<PAGE> 1
File Nos. 333-
811-3859
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. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No.
(Check appropriate box or boxes)
FS VARIABLE SEPARATE ACCOUNT
(Exact Name of Registrant)
First SunAmerica Life Insurance Company
(Name of Depositor)
1 SunAmerica Center
Los Angeles, California 90067-6022
(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
1 SunAmerica Center
Los Angeles, California 90067-6022
(Name and Address of Agent for Service)
Approximate date of commencement of proposed public offering: As soon as
practicable after the effective date of this registration.
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
_____ on (date) pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_____ on (date) pursuant to paragraph (a)(1) of Rule 485
The Registrant hereby elects pursuant to Rule 24f-2 under the Investment Company
Act of 1940 to register an indefinite amount of securities by this registration
statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that the Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
FS VARIABLE ANNUITY ACCOUNT FIVE
Cross Reference Sheet
PART A - PROSPECTUS
Item Number in Form N-4 Caption
- ----------------------- -------
1. Cover Page............................. Cover Page
2. Definitions............................ Glossary of Terms
3. Synopsis............................... Profile; The Polaris II
Variable Annuity; Fee
Tables; Examples
4. Condensed Financial Information........ Not applicable
5. General Description of Registrant,
Depositor and Portfolio Companies...... Investment Options;
Other Information
6. Deductions............................. Expenses
7. General Description of
Variable Annuity Contracts............. The Polaris II Variable
Annuity; Annuity Income
Options; Purchasing a
Polaris II Variable
Annuity; Access to Your
Money
8. Annuity Period......................... Annuity Income Options
9. Death Benefit.......................... Death Benefit
10. Purchases and Contract Value........... Purchasing a Polaris II
Variable Annuity; Access
to Your Money
11. Redemptions............................ Access to Your Money
12. Taxes.................................. Taxes
13. Legal Proceedings...................... Other Information
14. Table of Contents of Statement
of Additional Information.............. Other Information
<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.
Item Number in Form N-4 Caption
- ----------------------- -------
15. Cover Page............................. Cover Page
16. Table of Contents...................... Table of Contents
17. General Information and History........ Other Information(P)
18. Services............................... Expenses(P); Other
Information(P)
19. Purchase of Securities Being Offered... Purchasing a PolarisII
Annuity(P)
20. Underwriters........................... Other Information(P)
21. Calculation of Performance Data........ Performance Data
22. Annuity Payments....................... Annuity Income
Options(P); Annuity Unit
Values; Annuity Payments
23. Financial Statements................... Other Information(P)
<PAGE> 4
[POLARIS II LOGO]
P R O F I L E This profile is a summary of some of the more
important points that you should know and
consider before purchasing the Polaris II Variable Annuity.
The sections in this profile correspond to sections in the
accompanying prospectus which discuss the topics in more
, 1998 detail. The annuity is more fully described in the
prospectus. Please read the prospectus carefully.
1. THE POLARIS II VARIABLE ANNUITY
The Polaris II Variable Annuity is a contract between you and First
SunAmerica Life Insurance Company. It is designed to help you invest on a
tax-deferred basis and meet long-term financial goals, such as retirement
funding. Tax deferral means all your money, including the amount you would
otherwise pay in current income taxes, remains in your contract to generate
more earnings. Your money could grow faster than it would in a comparable
taxable investment.
Polaris II offers a diverse selection of money managers and investment
options. You may divide your money among any or all of our 25 variable
investment portfolios and 7 fixed investment options. Your investment is not
guaranteed. The value of your Polaris II contract can fluctuate up or down,
based on the performance of the underlying investments you select, and you
may experience a loss.
The variable investment portfolios offer professionally managed investment
choices with goals ranging from capital preservation to aggressive growth.
Your choices for the various investment options are found on the next page.
The contract also offers 7 fixed investment options, for different time
periods and each with a different interest rate that is guaranteed by First
SunAmerica.
Like most annuities, the contract has an Accumulation Phase and an Income
Phase. During the Accumulation Phase, you invest money in your contract.
Your earnings are based on the investment performance of the variable
investment portfolios to which your money is allocated and/or the interest
rate earned on the fixed investment options. You may withdraw money from
your contract during the Accumulation Phase. However, as with other
tax-deferred investments, you will pay taxes on earnings and untaxed
contributions when you withdraw them. An IRS tax penalty may apply if you
make withdrawals before age 59 1/2. During the Income Phase, you will
receive payments from your annuity. Your payments may be fixed in dollar
amount, vary with investment performance or a combination of both, depending
on where your money is allocated. Among other factors, the amount of money
you are able to accumulate in your contract during the Accumulation Phase
will determine the amount of your payments during the Income Phase.
2. ANNUITY INCOME OPTIONS
You can select from one of five annuity income options:
(1) payments for your lifetime;
(2) payments for your lifetime and your survivor's lifetime;
(3) payments for your lifetime and your survivor's lifetime, but for not
less than 10 years;
(4) payments for your lifetime, but for not less than 10 or 20 years; and
(5) payments for a specified period of 5 to 30 years.
You will also need to decide if you want your payments to fluctuate with
investment performance or remain constant, and the date on which your
payments will begin. Once you begin receiving payments, you cannot change
your annuity option. If your contract is part of a non-qualified retirement
plan (one that is established with after tax dollars), payments during the
Income Phase are considered partly a return of your original investment. The
"original investment" part of each payment is not taxable as income. For
contracts which are part of a qualified retirement plan using before-tax
dollars, the entire payment is taxable as income.
3. PURCHASING A POLARIS II VARIABLE
ANNUITY CONTRACT
You can buy a contract through your financial representative, who can also
help you complete the proper forms. For Non-qualified contracts, the minimum
initial investment is $5,000 and subsequent amounts of $500 or more may be
added to your contract at any time during the Accumulation Phase. For
Qualified contracts, the minimum initial investment is $2,000 and subsequent
amounts of $250 or more may be added to your contract at any time during the
Accumulation Phase.
<PAGE> 5
4. INVESTMENT OPTIONS
You may allocate money to the following variable investment portfolios of
the Anchor Series Trust and/or the SunAmerica Series Trust:
ANCHOR SERIES TRUST
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Capital Appreciation Portfolio
- Growth Portfolio
- Natural Resources Portfolio
- Government and Quality Bond Portfolio
SUNAMERICA SERIES TRUST
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Global Equities Portfolio
- Alliance Growth Portfolio
- Growth-Income Portfolio
MANAGED BY DAVIS SELECTED ADVISERS, L.P.
- Venture Value Portfolio
- Real Estate Portfolio
MANAGED BY FEDERATED INVESTORS
- Federated Value Portfolio
- Utility Portfolio
- Corporate Bond Portfolio
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT/
GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
- Asset Allocation Portfolio
- Global Bond Portfolio
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT INC.
- International Diversified Equities Portfolio
- Worldwide High Income Portfolio
MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
- Growth/Phoenix Investment Counsel Portfolio
- Balanced/Phoenix Investment Counsel Portfolio
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
- Putnam Growth Portfolio
- International Growth and Income Portfolio
- Emerging Markets Portfolio
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio
- SunAmerica Balanced Portfolio
- High-Yield Bond Portfolio
- Cash Management Portfolio
You may also allocate money to the 1, 3, 5, 7 and 10 year fixed investment
options and the 6-month and 1-year DCA account options. The interest rate
may differ from time to time but will never be less than 3%. Once
established, the rate will not change during the selected period. Your
contract value will be adjusted up or down for withdrawals or transfers from
the 3, 5, 7 and 10 year fixed investment options prior to the end of the
selected period.
5. EXPENSES
Each year, we deduct a $30 contract maintenance fee from your contract. This
fee is currently waived if the value of your contract is at least $50,000.
We also deduct insurance charges which equal 1.52% annually of the average
daily value of your contract allocated to the variable portfolios. The
insurance charges include: Mortality and Expense Risk, 1.37%, and
Distribution Expense, .15%.
As with other professionally managed investments, there are also investment
charges imposed on contracts with money allocated to the variable
portfolios, which are estimated to range from .62% to 1.90%.
If you take money out in excess of the amount allowed for in your contract,
you may be assessed a withdrawal charge which is a percentage of the money
you withdraw. The percentage declines with each year the money is in the
contract as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------
YEAR 1 2 3 4 5 6 7 8+
---------------------------------------------------
WITHDRAWAL
CHARGE 7% 6% 5% 4% 3% 2% 1% 0%
---------------------------------------------------
</TABLE>
Each year, you are allowed to make 15 transfers without charge. After your
first 15 free transfers, a $25 transfer fee will apply to each subsequent
transfer.
The following chart is designed to help you understand the charges in your
contract. The column "Total Annual Charges" shows the total of the 1.52%
insurance charges, the $30 contract maintenance fee and the investment
charges for each variable portfolio. We converted the contract maintenance
fee to a percentage using an assumed contract size of $40,000. The actual
impact of this charge on your contract may differ from this percentage.
The next two columns show two examples of the charges you would pay under
the contract. The examples assume that you invested $1,000 in a contract
which earns 5% annually and that you withdraw your money: (1) at the end of
year 1, and (2) at the end of year 10. The premium tax is assumed to be 0%
in both examples.
<PAGE> 6
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
EXAMPLES:
TOTAL ANNUAL TOTAL ANNUAL TOTAL EXPENSES TOTAL EXPENSES
INSURANCE INVESTMENT TOTAL ANNUAL AT END OF AT END OF
ANCHOR SERIES TRUST PORTFOLIO CHARGES CHARGES CHARGES 1 YEAR 10 YEARS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Appreciation 1.60% .75% 2.35% $ 24 $268
Growth 1.60% .81% 2.41% $ 24 $274
Natural Resources 1.60% .94% 2.54% $ 26 $287
Government and Quality Bond 1.60% .71% 2.31% $ 23 $264
- -----------------------------------------------------------------------------------------------------------------
SUNAMERICA SERIES TRUST PORTFOLIO
Emerging Markets 1.60% 1.90% 3.50% $ 35 $377
International Diversified
Equities 1.60% 1.59% 3.19% $ 32 $349
Global Equities 1.60% 1.03% 2.63% $ 27 $296
International Growth and
Income 1.60% 1.60% 3.20% $ 32 $350
Aggressive Growth 1.60% 1.05% 2.65% $ 27 $298
Real Estate 1.60% 1.25% 2.85% $ 29 $317
Putnam Growth 1.60% .90% 2.50% $ 25 $283
Growth/Phoenix 1.60% .74% 2.34% $ 24 $267
Alliance Growth 1.60% .71% 2.31% $ 23 $264
Venture Value 1.60% .85% 2.45% $ 25 $278
Federated Value 1.60% 1.05% 2.65% $ 27 $298
Growth-Income 1.60% .72% 2.32% $ 23 $265
Utility 1.60% 1.05% 2.65% $ 27 $298
Asset Allocation 1.60% .74% 2.34% $ 24 $267
Balanced/Phoenix 1.60% .84% 2.44% $ 25 $277
SunAmerica Balanced 1.60% 1.00% 2.60% $ 26 $293
Worldwide High Income 1.60% 1.18% 2.78% $ 28 $310
High-Yield Bond 1.60% .77% 2.37% $ 24 $270
Corporate Bond 1.60% .97% 2.57% $ 26 $290
Global Bond 1.60% .89% 2.49% $ 25 $282
Cash Management 1.60% .62% 2.22% $ 22 $255
-
-
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
For more detailed information, see the Fee Tables
and Examples in the prospectus.
6. TAXES
Unlike taxable investments where earnings are taxed in the year they are
earned, taxes on amounts earned in a Non-qualified contract (one that is
established with after tax dollars) are deferred until they are withdrawn.
In a Qualified contract (one that is established with before-tax dollars
like an IRA), all amounts are taxable when they are withdrawn.
When you begin taking distributions or withdrawals from your contract,
earnings are considered to be taken out first and will be taxed at your
ordinary income rate. You may be subject to a 10% IRS tax penalty for
distributions or withdrawals before age 59 1/2.
7. ACCESS TO YOUR MONEY
During the first year, you may withdraw free of a withdrawal charge an
amount that is equal to the penalty-free earnings in your contract as of the
date you make the withdrawal or, if you participate in the Systematic
Withdrawal Program, you may withdraw 10% of your total invested amount less
any withdrawals made during the year. The penalty-free earnings amount is
calculated by taking the value of your contract on the day you make the
withdrawal and subtracting your total invested amount. After the first year,
your maximum free withdrawal amount is the greater of: (1) the penalty-free
earnings or (2) 10% of your total invested amount that has been invested for
at least one year, less any withdrawals made during the year.
Withdrawals in excess of these limits will be assessed a withdrawal charge.
Withdrawals may be made from your contract in the amount of $1,000 or more.
You may request a withdrawal in writing or by establishing systematic
withdrawals. Under systematic withdrawals, the minimum withdrawal amount is
$250.
If you withdraw your entire contract value, you will not receive the benefit
of any free withdrawal amount. After your money has been in the contract for
seven full years, there are no withdrawal charges on that portion of the
money that you have invested for at least seven full years. Of course, you
may have to pay income tax and a 10% IRS tax penalty may apply if you are
under age 59 1/2. Additionally, withdrawal charges are not assessed when a
death benefit is paid.
<PAGE> 7
8. PERFORMANCE
As of the date of this prospectus, the sale of Polaris II contracts had
not begun. Therefore, no performance information is presented here.
9. DEATH BENEFIT
If you should die during the Accumulation Phase, your beneficiary will
receive a death benefit.
The death benefit is the greater of:
(1) the value of your contract,
(2) the money you put in less any withdrawals, or
(3) the maximum of the anniversary values up to your 81st birthday. The
anniversary value is equal to the value of your contract on the
contract anniversary less any withdrawals plus any additional money
you put in since that anniversary.
10. OTHER INFORMATION
FREE LOOK: You may cancel your contract within ten days by mailing it to
our Annuity Service Center. Your contract will be treated as void on the
date we receive it and we will pay you an amount equal to the value of the
variable portion of your contract plus any money you put into the fixed
investment options. This amount may be more or less than the money you
initially invested.
ASSET ALLOCATION REBALANCING: If selected by you, this program seeks to
keep your investment in line with your goals. We will maintain your
specified allocation mix in the variable investment portfolios and the
1-year fixed investment option by readjusting your money on a calendar
quarter, semiannual or annual basis.
SYSTEMATIC WITHDRAWAL PROGRAM: If selected by you, this program allows you
to receive either monthly, quarterly, semiannual or annual checks during
the Accumulation Phase. Systematic withdrawals may also be electronically
wired to your bank account. Of course, withdrawals may be taxable and a
10% IRS tax penalty may apply if you are under age 59 1/2.
DOLLAR COST AVERAGING: If selected by you, this program allows you to
invest gradually in the equity and bond portfolios from any of the
variable investment portfolios, the 1-year fixed investment option, the
6-month DCA account option or the 1-year DCA account option.
AUTOMATIC PAYMENT PLAN: You can add to your contract directly from your
bank account with as little as $20 per month.
CONFIRMATIONS AND QUARTERLY STATEMENTS: You will receive a confirmation of
each transaction within your contract. On a quarterly basis, you will
receive a complete statement of your transactions over the past quarter
and a summary of your account values.
11. INQUIRIES
If you have questions about your contract or need to make changes, call
your financial representative or contact us at:
First SunAmerica Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Telephone Number: (800) 99NY-SUN
If money accompanies your correspondence, you should direct it to:
First SunAmerica Life Insurance Company
P.O. Box 100357
Pasadena, California 91189-0357
<PAGE> 8
[POLARIS II LOGO]
PROSPECTUS
, 1998
<TABLE>
<S> <C> <C>
Please read this prospectus FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACTS
carefully before investing and issued by
keep it for future reference. FIRST SUNAMERICA LIFE INSURANCE COMPANY
It contains important in connection with
information about the FS VARIABLE SEPARATE ACCOUNT
Polaris II Variable Annuity. The annuity has 31 investment choices - 7 fixed investment options and
25 variable investment portfolios listed below. The 7 fixed investment
To learn more about the annuity options include specified periods of 1, 3, 5, 7 and 10 years and DCA
offered by this prospectus, you accounts for 6-month and 1-year periods. The 25 variable investment
can obtain a copy of the portfolios are part of the Anchor Series Trust or the SunAmerica
Statement of Additional Series Trust.
Information ("SAI") dated
, 1998. The SAI has ANCHOR SERIES TRUST:
been filed with the Securities MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
and Exchange Commission ("SEC") - Capital Appreciation Portfolio
and is incorporated by - Growth Portfolio
reference into this prospectus. - Natural Resources Portfolio
The Table of Contents of the - Government and Quality Bond Portfolio
SAI appears on page of this
prospectus. For a free copy of SUNAMERICA SERIES TRUST:
the SAI, call us at (800) MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
99NY-SUN or write to us at our - Global Equities Portfolio
Annuity Service Center, P.O. - Alliance Growth Portfolio
Box 54299, Los Angeles, - Growth-Income Portfolio
California 90054-0299. MANAGED BY DAVIS SELECTED ADVISERS, L.P.
- Venture Value Portfolio
In addition, the SEC maintains - Real Estate Portfolio
a website (http://www.sec.gov) MANAGED BY FEDERATED INVESTORS
that contains the SAI, - Federated Value Portfolio
materials incorporated by - Utility Portfolio
reference and other information - Corporate Bond Portfolio
filed electronically with the MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT/
SEC. GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
- Asset Allocation Portfolio
ANNUITIES INVOLVE RISKS, - Global Bond Portfolio
INCLUDING POSSIBLE LOSS OF MANAGED BY MORGAN STANLEY ASSET MANAGEMENT INC.
PRINCIPAL, AND ARE NOT A - International Diversified Equities Portfolio
DEPOSIT OR OBLIGATION OF, OR - Worldwide High Income Portfolio
GUARANTEED OR ENDORSED BY, ANY MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
BANK. THEY ARE NOT FEDERALLY - Growth/Phoenix Investment Counsel Portfolio
INSURED BY THE FEDERAL DEPOSIT - Balanced/Phoenix Investment Counsel Portfolio
INSURANCE CORPORATION, THE MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
FEDERAL RESERVE BOARD OR ANY - Putnam Growth Portfolio
OTHER AGENCY. - International Growth and Income Portfolio
- Emerging Markets Portfolio
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio
- SunAmerica Balanced Portfolio
- High-Yield Bond Portfolio
- Cash Management Portfolio
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 9
================================================================================
TABLE OF CONTENTS
================================================================================
<TABLE>
<S> <C> <C>
GLOSSARY............................................ 3
FEE TABLES.......................................... 4
Owner Transaction Expenses.................... 4
Annual Separate Account Expenses.............. 4
Portfolio Expenses............................ 4
EXAMPLES............................................ 5
1. THE POLARIS II VARIABLE ANNUITY............... 6
2. ANNUITY INCOME OPTIONS........................ 6
Allocation of Annuity Payments................ 7
Annuity Payments.............................. 7
Transfers During the Income Phase............. 7
Deferment of Payments......................... 7
3. PURCHASING A POLARIS II VARIABLE
ANNUITY CONTRACT.............................. 7
Allocation of Purchase Payments............... 7
Accumulation Units............................ 8
Free Look..................................... 8
4. INVESTMENT OPTIONS............................ 8
Variable Investment Options................... 8
Anchor Series Trust........................... 8
SunAmerica Series Trust....................... 8
Fixed Investment Options...................... 9
Market Value Adjustment....................... 9
Transfers During the Accumulation Phase....... 9
Dollar Cost Averaging Program................. 10
Asset Allocation Rebalancing Program.......... 10
Principal Advantage Program................... 11
Voting Rights................................. 11
Substitution.................................. 11
5. EXPENSES...................................... 11
Insurance Charges............................. 11
Mortality and Expense Risk Charge............. 11
Distribution Expense Charge................... 11
Withdrawal Charges............................ 11
Investment Charges............................ 12
Contract Maintenance Fee...................... 12
Transfer Fee.................................. 12
Income Taxes.................................. 12
Reduction or Elimination of Certain Charges... 12
6. TAXES......................................... 12
Annuity Contracts in General.................. 12
Tax Treatment of Distributions -
Non-Qualified Contracts....................... 12
Tax Treatment of Distributions -
Qualified Contracts........................... 13
Diversification............................... 13
7. ACCESS TO YOUR MONEY.......................... 13
Systematic Withdrawal Program................. 14
Minimum Contract Value........................ 14
8. PERFORMANCE................................... 14
9. DEATH BENEFIT................................. 14
10. OTHER INFORMATION............................. 15
First SunAmerica.............................. 15
The Separate Account.......................... 15
The General Account........................... 15
Distribution.................................. 15
Administration................................ 15
Legal Proceedings............................. 16
Custodian..................................... 16
Additional Information........................ 16
Selected Consolidated Financial Data.......... 17
Management Discussion and Analysis............ 18
Properties.................................... 18
Directors and Executive Officers.............. 19
Executive Compensation........................ 20
Security Ownership of Owners and Management... 20
State Regulation.............................. 20
Independent Accountants....................... 20
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL
INFORMATION......................................... 21
FINANCIAL STATEMENTS................................ 21
APPENDIX A -- MARKET VALUE ADJUSTMENT............... 23
</TABLE>
2
<PAGE> 10
================================================================================
GLOSSARY
================================================================================
We have capitalized some of the technical terms used in this prospectus. To help
you understand these terms, we have defined them in this glossary.
ACCUMULATION PHASE - The period during which you invest money in your contract.
ACCUMULATION UNITS - A measurement we use to calculate the value of the variable
portion of your contract during the Accumulation Phase.
ANNUITANT(S) - The person(s) on whose life (lives) we base annuity payments.
ANNUITY DATE - The date on which annuity payments are to begin, as selected by
you.
ANNUITY UNITS - A measurement we use to calculate the amount of annuity payments
you receive from the variable portion of your contract during the Income Phase.
BENEFICIARY (IES) - The person(s) designated to receive any benefits under the
contract if you or the Annuitant dies.
INCOME PHASE - The period during which we make annuity payments to you.
IRS - The Internal Revenue Service.
NON-QUALIFIED (CONTRACT) - A contract purchased with after-tax dollars. In
general, these contracts are not under any pension plan, specially sponsored
program or individual retirement account ("IRA").
PORTFOLIO(S) - The variable investment options available under the contract.
Each Portfolio has its own investment objective and is invested in the
underlying investments of the Anchor Series Trust or the SunAmerica Series
Trust.
PURCHASE PAYMENTS - The money you give us to buy the contract, as well as any
additional money you give us to invest in the contract after you own it.
QUALIFIED (CONTRACT) - A contract purchased with pretax dollars. These contracts
are generally purchased under a pension plan, specially sponsored program or
individual retirement account ("IRA").
TRUSTS - Refers to the Anchor Series Trust and the SunAmerica Series Trust
collectively.
3
<PAGE> 11
================================================================================
FEE TABLES
================================================================================
OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C> <C>
WITHDRAWAL CHARGE (AS A PERCENTAGE OF EACH PURCHASE PAYMENT)
Year 1..................... 7% Year 5..................... 3%
Year 2..................... 6% Year 6..................... 2%
Year 3..................... 5% Year 7..................... 1%
Year 4..................... 4% Year 8+.................... 0%
TRANSFER FEE................... No charge for first 15 transfers
each year; thereafter, fee is
$25
CONTRACT MAINTENANCE FEE*...... $30
*waived if contract value is $50,000 or more
</TABLE>
ANNUAL SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge................ 1.37%
Distribution Expense Charge...................... 0.15%
-----
TOTAL SEPARATE ACCOUNT EXPENSES 1.52%
======
</TABLE>
PORTFOLIO EXPENSES
ANCHOR SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S TWELVE-MONTH PERIOD ENDED
NOVEMBER 30, 1996)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
<S> <C> <C> <C>
============================================================================================================
Capital Appreciation .67% .08% .75%*
------------------------------------------------------------------------------------------------------------
Growth .73% .08% .81%*
------------------------------------------------------------------------------------------------------------
Natural Resources .75% .19% .94%*
------------------------------------------------------------------------------------------------------------
Government and Quality Bond .62% .09% .71%*
============================================================================================================
</TABLE>
SUNAMERICA SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S FISCAL YEAR ENDED
NOVEMBER 30, 1996)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
<S> <C> <C> <C>
============================================================================================================
Emerging Markets** 1.25% .65% 1.90%
------------------------------------------------------------------------------------------------------------
International Diversified Equities 1.00% .59% 1.59%
------------------------------------------------------------------------------------------------------------
Global Equities .80% .23% 1.03%
------------------------------------------------------------------------------------------------------------
International Growth and Income** 1.00% .60% 1.60%
------------------------------------------------------------------------------------------------------------
Aggressive Growth .75% .30% 1.05%*
------------------------------------------------------------------------------------------------------------
Real Estate** .80% .45% 1.25%
------------------------------------------------------------------------------------------------------------
Putnam Growth*** .82% .08% .90%
------------------------------------------------------------------------------------------------------------
Growth/Phoenix .66% .08% .74%
------------------------------------------------------------------------------------------------------------
Alliance Growth .64% .07% .71%
------------------------------------------------------------------------------------------------------------
Venture Value .77% .08% .85%
------------------------------------------------------------------------------------------------------------
Federated Value .75% .30% 1.05%*
------------------------------------------------------------------------------------------------------------
Growth-Income .64% .08% .72%
------------------------------------------------------------------------------------------------------------
Utility .75% .30% 1.05%*
------------------------------------------------------------------------------------------------------------
Asset Allocation .65% .09% .74%
------------------------------------------------------------------------------------------------------------
Balanced/Phoenix .70% .14% .84%
------------------------------------------------------------------------------------------------------------
SunAmerica Balanced .70% .30% 1.00%*
------------------------------------------------------------------------------------------------------------
Worldwide High Income 1.00% .18% 1.18%
------------------------------------------------------------------------------------------------------------
High-Yield Bond .68% .09% .77%
------------------------------------------------------------------------------------------------------------
Corporate Bond .70% .27% .97%
------------------------------------------------------------------------------------------------------------
Global Bond .73% .16% .89%
------------------------------------------------------------------------------------------------------------
Cash Management .54% .08% .62%
============================================================================================================
</TABLE>
* Annualized
** The percentages are based on estimated amounts for the current fiscal year.
*** As of April 16, 1997, the Provident Growth Portfolio was renamed the Putnam
Growth Portfolio, managed by Putnam Investment Management, Inc. The expenses
shown here are those of the former Provident Growth Portfolio managed by
Provident Investment Counsel.
THE ABOVE PORTFOLIO EXPENSES WERE PROVIDED BY THE TRUSTS. WE HAVE NOT
INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
4
<PAGE> 12
================================================================================
EXAMPLES
================================================================================
You will pay the following expenses on a $1,000 investment in each Portfolio,
assuming a 5% annual return on assets and:
(a) surrender of the contract at the end of the stated time period;
(b) if the contract is not surrendered or annuitized.
<TABLE>
<CAPTION>
<S> <C> <C>
PORTFOLIO 1 YEAR 3 YEARS
================================================================================
Capital Appreciation (a) $ 94 (a)$123
(b) $ 24 (b)$ 73
- ----------------------------------------------------------------
Growth (a) $ 94 (a)$125
(b) $ 24 (b)$ 75
- ----------------------------------------------------------------
Natural Resources (a) $ 96 (a)$129
(b) $ 26 (b)$ 79
- ----------------------------------------------------------------
Government and Quality Bond (a) $ 93 (a)$122
(b) $ 23 (b)$ 72
- ----------------------------------------------------------------
Emerging Markets (a) $105 (a)$157
(b) $ 35 (b)$107
- ----------------------------------------------------------------
International Diversified Equities (a) $102 (a)$148
(b) $ 32 (b)$ 98
- ----------------------------------------------------------------
Global Equities (a) $ 97 (a)$132
(b) $ 27 (b)$ 82
- ----------------------------------------------------------------
International Growth and Income (a) $102 (a)$148
(b) $ 32 (b)$ 98
- ----------------------------------------------------------------
Aggressive Growth (a) $ 97 (a)$132
(b) $ 27 (b)$ 82
- ----------------------------------------------------------------
Real Estate (a) $ 99 (a)$138
(b) $ 29 (b)$ 88
- ----------------------------------------------------------------
Putnam Growth (a) $ 95 (a)$128
(b) $ 25 (b)$ 78
- ----------------------------------------------------------------
Growth/Phoenix Investment Counsel (a) $ 94 (a)$123
(b) $ 24 (b)$ 73
- ----------------------------------------------------------------
Alliance Growth (a) $ 93 (a)$122
(b) $ 23 (b)$ 72
Venture Value (a) $ 95 (a)$126
(b) $ 25 (b)$ 76
- ----------------------------------------------------------------
Federated Value (a) $ 97 (a)$132
(b) $ 27 (b)$ 82
- ----------------------------------------------------------------
Growth-Income (a) $ 93 (a)$122
(b) $ 23 (b)$ 72
- ----------------------------------------------------------------
Utility (a) $ 97 (a)$132
(b) $ 27 (b)$ 82
- ----------------------------------------------------------------
Asset Allocation (a) $ 94 (a)$123
(b) $ 24 (b)$ 73
- ----------------------------------------------------------------
Balanced/Phoenix Investment Counsel (a) $ 95 (a)$126
(b) $ 25 (b)$ 76
- ----------------------------------------------------------------
SunAmerica Balanced (a) $ 96 (a)$131
(b) $ 26 (b)$ 81
- ----------------------------------------------------------------
Worldwide High Income (a) $ 98 (a)$136
(b) $ 28 (b)$ 86
- ----------------------------------------------------------------
High-Yield Bond (a) $ 94 (a)$124
(b) $ 24 (b)$ 74
- ----------------------------------------------------------------
Corporate Bond (a) $ 96 (a)$130
(b) $ 26 (b)$ 80
- ----------------------------------------------------------------
Global Bond (a) $ 95 (a)$127
(b) $ 25 (b)$ 77
- ----------------------------------------------------------------
Cash Management (a) $ 92 (a)$119
(b) $ 22 (b)$ 69
- ----------------------------------------------------------------
</TABLE>
================================================================================
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you would
incur directly and indirectly by investing in the contract.
2. For certain Portfolios, the adviser, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or reimburse certain expenses, if
necessary, to keep annual operating expenses at or below the lesser of the
maximum allowed by any applicable state expense limitations or the following
percentages of each Portfolio's average net assets: Aggressive Growth
(1.05%); Federated Value (1.05%); SunAmerica Balanced (1.00); Utility
(1.05%); Emerging Markets (1.90%); International Growth and Income (1.60%);
and Real Estate (1.25%). The adviser also may voluntarily waive or reimburse
additional amounts to increase a Portfolio's investment return. All waivers
and/or reimbursements may be terminated at any time. Furthermore, the
adviser may recoup any waivers or reimbursements within the following two
years, provided that the Portfolio is able to make such payment and remain
in compliance with the foregoing expense limitations.
3. The Examples assume that no transfer fees were imposed. Although premium
taxes may apply in certain states, they are not reflected in the Examples.
4. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
AS OF THE DATE OF THIS PROSPECTUS, THE SALE OF POLARIS II CONTRACTS HAD NOT
BEGUN AND THE PORTFOLIOS DID NOT HAVE ANY ASSETS. THEREFORE, NO CONDENSED
FINANCIAL INFORMATION IS PRESENTED HERE.
5
<PAGE> 13
==============================================================================
1. THE POLARIS II VARIABLE ANNUITY
==============================================================================
An annuity is a contract between you, as the owner, and an insurance company.
The contract provides tax deferral for your earnings, as well as a death benefit
and a guaranteed income in the form of annuity payments beginning on a date you
select. Until you decide to begin receiving annuity payments, your annuity is in
the Accumulation Phase. Once you begin receiving annuity payments, your contract
switches to the Income Phase. If you die during the Accumulation Phase, the
insurance company guarantees a death benefit to your Beneficiary.
The Polaris II Variable Annuity Contract is issued by First SunAmerica Life
Insurance Company ("First SunAmerica"), a stock life insurance company organized
under the laws of the state of New York. Its principal business address is 733
Third Avenue, 4th Floor, New York, New York 10017. First SunAmerica conducts
life insurance and annuity business in the state of New York. First SunAmerica
is an indirect wholly owned subsidiary of SunAmerica Inc., a Maryland
corporation.
During the Accumulation Phase, the value of your annuity benefits from tax
deferral. This means your earnings accumulate on a tax-deferred basis until you
take money out of your contract. The Income Phase occurs if you decide to
receive annuity payments. You select the date on which annuity payments are to
begin.
The contract is called a variable annuity because you can choose among 25
variable investment Portfolios. Depending upon market conditions, you can make
or lose money in any of these Portfolios. If you allocate money to the
Portfolios, the amount of money you are able to accumulate in your contract
during the Accumulation Phase depends upon the investment performance of the
Portfolio(s) you select. The amount of the annuity payments you receive during
the Income Phase from the variable portion of your contract also depends upon
the investment performance of the Portfolios you select for the Income Phase.
The contract also contains 7 fixed investment options. Your money will earn
interest at the rate set by First SunAmerica. The interest rate is guaranteed by
First SunAmerica for the time you agree to leave your money in the fixed
investment option. We currently offer fixed investment options for 1, 3, 5, 7
and 10 year periods and DCA account options for 6-month and 1-year periods. If
you allocate money to the fixed investment options, the amount of money you are
able to accumulate in your contract during the Accumulation Phase depends upon
the total interest credited to your contract. An adjustment to your contract
will apply to withdrawals or transfers from the 3, 5, 7 and 10 year fixed
investment options prior to the end of the selected period. The amount of
annuity payments you receive during the Income Phase from the fixed portion of
your contract will remain level for the entire Income Phase.
================================================================================
2. ANNUITY INCOME OPTIONS
================================================================================
When you switch to the Income Phase, you will receive regular income payments
under the contract. Annuity payments will be made on a monthly, quarterly,
semiannual or annual basis. You can choose to have your annuity payments sent to
you by check or electronically wired to your bank.
You select the date on which annuity payments are to begin, which must be the
first day of a month and must be at least two years after the date your contract
is issued. We call this the Annuity Date. You may change your Annuity Date at
least seven days prior to the date that your payments are to begin. However,
annuity payments must begin by your 90th birthday. If no Annuity Date is
selected, annuity payments will begin on your 90th birthday. If the Annuity Date
is past your 85th birthday, it is possible that the contract would not be
treated as an annuity and you may incur adverse tax consequences.
The Annuitant is the person on whose life annuity payments are based. You may
change the Annuitant at any time prior to the Annuity Date if you are an
individual designated as the owner of the contract. You may also designate a
second person on whose life annuity payments are based. If the Annuitant dies
before the Annuity Date, you must notify us and designate a new Annuitant.
If you do not choose an annuity income option, annuity payments will be made in
accordance with option 4 (below) for 10 years. If the annuity payments are for
joint lives, then we will make payments in accordance with option 3. We may pay
the annuity in one lump sum if your contract is less than $5,000. Likewise, if
your annuity payments would be less than $20 monthly, we have the right to
change the frequency of your payment to be on a quarterly, semiannual or annual
basis so that your annuity payments are at least $20. Annuity payments will be
made to you unless you designate another person to receive them. In that case,
you must notify us in writing at least thirty days before the Annuity Date. You
will remain fully responsible for any taxes related to the annuity payments.
The contract offers 5 annuity income options. Other annuity income options may
be available in the future.
OPTION 1 - LIFE INCOME
Under this option, we will make annuity payments as long as the Annuitant is
alive. Annuity payments stop when the Annuitant dies.
6
<PAGE> 14
OPTION 2 - JOINT AND SURVIVOR ANNUITY
Under this option, we will make annuity payments as long as the Annuitant and a
designated second person are alive. Upon the death of either person, we will
continue to make annuity payments so long as the survivor is alive. You choose
the amount of the annuity payments to the survivor, which can be equal to 100%,
66.66% or 50% of the full amount. Annuity payments stop upon the death of the
survivor.
OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY WITH 10 YEARS GUARANTEED
This option is similar to option 2 above, with the additional guarantee that
payments will be made for at least 10 years. If the Annuitant and designated
second person die before all guaranteed payments have been made, the rest will
be made to the Beneficiary.
OPTION 4 - LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED
This option is similar to option 1 above, with the additional guarantee that
payments will be made for at least 10 or 20 years, as selected by you. Under
this option, if the Annuitant dies before all guaranteed payments have been
made, the rest will be made to the Beneficiary.
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
Under this option, we will make annuity payments for any period of time from 5
to 30 years, as selected by you. However, the period must be for full 12-month
periods. Under this option, if the Annuitant dies before all guaranteed payments
have been made, the rest will be made to the Beneficiary. This option does not
contain an element of mortality risk. Therefore, you will not get the benefit of
the mortality component of the mortality and expense risk charge if this option
is selected.
ALLOCATION OF ANNUITY PAYMENTS
On the Annuity Date, if your money is invested in the fixed investment options,
your annuity payments will be fixed in amount. If your money is invested in the
variable Portfolios, your annuity payments will vary depending on the investment
performance of the Portfolios. If you have money in the fixed and variable
investment options, your annuity payments will be based on the investment
allocations. You may not convert between fixed and variable payments once
annuity payments begin.
ANNUITY PAYMENTS
If you choose to have any portion of your annuity payments come from the
variable Portfolios, the dollar amount of your payment will depend upon three
things: (1) the value of your contract in the Portfolios on the Annuity Date,
(2) the 3.5% assumed investment rate used in the annuity table for the contract
and (3) the performance of the Portfolios you selected. If the actual
performance exceeds the 3.5% assumed rate, your annuity payments will increase.
Similarly, if the actual rate is less than 3.5%, your annuity payments will
decrease. The SAI contains detailed information and sample calculations.
TRANSFERS DURING THE INCOME PHASE
Transfers are subject to the same limitations as transfers during the
Accumulation Phase. (See "Investment Options - Transfers During the Accumulation
Phase"). However, you can only make one transfer each month. You may not
transfer money from the fixed investment options to the variable Portfolios,
from the variable Portfolios to the fixed investment options or among the fixed
investment options during the Income Phase. You may transfer money among the
variable Portfolios.
DEFERMENT OF PAYMENTS
We may defer making fixed payments for up to six months, or less if required by
state law. Interest will be credited to you during the deferral period.
================================================================================
3. PURCHASING A POLARIS II
VARIABLE ANNUITY
================================================================================
A Purchase Payment is the money you give us to buy the contract, as well as any
additional money you give us to invest in the contract after you own it. You can
purchase a Non-qualified contract with a minimum initial investment of $5,000
and a Qualified contract with a minimum initial investment of $2,000. The
maximum we accept is $1,000,000 without prior approval. Payments in amounts of
$500 or more may be added to your Non-qualified contract ($250 or more for
Qualified contracts) at any time during the Accumulation Phase. You can make
scheduled subsequent Purchase Payments of $20 or more per month by enrolling in
the Automatic Payment Plan.
We may refuse any Purchase Payment. In general, we will not issue a
Non-qualified contract to anyone who is over age 85 or a Qualified contract to
anyone who is age 70 1/2 or older unless you can show that the minimum
distributions required by the IRS are being made.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, you will allocate your Purchase Payment to the
variable investment Portfolios and/or the fixed investment options. If you make
additional Purchase Payments, we will allocate them in the same way unless you
tell us otherwise.
Once we receive your Purchase Payment and a complete application at our
principal place of business, we will issue your contract and allocate your first
Purchase Payment within
7
<PAGE> 15
two business days. If you do not give us all the necessary information, we will
contact you to obtain it. If we are unable to complete this process within five
business days, we will either send back your money or get your permission to
keep it until we get all the necessary information.
ACCUMULATION UNITS
The value of the variable portion of your contract will go up or down depending
upon the investment performance of the Portfolio(s) you choose. In order to keep
track of the value of your contract, we use a unit of measure called an
Accumulation Unit, which works like a share of a mutual fund. During the Income
Phase, we call them Annuity Units.
The value of an Accumulation Unit is determined each day that the New York Stock
Exchange ("NYSE") is open. We calculate an Accumulation Unit value for each
Portfolio after the NYSE closes each day. We do this by:
(1) determining the total value of money invested in the particular
Portfolio;
(2) subtracting from that amount any insurance charges and any other
charges such as taxes; and
(3) dividing this amount by the number of outstanding Accumulation Units.
The value of an Accumulation Unit may go up or down from day to day. When you
make a Purchase Payment, we credit your contract with Accumulation Units. The
number of Accumulation Units credited is determined by dividing the amount of
the Purchase Payment allocated to a Portfolio by the value of the Accumulation
Unit for that Portfolio.
EXAMPLE:
We receive a $25,000 Purchase Payment from you on Wednesday. You want the
money to go to the Global Bond Portfolio. We determine that the value of an
Accumulation Unit for the Global Bond Portfolio is $11.10 when the NYSE
closes on Wednesday. We then divide $25,000 by $11.10 and credit your
contract on Wednesday night with 2252.252 Accumulation Units for the Global
Bond Portfolio.
FREE LOOK
If you change your mind about owning this contract, you can cancel it within ten
days after receiving it by mailing it back to our Annuity Service Center at P.O.
Box 54299, Los Angeles, California 90054-0299. You will receive back whatever
the value of the variable portion of your contract is on the day we receive your
request plus any Purchase Payment in the fixed investment options. This amount
may be more or less than the money you initially invested. Thus, the investment
risk is borne by you during the free look period.
If you purchase your contract as an IRA, we may be required to return your
Purchase Payment. If that is the case, we reserve the right to put your money in
the Cash Management Portfolio during the free look period. At the end of the
period, we will reallocate your money as you selected. If you cancel your
contract during the free look period, we will return to you the greater of your
Purchase Payments or the value of your contract.
================================================================================
4. INVESTMENT OPTIONS
================================================================================
VARIABLE INVESTMENT OPTIONS
The contract offers 25 variable investment Portfolios which invest in shares of
the Anchor Series Trust or the SunAmerica Series Trust. These Portfolios are
listed below. Additional Portfolios may be available in the future. SunAmerica
Asset Management Corp., an indirect wholly owned subsidiary of SunAmerica Inc.,
is the investment adviser for both Trusts. The Trusts serve as underlying
investments for other variable contracts sold by First SunAmerica, its
affiliate, Anchor National Life Insurance Company, and other unaffiliated
insurance companies. Neither First SunAmerica nor the Trusts believes offering
shares of the Trusts in this manner will be disadvantageous to you. We will
monitor the Trusts for any conflicts that may arise between contract owners.
Additional information is contained in the prospectuses for the Trusts.
ANCHOR SERIES TRUST
Wellington Management Company, LLP serves as subadviser to the Anchor Series
Trust Portfolios. Anchor Series Trust has Portfolios in addition to those listed
below which are not available for investment under the contract. The 4 available
Portfolios are:
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Capital Appreciation Portfolio
- Growth Portfolio
- Natural Resources Portfolio
- Government and Quality Bond Portfolio
SUNAMERICA SERIES TRUST
Various subadvisers provide investment advice for the SunAmerica Series Trust
Portfolios. The 21 Portfolios and the subadvisers are:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Global Equities Portfolio
- Alliance Growth Portfolio
- Growth-Income Portfolio
MANAGED BY DAVIS SELECTED ADVISERS, L.P.
- Venture Value Portfolio
- Real Estate Portfolio
MANAGED BY FEDERATED INVESTORS
- Federated Value Portfolio
- Utility Portfolio
- Corporate Bond Portfolio
8
<PAGE> 16
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT/
GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
- Asset Allocation Portfolio
- Global Bond Portfolio
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT INC.
- International Diversified Equities Portfolio
- Worldwide High Income Portfolio
MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
- Growth/Phoenix Investment Counsel Portfolio
- Balanced/Phoenix Investment Counsel Portfolio
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
- Putnam Growth Portfolio
- International Growth and Income Portfolio
- Emerging Markets Portfolio
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio
- SunAmerica Balanced Portfolio
- High-Yield Bond Portfolio
- Cash Management Portfolio
YOU SHOULD READ THE PROSPECTUSES FOR THE ANCHOR SERIES TRUST AND THE SUNAMERICA
SERIES TRUST CAREFULLY BEFORE INVESTING. THESE PROSPECTUSES CONTAIN DETAILED
INFORMATION ABOUT THE PORTFOLIOS AND ARE ATTACHED TO THIS PROSPECTUS.
FIXED INVESTMENT OPTIONS
The contract also offers 7 fixed investment options. We currently offer fixed
investment options for 1, 3, 5, 7, and 10 year periods and for contract owners
participating in the Dollar Cost Averaging Program, DCA account options for
6-month and 1-year periods. The fixed investment options offer interest rates
that are guaranteed by First SunAmerica. Interest rates may differ from time to
time due to changes in market conditions but will not be less than 3%. The
interest rates offered for a specified period for new Purchase Payments may
differ from the interest rates offered for money already in the fixed investment
option. Once an interest rate is established, it will not change during the
specified period. The interest rates are set at First SunAmerica's sole
discretion.
If you have money allocated to the 1, 3, 5, 7 or 10 year fixed investment
options, you can renew for another 1, 3, 5, 7 or 10 year period or put your
money into one or more of the variable Portfolios after the end of the specified
period. Unless you specify otherwise before the end of the period, we will keep
your money in the fixed investment option for the same period you previously
selected. You will receive the interest rate then in effect.
The 1-year fixed investment option and the 6-month and 1-year DCA accounts are
not registered under the Securities Act of 1933 and are not subject to other
provisions of the Investment Company Act of 1940.
MARKET VALUE ADJUSTMENT
NOTE: THE FOLLOWING DISCUSSION APPLIES TO THE 3, 5, 7 AND 10 YEAR FIXED
INVESTMENT OPTIONS ONLY.
If you take your money out of the fixed investment options (whether by
withdrawal, transfer or annuitization) before the end of the specified period,
we will make an adjustment to the value of your contract. This adjustment,
called a "market value adjustment," can increase or decrease the value of your
contract. The market value adjustment reflects the differing interest rate
environments between the time you put your money into the fixed investment
option and the time you take your money out of the fixed investment option.
We calculate the market value adjustment by comparing the interest rate you
received on the money you put into the fixed investment option against the
interest rate we are currently offering to contract owners for the period of
time remaining in the specified period. If we do not offer an interest rate for
that period, the interest rate will be determined by linear interpolation
between interest rates for the two nearest periods that are available.
Generally, if interest rates have dropped between the time you put your money
into the fixed investment option and the time you take it out, there will be a
positive adjustment to the value of your contract. Conversely, if interest rates
have increased between the time you put your money into the fixed investment
option and the time you take it out, there will be a negative adjustment to the
value of your contract.
If the market value adjustment is negative, it will be assessed first against
any money remaining in the fixed investment option and then against the money
you take out of the fixed investment option. If the market value adjustment is
positive, it will be added to the amount you take out of the fixed account.
Appendix A provides more information about how we calculate the market value
adjustment and gives some examples of the impact of the adjustment.
TRANSFERS DURING THE ACCUMULATION PHASE
You can transfer money among the Portfolios and the fixed investment options by
written request or by telephone. You can make fifteen transfers every year
without charge. We measure a year from the anniversary of the day we issued your
contract. If you make more than 15 transfers in a year, there is a $25 transfer
fee for each transfer thereafter. Transfers under Dollar Cost Averaging are
included as part of your 15 free transfers each year. However, transfers under
Asset Allocation Rebalancing are not counted against your 15 free transfers each
year.
The minimum amount you can transfer is $100. You cannot make a partial transfer
if the value of the Portfolio from which the transfer is being made would be
less than $100
9
<PAGE> 17
after the transfer. Your request for transfer must clearly state which
investment options are involved and the amount. We will accept transfers by
telephone unless you specify otherwise on your contract application. We have in
place procedures to provide reasonable assurance that instructions given to us
by telephone are genuine. Thus, we disclaim all liability for any claim, loss or
expense from any error. If we fail to use such procedures, we may be liable for
any losses due to unauthorized or fraudulent instructions.
We reserve the right to modify, suspend or terminate the transfer provisions at
any time. We also reserve the right to waive the $100 minimum amount for Dollar
Cost Averaging and Asset Allocation Rebalancing.
DOLLAR COST AVERAGING PROGRAM
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount or percentage from one variable Portfolio or the 1-year fixed investment
option to any other variable Portfolio(s). You can also select to transfer the
entire value in a variable Portfolio or the 1-year fixed investment option in a
stated number of transfers. Transfers may be on a monthly or quarterly basis.
You can change the amount or frequency at any time by notifying us in writing.
The minimum amount that can be transferred is $100.
You may also set up dollar cost averaging using the 6-month or 1-year DCA
accounts when you make either your initial Purchase Payment or a subsequent
Purchase Payment. In that case, all your money in that account will be
transferred to the variable Portfolio(s) in a maximum of 6 monthly transfers by
the end of the 6-month period or in either 12 or 4 transfers by the end of the
1-year period, depending on the option and frequency you selected. Once
selected, you cannot change the option or frequency. The minimum amount that can
be transferred from the DCA accounts is also $100. We reserve the right to
adjust the number of transfers in order to meet the minimum transfer amount. You
cannot transfer money from the variable Portfolio(s) or fixed investment options
into the DCA accounts.
The interest rate offered for the 6-month and 1-year DCA accounts may be
different from the interest rate offered to contract owners using the 1-year
fixed investment option for this program. If you terminate this program and are
dollar cost averaging from the DCA accounts, any money remaining in the DCA
accounts will be automatically transferred to the 1-year fixed investment option
and earn the interest rate then in effect for that investment option unless you
specify another fixed or variable investment option.
By allocating amounts on a regular schedule as opposed to allocating the total
amount at one particular time, you may be less susceptible to the impact of
market fluctuations. However, there is no assurance that you will make a greater
profit. You are still subject to loss in a declining market. Dollar cost
averaging involves continuous investment in securities regardless of fluctuating
price levels. You should consider your financial ability to continue to invest
through periods of fluctuating prices.
Transfers under the program are included as part of your 15 free transfers each
year. However, any transfers from the DCA accounts upon termination of this
program will not be counted against your 15 free transfers. We reserve the right
to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to gradually move $750 each quarter from the Cash
Management Portfolio to the Aggressive Growth Portfolio over six quarters.
You set up dollar cost averaging and purchase Accumulation Units at the
following values:
<TABLE>
<S> <C> <C>
- -----------------------------------------
ACCUMULATION UNITS
QUARTER UNIT PURCHASED
- -----------------------------------------
1 $ 7.50 100
2 $ 5.00 150
3 $10.00 75
4 $ 7.50 100
5 $ 5.00 150
6 $ 7.50 100
- -----------------------------------------
</TABLE>
You paid an average price of only $6.67 per Accumulation Unit over the six
quarters, while the average market price actually was $7.08. By investing
an equal amount of money each month, you automatically buy more
Accumulation Units when the market price is low and fewer Accumulation
Units when the market price is high.
ASSET ALLOCATION REBALANCING PROGRAM
Once your money has been allocated among the investment options, the earnings
may cause the percentage invested in each investment option to differ from your
original percentage allocations. You can direct us to automatically rebalance
your contract to return to your original percentage allocations by selecting our
Asset Allocation Rebalancing Program. Rebalancing may be on a calendar quarter,
semiannual or annual basis. Rebalancing will occur on the last business day of
the month for the period you selected.
Transfers under the program are not counted against your 15 free transfers each
year. We reserve the right to modify, suspend or terminate this program at any
time.
EXAMPLE:
Assume that you want your initial Purchase Payment split between two
Portfolios. You want 50% in the Corporate Bond Portfolio and 50% in the
Growth Portfolio. Over the next calendar quarter, the bond market does very
well while the stock market performs poorly. At the end of the calendar
quarter, the Corporate Bond Portfolio now represents 60% of your holdings
because it has increased in value and the Growth Portfolio represents 40%
of your holdings. If you had
10
<PAGE> 18
chosen quarterly rebalancing, on the last day of that quarter, we would sell
some of your units in the Corporate Bond Portfolio to bring its holdings back to
50% and use the money to buy more units in the Growth Portfolio to increase
those holdings to 50%.
PRINCIPAL ADVANTAGE PROGRAM
The Principal Advantage Program allows you to allocate Purchase Payments to a
fixed investment option and one or more variable Portfolios without any market
risk to your principal. You decide how much you want to invest and when you
would like a return of your principal. We will calculate how much of your
Purchase Payment needs to be allocated to the 1, 3, 5, 7 or 10 year fixed
investment options to ensure that this money will grow to equal the full amount
of your Purchase Payment by the end of the selected period. The rest of your
Purchase Payment may then be divided among the variable Portfolios where it has
the potential to achieve greater growth.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to allocate a portion of your initial Purchase Payment
of $100,000 to the fixed investment option. You want the amount allocated
to the fixed investment option to grow to $100,000 in 7 years. If the
7-year fixed investment option is offering a 7% interest rate, we will
allocate $62,275 to the 7-year fixed investment option to ensure that this
amount will grow to $100,000 at the end of the 7-year period. The remaining
$37,725 may be allocated among the variable Portfolios, as determined by
you, to provide opportunity for greater growth.
VOTING RIGHTS
First SunAmerica is the legal owner of the Trusts' shares. However, when a
Portfolio solicits proxies in conjunction with a vote of shareholders, we are
required to obtain from you instructions as to how to vote those shares. When we
receive those instructions, we will vote all of the shares we own in proportion
to those instructions. This will also include any shares that we own on our
behalf. Should we determine that we are no longer required to comply with the
above, we will vote the shares in our own right.
SUBSTITUTION
If any of the Portfolios you selected are no longer available, we may be
required to substitute shares of another Portfolio. We will seek prior approval
of the SEC and give you notice before doing this.
================================================================================
5. EXPENSES
================================================================================
There are charges and other expenses associated with the contract that will
reduce your investment return. These charges and expenses are described below.
INSURANCE CHARGES
Each day, we make a deduction for our insurance charges. This is done as part of
our calculation of the value of the Accumulation Units during the Accumulation
Phase and the Annuity Units during the Income Phase. The insurance charges
consist of the mortality and expense risk and the distribution expense charge.
MORTALITY AND EXPENSE RISK CHARGE
This charge is equal, on an annual basis, to 1.37% of the daily value of the
contract invested in a Portfolio. This charge is for our obligation to make
annuity payments, to provide the death benefits and for assuming the risk that
the current charges will be insufficient in the future to cover the cost of
administering the contract.
If the charges under the contract are not sufficient, we will bear the loss. We
will not increase this charge. We may use any profits from this charge to pay
for the costs of distributing the contract.
DISTRIBUTION EXPENSE CHARGE
This charge is equal, on an annual basis, to .15% of the daily value of the
contract invested in a Portfolio. This charge is for all expenses associated
with the distribution of the contract. These expenses include preparing the
contract, confirmations and statements, providing sales support, and maintaining
contract records. If this charge is not enough to cover the costs of
distributing the contract, we will bear the loss.
WITHDRAWAL CHARGES
Withdrawals in excess of your free withdrawal amount, as described in more
detail under "Access To Your Money," will be assessed a withdrawal charge. You
will not receive the benefit of any free withdrawal amount if you withdraw your
entire contract value.
We keep track of each Purchase Payment and assess a charge based on the length
of time a Purchase Payment is in your contract before it is withdrawn. After a
Purchase Payment has been in your contract for seven years, no withdrawal
charges are assessed on withdrawals of that Purchase Payment.
The withdrawal charge is assessed as a percentage of the Purchase Payment you
withdraw, which declines each year the Purchase Payment is in the contract as
follows:
11
<PAGE> 19
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
YEAR 1 2 3 4 5 6 7 8+
- -----------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
WITHDRAWAL CHARGE 7% 6% 5% 4% 3% 2% 1% 0%
- -----------------------------------------------------------------------------------
</TABLE>
If the withdrawal is for only part of the contract, we will deduct the
withdrawal charge from the remaining value in your contract. For purposes of
calculating the withdrawal charge, we treat withdrawals as coming from the
oldest Purchase Payment first. However, for tax purposes, earnings are
considered withdrawn first.
We will not assess a withdrawal charge for money withdrawn to pay a death
benefit or for annuity payments during the Income Phase.
INVESTMENT CHARGES
If you have money allocated to the variable Portfolios, there are deductions
from and expenses paid out of the assets of the various Portfolios. These
investment charges are summarized in the Fee Tables. For more detailed
information, you should refer to the prospectuses for the Anchor Series Trust
and the SunAmerica Series Trust.
CONTRACT MAINTENANCE FEE
During the Accumulation Phase, we will deduct a $30 contract maintenance fee
from your contract on each contract anniversary. This fee is for expenses
incurred to establish and maintain your contract. This fee cannot be increased.
If you make a complete withdrawal from your contract, the entire contract
maintenance fee will be deducted prior to the withdrawal.
We will not deduct the contract maintenance fee if the value of your contract is
$50,000 or more when the deduction is to be made. We may discontinue this
practice at any time.
TRANSFER FEE
You can make 15 free transfers every year. We measure a year from the day we
issue your contract. If you make more than 15 transfers a year, we will deduct a
$25 transfer fee on each subsequent transfer.
INCOME TAXES
Although we do not currently deduct any income taxes borne under your contract,
we reserve the right to do so in the future.
REDUCTION OR ELIMINATION OF CERTAIN CHARGES
We will reduce or eliminate the amount of certain insurance charges when the
contract is sold to groups of individuals under circumstances which reduce its
sales expenses. We will determine the eligibility of such groups by considering
the following factors: (1) the size of the group; (2) the total amount of
Purchase Payments we expect to receive from the group; (3) the nature of the
purchase and the persistency we expect in that group; (4) the purpose of the
purchase and whether that purpose makes it likely that expenses will be reduced;
and (5) any other circumstances which we believe to be relevant in determining
whether reduced sales expenses may be expected.
================================================================================
6. TAXES
================================================================================
NOTE: WE HAVE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL
DISCUSSION OF THE SUBJECT. IT IS NOT INTENDED AS TAX ADVICE. YOU ARE CAUTIONED
TO SEEK COMPETENT TAX ADVICE ABOUT YOUR OWN CIRCUMSTANCES. WE DO NOT GUARANTEE
THE TAX STATUS OF THE ANNUITY.
ANNUITY CONTRACTS IN GENERAL
The Internal Revenue Code ("IRC") provides for special rules regarding the tax
treatment of annuity contracts. Generally, you will not be taxed on the earnings
in your annuity contract until you take the money out. Different rules apply
depending on how you take the money out and whether your contract is Qualified
or Non-qualified.
If you do not purchase your contract under a pension plan, specially sponsored
program or an individual retirement account, your contract is referred to as a
Non-qualified contract and receives different tax treatment than a Qualified
contract. In general, your cost basis in a Non-qualified contract is equal to
the Purchase Payments you put into the contract. You have already been taxed on
the cost basis in your contract.
If you purchase your contract under a pension plan, specially sponsored program
or as an individual retirement account, your contract is referred to as a
Qualified contract. Examples of qualified plans are: Individual Retirement
Annuities, Tax-Sheltered Annuities (referred to as 403(b) contracts), H.R. 10
Plans (referred to as Keogh Plans) and pension and profit sharing plans,
including 401(k) plans. Typically you have not paid any tax on the Purchase
Payments used to buy your contract and therefore, you have no cost basis in your
contract.
TAX TREATMENT OF DISTRIBUTIONS-
NON-QUALIFIED CONTRACTS
If you make a withdrawal from a Non-qualified contract, the IRC treats such a
withdrawal as first coming from the earnings and then as coming from your
Purchase Payments. For annuity payments, any portion of each payment that is
considered a return of your Purchase Payment will not be taxed. Withdrawn
earnings are treated as income to you and are taxable. The IRC further provides
for a 10% tax penalty on any earnings that are withdrawn other than in
conjunction
12
<PAGE> 20
with the following circumstances: (1) after reaching age 59 1/2; (2) by your
Beneficiary after you die; (3) after you become disabled (as defined in the
IRC); (4) in a series of substantially equal installments made for your life or
for the joint lives of you and your Beneficiary; (5) under an immediate annuity;
or (6) which come from Purchase Payments made prior to August 14, 1982.
TAX TREATMENT OF DISTRIBUTIONS-
QUALIFIED CONTRACTS
Generally, you have not paid any taxes on the Purchase Payments used to buy a
Qualified contract or on any earnings and therefore, any amount you take out as
a withdrawal or as annuity payments will be taxable income. The IRC further
provides for a 10% tax penalty on any withdrawal or annuitization paid to you
other than in conjunction with the following circumstances: (1) after reaching
age 59 1/2; (2) by your Beneficiary after you die; (3) after you become disabled
(as defined in the IRC); (4) in a series of substantially equal installments
made for your life or for the joint lives of you and your Beneficiary; and,
except in the case of an IRA as to the following (5) after you separate from
service after attaining age 55; (6) to the extent such withdrawals do not exceed
limitations set by the IRC for amounts paid during the taxable year for medical
care; and (7) to an alternate payee pursuant to a qualified domestic relations
order.
The IRC limits the withdrawal of Purchase Payments from certain Tax-Sheltered
Annuities. Withdrawals can only be made when an owner: (1) reaches age 59 1/2;
(2) leaves his or her job; (3) dies; (4) becomes disabled (as defined in the
IRC); or (5) in the case of hardship. In the case of hardship, the owner can
only withdraw an amount equal to Purchase Payments and not any earnings.
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity in order to be treated as a variable annuity
for tax purposes. We believe that the variable Portfolios are being managed so
as to comply with these requirements.
The diversification regulations do not provide guidance as to the circumstances
under which you, because of the degree of control you exercise over the
underlying investments, and not First SunAmerica, would be considered the owner
of the shares of the Portfolios. It is unknown to what extent owners are
permitted to select investments, to make transfers among portfolios or the
number and type of portfolios owners may select from. If any guidance is
provided which is considered a new position, then the guidance would generally
be applied prospectively. However, if such guidance is considered not to be a
new position, it may be applied retroactively. This would mean you, as the owner
of the contract, could be treated as the owner of the variable investment
Portfolios.
Due to the uncertainty in this area, we reserve the right to modify the contract
in an attempt to maintain favorable tax treatment.
================================================================================
7. ACCESS TO YOUR MONEY
================================================================================
Under your contract, money can be accessed in the following ways: (1) by making
a withdrawal, either for a part of the value of your contract or for the entire
value of your contract during the Accumulation Phase; (2) by receiving annuity
payments during the Income Phase; and (3) when a death benefit is paid to your
Beneficiary.
Generally, withdrawals are subject to a withdrawal charge, a market value
adjustment if the money is withdrawn from the 3, 5, 7 or 10 year fixed
investment options and, if you withdraw your entire contract value, premium
taxes and a contract maintenance fee. (See "Expenses" for more complete
information).
Your contract provides for a free withdrawal amount. For purposes of calculating
your free withdrawal amount, there are some special terms you should know and
understand how we define and calculate them.
Your "total invested amount" is equal to the sum of all your Purchase Payments
less any amounts previously withdrawn that incurred a withdrawal charge, and
less any Purchase Payments withdrawn that were not subject to a withdrawal
charge. A "penalty-free earnings" amount is also calculated by taking the value
of your contract on the day you make the withdrawal and subtracting your total
invested amount. Any free withdrawals made in excess of your penalty-free
earnings will be considered a withdrawal of future penalty-free earnings and
therefore not a withdrawal of your total invested amount.
During the first year, your free withdrawal amount is equal to the penalty-free
earnings in your contract as of the date you make the withdrawal or, if you
participate in the Systematic Withdrawal Program, you may withdraw 10% of your
total invested amount less any withdrawals made during the year. After the first
year, your maximum free withdrawal amount is the greater of: (1) the
penalty-free earnings or (2) 10% of your total invested amount that has been
invested for at least one year, less any withdrawals made during the year.
Although amounts withdrawn free of a withdrawal charge may reduce your
principal, they do not reduce your "total invested amount" for purposes of
calculating the withdrawal charge, the penalty-free earnings in your contract or
the free withdrawal amount under the Systematic Withdrawal Program. As a result,
you will not receive the benefit of any free withdrawal amounts if you make a
complete withdrawal of your contract.
If you make a complete withdrawal, you will receive the value of your contract,
less any applicable fees and charges, as
13
<PAGE> 21
calculated on the day following receipt by us at our principal place of business
of a complete withdrawal request. Your contract must be submitted as well.
Under most circumstances, partial withdrawals must be for a minimum of $1,000.
We require that the value left in the contract be at least $500 after the
withdrawal. Unless you provide us with different instructions, partial
withdrawals will be made pro rata from each Portfolio and the fixed investment
option in which your contract is invested. You must send a written withdrawal
request to us prior to any withdrawal being made.
We may be required to suspend or postpone the payment of a withdrawal for any
period of time when: (1) the NYSE is closed (other than a customary weekend and
holiday closings); (2) trading on the NYSE is restricted; (3) an emergency
exists such that disposal of or determination of the value of shares of the
portfolios is not reasonably practicable; (4) the SEC, by order, so permits for
the protection of contract owners.
Additionally, we reserve the right to defer payments for a withdrawal from the
fixed investment option for the period permitted by law but not for more than
six months.
SYSTEMATIC WITHDRAWAL PROGRAM
This program allows you to receive either monthly, quarterly, semiannual or
annual checks during the Accumulation Phase. You can also choose to have
systematic withdrawals electronically wired to your bank account. The minimum
amount of each withdrawal is $250. Withdrawals may be taxable and a 10% IRS tax
penalty may apply if you are under age 59 1/2. There is no charge for
participating in this program.
This program is not available to everyone. Please check with our Annuity Service
Center, which can provide the necessary enrollment forms. We reserve the right
to modify, suspend or terminate this program at any time.
WITHDRAWAL CHARGES, MARKET VALUE ADJUSTMENTS, INCOME TAXES, TAX PENALTIES AND
CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL YOU MAKE.
MINIMUM CONTRACT VALUE
Where permitted by state law, we may terminate your contract if both of the
following occur: (1) your contract is less than $500 as a result of withdrawals
and (2) no Purchase Payments have been made during the past three years. We will
provide you with sixty days written notice and distribute the contract's
remaining value to you.
================================================================================
8. PERFORMANCE
================================================================================
From time to time we may advertise the Cash Management Portfolio's yield and
effective yield. In addition, the other variable investment Portfolios may also
advertise total return, gross yield and yield to maturity information. These
figures are based on historical data and are not intended to indicate future
performance.
For periods starting prior to the date the contracts were first offered, the
performance will be derived from the performance of the corresponding portfolios
of the Trusts, modified to reflect Polaris II charges and expenses as if the
contracts had been in existence during the period stated in the advertisement.
Thus, these figures should not be construed to reflect actual historic
performance.
More detailed information on the method used to calculate performance for the
Portfolios is contained in the SAI.
The performance of each Portfolio may also be measured against unmanaged market
indices, including but not limited to the Dow Jones Industrial Average, the
Standard & Poor's 500, the Russell 1000 Growth Index, the Morgan Stanley Capital
International Europe, Australia, and Far East Index (EAFE) and the Morgan
Stanley Capital International World Index, and may be compared to that of other
variable annuities with similar objectives and policies as reported by
independent ranking agencies such as Morningstar, Inc., Lipper Analytical
Services, Inc. or the Variable Annuity Research & Data Service ("VARDS").
At times First SunAmerica may also advertise the ratings and other information
assigned to it by independent rating organizations such as A.M. Best Company
("A.M. Best"), Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Insurance Rating Services ("S&P"), and Duff & Phelps. A.M. Best's and Moody's
ratings reflect their current opinion of our financial strength and performance
in comparison to others in the life/health insurance industry. S&P's and Duff &
Phelps' ratings measure the ability of an insurance company to meet its
obligations under insurance policies it issues and do not measure the ability of
such companies to meet other non-policy obligations. The ratings also do not
relate to the performance of the Portfolios.
================================================================================
9. DEATH BENEFIT
================================================================================
If you should die during the Accumulation Phase of your contract, we will pay a
death benefit to your Beneficiary.
The death benefit is the greater of:
(1) the value of your contract at the time we receive adequate proof of death,
(2) total Purchase Payments less any withdrawals, or
14
<PAGE> 22
(3) the maximum of the anniversary values up to your 81st birthday. The
anniversary value is equal to the value of your contract on the contract
anniversary less any withdrawals plus any additional Purchase Payments since
that anniversary.
The death benefit is not paid after you switch to the Income Phase. During the
Income Phase, your Beneficiary(ies) will receive any remaining guaranteed
annuity payments in accordance with the annuity option you choose.
You may select the Beneficiary(ies) to receive any amounts payable on death. You
may change the Beneficiary at any time, unless you previously made an
irrevocable Beneficiary designation. A new Beneficiary designation in not
effective until we record the change.
The death benefit is immediately payable under the contract. If the Beneficiary
elects an annuity option, it must be paid over the Beneficiary's lifetime or for
a period not extending beyond the Beneficiary's life expectancy. If the
Beneficiary is the spouse of the owner, he or she can elect to continue the
contract at the then current value, in which case he or she will not receive the
death benefit.
The death benefit will be paid out when we receive adequate proof of death: (1)
a certified copy of a death certificate; (2) a certified copy of a decree of
court of competent jurisdiction as to the finding of death; (3) a written
statement by a medical doctor who attended the deceased at the time of death; or
(4) any other proof satisfactory to us. We may also require additional
documentation or proof in order for the death benefit to be paid. If the
Beneficiary does not make a specific election within sixty days of our receipt
of such proof of death, the death benefit will be paid in a lump sum.
================================================================================
10. OTHER INFORMATION
================================================================================
FIRST SUNAMERICA
First SunAmerica and its affiliates, SunAmerica Life Insurance Company, Anchor
National Life Insurance Company, CalAmerica Life Insurance Company, SunAmerica
Asset Management Corp., Imperial Premium Finance, Inc., Resources Trust Company
and three broker-dealers, offer a full line of financial services, including
fixed and variable annuities, mutual funds, premium finance, broker-dealer and
trust administration services. First SunAmerica is an indirect wholly owned
subsidiary of SunAmerica Inc. First SunAmerica is licensed to do business in the
states of New York, Nebraska and New Mexico.
THE SEPARATE ACCOUNT
First SunAmerica originally established a separate account, FS Variable Separate
Account, under New York law on September 9, 1994. The separate account is
registered with the SEC as a unit investment trust under the Investment Company
Act of 1940.
First SunAmerica owns the assets in the separate account. However, the assets in
the separate account are not chargeable with liabilities arising out of any
other business First SunAmerica may conduct. Income, gains and losses (realized
and unrealized) resulting from the assets in the separate account are credited
to or charged against the separate account without regard to other income, gains
or losses of First SunAmerica.
THE GENERAL ACCOUNT
If you put your money into the fixed investment options, it goes into First
SunAmerica's general account. The general account is made up of all of First
SunAmerica's assets other than assets attributable to a separate account. All of
the assets in the general account are chargeable with the claims of any First
SunAmerica contract owners as well as all creditors. The general account is
invested in assets permitted by state insurance law.
DISTRIBUTION
The contract is sold through registered representatives of broker-dealers.
Commissions are paid to registered representatives for the sale of contracts.
Commissions are not expected to exceed 6.5% of your Purchase Payment. Under some
circumstances, we may pay a persistency bonus in addition to standard
commissions. Usually the standard commission is lower when we pay a persistency
bonus, which is not anticipated to exceed .65% annually. Commissions paid to
registered representatives are not directly deducted from your Purchase Payment.
SunAmerica Capital Services, Inc., 733 Third Avenue, 4th Floor, New York, New
York 10017 acts as the distributor of the contracts. SunAmerica Capital
Services, Inc., an affiliate of First SunAmerica, is registered as a
broker-dealer under the Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc.
ADMINISTRATION
We are responsible for all the administrative servicing of your contract. Please
contact First SunAmerica's Annuity Service Center at the telephone number and
address provided in the profile section of this prospectus if you have any
comment, question or service request.
We will send out transaction confirmations and quarterly statements. Please
review these documents carefully and notify us of any inaccuracies immediately.
We will investigate all
15
<PAGE> 23
questions and, to the extent we have made an error, we will retroactively adjust
your contract provided you have notified us within thirty days of receiving the
transaction confirmation or quarterly statement, as applicable. All other
adjustments will be made as of the time we receive notice of the error.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the separate account. First
SunAmerica and its subsidiaries are engaged in various kinds of routine
litigation which, in management's judgment, are not of material importance to
their respective total assets or material with respect to the separate account.
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, serves as the custodian of the assets of the separate account. First
SunAmerica pays State Street Bank for services based on a schedule of fees.
ADDITIONAL INFORMATION
First SunAmerica is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. In accordance with such requirements, we file
reports and other information with the SEC. Such reports and other information
we file can be inspected and copied. Copies can be obtained at the public
reference facilities of the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, or at the regional offices in Chicago and New York. The
addresses of these regional offices are as follows: 500 West Madison Street,
Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of such material also can be obtained by mail from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549,
upon payment of the fees prescribed by the rules and regulations of the SEC at
prescribed rates.
Registration statements have been filed with the SEC, Washington, D.C., under
the Securities Act of 1933 as amended, relating to the contracts offered by this
prospectus. This prospectus does not contain all the information set forth in
the registration statements and the exhibits filed as part of the registration
statements. Reference should be made to such registration statements and
exhibits for further information concerning the separate account, First
SunAmerica and its general account, the Portfolios and the contract.
16
<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL DATA
[TO BE FILED BY AMENDMENT]
17
<PAGE> 25
MANAGEMENT DISCUSSION AND ANALYSIS
[TO BE FILED BY AMENDMENT]
PROPERTIES
First SunAmerica's principal office is
leased at 733 Third Avenue, 4th Floor,
New York, New York 10017. Through an
affiliate, we also lease office space
in Los Angeles, California and in
Torrance, California for certain policy
administration, recordkeeping and data
processing functions.
We believe that such properties
including the equipment located in
these properties are suitable and
adequate to meet the requirements of
First SunAmerica's business.
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<PAGE> 26
DIRECTORS AND EXECUTIVE OFFICERS
First SunAmerica's directors and officers as of [December 17, 1997] are listed
below:
<TABLE>
<CAPTION>
OTHER POSITIONS AND
YEAR OTHER BUSINESS
PRESENT ASSUMED EXPERIENCE WITHIN
NAME AGE POSITION(S) POSITION(S) LAST FIVE YEARS** FROM-TO
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Eli Broad* 64 Chairman, Chief Executive Officer and 1994 Co-founded SunAmerica Inc. (SAI) in 1957
President of First SunAmerica
Chairman, Chief Executive Officer and 1986
President of SAI
- ----------------------------------------------------------------------------------------------------------------------------------
Joseph M. Tumbler* 49 Executive Vice President of First 1996 President and Chief Executive Officer, 1989-1995
SunAmerica Providian Capital Management
Vice Chairman of SAI 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Jay S. Wintrob* 40 Executive Vice President of First 1991 (Joined SAI in 1987)
SunAmerica
Vice Chairman of SAI 1995
- ----------------------------------------------------------------------------------------------------------------------------------
James R. Belardi* 40 Senior Vice President of First 1992 Vice President and Treasurer (Jointed SAI 1989-1992
SunAmerica in 1986)
Executive Vice President of SAI 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Jana W. Greer* 45 Senior Vice President of First 1991 (Jointed SAI in 1974)
SunAmerica and SAI
- ----------------------------------------------------------------------------------------------------------------------------------
Peter McMillan, 40 Executive Vice President and Chief 1994 Senior Vice President, SunAmerica 1989-1994
III* Investment Officer of SunAmerica Investments, Inc.
Investments, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
Scott L. Robinson* 51 Senior Vice President and Treasurer of 1991 (Joined SAI in 1978)
First SunAmerica
Senior Vice President and Controller
of SAI
- ----------------------------------------------------------------------------------------------------------------------------------
James W. Rowan* 35 Senior Vice President of First 1996 Vice President 1993-1995
SunAmerica and SAI Assistant to the Chairman 1992
Senior Vice President, Security Pacific 1986-1992
Corp.
- ----------------------------------------------------------------------------------------------------------------------------------
Lorin M. Fife* 44 Senior Vice President, General Counsel 1994 Vice President and General Counsel - 1994-1995
and Assistant Secretary of First Regulatory Affairs of SAI
SunAmerica
Senior Vice President and General 1995 Vice President and Associate General 1989-1994
Counsel - Regulatory Affairs of SAI Counsel of SAI (Joined SAI in 1989)
- ----------------------------------------------------------------------------------------------------------------------------------
Susan L. Harris* 40 Senior Vice President and Secretary of 1994 Vice President, General Counsel - 1994-1995
First SunAmerica Corporate Affairs and Secretary of SAI
Senior Vice President, General Counsel 1995 Vice President, Associate General Counsel 1989-1994
-Corporate Affairs and Secretary of and Secretary of SAI (Joined SAI in 1985)
SAI
- ----------------------------------------------------------------------------------------------------------------------------------
N. Scott Gillis 44 Senior Vice President and Controller 1994 Vice President and Controller, SunAmerica 1989-1994
of First SunAmerica Life Companies
(Joined SAI in 1985)
- ----------------------------------------------------------------------------------------------------------------------------------
Edwin R. Reoliquio 40 Senior Vice President and Chief 1995 Vice President and Actuary, SunAmerica 1990-1995
Actuary of First SunAmerica Life Companies
- ----------------------------------------------------------------------------------------------------------------------------------
Victor E. Akin 33 Senior Vice President of First 1996 Vice President, SunAmerica Life Companies 1995-1996
SunAmerica
Director, SunAmerica Life Companies 1994-1995
Manager, SunAmerica Life Companies 1993-1994
Actuary, Milliman & Robertson 1992-1993
Consultant, Chalke Inc. 1991-1992
- ----------------------------------------------------------------------------------------------------------------------------------
David W. Ferguson 44 Director 1987 Partner, Davis Polk & Wardwell 1980 to
present
- ----------------------------------------------------------------------------------------------------------------------------------
Thomas A. Harnett 73 Director 1987 Partner, Lane & Mitterdorf, LLP 1989 to
present
- ----------------------------------------------------------------------------------------------------------------------------------
Margery K. Neale 38 Director 1996 Partner, Shereff, Friedman, Hoffman & 1990 to
Goodman, LLP present
- ----------------------------------------------------------------------------------------------------------------------------------
Lester Pollack 64 Director 1987 Chief Executive Officer, Centre Partners, 1986 to
L.P. present
General Partner, Lazard Freres & Co. 1986 to
present
Senior Managing Director, Corporate 1988 to
Partners, L.P. present
- ----------------------------------------------------------------------------------------------------------------------------------
Richard D. Rohr 71 Director 1987 Partner, Bodman, Longley & Dahling 1958 to
present
==================================================================================================================================
</TABLE>
* Also serves as a director.
** Unless otherwise indicated, offices and positions are with SunAmerica Inc.
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<PAGE> 27
EXECUTIVE COMPENSATION
All of First SunAmerica's executive officers are also employees of SunAmerica
Inc. or its affiliates and do not receive direct compensation from First
SunAmerica. Some of the executive officers also serve as officers of other
companies affiliated with First SunAmerica. We allocated the time each executive
officer spent devoted to his or her duties as an executive officer of First
SunAmerica to determine the executive compensation set forth below for the Chief
Executive Officer and the other four highest compensated executive officers, as
well as the executive officers as a group, for services rendered during 1996.
<TABLE>
<CAPTION>
-----------------------------------------------------------------
NAME OF INDIVIDUAL CAPACITIES ALLOCATED
OR NUMBER IN WHICH CASH
IN GROUP SERVED COMPENSATION
-----------------------------------------------------------------
<S> <C> <C>
Eli Broad Chairman, Chief Executive
Officer and President $ 10,380
Joseph M. Tumbler Executive Vice President 6,488
Jay S. Wintrob Executive Vice President 6,488
James R. Belardi Senior Vice President 2,955
Jana W. Greer Senior Vice President 7,342
All Executive Officers
as a Group(12) $ 49,731
----------------------------------------------------------------
</TABLE>
SECURITY OWNERSHIP OF OWNERS AND MANAGEMENT
No shares of First SunAmerica are owned by any executive officer or director.
First SunAmerica is an indirect wholly-owned subsidiary of SunAmerica Inc. The
only officer or director that owned more than 1% of the shares of SunAmerica
Inc. is Mr. Eli Broad. At October 31, 1997, Mr. Broad beneficially owned
8,953,544 shares of Common Stock (approximately 5% of the class outstanding) and
13,740,441 shares of Class B Common Stock (approximately 84% of the class
outstanding). Of the Common Stock, 1,063,773 shares represent restricted shares
granted under the First SunAmerica's employee stock plans as to which Mr. Broad
has no investment power; and 5,197,050 shares represent employee stock options
held by Mr. Broad which are or will become exercisable on or before February 28,
1998 and as to which he has no voting or investment power. Of the Class B Common
Stock, 12,684,210 shares are held directly by Mr. Broad and 1,056,231 shares are
registered in the name of a corporation as to which Mr. Broad exercises sole
voting and dispositive powers. At October 31, 1997, all directors and officers
as a group beneficially owned 12,921,769 shares of Common Stock (approximately
7% of the class outstanding) and 13,740,441 shares of Class B Common Stock
(approximately 84.4% of the class outstanding). All share numbers reflect a
3-for-2 stock split paid in the form of a stock dividend on August 29, 1997 to
holders of record on August 20, 1997.
STATE REGULATION
First SunAmerica is subject to regulation and supervision by the states of New
York, Nebraska and New Mexico and their insurance departments. State insurance
laws establish supervisory agencies with broad administrative and supervisory
powers related to granting and revoking licenses to transact business,
regulating marketing and other trade practices, operating guaranty associations,
licensing agents, approving policy forms, regulating certain premium rates,
regulating insurance holding company systems, establishing reserve requirements,
prescribing the form and content of required financial statements and reports,
performing financial and other examinations, determining the reasonableness and
adequacy of statutory capital and surplus, regulating the type, valuation and
amount of investments permitted, limiting the amount of dividends that can be
paid and the size of transactions that can be consummated without first
obtaining regulatory approval and other related matters.
During the last decade, the insurance regulatory framework has been placed under
increased scrutiny by various states, the federal government and the NAIC.
Various states have considered or enacted legislation that changes, and in many
cases increases, the states' authority to regulate insurance companies.
Legislation has been introduced from time to time in Congress that could result
in the federal government assuming some role in the regulation of insurance
companies. In recent years, the NAIC has approved and recommended to the states
for adoption and implementation several regulatory initiatives designed to
reduce the risk of insurance company insolvencies and market conduct violations.
These initiatives include investment reserve requirements, risk-based capital
standards, new investment standards and restrictions on an insurance company's
ability to pay dividends to its stockholders. The NAIC is also currently
developing model laws relating to product design and illustrations for annuity
products. Current proposals are still being debated and First SunAmerica is
monitoring developments in this area and the effects any changes would have on
First SunAmerica.
INDEPENDENT ACCOUNTANTS
[The consolidated financial statements of First SunAmerica as of September 30,
1997 and 1996 and for each of the three years in the period ended September 30,
1997 included in this prospectus have been included in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.]
20
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===============================================================================
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
===============================================================================
<TABLE>
<S> <C>
Separate Account..................................................... 3
General Account...................................................... 3
Performance Data..................................................... 4
Annuity Payments..................................................... 6
Annuity Unit Values.................................................. 7
Taxes................................................................ 9
Distribution of Contracts............................................ 12
Financial Statements................................................. 12
</TABLE>
===============================================================================
FINANCIAL STATEMENTS
===============================================================================
The consolidated financial statements of First SunAmerica which are included in
this prospectus should be considered only as bearing on the ability First
SunAmerica to meet its obligations with respect to amounts allocated to the
fixed investment options and with respect to the death benefit and our
assumption of the mortality and expense risks and the risks that the withdrawal
charge will not be sufficient to cover the cost of distributing the contracts.
They should not be considered as bearing on the investment performance of the
variable Portfolios. The value of the variable Portfolios is affected primarily
by the performance of the underlying investments.
21
<PAGE> 29
REPORT OF INDEPENDENT ACCOUNTANTS
[TO BE FILED BY AMENDMENT]
22
<PAGE> 30
================================================================================
APPENDIX A - MARKET VALUE ADJUSTMENT
================================================================================
The market value adjustment reflects the impact that changing interest rates
have on the value of money invested at a fixed interest rate. The longer the
period of time remaining in the term you initially agreed to leave your money in
the fixed investment option, the greater the impact of changing interest rates.
The impact of the market value adjustment can be either positive or negative,
and is computed by multiplying the amount withdrawn, transferred or annuitized
by the following factor:
N/12
[(1+I/(1+J+0.005)] - 1
where:
I is the interest rate you are earning on the money invested in the
fixed investment option;
J is the interest rate then currently available for the period of time
equal to the number of years remaining in the term you initially agreed
to leave your money in the fixed investment option; and
N is the number of full months remaining in the term you initially
agreed to leave your money in the fixed investment option.
EXAMPLES OF THE MARKET VALUE ADJUSTMENT
The examples below assume the following:
(1) You made an initial Purchase Payment of $10,000 and allocated it to the
10-year fixed investment option at a rate of 7%;
(2) You make a partial withdrawal of $4,000 when 1 1/2 years (18 months)
remain in the 10-year term you initially agreed to leave your money in
the fixed investment option (N=18);
(3) The value of your contract on the date you make the withdrawal is
$17,454.67 which reflects the deduction of all applicable fees and
charges; and
(4) You have not made any other transfers, additional Purchase Payments, or
withdrawals.
No withdrawal charges are reflected because your Purchase Payment has been in
the contract for seven full years. If a withdrawal charge applies, it is
deducted before the market value adjustment. The market value adjustment is
assessed on the amount withdrawn less any withdrawal charge.
NEGATIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 1-year fixed investment option is 7.5% and the 3-year
fixed investment option is 8.5%. By linear interpolation, the interest rate for
the remaining 2 years (1 1/2 years rounded up to the next full year) in the
contract is calculated to be 8%.
N/12
The market value adjustment factor is = [(1+I)/(1+J+0.005)] - 1
18/12
= [(1.07)/(1.08+0.005)] - 1
1.5
= (0.986175) - 1
= 0.979335 - 1
= - 0.020665
The requested withdrawal amount is multiplied by the market value adjustment
factor to determine the market value adjustment:
$4,000 X (- 0.020665) = -$82.66
$82.66 represents the market value adjustment that will be deducted from the
money remaining in the 10-year fixed investment option.
POSITIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for a new
Purchase Payments in the 1-year fixed investment option is 5.5% and the 3-year
fixed investment option is 6.5%. By linear interpolation, the interest rate for
the remaining 2 years (1 1/2 years rounded up to the next full year) in the
contract is calculated to be 6%.
N/12
The market value adjustment factor is = [(1+I/(1+J+0.005)] - 1
18/12
= [(1.07)/(1.06+0.005)] - 1
1.5
= (1.004695) - 1
= 1.007051 - 1
= + 0.007051
The requested withdrawal amount is multiplied by the market value adjustment
factor to determine the market value adjustment:
$4,000 x (+0.007051) = +$28.20
$28.20 represents the market value adjustment that would be added to your
withdrawal.
23
<PAGE> 31
- --------------------------------------------------------------------------------
Please forward a copy (without charge) of the Polaris II Variable Annuity
Statement of Additional Information to:
(Please print or type and fill in all information.)
------------------------------------------------------------------------
Name
------------------------------------------------------------------------
Address
------------------------------------------------------------------------
City/State/Zip
Date: Signed:
------------- --------------------------------------------
Return to: First SunAmerica Life Insurance Company, Annuity Service Center,
P.O. Box 52499, Los Angeles, California 90054-0299
- --------------------------------------------------------------------------------
<PAGE> 32
STATEMENT OF ADDITIONAL INFORMATION
FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACTS
ISSUED BY
FIRST SUNAMERICA LIFE INSURANCE COMPANY
IN CONNECTION WITH
FS VARIABLE SEPARATE ACCOUNT
This Statement of Additional Information is not a prospectus; it should be read
with the prospectus relating to the annuity contracts described above. A copy of
the prospectus may be obtained without charge by calling (800) 99NY-SUN or
writing us at:
FIRST SUNAMERICA LIFE INSURANCE COMPANY
ANNUITY SERVICE CENTER
P.O. BOX 54299
LOS ANGELES, CALIFORNIA 90054-0299
________________, 1998
<PAGE> 33
TABLE OF CONTENTS
PAGE
----
Separate Account...................................................... 3
General Account....................................................... 3
Performance Data ..................................................... 4
Annuity Payments...................................................... 6
Annuity Unit Values................................................... 7
Taxes................................................................. 9
Distribution of Contracts............................................. 12
Financial Statements.................................................. 12
<PAGE> 34
SEPARATE ACCOUNT
FS Variable Separate Account was originally established by First
SunAmerica Life Insurance Company (the "Company") on September 9, 1994, pursuant
to the provisions of New York law, as a segregated asset account of the Company.
The separate account meets the definition of a "separate account" under the
federal securities laws and is registered with the Securities and Exchange
Commission (the "SEC") as a unit investment trust under the Investment Company
Act of 1940. This registration does not involve supervision of the management of
the separate account or the Company by the SEC.
The assets of the separate account are the property of the Company.
However, the assets of the separate account, equal to its reserves and other
contract liabilities, are not chargeable with liabilities arising out of any
other business the Company may conduct. 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 Portfolios, with the assets of each
Portfolio invested in the shares of one of the underlying funds. The Company
does not guarantee the investment performance of the separate account, its
Portfolios or the underlying funds. Values allocated to the separate account and
the amount of variable annuity payments will vary with the values of shares of
the underlying funds, and are also reduced by contract charges.
The basic objective of a variable annuity contract is to provide
variable annuity payments which will be to some degree responsive to changes in
the economic environment, including inflationary forces and changes in rates of
return available from various types of investments. The contract is designed to
seek to accomplish this objective by providing that variable annuity payments
will reflect the investment performance of the separate account with respect to
amounts allocated to it both before and after the Annuity Date. Since the
separate account is always fully invested in shares of the underlying funds, its
investment performance reflects the investment performance of those entities.
The values of such shares held by the separate account fluctuate and are subject
to the risks of changing economic conditions as well as the risk inherent in the
ability of the underlying funds' managements to make necessary changes in their
Portfolios to anticipate changes in economic conditions. Therefore, the owner
bears the entire investment risk that the basic objectives of the contract may
not be realized, and that the adverse effects of inflation may not be lessened.
There can be no assurance that the aggregate amount of variable annuity payments
will equal or exceed the Purchase Payments made with respect to a particular
account for the reasons described above, or because of the premature death of an
Annuitant.
Another important feature of the contract related to its basic objective
is the Company's promise that the dollar amount of variable annuity payments
made during the lifetime of the Annuitant will not be adversely affected by the
actual mortality experience of the Company or by the actual expenses incurred by
the Company in excess of expense deductions provided for in the contract
(although the Company does not guarantee the amounts of the variable annuity
payments).
GENERAL ACCOUNT
The general account is made up of all of the general assets of the
Company other than those allocated to the separate account or any other
segregated asset account of the Company. A Purchase Payment may be allocated to
the 1, 3, 5, 7 or 10 year fixed investment options and the 6-month or 1-year DCA
account options available in connection with the general account, as elected by
the owner at the time of purchasing a contract or when making a subsequent
Purchase Payment. Assets supporting amounts
-3-
<PAGE> 35
allocated to fixed investment options become part of the Company's general
account assets and are available to fund the claims of all classes of customers
of the Company, as well as of its creditors. Accordingly, all of the Company's
assets held in the general account will be available to fund the Company's
obligations under the contracts as well as such other claims.
The Company will invest the assets of the general account in the manner
chosen by the Company and allowed by applicable state laws regarding the nature
and quality of investments that may be made by life insurance companies and the
percentage of their assets that may be committed to any particular type of
investment. In general, these laws permit investments, within specified limits
and subject to certain qualifications, in federal, state and municipal
obligations, corporate bonds, preferred and common stocks, real estate
mortgages, real estate and certain other investments.
PERFORMANCE DATA
From time to time the separate account may advertise the Cash Management
Portfolio'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 Cash Management Portfolio refers to the net income generated for
a contract funded by an investment in the Portfolio (which invests in shares of
the Cash Management Portfolio of SunAmerica Series Trust) 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
Portfolio 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 withdrawal charges. The impact of other recurring
charges (including the mortality and expense risk charge, distribution expense
charge and contract maintenance fee) 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 Portfolios. 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 Portfolio 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 Cash Management
Portfolio.
For periods starting prior to the date the contracts were first offered
to the public, the total return data for the Portfolios of the separate account
will be derived from the performance of the corresponding Portfolios of Anchor
Series Trust and SunAmerica Series Trust, modified to reflect the charges and
expenses as if the separate account Portfolio had been in existence since the
inception date of each respective Anchor Series Trust and SunAmerica Series
Trust Portfolio. Thus, such performance figures should not be construed to be
actual historic performance of the relevant separate account Portfolio. Rather,
they are intended to indicate the historical performance of the corresponding
Portfolios of Anchor Series Trust and SunAmerica Series Trust, adjusted to
provide direct comparability to the performance of the
-4-
<PAGE> 36
Portfolios after the date the contracts were first offered to the public (which
will reflect the effect of fees and charges imposed under the contracts). Anchor
Series Trust and SunAmerica Series Trust have served since their inception as
underlying investment media for separate accounts of other insurance companies
in connection with variable contracts not having the same fee and charge
schedules as those imposed under the contracts.
Performance data for the various Portfolios are computed in the manner
described below.
CASH MANAGEMENT PORTFOLIO
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 contract maintenance
fee, 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 (RMC) is first allocated among the
Portfolios and the general account so that each Portfolio's allocated portion of
the charge is proportional to the percentage of the number of contract owners'
accounts that have money allocated to that Portfolio. The portion of the charge
allocable to the Cash Management Portfolio 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 Cash Management Portfolio. Finally, 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 Cash Management Portfolio 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 underlying fund. 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:
(365/7)
Effective Yield = [(Base Period Return + 1) - 1]
The yield quoted should not be considered a representation of the yield
of the Cash Management Portfolio in the future since the yield is not fixed.
Actual yields will depend on the type, quality and maturities of the investments
held by the underlying fund and changes in interest rates on such investments.
-5-
<PAGE> 37
Yield information may be useful in reviewing the performance of the Cash
Management Portfolio and for providing a basis for comparison with other
investment alternatives. However, the Cash Management Portfolio's yield
fluctuates, unlike bank deposits or other investments that typically pay a fixed
yield for a stated period of time.
OTHER PORTFOLIOS
The Portfolios of the separate account other than the Cash Management
Portfolio compute their performance data as "total return."
Total return for a Portfolio represents a single computed annual rate of
return that, when compounded annually over a specified time period (one, five,
and ten years, or since inception) and applied to a hypothetical initial
investment in a contract funded by that Portfolio 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. The total rate
of return (T) is computed so that it satisfies the formula:
n
P(1+T) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5, or 10 year period as of
the end of the period (or fractional portion thereof).
The total return figures reflect the effect of recurring charges, as
discussed herein. Recurring charges are taken into account in a manner similar
to that used for the yield computations for the Cash Management Portfolio,
described above. As with the Cash Management Portfolio yield figures, total
return figures are derived from historical data and are not intended to be a
projection of future performance.
ANNUITY PAYMENTS
INITIAL MONTHLY ANNUITY PAYMENTS
The initial annuity payment is determined by applying separately that
portion of the contract value allocated to the fixed investment options and the
variable Portfolio(s), less any premium tax, and then applying it to the annuity
table specified in the contract for fixed and variable annuity payments. Those
tables are based on a set amount per $1,000 of proceeds applied. The appropriate
rate must be determined by the sex (except where, as in the case of certain
Qualified contracts and other employer-sponsored retirement plans, such
classification is not permitted) and age of the Annuitant and designated second
person, if any, and the annuity option selected.
The dollars applied are then divided by 1,000 and the result multiplied
by the appropriate annuity factor appearing in the table to compute the amount
of the first monthly annuity payment. In the case of a variable annuity, 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 variable annuity
payment. The number of Annuity Units determined for the first variable annuity
payment remains constant for the second and subsequent monthly
-6-
<PAGE> 38
variable annuity payments, assuming that no reallocation of contract values is
made.
SUBSEQUENT MONTHLY PAYMENTS
For fixed annuity payments, the amount of the second and each subsequent
monthly annuity payment is the same as that determined above for the first
monthly payment.
For variable annuity payments, the amount of the second and each
subsequent monthly annuity payment is determined by multiplying the number of
Annuity Units, as determined in connection with the determination of the initial
monthly payment, above, by the Annuity Unit value as of the day preceding the
date on which each annuity payment is due.
ANNUITY UNIT VALUES
The value of an Annuity Unit is determined independently for each
Portfolio.
The annuity tables contained in the contract are based on a 3.5% per
annum assumed investment rate. If the actual net investment rate experienced by
a Portfolio exceeds 3.5%, variable annuity payments derived from allocations to
that Portfolio will increase over time. Conversely, if the actual rate is less
than 3.5%, variable annuity payments will decrease over time. If the net
investment rate equals 3.5%, the variable annuity payments will remain constant.
If a higher assumed investment rate had been used, the initial monthly payment
would be higher, but the actual net investment rate would also have to be higher
in order for annuity payments to increase (or not to decrease).
The payee 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 Portfolios elected, and the amount of each annuity payment
will vary accordingly.
For each Portfolio, the value of an Annuity Unit is determined by
multiplying the Annuity Unit value for the preceding month by the Net Investment
Factor for the month for which the Annuity Unit value is being calculated. The
result is then multiplied by a second factor which offsets the effect of the
assumed net investment rate of 3.5% per annum which is assumed in the annuity
tables contained in the contract.
NET INVESTMENT FACTOR
The Net Investment Factor ("NIF") is an index applied to measure the net
investment performance of a Portfolio from one day to the next. The NIF may be
greater or less than or equal to one; therefore, the value of an Annuity Unit
may increase, decrease or remain the same.
The NIF for any Portfolio for a certain month is determined by dividing
(a) by (b) where:
(a) is the Accumulation Unit value of the Portfolio determined as of
the end of that month, and
(b) is the Accumulation Unit value of the Portfolio determined as of
the end of the preceding month.
The NIF for a Portfolio for a given month is a measure of the net
investment performance of the Portfolio from the end of the prior month to the
end of the given month. A NIF of 1.000 results in no change; a NIF greater than
1.000 results in an increase; and a NIF less than 1.000 results in a decrease.
The
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<PAGE> 39
NIF is increased (or decreased) in accordance with the increases (or decreases,
respectively) in the value of a share of the underlying fund in which the
Portfolio invests; it is also reduced by separate account asset charges.
ILLUSTRATIVE EXAMPLE
Assume that one share of a given Portfolio had an Accumulation Unit
value of $11.46 as of the close of the New York Stock Exchange ("NYSE") on the
last business day in September; that its Accumulation Unit value had been $11.44
at the close of the NYSE on the last business day at the end of the previous
month. The NIF for the month of September is:
NIF = ($11.46/$11.44)
= 1.00174825
The change in Annuity Unit value for a Portfolio from one month to the
next is determined in part by multiplying the Annuity Unit value at the prior
month end by the NIF for that Portfolio for the new month. In addition, however,
the result of that computation must also be multiplied by an additional factor
that takes into account, and neutralizes, the assumed investment rate of 3.5
percent per annum upon which the annuity payment tables are based. For example,
if the net investment rate for a Portfolio (reflected in the NIF) were equal to
the assumed investment rate, the variable annuity payments should remain
constant (i.e., the Annuity Unit value should not change). The monthly factor
that neutralizes the assumed investment rate of 3.5 percent per annum is:
(1/12)
1/[(1.035) ] = 0.99713732
In the example given above, if the Annuity Unit value for the Portfolio
was $10.103523 on the last business day in August, the Annuity Unit value on the
last business day in September would have been:
$10.103523 x 1.00174825 x 0.99713732 = $10.092213
VARIABLE ANNUITY PAYMENTS
ILLUSTRATIVE EXAMPLE
Assume that a male owner, P, owns a contract in connection with which P
has allocated all of his contract value to a single Portfolio. P is also the
sole Annuitant and, at age 60, has elected to annuitize his contract under
Option 4, a Life Annuity With 120 Monthly Payments Guaranteed. As of the last
valuation preceding the Annuity Date, P's Account was credited with 7543.2456
Accumulation Units each having a value of $15.432655, (i.e., P's account value
is equal to 7543.2456 x $15.432655 = $116,412.31). Assume also that the Annuity
Unit value for the Portfolio on that same date is $13.256932, and that the
Annuity Unit value on the day immediately prior to the second annuity payment
date is $13.327695.
P's first variable annuity payment is determined from the annuity factor
tables in P's contract, using the information assumed above. From these tables,
which supply monthly annuity factors for each $1,000 of applied contract value,
P's first variable annuity payment is determined by multiplying the factor of
$4.92 (Option 4 tables, male Annuitant age 60 at the Annuity Date) by the result
of dividing P's account value by $1,000:
-8-
<PAGE> 40
First Payment = $4.92 x ($116,412.31/$1,000) = $572.75
The number of P's Annuity Units (which will be fixed; i.e., it will not
change unless he transfers his Account to another Account) is also determined at
this time and is equal to the amount of the first variable annuity payment
divided by the value of an Annuity Unit on the day immediately prior to
annuitization:
Annuity Units = $572.75/$13.256932 = 43.203812
P's second variable annuity payment is determined by multiplying the
number of Annuity Units by the Annuity Unit value as of the day immediately
prior to the second payment due date:
Second Payment = 43.203812 x $13.327695 = $575.81
The third and subsequent variable annuity payments are computed in a
manner similar to the second variable annuity payment.
Note that the amount of the first variable annuity payment depends on
the contract value in the relevant Portfolio on the Annuity Date and thus
reflects the investment performance of the Portfolio net of fees and charges
during the Accumulation Phase. The amount of that payment determines the number
of Annuity Units, which will remain constant during the Annuity Phase (assuming
no transfers from the Portfolio). The net investment performance of the
Portfolio during the Annuity Phase is reflected in continuing changes during
this phase in the Annuity Unit value, which determines the amounts of the second
and subsequent variable annuity payments.
TAXES
GENERAL
Section 72 of the Internal Revenue Code of 1986, as amended (the "Code")
governs taxation of annuities in general. An owner is not taxed on increases in
the value of a contract until distribution occurs, either in the form of a
non-annuity distribution 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 contracts issued in connection with Nonqualified plans, the cost
basis is generally the Purchase Payments, while for contracts issued in
connection with Qualified plans 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. Owners, Annuitants and
Beneficiaries under the contract should seek competent financial advice about
the tax consequences of distributions under the retirement plan under which the
contract is 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.
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<PAGE> 41
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 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 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 - SEPARATE ACCOUNT INVESTMENTS
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
owner with respect to earnings allocable to the contract prior to the receipt of
any payments under the contract. The Code contains a safe harbor provision which
provides that annuity contracts, such as your contract, meet the diversification
requirements if, as of the close of each calendar 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
-10-
<PAGE> 42
met, "each United States government agency or instrumentality shall be treated
as a separate issuer."
MULTIPLE CONTRACTS
Multiple annuity contracts which are issued within a calendar year to
the same contract owner by one company 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 multiple 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. 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 have tax consequences, and may also be
prohibited by ERISA in some circumstances. Owners should therefore consult
competent legal advisers should they wish to assign their contracts.
QUALIFIED PLANS
The contracts offered by this prospectus are designed to be suitable for
use under various types of Qualified plans. Taxation of owners in each Qualified
plan varies with the type of plan and terms and conditions of each specific
plan. 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 information 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.
(a) H.R. 10 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 owners 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. Purchasers of
contracts for use with an H.R. 10 Plan should obtain competent tax
advice as to the tax treatment
-11-
<PAGE> 43
and suitability of such an investment.
(b) TAX-SHELTERED ANNUITIES
Section 403(b) of the Code permits the purchase of "tax-sheltered
annuities" by public schools and certain charitable, education 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. Any employee should obtain competent tax advice as to the
tax treatment and suitability of such an investment.
(c) INDIVIDUAL RETIREMENT ANNUITIES
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. 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.
DISTRIBUTION OF CONTRACTS
The contracts are offered through SunAmerica Capital Services, Inc.,
located at 733 Third Avenue, 4th Floor, New York, New York 10017. SunAmerica
Capital Services, 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. The Company and SunAmerica Capital Services, Inc. are
each an indirect wholly owned subsidiary of SunAmerica Inc.
Contracts are offered on a continuous basis.
FINANCIAL STATEMENTS
[The audited 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 the prospectus. 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 for amounts allocated to the 1, 3, 5, 7 or 10
year fixed investment options and the 6-month and 1-year DCA accounts.
Price Waterhouse LLP, 400 South Hope Street, Los Angeles, California
90071, serves as the independent accountants for the separate account and the
Company. The consolidated 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, 1996 have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.]
-12-
<PAGE> 44
As of the date of this Statement of Additional Information, the sale of
the PolarisII contracts had not commenced and the Portfolios had no assets.
Therefore, no financial statements with respect to the separate account are
presented in this Statement of Additional Information.
-13-
<PAGE> 45
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:
To be filed by amendment - Financial Statements of
First SunAmerica Life Insurance Company
The following financial statements are included in Part B of the
Registration Statement:
None
(b) Exhibits
(1) Resolution Establishing Separate Account....... To Be Filed
(2) Custody Agreements............................. Not Applicable
(3) (a) Distribution Contract...................... To Be Filed
(b) Selling Agreement.......................... To Be Filed
(4) Variable Annuity Contract...................... To Be Filed
(a) Seasons Group Annuity Certificate.......... To Be Filed
(b) Seasons Individual Acuity Contract......... To Be Filed
(5) Application for Contract....................... To Be Filed
(a) Seasons Participant Enrollment Form........ To Be Filed
(b) Seasons Annuity Application................ To Be Filed
(6) Depositor - Corporate Documents
(a) Certificate of Incorporation............... To Be Filed
(b) By-Laws.................................... To Be Filed
(7) Reinsurance Contract........................... Not Applicable
(8) Fund Participation Agreement................... To Be Filed
(9) Opinion of Counsel............................. To Be Filed
Consent of Counsel............................. To Be Filed
(10) Consent of Independent Accountants............. To Be Filed
(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........... To Be Filed
(15) Powers of Attorney............................. Filed Herewith
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.
Name Position
- ---- --------
Eli Broad Chairman, President and
Chief Executive Officer
Jay S. Wintrob Director and Executive Vice
President
Joseph M. Tumbler 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
Peter McMillan Director
<PAGE> 46
Jana W. Greer Director and Senior Vice
President
James R. Belardi Director and Senior Vice
President
James W. Rowan 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
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
Greg Outcalt Vice President
Scott H. Richland Vice President and
Assistant Treasurer
- ----------------
(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 which is incorporated herein by reference.
Item 27. Number of Contract Owners
None.
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.
Name Position with Distributor
---- -------------------------
Peter A. Harbeck President
Robert M. Zakem Executive Vice President,
General Counsel & Assistant
Secretary
<PAGE> 47
Enrique Lopez-Balboa Vice President
Steven Rothstein Treasurer
Susan L. Harris Secretary
Lorin M. Fife Assistant Secretary
Net Distribution Compensation on
Name of Discounts and Redemption or Brokerage
Distributor Commissions Annuitization Commissions Commissions*
- ----------- --------------- ------------- ----------- -----------
SunAmerica None None None None
Capital
Services, Inc.
- --------------------
*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 fees and charges under the
contract which, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by the
Company.
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 statement, including
the prospectus, used in connection with the
<PAGE> 48
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> 49
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant has caused this Registration Statement to be signed on
its behalf, in the City of Los Angeles, and the State of California, on this
24th day of November, 1997.
FS VARIABLE SEPARATE ACCOUNT
(Registrant)
By: FIRST SUNAMERICA LIFE INSURANCE COMPANY
(Depositor)
By: /s/ JAY S. WINTROB
-------------------------
Jay S. Wintrob
Executive Vice President
FIRST SUNAMERICA LIFE INSURANCE COMPANY
(Depositor)
By: /s/ JAY S. WINTROB
------------------------
Jay S. Wintrob
Executive Vice President
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints LORIN M. FIFE, SUSAN L. HARRIS AND
CHRISTINE A. NIXON or each of them, as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, as fully to all
intents as he or she might or could do in person, including specifically, but
without limiting the generality of the foregoing, to (i) take any action to
comply with any rules, regulations or requirements of the Securities and
Exchange Commission under the federal securities laws; (ii) make application for
and secure any exemptions from the federal securities laws; (iii) register
additional annuity contracts under the federal securities laws, if registration
is deemed necessary. The undersigned hereby ratifies and confirms all that said
attorneys-in-fact and agents or any of them, or their substitutes, shall do or
cause to be done by virtue thereof.
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacity and on the dates
indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ ELI S. BROAD President, Chief November 24, 1997
- -------------------- Executive Officer and
Eli Broad Chairman of the Board
(Principal Executive
Officer)
/s/ SCOTT L. ROBINSON Senior Vice President November 24, 1997
- -------------------- and Director
Scott L. Robinson (Principal Financial
Officer)
<PAGE> 50
/s/ N. SCOTT GILLIS Senior Vice President November 24, 1997
- -------------------- and Controller
N. Scott Gillis (Principal Accounting
Officer)
/s/ JAMES R. BELARDI Director November 24, 1997
- --------------------
James R. Belardi
/s/ LORIN M. FIFE Director November 24, 1997
- --------------------
Lorin M. Fife
/s/ JANA W. GREER Director November 24, 1997
- --------------------
Jana W. Greer
/s/ SUSAN L. HARRIS Director November 24, 1997
- --------------------
Susan L. Harris
/s/ PETER MCMILLAN Director November 24, 1997
- --------------------
Peter McMillan
/s/ JAMES W. ROWAN Director November 24, 1997
- --------------------
James W. Rowan
/s/ JOSEPH M. TUMBLER Director November 24, 1997
- --------------------
Joseph M. Tumbler
/s/ JAY S. WINTROB Director November 24, 1997
- --------------------
Jay S. Wintrob
/s/ DAVID W. FERGUSON Director November 24, 1997
- --------------------
David W. Ferguson
/s/ THOMAS A. HARNETT Director November 24, 1997
- --------------------
Thomas A. Harnett
/s/ MARGERY K. NEALE Director November 24, 1997
- --------------------
Margery K. Neale
/s/ LESTER POLLACK Director November 24, 1997
- --------------------
Lester Pollack
/s/ RICHARD D. ROHR Director November 24, 1997
- --------------------
Richard D. Rohr
<PAGE> 51
EXHIBIT INDEX
Exhibit
(15) Powers of Attorney
(included on signature page)
