Sales to Certain
Groups................................................. 14
DESCRIPTION OF THE CONTRACTS................................ 14
Transfer During Accumulation Period..................... 14
Automatic Dollar Cost Averaging Program................. 15
Modification of the Contract............................ 16
Assignment.............................................. 16
Death of Owner of Non-Qualified Contract................ 16
Death Benefit........................................... 17
Beneficiary............................................. 17
ANNUITY PERIOD.............................................. 17
Annuity Date............................................ 17
Allocation of Annuity Payments.......................... 18
Annuity Options......................................... 18
Other Options........................................... 19
Transfer During Annuity Period.......................... 19
Death Benefit During Annuity Period..................... 20
PURCHASES AND CONTRACT VALUE................................ 20
Minimum Purchase Payment................................ 20
Maximum Purchase Payment................................ 20
Allocation of Purchase Payments......................... 20
Accumulation Unit Value................................. 21
Distribution of Contracts............................... 21
Withdrawals (Redemptions)............................... 21
Systematic Withdrawal Program........................... 22
ERISA Plans............................................. 22
Minimum Contract Value.................................. 22
ADMINISTRATION.............................................. 23
TAXES....................................................... 23
General................................................. 23
Withholding Tax on Distributions........................ 24
Diversification......................................... 24
Multiple Contracts...................................... 25
Tax Treatment of Assignments............................ 25
Tax Treatment of Withdrawals -- Non-Qualified
Contracts.............................................. 25
Qualified Plans......................................... 25
Tax Treatment of Withdrawals -- Qualified Contracts..... 26
Tax Sheltered Annuities -- Withdrawal Limitations....... 27
Deferred Compensation Plans -- Section 457.............. 27
LEGAL PROCEEDINGS........................................... 27
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL
INFORMATION............................................... 28
</TABLE>
(i)
<PAGE> 6
- --------------------------------------------------------------------------------
DEFINITIONS
- --------------------------------------------------------------------------------
The following terms, as used in this Prospectus, have the indicated
meanings:
ACCUMULATION PERIOD -- The period between the Issue Date of the Contract and the
Annuity Date, the build-up phase of the Contract.
ACCUMULATION UNIT -- A unit of measurement which the Company uses to calculate
Contract Value during the Accumulation Period.
ADMINISTRATIVE SERVICE CENTER -- Its current address and phone number are: P.O.
Box 54299, Los Angeles, California 90054-0299, (800) 99-NYSUN. Correspondence
accompanying a payment should be directed to P.O. Box 100357, Pasadena,
California 91189-0357. The Company will notify Contract Owners of any change in
address or telephone number.
ANNUITANT(S) -- The person(s) designated on the application to receive or who
actually receive(s) annuity payments. Annuity payments involving life
contingencies depend on the continuation of an Annuitant's life.
ANNUITIZATION -- The process by which an Owner converts from the Accumulation
Period to the Annuity Period. Upon Annuitization, the Contract is converted from
the build-up phase to the phase during which the Annuitant(s) receive(s)
periodic annuity payments.
ANNUITY DATE -- The date on which annuity payments are to begin.
ANNUITY PERIOD -- The period starting on the Annuity Date.
ANNUITY UNIT -- A unit of measurement which the Company uses to calculate the
amount of Variable Annuity payments.
BENEFICIARY(IES) -- The person designated to receive any benefits under a
Contract upon the death of the Annuitant or the Owner. If the Owner dies during
the Accumulation Period, the Beneficiary will, unless the Owner has elected
otherwise, become the Owner of the Contract.
CODE -- The Internal Revenue Code of 1986, as amended.
COMPANY -- First SunAmerica Life Insurance Company, a New York corporation.
CONTRACT(S) -- The flexible payment variable annuity contracts offered by this
Prospectus.
CONTRACT OWNER(S) OR OWNER(S) -- The person(s) having the privileges of
ownership defined in the Contract. If an Owner dies during the Accumulation
Period, the Beneficiary will, unless the Owner has elected otherwise, become the
Owner of the Contract. Joint Owners have equal ownership interests in the
Contract unless the Company is advised otherwise in writing. Only spouses may be
Joint Owners.
CONTRACT VALUE -- The sum of the values of the Owner's interest in the General
Account and the Separate Account Divisions.
CONTRACT YEAR -- A year starting from the Issue Date in one calendar year and
ending on the Issue Date in the succeeding calendar year.
CONTRIBUTION YEAR -- With respect to a given Purchase Payment, a year starting
from the date of the Purchase Payment in one calendar year and ending on the day
before the anniversary of such date in the succeeding calendar years. The
Contribution Year in which a Purchase Payment is made is "Contribution Year 1";
subsequent Contribution Years are successively numbered beginning with
Contribution Year 2.
DIVISION OR SEPARATE ACCOUNT DIVISION -- A Division of the Separate Account
invested wholly in shares of one of the Portfolios of the Trust.
DUE PROOF OF DEATH -- (1) A certified copy of a 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 time of death; or (4) any other proof satisfactory to the
Company.
FIXED ANNUITY -- A series of payments that are fixed in amount and made during
the Annuity Period to a payee under a Contract.
GENERAL ACCOUNT -- The Company's general investment account which contains all
the assets of the Company, with the exception of the Separate Account and other
segregated asset accounts.
ISSUE DATE -- The date a Contract is issued.
2
<PAGE> 7
NON-QUALIFIED PLAN -- A retirement plan which does not receive favorable tax
treatment under Sections 401, 403(b), 408 or 457 of the Code.
PORTFOLIO -- One of the investment options available under the Contract in the
Trust.
PURCHASE PAYMENTS -- Amounts paid to the Company by a Contract Owner.
QUALIFIED PLAN -- A retirement plan which receives favorable tax treatment under
Sections 401, 403(b), 408 or 457 of the Code.
SEPARATE ACCOUNT OR ACCOUNT -- A segregated investment account of the Company
entitled "Variable Annuity Account One" established by the Company.
TRUST -- Anchor Series Trust.
VALUATION DATE -- Monday through Friday except for New Year's Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas Day.
VALUATION PERIOD -- The period commencing at 4:00 p.m. New York time on each
Valuation Date and ending at 4:00 p.m. New York time on the next succeeding
Valuation Date.
VARIABLE ANNUITY -- A series of payments made during the Annuity Period which
varies in amount in accordance with the investment experience of the Separate
Account Division(s).
WITHDRAWAL CHARGE -- The contingent deferred sales charge assessed against
certain withdrawals or annuitizations.
WITHDRAWAL VALUE -- Contract Value, less any premium tax payable if the Contract
is being annuitized, minus any applicable Withdrawal Charge.
3
<PAGE> 8
- --------------------------------------------------------------------------------
SUMMARY
- --------------------------------------------------------------------------------
This Prospectus describes the uses and objectives of the Contracts, their
costs, and the rights and privileges of the Owner. It also contains information
about the Company, the Separate Account and its Divisions, and the Portfolios in
which the Divisions invest. We urge you to read it carefully and retain it and
the Prospectus for the Trust for future reference. (The Prospectus for the Trust
is attached to and follows this Prospectus).
WHAT IS THE CONTRACT?
The Contract offered is a tax deferred annuity which provides fixed
benefits, variable benefits or a combination of both. Individuals wishing to
purchase a Contract must complete an application and provide an initial Purchase
Payment which will be sent to the Company at its Administrative Service Center
or in such other manner as deemed acceptable to the Company. The minimum and
maximum of Purchase Payments vary depending upon the type of Contract purchased.
(See "Minimum Purchase Payment").
WHAT IS THE DIFFERENCE BETWEEN A VARIABLE ANNUITY AND A FIXED ANNUITY?
The Contract has appropriate provisions relating to variable and fixed
accumulation values and variable and fixed annuity payments. A Variable Annuity
and a Fixed Annuity have certain similarities. Both provide that Purchase
Payments, less certain deductions, will be accumulated prior to the Annuity
Date. After the Annuity Date, annuity payments will be made to a designated
payee for the life of the Annuitant or a period certain or a combination
thereof. The Company assumes mortality and expense risks under the Contracts,
for which it receives certain compensation.
The most significant difference between a Variable Annuity and a Fixed
Annuity is that under a Variable Annuity, all investment risk before and after
the Annuity Date is assumed by the Owner or other payee; the amounts of the
annuity payments vary with the investment performance of the Divisions of the
Separate Account selected by the Owner. Under a Fixed Annuity, in contrast, the
investment risk after the Annuity Date is assumed by the Company and the amounts
of the annuity payments do not vary.
HOW MAY PURCHASE PAYMENTS BE ALLOCATED?
Purchase Payments for the Contracts may be allocated pursuant to
instructions in the application to one or more Divisions of the Separate
Account, and/or to the Company's General Account. The Separate Account invests
in shares of the following Portfolios (see "Anchor Series Trust"):
<TABLE>
<S> <C>
* FOREIGN SECURITIES * MULTI-ASSET
* CAPITAL APPRECIATION * HIGH-YIELD
* GROWTH * FIXED INCOME
* NATURAL RESOURCES * GOVERNMENT AND QUALITY BOND
* GROWTH AND INCOME * MONEY MARKET
* STRATEGIC MULTI-ASSET
</TABLE>
Purchase Payments allocated to the General Account will earn interest at the
current rate then being offered by the Company for a one year period beginning
on the date amounts are allocated to it.
Prior to the Annuity Date, transfers may be made among the Divisions and/or
the General Account. Fifteen transfers are permitted before a transfer fee will
be assessed. (See "Description of the Contracts -- Transfer During Accumulation
Period").
MAY WITHDRAWALS BE MADE BEFORE ANNUITIZATION?
Except as explained below, Contract Value may be withdrawn at any time
during the Accumulation Period. In addition to potential losses due to
investment risks, withdrawals may be reduced by a Withdrawal Charge, and a
penalty tax and income tax may apply. Contracts in connection with Qualified
Plans may be subject to additional withdrawal restrictions imposed by the plan.
Alternatively, there is a free withdrawal amount which applies to the first
withdrawal during a Contract Year after the first Contract Year. (See "Contract
Charges -- Sales Charges -- Withdrawal Charge"). Certain Owners of Nonqualified
Plan Contracts and Contracts issued in connection with Individual Retirement
Annuities ("IRAs") may choose to withdraw amounts which in the aggregate add up
to 10% of their Purchase Payments annually pursuant to a systematic withdrawal
program without charge. (See
4
<PAGE> 9
"Purchases and Contract Value -- Systematic Withdrawal Program"). Withdrawals
are taxable and a 10% federal tax penalty may apply to withdrawals before age
59 1/2.
Owners should consult their own tax counsel or other tax adviser regarding
any withdrawals or distributions.
CAN I EXAMINE THE CONTRACT?
The Contract Owner may return the Contract to the Company within 10 days
after it is received by delivering or mailing it to the Company's Administrative
Service Center. If the Contract is returned to the Company, it will be
terminated and the Company will pay the Owner an amount equal to the Contract
Value represented by the Contract on the date it is received by the Company.
WHAT ARE THE CHARGES AND DEDUCTIONS UNDER A CONTRACT?
A mortality and expense risk charge is assessed daily against the assets of
each Division at an annual rate of 1.25%. An administrative expense charge is
assessed daily against the assets of each Division at an annual rate of 0.15%.
The Contracts also provide for certain deductions and charges, including a
Records Maintenance Charge of $30 annually, which is guaranteed not to increase.
The Contract permits up to 15 free transfers each Contract Year, after which
point a $25 transfer fee is applicable to each subsequent transfer.
Additionally, a Withdrawal Charge may be assessed against the Contract Value
during the first five Contribution Years (5%-4%-3%-2%-1%) when a withdrawal is
made. (See "Contract Charges").
DOES THE CONTRACT PAY ANY DEATH BENEFITS?
A Death Benefit is provided in the event of the death of the Owner during
the Accumulation Period. The Death Benefit is equal to the greater of: (1) the
Contract Value upon receipt of Due Proof of Death; or (2) the total of Purchase
Payments made prior to the death of the Owner, minus any partial withdrawals
and/or partial annuitizations and contract charges; or (3) after the fifth
Contract Year, the Contract Value at the last anniversary of the Issue Date of
the Contract minus any partial withdrawals and/or partial annuitizations since
that anniversary. (See "Description of the Contracts -- Death Benefit").
WHAT ARE THE AVAILABLE ANNUITY OPTIONS UNDER THE CONTRACT?
There are three available annuity options under the Contract. They include
an annuity for life, a joint and survivor annuity, and monthly payments for a
specified number of years. If a Contract Owner does not elect otherwise, monthly
annuity payments generally will be made under the first option to provide a life
annuity with 120 monthly payments certain. (See "Annuity Period -- Annuity
Options").
DOES THE OWNER HAVE ANY VOTING RIGHTS UNDER THE CONTRACT?
Owners will have the right to vote on matters affecting the Portfolios to
the extent that proxies are solicited by the Trust. If the Owner does not vote,
the Company will vote such interests in the same proportion as it votes shares
for which it has received instructions. (See "Anchor Series Trust -- Voting
Rights").
5
<PAGE> 10
- --------------------------------------------------------------------------------
FEE TABLES
- --------------------------------------------------------------------------------
OWNER TRANSACTION EXPENSES
WITHDRAWAL CHARGE (AS A PERCENTAGE OF PURCHASE PAYMENTS):
<TABLE>
<CAPTION>
CONTRIBUTION YEAR
<S> <C>
One....................................................................................... 5%
Two....................................................................................... 4%
Three..................................................................................... 3%
Four...................................................................................... 2%
Five...................................................................................... 1%
Six and later............................................................................. 0%
ANNUAL RECORDS MAINTENANCE CHARGE............................................................... $30
TRANSFER FEE.................................................................................... $25
(applies solely to transfers in excess of fifteen in a Contract Year)
</TABLE>
- ---------------
The Owner Transaction Expenses apply to the Contract Value allocated to the
General Account, as well as the Separate Account.
- --------------------------------------------------------------------------------
ANNUAL SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF DAILY NET ASSET VALUE)
<TABLE>
<S> <C>
MORTALITY RISK CHARGE.......................................................................... 0.90%
EXPENSE RISK CHARGE............................................................................ 0.35%
ADMINISTRATION EXPENSE CHARGE.................................................................. 0.15%
------
TOTAL EXPENSE CHARGE..................................................................... 1.40%
======
</TABLE>
- ---------------
ANNUAL TRUST EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE FISCAL YEAR ENDED DECEMBER 31,
1997):
<TABLE>
<CAPTION>
TOTAL ANNUAL
MANAGEMENT FEE OTHER EXPENSES EXPENSES
-------------- -------------- ------------
<S> <C> <C> <C>
Foreign Securities............................................... .90% .48% 1.38%
Capital Appreciation............................................. .65% .06% .71%
Growth........................................................... .72% .06% .78%
Natural Resources................................................ .75% .14% .89%
Growth and Income................................................ .70% .12% .82%
Strategic Multi-Asset............................................ 1.00% .41% 1.41%
Multi-Asset...................................................... 1.00% .08% 1.08%
High Yield....................................................... .70% .18% .88%
Target '98....................................................... .63% .37% 1.00%
Fixed Income..................................................... .63% .28% .91%
Government & Quality Bond........................................ .62% .09% .71%
Money Market..................................................... .50% .08% .58%
</TABLE>
6
<PAGE> 11
- --------------------------------------------------------------------------------
EXAMPLES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPARATE CONDITIONS
ACCOUNT A Contract Owner would pay the following expenses on a TIME PERIODS
DIVISION $1,000 investment assuming 5% annual return on assets: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOREIGN (a) upon surrender at the end of the stated time period. (a) $ 79 $ 116 $ 160 $319
SECURITIES (b) if the Contract WAS NOT surrendered. (b) 29 89 151 319
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL SAME (a) 72 96 127 252
APPRECIATION (b) 22 69 118 252
- ---------------------------------------------------------------------------------------------------------------------------
GROWTH SAME (a) 73 98 130 260
(b) 23 71 121 260
- ---------------------------------------------------------------------------------------------------------------------------
NATURAL SAME (a) 74 101 136 271
RESOURCES (b) 24 74 127 271
- ---------------------------------------------------------------------------------------------------------------------------
GROWTH AND SAME (a) 73 99 132 264
INCOME (b) 23 72 123 264
- ---------------------------------------------------------------------------------------------------------------------------
STRATEGIC SAME (a) 79 117 161 322
MULTI-ASSET (b) 29 90 152 322
- ---------------------------------------------------------------------------------------------------------------------------
MULTI-ASSET SAME (a) 76 107 145 290
(b) 26 80 136 290
- ---------------------------------------------------------------------------------------------------------------------------
HIGH YIELD SAME (a) 74 101 135 270
(b) 24 74 126 270
- ---------------------------------------------------------------------------------------------------------------------------
TARGET '98 SAME (a) 75 104 141 282
(b) 25 77 132 282
- ---------------------------------------------------------------------------------------------------------------------------
FIXED SAME (a) 74 102 137 273
INCOME (b) 24 75 128 273
- ---------------------------------------------------------------------------------------------------------------------------
GOV'T & SAME (a) 72 96 127 252
QUALITY BOND (b) 22 69 118 252
- ---------------------------------------------------------------------------------------------------------------------------
MONEY MARKET SAME (a) 71 92 120 239
(b) 21 65 111 239
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
EXPLANATION OF FEE TABLES
AND EXAMPLES
- --------------------------------------------------------------------------------
1. The purpose of the foregoing tables and examples is to assist the Contract
Owner in understanding the various costs and expenses that he or she will
bear directly or indirectly. The table reflects expenses of the Separate
Account as well as the Trust. For additional information see "Contract
Charges" of this Prospectus and "Management of the Trust" of the Prospectus
for the Trust. The examples do not illustrate the tax consequences of
surrendering a Contract.
2. The examples assume that there were no transactions which would result in
the imposition of the Transfer Fee. The Contracts are sold only in the State
of New York, which does not assess premium taxes. Accordingly, premium taxes
are not reflected.
3. For purposes of the amounts reported in the examples, the Records
Maintenance Charge is reflected by dividing the total amount of Records
Maintenance Charges anticipated to be collected during the year by the total
net assets of the Separate Account's Divisions and the related Fixed Account
assets.
4. NEITHER THE FEE TABLES NOR THE EXAMPLES ARE REPRESENTATIONS OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
7
<PAGE> 12
- --------------------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
9/23/91 FISCAL FISCAL FISCAL FISCAL FISCAL FISCAL
(INCEPTION) YEAR YEAR YEAR YEAR YEAR YEAR
TO ENDED ENDED ENDED ENDED ENDED ENDED
SEPARATE ACCOUNT DIVISION 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- -------------------------- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Foreign Securities
Beginning AUV........... $ 11.66 $11.26 $ 9.64 $12.39 $11.83 $13.13 $14.43
End AUV................. $ 11.26 $ 9.64 $12.39 $11.83 $13.13 $14.43 $14.08
End # AU's.............. 6,197 32,027 110,045 165,468 130,525 81,476 49,753
Capital Appreciation
Beginning AUV........... $ 13.71 $15.36 $19.09 $22.79 $21.62 $28.68 $35.39
End AUV................. $ 15.36 $19.09 $22.79 $21.62 $28.68 $35.39 $43.78
End # AU's.............. 244 27,092 111,129 167,384 131,688 106,421 82,226
Growth
Beginning AUV........... $ 23.45 $23.36 $27.40 $29.12 $27.36 $34.08 $42.03
End AUV................. $ 26.36 $27.40 $29.12 $27.36 $34.08 $42.03 $54.05
End # AU's.............. 4,483 108,874 179,035 170,859 146,484 97,902 63,077
Natural Resources
Beginning AUV........... $ 11.51 $11.13 $11.25 $15.11 $15.05 $17.43 $19.61
End AUV................. $ 11.13 $11.25 $15.11 $15.05 $17.43 $19.61 $17.68
End # AU's.............. 451 8,283 20,215 43,075 23,005 21,096 11,485
Growth and Income
Beginning AUV........... $ 12.66 $13.12 $15.55 $18.70 $16.67 $19.16 $22.69
End AUV................. $ 13.12 $15.55 $18.70 $16.67 $19.16 $22.69 $28.81
End # AU's.............. 1,911 19,305 58,427 69,818 59,120 49,540 33,513
Strategic Multi-Asset
Beginning AUV........... $ 12.65 $13.55 $13.88 $15.78 $15.16 $18.35 $20.78
End AUV................. $ 13.55 $13.88 $15.78 $15.16 $18.35 $20.78 $23.43
End # AU's.............. 545 11,556 32,409 77,616 55,855 34,452 20,329
Multi-Asset
Beginning AUV........... $ 13.78 $14.98 $15.97 $16.90 $16.39 $20.19 $22.67
End AUV................. $ 14.98 $15.97 $16.90 $16.39 $20.19 $22.67 $27.09
End # AU's.............. 8,409 141,059 310,679 287,625 241,450 171,566 118,421
High Yield
Beginning AUV........... $ 13.75 $14.44 $16.24 $19.07 $17.96 $21.03 $23.17
End AUV................. $ 14.44 $16.24 $19.07 $17.96 $21.03 $23.17 $25.42
End # AU's.............. 1,395 34,946 63,091 80,486 64,930 42,707 24,819
Target '98
Beginning AUV........... $ 13.80 $15.11 $15.97 $17.52 $16.57 $18.72 $19.15
End AUV................. $ 15.11 $15.97 $17.52 $16.57 $18.72 $19.15 $19.86
End # AU's.............. 4,195 23,426 51,836 61,733 61,464 30,036 16,834
Fixed Income
Beginning AUV........... $ 19.00 $20.31 $21.34 $22.71 $21.67 $25.46 $25.73
End AUV................. $ 20.31 $21.34 $22.71 $21.67 $25.46 $25.73 $27.76
End # AU's.............. 1,266 40,684 66,362 56,430 36,124 16,119 7,626
Government &
Quality Bond
Beginning AUV........... $ 19.61 $21.00 $22.13 $23.63 $22.60 $26.60 $26.99
End AUV................. $ 21.00 $22.13 $23.63 $22.60 $26.60 $26.99 $29.16
End # AU's.............. 3,572 177,925 217,255 176,490 148,101 90,313 53,619
Money Market
Beginning AUV........... $ 15.06 $15.23 $15.53 $15.72 $16.10 $16.77 $17.36
End AUV................. $ 15.23 $15.53 $15.72 $16.10 $16.77 $17.36 $18.00
End # AU's.............. 48 91,048 82,889 15,560 29,241 12,090 5,430
</TABLE>
AUV -- Accumulation Unit Value.
AU -- Accumulation Units.
8
<PAGE> 13
- --------------------------------------------------------------------------------
PERFORMANCE DATA
- --------------------------------------------------------------------------------
From time to time the Separate Account may advertise its Money Market
Division's "yield" and "effective yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of the Money Market Division refers to the net income generated for a
Contract funded by an investment in the Division over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in the Division is assumed
to be reinvested at the end of each seven-day period. The "effective yield" will
be slightly higher than the "yield" because of the compounding effect of this
assumed reinvestment. Neither the yield nor the effective yield takes into
consideration the effect of any capital changes that might have occurred during
the seven-day period, nor do they reflect the impact of premium taxes or any
Annuity Charges or Withdrawal Charges. The impact of other, recurring charges on
both yield figures is, however, reflected in them to the same extent it would
affect the yield (or effective yield) for a Contract of average size.
In addition, the Separate Account may advertise "total return" data for its
other Divisions. Like the yield figures described above, total return figures
are based on historical data and are not intended to indicate future
performance. The "total return" is a computed rate of return that, when
compounded annually over a stated period of time and applied to a hypothetical
initial investment in a Division made at the beginning of the period, will
produce the same Contract Value at the end of the period that the hypothetical
investment would have produced over the same period (assuming a complete
redemption of the Contract at the end of the period). Recurring Contract charges
are reflected in the total return figures in the same manner as they are
reflected in the yield data for Contracts funded through the Money Market
Division. The effect of applicable Withdrawal Charges due to the assumed
redemption will be reflected in the return figures, but may be omitted in
additional return figures given for comparison.
For a more complete description of Contract charges, see "Contract
Charges"; for a more detailed description of the performance data computations,
please refer to the Statement of Additional Information.
- --------------------------------------------------------------------------------
DESCRIPTION OF THE COMPANY AND THE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
COMPANY
The Company is a stock life insurance company organized under the laws of
the state of New York on December 5, 1978. Its legal domicile is 733 Third
Avenue, New York, New York 10017. The Company is an indirect, wholly owned
subsidiary of SunAmerica Inc., a Maryland corporation.
The Company and its affiliates, SunAmerica Life Insurance Company, Anchor
National Life Insurance Company, CalAmerica Life Insurance Company, SunAmerica
National Life Insurance Company, SunAmerica Asset Management Corp., Imperial
Premium Finance, Inc., Resources Trust Company and four broker-dealers,
specialize in retirement savings and investment products and services, including
fixed and variable annuities, mutual funds, premium finance, broker-dealer and
trust administration services. The Company is admitted to conduct life insurance
and annuity business in the state of New York, New Mexico and Nebraska.
The Company may from time to time publish in advertisements, sales
literature and reports to Owners, the ratings and other information assigned to
it by A.M. Best Company ("A.M. Best"). A.M. Best's ratings reflect its current
opinion on the relative financial strength and operating performance of an
insurance company in comparison to the norms of the life/health insurance
industry. Its ratings do not apply to the Separate Account. However, the
contractual obligations under the Contracts are general corporate obligations of
the Company.
The Contracts offered by this Prospectus are issued by the Company and will
be funded in the Separate Account, as well as in the Company's General Account.
SEPARATE ACCOUNT
The Separate Account was established pursuant to New York insurance law on
May 30, 1990. The Separate Account is registered with the Securities and
Exchange Commission as a unit investment trust under the Investment
9
<PAGE> 14
Company Act of 1940. This registration does not involve supervision of the
management of the Separate Account or the Company by the Securities and Exchange
Commission.
The assets of the Separate Account are the property of the Company.
However, the assets of the Separate Account, equal to the reserves and other
contract liabilities of the Separate Account, are not chargeable with
liabilities arising out of any other business the Company may conduct. The
Company's obligations arising under the Contracts are general corporate
obligations of the Company.
Income, gains and losses, whether or not realized, from assets allocated to
the Separate Account are credited to or charged against the Separate Account
without regard to other income, gains or losses of the Company.
The Separate Account is divided into Divisions, with the assets of each
Division invested in the shares of one of the eleven Portfolios of the Trust.
The Company does not guarantee the investment performance of the Separate
Account or its Divisions. Values allocated to the Separate Account and the
amount of variable annuity payments will vary with the value of shares of the
Portfolios and the Contract charges.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Financial statements of the Separate Account appear in the Statement of
Additional Information. Financial information regarding the General Account is
reported in the Company's financial statements. The Company's financial
statements are also included in the Statement of Additional Information. A copy
of the Statement of Additional Information may be obtained by contacting the
Company, c/o of its Administrative Service Center.
- --------------------------------------------------------------------------------
ANCHOR SERIES TRUST
- --------------------------------------------------------------------------------
Each of the eleven Divisions of the Separate Account invests solely in the
shares of one of the eleven Portfolios of the Trust. The Trust is an open-end
diversified management investment company registered under the Investment
Company Act of 1940. While a brief summary of the investment objectives is set
forth below, more comprehensive information, including a discussion of potential
risks, is found in the Prospectus for the Trust. Additional copies of this
Prospectus, the Trust's Prospectus and the Statement of Additional Information
can be obtained by calling the Administrative Service Center number on the cover
page of this Prospectus. Both prospectuses should be read carefully before
investing to understand all aspects of the Contract, the Separate Account and
the Portfolios. SunAmerica Asset Management Corp. ("SAAM"), an affiliate of the
Company, is the investment manager for the Trust. Wellington Management Company,
LLP ("WMC"), which is not affiliated with the Company, serves as sub-adviser for
the Trust. (See the Trust Prospectus for information concerning the investment
management fees.)
The eleven Portfolios and their investment objectives are:
EQUITY PORTFOLIOS
FOREIGN SECURITIES PORTFOLIO seeks long-term capital appreciation. This
Portfolio will invest primarily in a diversified group of equity securities
issued by foreign companies and primarily denominated in foreign currencies.
CAPITAL APPRECIATION PORTFOLIO seeks long-term capital appreciation. This
Portfolio will invest in growth equity securities which are widely diversified
by industry and company and may engage in transactions involving stock index
futures and options thereon as a hedge against changes in market conditions.
GROWTH PORTFOLIO seeks capital appreciation through investments in growth
equity securities. This Portfolio may engage in transactions involving stock
index futures and options thereon as a hedge against changes in market
conditions.
NATURAL RESOURCES PORTFOLIO seeks a total return in excess of the U.S. rate
of inflation as represented by the Consumer Price Index. This Portfolio will
invest primarily in equity securities of U.S. or foreign companies which are
expected to provide favorable returns in periods of rising inflation.
GROWTH AND INCOME PORTFOLIO seeks high current income and long-term capital
appreciation. This Portfolio will invest primarily in securities that provide
the potential for growth and offer income, such as dividend-paying
10
<PAGE> 15
stocks and securities convertible into common stock. This Portfolio may also
engage in transactions involving stock index futures and options thereon as a
hedge against changes in market conditions.
MANAGED PORTFOLIOS
STRATEGIC MULTI-ASSET PORTFOLIO seeks high long-term total investment
return. This Portfolio will invest in a diversified group of securities of the
following types: growth equity and aggressive growth equity securities,
including the securities of smaller companies which may be newer and less
seasoned, investment grade and high-yield, high-risk bonds, international
securities and money market instruments. The Portfolio may also engage in
transactions involving stock index futures contracts and options thereon, and
Financial Futures Contracts and options thereon, as a hedge against changes in
market conditions.
MULTI-ASSET PORTFOLIO seeks long-term total investment return consistent
with moderate investment risk. This Portfolio will invest in a diversified group
of securities, including: growth equity securities, convertible securities,
investment grade fixed income securities and money market securities. The
Portfolio also may engage in transactions involving stock index futures
contracts and options thereon, and Financial Futures Contracts and options
thereon, as a hedge against changes in market conditions.
FIXED INCOME PORTFOLIOS
HIGH YIELD PORTFOLIO seeks high current income. A secondary investment
objective is capital appreciation. This Portfolio will seek its objectives by
investing, except for temporary defensive purposes, at least 65% of its assets
in high-yielding, high-risk, income-producing corporate bonds, which generally
carry ratings lower than those assigned to investment grade bonds by Moody's
Investor's Service, Inc. ("Moody's") or Standard & Poor's Corporation ("Standard
& Poor's"), or which are unrated. This Portfolio may also engage in transactions
involving Financial Futures Contracts and options thereon as a hedge against
changes in market conditions. High-yield, high-risk bonds typically are subject
to greater risks than are investments in lower-yielding, higher-rated bonds. See
the Trust's Prospectus for more information.
FIXED INCOME PORTFOLIO seeks high level of current income consistent with
preservation of capital. This Portfolio will invest primarily in investment
grade, fixed income securities and may engage in Financial Futures Contracts and
options thereon as a hedge against changes in market conditions.
GOVERNMENT AND QUALITY BOND PORTFOLIO seeks relatively high current income,
liquidity and security of principal. This Portfolio will invest in obligations
issued, guaranteed or insured by the U.S. Government, its agencies or
instrumentalities and in corporate debt securities rated Aa or better by Moody's
or AA or better by Standard & Poor's.
MONEY MARKET PORTFOLIO seeks current income consistent with stability of
principal through investment in a diversified portfolio of money market
instruments maturing in 397 days or less. The Portfolio will maintain a dollar-
weighted average portfolio maturity of not more than 90 days.
There is no assurance that the investment objective of any of the
Portfolios will be met. Contract Owners bear the complete investment risk for
Purchase Payments allocated to a Division. Contract Values will fluctuate in
accordance with the investment performance of the Division(s) to which Purchase
Payments are allocated, and in accordance with the imposition of the fees and
charges assessed under the Contracts.
Shares of the Trust are, and will be, issued and redeemed only in
connection with investments in and payments under variable contracts sold by the
Company and its affiliate, Anchor National Life Insurance Company as well as two
unaffiliated companies, Presidential Life Insurance Company and Phoenix Mutual
Life Insurance Company. No disadvantage to Contract Owners is seen to arise from
the fact that the Trust offers its shares in this fashion.
Additional Portfolios may be established by the Trust from time to time and
may be made available to Contract Owners. However, there is no assurance that
this will occur.
CONTRACT OWNERS IN TARGET '98 PORTFOLIO
As of January 1, 1998, no Purchase Payments or transfers into the Target
'98 Division are being accepted. Purchase Payments may be allocated among the
other eleven Divisions of the Separate Account and/or Fixed Account option.
11
<PAGE> 16
Contract Owners currently in the Target '98 Division must provide the
Company with reallocation instructions before November 15, 1998. If the Company
does not receive reallocation instructions before November 15, 1998, Contract
Values will be automatically reallocated to the Money Market Division.
Reallocations of Contract Values from the Target '98 Division will not be
considered "transfers" for purposes of determining any applicable transfer fees.
Other transfers out of the Target '98 Division will not be permitted after
October 15, 1998. None of the foregoing constraints affect a Contract Owner's
right to redeem his or her Contract Value at any time (See "Purchases and
Contract Value -- Withdrawals (Redemption)").
VOTING RIGHTS
In accordance with its view of present applicable law, the Company will
vote the shares of the Trust held in the Separate Account at special meetings of
the shareholders of the Trust in accordance with instructions received from
persons having the voting interest in the Separate Account. The Company will
vote shares for which it has not received instructions in the same proportion as
it votes shares for which it has received instructions. The Trust does not hold
regular meetings of shareholders.
The number of shares which a person has a right to vote will be determined
as of a date to be chosen by the Company not more than 60 days prior to the
meeting of the Trust's shareholders. Voting instructions will be solicited by
written communication at least 14 days prior to such meeting. The person having
such voting rights will be the Contract Owner before the Annuity Date or the
death of the Annuitant; thereafter the payee entitled to receive payments under
the Contract. Voting rights attributable to a Contract will generally decrease
as Contract Values decrease.
SUBSTITUTION OF SECURITIES
If the shares of any of the Portfolios should no longer be available for
investment by the Separate Account or if, in the judgment of the Company's Board
of Directors, further investment in the shares of a Portfolio is no longer
appropriate in view of the purpose of the Contract, the Company may substitute
shares of another open-end management investment company (or series thereof) for
Portfolio shares already purchased or to be purchased in the future by Purchase
Payments under the Contract. No substitution of securities may take place
without prior approval of the Securities and Exchange Commission and under such
requirements as it may impose.
- --------------------------------------------------------------------------------
CONTRACT CHARGES
- --------------------------------------------------------------------------------
MORTALITY AND EXPENSE RISK CHARGE
The Company deducts a risk charge from each Division of the Separate
Account during each Valuation Period. The risk charge is equal, on an annual
basis, to 1.25% of the daily net asset value of each Division (approximately
.90% is for mortality risks and approximately .35% is for expense risks). The
mortality risks assumed by the Company arise from its contractual obligations to
make annuity payments after the Annuity Date for the life of the Annuitant(s),
to waive the Withdrawal Charge in the event of the death of the Annuitant, and
to provide the death benefit prior to the Annuity Date. 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 Records Maintenance Charge and
the Administrative Expense Charge. (See "Administrative Charges"). This charge
is guaranteed by the Company and cannot be increased.
ADMINISTRATIVE CHARGES
ADMINISTRATIVE EXPENSE CHARGE
The Company deducts an Administrative Expense Charge from each Division of
the Separate Account which is equal, on an annual basis, to .15% of the daily
net asset value of each Division. This charge is designed to cover those
administrative expenses which exceed the revenues from the Records Maintenance
Charge. The Company does not intend to profit from this charge. The Company
believes that the Administrative Expense Charge has been set at a level that
will recover no more than the actual costs associated with administering the
Contract. In the event that it exceeds the amount necessary to reimburse the
Company for its administrative expenses, the charge will be
12
<PAGE> 17
appropriately reduced. In no event will this charge be increased. The
Administrative Expense Charge is assessed during both the Accumulation Period
and the Annuity Period.
RECORDS MAINTENANCE CHARGE
An annual Records Maintenance Charge of $30 is charged against each
Contract. The amount of this charge is guaranteed and cannot be increased by the
Company. This charge reimburses the Company for expenses incurred in
establishing and maintaining records relating to a Contract. The Records
Maintenance Charge will be assessed each Contract Year on the anniversary of the
Issue Date of the Contract. In the event that a total surrender of Contract
Value is made, the Charge will be assessed as of the date of surrender without
proration.
SALES CHARGES
The Withdrawal Charge and the Annuity Charge are sales charges.
WITHDRAWAL CHARGE
Effective January 1, 1989, federal tax law limits withdrawals from annuity
contracts issued in connection with 403(b) Qualified Plans. Subject to those
limitations, the Contract Value may be withdrawn at any time during the
Accumulation Period. Contract Owners should consult their own tax counsel or
other tax adviser regarding any withdrawals. (See "Taxes -- Tax Treatment of
Withdrawals -- Non-Qualified Contracts" and "Taxes -- Tax Treatment of
Withdrawals -- Qualified Contracts").
There is a Free Withdrawal Amount which applies to the first withdrawal
during a Contract Year after the first Contract Year. The Free Withdrawal Amount
is equal to 10% of the aggregate Purchase Payments less prior withdrawals.
Alternatively, certain Owners of Non-Qualified Contracts and Contracts issued in
connection with IRAs may choose to withdraw amounts which in the aggregate add
up to 10% of their initial Purchase Payments annually pursuant to the Systematic
Withdrawal Program without charge. To participate in the Systematic Withdrawal
Program, Owners must complete an enrollment form which describes the program and
send it to the Company, c/o its Administrative Service Center. Depending on
fluctuations in the net asset value of the Separate Account's Divisions,
systematic withdrawals may reduce or even exhaust Contract Value. (See
"Purchases and Contract Value -- Systematic Withdrawal Program").
A contingent deferred sales charge, which is referred to as the Withdrawal
Charge, may be imposed upon other withdrawals. Withdrawal Charges will vary in
amount depending upon the Contribution Year in which the Purchase Payment being
withdrawn was made, and will be calculated based on the Withdrawal Charge Table,
below, and the amount of Purchase Payment withdrawn which is still subject to
the Withdrawal Charge and not previously withdrawn. The Withdrawal Charge is
deducted from remaining Contract Value so that the actual reduction in Contract
Value as a result of the withdrawal will be greater than the withdrawal amount
requested and paid. Free withdrawals and other withdrawals will be allocated to
Purchase Payments on a first-in-first-out basis so that all withdrawals are
allocated to Purchase Payments to which the lowest Withdrawal Charge, if any,
applies.
WITHDRAWAL CHARGE TABLE
<TABLE>
<CAPTION>
APPLICABLE WITHDRAWAL
CONTRIBUTION YEAR CHARGE PERCENTAGE
----------------- ---------------------
<S> <C>
First....................................................... 5%
Second...................................................... 4%
Third....................................................... 3%
Fourth...................................................... 2%
Fifth....................................................... 1%
Sixth and later............................................. 0%
</TABLE>
Where legally permitted, the Withdrawal Charge will be eliminated when a
Contract is issued to an officer, director or employee of the Company or its
affiliates, or an immediate family member of such person. In addition, the
Withdrawal Charge may be waived by the Company on withdrawals where the amount
withdrawn is used to purchase another annuity contract issued by the Company.
Additional information regarding the elimination or waiver of the Withdrawal
Charge may be obtained by contacting the Company.
13
<PAGE> 18
The amounts obtained from the Withdrawal Charge will be used to pay sales
commissions and other promotional or distribution expenses associated with the
marketing of the Contracts. To the extent that the Withdrawal Charge is
insufficient to cover all sales commissions and other promotional or
distribution expenses, the Company may use any of its corporate assets,
including potential profit which may arise from the Mortality and Expense Risk
Charge (See "Contract Charges -- Mortality and Expense Risk Charge"), to make up
any difference.
ANNUITY CHARGE
If a Contract Owner elects to have annuity payments made under annuity
option 1, Life Income with Installments Guaranteed or annuity option 2, Joint
and Survivor Annuity (See "Annuity Period -- Annuity Options"), no Annuity
Charge applies and 100% of Contract Value is applied.
If a Contract Owner elects annuity option 3, Income for a Specified Period,
and if Purchase Payments were made in the Contract Year in which annuity
payments are to begin or any of the four preceding Contract Years, an Annuity
Charge may apply. This Annuity Charge equals the Withdrawal Charge that would
apply if the Contract were being surrendered. Further, no Annuity Charge will be
assessed if annuity option 3 is elected by a Beneficiary under the Death
Benefit.
The Annuity Charge also applies to certain annuitizations of Contract
Values allocated to the General Account.
DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES
While the Company is not currently maintaining a provision for taxes, the
Company has reserved the right to establish such a provision for taxes in the
future if it determines in its sole discretion, that it will incur a tax as a
result of the operation of the Separate Account. The Company will deduct for any
taxes incurred by it as a result of the operation of the Separate Account
whether or not there was a provision for taxes and whether or not it was
sufficient. (See "Taxes").
OTHER EXPENSES
There are other deductions from and expenses paid out of the assets of the
Trust which are described in the accompanying Trust Prospectus.
WAIVER OR REDUCTION OF CHARGES, CREDITS OR BONUS GUARANTEED INTEREST RATES FOR
SALES TO CERTAIN GROUPS
The Company may reduce or waive some of the charges, credit additional
amounts or grant bonus guarantee interest rates on individual Contracts sold to
certain groups of individuals, or to a trustee, employer or other entity
representing a group, where it is expected that such sales will result in
savings of sales or administrative expenses. The Company determines the
eligibility of groups for such reduced charges, and the amount of such
reductions for particular groups, by considering the following factors: (1) the
size of the group; (2) the total amount of Purchase Payments expected to be
received from the group; (3) the nature of the group for which the Contracts are
purchased, and the persistency expected in that group; (4) the purpose for which
the Contracts are purchased and whether that purpose makes it likely that
expenses will be reduced; and (5) any other circumstances which the Company
believes to be relevant to determining whether reduced sales or administrative
expenses may be expected. None of the reductions in charges for group sales are
contractually guaranteed. In addition, the Company may waive or reduce the
Records Maintenance Charge or Administrative Expense Charge, credit additional
amounts or grant bonus guaranteed interest rates in connection with contracts
sold to officers, directors and employees of the Company or its affiliates,
registered representatives, and employees of broker/dealers with a current
selling agreement with the company or its Affiliates, ("Eligible Individuals")
and certain family members of Eligible Individuals. Such reductions, waivers or
interest crediting arrangements may be withdrawn or modified by the Company on a
uniform basis. The Company's reductions in charges for group sales will not be
unfairly discriminatory to the interests of any Contract Owners. Commissions may
be waived or reduced with respect to contracts established for the personal
accounts of Eligible Individuals.
- --------------------------------------------------------------------------------
DESCRIPTION OF THE CONTRACTS
- --------------------------------------------------------------------------------
TRANSFER DURING ACCUMULATION PERIOD
During the Accumulation Period, the Contract Owner, or his or her agent,
may transfer Contract Values among Divisions and/or the General Account, by
written request or by telephone authorization pursuant to a duly executed
14
<PAGE> 19
Telephone Transfer Authorization Form delivered to the Company at its
Administrative Service Center, if applicable law permits. The Company has in
place procedures which are designed to provide reasonable assurance that
telephone authorizations are genuine, including tape recording all telephone
communications and requesting identifying information. Accordingly, the Company
and its affiliates disclaim all liability for any claim, loss or expense
resulting from any alleged error or mistake in connection with a telephone
transfer which was not properly authorized by the Contract Owner. However, if
the Company fails to employ reasonable procedures to ensure that all telephone
transfers are properly authorized, the Company may be held liable for such
losses. The Company reserves the right to modify or discontinue at any time and
without notice the use of telephone transfers and acceptance of telephone
transfer instructions from someone other than the Contract Owner. Telephone
calls authorizing transfers must be completed by 4:00 p.m. Eastern time in order
to effect the transfer the day of receipt. All other transfers will be processed
on the next business day.
Transactions effecting transfer may not be made more than fifteen times in
any Contract Year without charge. A charge of $25 per transaction is assessed
against any transaction effecting transfer in excess of the fifteen permitted
without charge in any Contract Year or, if all or part of a Contract Owner's
interest in a Division is transferred to another Division, within 30 days of the
Issue Date. Transfers made under the Dollar Cost Averaging Program, described
below, are counted against this limitation in the same manner as other
transfers. The fee will be deducted from Contract Values which remain in the
Division from which the transfer was made. If the remaining Contract Value is
insufficient to pay the transfer fee, then the fee will be deducted from
transferred Contract Values. The transfer fee is at cost with no margin included
for profit. The transfer fee may be waived, under certain circumstances, in
connection with pre-approved transfer programs.
This transfer privilege may be suspended, modified or terminated at any
time without notice. (See "Taxes -- Diversification").
The minimum partial transfer amount is $500. No partial transfer may be
made if the value of the Contract Owner's interest in the Division from which a
transfer is being made would be less than $500 after the transfer. As with
initial Purchase Payments, at least $500 must be allocated to a Division before
another Division is selected. These dollar amounts are subject to change at the
Company's option. The Company may waive the minimum partial transfer amount in
connection with pre-authorized automatic transfer programs.
Any amounts allocated or transferred to the General Account may only be
transferred from the General Account once each Contract Year during the 30-day
period following the anniversary of such allocation or transfer. If a transfer
request is received prior to the anniversary of an allocation or transfer, then
the transfer will take effect on the next Valuation Date following the
anniversary if the anniversary is not a Valuation Date. If the Company receives
the transfer request within the 30 days following the anniversary of an
allocation or transfer to the General Account the transfer will be effective on
the next following Valuation Date. The foregoing limitations may be waived in
connection with pre-authorized automatic transfer programs.
AUTOMATIC DOLLAR COST AVERAGING PROGRAM
Contract Owners who wish to purchase units of the Separate Accounts over a
period of time may be able to do so through the Dollar Cost Averaging ("DCA")
Program. Under this DCA Program, a Contract Owner may authorize the automatic
transfer of a fixed dollar amount ($100 minimum) or percentage of his or her
choice at regular intervals from either the Money Market Portfolio, Government
and Quality Bond Portfolio or the General Account to one or more of the Separate
Accounts (other than the Money Market Portfolio or the Government and Quality
Bond Portfolio) at the unit values determined on the dates of the transfers. The
intervals between transfers from the Money Market Portfolio or Government and
Quality Bond Portfolio may be monthly, quarterly, semi-annually or annually, at
the option of the Contract Owner. Transfers from the General Account must be
made by percentage and at quarterly intervals only and are limited to 8% of the
value of the Contract Owner's interest in the General Account in any Contract
Year. The theory of dollar cost averaging is that greater numbers of units are
purchased at times when the unit prices are relatively low than are purchased
when the prices are higher. This has the effect of reducing the aggregate
average cost per unit to less than the average of the unit prices on the same
purchase dates. However, participation in the DCA Program does not assure the
Contract Owner of a greater profit, or any profit, from his or her purchases
under the DCA Program; nor will it prevent or necessarily alleviate losses in a
declining market.
Although the various options under the DCA Program will allow transfers to
be made either from the Money Market Portfolio, Government and Quality Bond
Portfolio or the General Account, a Contract Owner must elect to
15
<PAGE> 20
have the transfers made exclusively from one or the other of these three
sources. A Contract Owner may elect to increase, decrease or change the
frequency or amount of Purchase Payments under a DCA Program. The application
and any Purchase Payments should be sent to the Company, c/o its Administrative
Service Center for correspondence accompanied by payments. The Company reserves
the right to modify, suspend or terminate the DCA Program at any time.
A Contract Owner may not simultaneously participate in both the DCA Program
and the Systematic Withdrawal Program. Participation in the DCA Program will be
effective one week after the Company has received and approved the application
to participate in the DCA Program.
MODIFICATION OF THE CONTRACT
Only the Company's President or Secretary may approve a change or waive the
provisions of the Contract. Any change or waiver must be in writing. No agent
has the authority to change or waive the provisions of the Contract.
ASSIGNMENT
Contracts issued pursuant to Non-Qualified Plans that are not subject to
Title 1 of the Employee Retirement Income Security Act of 1974 ("ERISA") may be
assigned by the Owner at any time during the lifetime of the Annuitant prior to
the Annuity Date. The Company will not be bound by any assignment until written
notice is received by the Company, c/o its Administrative Service Center. The
Company is not responsible for the validity, tax or other legal consequences of
any assignment. An assignment will not affect any payments the Company may make
or actions it may take before it receives notice of the assignment.
If the Contract is issued pursuant to a Qualified Plan (or a Non-Qualified
Plan that is subject to Title 1 of ERISA), it may not be assigned, pledged or
otherwise transferred except under such conditions as may be allowed under
applicable law.
BECAUSE AN ASSIGNMENT MAY BE A TAXABLE EVENT, CONTRACT OWNERS SHOULD
CONSULT COMPETENT TAX ADVISERS SHOULD THEY WISH TO ASSIGN THEIR CONTRACTS.
DEATH OF OWNER OF NON-QUALIFIED CONTRACT
The following section applies only if the Contract is issued on a
Non-Qualified basis and if either of the two following conditions exists:
(A) The Owner and the Annuitant are the same individual and that
individual dies during the Accumulation Period; or
(B) The Owner and Annuitant are different persons and the Owner dies
during the Accumulation Period prior to the Annuitant's death.
If either of the above conditions occurs, the following provisions apply:
(1) If the Beneficiary is the spouse of the Owner, then the
Beneficiary may elect to become the Owner and maintain the Contract in full
force and effect. A spouse Beneficiary may alternatively choose to take a
lump sum distribution. (See below).
(2) If the Beneficiary is a natural person and not the spouse of the
Owner, the Beneficiary can elect to have the existing Contract Value paid
under one of the annuity options set forth in the Contract over a period
not extending beyond the life expectancy of the Beneficiary at the time of
the election, or such a Beneficiary can elect to take a lump sum
distribution. (See below). Payments under any annuity option selected must
begin not later than one year after the date of death of the Owner.
(3) If there is no Beneficiary or if the Beneficiary is not a natural
person, then the entire Contract Value must be paid out within five years
of the Owner's death.
The amount of a lump sum distribution is the greater of:
(1) the current Contract Value at the time of election; or
(2) the total amount of Purchase Payments made under the Contract less
the aggregate dollar amount of any partial withdrawals and any Withdrawal
Charges which were assessed at the time of withdrawal. Under this
alternative election, the lump sum must be paid to the Beneficiary within
five years of the Owner's death.
16
<PAGE> 21
If the Contract is issued pursuant to a Qualified Plan, similar provisions
will apply upon the death of the Contract Owner. Purchasers acquiring Contracts
pursuant to Qualified Plans should consult a qualified pension or tax adviser.
DEATH BENEFIT
If the Annuitant dies during the Accumulation Period, a Death Benefit will
be payable to the Beneficiary upon receipt by the Company of Due Proof of Death
of the Annuitant.
The Death Benefit is equal to the greater of:
(1) the Contract Value at the end of the Valuation Period during which
Due Proof of Death and an election of the type of payment to be made to the
Beneficiary is received by the Company, c/o its Administrative Service
Center; or
(2) the total amount of Purchase Payments minus the amount of partial
withdrawals and/or partial annuitizations and applicable contract charges;
or
(3) after the fifth Contract Year, the Contract Value at the last
anniversary of the Issue Date of the Contract minus the total amount of any
partial withdrawals and/or partial annuitizations made since that
anniversary.
Payment of the Death Benefit may be made in one lump sum or applied under
one of the annuity options.
BENEFICIARY
The Contract Owner may designate the Beneficiary(ies) to receive any amount
payable on death. However, where a Contract is jointly owned, each joint Owner
shall be a primary Beneficiary. The original Beneficiary(ies) will be named in
the application. Unless an irrevocable Beneficiary(ies) designation was
previously filed or unless the Contract is jointly owned, the Contract Owner may
change the Beneficiary(ies) prior to the Annuity Date by written request
delivered to the Company, c/o its Administrative Service Center, or by
completing a Change of Beneficiary Form provided by the Company. Any change will
take effect when recorded by the Company. The Company is not liable for any
payment made or action taken before it records the change.
- --------------------------------------------------------------------------------
ANNUITY PERIOD
- --------------------------------------------------------------------------------
ANNUITY DATE
The Contract Owner selects an Annuity Date (the date on which annuity
payments are to begin) at the time of application. The Annuity Date must always
be the first day of a calendar month and must be at least one month after the
Issue Date. Annuity payments will begin no later than the first day of the
calendar month following the Annuitant's 85th birthday. Where joint Annuitants
are named, the Annuity Date may not be later than the first of the month
following the 85th birthday of the youngest Annuitant. The Contract Owner may
change the Annuity Date at any time at least seven days prior to the Annuity
Date then indicated on the Company's records by written notice to the Company,
c/o its Administrative Service Center.
The actual dollar amount of variable annuity payments is dependent upon:
(1) the Contract Value at the time of annuitization; (2) the annuity table
specified in the Contract; (3) the annuity option selected; and (4) the
investment performance of the Divisions selected. In addition, if annuity option
3, Income for a Specified Period, is elected, an Annuity Charge may apply. (See
"Contract Charges -- Sales Charges" and "Contract Charges -- Annuity Charge").
The annuity tables contained in the Contract are based on a 5% assumed
investment rate. If the actual net investment rate exceeds 5%, payments will
increase. Conversely, if the actual rate is less than 5%, annuity payments will
decrease. If a higher assumed investment rate were used, the initial payment
would be higher, but the actual net investment rate would have to be higher in
order for annuity payments to increase.
The Annuitant receives the value of a fixed number of Annuity Units each
month. The value of a fixed number of Annuity Units will reflect the investment
performance of the Divisions elected, and the amount of each annuity payment
will vary accordingly.
17
<PAGE> 22
ALLOCATION OF ANNUITY PAYMENTS
If all of the Contract Value on the seventh calendar day before the Annuity
Date is allocated to the General Account, the Annuity will be paid as a fixed
annuity. If all of the Contract Value on that date is allocated to the Separate
Account, the Annuity will be paid as a Variable Annuity. If the Contract Value
on that date is allocated to both the General Account and the Separate Account,
the Annuity will be paid as a combination of a fixed annuity and a Variable
Annuity to reflect the allocation between the Accounts. Variable Annuity
payments will reflect the investment performance of the Separate Account
Divisions. The payee(s) may, by written notice to the Company, convert Variable
Annuity payments to fixed annuity Payments. However, fixed annuity Payments may
not be converted to Variable Annuity payments.
ANNUITY OPTIONS
The Contract Owner, or any Beneficiary who is so entitled, may elect to
receive a lump sum at the end of the Accumulation Period. However, a lump sum
distribution may be deemed to be a withdrawal, and at least a portion of it may
be subject to federal income tax. (See "Taxes -- Tax Treatment of
Withdrawals -- Non-Qualified Contracts" and "Tax Treatment of
Withdrawals -- Qualified Contracts"). Alternatively, an annuity option may be
elected. The Contract Owner may elect an annuity option or change an annuity
option at any time during the lifetime of the Annuitant prior to the Annuity
Date. The Annuitant may make the election on the Annuity Date unless the
Contract Owner has restricted the right to make such an election. The
Beneficiary may elect an annuity option upon the Annuitant's death unless the
Contract Owner has restricted this right.
If no other annuity option is elected, monthly annuity payments will be
made in accordance with annuity option 1 below with a 10 year period certain.
Generally, annuity payments will be made in monthly installments. However, if
the amount available to apply under an annuity option is less than $2,000, the
Company has the right to pay the annuity in one lump sum. In addition, if the
first payment provided would be less than $20, the Company shall have the right
to change the frequency of payments to be at quarterly, semi-annual or annual
intervals so as to result in an initial payment of at least $20.
Contract Owners may elect to have annuity payments electronically wired to
his or her financial institution by completing the instructions on the
Electronic Fund Transfer Form or by written request delivered to the Company at
its Administrative Service Center. A voided check (for checking accounts), the
account number and bank ABA number must accompany all requests. Electronic
transfers may also be requested on the Annuity Option Selection Form. The
Company reserves the right to modify, suspend or terminate the availability of
electronic fund transfers at any time.
The following annuity options are generally available under the Contract.
However, there may be restrictions in the retirement plan pursuant to which a
Contract issued on a qualified basis has been purchased.
OPTION 1 -- LIFE INCOME WITH INSTALLMENTS GUARANTEED
An annuity payable monthly during the lifetime of the payee. Upon election
a guaranteed payment period of either 10 years or 20 years may be chosen. If the
payee dies before the end of the guaranteed period, the present value, based on
a 5% annual interest rate, of any remaining guaranteed payments will be paid to
the payee's estate or to the Beneficiary.
OPTION 2 -- JOINT AND SURVIVOR ANNUITY
An annuity payable monthly while both payees are living. Upon the death of
either payee, the monthly income payable will continue during the lifetime of
the surviving payee at the percentage of the full amount chosen at the time of
election of this annuity option. This is the automatic form of annuity where
joint Annuitants are named, but a different option may be elected.
Annuity payments terminate automatically and immediately upon the death of
the surviving payee without regard to the number or total amount of payments
received.
There is no minimum number of guaranteed payments and it is possible to
have only one annuity payment if both payees die before the due date of the
second payment.
No Annuity Charge applies if either option 1 or option 2 is elected.
18
<PAGE> 23
OPTION 3 -- INCOME FOR A SPECIFIED PERIOD
If Purchase Payments were made in the Contract Year in which annuity
payments are to begin or in any of the four preceding Contract Years, an Annuity
Charge may apply. The Annuity Charge equals the Withdrawal Charge that would
apply if the Contract were being surrendered. No Annuity Charge will be assessed
if annuity option 3 is elected by a Beneficiary under the Death Benefit.
Under this option, a payee can elect an annuity payable monthly for any
period of years from 5 to 30. This election must be made for full 12 month
periods. In the event the payee dies before the specified number of payments has
been made, the Beneficiary may elect to continue receiving the scheduled
payments or may alternatively elect to receive the present value, based on a 5%
annual interest rate, of any remaining guaranteed payments. Because Contract
Values are redeemable even after the Annuity Date under this option at any time
while payments are being made, the payee may elect to receive the present value
of the remaining payments, commuted at the interest rate used to create the
annuity factor for this option.
The value of an Annuity Unit, regardless of the option chosen, takes into
account the Mortality and Expense Risk Charge. (See "Contract
Charges -- Mortality and Expense Risk Charge"). Since annuity option 3, Income
for a Specified Period, does not contain an element of mortality risk, the payee
is not getting the benefit of this Charge. There shall be no right to terminate
the Contract during the Annuity Period if the option elected contains an element
of mortality risk.
OTHER OPTIONS
At the sole discretion of the Company, other annuity options may be made
available to the Contract Owner. However, to the extent that Withdrawal Charges
would otherwise apply to a withdrawal or termination, the identical Withdrawal
Charge may apply with respect to any additional options.
With respect to Contracts issued under Sections 401, 403(b) or 408 of the
Code, any payments will be made only to the Annuitant and the Annuitant's
spouse.
TRANSFER DURING ANNUITY PERIOD
During the Annuity Period, the payee has the sole right to transfer the
Contract Value to the General Account and/or among Separate Account Division(s)
by written request to the Company. The following limitations apply:
(1) No transfer to a Separate Account Division may be made during the
first year of the Annuity Period. Thereafter, only one transfer per
Division is permitted during each Contract Year of the Annuity Period.
(2) The entire value in a Separate Account Division must be
transferred.
(3) The request for transfer must be received by the Company, c/o its
Administrative Service Center, during the 45 days preceding the anniversary
of the Contract's Issue Date. The transfer will be effected at the next
Annuity Unit value calculation after receipt of a valid transfer request
which meets the limitations and conditions as are prescribed for transfers
during the Accumulation Period. (See "Transfer During Accumulation
Period").
(4) The amount allocated to the General Account in the event of a
transfer from a Separate Account Division will be equal to the annuity
reserve for the payee's interest in that Separate Account Division. The
annuity reserve is the product of "(A)" multiplied by "(B)" multiplied by
"(C)", where "(A)" is the number of Annuity Units representing the payee's
interest in the Separate Account Division per annuity payment; "(B)" is the
Annuity Unit value for the Separate Account Division; and "(C)" is the
present value of $1.00 per payment period as of the adjusted age of the
payee attained at the time of transfer, determined by using the 1983 Table
A, projected at Scale G with interest at the rate of 5% per annum. Amounts
transferred to the General Account will be applied under the annuity option
originally elected, except that adjustment will be made for the time
elapsed since the Annuity Date. All amounts and Annuity Unit values will be
determined as of the end of the Valuation Period preceding the effective
date of transfer.
(5) The transfer privilege may be suspended or discontinued at any
time.
19
<PAGE> 24
DEATH BENEFIT DURING ANNUITY PERIOD
If the payee dies after the Annuity Date while the Contract is in force,
the death proceeds, if any, will depend upon the annuity option in effect at the
time of the payee's death. If the Owner or Annuitant, if different, dies after
the Annuity Date and before the entire interest in the Contract has been
distributed, the remaining interest, if any, as provided for in the annuity
option elected will be distributed at least as rapidly as under the method of
distribution in effect at the Owner's or Annuitant's death.
- --------------------------------------------------------------------------------
PURCHASES AND CONTRACT VALUE
- --------------------------------------------------------------------------------
MINIMUM PURCHASE PAYMENT
The minimum initial Purchase Payment for Contracts issued pursuant to a
Non-Qualified Plan is $1,000. Minimum additional Purchase Payments may be made
in amounts of $500. The minimum Purchase Payment for a Contract issued pursuant
to a Qualified Plan is $100. A minimum of $500 must be allocated to one Division
or the General Account before transfers are permitted. (See "Description of the
Contracts -- Transfer During Accumulation Period"). The Company reserves the
right to refuse any Purchase Payment at any time.
MAXIMUM PURCHASE PAYMENT
Purchase Payments of more than $1,000,000 require prior Company approval.
ALLOCATION OF PURCHASE PAYMENTS
Purchase Payments are allocated to the General Account and/or the
Division(s) of the Separate Account selected by the Contract Owner. The current
General Account allocation option pays a fixed rate of interest declared by the
Company for one year from the date amounts are allocated to it. The Company, at
its discretion, may offer other General Account allocation options which are
subject to different terms and conditions than apply to the current option.
Contract Owners making initial Purchase Payments should be sure to specify
their allocations on the application for a Contract. If the application is in
good order, the Company will apply the initial Purchase Payment to the General
Account and the selected Division(s), and credit the Contract with Accumulation
Units within two business days of receipt at the P.O. Box for the Company's
Administrative Service Center. The number of Accumulation Units in a Division
attributable to a Purchase Payment is determined by dividing that portion of the
Purchase Payment which is allocated to the Division by the Division's
Accumulation Unit value during the Valuation Period when the allocation occurs.
IF THE APPLICATION DOES NOT SPECIFY AN ALLOCATION, THE APPLICATION IS NOT
IN GOOD ORDER.
If the application for a Contract is not in good order, the Company will
attempt to rectify it within five business days of its receipt at the P.O. Box
for the Company's Administrative Service Center. The Company will credit the
initial Purchase Payment within two business days after the application has been
rectified. Unless the Contract Owner consents otherwise, the application and the
initial Purchase Payment will be returned if the application cannot be put in
good order within five business days of its receipt.
Just like Contract Owners making initial Purchase Payments, Contract Owners
making subsequent Purchase Payments should be sure to specify how they want
their payments allocated. OTHERWISE, THE COMPANY WILL AUTOMATICALLY PROCESS THE
PURCHASE PAYMENT BASED ON THE PREVIOUS ALLOCATION.
A Contract Owner may elect to increase, decrease or change the frequency or
amount of Purchase Payments. The application and any Purchase Payments should be
sent to the Company at its Administrative Service Center.
20
<PAGE> 25
ACCUMULATION UNIT VALUE
Accumulation Unit value is determined Monday through Friday (except for the
following Federal holidays) as of 4:00 p.m. New York time.
<TABLE>
<S> <C>
New Year's Day Independence Day
Martin Luther King Day Labor Day
President's Day Thanksgiving
Good Friday Christmas Day
Memorial Day
</TABLE>
A separate Accumulation Unit value is determined for each Division. If the
Company elects or is required to assess a charge for taxes, a separate
Accumulation Unit value may be calculated for Non-Qualified and Qualified
Contracts within each Division.
The net assets are determined by calculating the total value of each
Division's assets (that is, the aggregate value of the shares of the Portfolio
of the Trust held by the Division). After calculation of the net assets of a
Division, that amount is reduced by the accrued but unpaid daily charge for
mortality and expense risks and administration expense (which together amount to
1.40% per annum) and any provision for taxes which may occur. After that
calculation, the resulting number is then divided by the number of Accumulation
Units outstanding at the end of the Valuation Period to determine Accumulation
Unit value.
The Accumulation Unit value for each Division will vary with the price of a
share in the underlying Portfolio and in accordance with the Mortality and
Expense Risk Charge, Administrative Expense Charge, and any provision for taxes.
Assessments of Withdrawal Charges and Records Maintenance Charges are made
separately for each Contract. They do not affect Accumulation Unit value.
DISTRIBUTION OF CONTRACTS
The Contracts are only available in the State of New York.
Contracts are sold by registered representatives of broker-dealers who are
licensed insurance agents of the Company, either individually or through an
incorporated insurance agency. Commissions paid to registered representatives
may vary, but in the aggregate are not anticipated to exceed 5% of any Purchase
Payment.
Furthermore, the Company may from time to time, pay or allow additional
promotional incentives, in the form of cash or other compensation. In some
instances, such other incentives may be offered only to certain broker/dealers
that sell or are expected to sell, during specified time periods, certain
minimum amounts of the contract, or other contracts offered by the Company.
Commissions may be waived or reduced with respect to contracts established for
Eligible Individuals. (See "Contract Charges -- Waiver or Reduction of Charges,
Credits or Bonus Guaranteed Interest Rates for Sales to Certain Groups").
SunAmerica Capital Services, Inc., located at 733 Third Avenue, 4th Floor,
New York, New York 10017 serves as distributor of the Contracts. SunAmerica
Capital Services, Inc., an indirect wholly owned subsidiary of SunAmerica Inc.,
is registered as a broker-dealer under the Securities Exchange Act of 1934, as
amended, and is a member of the National Association of Securities Dealers, Inc.
WITHDRAWALS (REDEMPTIONS)
Except as explained below, the Contract Owner may redeem a Contract for all
or a portion of the Contract Value during the Accumulation Period. The Contract
Owner may also redeem Contract Values after the Annuity Date if annuity option 3
is elected. Withdrawal Charges may be assessed. (See "Contract
Charges -- Withdrawal Charge").
Effective January 1, 1989, withdrawals of amounts attributable to
contributions made pursuant to a salary reduction agreement (as defined in
Section 403(b)(11) of the Code) are limited to circumstances only: when the
Contract Owner attains age 59 1/2, separates from service, dies, becomes
disabled (within the meaning of Section 72(m)(7) of the Code), or in the case of
hardship. Withdrawals for hardship are restricted to the portion of the Contract
Owner's Contract Value which represents contributions made by the Contract Owner
and does not include any investment results. These limitations on withdrawals
apply to: (1) salary reduction contributions made after December 31, 1988; (2)
income attributable to such contributions; and (3) income attributable to
amounts held as
21
<PAGE> 26
of December 31, 1988. The limitations on withdrawals do not affect rollovers or
exchanges between certain Qualified Plans. Tax penalties may also apply. (See
"Taxes -- Tax Sheltered Annuities -- Withdrawal Limitations").
While the foregoing limitations only apply to certain contracts issued in
connection with 403(b) Qualified Plans, all Contract Owners should seek
competent tax advice regarding any withdrawals or distributions.
Except in connection with the Systematic Withdrawal Program, the minimum
partial withdrawal amount is $500, or the Owner's entire interest in the
Division from which a withdrawal is requested. The Owner's interest in the
Division from which the withdrawal is requested must be at least $500 after the
withdrawal is completed if anything is left in that Division.
A written withdrawal request or Systematic Withdrawal Program enrollment
form, as the case may be, must be sent to the Company, c/o its Administrative
Service Center. The required form will not be in good order unless it includes
the Contract Owner's Tax I.D. Number (e.g., Social Security Number) and provides
instructions regarding withholding of income taxes. The Company provides the
required forms.
If the request is for total withdrawal, the Contract or a Lost Contract
Affidavit (which may be obtained by calling the Company's Administrative Service
Center) must be submitted as well. The Withdrawal Value is determined on the
basis of the Accumulation Unit values next computed following receipt of a
request in proper order. The Withdrawal Value will be paid within seven days
after the day a proper request is received by the Company. However, the Company
may suspend the right of withdrawal or delay payment more than seven days: (1)
during any period when the New York Stock Exchange is closed (other than
customary weekend and holiday closings); (2) when trading on the markets the
Separate Account or Portfolios normally utilize is restricted or an emergency
exists as determined by the Securities and Exchange Commission so that disposal
of the Separate Account's or a Portfolio's investments or determination of
Accumulation Unit value is not reasonably practicable; or (3) for such other
periods as the Securities and Exchange Commission, by order, may permit for
protection of Contract Owners.
SYSTEMATIC WITHDRAWAL PROGRAM
Certain Participants of Nonqualified Plan Contracts and Contracts issued in
connection with IRAs may choose to withdraw amounts which in the aggregate add
up to a maximum of 10% of their Purchase Payments annually pursuant to a
Systematic Withdrawal Program without charge. Withdrawals are taxable and a 10%
federal tax penalty may apply to withdrawals before age 59 1/2. Participants
must complete an enrollment form which describes the program and send it to the
Company, c/o its Administrative Service Center. Participation in the Systematic
Withdrawal Program may be elected at the time the Contract is issued or on any
date prior to the Annuity Date. Depending on fluctuations in the net asset value
of the Portfolios, systematic withdrawals may reduce or even exhaust Contract
Value. The minimum systematic withdrawal amount is $250 per withdrawal.
Amounts withdrawn under to the Systematic Withdrawal Program may be
electronically wired to the Contract Owner's financial institution by completing
the instructions on the Electronic Fund Transfer Form or by written request
delivered to the Company at its Administrative Service Center. A voided check
(for checking accounts), the account number and bank ABA number must accompany
all requests. Electronic transfers may also be requested on the Systematic
Withdrawal Request Form. The Company reserves the right to modify, suspend or
terminate the Systematic Withdrawal Progam and the availability of electronic
fund transfers at any time.
ERISA PLANS
Spousal consent may be required when a married Contract Owner seeks a
distribution from a Contract that has been issued in connection with a Qualified
Plan or a Non-Qualified Plan that is subject to Title I of ERISA. Owners should
obtain competent advice.
MINIMUM CONTRACT VALUE
If the Contract Value is less than $500 and no Purchase Payments have been
made during the previous three full calendar years, the Company reserves the
right, after 60 days written notice to the Owner, to terminate the Contract and
distribute the Withdrawal Value to the Owner. This privilege will be exercised
only if the Contract Value has been reduced to less than $500 as a result of
withdrawals. In no instance shall such termination occur if the value has fallen
below $500 due to either decline in Accumulation Unit value or the imposition of
fees and charges.
22
<PAGE> 27
- --------------------------------------------------------------------------------
ADMINISTRATION
- --------------------------------------------------------------------------------
The Company has primary responsibility for all administration of the
Contracts and the Separate Account. Its Administrative Service Center is located
at P.O. Box 54299, Los Angeles, California 90054-0299 and its telephone number
is (800) 99-NYSUN.
The administrative services provided include, but are not limited to:
issuance of the Contracts; maintenance of Contract Owner records; Contract Owner
services; calculation of unit values; and preparation of Contract Owner reports.
Contract statements and transaction confirmations are mailed to Contract
Owners at least quarterly. Contract Owners should read their statements
carefully and verify their accuracy. Questions about periodic statements should
be communicated to the Company promptly. The Company will investigate all
complaints and make any necessary adjustments retroactively, provided that it
has received notice of a potential error within 30 days after the date the
Contract Owner receives the questioned statement. If the Company has not
received notice of a potential error within this time, any adjustment shall be
made as of the date that the Administrative Service Center receives notice of
the potential error.
The Company relies significantly on computer systems and applications in
its daily operations. Many of these systems and applications are not presently
year 2000 compliant. The Company's business, financial condition and results of
operations could be materially and adversely affected by the failure of the
Company's systems and applications (and those operated by third parties
interfacing with the Company's systems and applications) to properly operate or
manage dates beyond the year 1999. The Company has a coordinated plan to repair
or replace these noncompliant systems and to obtain similar assurances from
third parties interfacing with the Company's systems and applications and
expects to significantly complete its plan by the end of calendar year 1998,
leaving 1999 for testing.
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING
OF CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE
COMPANY CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE
MADE. PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE
POSSIBILITY OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF
THE CONTRACTS. PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE
TREATED AS "ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS.
GENERAL
From time to time, Federal initiatives are proposed that could affect the
tax treatment of insurance products. Recent administration budget proposals
include the proposed taxation of exchanges involving variable annuity contracts,
reallocations within variable annuity contracts and certain other proposals
relating to annuities. Please consult your tax advisor for additional
information.
Currently, a Contract Owner is not taxed on increases in the value of a
Contract until distribution occurs, either in the form of a lump sum payment or
as annuity payments under the annuity option elected. For a lump sum payment
received as a total surrender (total redemption), the recipient is taxed on the
portion of the payment that exceeds the cost basis of the Contract. For a
payment received as a withdrawal (partial redemption), federal tax liability is
determined on a last-in-first-out basis, meaning taxable income is withdrawn
before the cost basis of the Contract is withdrawn. For Non-Qualified Contracts,
the cost basis is generally the Purchase Payments, while for Qualified Contracts
there may be no cost basis. The taxable portion of the lump sum payment is taxed
at ordinary income tax rates. Tax penalties may also apply.
For annuity payments, the taxable portion is determined by a formula which
establishes the ratio that the cost basis of the Contract bears to the total
value of annuity payments for the term of the annuity Contract. The taxable
portion is taxed at ordinary income tax rates. For certain types of Qualified
Plans there may be no cost basis in the
23
<PAGE> 28
Contract within the meaning of Section 72 of the Code. Contract Owners,
Annuitants and Beneficiaries under the Contracts should seek competent financial
advice about the tax consequences of distributions under the retirement plan
under which the Contracts are purchased.
The Company is taxed as a life insurance company under the Code. For
federal income tax purposes, the Separate Account is not a separate entity from
the Company and its operations form a part of the Company.
WITHHOLDING TAX ON DISTRIBUTIONS
The Code generally requires the Company (or, in some cases, a plan
administrator) to withhold tax on the taxable portion of any distribution or
withdrawal from a Contract. For "eligible rollover distributions" from Contracts
issued under certain types of Qualified Plans, 20% of the distribution must be
withheld, unless the payee elects to have the distribution "rolled over" to
another eligible plan in a direct "trustee to trustee" transfer. This
requirement is mandatory and cannot be waived by the Contract Owner. Withholding
on other types of distributions can be waived.
An "eligible rollover distribution" is the estimated taxable portion of any
amount received by a covered employee from a plan qualified under section 401(a)
or 403(a) of the Code, or from a tax-sheltered annuity qualified under section
403(b) of the Code (other than (1) annuity payments for the life (or life
expectancy) of the employee, or joint lives (or joint life expectancies) of the
employee and his or her designated Beneficiary, or for a specified period of ten
years or more; and (2) distributions required to be made under the Code).
Failure to "roll over" the entire amount of an eligible rollover distribution
(including an amount equal to the 20% portion of the distribution that was
withheld) could have adverse tax consequences, including the imposition of a
penalty tax on premature withdrawals, described later in this section.
Withdrawals or distributions from a Contract other than eligible rollover
distributions are also subject to withholding on the estimated taxable portion
of the distribution, but the Contract Owner may elect in such cases to waive the
withholding requirement. If not waived, withholding is imposed (1) for periodic
payments, at the rate that would be imposed if the payments were wages, or (2)
for other distributions, at the rate of 10%. If no withholding exemption
certificate is in effect for the payee, the rate under (1) above is computed by
treating the payee as a married individual claiming 3 withholding exemptions.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not adequately
diversified, in accordance with regulations prescribed by the United States
Treasury Department ("Treasury Department"). Disqualification of the Contract as
an annuity contract would result in imposition of federal income tax to the
Contract Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contracts meet the
diversification requirements if, as of the close of each quarter, the underlying
assets meet the diversification standards for a regulated investment company,
and no more than 55% of the total assets consist of cash, cash items, U.S.
Government securities and securities of other regulated investment companies.
The Treasury Department has issued Regulations which establish
diversification requirements for the investment portfolios underlying variable
contracts such as the Contracts. The Regulations amplify the diversification
requirements for variable contracts set forth in the Code and provide an
alternative to the safe harbor provision described above. Under the Regulations
an investment portfolio will be deemed adequately diversified if: (1) no more
than 55% of the value of the total assets of the portfolio is represented by any
one investment; (2) no more than 70% of the value of the total assets of the
portfolio is represented by any two investments; (3) no more than 80% of the
value of the total assets of the portfolio is represented by any three
investments; and (4) no more than 90% of the value of the total assets of the
portfolio is represented by any four investments. For purposes of determining
whether or not the diversification standards imposed on the underlying assets of
variable contracts by Section 817(h) of the Code have been met, "each United
States government agency or instrumentality shall be treated as a separate
issuer."
The Company intends that each Portfolio of the Trust underlying the
Contracts will be managed by the investment adviser for the Trust in such a
manner as to comply with these diversification requirements.
24
<PAGE> 29
MULTIPLE CONTRACTS
Multiple annuity contracts which are issued within a calendar year to the
same contract owner by one company or its affiliates are treated as one annuity
contract for purposes of determining the tax consequences of any distribution.
Such treatment may result in adverse tax consequences including more rapid
taxation of the distributed amounts from such combination of contracts. The
Company believes that Congress intended to affect the purchase of multiple
deferred annuity contracts which may have been purchased to avoid withdrawal
income tax treatment. Contract Owners should consult a tax adviser prior to
purchasing more than one annuity contract in any calendar year.
TAX TREATMENT OF ASSIGNMENTS
An assignment of a Contract may be a taxable event and may be prohibited by
ERISA in some circumstances. Contract Owners should therefore consult competent
tax advisers should they wish to assign their Contracts.
TAX TREATMENT OF WITHDRAWALS -- NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate Purchase
Payments made, any amount withdrawn not in form of an annuity payment will be
treated as coming first from the earnings and then, only after the income
portion is exhausted, as coming from the principal. Withdrawn earnings are
includible in a taxpayer's gross income. Section 72 further provides that a 10%
penalty will apply to the income portion of any premature distribution. The
penalty is not imposed on amounts received: (1) after the taxpayer reaches
59 1/2; (2) upon the death of the Contract Owner; (3) if the taxpayer is totally
disabled; (4) in a series of substantially equal periodic payments made for the
life of the taxpayer or for the joint lives of the taxpayer and his Beneficiary;
(5) under an immediate annuity; or (6) which are allocable to purchase payments
made prior to August 14, 1982.
The above information applies to Qualified Contracts issued pursuant to
Section 457 of the Code, but does not apply to other Qualified Contracts.
Separate tax withdrawal penalties and restrictions apply to Qualified Contracts.
(See "Tax Treatment of Withdrawals -- Qualified Contracts").
QUALIFIED PLANS
The Contracts offered by this Prospectus are designed to be suitable for
use under various types of Qualified Plans. Taxation of participants in each
Qualified Plan varies with the type of plan and the terms and conditions of each
specific plan. Contract Owners, Annuitants and Beneficiaries are cautioned that
benefits under a Qualified Plan may be subject to the terms and conditions of
the plan, regardless of the terms and conditions of the contracts issued
pursuant to the plan.
Following are general descriptions of the types of Qualified Plans with
which the Contracts may be used. Such descriptions are not exhaustive and are
for general informational purposes only. The tax rules regarding Qualified Plans
are very complex and will have differing applications depending on individual
facts and circumstances. Each purchaser should obtain competent tax advice prior
to purchasing a Contract issued under a Qualified Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available and described in
this Prospectus. Generally, Contracts issued pursuant to Qualified Plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals -- Qualified Contracts").
(A) H.R. 10 OR KEOGH PLANS
Section 401 of the Code permits self-employed individuals to establish
Qualified Plans for themselves and their employees, commonly referred to as
"H.R. 10" or "Keogh" plans. Contributions made to the plan for the benefit
of the employees will not be included in the gross income of the employees
until distributed from the plan. The tax consequences to participants may
vary depending upon the particular plan design. However, the Code places
limitations and restrictions on all plans on such items as: amounts of
allowable contributions; form, manner and timing of distributions; vesting
and nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders. (See "Tax Treatment of Withdrawals -- Qualified Contracts").
Purchasers of Contracts for use with an H.R. 10 Plan should obtain
competent tax advice as to the tax treatment and suitability of such an
investment.
25
<PAGE> 30
(B) TAX-SHELTERED ANNUITIES
Section 403(b) of the Code permits the purchase of "tax-sheltered
annuities" by public schools and certain charitable, educational and
scientific organizations described in Section 501(c)(3) of the Code. These
qualifying employers may make contributions to the Contracts for the
benefit of their employees. Such contributions are not includible in the
gross income of the employee until the employee receives distributions from
the Contract. The amount of contributions to the tax-sheltered annuity is
limited to certain maximums imposed by the Code. Furthermore, the Code sets
forth additional restrictions governing such items as transferability,
distributions, nondiscrimination and withdrawals. (See "Tax Treatment of
Withdrawals -- Qualified Contracts"). Any employee should obtain competent
tax advice as to the tax treatment and suitability of such an investment.
(C) INDIVIDUAL RETIREMENT ANNUITIES ("IRAS")
Section 408(b) of the Code permits eligible individuals to contribute
to an individual retirement program known as an "Individual Retirement
Annuity" ("IRA"). Under applicable limitations, certain amounts may be
contributed to an IRA which will be deductible from the individual's gross
income. These IRAs are subject to limitations on eligibility,
contributions, transferability and distributions. (See "Tax Treatment of
Withdrawals -- Qualified Contracts"). Under certain conditions,
distributions from other IRAs and other Qualified Plans may be rolled over
or transferred on a tax-deferred basis into an IRA. Sales of Contracts for
use with IRAs are subject to special requirements imposed by the Code,
including the requirement that certain informational disclosure be given to
persons desiring to establish an IRA. Purchasers of Contracts to be
qualified as IRAs should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
(D) ROTH IRAS
Section 408A of the Code permits an individual to contribute to an
individual retirement program called a Roth IRA. Unlike contributions to a
regular IRA under Section 408(b) of the Code, contributions to a Roth IRA
are not made on tax-deferred basis, but distributions are tax-free if
certain requirements are satisfied. Like regular IRAs, Roth IRAs are
subject to limitations on the amount that may be contributed, those who may
be eliegible and the time when distributions may commence. A regular IRA
may be converted into a Roth IRA, and the resulting income tax may be
spread over four years if the conversion occurs before January 1, 1999. If
and when Contracts are made available for use with Roth IRAs, they may be
subject to special requirements imposed by the Internal Revenue Service.
Purchasers of the Contracts for this purpose will be provided with such
supplementary information as may be required by the Internal Revenue
Service or other appropriate agency.
(E) CORPORATE PENSION AND PROFIT-SHARING PLANS
Sections 401(a) and 401(k) of the Code permit corporate employers to
establish various types of retirement plans for employees. These retirement
plans may permit the purchase of the Contracts to provide benefits under
the plan. Contributions to the plan for the benefit of employees will not
be includible in the gross income of the employee until distributed from
the plan. The tax consequences to participants may vary depending upon the
particular plan design. However, the Code places limitations on all plans
on such items as amount of allowable contributions; form, manner and timing
of distributions; vesting and nonforfeitability of interests;
nondiscrimination in eligibility and participation; and the tax treatment
of distributions, withdrawals and surrenders. (See "Tax Treatment of
Withdrawals -- Qualified Contracts"). Purchasers of Contracts for use with
corporate pension or profit sharing plans should obtain competent tax
advice as to the tax treatment and suitability of such an investment.
TAX TREATMENT OF WITHDRAWALS -- QUALIFIED CONTRACTS
Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion
of any early distribution from qualified retirement plans, including contracts
issued and qualified under Code Sections 401 (H.R. 10 and Corporate Pension and
Profit Sharing Plans), 403(b) (Tax-Sheltered Annuities) and 408(b) (IRAs).
The tax penalty will not apply to the following distributions: (1) if
distribution is made on or after the date on which the Contract Owner or
Annuitant (as applicable) reaches age 59 1/2; (2) distributions following the
death or disability of the Contract Owner or Annuitant (as applicable) (for this
purpose "disability" is defined in Section 72(m)(7) of the Code); (3)
distributions that are part of substantially equal periodic payments made not
less frequently than annually for the life (or life expectancy) of the Contract
Owner or Annuitant (as applicable) or
26
<PAGE> 31
the joint lives (or joint life expectancies) of such Contract Owner or Annuitant
(as applicable) and his or her designated Beneficiary; (4) distributions to a
Contract Owner or Annuitant (as applicable) who has separated from service after
he or she has attained age 55; (5) distributions made to the Contract Owner or
Annuitant (as applicable) to the extent such distributions do not exceed the
amount allowable as a deduction under Code Section 213 to the Contract Owner or
Annuitant (as applicable) for amounts paid during the taxable year for medical
care; (6) distributions made to an alternate payee pursuant to a qualified
domestic relations order; (7) distributions from an IRA made to the Owner or
Annuitant (as applicable) to the extent such distributions do not exceed the
Qualified Higher Education expenses (as defined in Section 72(t)(7) of the Code)
of the Owner or Annuitant (as applicable) for the taxable year; and (8)
distribution from an IRA made to the Owner or Annuitant (as applicable) which
are Qualified First Time Home Buyer distributions (as defined in Section
72(t)(8) of the Code).
The exceptions stated in items (4), (5) and (6) above do not apply in the
case of an IRA.
The taxable portion of a withdrawal or distribution from Contracts issued
under certain types of plans may, under some circumstances, be "rolled over"
into another eligible plan so as to continue to defer income tax on the taxable
portion. Effective January 1, 1993, such treatment is available for any
"eligible rollover distribution" made by certain types of plans (as described
above under "Taxes -- Withholding Tax on Distributions") that is transferred
within 60 days of receipt into a plan qualified under section 401(a) or 403(a)
of the Code, a tax-sheltered annuity, an IRA, or an individual retirement
account described in section 408(a) of the Code. Plans making such eligible
rollover distributions are also required, with some exceptions specified in the
Code, to provide for a direct "trustee to trustee" transfer of the distribution
to the transferee plan designated by the recipient.
TAX SHELTERED ANNUITIES -- WITHDRAWAL LIMITATIONS
The Tax Reform Act of 1986, effective January 1, 1989, limits the
withdrawal of amounts attributed to contributions made pursuant to a salary
reduction agreement (as defined in Section 403(b)(11) of the Code) to
circumstances only: when the Contract Owner attains age 59 1/2, separates from
service, dies, becomes disabled (within the meaning of Section 72(m)(7) of the
Code), or in the case of hardship. Withdrawals for hardship are restricted to
the portion of the Contract Owner's Contract Value which represents
contributions by the Contract Owner and does not include any investment results.
These limitations on withdrawals apply only to salary reduction contributions
made after December 31, 1988, to income attributable to such contributions, and
to income attributable to amounts held as of December 31, 1988. The limitations
on withdrawals do not affect rollovers or exchanges between certain Qualified
Plans. Contract Owners should consult their own tax counsel or other tax adviser
regarding any distributions.
DEFERRED COMPENSATION PLANS -- SECTION 457
Under Section 457 of the Code, governmental and certain other tax exempt
employers may establish deferred compensation plans for the benefit of their
employees which may invest in annuity contracts. The Code, as in the case of
Qualified Plans, establishes limitations and restrictions on eligibility,
contributions, and distributions. Under these plans, contributions made for the
benefit of the employees will not be includible in the employees' gross income
until distributed from the plan. However, under a 457 plan all the plan assets
shall remain solely the property of the employer, subject only to the claims of
the employer's general creditors until such time as made available to a
participant or a beneficiary.
- --------------------------------------------------------------------------------
LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
There are no legal proceedings to which the Separate Account is a party or
to which the assets of the Separate Account are subject. The Company is engaged
in various kinds of routine litigation that in the Company's judgment will not
have a material adverse impact upon the Company's financial position.
27
<PAGE> 32
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
OF THE STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
ITEM ----
<S> <C>
COMPANY..................................................... 1
INDEPENDENT ACCOUNTANTS..................................... 1
DISTRIBUTOR................................................. 1
PERFORMANCE DATA............................................ 1
Money Market Division..................................... 2
Other Divisions........................................... 3
ANNUITY PAYMENTS............................................ 4
Annuity Unit Value........................................ 4
Amount of Annuity Payments................................ 5
Subsequent Monthly Payments............................... 5
FINANCIAL STATEMENTS........................................ 5
</TABLE>
28
<PAGE> 33
Please forward a copy (without charge) of the Statement of Additional
Information concerning ICAP II Variable Annuity Contracts issued by First
SunAmerica Life Insurance Company to:
(Please print or type and fill in all information.)
- ------------------------------------------------------------------------------
Name
- ------------------------------------------------------------------------------
Address
- ------------------------------------------------------------------------------
City/State/Zip
- ------------------------------------------------------------------------------
Date: Signed:
-------------------- -------------------------------------------
Return to: First SunAmerica Life Insurance Company, Annuity Service Center, P.O.
Box 54299, Los Angeles, California 90054-0299.
<PAGE> 34
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED
VARIABLE ANNUITY CONTRACTS
ISSUED BY
VARIABLE ANNUITY ACCOUNT ONE
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION
SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE INDIVIDUAL FLEXIBLE
PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS WHICH ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE
INVESTOR OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS DATED
APRIL 1, 1998, AS IT MAY BE SUPPLEMENTED, CALL OR WRITE THE COMPANY C/O ITS
ADMINISTRATIVE SERVICE CENTER, P.O. BOX 54299, LOS ANGELES, CALIFORNIA
90054-0299, 1-800-445-SUN2.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED
APRIL 1, 1998
<PAGE> 35
TABLE OF CONTENTS
Item Page
Company................................................................. 1
Independent Accountants................................................. 1
Distributors............................................................ 1
Performance Data........................................................ 1
Money Market Division................................................ 2
Other Divisions...................................................... 3
Annuity Payments........................................................ 4
Annuity Unit Value................................................... 4
Amount of Annuity Payments........................................... 5
Subsequent Monthly Payments.......................................... 5
Financial Statements.................................................... 5
<PAGE> 36
COMPANY
Information regarding First SunAmerica Life Insurance Company (the
"Company") and its ownership is contained in the Prospectus.
INDEPENDENT ACCOUNTANTS
The financial statements of the Company as of September 30, 1997 and
1996 and for each of the three years in the period ended September 30, 1997 are
presented in this Statement of Additional Information. The financial statements
of the Company should be considered only as bearing on the ability of the
Company to meet its obligation under the Contracts. The financial statements of
the Separate Account as of December 31, 1997 and for each of the two years in
the period ended December 31, 1997, also are included in this Statement of
Additional Information.
Price Waterhouse LLP, 400 South Hope Street, Los Angeles, California
90071, serves as the independent accountants for the Separate Account and the
Company. The financial statements referred to above included in this Statement
of Additional Information have been so included in reliance on the reports of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
DISTRIBUTOR
The Contracts are sold by licensed insurance agents, where the
Contracts may be lawfully sold, who are registered representatives of
broker-dealers which are registered under the Securities Exchange Act of 1934
and are members of the National Association of Securities Dealers, Inc.
The offering is on a continuous basis.
Effective January 28, 1994, the Contracts are offered through the
distributor for the Separate Account, SunAmerica Capital Services, Inc., 733
Third Avenue, 4th Floor, New York, New York 10017, which is an indirect wholly
owned subsidiary of SunAmerica Inc. Prior to this time, Royal Alliance
Associates, Inc. and SunAmerica Securities, Inc., both affiliates of SunAmerica
Capital Services, Inc. and located at 733 Third Avenue, 4th Floor, New York, New
York 10017 and 2201 East Camelback Road, Phoenix, Arizona 85016, respectively,
served as co-distributors of the Contracts. Royal Alliance Associates, Inc. and
SunAmerica Capital Services, Inc. are each an indirect, wholly-owned subsidiary
of SunAmerica Inc.
For the year ended December 31, 1995, the aggregate amount of
underwriting commissions paid by the Company to SunAmerica Capital Services,
Inc. was $23,437, of which $2,329 was retained by them. For the year ended
December 31, 1996, the aggregate amount of underwriting commissions paid by the
Company to SunAmerica Capital Services, Inc. was $19,219, of which $1,872 was
retained by them. For the year end December 31, 1997, the aggregate amount of
underwriting commissions paid be the Company to SunAmerica Capital Services,
Inc. was $39,126, of which $4,230 was retained by them.
PERFORMANCE DATA
Performance data for the various Divisions of the Separate Account are
determined in the manner described on the following page.
1
<PAGE> 37
Money Market Division
The annualized current yield and the effective yield for the Money
Market Division for the seven day period ended December 31, 1997 were 3.28% and
3.33%, respectively.
Current yield is computed by first determining the Base Period Return
attributable to a hypothetical Contract having a balance of one Accumulation
Unit at the beginning of a 7 day period using the formula:
Base Period Return = (EV-SV-RMC)/(SV)
where:
SV = value of one Accumulation Unit at the start of a
7 day period
EV = value of one Accumulation Unit at the end of the
7 day period
RMC = an allocated portion of the $30 annual Records
Maintenance Charge, prorated for 7 days.
The change in the value of an Accumulation Unit during the 7 day period
reflects the income received, minus any expenses accrued, during such 7 day
period. The Records Maintenance Charge is first allocated among the Divisions
and the General Account so that each Division's allocated portion of the charge
is proportional to the percentage of the number of Contract Owners' accounts
that have money allocated to that Division. The portion of the Charge allocable
to the Money Market Division is further reduced, for purposes of the yield
computation, by multiplying it by the ratio that the value of the hypothetical
Contract bears to the value of an account of average size for Contracts funded
by the Money Market Division. Finally, as is done with the other charges
discussed above, the result is multiplied by the fraction 7/365 to arrive at the
portion attributable to the 7 day period.
The current yield is then obtained by annualizing the Base Period
Return:
Current Yield = (Base Period Return) x (365/7)
The Money Market Division also quotes an "effective yield" that differs
from the current yield given above in that it takes into account the effect of
dividend reinvestment in the Money Market Division. The effective yield, like
the current yield, is derived from the Base Period Return over a 7 day period.
However, the effective yield accounts for dividend reinvestment by compounding
the current yield according to the formula:
Effective Yield = [(Base Period Return+1)365/7 -1].
Net investment income for yield quotation purposes will not include
either realized capital gains and losses or unrealized appreciation and
depreciation, whether reinvested or not. The yield quotations also do not
reflect any impact of transfer fees or Withdrawal or Annuity Charges.
2
<PAGE> 38
The yields quoted should not be considered a representation of the
yield of the Money Market Division in the future since the yield is not fixed.
Actual yields will depend not only on the type, quality and maturities of the
investments held by the Money Market Division and changes in interest rates on
such investments, but also on factors such as a Contract Owner's account size
(since the impact of fixed dollar charges will be greater for small accounts
than for larger accounts).
Yield information may be useful in reviewing the performance of the
Money Market Division and for providing a basis for comparison with other
investment alternatives. However, the Money Market Division's yield fluctuates,
unlike bank deposits or other investments that typically pay a fixed yield for a
stated period of time.
Other Divisions
Divisions of the Separate Account other than the Money Market Division
compute their performance data as "total return." The total returns of the
various Divisions over the last one, five and ten year periods, and since their
inception, are shown below, both with and without an assumed complete redemption
at the end of the period.
TOTAL ANNUAL RETURN (IN PERCENT) FOR PERIODS ENDING ON 12/31/97:
(RETURN WITH/WITHOUT REDEMPTION)
<TABLE>
<CAPTION>
INCEPTION SINCE
DIVISION DATE 1 YEAR 5 YEARS 10 YEARS** INCEPTION
- -------- ---- ------ ------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Foreign Securities 9/23/91 -7.51/-2.51 7.66/7.79 4.87/4.87 2.79/2.79
Capital Appreciation 9/23/91 18.66/23.66 17.91/18.00 18.24/18.24 20.34/20.34
Growth 9/23/91 23.53/28.53 14.39/14.50 14.54/14.54 14.34/14.34
Natural Resources 9/23/91 -15.00/-10.00 9.25/9.37 -- 7.42/7.42
Growth and Income* 9/23/91 21.88/26.88 12.94/13.05 12.73/12.73 13.98/13.98
Strategic Multi-Asset 9/23/91 7.65/12.65 10.84/10.96 9.93/9.93 10.08/10.08
Multi-Asset 9/23/91 14.41/19.41 10.98/11.10 11.22/11.22 11.33/11.33
High Yield 9/23/91 4.67/9.67 9.19/9.32 8.19/8.19 10.04/10.04
Target '98 9/23/91 -1.38/3.62 4.23/4.39 -- 5.62/5.62
Fixed Income 9/23/91 2.73/7.73 5.18/5.33 6.86/6.86 5.93/5.93
Gov't & Quality Bond 9/23/91 2.95/7.95 5.47/5.62 7.65/7.65 6.24/6.24
</TABLE>
- -------------
The total return figures are based on historical data and are not intended to
indicate future performance.
* Formerly the Convertible Securities Division.
** For periods starting prior to September 23, 1991, the date the Contracts were
first offered the public, the total return data is and will be initially derived
from the performance of the corresponding Portfolios of the Trust, modified to
reflect the same charges and expenses as if the Division had been in existence
since the inception date of each respective Portfolio. Thus, such performance
figures should not be construed to be actual historic performance of the
Separate Account. Rather, they are intended to indicate the historic performance
of the Trust, adjusted to provide direct comparability to the performance of the
Division since it was first offered to the public. The Trust has served since
its inception as an underlying investment medium for separate accounts of other
insurance companies having the same fee and charge schedules as those of the
Separate Account.
These figures show the total return hypothetically experienced by
Contracts funded through the various Divisions of the Account over the time
period shown.
Total return for a Division represents a computed annual rate of return
that, when compounded annually over the time period shown and applied to a
hypothetical initial investment in a Contract funded by that Division made at
the beginning of the period, will produce the same Contract Value at
3
<PAGE> 39
the end of the period that the hypothetical investment would have produced over
the same period. The total rate of return (T) is computed so that it satisfies
the formula:
P(1+T)n = ERV
where:
P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1000 payment made
at the beginning of the 1, 5, or 10 year periods at the end of
the 1, 5, or 10 year periods (or fractional portion thereof).
The total return figures given reflect the effects of both
non-recurring and recurring charges, as discussed herein. Recurring charges are
taken into account in a manner similar to that used for the yield computations
for the Money Market Division, described above. The applicable Withdrawal Charge
(if any) is deducted as of the end of the period, to reflect the effect of the
assumed complete redemption in the case of the first of the two figures given in
the table above for each Division and time period. Because the impact of Records
Maintenance Charges on a particular Contract Owner's account would generally
have differed from that assumed in the computation, due to differences between
most actual allocations and the assumed one, as well as differences due to
varying account sizes, the total return experienced by an actual account over
these same time periods would generally have been different from those given
above. As with the Money Market Division yield figures, total return figures are
derived from historical data and are not intended to be a projection of future
performance.
ANNUITY PAYMENTS
Annuity Unit Value
The value of an Annuity Unit is determined independently for each
Separate Account Division.
For each Division, the value of an Annuity Unit for any Valuation
Period is determined by multiplying the Annuity Unit value for the immediately
preceding Valuation Period by the net investment factor for the Valuation Period
for which the Annuity Unit Value is being calculated and multiplying the result
by an interest factor which offsets the effect of the investment earnings rate
of five percent (5%) per annum that is assumed in the annuity table contained in
the Contract.
The net investment factor for each Division for a Valuation Period is
determined by dividing (a) by (b) and subtracting (c) from the result where: (a)
is the value of an Accumulation Unit from the applicable Division as of the end
of the current Valuation Period; (b) is the value of an Accumulation Unit for
the applicable Division as of the end of the immediately preceding Valuation
Period; and (c) is a factor representing the daily charge for mortality and
expense risks and administration of 1.40% per annum.
4
<PAGE> 40
Amount of Annuity Payments
The initial annuity payment is determined by applying the Contract
Value, less any Annuity Charge (if annuity option 3 is elected), to the annuity
table specified in the Contract. Those tables are based on a set amount per
$1,000 of proceeds applied. The appropriate rate must be determined by the sex
and adjusted age of the Annuitant and joint Annuitant, if any. The adjusted age
is determined from the actual age to the nearest birthday at the Annuity Date
according to the table below. The Adjusted Age Table is used to correct for
population mortality improvements over time.
ADJUSTED AGE TABLE
<TABLE>
<CAPTION>
ADJUSTMENT ADJUSTMENT
CALENDAR TO ACTUAL CALENDAR TO ACTUAL
YEAR OF BIRTH AGE YEAR OF BIRTH AGE
- ------------- --------- ------------- ---------
<S> <C> <C> <C>
1899-1905 +6 1946-1951 -1
1906-1911 +5 1952-1958 -2
1912-1918 +4 1959-1965 -3
1919-1925 +3 1966-1972 -4
1926-1932 +2 1973-1979 -5
1933-1938 +1 1980-1985 -6
1939-1945 0 1986-1992 -7
</TABLE>
The dollars applied are then divided by 1,000 and multiplied by the
appropriate annuity factor to indicate the amount of the first annuity payment.
That amount is divided by the value of an Annuity Unit as of the Annuity Date to
establish the number of Annuity Units representing each annuity payment. The
number of Annuity Units determined for the first annuity payment remains
constant for the second and subsequent monthly payments.
Subsequent Monthly Payments
The amount of the second and subsequent annuity payments is determined
by multiplying the number of Annuity Units by the Annuity Unit value as of the
Valuation Period next preceding the date on which each annuity payment is due.
The dollar amount of the first annuity payment determined as above is divided by
the value of an Annuity Unit as of the Annuity Date to establish the number of
Annuity Units representing each annuity payment. The number of Annuity Units
determined for the first annuity payment remains constant for the second and
subsequent monthly payments.
FINANCIAL STATEMENTS
The financial statements of the Company included herein should be
considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts. The financial statements of the Separate
Account are also included in this Statement of Additional Information.
5
<PAGE> 41
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
First SunAmerica Life Insurance Company
In our opinion, the accompanying balance sheet and the related income statement
and statement of cash flows present fairly, in all material respects, the
financial position of First SunAmerica Life Insurance Company (the "Company") at
September 30, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1997, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 2, the financial statements for the year ended September
30, 1997 have been restated to reflect the merger of John Alden Life Insurance
Company of New York ("JANY") with and into the Company. The merger was accounted
for similar to a pooling of interest. The income statement includes the
operating results of JANY only for the period from April 1, 1997 (the date of
acquisition of JANY by SunAmerica Life Insurance Company, the direct parent of
the Company) through September 30, 1997. We have audited the adjustments that
were applied to restate the 1997 financial statements. In our opinion, such
adjustments are appropriate and have been properly applied to the 1997 financial
statements.
Price Waterhouse LLP
Los Angeles, California
March 25, 1998
6
<PAGE> 42
FIRST SUNAMERICA LIFE INSURANCE COMPANY
BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1996 1997 1997
------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Investments:
Cash and short-term investments...................... $ 6,707,000 $ 50,585,000 $ 71,060,000
Bonds and notes available for sale, at fair value
(amortized cost: September 1996, $146,908,000;
September 1997, $1,459,112,000; December 1997,
$1,368,509,000)................................... 146,401,000 1,499,253,000 1,407,942,000
Mortgage loans....................................... -- 131,117,000 130,023,000
Other invested assets................................ 129,000 9,277,000 7,982,000
------------ -------------- --------------
Total investments.................................... 153,237,000 1,690,232,000 1,617,007,000
Variable annuity assets................................ 68,901,000 171,475,000 194,892,000
Accrued investment income.............................. 1,462,000 22,243,000 19,524,000
Deferred acquisition costs............................. 12,127,000 96,516,000 93,087,000
Income taxes currently receivable...................... 299,000 -- --
Other assets........................................... 842,000 4,024,000 1,700,000
------------ -------------- --------------
TOTAL ASSETS........................................... $236,868,000 $1,984,490,000 $1,926,210,000
============ ============== ==============
</TABLE>
<TABLE>
LIABILITIES AND SHAREHOLDER'S EQUITY
<S> <C> <C> <C>
Reserves, payables and accrued liabilities:
Reserves for fixed annuity contracts................. $140,613,000 $1,556,656,000 $1,534,514,000
Payable to brokers for purchases of securities....... 1,939,000 12,460,000 --
Income taxes currently payable....................... -- 2,236,000 4,395,000
Other liabilities.................................... 845,000 68,601,000 13,933,000
------------ -------------- --------------
Total reserves, payables and accrued liabilities..... 143,397,000 1,639,953,000 1,552,842,000
------------ -------------- --------------
Variable annuity liabilities........................... 68,901,000 171,475,000 194,892,000
------------ -------------- --------------
Deferred income taxes.................................. 1,350,000 4,984,000 5,878,000
------------ -------------- --------------
Shareholder's equity:
Common Stock......................................... 3,000,000 3,000,000 3,000,000
Additional paid-in capital........................... 14,428,000 144,428,000 144,428,000
Retained earnings.................................... 5,973,000 14,826,000 19,099,000
Net unrealized gains (losses) on debt and equity
securities available for sale..................... (181,000) 5,824,000 6,071,000
------------ -------------- --------------
Total shareholder's equity........................... 23,220,000 168,078,000 172,598,000
------------ -------------- --------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY............. $236,868,000 $1,984,490,000 $1,926,210,000
============ ============== ==============
</TABLE>
See accompanying notes.
7
<PAGE> 43
FIRST SUNAMERICA LIFE INSURANCE COMPANY
INCOME STATEMENT
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, DECEMBER 31,
---------------------------------------- --------------------------
1995 1996 1997 1996 1997
----------- ----------- ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Investment income................... $ 7,834,000 $ 9,957,000 $ 65,559,000 $ 2,893,000 $ 29,882,000
Interest expense on:
Fixed annuity contracts........... (5,042,000) (7,155,000) (45,765,000) (2,257,000) (21,307,000)
Senior indebtedness............... (8,000) (4,000) (589,000) -- (28,000)
----------- ----------- ------------ ----------- ------------
Total interest expense.... (5,050,000) (7,159,000) (46,354,000) (2,257,000) (21,335,000)
----------- ----------- ------------ ----------- ------------
NET INVESTMENT INCOME............... 2,784,000 2,798,000 19,205,000 636,000 8,547,000
----------- ----------- ------------ ----------- ------------
NET REALIZED INVESTMENT GAINS
(LOSSES).......................... (1,348,000) (539,000) 5,020,000 459,000 2,075,000
----------- ----------- ------------ ----------- ------------
Fee Income:
Variable annuity fees............. 412,000 690,000 1,712,000 292,000 699,000
Surrender charges................. 194,000 221,000 1,809,000 56,000 954,000
----------- ----------- ------------ ----------- ------------
TOTAL FEE INCOME.................... 606,000 911,000 3,521,000 348,000 1,653,000
----------- ----------- ------------ ----------- ------------
GENERAL AND ADMINISTRATIVE
EXPENSES.......................... (1,004,000) (1,480,000) (3,222,000) (357,000) (944,000)
----------- ----------- ------------ ----------- ------------
AMORTIZATION OF DEFERRED ACQUISITION
COSTS............................. (300,000) (500,000) (10,386,000) (302,000) (4,026,000)
----------- ----------- ------------ ----------- ------------
ANNUAL COMMISSIONS.................. (33,000) (19,000) (195,000) (4,000) (112,000)
----------- ----------- ------------ ----------- ------------
PRETAX INCOME....................... 705,000 1,171,000 13,943,000 780,000 7,193,000
Income tax expense.................. (182,000) (448,000) (5,090,000) (316,000) (2,919,000)
----------- ----------- ------------ ----------- ------------
NET INCOME.......................... $ 523,000 $ 723,000 $ 8,853,0000 $ 464,000 $ 4,274,000
=========== =========== ============ =========== ============
</TABLE>
See accompanying notes
8
<PAGE> 44
FIRST SUNAMERICA LIFE INSURANCE COMPANY
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, DECEMBER 31,
----------------------------------------------- ----------------------------
1995 1996 1997 1996 1997
------------- ------------- --------------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................. $ 523,000 $ 723,000 $ 8,853,000 $ 464,000 $ 4,274,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Interest credited to:
Fixed annuity contracts.......... 5,042,000 7,155,000 45,765,000 2,257,000 21,307,000
Net realized investment (gains)
losses............................. 1,348,000 539,000 (5,020,000) (459,000) (2,075,000)
Accretion of net discounts on
investments........................ (394,000) (343,000) (1,070,000) (55,000) (543,000)
Amortization of goodwill.............. 58,000 58,000 58,000 15,000 14,000
Provision for deferred income taxes... 333,000 740,000 401,000 276,000 761,000
Change in:
Deferred acquisition costs................ (2,740,000) (5,736,000) (4,215,000) (2,700,000) (471,000)
Income taxes receivable/payable........... (418,000) (322,000) 2,535,000 40,000 2,159,000
Other, net.................................. (323,000) (254,000) (7,059,000) (192,000) 4,701,000
------------- ------------- --------------- ------------ -------------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES:............................... 3,429,000 2,560,000 40,248,000 (354,000) 30,127,000
------------- ------------- --------------- ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of:
Bonds and notes......................... (125,130,000) (124,681,000) (2,013,314,000) (32,592,000) (173,754,000)
Common stock............................ (112,000) -- -- -- (11,000)
Sales of:
Bonds and notes......................... 55,553,000 80,440,000 650,841,000 7,227,000 230,398,000
Mortgage loans.......................... -- -- 88,371,000 -- --
Common stock............................ -- -- 140,000 139,000 --
Redemptions and maturities of:
Bonds and notes......................... 21,369,000 11,514,000 1,142,900,000 608,000 23,953,000
Mortgage loans.......................... 35,000 4,736,000 13,520,000 -- 1,258,000
------------- ------------- --------------- ------------ -------------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES................................ (48,285,000) (27,991,000) (117,542,000) (24,618,000) 81,844,000
------------- ------------- --------------- ------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Premium receipts on fixed annuity
contracts............................... $ 51,681,000 $ 45,417,000 $ 131,711,000 $ 25,828,000 $ 30,790,000
Net exchanges from the fixed accounts of
variable annuity contracts.............. (87,000) (4,719,000) (22,346,000) (2,551,000) (11,632,000)
Withdrawal payments on fixed annuity
contracts............................... (14,131,000) (9,850,000) (88,229,000) (2,451,000) (55,669,000)
Claims and annuity payments on fixed
annuity contracts....................... (2,974,000) (3,752,000) (13,774,000) (932,000) (6,925,000)
Capital contributions..................... -- -- 5,000,000 -- --
Net receipts from (repayments of) other
short-term financings................... 1,964,000 (1,340,000) 23,429,000 (1,000) (13,284,000)
Cession of non-annuity product lines...... -- -- -- -- (34,776,000)
------------- ------------- --------------- ------------ -------------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES................................ 36,453,000 25,756,000 35,791,000 19,893,000 (91,496,000)
------------- ------------- --------------- ------------ -------------
NET INCREASE (DECREASE) IN CASH AND
SHORT-TERM INVESTMENTS.................... (8,403,000) 325,000 (41,503,000) (5,079,000) 20,475,000
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING
OF PERIOD................................. 14,785,000 6,382,000 6,707,000 6,707,000 50,585,000
------------- ------------- --------------- ------------ -------------
CASH AND SHORT-TERM INVESTMENTS OF MERGED
ENTITY AT DATE OF MERGER.................. -- -- 85,381,000 -- --
CASH AND SHORT-TERM INVESTMENTS AT END OF
PERIOD.................................... $ 6,382,000 $ 6,707,000 $ 50,585,000 $ 1,628,000 71,060,000
============= ============= =============== ============ =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid on indebtedness........... $ 8,000 $ 4,000 $ 589,000 $ -- $ 28,000
============= ============= =============== ============ =============
Net income taxes paid................... $ 254,000 $ 30,000 $ 2,154,000 $ -- $ 1,000
============= ============= =============== ============ =============
</TABLE>
See accompanying notes
9
<PAGE> 45
FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
First SunAmerica Life Insurance Company (The "Company") is a New York- domiciled
life insurance company engaged primarily in the business of writing fixed and
variable annuity contracts in the state of New York.
The operations of the Company are influenced by many factors, including general
economic conditions, monetary and fiscal policies of the federal government, and
policies of state and other regulatory authorities. The level of sales of the
Company's financial products is influenced by many factors, including general
market rates of interest; strengths, weaknesses and volatility of equity
markets; and terms and conditions of competing financial products. The Company
is exposed to the typical risks normally associated with a portfolio of
fixed-income securities, namely interest rate, option, liquidity and credit
risk. The Company controls its exposure to these risks by, among other things,
closely monitoring and matching the duration of its assets and liabilities,
monitoring and limiting prepayment and extension risk in its portfolio,
maintaining a large percentage of its portfolio in highly liquid securities, and
engaging in a disciplined process of underwriting, reviewing and monitoring
credit risk. The Company also is exposed to market risk, as market volatility
may result in reduced fee income in the case of assets held in separate
accounts.
2. MERGER
On March 31, 1997, SunAmerica Life Insurance Company, the direct parent of the
Company, completed the acquisition of all of the outstanding stock of John Alden
Life Insurance Company of New York ("JANY"). On October 31, 1997, JANY was
merged with and into the Company. On the date of acquisition, JANY had assets
having an aggregate fair value of $1,536,179,000, composed primarily of invested
assets totaling $1,403,807,000. Liabilities assumed in this acquisition totaled
$1,411,179,000, including $1,363,764,000 of fixed annuity reserves. An amount
equal to the excess of the purchase price over the fair value of the net assets
acquired, amounting to $103,695,000 at September 30, 1997, is included in
Deferred Acquisition Costs in the balance sheet. The parent accounted for the
acquisition by using the purchase method of accounting and all purchase
accounting adjustments were pushed down to the accounts of JANY. First
SunAmerica has accounted for the JANY merger by using the pooling method from
the date of acquisition. Accordingly, the income statement includes the
operating results of JANY only for the period from April 1, 1997 through
September 30, 1997. On a pro forma basis, assuming the acquisition and merger
had occurred on October 1, 1994, the beginning of the earliest period presented,
revenues (net investment income, net realized investment losses and fee income)
would have been $40,891,000, $29,768,000 and $18,508,000, and net income would
have been $12,434,000, $6,710,000 and $5,038,000 for the years ended September
30, 1997, 1996 and 1995, respectively.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The accompanying financial statements have been prepared
in accordance with generally accepted accounting principles and include the
accounts of the Company, an indirect wholly owned subsidiary of SunAmerica Inc.
(the "Parent"). Certain prior period amounts have been reclassified to conform
with the 1997 presentation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the amounts reported in the financial statements and the accompanying notes.
Actual results could differ from those estimates.
INVESTMENTS: Cash and short-term investments primarily include cash, commercial
paper, money market investments, repurchase agreements and short-term bank
participations. All such investments are carried at cost plus accrued interest,
which approximates fair value, have maturities of three months or less and are
considered cash equivalents for purposes of reporting cash flows.
Bonds and notes available for sale and common stocks are carried at aggregate
fair value and changes in unrealized gains or losses, net of tax, are credited
or charged directly to shareholder's equity. Bonds and notes are reduced to
estimated net realizable value when necessary for declines in value considered
to be other than temporary. Estimates of net realizable value are subjective and
actual realization will be dependent upon future events.
Mortgage loans are carried at amortized unpaid balances, net of provisions for
estimated losses. Other invested assets include real estate, which is carried at
the lower of cost or fair value, and policy loans, which are carried at unpaid
balances.
10
<PAGE> 46
FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Realized gains and losses on the sale of investments are recognized in
operations at the date of sale and are determined using the specific cost
identification method. Premiums and discounts on investments are amortized to
investment income using the interest method over the contractual lives of the
investments.
DEFERRED ACQUISITION COSTS: Policy acquisition costs are deferred and amortized,
with interest, in relation to the incidence of estimated gross profits to be
realized over the estimated lives of the annuity contracts. Estimated gross
profits are composed of net interest income, net realized investment gains and
losses, variable annuity fees, surrender charges and direct administrative
expenses. Deferred acquisition costs consist of commissions and other costs that
vary with, and are primarily related to, the production or acquisition of new
business.
As debt and equity securities available for sale are carried at aggregate fair
value, an adjustment is made to deferred acquisition costs equal to the change
in amortization that would have been recorded if such securities had been sold
at their stated aggregate fair value and the proceeds reinvested at current
yields. The change in this adjustment, net of tax, is included with the change
in net unrealized gains or losses on debt and equity securities available for
sale that is credited or charged directly to shareholder's equity. Deferred
Acquisition Costs have been decreased by $31,200,000 at September 30, 1997 and
increased by $100,000 at September 30, 1996 for this adjustment.
VARIABLE ANNUITY ASSETS AND LIABILITIES: The assets and liabilities resulting
from the receipt of variable annuity premiums are segregated in separate
accounts. The Company receives fees for assuming mortality and certain expense
risks. Such fees are included in Variable Annuity Fees in the income statement.
GOODWILL: Goodwill, amounting to $763,000 at September 30, 1997, is amortized by
using the straight-line method over a period of 25 years and is included in
Other Assets in the balance sheet. Goodwill is evaluated for impairment when
events or changes in economic conditions indicate that the carrying amount may
not be recoverable.
CONTRACTHOLDER RESERVES: Contractholder reserves for fixed annuity contracts are
accounted for as investment-type contracts in accordance with Statement of
Financial Accounting Standards No. 97, "Accounting and Reporting by Insurance
Enterprises for Certain Long-Duration Contracts and for Realized Gains and
Losses from the Sale of Investments," and are recorded at accumulated value
(premiums received, plus accrued interest, less withdrawals and assessed fees).
FEE INCOME: Variable annuity fees and surrender charges are recorded in income
as earned.
INCOME TAXES: The Company is included in the consolidated federal income tax
return of the Parent and files as a "life insurance company" under the
provisions of the Internal Revenue Code of 1986. Income taxes have been
calculated as if the Company filed a separate return. The Company will file a
separate tax return for the operations of JANY for the six months ended
September 30, 1997. Deferred income tax assets and liabilities are recognized
based on the difference between financial statement carrying amounts and income
tax bases of assets and liabilities using enacted income tax rates and laws.
11
<PAGE> 47
FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
4. INVESTMENTS
The amortized cost and estimated fair value of bonds and notes available for
sale by major category follow:
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED FAIR
COST VALUE
-------------- --------------
<S> <C> <C>
AT SEPTEMBER 30, 1997:
Securities of the United States Government............... $ 36,083,000 $ 36,950,000
Mortgage-backed securities............................... 487,585,000 501,683,000
Securities of public utilities........................... 50,855,000 53,018,000
Corporate bonds and notes................................ 754,322,000 775,073,000
Other debt securities.................................... 130,267,000 132,529,000
-------------- --------------
Total available for sale................................. $1,459,112,000 $1,499,253,000
============== ==============
AT SEPTEMBER 30, 1996:
Securities of the United States Government............... $ 9,631,000 $ 9,562,000
Mortgage-backed securities............................... 75,846,000 75,607,000
Securities of public utilities........................... 1,032,000 971,000
Corporate bonds and notes................................ 41,545,000 41,722,000
Other debt securities.................................... 18,854,000 18,539,000
-------------- --------------
Total available for sale................................. $ 146,908,000 $ 146,401,000
============== ==============
</TABLE>
The amortized cost and estimated fair value of bonds and notes available for
sale by contractual maturity, as of September 30, 1997, follow:
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED FAIR
COST VALUE
-------------- --------------
<S> <C> <C>
Due in one year or less.................................... $ 1,054,000 $ 1,056,000
Due after one year through five years...................... 251,938,000 256,383,000
Due after five years through ten years..................... 556,697,000 574,199,000
Due after ten years........................................ 161,838,000 165,932,000
Mortgage-backed securities................................. 487,585,000 501,683,000
-------------- --------------
Total available for sale................................... $1,459,112,000 $1,499,253,000
============== ==============
</TABLE>
Actual maturities of bonds and notes will differ from those shown above due to
prepayments and redemptions.
12
<PAGE> 48
FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
4. INVESTMENTS (CONTINUED)
Gross unrealized gains and losses on bonds and notes available for sale by major
category follow:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED
GAINS LOSSES
----------- -----------
<S> <C> <C>
AT SEPTEMBER 30, 1997:
Securities of the United States Government................ $ 867,000 $ --
Mortgage-backed securities................................ 14,177,000 (78,000)
Securities of public utilities............................ 2,163,000 --
Corporate bonds and notes................................. 21,181,000 (430,000)
Other debt securities..................................... 2,269,000 (8,000)
----------- -----------
Total available for sale.................................. $40,657,000 $ (516,000)
=========== ===========
AT SEPTEMBER 30, 1996:
Securities of the United States Government..... .......... $ 55,000 $ (124,000)
Mortgage-backed securities................................ 515,000 (754,000)
Securities of public utilities............................ -- (61,000)
Corporate bonds and notes................................. 749,000 (572,000)
Other debt securities..................................... 3,000 (318,000)
----------- -----------
Total available for sale $ 1,322,000 $(1,829,000)
=========== ===========
</TABLE>
At September 30, 1997, gross unrealized gains on equity securities available for
sale aggregated $19,000 and there were no unrealized losses. At September 30,
1996, gross unrealized gains on equity securities available for sale aggregated
$129,000 and there were no unrealized losses.
Gross realized investment gains and losses on sales of investments are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------------------
1997 1996 1995
---------- ---------- -----------
<S> <C> <C> <C>
BONDS AND NOTES:
Realized gains............................................ $6,441,000 $1,039,000 $ 423,000
Realized losses........................................... (1,466,000) (1,295,000) (1,771,000)
COMMON STOCKS:
Realized gains/losses..................................... 140,000 (112,000) --
MORTGAGE LOANS:
Realized gains/losses..................................... (15,000) -- --
IMPAIRMENT WRITEDOWNS....................................... (80,000) (171,000) --
---------- ---------- -----------
Total net realized investment gains/losses................ $5,020,000 $ (539,000) $(1,348,000)
========== ========== ===========
</TABLE>
The sources and related amounts of investment income are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------------------
1997 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
Short-term investments...................................... $ 1,334,000 $ 390,000 $1,045,000
Bonds and notes............................................. 56,253,000 9,186,000 6,291,000
Mortgage loans.............................................. 7,714,000 381,000 498,000
Other invested assets....................................... 258,000 -- --
----------- ---------- ----------
Total investment income................................... $65,559,000 $9,957,000 $7,834,000
=========== ========== ==========
</TABLE>
13
<PAGE> 49
FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
4. INVESTMENTS (CONTINUED)
Expenses incurred to manage the investment portfolio amounted to $387,000 for
the year ended September 30, 1997, $121,000 for the year ended September 30,
1996, and $125,000 for the year ended September 30, 1995 and are included in
General and Administrative Expenses in the income statement.
At September 30, 1997, no investment exceeded 10% of the Company's shareholder's
equity.
At September 30, 1997, bonds and notes included $91,130,000 (fair value of
$94,420,000) of bonds and notes not rated investment grade. The Company had no
material concentrations of non-investment-grade assets at September 30, 1997.
At September 30, 1997, mortgage loans were collateralized by properties located
in 29 states, with loans totaling approximately 13% of the aggregate carrying
value of the portfolio secured by properties located in Florida and
approximately 12% by properties located in New York. No more than 10% of the
portfolio was secured by properties in any other single state.
At September 30, 1997, the amortized cost of investments in default as to the
payment of principal or interest was $2,259,000, all of which were mortgage
loans. Such nonperforming investments had an estimated fair value equal to their
carrying value.
At September 30, 1997, $25,529,000 of bonds, at amortized cost, were on deposit
with regulatory authorities in accordance with statutory requirements.
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value disclosures are limited to reasonable
estimates of the fair value of only the Company's financial instruments. The
disclosures do not address the value of the Company's recognized and
unrecognized nonfinancial assets and liabilities or the value of anticipated
future business. The Company does not plan to sell most of its assets or settle
most of its liabilities at these estimated fair values.
The fair value of a financial instrument is the amount at which the instrument
could be exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. Selling expenses and potential taxes are not
included. The estimated fair value amounts were determined using available
market information, current pricing information and various valuation
methodologies. If quoted market prices were not readily available for a
financial instrument, management determined an estimated fair value.
Accordingly, the estimates may not be indicative of the amounts the financial
instruments could be exchanged for in a current or future market transaction.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
CASH AND SHORT-TERM INVESTMENTS: Carrying value is considered to be a reasonable
estimate of fair value.
BONDS AND NOTES: Fair value is based principally on independent pricing
services, broker quotes and other independent information.
MORTGAGE LOANS: Fair values are primarily determined by discounting future cash
flows to the present at current market rates, using expected prepayment rates.
VARIABLE ANNUITY ASSETS: Variable annuity assets are carried at the market value
of the underlying securities.
RESERVES FOR FIXED ANNUITY CONTRACTS: Deferred annuity contracts are assigned a
fair value equal to current net surrender value. Annuitized contracts are valued
based on the present value of future cash flows at current pricing rates.
PAYABLE TO BROKERS FOR PURCHASES OF SECURITIES: Such obligations represent net
transactions of a short-term nature for which the carrying value is considered a
reasonable estimate of fair value.
VARIABLE ANNUITY LIABILITIES: Fair values of contracts in the accumulation phase
are based on net surrender values. Fair values of contracts in the payout phase
are based on the present value of future cash flows at assumed investment rates.
14
<PAGE> 50
FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
5. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Company's financial instruments at September
30, 1997 and 1996, compared with their respective carrying values, are as
follows:
<TABLE>
<CAPTION>
CARRYING FAIR
VALUE VALUE
-------------- --------------
<S> <C> <C>
1997:
ASSETS:
Cash and short-term investments........................... $ 50,585,000 $ 50,585,000
Bonds and notes........................................... 1,499,253,000 1,499,253,000
Mortgage loans............................................ 131,117,000 136,648,000
Variable annuity assets................................... 171,475,000 171,475,000
LIABILITIES:
Reserves for fixed annuity contracts...................... 1,556,656,000 1,486,551,000
Payable to brokers for purchases of securities............ 12,460,000 12,460,000
Variable annuity liabilities.............................. 171,475,000 163,045,000
============== ==============
1996:
ASSETS:
Cash and short-term investments........................... $ 6,707,000 $ 6,707,000
Bonds and notes........................................... 146,401,000 146,401,000
Common stocks............................................. 129,000 129,000
Variable annuity assets................................... 68,901,000 68,901,000
LIABILITIES:
Reserves for fixed annuity contracts...................... 140,613,000 134,479,000
Payable to brokers for purchases of securities............ 1,939,000 1,939,000
Variable annuity liabilities.............................. 68,901,000 65,546,000
============== ==============
</TABLE>
6. CONTINGENT LIABILITIES
The Company is involved in various kinds of litigation common to its business.
These cases are in various stages of development and, based on reports of
counsel, management believes that provisions made for potential losses relating
to such litigation are adequate and any further liabilities and costs will not
have a material adverse impact upon the Company's financial position or results
of operations.
15
<PAGE> 51
FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
7. SHAREHOLDER'S EQUITY
The Company is authorized to issue 300 shares of its $10,000 par value Common
Stock. At September 30, 1997 and 1996, 300 shares were outstanding.
Changes in shareholder's equity are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
ADDITIONAL PAID-IN CAPITAL:
Beginning balance......................................... $ 14,428,000 $14,428,000 $14,428,000
Additional paid-in capital acquired as a result of the
merger with JANY....................................... 125,000,000 -- --
Capital contributions received............................ 5,000,000 -- --
------------ ----------- -----------
Ending balance............................................ $144,428,000 $14,428,000 $14,428,000
============ =========== ===========
RETAINED EARNINGS:
Beginning balance......................................... $ 5,973,000 $ 5,250,000 $ 4,727,000
Net income................................................ 8,853,000 723,000 523,000
------------ ----------- -----------
Ending balance............................................ $ 14,826,000 $ 5,973,000 $ 5,250,000
============ =========== ===========
NET UNREALIZED GAINS/LOSSES ON DEBT AND EQUITY SECURITIES
AVAILABLE FOR SALE:
Beginning balance......................................... $ (181,000) $ (860,000) $(2,340,000)
Change in net unrealized gains/losses on debt securities
available for sale..................................... 40,648,000 939,000 4,254,000
Change in net unrealized gains/losses on equity securities
available for sale..................................... (110,000) 206,000 (77,000)
Change in adjustment to deferred acquisition costs........ (31,300,000) (100,000) (1,900,000)
Tax effect of net changes................................. (3,233,000) (366,000) (797,000)
------------ ----------- -----------
Ending balance............................................ $ 5,824,000 $ (181,000) $ (860,000)
============ =========== ===========
</TABLE>
For a life insurance company domiciled in the State of New York, no dividend may
be distributed to any shareholder unless notice of the domestic insurer's
intention to declare such dividend and the amount have been filed with the
Superintendent of Insurance not less than 30 days in advance of such proposed
declaration, or if the Superintendent disapproves the distribution of the
dividend within the 30-day period. No dividends were paid in fiscal years 1997,
1996 or 1995.
Under statutory accounting principles utilized in filings with insurance
regulatory authorities, the Company's net income for the nine months ended
September 30, 1997 was $6,336,000. The statutory net loss for the year ended
December 31, 1996 was $450,000 and the statutory net loss for the year ended
December 31, 1995 was $2,083,000. The Company's statutory capital and surplus
was $79,169,000 at September 30, 1997, $13,126,000 at December 31, 1996 and
$13,862,000 at December 31, 1995.
16
<PAGE> 52
FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
8. INCOME TAXES
The components of the provisions for income taxes on pretax income consist of
the following:
<TABLE>
<CAPTION>
NET REALIZED
INVESTMENT
GAINS (LOSSES) OPERATIONS TOTAL
-------------- ---------- ----------
<S> <C> <C> <C>
1997:
Currently payable........................................... $1,790,000 $2,899,000 $4,689,000
Deferred.................................................... (11,000) 412,000 401,000
---------- ---------- ----------
Total income tax expense.......................... $1,779,000 $3,311,000 $5,090,000
========== ========== ==========
1996:
Currently payable $ (121,000) $ (171,000) $ (292,000)
Deferred (105,000) 845,000 740,000
---------- ---------- ----------
Total income tax expense $ (226,000) $ 674,000 $ 448,000
========== ========== ==========
1995:
Currently payable........................................... $ (592,000) $ 441,000 $ (151,000)
Deferred.................................................... (28,000) 361,000 333,000
---------- ---------- ----------
Total income tax expense.......................... $ (620,000) $ 802,000 $ 182,000
========== ========== ==========
</TABLE>
Income taxes computed at the United States federal income tax rate of 35% and
income taxes provided differ as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------
1997 1996 1995
---------- -------- --------
<S> <C> <C> <C>
Amount computed at statutory rate........................... $4,880,000 $410,000 $247,000
Increases (decreases) resulting from:
Amortization of differences between book and tax bases of
net assets acquired.................................... 20,000 20,000 20,000
State income taxes, net of federal tax benefit............ 200,000 25,000 (86,000)
Other, net................................................ (10,000) (7,000) 1,000
---------- -------- --------
Total income tax expense.......................... $5,090,000 $448,000 $182,000
========== ======== ========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax reporting purposes. The significant
components of the liability for Deferred Income Taxes are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1997 1996
------------ -----------
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Investments................................................. $ 891,000 $ 225,000
Deferred acquisition costs.................................. 30,144,000 3,902,000
Net unrealized gains on debt and equity securities available
for sale.................................................. 3,136,000 --
Other liabilities........................................... 125,000 84,000
------------ -----------
Total deferred tax liabilities.............................. 34,296,000 4,211,000
------------ -----------
DEFERRED TAX ASSETS:
Contractholder reserves..................................... (26,202,000) (2,582,000)
State income taxes.......................................... (80,000) (79,000)
Net unrealized losses on debt and equity securities
available for sale........................................ -- (97,000)
Other assets................................................ (3,030,000) (103,000)
------------ -----------
Total deferred tax assets................................... (29,312,000) (2,861,000)
------------ -----------
Deferred income taxes....................................... $ 4,984,000 $ 1,350,000
============ ===========
</TABLE>
17
<PAGE> 53
FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
9. RELATED PARTY MATTERS
The Company pays commissions to three affiliated companies, SunAmerica
Securities, Inc., Advantage Capital Corp. and Royal Alliance Associates, Inc.
These broker-dealers represent a significant portion of the Company's business,
amounting to approximately 38.9%, 57.9% and 31.2% of premiums in 1997, 1996 and
1995, respectively. Commissions paid to these broker-dealers totaled $4,486,000
in 1997, $2,646,000 in 1996, and $761,000 in 1995. No single unaffiliated
broker-dealer was responsible for more than 9% of total sales in the years ended
September 30, 1997, 1996, and 1995.
The Company paid occupancy and office services expenses to Royal Alliance
Associates, Inc. totaling $15,000 for the year ended September 30, 1996 and
$113,000 for the year ended September 30, 1995. The Company paid no such charges
in the year ended September 30, 1997.
The Company purchases administrative, investment management, accounting,
marketing and data processing services from SunAmerica Financial, Inc., whose
purpose is to provide services to the SunAmerica companies. Amounts paid for
such services totaled $2,454,000 for the year ended September 30, 1997,
$2,097,000 for the year ended September 30, 1996 and $722,000 for the year ended
September 30, 1995. Such amounts are included in General and Administrative
Expenses in the income statement.
18
<PAGE> 54
VARIABLE ANNUITY ACCOUNT ONE
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
FINANCIAL STATEMENTS
DECEMBER 31, 1997
19
<PAGE> 55
REPORT OF INDEPENDENT ACCOUNTANTS
February 26, 1998
To the Board of Directors of First SunAmerica Life Insurance Company and
the Contractholders of its separate account, Variable Annuity Account One
In our opinion, the accompanying statement of net assets, including the
schedule of portfolio investments, and the related statements of
operations and of changes in net assets present fairly, in all material
respects, the financial position of each of the Variable Accounts
constituting Variable Annuity Account One, a separate account of First
SunAmerica Life Insurance Company (the "Separate Account") at December 31,
1997, the results of their operations for the year then ended, and the
changes in their net assets for the two years then ended, in conformity
with generally accepted accounting principles. These financial statements
are the responsibility of the Separate Account's management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial statements
in accordance with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities owned at December
31, 1997 by correspondence with the custodian, provide a reasonable basis
for the opinion expressed above.
20
<PAGE> 56
VARIABLE ANNUITY ACCOUNT ONE
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
December 31, 1997
<TABLE>
<CAPTION>
Foreign Capital Natural Growth and
Securities Appreciation Growth Resources Income
Portfolio Portfolio Portfolio Portfolio Portfolio
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 700,644 $3,599,700 $3,408,953 $ 203,051 $ 965,748
Liabilities 0 0 0 0 0
------------------------------------------------------------------------------
Net Assets $ 700,644 $3,599,700 $3,408,953 $ 203,051 $ 965,748
==============================================================================
Accumulation units outstanding 49,753 82,226 63,077 11,485 33,513
==============================================================================
Unit value of accumulation units $ 14.08 $ 43.78 $ 54.05 $ 17.68 $ 28.81
==============================================================================
Strategic
Multi-Asset Multi-Asset
Portfolio Portfolio
---------- ----------
<S> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 476,353 $3,207,590
Liabilities 0 0
---------------------------
Net Assets $ 476,353 $3,207,590
===========================
Accumulation units outstanding 20,329 118,421
===========================
Unit value of accumulation units $ 23.43 $ 27.09
===========================
</TABLE>
See accompanying notes to financial statements.
21
<PAGE> 57
VARIABLE ANNUITY ACCOUNT ONE
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Government and Money
High Yield Target '98 Fixed Income Quality Bond Market
Portfolio Portfolio Portfolio Portfolio Portfolio TOTAL
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $ 631,034 $ 334,408 $ 211,753 $ 1,563,158 $ 97,747 $15,400,139
Liabilities 0 0 0 0 0 0
---------------------------------------------------------------------------------
Net Assets $ 631,034 $ 334,408 $ 211,753 $ 1,563,158 $ 97,747 $15,400,139
=================================================================================
Accumulation units outstanding 24,819 16,834 7,626 53,619 5,430
===================================================================
Unit value of accumulation units $ 25.42 $ 19.86 $ 27.76 $ 29.16 $ 18.00
===================================================================
</TABLE>
See accompanying notes to financial statements.
22
<PAGE> 58
VARIABLE ANNUITY ACCOUNT ONE
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
Market Value Market
Variable Accounts Shares Per Share Value Cost
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Foreign Securities Portfolio 61,449 $ 11.40 $ 700,644 $ 672,535
Capital Appreciation Portfolio 111,744 32.21 3,599,700 2,423,003
Growth Portfolio 126,052 27.04 3,408,953 2,653,634
Natural Resources Portfolio 14,080 14.42 203,051 209,738
Growth and Income Portfolio 56,348 17.14 965,748 759,105
Strategic Multi-Asset Portfolio 42,224 11.28 476,353 515,587
Multi-Asset Portfolio 237,225 13.52 3,207,590 3,117,544
High Yield Portfolio 75,338 8.38 631,034 639,407
Target '98 Portfolio 30,200 11.07 334,408 385,462
Fixed Income Portfolio 15,944 13.28 211,753 220,975
Government and Quality Bond Portfolio 111,950 13.96 1,563,158 1,558,685
Money Market Portfolio 97,747 1.00 97,747 97,747
--------------------------------
$15,400,139 $13,253,422
================================
</TABLE>
See accompanying notes to financial statements.
23
<PAGE> 59
VARIABLE ANNUITY ACCOUNT ONE
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
December 31, 1997
<TABLE>
<CAPTION>
Foreign Capital Natural
Securities Appreciation Growth Resources
Portfolio Portfolio Portfolio Portfolio
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 97,107 $ 311,107 $ 370,117 $ 21,218
-----------------------------------------------------------
Total investment income 97,107 311,107 370,117 21,218
-----------------------------------------------------------
Expenses:
Mortality risk charge (8,867) (32,939) (34,038) (3,224)
Expense risk charge (3,449) (12,810) (13,237) (1,254)
Administrative expense charge (1,478) (5,490) (5,673) (537)
-----------------------------------------------------------
Total expenses (13,794) (51,239) (52,948) (5,015)
-----------------------------------------------------------
Net investment income 83,313 259,868 317,169 16,203
-----------------------------------------------------------
Net realized gains (losses) from securities transactions:
Proceeds from shares sold 539,758 1,061,375 1,765,933 216,235
Cost of shares sold (448,578) (732,135) (1,377,951) (195,035)
-----------------------------------------------------------
Net realized gains (losses) from securities transactions 91,180 329,240 387,982 21,200
-----------------------------------------------------------
Net unrealized appreciation (depreciation) of investments:
Beginning of period 206,720 994,434 493,812 54,649
End of period 28,109 1,176,697 755,319 (6,687)
-----------------------------------------------------------
Change in net unrealized appreciation/depreciation
of investments (178,611) 182,263 261,507 (61,336)
-----------------------------------------------------------
Increase (decrease) in net assets from operations $ (4,118) $ 771,371 $ 966,658 $ (23,933)
===========================================================
Growth and Strategic
Income Multi-Asset Multi-Asset
Portfolio Portfolio Portfolio
-------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 17,458 $ 109,883 $ 543,009
-------------------------------------------
Total investment income 17,458 109,883 543,009
-------------------------------------------
Expenses:
Mortality risk charge (9,394) (5,714) (32,189)
Expense risk charge (3,654) (2,223) (12,518)
Administrative expense charge (1,566) (953) (5,365)
-------------------------------------------
Total expenses (14,614) (8,890) (50,072)
-------------------------------------------
Net investment income 2,844 100,993 492,937
-------------------------------------------
Net realized gains (losses) from securities transactions:
Proceeds from shares sold 571,707 340,871 1,507,846
Cost of shares sold (474,001) (337,990) (1,386,690)
-------------------------------------------
Net realized gains (losses) from securities transactions 97,706 2,881 121,156
-------------------------------------------
Net unrealized appreciation (depreciation) of investments:
Beginning of period 49,205 (15,105) 51,994
End of period 206,643 (39,234) 90,046
-------------------------------------------
Change in net unrealized appreciation/depreciation
of investments 157,438 (24,129) 38,052
-------------------------------------------
Increase (decrease) in net assets from operations $ 257,988 $ 79,745 $ 652,145
===========================================
</TABLE>
See accompanying notes to financial statements.
24
<PAGE> 60
VARIABLE ANNUITY ACCOUNT ONE
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Government and
High Yield Target '98 Fixed Income Quality Bond
Portfolio Portfolio Portfolio Portfolio
--------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 77,336 $ 38,198 $ 20,929 $ 119,641
--------------------------------------------------------
Total investment income 77,336 38,198 20,929 119,641
--------------------------------------------------------
Expenses:
Mortality risk charge (7,413) (4,043) (2,727) (17,527)
Expense risk charge (2,883) (1,573) (1,060) (6,816)
Administrative expense charge (1,236) (674) (454) (2,921)
--------------------------------------------------------
Total expenses (11,532) (6,290) (4,241) (27,264)
--------------------------------------------------------
Net investment income 65,804 31,908 16,688 92,377
--------------------------------------------------------
Net realized gains (losses) from securities transactions:
Proceeds from shares sold 470,444 296,353 234,100 1,207,096
Cost of shares sold (466,297) (328,983) (241,898) (1,215,593)
--------------------------------------------------------
Net realized gains (losses) from securities transactions 4,147 (32,630) (7,798) (8,497)
--------------------------------------------------------
Net unrealized appreciation (depreciation) of investments:
Beginning of period (15,997) (68,067) (20,710) (48,323)
End of period (8,373) (51,054) (9,222) 4,473
--------------------------------------------------------
Change in net unrealized appreciation/depreciation
of investments 7,624 17,013 11,488 52,796
--------------------------------------------------------
Increase (decrease) in net assets from operations $ 77,575 $ 16,291 $ 20,378 $ 136,676
========================================================
Money
Market
Portfolio TOTAL
--------------------------
<S> <C> <C>
Investment income:
Dividends and capital gains distributions $ 8,772 $ 1,734,775
--------------------------
Total investment income 8,772 1,734,775
Expenses:
Mortality risk charge (1,575) (159,650)
Expense risk charge (612) (62,089)
Administrative expense charge (262) (26,609)
--------------------------
Total expenses (2,449) (248,348)
--------------------------
Net investment income 6,323 1,486,427
--------------------------
Net realized gains (losses) from securities transactions:
Proceeds from shares sold 349,225 8,560,943
Cost of shares sold (349,225) (7,554,376)
--------------------------
Net realized gains (losses) from securities transactions 0 1,006,567
--------------------------
Net unrealized appreciation (depreciation) of investments:
Beginning of period 0 1,682,612
End of period 0 2,146,717
--------------------------
Change in net unrealized appreciation/depreciation
of investments 0 464,105
--------------------------
Increase (decrease) in net assets from operations $ 6,323 $ 2,957,099
==========================
</TABLE>
See accompanying notes to financial statements.
25
<PAGE> 61
VARIABLE ANNUITY ACCOUNT ONE
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
December 31, 1997
<TABLE>
<CAPTION>
Foreign Capital Natural
Securities Appreciation Growth Resources
Portfolio Portfolio Portfolio Portfolio
--------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 83,313 $ 259,868 $ 317,169 $ 16,203
Net realized gains (losses) from securities transactions 91,180 329,240 387,982 21,200
Change in net unrealized appreciation/depreciation
of investments (178,611) 182,263 261,507 (61,336)
--------------------------------------------------------
Increase (decrease) in net assets from operations (4,118) 771,371 966,658 (23,933)
--------------------------------------------------------
From capital transactions:
Net proceeds from units sold 21,594 37,788 24,945 22,187
Cost of units redeemed (456,770) (994,374) (1,646,641) (208,478)
Net transfers (35,194) 18,897 (50,802) (484)
--------------------------------------------------------
Decrease in net assets from capital transactions (470,370) (937,689) (1,672,498) (186,775)
--------------------------------------------------------
Decrease in net assets (474,488) (166,318) (705,840) (210,708)
Net assets at beginning of period 1,175,132 3,766,018 4,114,793 413,759
--------------------------------------------------------
Net assets at end of period $ 700,644 $ 3,599,700 $ 3,408,953 $ 203,051
--------------------------------------------------------
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Units sold 1,230 896 554 918
Units redeemed (30,472) (25,616) (34,186) (10,499)
Units transferred (2,481) 525 (1,193) (30)
--------------------------------------------------------
Decrease in units outstanding (31,723) (24,195) (34,825) (9,611)
Beginning units 81,476 106,421 97,902 21,096
--------------------------------------------------------
Ending units 49,753 82,226 63,077 11,485
========================================================
Growth and Strategic
Income Multi-Asset Multi-Asset
Portfolio Portfolio Portfolio
----------- ----------- -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 2,844 $ 100,993 $ 492,937
Net realized gains (losses) from securities transactions 97,706 2,881 121,156
Change in net unrealized appreciation/depreciation
of investments 157,438 (24,129) 38,052
-----------------------------------------
Increase (decrease) in net assets from operations 257,988 79,745 652,145
-----------------------------------------
From capital transactions:
Net proceeds from units sold 21,682 5,131 37,603
Cost of units redeemed (515,426) (280,149) (1,343,829)
Net transfers 77,290 (44,579) (28,503)
-----------------------------------------
Decrease in net assets from capital transactions (416,454) (319,597) (1,334,729)
-----------------------------------------
Decrease in net assets (158,466) (239,852) (682,584)
Net assets at beginning of period 1,124,214 716,205 3,890,174
-----------------------------------------
Net assets at end of period $ 965,748 $ 476,353 $ 3,207,590
-----------------------------------------
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Units sold 895 200 1,482
Units redeemed (19,691) (12,420) (53,436)
Units transferred 2,769 (1,903) (1,191)
-----------------------------------------
Decrease in units outstanding (16,027) (14,123) (53,145)
Beginning units 49,540 34,452 171,566
-----------------------------------------
Ending units 33,513 20,329 118,421
=========================================
</TABLE>
See accompanying notes to financial statements.
26
<PAGE> 62
VARIABLE ANNUITY ACCOUNT ONE
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Government and
High Yield Target '98 Fixed Income Quality Bond
Portfolio Portfolio Portfolio Portfolio
---------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 65,804 $ 31,908 $ 16,688 $ 92,377
Net realized gains (losses) from securities transactions 4,147 (32,630) (7,798) (8,497)
Change in net unrealized appreciation/depreciation
of investments 7,624 17,013 11,488 52,796
---------------------------------------------------------
Increase (decrease) in net assets from operations 77,575 16,291 20,378 136,676
---------------------------------------------------------
From capital transactions:
Net proceeds from units sold 3,450 13,771 6,918 4,916
Cost of units redeemed (437,856) (275,058) (222,809) (1,067,926)
Net transfers (1,756) 4,365 (7,557) 52,170
---------------------------------------------------------
Decrease in net assets from capital transactions (436,162) (256,922) (223,448) (1,010,840)
---------------------------------------------------------
Decrease in net assets (358,587) (240,631) (203,070) (874,164)
Net assets at beginning of period 989,621 575,039 414,823 2,437,322
---------------------------------------------------------
Net assets at end of period $ 631,034 $ 334,408 $ 211,753 $ 1,563,158
=========================================================
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Units sold 157 706 258 215
Units redeemed (17,968) (14,138) (8,468) (38,742)
Units transferred (77) 230 (283) 1,833
---------------------------------------------------------
Decrease in units outstanding (17,888) (13,202) (8,493) (36,694)
Beginning units 42,707 30,036 16,119 90,313
---------------------------------------------------------
Ending units 24,819 16,834 7,626 53,619
=========================================================
Money
Market
Portfolio TOTAL
---------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 6,323 $ 1,486,427
Net realized gains (losses) from securities transactions 0 1,006,567
Change in net unrealized appreciation/depreciation
of investments 0 464,105
---------------------------
Increase (decrease) in net assets from operations 6,323 2,957,099
---------------------------
From capital transactions:
Net proceeds from units sold 0 199,985
Cost of units redeemed (155,164) (7,604,480)
Net transfers 36,647 20,494
---------------------------
Decrease in net assets from capital transactions (118,517) (7,384,001)
---------------------------
Decrease in net assets (112,194) (4,426,902)
Net assets at beginning of period 209,941 19,827,041
---------------------------
Net assets at end of period $ 97,747 $ 15,400,139
---------------------------
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Units sold 0
Units redeemed (8,803)
Units transferred 2,143
------------
Decrease in units outstanding (6,660)
Beginning units 12,090
------------
Ending units 5,430
------------
</TABLE>
See accompanying notes to financial statements.
27
<PAGE> 63
VARIABLE ANNUITY ACCOUNT ONE
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
December 31, 1996
<TABLE>
<CAPTION>
Foreign Capital Natural Growth and
Securities Appreciation Growth Resources Income
Portfolio Portfolio Portfolio Portfolio Portfolio
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 441 $ 91,119 $ 128,542 $ 3,223 $ 48,621
Net realized gains (losses) from securities transactions 122,180 437,980 90,902 17,873 349
Change in net unrealized appreciation/depreciation
of investments 18,953 275,905 703,773 22,822 149,402
-------------------------------------------------------------------
Increase (decrease) in net assets from operations 141,574 805,004 923,217 43,918 198,372
-------------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 72,656 40,997 82,593 31,742 19,997
Cost of units redeemed (785,878) (1,582,302) (1,906,002) (124,789) (344,238)
Net transfers 33,284 725,436 23,348 61,808 117,567
-------------------------------------------------------------------
Decrease in net assets from capital transactions (679,938) (815,869) (1,800,061) (31,239) (206,674)
-------------------------------------------------------------------
Increase (decrease) in net assets (538,364) (10,865) (876,844) 12,679 (8,302)
Net assets at beginning of period 1,713,496 3,776,883 4,991,637 401,080 1,132,516
-------------------------------------------------------------------
Net assets at end of period $ 1,175,132 $ 3,766,018 $ 4,114,793 $ 413,759 $ 1,124,214
===================================================================
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Units sold 5,285 1,221 2,340 1,647 938
Units redeemed (56,705) (48,122) (51,274) (6,689) (16,332)
Units transferred 2,371 21,634 352 3,133 5,814
-------------------------------------------------------------------
Decrease in units outstanding (49,049) (25,267) (48,582) (1,909) (9,580)
Beginning units 130,525 131,688 146,484 23,005 59,120
-------------------------------------------------------------------
Ending units 81,476 106,421 97,902 21,096 49,540
===================================================================
Strategic
Multi-Asset Multi-Asset
Portfolio Portfolio
-------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 81,824 $ 338,574
Net realized gains (losses) from securities transactions (23,508) 6,175
Change in net unrealized appreciation/depreciation
of investments 66,004 137,058
-------------------------
Increase (decrease) in net assets from operations 124,320 481,807
-------------------------
From capital transactions:
Net proceeds from units sold 38,541 53,194
Cost of units redeemed (518,547) (1,599,522)
Net transfers 46,676 78,687
-------------------------
Decrease in net assets from capital transactions (433,330) (1,467,641)
-------------------------
Increase (decrease) in net assets (309,010) (985,834)
Net assets at beginning of period 1,025,215 4,876,008
-------------------------
Net assets at end of period $ 716,205 $ 3,890,174
-------------------------
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Units sold 2,013 2,654
Units redeemed (25,718) (76,228)
Units transferred 2,302 3,690
-------------------------
Decrease in units outstanding (21,403) (69,884)
Beginning units 55,855 241,450
-------------------------
Ending units 34,452 171,566
=========================
</TABLE>
See accompanying notes to financial statements.
28
<PAGE> 64
VARIABLE ANNUITY ACCOUNT ONE
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
December 31, 1996
(Continued)
<TABLE>
<CAPTION>
Government and
High Yield Target '98 Fixed Income Quality Bond
Portfolio Portfolio Portfolio Portfolio
---------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 99,980 $ 64,570 $ 31,202 $ 137,117
Net realized gains (losses) from securities transactions (11,840) (48,191) (26,302) (16,838)
Change in net unrealized appreciation/depreciation
of investments 27,120 (837) (14,150) (110,945)
---------------------------------------------------------
Increase (decrease) in net assets from operations 115,260 15,542 (9,250) 9,334
---------------------------------------------------------
From capital transactions:
Net proceeds from units sold 5,521 1,644 11,333 9,313
Cost of units redeemed (626,641) (671,884) (414,860) (1,267,417)
Net transfers 129,591 79,032 (92,348) (252,913)
---------------------------------------------------------
Decrease in net assets from capital transactions (491,529) (591,208) (495,875) (1,511,017)
---------------------------------------------------------
Increase (decrease) in net assets (376,269) (575,666) (505,125) (1,501,683)
Net assets at beginning of period 1,365,890 1,150,705 919,948 3,939,005
---------------------------------------------------------
Net assets at end of period $ 989,621 $ 575,039 $ 414,823 $ 2,437,322
=========================================================
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Units sold 311 61 429 323
Units redeemed (28,513) (35,739) (16,587) (48,405)
Units transferred 5,979 4,250 (3,847) (9,706)
---------------------------------------------------------
Decrease in units outstanding (22,223) (31,428) (20,005) (57,788)
Beginning units 64,930 61,464 36,124 148,101
---------------------------------------------------------
Ending units 42,707 30,036 16,119 90,313
=========================================================
Money
Market
Portfolio TOTAL
---------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 12,562 $ 1,037,775
Net realized gains (losses) from securities transactions 0 548,780
Change in net unrealized appreciation/depreciation
of investments 0 1,275,105
---------------------------
Increase (decrease) in net assets from operations 12,562 2,861,660
---------------------------
From capital transactions:
Net proceeds from units sold 167 367,698
Cost of units redeemed (198,089) (10,040,169)
Net transfers (95,011) 855,157
---------------------------
Decrease in net assets from capital transactions (292,933) (8,817,314)
---------------------------
Increase (decrease) in net assets (280,371) (5,955,654)
Net assets at beginning of period 490,312 25,782,695
---------------------------
Net assets at end of period $ 209,941 $ 19,827,041
---------------------------
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Units sold 30
Units redeemed (11,580)
Units transferred (5,601)
------------
Decrease in units outstanding (17,151)
Beginning units 29,241
------------
Ending units 12,090
============
</TABLE>
See accompanying notes to financial statements.
29
<PAGE> 65
VARIABLE ANNUITY ACCOUNT ONE
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Variable Annuity Account One of First SunAmerica Life Insurance Company
(the "Separate Account") is a segregated investment account of First
SunAmerica Life Insurance Company (the "Company"). The Company is an
indirect, wholly owned subsidiary of SunAmerica Inc. The Separate
Account is registered as a segregated unit investment trust pursuant to
the provisions of the Investment Company Act of 1940, as amended.
The Separate Account is composed of twelve variable portfolios (the
"Variable Accounts"). Each of the Variable Accounts is invested solely
in the shares of a designated portfolio of the Anchor Series Trust (the
"Trust"). The Trust is a diversified, open-end, affiliated investment
company, which retains an investment advisor to assist in the
investment activities of the Trust. The contractholder may elect to
have payments allocated to a guaranteed-interest fund of the Company
(the "General Account"), which is not a part of the Separate Account.
The financial statements include balances allocated by the
contractholder to the twelve Variable Accounts and do not include
balances allocated to the General Account.
The investment objectives and policies of the twelve portfolios of the
Trust are summarized below:
The FOREIGN SECURITIES PORTFOLIO seeks long-term capital appreciation.
This portfolio invests primarily in a diversified group of equity
securities issued by foreign companies and primarily denominated in
foreign currencies.
The CAPITAL APPRECIATION PORTFOLIO seeks long-term capital
appreciation. This portfolio invests in growth equity securities which
are widely diversified by industry and company and may engage in
transactions involving stock index futures and options thereon as a
hedge against changes in market conditions.
The GROWTH PORTFOLIO seeks capital appreciation. This portfolio invests
in growth equity securities and may engage in transactions involving
stock index futures and options thereon as a hedge against changes in
market conditions.
30
<PAGE> 66
VARIABLE ANNUITY ACCOUNT ONE
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The NATURAL RESOURCES PORTFOLIO seeks a total return in excess of the
U.S. rate of inflation as represented by the Consumer Price Index. This
portfolio invests primarily in equity securities of U.S. or foreign
companies which are expected to provide favorable returns in periods of
rising inflation.
The GROWTH AND INCOME PORTFOLIO seeks to provide high current income
and long-term capital appreciation. This portfolio invests primarily in
securities that provide the potential for growth and offer income, such
as dividend-paying stocks and securities convertible into common stock.
This portfolio may also engage in transactions involving stock index
futures and options thereon as a hedge against changes in market
conditions.
The STRATEGIC MULTI-ASSET PORTFOLIO seeks high long-term total
investment return. This portfolio invests in growth equity securities,
aggressive growth equity securities, investment grade bonds,
high-yield, high-risk bonds, international equity securities and money
market instruments. This portfolio may also engage in transactions
involving stock index futures contracts and options thereon, and
transactions involving the future delivery of fixed-income securities
("Financial Futures Contracts") and options thereon as a hedge against
changes in market conditions.
The MULTI-ASSET PORTFOLIO seeks long-term total investment return
consistent with moderate investment risk. This portfolio invests in
growth equity securities, convertible securities, investment grade
fixed-income securities and money market securities. This portfolio may
also engage in transactions involving stock index futures contracts and
options thereon, and Financial Futures Contracts and options thereon as
a hedge against changes in market conditions.
The HIGH YIELD PORTFOLIO seeks high current income. A secondary
investment objective is capital appreciation. This portfolio invests at
least 65% of its assets in high-yielding, high-risk, income-producing
corporate bonds, which generally carry ratings lower than those
assigned to investment grade bonds by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Corporation ("S&P"), or which are
unrated. This portfolio may also engage in transactions involving
Financial Futures Contracts and options thereon as a hedge against
changes in market conditions.
31
<PAGE> 67
VARIABLE ANNUITY ACCOUNT ONE
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The TARGET '98 PORTFOLIO seeks a predictable compounded investment
return for the specified time period, consistent with preservation of
capital. This portfolio invests primarily in zero coupon securities and
current, interest-bearing, investment grade debt obligations which are
issued by the U.S. Government, its agencies and instrumentalities, and
both domestic and foreign corporations. These investments will
generally mature no later than November 15, 1998. Accordingly,
effective January 1, 1998, no purchase payments or transfers into this
portfolio are being accepted.
The FIXED INCOME PORTFOLIO seeks a high level of current income
consistent with preservation of capital. This portfolio invests
primarily in investment grade, fixed-income securities and may engage
in Financial Futures Contracts and options thereon as a hedge against
changes in market conditions.
The GOVERNMENT AND QUALITY BOND PORTFOLIO seeks relatively high current
income, liquidity and security of principal. This portfolio invests in
obligations issued, guaranteed or insured by the U.S. Government, its
agencies or instrumentalities and in corporate debt securities rated Aa
or better by Moody's or AA or better by S&P.
The MONEY MARKET PORTFOLIO seeks current income consistent with
stability of principal through investment in a diversified portfolio of
money market instruments maturing in 397 days or less. The portfolio
will maintain a dollar-weighted average portfolio maturity of not more
than 90 days.
Purchases and sales of shares of the portfolios of the Trust are valued
at the net asset values of the shares on the date the shares are
purchased or sold. Dividends and capital gains distributions are
recorded when received. Realized gains and losses on the sale of
investments in the Trust are recognized at the date of sale and are
determined on an average cost basis.
Accumulation unit values are computed daily based on the total net
assets of the Variable Accounts.
32
<PAGE> 68
VARIABLE ANNUITY ACCOUNT ONE
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
2. CHARGES AND DEDUCTIONS
Charges and deductions are applied against the current value of the
Separate Account and are paid as follows:
WITHDRAWAL CHARGE: The contract value may be withdrawn at any time
during the accumulation period. There is a free withdrawal amount for
the first withdrawal during a contract year after the first contract
year. The free withdrawal amount is equal to 10% of aggregate purchase
payments that remain subject to the withdrawal charge and that have not
previously been withdrawn. Should a withdrawal exceed the free
withdrawal amount, a withdrawal charge, in certain circumstances, is
imposed and paid to the Company.
Withdrawal charges vary in amount depending upon the number of years
since the purchase payment being withdrawn was made. The withdrawal
charge is deducted from the remaining contract value so that the actual
reduction in contract value as a result of the withdrawal will be
greater than the withdrawal amount requested and paid. For purposes of
determining the withdrawal charge, withdrawals will be allocated to the
oldest purchase payments first so that all withdrawals are allocated to
purchase payments to which the lowest (if any) withdrawal charge
applies.
Any amount withdrawn which exceeds a free withdrawal may be subject to
a withdrawal charge in accordance with the withdrawal charge table
shown below:
<TABLE>
<CAPTION>
Years since Purchase Applicable Withdrawal
Payment Charge Percentage
-------------------- ---------------------
<S> <C>
First 5%
Second 4%
Third 3%
Fourth 2%
Fifth 1%
Sixth and beyond 0%
</TABLE>
33
<PAGE> 69
VARIABLE ANNUITY ACCOUNT ONE
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
2. CHARGES AND DEDUCTIONS (continued)
ANNUITY CHARGE: Contractholders may elect a lump sum payment or one of
three annuity options. Option 1 provides a life income with
installments guaranteed, Option 2 provides a joint and survivor
annuity, and Option 3 provides income for a specified period. No
annuity charge is assessed if Option 1 or Option 2 is elected. If a
contractholder elects Option 3, an annuity charge equal to the
withdrawal charge if the contract were surrendered may be applied. No
annuity charge will be assessed if Option 3 is elected by a beneficiary
under the death benefit.
RECORDS MAINTENANCE CHARGE: An annual records maintenance charge of $30
is charged against each contract, which reimburses the Company for
expenses incurred in establishing and maintaining records relating to a
contract. The records maintenance charge will be assessed on each
anniversary of the issue date of the contract. In the event that a
total surrender of contract value is made, the charge will be assessed
as of the date of surrender without proration.
TRANSFER FEE: A transfer fee of $25 per transaction is assessed on each
transfer of funds in excess of fifteen transactions within a contract
year or if a transfer is made within 30 days of the issue date of the
contract.
MORTALITY AND EXPENSE RISK CHARGE: The Company deducts mortality and
expense risk charges, which total to an annual rate of 1.25% of the net
asset value of each portfolio, computed on a daily basis. The mortality
risk charge is compensation for the mortality risks assumed by the
Company from its contractual obligations to make annuity payments after
the contract has annuitized for the life of the annuitant, to waive the
withdrawal charge in the event of the death of the annuitant and to
provide a death benefit if the annuitant dies prior to the date annuity
payments begin. The expense risk charge is compensation for the risk
assumed by the Company that the cost of administering the contracts
will exceed the amount received from the records maintenance charge and
the administrative expense charge. Both of the charges are guaranteed
by the Company and cannot be increased.
34
<PAGE> 70
VARIABLE ANNUITY ACCOUNT ONE
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
2. CHARGES AND DEDUCTIONS (continued)
ADMINISTRATIVE EXPENSE CHARGE: The Company deducts an administrative
expense charge at an annual rate of 0.15% of the net asset value of
each portfolio, computed on a daily basis. The administrative expense
charge is designed to cover those expenses which exceed the revenues
from the records maintenance charge.
SEPARATE ACCOUNT INCOME TAXES: The Company currently does not maintain
a provision for taxes, but has reserved the right to establish such a
provision for taxes in the future if it determines, in its sole
discretion, that it will incur a tax as a result of the operation of
the Separate Account.
3. INVESTMENT IN ANCHOR SERIES TRUST
The aggregate cost of the Trust's shares acquired and the aggregate
proceeds from shares sold during the year ended December 31, 1997
consist of the following:
<TABLE>
<CAPTION>
Cost of Shares Proceeds from
Variable Accounts Acquired Shares Sold
----------------- ---------------------------------
<S> <C> <C>
Foreign Securities Portfolio $ 152,701 $ 539,758
Capital Appreciation Portfolio 383,555 1,061,375
Growth Portfolio 410,603 1,765,933
Natural Resources Portfolio 45,664 216,235
Growth and Income Portfolio 158,096 571,707
Strategic Multi-Asset Portfolio 122,266 340,871
Multi-Asset Portfolio 666,053 1,507,846
High Yield Portfolio 100,086 470,444
Target '98 Portfolio 71,339 296,353
Fixed Income Portfolio 27,341 234,100
Government and Quality Bond
Portfolio 288,634 1,207,096
Money Market Portfolio 237,030 349,225
========== ==========
</TABLE>
35
<PAGE> 71
VARIABLE ANNUITY ACCOUNT ONE
OF
FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
4. FEDERAL INCOME TAXES
The Company qualifies for federal income tax treatment granted to life
insurance companies under subchapter L of the Internal Revenue Service
Code (the "Code"). The operations of the Separate Account are part of
the total operations of the Company and are not taxed separately. The
Separate Account is not treated as a regulated investment company under
the Code.
36
<PAGE> 72
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The following financial statements are included in Part A of the
Registration Statement:
None
The following financial statements are included in Part B of the
Registration Statement:
Financial Statements of First SunAmerica
Life Insurance Company for the fiscal year ended September 30,
1997
Financial Statements of Variable Annuity Account One for the
fiscal year ended December 31, 1997
<TABLE>
<CAPTION>
(b) Exhibits
- ----------------
<S> <C>
(1) Resolutions Establishing Separate Account...... Not Applicable
(2) Custody Agreements............................. Not Applicable
(3) (a) Distribution Contract...................... Not Applicable
(b) Form of Selling Agreement.................. Not Applicable
(4) Variable Annuity Contract...................... Not Applicable
(5) Application for Contract....................... Not Applicable
(6) Depositor - Corporate Documents
(a) Certificate of Incorporation............... Not Applicable
(b) By-Laws.................................... Not Applicable
(7) Reinsurance Contract........................... Not Applicable
(8) Fund Participation Agreement................... Not Applicable
(9) Opinion of Counsel............................. Not Applicable
Consent of Counsel............................. Not Applicable
(10) Consent of Independent Accountants............. Filed Herewith
(11) Financial Statements Omitted from Item 23...... None
(12) Initial Capitalization Agreement............... Not Applicable
(13) Performance Computations....................... Not Applicable
(14) Diagram and Listing of All Persons Directly
or Indirectly Controlled By or Under Common
Control with First SunAmerica Life Insurance
Company, the Depositor of Registrant........... Not Applicable
(15) Powers of Attorney............................. Not Applicable
(27) Financial Data Schedules....................... Not Applicable
</TABLE>
Item 25. Directors and Officers of the Depositor
The officers and directors of First SunAmerica Life Insurance Company
are listed below. Their principal business address is 1 SunAmerica Center, Los
Angeles, California 90067-6022, unless otherwise noted.
<TABLE>
<CAPTION>
Name Position
- ---- --------
<S> <C>
Eli Broad Chairman, President and
Chief Executive Officer
Jay S. Wintrob Director and Executive Vice
President
David W. Ferguson(1) Director
Thomas A. Harnett(2) Director
Lester Pollack(3) Director
Richard D. Rohr(4) Director
Margery K. Neale (5) Director
Jana W. Greer Director and Senior Vice
President
Peter McMillan Director
</TABLE>
<PAGE> 73
<TABLE>
<S> <C>
James R. Belardi Director and Senior Vice
President
Lorin M. Fife Director, Senior Vice
President, General Counsel
and Assistant Secretary
Susan L. Harris Director, Senior Vice
President and Secretary
Scott L. Robinson Director, Senior Vice
President and Treasurer
James W. Rowan Director and Senior Vice
President
N. Scott Gillis Senior Vice President and
Controller
Edwin R. Reoliquio Senior Vice President and
Chief Actuary
Victor E. Akin Senior Vice President
Keith B. Jones Vice President
Michael Lindquist Vice President
Gregory M. Outcalt Vice President
Scott H. Richland Vice President and
Assistant Treasurer
</TABLE>
- -----------------
(1) One Chase Manhattan Plaza, New York, New York 10005
(2) 99 Park Avenue, New York, New York 10063
(3) One Rockerfeller Plaza, Suite 1025, New York, New York 10020
(4) 100 Renaissance Center, 34th Floor, Detroit, Michigan 48243
(5) 919 Third Avenue, New York, New York 10022-9998
Item 26. Persons Controlled By or Under Common Control With Depositor or
Registrant
The Registrant is a separate account of First SunAmerica Life Insurance
Company (Depositor). For a complete listing and diagram of all persons directly
or indirectly controlled by or under common control with the Depositor or
Registrant, see Exhibit 14 incorporated herein by reference.
Item 27. Number of Contract Owners
As of December 31, 1997, the number of Contracts funded by the Variable
Annuity Account One of First SunAmerica Life Insurance Company was 506, of which
214 were Qualified Contracts and 292 were Nonqualified Contracts.
Item 28. Indemnification
None.
Item 29. Principal Underwriter
SunAmerica Capital Services, Inc. serves as distributor to the
Registrant.
Its principal business address is 733 Third Avenue, 4th Floor, New
York, New York 10017. The following are the directors and officers of SunAmerica
Capital Services, Inc.
<TABLE>
<CAPTION>
Name Position with Distributor
---- -------------------------
<S> <C>
J. Steven Neamtz Director and President
Robert M. Zakem Director, Executive Vice
President and Assistant
Secretary
Peter Harbeck Director
Gary W. Krat Director
Enrique Lopez-Balboa Vice President
Steven Rothstein Treasurer
Susan L. Harris Secretary
Lorin M. Fife Assistant Secretary
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
Net
Distribution Compensation
Name of Discounts and on Redemption Brokerage
Distributor Commissions Annuitization Commission Commissions*
- ------------ -------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
SunAmerica None None None None
Capital
Services, Inc.
</TABLE>
- ---------------
* The distribution fee is paid by First SunAmerica Life Insurance Company.
Item 30. Location of Accounts and Records
First SunAmerica Life Insurance Company, the Depositor for the
Registrant, is located at 733 Third Avenue, 4th Floor, New York, New York 10017.
SunAmerica Capital Services, Inc., the distributor of the Contracts, is located
at 733 Third Avenue, 4th Floor, New York, New York 10017. Each maintains those
accounts and records required to be maintained by it pursuant to Section 31(a)
of the Investment Company Act and the rules promulgated thereunder.
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02100, maintains certain accounts and records pursuant to the
instructions of the Registrant.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
Registrant undertakes to (1) file post-effective amendments to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old for so long as payments under the variable annuity Contracts may be
accepted; (2) include either (A) as part of any application to purchase a
Contract offered by the prospectus forming a part of the Registration Statement,
a space that an applicant can check to request a Statement of Additional
Information, or (B) a postcard or similar written communication affixed to or
included in the Prospectus that the Applicant can remove to send for a Statement
of Additional Information; and (3) deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form N-4 promptly upon written or oral request.
Further, Registrant undertakes to deduct mortality and expense risk
charges, distribution expense charges, withdrawal charges (contingent deferred
sales charges), contract maintenance fees and transfer fees that are in the
aggregate (1) reasonable in relation to the risks assumed by the Company and (2)
reasonable in relation to the risks assumed by the Company and (2) reasonable in
relation to the services rendered; and (3) reasonable in relation to the
expenses expected to be incurred. Those determinations are based on the
Company's analysis of publicly available information about similar industry
practices, and by taking into consideration factors such as current charge
levels and benefits provided, the existence of expense charge guarantees and
guaranteed annuity rates.
Item 33. Representation
The Company hereby represents that it is relying upon a No-Action
Letter issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been complied
with:
1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration
<PAGE> 75
statement, including the prospectus, used in connection with the offer
of the contract;
2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in
connection with the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase the
contract specifically to bring the redemption restrictions imposed by
Section 403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed
statement acknowledging the participant's understanding of (1) the
restrictions on redemption imposed by Section 403(b)(11), and (2) other
investment alternatives available under the employer's Section 403(b)
arrangement to which the participant may elect to transfer his contract
value.
<PAGE> 76
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant certifies that it meets the requirements of
Securities Act Rule 485 for effectiveness of this Registration Statement and
has caused this Post-Effective Amendment to the Registration Statement to be
signed on its behalf, in the City of Los Angeles, and the State of California,
on this 26th day of February, 1998.
VARIABLE ANNUITY ACCOUNT ONE
(Registrant)
By: FIRST SUNAMERICA LIFE INSURANCE COMPANY
(Depositor)
By: /s/ JAY S. WINTROB
----------------------------------------------
Jay S. Wintrob
Executive Vice President
By: FIRST SUNAMERICA LIFE INSURANCE COMPANY
(Depositor, on behalf of itself and Registrant)
By: /s/ JAY S. WINTROB
-----------------------------------------------
Jay S. Wintrob
Executive Vice President
As required by the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
ELI BROAD* President, Chief Executive
- --------------------- Officer, & Chairman of
Eli Broad Board
(Principal Executive Officer)
SCOTT L. ROBINSON* Senior Vice President,
- --------------------- Treasurer & Director
Scott L. Robinson (Principal Financial Officer)
N. SCOTT GILLIS* Senior Vice President &
- --------------------- Controller
N. Scott Gillis (Principal Accounting Officer)
JAMES R. BELARDI* Director
- ---------------------
James R. Belardi
DAVID W. FERGUSON* Director
- ---------------------
David W. Ferguson
LORIN M. FIFE* Director
- ---------------------
Lorin M. Fife
JANA W. GREER* Director
- ---------------------
Jana W. Greer
</TABLE>
<PAGE> 77
<TABLE>
<S> <C> <C>
THOMAS A. HARNETT* Director
- ---------------------
Thomas A. Harnett
MARGERY K. NEALE* Director
- ---------------------
Margery K. Neale
JAY S. WINTROB* Director
- ---------------------
Jay S. Wintrob
/s/ SUSAN L. HARRIS Director February 26, 1998
- ---------------------
Susan L. Harris
PETER MCMILLAN* Director
- ---------------------
Peter McMillan
JAMES W. ROWAN* Director
- ---------------------
James W. Rowan
LESTER POLLACK* Director
- ---------------------
Lester Pollack
RICHARD D. ROHR* Director
- ---------------------
Richard D. Rohr
*By:/s/ SUSAN L. HARRIS Attorney-in-Fact
-------------------
Susan L. Harris
Date: February 26, 1998
</TABLE>
<PAGE> 78
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
(10) Consent of Independent Accountants
</TABLE>
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in the Prospectus and Statement of Additional
Information constituting part of this Registration Statement on Form N-4 for
Variable Annuity Account One of First SunAmerica Life Insurance Company, of our
report dated March 25, 1998 relating to the financial statements of First
SunAmerica Life Insurance Company, and of our report dated February 26, 1998
relating to the financial statements of Variable Annuity Account One of First
SunAmerica Life Insurance Company, which appear in such Statement of Additional
Information. We also consent to the reference to us under the heading
"Independent Accountants" in such Statement of Additional Information.
PRICE WATERHOUSE LLP
Los Angeles, California
March 25, 1998
