<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 20, 1998
FILE NOS. 333-
811-07727
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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)
------------------------
VARIABLE ANNUITY ACCOUNT FIVE
(Exact Name of Registrant)
ANCHOR NATIONAL 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.
ANCHOR NATIONAL LIFE INSURANCE COMPANY
1 SUNAMERICA CENTER
LOS ANGELES, CALIFORNIA 90067-6022
(Name and Address of Agent for Service)
Approximate date of proposed public offering:
As soon as practicable after effectiveness of the Registration Statement.
Title of securities being registered:
Interests in a Separate Account under group and individual flexible payment
deferred annuity contracts.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
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),
shall determine.
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<PAGE>
VARIABLE ANNUITY ACCOUNT FIVE
CROSS REFERENCE SHEET
PART A -- PROSPECTUS
<TABLE>
<CAPTION>
ITEM NUMBER IN FORM N-4 CAPTION
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Cover Page........................................... Cover Page
2. Definitions.......................................... Glossary
3. Synopsis............................................. Profile; Fee Tables; Portfolio Expenses; Examples
4. Condensed Financial Information...................... Examples
5. General Description of Registrant, Depositor and
Portfolio Companies................................. The Seasons Select Variable Annuity; Other
Information
6. Deductions........................................... Expenses
7. General Description of Variable Annuity Contracts.... The Seasons Select Variable Annuity; Purchasing a
Seasons Select Variable Annuity; Investment Options
8. Annuity Period....................................... Income Options
9. Death Benefit........................................ Death Benefit
10. Purchases and Contract Value......................... Purchasing a Seasons Select Variable Annuity
11. Redemptions.......................................... Access to Your Money
12. Taxes................................................ Taxes
13. Legal Proceedings.................................... Other Information -- Legal Proceedings
14. Table of Contents of Statement of Additional
Information......................................... Table of Contents of Statement of Additional
Information
</TABLE>
<PAGE>
PART B -- STATEMENT OF ADDITIONAL INFORMATION
Certain information required in part B of the Registration Statement has been
included within the Prospectus forming part of this Registration Statement; the
following cross-references suffixed with a "P" are made by reference to the
captions in the Prospectus.
<TABLE>
<CAPTION>
ITEM NUMBER IN FORM N-4 CAPTION
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
15. Cover Page........................................... Cover Page
16. Table of Contents.................................... Table of Contents
17. General Information and History...................... The Seasons Select Variable Annuity (P); Separate
Account; General Account; Investment Options (P);
Other Information
18. Services............................................. Other Information (P)
19. Purchase of Securities Being Offered................. Purchasing a Seasons Select Variable Annuity (P)
20. Underwriters......................................... Distribution of Contracts
21. Calculation of Performance Data...................... Performance Data
22. Annuity Payments..................................... Income Options (P); Annuity Payments; Annuity Unit
Values
23. Financial Statements................................. Depositor; Other Information -- Financial Statements;
Registrant; Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of this Registration Statement.
<PAGE>
[LOGO]
PROFILE
January __, 1999
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS YOU SHOULD KNOW
AND CONSIDER BEFORE PURCHASING THE SEASONS SELECT VARIABLE ANNUITY. THE ANNUITY
IS MORE FULLY DESCRIBED IN THE PROSPECTUS. PLEASE READ THE PROSPECTUS CAREFULLY.
1. THE SEASONS SELECT VARIABLE ANNUITY
The Seasons Select Variable Annuity contract is a contract between you and
Anchor National Life Insurance Company. We designed Seasons Select to help you
save on a tax-deferred basis. Season Select provides a means to diversify your
investments among asset classes and managers as well as a variety of investment
styles to 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.
The Seasons Select Variable Annuity helps you meet these goals by offering
variable investment options. There are nine multimanaged portfolios called
SELECT PORTFOLIOS representing a spectrum of investment styles. In addition,
there are four STRATEGIES which are managed by five different professional
investment managers. The value of any portion of your contract allocated to the
SELECT PORTFOLIOS or STRATEGIES will fluctuate up or down based on the
performance of the SELECT PORTFOLIOS and STRATEGIES you select. You may
experience a loss of both principal and earnings. Five fixed investment options,
each for a different length of time and offering different interest rates
guaranteed by Anchor National are also available. In addition, the DCA fixed
accounts offer fixed interest rates guaranteed by Anchor National and are
available under the contract strictly as source accounts for the Dollar Cost
Averaging program.
The SELECT PORTFOLIOS, STRATEGIES and fixed investment options are designed to
be used in concert in order to achieve your desired investment goals. You may
put money into any of the SELECT PORTFOLIOS, STRATEGIES and/or fixed investment
options. You may transfer between the SELECT PORTFOLIOS, STRATEGIES and/or the
fixed investment options four times per year without charge.
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 SELECT PORTFOLIO(S) or
STRATEGY(IES) 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 be 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.
<PAGE>
2. INCOME OPTIONS
You can select from one of five 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 or 20 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.
Other options may be available.
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 income
option. If your contract is non-qualified, payments during the Income Phase are
considered partly a return of your original investment. The "original
investment" part of each payment is not taxable but any gain to your original
investment is currently taxable as ordinary income upon distribution. For
qualified contracts, the entire payment is currently taxable as ordinary income.
In addition to the above income options, you may also elect to take income
payments under the Income Protector program, subject to the provisions thereof.
3. PURCHASING A SEASONS VARIABLE ANNUITY
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 $5000. For Qualified contracts the minimum initial investment is
$2000. You can add $500 or more to your contract at any time during the
Accumulation Phase.
4. INVESTMENT OPTIONS
You can put your money into any one or more of the nine distinct SELECT
PORTFOLIOS, four multi-manager variable investment STRATEGIES and/or the seven
fixed investment options. The fixed investment options offer fixed rates of
interest for specified lengths of time.
Each SELECT PORTFOLIO has a distinct investment objective utilizing a
disciplined investing style to achieve its objective. Each SELECT PORTFOLIO
invests in an underlying investment portfolio. Except for the Cash Management
portfolio[s], each underlying portfolio is multi-managed by a team of three
money managers specializing in the distinct investment style. The nine SELECT
PORTFOLIOS and the respective managers are:
<TABLE>
<S> <C>
LARGE CAP GROWTH LARGE CAP COMPOSITE
BANKERS TRUST COMPANY BANKERS TRUST
("BANKERS TRUST") SUNAMERICA ASSET
GOLDMAN SACHS ASSET MANAGEMENT COMPANY
MANAGEMENT ("GOLDMAN ("SAAMCO")
SACHS") T. ROWE PRICE ASSOCIATES,
INC.
JANUS CAPITAL ("T. ROWE PRICE")
CORPORATION("JANUS")
LARGE CAP VALUE MID CAP GROWTH
BANKERS TRUST BANKERS TRUST
T. ROWE PRICE T. ROWE PRICE
WELLINGTON MANAGEMENT WELLINGTON
COMPANY LLP
("WELLINGTON")
MID CAP VALUE SMALL-CAP
BANKERS TRUST BANKERS TRUST
GOLDMAN SACHS LORD ABBETT
LORD ABBETT & CO. ("LORD SAAMCO
ABBETT")
INTERNATIONAL EQUITY DIVERSIFIED FIXED INCOME
BANKERS TRUST BANKERS TRUST
GOLDMAN SACHS MANAGEMENT SAAMCO
INTERNATIONAL ("GOLDMAN WELLINGTON
SACHS INT'L")
LORD ABBETT
CASH MANAGEMENT
SAAMCO
</TABLE>
Each STRATEGY has a different investment objective. The STRATEGY(IES) use an
asset allocation investment approach. Each STRATEGY invests in a combination of
underlying investment portfolios which in turn invest in a combination of
stocks, bonds and cash, to achieve its investment objective. The four investment
STRATEGY(IES) are:
GROWTH
MODERATE GROWTH
BALANCED GROWTH
CONSERVATIVE GROWTH
Each STRATEGY invests in three out of six underlying investment portfolios. The
underlying investment portfolios are managed by the following five investment
managers:
PUTNAM INVESTMENT MANAGEMENT, INC.
T. ROWE PRICE ASSOCIATES, INC.
JANUS CAPITAL CORPORATION
SUNAMERICA ASSET MANAGEMENT COMPANY
WELLINGTON MANAGEMENT COMPANY, LLP
5. EXPENSES
Each year we deduct a $35 ($30 in North Dakota) contract administration fee on
your contract anniversary. We currently waive this fee if your contract value is
at least $50,000 on your contract anniversary.
We also deduct insurance charges. If you are under 81 years of age at the issue
date, the insurance charge amounts to 1.40% annually of the average daily value
of your contract allocated to the SELECT PORTFOLIO(S) and/or STRATEGY(IES). If
you are 81 years of age or older at the issue date, the amount of the insurance
charge is 1.52% annually of the average daily value of your contract allocated
to the SELECT PORTFOLIO(S) and/or STRATEGY(IES). There are also investment
charges and other expenses if you put money into the SELECT PORTFOLIO(S) or
STRATEGY(IES), which are estimated to range from [1.10%-1.30%]. Investment
charges may be more or less than the percentages reflected here.
<PAGE>
If you take your money out in excess of the "free withdrawal" amount allowed for
in your contract, we may assess a withdrawal charge that is a percentage of the
money you withdraw. The percentage declines with each year the purchase payment
is in the contract as follows:
<TABLE>
<S> <C> <C> <C>
Year 1........ 9% Year 6........ 5%
Year 2........ 8% Year 7........ 4%
Year 3........ 7% Year 8........ 3%
Year 4........ 6% Year 9........ 2%
Year 5........ 6% Year 10........ 0%
</TABLE>
Additionally, if you take money out of a multi-year fixed investment option
before the end of the selected period, we may assess an adjustment which could
increase or decrease the value of your money.
In some states you may also be assessed a state premium tax of up to 3.5%,
depending upon the state in which you reside.
If you transfer among the SELECT PORTFOLIO(S), STRATEGY(IES) and/or fixed
investment options more than four times per year, we charge a $25 dollar
transfer fee for each subsequent transfer ($10 in Pennsylvania and Texas).
If you elect the PLUS or MAX Alternative of the Income Protector program, we
charge .15% or .30% of your Income Benefit Base (as described in the prospectus)
from your contract value on each contract anniversary.
The following charts are designed to help you understand the charges in your
contract. THE COLUMN "TOTAL ANNUAL CHARGES" SHOWS THE TOTAL OF THE $35 CONTRACT
ADMINISTRATION CHARGE, THE 1.40% OR 1.52% INSURANCE CHARGES, WHICHEVER IS
APPLICABLE, AND THE INVESTMENT CHARGES FOR EACH SELECT PORTFOLIO AND STRATEGY.
WE CONVERTED THE CONTRACT ADMINISTRATION CHARGE TO A PERCENTAGE (.09%) USING AN
ASSUMED CONTRACT SIZE OF $40,000. The actual impact of this charge on your
contract may differ from this percentage.
If you are age 80 or younger at contract issue:
<TABLE>
<CAPTION>
Total Annual
Insurance
Related Total Annual EXAMPLES
Charges Investment Total Total Total
SELECT PORTFOLIOS Related Annual Expenses Expenses
Charges Charges at end of at end of
1 YEAR 10 YEARS
<S> <C> <C> <C> <C> <C> <C>
Large-Cap Growth 1.49% (1.40% + .09%) 1.10% 2.59%
Large-Cap Composite 1.49% (1.40% + .09%) 1.10 2.59
Large-Cap Value 1.49% (1.40% + .09%) 1.10 2.59
Mid-Cap Growth 1.49% (1.40% + .09%) 1.15 2.64
Mid-Cap Value 1.49% (1.40% + .09%) 1.15 2.64
Small-Cap 1.49% (1.40% + .09%) 1.15 2.64
International Equity 1.49% (1.40% + .09%) 1.30 2.79
Diversified Fixed Income 1.49% (1.40% + .09%) 1.00 2.49
Cash Management 1.49% (1.40% + .09%) .85 2.34
<CAPTION>
Total Annual
Insurance
Related Total Annual EXAMPLES
Charges Investment Total Total Total
STRATEGIES Related Annual Expenses Expenses
Charges(1) Charges at end of at end of
1 YEAR 10 YEARS
<S> <C> <C> <C> <C> <C> <C>
Growth 1.49% (1.40% + .09%) 1.25% 2.74% $98 $307
Moderate Growth 1.49% (1.40% + .09%) 1.21% 2.70% $97 $303
Balanced Growth 1.49% (1.40% + .09%) 1.17% 2.66% $97 $299
Conservative Growth 1.49% (1.40% + .09%) 1.12% 2.61% $96 $294
</TABLE>
(1) Investment related charges for each STRATEGY is based upon the allocation to
the underlying investment portfolio after the quarterly rebalancing
described in the prospectus.
<PAGE>
If you are age 81 or older at contract issue:
<TABLE>
<CAPTION>
Total Annual
Insurance
Related Total Annual EXAMPLES
Charges Investment Total Total Total
SELECT PORTFOLIO(S) Related Annual Expenses Expenses
Charges Charges at end of at end of
1 YEAR 10 YEARS
<S> <C> <C> <C> <C> <C> <C>
Large-Cap Growth 1.52% (1.52% + .09%) 1.10% 2.62%
Large-Cap Composite 1.52% (1.52% + .09%) 1.10 2.62
Large-Cap Value 1.52% (1.52% + .09%) 1.10 2.62
Mid-Cap Growth 1.52% (1.52% + .09%) 1.15 2.67
Mid-Cap Value 1.52% (1.52% + .09%) 1.15 2.67
Small-Cap Portfolio 1.52% (1.52% + .09%) 1.15 2.67
International Equity 1.52% (1.52% + .09%) 1.30 2.82
Diversified Fixed Income 1.52% (1.52% + .09%) 1.00 2.52
Cash Management 1.52% (1.52% + .09%) .85 2.37
<CAPTION>
Total Annual
Insurance
Related Total Annual EXAMPLES
Charges Investment Total Total Total
STRATEGY(IES) Related Annual Expenses Expenses
Charges(1) Charges at end of at end of
1 YEAR 10 YEARS
<S> <C> <C> <C> <C> <C> <C>
Growth 1.52% (1.52% + .09%) 1.25% 2.74% $98 $307
Moderate Growth 1.52% (1.52% + .09%) 1.21% 2.70% $97 $303
Balanced Growth 1.52% (1.52% + .09%) 1.17% 2.66% $97 $299
Conservative Growth 1.52% (1.52% + .09%) 1.12% 2.61% $96 $294
</TABLE>
(1) Investment related charges for each STRATEGY is based upon the allocation to
the underlying investment portfolio after the quarterly rebalancing
described in the prospectus.
The examples assume that you invested $1,000 in a SELECT PORTFOLIO or STRATEGY
which earns 5% annually and that you withdrew your money at the end of a 1 year
period and at the end of a 10 year period. For year 1, the total annual charges
are assessed as well as the withdrawal charge. For year 10, the example reflects
the total annual charges but there is no withdrawal charge applicable. The
annual investment-related expenses may vary. The amounts shown here are
estimates and reflect the waiver or reimbursement of expenses by the investment
adviser. No premium taxes are reflected. Please see the Fee Tables in the
prospectus for more detailed information regarding the fees and expenses
incurred under the contract.
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) 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
tax 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
Withdrawals may be made from your contract in the amount of $1,000 or more.
Your contract provides for a free withdrawal amount each year. A free withdrawal
amount is the portion of your account that we allow you to take out each year
without being charged a surrender penalty. However, upon a future partial
withdrawal or full surrender of your contract we will recoup any surrender
charges which would have been due if your free withdrawal had not been free.
To determine your free withdrawal amount and your surrender charge, we refer to
two special terms. These are penalty free earnings and the total invested
amount.
The penalty-free earnings portion of your contract is simply your account value
less your total invested amount. The total invested amount is the total of all
Purchase Payments you have made into the contract less portions of some prior
withdrawals you made.
During the first year after we issue your contract your free withdrawal amount
is the greater of:
1. Your penalty-free earnings and;
<PAGE>
2. If you are participating in the Systematic Withdrawal program, a total of
10% of your total invested amount.
After the first contract year, you can take out the greater of the following
amounts each year:
1. Your penalty free earnings and any portion of your total invested amount no
longer subject to surrender charges
2. 10% of the portion of your total invested amount that has been in your
contract for at least one year.
If you withdraw your entire contract value you will not receive the benefit of
any free withdrawal amount. A separate withdrawal charge schedule applies to
each purchase payment. After a purchase payment has been in the contract for
nine full years, withdrawal charges no longer apply to that portion of the
money. Of course, upon withdrawal you may also have to pay income tax and a 10%
IRS tax penalty may apply. Neither withdrawal charges nor the 10% IRS penalty
are assessed when a death benefit is paid.
8. PERFORMANCE
The value of your annuity will fluctuate depending upon the investment
performance of the SELECT PORTFOLIO(S) and/or STRATEGY(IES) you select. From
time to time we may advertise a SELECT PORTFOLIO'S or STRATEGY'S total return.
The total return figures are based on historical data and are not intended to
indicate future performance.
The following chart shows total return for each STRATEGY since the STRATEGIES
first became available on April 15, 1997. These numbers reflect the insurance
charges, the contract maintenance fee and investment charges. Withdrawal charges
are not reflected in the chart. Past performance is not a guarantee of future
results.
<TABLE>
<CAPTION>
INCEPTION
TO
STRATEGY 9/30/98
<S> <C>
Growth 15.20%
Moderate Growth 14.05%
Balanced Growth 13.97%
Conservative Growth 12.53%
</TABLE>
The SELECT PORTFOLIO(S) were not available for sale prior to the date of this
prospectus. Therefore, no performance information is available.
9. DEATH BENEFIT
If you, or, if there is a joint owner, either of the two, should die during the
Accumulation Phase, your Beneficiary will receive a death benefit.
If at the time we issued your contract, you were 80 years old or younger, the
death benefit is the greatest of:
(1.) the value of your contract at the time we receive satisfactory proof of
death; or (2.) total Purchase Payments less withdrawals (and any fees or charges
applicable to such withdrawals) in an amount proportionate to the amount by
which such withdrawals decreased contract values, compounded at a 4% annual
growth rate until the date of death (3% growth rate if 70 or older at the time
of contract issue); or (3.) the value of your contract on the seventh contract
anniversary, plus any Purchase Payments and less withdrawals (and any fees or
charges applicable to such withdrawals) in an amount proportionate to the amount
by which such withdrawals decreased contract values, since the seventh contract
anniversary, all compounded at a 4% annual growth rate until the date of death
(3% growth rate if age 70 or older at the time of contract issue). (4.) the
maximum anniversary value on any contract anniversary prior to your 81st
birthday. The anniversary value equals the value of your contract on a contract
anniversary plus any Purchase Payments and less any withdrawals (and any fees or
charges applicable to such withdrawals) in an amount proportionate to the amount
by which such withdrawals decreased contract values, since that contract
anniversary.
If at the time we issued your contract, you were 81 years old or older, the
death benefit is the greatest of: (1) the value of your contract at the time we
receive satisfactory proof of death, or (2) total Purchase Payments less
withdrawals (and any fees or charges applicable to such withdrawals) in an
amount proportionate to the amount by which such withdrawals decreased contract
values, compounded at 3%.
In the instance of joint owners, the amount of the death benefit is calculated
based upon the age of the youngest joint owner.
10. OTHER INFORMATION
OWNERSHIP: The contract is an allocated fixed and variable group annuity
contract. A group contract is issued to a contractholder, for the benefit of the
participants in the group. You, as an owner of a Seasons Select Variable
Annuity, are a participant in the group and will receive a certificate
evidencing your ownership. You, as the owner of a certificate, are entitled to
all the rights and privileges of ownership. As used in this Profile and the
prospectus, the term contract refers to your certificate. In some states an
individual fixed and variable annuity contract may be available instead, which
is identical to the group contract described in this Profile and the prospectus
except that it is issued directly to the individual owner.
FREE LOOK: You may cancel your contract within 10 days of receiving it (or
whatever period is required by your state) 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 money in the SELECT
PORTFOLIO(S) and/or STRATEGY(IES) plus any money you put into the fixed
investment options. Its value may be more or less than the money you initially
invested. Thus, the investment risk is borne by you during the free look period.
SYSTEMATIC WITHDRAWAL PROGRAM: If selected by you, this program allows you to
receive either monthly, quarterly, semi-annual or annual checks during the
Accumulation Phase. Systematic withdrawals may also be electronically
transferred to your bank account. Of course, withdrawals during the Accumulation
Phase may be taxable and a 10% IRS tax penalty may apply if you are under age
59 1/2.
<PAGE>
DOLLAR COST AVERAGING: If selected by you, this program allows you to invest
gradually into one or more of the SELECT PORTFOLIO(S) or STRATEGY(IES).
PRINCIPAL ADVANTAGE PROGRAM: If selected by you, this program allows you to put
money in a fixed investment option and one or more SELECT PORTFOLIO(S) or
STRATEGY(IES) and we will guarantee that the portion allocated to the fixed
investment option assuming that it remains invested in that option, will grow to
equal your principal investment.
AUTOMATIC PAYMENT PLAN: You can add to your contract directly from your bank
account with as little as $50 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:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
800/445-SUN2
If money accompanies your correspondence, you should direct it to:
Anchor National Life Insurance Company
P.O. Box 100330
Pasadena, California 91189-0001
<PAGE>
[LOGO]
ALLOCATED FIXED AND VARIABLE GROUP ANNUITY
issued by
VARIABLE ANNUITY ACCOUNT FIVE
and
ANCHOR NATIONAL LIFE INSURANCE COMPANY
The annuity contract has 20 investment choices - 7 fixed investment options
which offer interest rates guaranteed by Anchor National for different periods
of time, 9 variable investment SELECT PORTFOLIOS and 4 variable investment
STRATEGIES:
SELECT PORTFOLIOS
LARGE-CAP GROWTH
LARGE-CAP COMPOSITE
LARGE-CAP VALUE
MID-CAP GROWTH
MID-CAP VALUE
SMALL-CAP
INTERNATIONAL EQUITY
DIVERSIFIED FIXED INCOME
CASH MANAGEMENT
STRATEGIES
GROWTH
MODERATE GROWTH
BALANCED GROWTH
CONSERVATIVE GROWTH
all of which invest in the underlying portfolios of
SEASONS SERIES TRUST
which is managed by:
SELECT PORTFOLIOS
BANKERS TRUST COMPANY
GOLDMAN SACHS ASSET MANAGEMENT
JANUS CAPITAL CORPORATION
LORD, ABBETT & COMPANY
SUNAMERICA ASSET MANAGEMENT COMPANY
T. ROWE PRICE ASSOCIATES, INC.
WELLINGTON MANAGEMENT COMPANY, LLP
STRATEGIES
PUTNAM INVESTMENT MANAGEMENT, INC.
T. ROWE PRICE ASSOCIATES, INC.
JANUS CAPITAL CORPORATION
SUNAMERICA ASSET MANAGEMENT COMPANY
WELLINGTON MANAGEMENT COMPANY, LLP
You can put your money into any one or all of the SELECT PORTFOLIO(S),
STRATEGY(IES) and/or fixed investment options.
Please read this prospectus carefully before investing and keep it for your
future reference. It contains important information you should know about the
Seasons Select Variable Annuity.
To learn more about the annuity offered by this prospectus, you can obtain a
copy of the Statement of Additional Information ("SAI") dated January ,
1999. The SAI has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this prospectus. The table of
contents of the SAI appears on page 39 of this prospectus. For a free copy of
the SAI, call us at 800/445-SUN2 or write us at our Annuity Service Center, P.O.
Box 54299, Los Angeles, California 90054-0299.
In addition, the SEC maintains a website (http://www.sec.gov) that contains the
SAI, materials incorporated by reference and other information filed
electronically with the SEC.
ANNUITIES INVOLVE RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL, AND ARE NOT A
DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. THEY ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY............................................................................................................ 3
FEE TABLES.......................................................................................................... 4
Owner Transaction Expenses...................................................................................... 4
Annual Separate Account Expenses................................................................................ 4
Portfolio Expenses.............................................................................................. 5
EXAMPLES............................................................................................................ 7
1. THE SEASONS SELECT VARIABLE ANNUITY............................................................................. 9
2. PURCHASING A SEASONS SELECT VARIABLE ANNUITY CONTRACT........................................................... 9
Allocation of Purchase Payments................................................................................. 10
Accumulation Units.............................................................................................. 10
Free Look....................................................................................................... 10
3. INVESTMENT OPTIONS.............................................................................................. 11
Variable Investment Options..................................................................................... 11
THE SELECT PORTFOLIO(S)....................................................................................... 11
THE STRATEGY(IES)............................................................................................. 12
Market Value Adjustment......................................................................................... 16
Dollar Cost Averaging........................................................................................... 18
Principal Advantage Program..................................................................................... 19
Voting Rights................................................................................................... 20
Substitution.................................................................................................... 20
4. ACCESS TO YOUR MONEY............................................................................................ 20
Systematic Withdrawal Program................................................................................... 22
Minimum Contract Value.......................................................................................... 22
5. DEATH BENEFIT................................................................................................... 22
6. EXPENSES........................................................................................................ 23
Insurance Charges............................................................................................... 23
Withdrawal Charges.............................................................................................. 24
Investment Charges.............................................................................................. 24
Contract Maintenance Fee........................................................................................ 24
Transfer Fee.................................................................................................... 25
Premium Taxes................................................................................................... 25
Income Taxes.................................................................................................... 25
Reduction or Elimination of Certain Charges and Additional Amounts Credited..................................... 25
7. INCOME OPTIONS.................................................................................................. 25
Annuity Payments................................................................................................ 25
Allocation of Annuity Payments.................................................................................. 27
Transfers During the Income Phase............................................................................... 27
Deferment of Payments........................................................................................... 27
The Income Protector............................................................................................ 28
8. TAXES........................................................................................................... 31
Annuity Contracts in General.................................................................................... 31
Tax Treatment of Distributions--Non-qualified Contracts......................................................... 32
Tax Treatment of Distributions--Qualified Contracts............................................................. 32
Diversification................................................................................................. 32
9. PERFORMANCE..................................................................................................... 33
10. OTHER INFORMATION............................................................................................... 33
The Separate Account............................................................................................ 34
The General Account............................................................................................. 34
Distribution of the Contracts................................................................................... 34
Administration.................................................................................................. 34
Legal Proceedings............................................................................................... 35
Custodian....................................................................................................... 35
Additional Information.......................................................................................... 36
Selected Consolidated Financial Data............................................................................
Management Discussion and Analysis..............................................................................
Properties...................................................................................................... 36
Directors and Executive Officers................................................................................ 38
Executive Compensation.......................................................................................... 39
Security Ownership of Owners and Management..................................................................... 39
Regulation......................................................................................................
Independent Accountants.........................................................................................
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION............................................................
FINANCIAL STATEMENTS................................................................................................ 41
APPENDIX A--MARKET VALUE ADJUSTMENT................................................................................. A-1
APPENDIX B--PREMIUM TAXES........................................................................................... B-1
</TABLE>
2
<PAGE>
GLOSSARY
We have capitalized some of the technical terms used in this prospectus. To help
you understand these terms, we define them in this glossary.
ACCUMULATION PHASE--The period during which you invest money in your contract.
ACCUMULATION UNITS--A measurement we use to calculate the value of the variable
portion of your contract during the Accumulation Phase.
ANNUITANT(S)--The person(s) on whose life (lives) we base annuity payments.
ANNUITY DATE--The date on which annuity payments are to begin, as selected by
you.
ANNUITY UNITS--A measurement we use to calculate the amount of annuity payments
you receive from the variable portion of your contract during the Income Phase.
BENEFICIARY (IES)--The person(s) designated to receive any benefits under the
contract if you or the Annuitant dies.
COMPANY--Anchor National Life Insurance Company ("Anchor National"), We, Us, the
issuer of this annuity contract.
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").
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").
STRATEGY(IES)--A sub-account of Variable Annuity Account Five which provides for
the variable investment options available under the contract. Each STRATEGY has
its own investment objective and is invested in the underlying investment
porfolios of the Seasons Series Trust. This investment option allocates assets
to three out of six available portfolios, each of which is managed by a
different investment advisor.
SELECT PORTFOLIO(S)--A sub-account of Variable Annuity Account Five which
provides for the variable investment options available under the contract. Each
SELECT PORTFOLIO has a distinct investment objective and is invested in the
underlying investment portfolios of the Seasons Series Trust. This investment
option allocates assets to an underlying fund in which a portion of the assets
is managed by three out of seven advisors.
3
<PAGE>
SEASONS VARIABLE ANNUITY FEE TABLES
------------------------------------------------------------
OWNER TRANSACTION EXPENSES
Withdrawal Charge as a percentage of Purchase Payments:
<TABLE>
<S> <C> <C> <C>
Year 1.............. 9% Year 6.............. 5%
Year 2.............. 8% Year 7.............. 4%
Year 3.............. 7% Year 8.............. 3%
Year 4.............. 6% Year 9.............. 2%
Year 5.............. 6% Year 10............. 0%
</TABLE>
<TABLE>
<S> <C>
Contract Maintenance Charge........ $35 each year ($30 in North Dakota)
Transfer Fee....................... No charge for first 4 transfers each
year; thereafter, the fee is $25 per
transfer ($10 in
Pennsylvania and Texas)
</TABLE>
ANNUAL SEPARATE ACCOUNT EXPENSES
(as a percentage of daily net asset value)
If age 80 or younger at contract issue:
<TABLE>
<S> <C>
Mortality Risk Charge........................ 0.90%
Expense Risk Charge.......................... 0.35%
Distribution Expense Charge.................. 0.15%
---
Total Separate Account Expenses........ 1.40%
</TABLE>
If age 81 or older at contract issue:
<TABLE>
<S> <C>
Mortality Risk Charge........................ 1.02%
Expense Risk Charge.......................... 0.35%
Distribution Expense Charge.................. 0.15%
---
Total Separate Account Expenses........ 1.52%
</TABLE>
THE INCOME PROTECTOR EXPENSE
(The Income Protector PLUS & MAX features are optional and
if elected the fees are deducted annually from your contract value.)
<TABLE>
<CAPTION>
Fee as a percentage of
The Income Protector your
Alternatives Income Benefit Base
- ---------------------------------------------- -------------------------
<S> <C>
Income Protector BASE......................... 0.00%
Income Protector PLUS......................... 0.15%
Income Protector MAX.......................... 0.30%
</TABLE>
4
<PAGE>
INVESTMENT PORTFOLIO EXPENSES
(as a percentage of daily net asset value of each investment portfolio after
reimbursement of expenses)*
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
FEE EXPENSES EXPENSES
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
SELECT PORTFOLIOS*
- --------------------------------------------
Large Cap Growth .80% .30% 1.10%
Large Cap Composite .80% .30% 1.10%
Large Cap Value .80% .30% 1.10%
Mid Cap Growth .85% .30% 1.15%
Mid Cap Value .85% .30% 1.15%
Small Company .85% .30% 1.15%
International Equity 1.00% .30% 1.30%
Diversified Fixed Income .70% .30% 1.00%
Cash Management 55% .30% .85%
STRATEGY Underlying Portfolios
- --------------------------------------------
Stock .85% .36% 1.21%
Asset Allocation: Diversified Growth .85% .36% 1.21%
Multi-Managed Growth .89% .40% 1.29%
Multi-Managed Moderate Growth .85% .36% 1.21%
Multi-Managed Income/Equity .81% .33% 1.14%
Multi-Managed Income .77% .29% 1.06%
- -------------------------------------------------------------------------------------------------------
* The percentages set forth above are based on estimated amounts for the current fiscal year
</TABLE>
For certain investment portfolios in which the STRATEGY(IES) invest, 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 following percentages of each investment portfolio's average net
assets: Stock and Asset Allocation: Diversified Growth Portfolios: 1.21%;
Multi-Managed Growth: 1.29%; Multi-Managed Moderate Growth: 1.21%; Multi-Managed
Income/Equity: 1.14%, Multi-Managed Income: 1.06%. The adviser also may
voluntarily waive or reimburse additional amounts to increase an investment
portfolios' investment return. All waivers and/or reimbursements may be
terminated at any time. Furthermore, the adviser may recoup any waivers or
reimbursements within two years after such waivers or reimbursements are
granted, provided that the investment portfolio is able to make such payment and
remain in compliance with the foregoing expense limitations.
IMPORTANT INFORMATION ABOUT PORTFOLIO EXPENSES IF INVESTED IN STRATEGY(IES):
The Investment Portfolio Expenses table set forth above identifies the total
investment expenses charged by the underlying investment portfolios of Seasons
Series Trust. Each contractholder invested in a STRATEGY will incur only a
portion of the investment expense of those portfolios in which the STRATEGY
invests. The following table entitled "Investment Portfolio Expenses by
STRATEGY" shows the total investment expenses a contractholder would incur if
invested in each respective STRATEGY, after the automatic quarterly rebalancing
of such STRATEGY as described on page . The actual investment expenses
incurred by contractholders within a STRATEGY will vary depending upon the daily
net asset value of each investment portfolio in which such STRATEGY is invested.
INVESTMENT PORTFOLIO EXPENSES BY STRATEGY
(based on the total annual expenses of the underlying investment portfolios
reflected above, after reimbursement of expenses)*
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
FEE EXPENSES EXPENSES
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
Growth .87% .38% 1.25%
Moderate Growth .85% .36% 1.21%
Balanced Growth .83% .34% 1.17%
Conservative Growth .80% .32% 1.12%
- -------------------------------------------------------------------------------------------------------
* The percentages set forth above are based on estimated amounts for the current fiscal year
</TABLE>
5
<PAGE>
EXAMPLES
You will pay the following expenses on a $1,000 investment, assuming a 5% annual
return on assets at and:
(a) surrender of the contract at the end of the stated time period if you were
80 or younger at time of issue;
(b) surrender of the contract at the end of the stated time period if you were
age 81 or older at time of issue.
(c)if the contract is annuitized or not surrendered.*
<TABLE>
<CAPTION>
TIME PERIODS
SELECT PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Large Cap Growth (a) (a) (a) (a)
(b) (b) (b) (b)
(c) (c) (c) (c)
Large Cap Composite (a) (a) (a) (a)
(b) (b) (b) (b)
(c) (c) (c) (c)
Large Cap Value (a) (a) (a) (a)
(b) (b) (b) (b)
(c) (c) (c) (c)
Mid Cap Growth (a) (a) (a) (a)
(b) (b) (b) (b)
(c) (c) (c) (c)
Mid Cap Value (a) (a) (a) (a)
(b) (b) (b) (b)
(c) (c) (c) (c)
Small Company (a) (a) (a) (a)
(b) (b) (b) (b)
(c) (c) (c) (c)
International Equity (a) (a) (a) (a)
(b) (b) (b) (b)
(c) (c) (c) (c)
Diversified Fixed
Income (a) (a) (a) (a)
(b) (b) (b) (b)
(c) (c) (c) (c)
Cash Management (a) (a) (a) (a)
(b) (b) (b) (b)
(c) (c) (c) (c)
<CAPTION>
STRATEGY
<S> <C> <C> <C> <C>
Growth (a) $98 (a) $145 (a) $185 (a) $307
(b) $28 (b) $ 85 (b) $145 (b) $307
Moderate Growth (a) $97 (a) $144 (a) $183 (a) $303
(b) $27 (b) $ 84 (b) $143 (b) $303
Balanced Growth (a) $97 (a) $143 (a) $181 (a) $299
(b) $27 (b) $ 83 (b) $141 (b) $299
Conservative Growth (a) $96 (a) $141 (a) $178 (a) $294
(b) $26 (b) $ 81 (b) $138 (b) $294
</TABLE>
* We do not currently charge a surrender charge upon annuitization, unless the
contract is annuitized under the Income Protector Program. We will assess any
applicable surrender charges upon annuitizations using the Income Protector
program.
6
<PAGE>
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you will
incur directly and indirectly by investing in the contract. The example
reflects owner transaction expenses, separate account expenses and
investment portfolio expenses by SELECT PORTFOLIO and STRATEGY.
2. The Examples assume that no transfer fees were imposed. Premium taxes are
not reflected but may be applicable. Although premium taxes may apply in
certain states, they are not reflected in the Examples. In addition, these
examples do not reflect the fees associated with the optional Income
Protector PLUS and MAX features.
3. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE HISTORICAL ACCUMULATION
UNIT VALUES FOR THE STRATEGY(IES) ARE CONTAINED IN
APPENDIX A--CONDENSED FINANCIAL INFORMATION
HISTORICAL ACCUMULATION UNIT VALUES FOR THE
SELECT PORTFOLIO(S) ARE NOT YET AVAILABLE SINCE SALES OF
THOSE PORTFOLIOS HAVE NOT YET BEGUN
7
<PAGE>
THE SEASONS SELECT VARIABLE ANNUITY
- --------------------------------------------------------------------------------
An annuity is a contract between you and an insurance company. You are the owner
of the contract. The contract provides three main benefits:
- Tax Deferral: means that you do not pay taxes on your earnings from the
annuity until you withdraw them.
- Death Benefit: If you die during the Accumulation Phase, the insurance
company pays a death benefit to your Beneficiary.
- Guaranteed Income: If elected, you receive a stream of income for your
lifetime, or another available period you select.
This annuity was developed to help you contribute to your retirement savings.
This annuity works in two stages, the Accumulation Phase and the Income Phase.
Your contract is in the Accumulation Phase during the period when you make
payments into the contract. The Income Phase begins when you request us to start
making payments to you out of the money accumulated in your contract.
The Contract is called a "variable" annuity because it allows you to invest in
variable investment portfolios which we call SELECT PORTFOLIOS and/or
STRATEGIES. The SELECT PORTFOLIOS and STRATEGIES, are similar to mutual funds,
in that they have specific investment objectives and their performance varies.
You can gain or lose money if you invest in these SELECT PORTFOLIOS or
STRATEGIES. The amount of money you accumulate in your contract depends on the
performance of the SELECT PORTFOLIO(S) or STRATEG(IES) in which you invest.
The Contract also offers several fixed account options for varying time periods.
Fixed account options earn interest at a rate set and guaranteed by Anchor
National. If you allocate money to the fixed account options, the amount of
money that accumulates in your Contract depends on the total interest credited
to the particular fixed account option(s) in which you are invested.
For more information on SELECT PORTFOLIO(S), STRATEGY(IES) and fixed account
options available under this contract SEE INVESTMENT OPTIONS, PAGE .
Anchor National Life Insurance Company (Anchor National, The Company, Us, We)
issues the Seasons Select Variable Annuity. When you purchase a Seasons Select
Variable Annuity, a contract exists between you and Anchor National. The Company
is a stock life insurance company organized under the laws of the state of
Arizona. Its principal place of business is 1 SunAmerica Center, Los Angeles,
California 90067. The Company conducts life insurance and annuity business in
the District of Columbia and all states except New York. Anchor National is an
indirect, wholly owned subsidiary of American International Group, Inc., a
Delaware corporation.
PURCHASING A SEASONS SELECT VARIABLE ANNUITY
- --------------------------------------------------------------------------------
A Purchase Payment is the money you give us to buy a contract. Any additional
money you give us to invest in the contract after purchase is a subsequent
Purchase Payment.
8
<PAGE>
This chart shows the minimum initial and subsequent Purchase Payments permitted
under your contract. These amounts depend upon whether a contract is Qualified
or Non-Qualified for tax purposes.
<TABLE>
<CAPTION>
MINIMUM
MINIMUM INITIAL SUBSEQUENT
PURCHASE PAYMENT PURCHASE PAYMENT
----------------- -------------------
<S> <C> <C>
Qualified $ 2,000 $ 500
Non-Qualified $ 5,000 $ 500
</TABLE>
Prior Company approval is required to accept Purchase Payments greater than
$1,000,000. Also, the optional Automatic Payment Plan allows you to make
subsequent payments as small as $50.00. We may refuse any Purchase Payment.
In general, for a Qualified Contract we will not issue a contract to anyone who
is age 70 1/2 or older, unless they certify to us that the minimum distribution
required by the IRS is being made. In addition we may not issue a contract to
anyone over age 90.
ALLOCATION OF PURCHASE PAYMENTS
We invest your Purchase Payments in the fixed accounts, SELECT PORTFOLIO(S)
and/or STRATEGY(IES) according to your instructions. If we receive a Purchase
Payment without allocation instructions, we will invest the money according to
your last allocation instructions. SEE INVESTMENT OPTIONS PAGE .
In order to issue your contract, we must receive your completed application,
Purchase Payment allocation instructions and any other required paper work at
our Annuity Service Center. We allocate your initial purchase payment within two
days of receiving it. If we do not have complete information necessary to issue
your contract, we will contact you. If we do not have the information necessary
to issue your contract within 5 business days we will:
- Send your money back to you, or;
- Ask your permission to keep your money until we get the information
necessary to issue the contract.
ACCUMULATION UNITS
The value of the variable portion of your contract will go up or down depending
upon the investment performance of the SELECT PORTFOLIO(S) or STRATEGY(IES) you
select. In order to keep track of the value of your contract, we use a unit of
measure called an Accumulation Unit which works like a share of a mutual fund.
During the Income Phase, we call them Annuity Units.
An Accumulation Unit value is determined each day that the New York Stock
Exchange ("NYSE") is open. We calculate an Accumulation Unit for each STRATEGY
or SELECT PORTFOLIO after the NYSE closes each day. We do this by:
1. determining the total value of money invested in a particular STRATEGY
or SELECT PORTFOLIO;
2. subtracting from that amount any asset-based charges and any other
charges such as taxes we have deducted; and
3. dividing this amount by the number of outstanding Accumulation Units.
FREE LOOK
You may cancel your contract within ten days after receiving it (or longer if
required by state law). We call this a "free look." To cancel, you must mail the
contract along with your free look request to our Annuity Service Center at P.O.
Box 54299, Los Angeles, California 90054-0299. Unless otherwise required by
state law, you will receive
9
<PAGE>
back the value of the money allocated to the SELECT PORTFOLIO(S) or
STRATEGY(IES) on the day we receive your request plus any Purchase Payment in
the fixed investment options. This value may be more or less than the money you
initially invested. Thus, the investment risk is borne by you during the free
look period.
Certain states require us to return your Purchase Payments upon a free look
request. Additionally, all contracts issued as an IRA require the full return of
Purchase Payments upon a free look. With respect to those contracts, we reserve
the right to put your money in the 1-year fixed investment option during the
free look period. If you cancel your contract during the free look period, we
return your Purchase Payment or the value of your contract, whichever is larger.
At the end of the free look period, we reallocate your money according to your
instructions.
INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
The contract offers variable investment options which we call SELECT
PORTFOLIO(S) and STRATEGY(IES), and fixed investment options. We designed the
contract to meet your varying investment needs over time. You can achieve this
by using the SELECT PORTFOLIO(S) and/or STRATEGY(IES) alone or in concert with
the other and/or the fixed investment options. The SELECT PORTFOLIO(S) and
STRATEGY(IES) operate similar to a mutual fund but are only available through
the purchase of certain variable annuities. A mixture of your investment in the
SELECT PORTFOLIO(S) and/or STRATEGY(IES) and fixed account options may lower the
risk associated with investing only in a variable investment option.
VARIABLE INVESTMENT OPTIONS
Each of the variable investment options of the contract invests in underlying
portfolios of Seasons Series Trust. SunAmerica Asset Management Company
("SAAMCo"), an affiliate of Anchor National, manages Seasons Series Trust.
SAAMCo has engaged sub-advisers to provide investment advice for certain of the
underlying investment portfolios.
YOU SHOULD READ THE PROSPECTUS FOR THE SEASONS SERIES TRUST CAREFULLY BEFORE
INVESTING. THE PROSPECTUS CONTAINS DETAILED INFORMATION ABOUT THE UNDERLYING
INVESTMENT PORTFOLIOS INCLUDING INVESTMENT OBJECTIVE AND RISK FACTORS.
THE SELECT PORTFOLIOS
The contract offers nine SELECT PORTFOLIO(S), each with a distinct investment
objective, utilizing a disciplined investing style to achieve its objective.
Each SELECT PORTFOLIO invests in an underlying investment portfolio of the
Seasons Series Trust. Except for the Cash Management portfolio, each underlying
portfolio is multi-managed by a team of three money managers, including an
unmanaged component that tracks a particular target index or subset of an index.
The unmanaged component of each underlying portfolio is intended to balance some
of the risks associated with an actively traded portfolio.
10
<PAGE>
Each underlying portfolio and the respective managers are:
<TABLE>
<S> <C>
LARGE-CAP GROWTH LARGE-CAP COMPOSITE
Bankers Trust Company ("Bankers Trust") Bankers Trust
Goldman Sachs Assets Management ("Goldman Sachs) SAAMCo
Janus Capital Corporation ("Janus") T. Rowe Price Associates, Inc. ("T. Rowe
Price")
LARGE-CAP VALUE MID-CAP GROWTH
Bankers Trust Bankers Trust
T. Rowe Price T. Rowe Price
Wellington Management Company, LLP ("Wellington") Wellington
MID-CAP VALUE SMALL-CAP
Bankers Trust Bankers Trust
Goldman Sachs Lord Abbett
Lord Abbett & Co. ("Lord Abbett") SAAMCo
INTERNATIONAL EQUITY DIVERSIFIED FIXED INCOME
Bankers Trust Bankers Trust
Goldman Sachs Asset Management International SAAMCo
Lord Abbett Wellington
CASH MANAGEMENT
SAAMCo
</TABLE>
SELECT PORTFOLIO OPERATION
Each SELECT PORTFOLIO is designed to meet a distinct investment objective
facilitated by the management philosophy of three different money managers. An
equal portion of the assets of each SELECT PORTFOLIO will initially be allocated
among the three managers for that SELECT PORTFOLIO. Each quarter SAAMCo will
evaluate the asset allocation between the three managers of each SELECT
PORTFOLIO. If SAAMCo determines that the assets have become significantly
unequal in allocation among the managers, then the in-coming cash flows may be
redirected in an attempt to stabilize the allocations. Generally, existing
SELECT PORTFOLIO assets will not be rebalanced. However, we reserve the right to
do so in the event that it is deemed necessary and not adverse to the interest
of contract owners invested in the SELECT PORTFOLIO. Transfers made as a result
of rebalancing a SELECT PORTFOLIO do not count against your four free transfers
per year.
THE STRATEGIES
The contract offers four multi-manager variable investment STRATEGY(IES), each
with a different investment objective. We designed the STRATEGY(IES) utilizing
an asset allocation approach to meet your investment needs over time,
considering factors such as your age, goals and risk tolerance. However, each
STRATEGY is designed to achieve different levels of growth over time.
Each STRATEGY invests in three underlying investment portfolios of the Seasons
Series Trust. The allocation of money among these investment portfolios varies
depending on the objective of the STRATEGY.
The underlying investment portfolios of Seasons Series Trust in which the
STRATEGY(IES) invest include the Asset Allocation--Diversified Growth Portfolio,
the Stock Portfolio and the Multi-Managed Growth, Multi-Managed Moderate Growth,
Multi-Managed Income/Equity and Multi-Managed Income Portfolios (the "Multi-
Managed Portfolios").
The Asset Allocation: Diversified Growth Portfolio is managed by Putnam
Investment Management, Inc. The Stock Portfolio is managed by T. Rowe Price
Associates, Inc. All of the Multi-Managed Portfolios include the same three
basic investment components: a growth component managed by Janus Capital
Corporation, a balanced component managed by SAAMCo and a fixed income component
managed by Wellington Management Company,
11
<PAGE>
LLP. The Growth STRATEGY and the Moderate Growth STRATEGY also have an
aggressive growth component which SAAMCo manages. The percentage that any one of
these components represents in each Multi-Managed Portfolio varies in accordance
with the investment objective.
Each STRATEGY uses an investment approach based on Asset Allocation. The
Portfolios underlying each STRATEGY invest in a combination of domestic and
international stocks, bonds and cash. The holdings in each STRATEGY will vary
over time. However, each STRATEGY has a neutral asset allocation mix, including
cash. The cash component is required to reflect the anticipated cash holdings
necessary to rebalance each STRATEGY quarterly. The managers rebalance each
STRATEGY quarterly to maintain this neutral allocation. The following charts
outline the target allocations which will result after the quarterly
rebalancing.
12
<PAGE>
GROWTH
GOAL: Long-term growth of capital, allocating its assets primarily to
stocks. This STRATEGY may be best suited for those with longer periods to
invest.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Stocks 80%
Bonds 15%
Cash 5%
</TABLE>
UNDERLYING INVESTMENT
PORTFOLIOS & MANAGERS
ASSET ALLOCATION: DIVERSIFIED
GROWTH PORTFOLIO 25%
Managed by Putnam Investment
Management, Inc.
STOCK PORTFOLIO 25%
Managed by T. Rowe Price
Associates, Inc.
MULTI-MANAGED GROWTH PORTFOLIO 50%
Managed by:
Janus Capital Corporation
SunAmerica Asset Management Corp.
Wellington Management Company, LLP
MODERATE GROWTH
GOAL: Growth of capital through investments in equities, with a secondary
objective of conservation of principal by allocating more of its assets to bonds
than the Growth STRATEGY. This STRATEGY may be best suited for those nearing
retirement years but still earning income.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Stocks 70%
Bonds 25%
Cash 5%
</TABLE>
UNDERLYING INVESTMENT
PORTFOLIOS & MANAGERS
ASSET ALLOCATION: DIVERSIFIED
GROWTH PORTFOLIO 25%
Managed by Putnam Investment
Management, Inc.
STOCK PORTFOLIO 20%
Managed by T. Rowe Price
Associates, Inc.
MULTI-MANAGED MODERATE GROWTH
PORTFOLIO 55%
Managed by:
Janus Capital Corporation
SunAmerica Asset Management Corp.
Wellington Management Company, LLP
13
<PAGE>
BALANCED GROWTH
Goal: Focuses on conservation of principal by investing in a more balanced
weighting of stocks and bonds, with a secondary objective of seeking a high
total return. This STRATEGY may be best suited for those approaching retirement
and with less tolerance for investment risk.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Stocks 55%
Bonds 40%
Cash 5%
</TABLE>
UNDERLYING INVESTMENT
PORTFOLIOS & MANAGERS
ASSET ALLOCATION: DIVERSIFIED
GROWTH PORTFOLIO 25%
Managed by Putnam Investment
Management, Inc.
STOCK PORTFOLIO 20%
Managed by T. Rowe Price
Associates, Inc.
MULTI-MANAGED INCOME/EQUITY
PORTFOLIO 55%
Managed by:
Janus Capital Corporation
SunAmerica Asset Management Corp.
Wellington Management Company, LLP
CONSERVATIVE GROWTH
Goal: Capital preservation while maintaining some potential for growth over
the long term. This STRATEGY may be best suited for those with lower investment
risk tolerance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Stocks 42%
Bonds 53%
Cash 5%
</TABLE>
UNDERLYING INVESTMENT
PORTFOLIOS & MANAGERS
ASSET ALLOCATION: DIVERSIFIED
GROWTH PORTFOLIO 25%
Managed by Putnam Investment
Management, Inc.
STOCK PORTFOLIO 15%
Managed by T. Rowe Price
Associates, Inc.
MULTI-MANAGED INCOME PORTFOLIO 60%
Managed by:
Janus Capital Corporation
SunAmerica Asset Management Corp.
Wellington Management Company, LLP
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<PAGE>
STRATEGY REBALANCING
Each STRATEGY is designed to meet its investment objective by allocating a
portion of your money to three different investment portfolios. In order to
maintain the mix of investment portfolios consistent with each STRATEGY's
objective, each STRATEGY within your contract is rebalanced each quarter. On the
first business day of each quarter (or as close to such date as is
administratively practicable) it will be allocated among the various investment
portfolios according to the percentages set forth on the prior pages.
Additionally, within each Multi-Managed Portfolio, your money will be rebalanced
among the various components. We also reserve the right to rebalance any
STRATEGY more frequently if deemed necessary and in no event adverse to the
interests of contract owners invested in such STRATEGY. Rebalancing a STRATEGY
may involve shifting a portion of assets out of underlying investment portfolios
with higher returns into underlying investment portfolios with relatively lower
returns. Transfers made as a result of rebalancing a STRATEGY are not counted
against your four free transfers per year.
SUBSTITUTION
If any of the underlying investment portfolios is no longer available, we may be
required to substitute shares of another investment portfolio. We will seek any
required prior approval of the SEC and give you notice before doing this.
FIXED INVESTMENT OPTIONS
The contract also offers seven fixed investment options. Anchor National will
guarantee the interest rate earned on money you allocate to any of these fixed
investment options. We currently offer fixed investment options for periods of
one, three, five, seven and ten years, which we call guarantee periods. In
Maryland or Washington only the one year fixed investment option is available.
The seven and ten year guarantee periods are not available in Oregon.
Additionally, we guarantee the interest rate for money allocated to the
six-month DCA fixed account and/ or the one year DCA fixed account (the "DCA
fixed accounts") which are available only in conjunction with the Dollar Cost
Averaging Program. Please see the section on the Dollar Cost Averaging Program
on the next page for additional information about, including limitations on, the
availability and operation of the DCA fixed accounts. The DCA fixed accounts are
only available for new Purchase Payments.
All of these fixed account options pay interest at rates set and guaranteed by
Anchor National. Interest rates may differ from time to time and are set at our
sole discretion. We will never credit less than a 3% annual effective rate to
any of the fixed account options. The interest rate offered for new Purchase
Payments may differ from that offered for subsequent Purchase Payments and money
already in the fixed account options. In addition, different guarantee periods
offer different interest rates. Once established, the rates for specified
payments do not change during the specified period.
When a guarantee period ends, you may leave your money in the same guarantee
period. You may also reallocate money to another fixed investment option (other
than the DCA fixed accounts) or to any of the SELECT PORTFOLIO(S) or
STRATEGY(IES). If you want to reallocate your money, you must contact us within
30 days after the end of the current guarantee period and instruct us how to
reallocate your money. If we do not hear from you, we will keep your money in
the same guarantee period where it will earn the renewal interest rate
applicable at that time.
MARKET VALUE ADJUSTMENT
NOTE: THE FOLLOWING DISCUSSION APPLIES TO THE 3, 5, 7 or 10 YEAR FIXED
INVESTMENT OPTIONS, ONLY. THESE OPTIONS ARE NOT AVAILABLE IN ALL STATES. PLEASE
CONTACT YOUR FINANCIAL REPRESENTATIVE FOR MORE INFORMATION. THIS DISCUSSION DOES
NOT APPLY TO WITHDRAWALS TO PAY A DEATH BENEFIT OR CONTRACT FEES AND CHARGES.
15
<PAGE>
If you take money out of the 3, 5, 7 or 10 year fixed investment options before
the end of the guarantee period, we make an adjustment to your contract (the
"market value adjustment"). This market value adjustment reflects any difference
in the interest rate environment between the time you place your money in the
fixed investment option and the time when you withdraw that money. This
adjustment can increase or decrease your contract value. You have 30 days after
the end of each guarantee period to reallocate your funds without incurring a
market value adjustment.
We will not assess a market value adjustment against withdrawals made (1) to pay
a death benefit; (2) to pay contract fees and charges; or (3) to begin the
income phase of your contract on the latest annuity date.
We calculate the market value adjustment by doing a comparison between current
rates and the rate being credited to you in the fixed investment option. For the
current rate we use a rate being offered by us for a guarantee period that is
equal to the time remaining in the guarantee period from which you seek
withdrawal. If we are not currently offering a guarantee period for that period
of time, we determine an applicable rate by using a formula to arrive at a
number between the interest rates currently offered for the two closest periods
available.
Generally, if interest rates drop between the time you put your money into the
fixed investment options and the time you take it out, we credit a positive
adjustment to your contract. On the other hand, if interest rates increase
during the same period, we post a negative adjustment to your contract.
Where the market value adjustment is negative, we first deduct the adjustment
from any money remaining in the fixed investment option. If there is not enough
money in the fixed investment option to meet the negative deduction, we deduct
the remainder from your withdrawal. Where the market value adjustments is
positive, we add the adjustment to your withdrawal amount.
The one year fixed investment option and the DCA fixed accounts do not impose a
market value adjustment. These fixed investment options are not registered under
the Securities Act of 1933 and are not subject to the provisions of the
Investment Company Act of 1940.
Please see Appendix B for more information on how we calculate the market value
adjustment.
TRANSFERS DURING THE ACCUMULATION PHASE
Except as provided in the next sentence with respect to the DCA Account, you can
transfer money among the SELECT PORTFOLIO(S), STRATEGY(IES) and the fixed
investment options by written request or by telephone. Although you may transfer
money out of the DCA Account, you may not transfer money into the DCA Account
from any SELECT PORTFOLIO, STRATEGY or fixed investment option. You can make
four transfers every year without incurring a transfer charge. We measure a year
from the anniversary of the date we issued your contract. If you make more than
four transfers in a year, there is a $25 fee per transfer ($10 in Pennsylvania
and Texas). Additionally, transfers out of a 3, 5, 7 or 10 year fixed investment
option may be subject to a market value adjustment.
The minimum amount you can transfer is $500, or a lesser amount if you transfer
the entire balance from a SELECT PORTFOLIO, STRATEGY or a fixed investment
option. Any money remaining in a SELECT PORTFOLIO, STRATEGY or fixed investment
option after making a transfer must equal at least $500. Your request for
transfer must clearly state which investment option(s) are involved and the
amount you want to transfer. Please see the section below on Dollar Cost
Averaging for specific rules regarding the DCA Account.
We will accept transfers by telephone unless you specify otherwise on your
contract application. Additionally, in the future you may be able to execute
transfers or other financial transactions over the internet. When receiving
16
<PAGE>
instructions over the telephone, we follow appropriate procedures to provide
reasonable assurance that the transactions executed are genuine. Thus, we are
not responsible for any claim, loss or expense from any error resulting from
instructions received over the telephone.
Upon implementation of internet account transfers we will have appropriate
procedures in place to provide reasonable assurance that the transactions
executed are genuine. Thus, we would not be responsible for any claim, loss or
expense from any error resulting from instructions received over the internet.
If we fail to follow our procedures we may be liable for any losses due to
unauthorized or fraudulent transactions.
For information regarding transfers during the Income Phase, see INCOME OPTIONS
on page .
We may limit the number of transfers in any contract year or refuse any transfer
request for you or others invested in the contract if we believe that:
- Excessive trading or a specific transfer request or group transfer
requests may have a detrimental effect on unit values or the share prices
of the underlying Variable Portfolios; or
- The underlying Variable Portfolios inform us that they need to restrict
the purchase or redemption of the shares because of excessive trading or
because a specific transfer or group of transfers is deemed to have a
detrimental effect on share prices of affected underlying Variable
Portfolios.
Where permitted by law, we may accept your authorization for a third party to
make transfers for you subject to our rules. We reserve the right to suspend or
cancel such acceptance at any time and will notify you accordingly.
Additionally, we may restrict the investment options available for transfers
during any period in which such third party acts for you. We notify such third
party beforehand regarding any restrictions. However, we will not enforce these
restrictions if we are satisfied that:
- such third party has been appointed by a court of competent jurisdiction
to act on your behalf; or
- such third party is a trustee/fiduciary appointed, by you or for you, to
act on your behalf for all your financial affairs.
We may provide administrative or other support services to independent third
parties you authorize to make transfers on your behalf. We do not currently
charge you extra for providing these support services. This includes, but is not
limited to, transfers between investment options in accordance with market
timing strategies. Such independent third parties may or may not be appointed
with us for the sale of annuities. However, WE DO NOT ENGAGE ANY THIRD PARTIES
TO OFFER INVESTMENT ALLOCATION SERVICES OF ANY TYPE. WE TAKE NO RESPONSIBILITY
FOR THE INVESTMENT ALLOCATION AND TRANSFERS TRANSACTED ON YOUR BEHALF BY SUCH
THIRD PARTIES OR FOR ANY INVESTMENT ALLOCATION RECOMMENDATIONS MADE BY SUCH
PARTIES.
We reserve the right to modify, suspend or terminate the transfer privileges at
any time.
DOLLAR COST AVERAGING
The Dollar Cost Averaging ("DCA") program allows you to invest gradually in the
variable investment options. Under the program you systematically transfer a set
dollar amount or percentage of any SELECT PORTFOLIO and/or STRATEGY or from the
1-year fixed account option (source accounts) to any other SELECT PORTFOLIO or
STRATEGY. Transfers may be monthly or quarterly. You may change the frequency at
any time by notifying us in writing. The minimum transfer amount under the DCA
program is $500, regardless of the source account.
We also offer the 6-month and a 1-year DCA fixed accounts exclusively to
facilitate this program. The DCA fixed accounts only accept new Purchase
Payments. You can not transfer money already in your contract into these
17
<PAGE>
options. If you allocate a Purchase Payment into a DCA fixed account, we
transfer all your money allocated to that account into the SELECT PORTFOLIO(S)
or STRATEGY(IES) you select over the selected 6-month or 1-year period. You
cannot change the option or the frequency of transfers once selected.
If allocated to the 6-month DCA fixed account, we transfer your money over a
maximum of 6 monthly transfers. We base the actual number of transfers on the
total amount allocated to the account. For example, if you allocate $500 to the
6-month DCA fixed account, we transfer your money over a period of five months,
so that each payment complies with the $100 per transfer minimum.
We determine the amount of the transfers from the 1-year DCA fixed account based
on
- the total amount of money allocated to the account, and
- the frequency of transfers selected.
For example, let's say you allocate $1,000 to the 1-year DCA account. You select
monthly transfers. We completely transfer all of your money to the selected
investment options over a period of ten months.
You may terminate your DCA program at any time. If money remains in the DCA
fixed account, we transfer the remaining money to the 1-year fixed investment
option, unless we receive different instructions from you.
Transfers under the DCA program do not count against your four free transfers
per year. In addition, transfers resulting from a termination of this program do
not count towards your 4 free transfers.
The DCA program is designed to lessen the impact of market fluctuations on your
investment. However, we cannot ensure that you will make a profit. When you
elect the DCA Program, you are continuously investing in securities regardless
of fluctuating price levels. You should consider your tolerance for investing
through periods of fluctuating price levels.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to gradually move $750 each quarter from the Cash
Management Portfolio to the Mid-Cap Value SELECT PORTFOLIO over six
quarters. You set up dollar cost averaging and purchase Accumulation Units
at the following values:
<TABLE>
<CAPTION>
QUARTER ACCUMULATION UNIT UNITS PURCHASED
- --------- ----------------- -------------------
<S> <C> <C>
1 $ 7.50 100
2 $ 5.00 150
3 $ 10.00 75
4 $ 7.50 100
5 $ 5.00 150
6 $ 7.50 100
</TABLE>
You paid an average price of only $6.67 per Accumulation Unit over six
quarters, while the average market price actually was $7.08. By investing an
equal amount of money each month, you automatically buy more Accumulation
Units when the market price is low and fewer Accumulation Units when the
market price is high. This example is for illustrative purposes only.
PRINCIPAL ADVANTAGE PROGRAM
The Principal Advantage Program allows you to invest in one or more of the
SELECT PORTFOLIO(S) or STRATEGY(IES) without putting your principal at direct
risk. The program accomplishes this by allocating your
18
<PAGE>
investment strategically between the fixed investment options (other than the
DCA fixed accounts) and the SELECT PORTFOLIO or STRATEGY you select. You decide
how much you want to invest and approximately when you want a return of
principal. We calculate how much of your Purchase Payment needs to be allocated
to the particular fixed investment option to ensure that it grows to an amount
equal to your total principal invested under this program.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to allocate a portion of your initial Purchase Payment
of $100,000 to the fixed 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 5% interest rate, we will allocate
$71,068.13 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
$28,931.87 may be allocated among the SELECT PORTFOLIO(S) or STRATEGY(IES),
as determined by you, to provide opportunity for greater growth. This
example assumes that you are NOT participating in the Income Protector Plus
or Max.
VOTING RIGHTS
Anchor National is the legal owner of the Seasons Series Trust shares. However,
when an underlying portfolio solicits proxies in conjunction with a vote of
shareholders, we must obtain your instructions on how to vote those shares. We
vote all of the shares we own in proportion to your instructions. This includes
any shares we own on our own behalf. Should we determine that we are no longer
required to comply with these rules, we will vote the shares in our own right.
SUBSTITUTION
If any of the underlying portfolios become unavailable for investment, we may be
required to substitute shares of another investment portfolio. We will seek
prior approval of the SEC and give you notice before substituting shares.
ACCESS TO YOUR MONEY
- --------------------------------------------------------------------------------
You can access money in your contract in two ways:
- by making a partial or total withdrawal, and/or;
- by receiving income payments during the Income Phase. See INCOME OPTIONS
on page
Generally, we deduct a withdrawal charge applicable to any total or partial
withdrawal and a market value adjustment if a withdrawal comes from the 3, 5, 7
or 10 year fixed investment options. If you withdraw your entire contract value,
we also deduct any applicable premium taxes and a contract maintenance fee. See
EXPENSES on page . We calculate charges due on a total withdrawal on the day
after we receive your request and other required paper work. We return your
contract value less any applicable fees and charges.
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<PAGE>
FREE WITHDRAWAL PROVISION
Your contract provides for a free withdrawal amount each year. A free withdrawal
amount is the portion of your account that we allow you to take out each year
without being charged a surrender penalty. However, upon a future partial
withdrawal or full surrender of your contract we will recoup any surrender
charges which would have been due if your free withdrawal had not been free.
To determine your free withdrawal amount and your surrender charge, we refer to
two special terms. These are penalty free earnings and the total invested
amount.
The penalty-free earnings portion of your contract is simply your account value
less your total invested amount. The total invested amount is the total of all
Purchase Payments you have made into the contract less portions of some prior
withdrawals you made. The portions of prior withdrawals that reduce your total
invested amount are as follows:
1. Any free withdrawals in any year that were in excess of your penalty
free earnings and were based on the part of the Total Investment Amount
that was no longer subject to surrender charges at the time of the
withdrawal.
2. Any prior withdrawals of the Total Investment Amount on which you
already paid a surrender penalty, plus any surrender charge paid on such
a withdrawal.
When you make a withdrawal, we assume that it is taken from penalty-free
earnings first, then from the total invested amount on a first-in, first-out
basis. This means that you can also access your Purchase Payments which are no
longer subject to a surrender charge before those Purchase Payments which are
still subject to the surrender charge.
During the first year after we issue your contract your free withdrawal amount
is the greater of:
1. Your penalty-free earnings and;
2. If you are participating in the Systematic Withdrawal program, a total
of 10% of your total invested amount.
After the first contract year, you can take out the greater of the following
amounts each year:
1. Your penalty free earnings and any portion of your total invested amount
no longer subject to surrender charges
2. 10% of the portion of your total invested amount that has been in your
contract for at least one year.
Under most circumstances, the minimum partial withdrawals amount is $1,000. We
require that the value left in any SELECT PORTFOLIO, STRATEGY or fixed account
be at least $500, after the withdrawal. You must send a written withdrawal
request. Unless you provide us with different instructions, partial withdrawals
will be made in equal amounts from each SELECT PORTFOLIO, STRATEGY and the fixed
investment option in which your contract is invested. Withdrawals from fixed
investment options prior to the end of the guarantee period may result in a
market value adjustment.
We may be required to suspend or postpone the payment of a withdrawal for any
period of time when: (1) the NYSE is closed (other than a customary weekend and
holiday closings); (2) trading with the NYSE is restricted; (3) an emergency
exists such that disposal of or determination of the value of shares of the
Portfolios is not reasonably practicable; (4) the SEC, by order, so permits for
the protection of contract owners.
Additionally, we reserve the right to defer payments for a withdrawal from a
fixed investment option. Such deferrals are limited to no longer than six
months.
20
<PAGE>
SYSTEMATIC WITHDRAWAL PROGRAM
If you elect, we use money in your contract to pay you monthly, quarterly,
semi-annual or annual payments during the Accumulation Phase. Electronic
transfer of these funds to your bank account is also available. The minimum
amount of each withdrawal is $250. There must be at least $500 remaining in your
contract at all times. Withdrawals may be taxable and a 10% IRS tax penalty may
apply if you are under age 59 1/2. Any withdrawals you make using this program
count against your free withdrawal amount as described above. Withdrawals in
excess of that amount may incur a withdrawal charge. There is no additional
charge for participating in this program.
The program is not available to everyone. Please check with our Annuity Service
Center, which can provide the necessary enrollment forms. We reserve the right
to modify, suspend or terminate this program at any time.
MINIMUM CONTRACT VALUE
Where permitted by state law, we may terminate your contract if both of the
following occur: (1) your contract is less than $500 as a result of withdrawals;
and (2) you have not made any Purchase Payments during the past three years. We
will provide you with sixty days written notice. At the end of the notice
period, we will distribute the contract's remaining value to you.
QUALIFIED CONTRACT OWNERS
Certain qualified plans restrict and/or prohibit your ability to withdraw money
from your contract. Please see Section 6, TAXES for a more detailed explanation.
DEATH BENEFIT
- --------------------------------------------------------------------------------
If you die during the Accumulation Phase of your contract, we pay a death
benefit to your Beneficiary.
If at the time we issued your contract, you were 80 years old or younger, the
death benefit is the greatest of:
1. the value of your contract at the time we receive satisfactory proof of
death; or
2. total Purchase Payments less withdrawals (and any fees or charges
applicable to such withdrawals) in an amount proportionate to the amount
by which such withdrawals decreased contract values, compounded at a 4%
annual growth rate until the date of death (3% growth rate if 70 or older
at the time of contract issue); or
3. the value of your contract on the seventh contract anniversary, plus any
Purchase Payments and less withdrawals (and any fees or charges
applicable to such withdrawals) in an amount proportionate to the amount
by which such withdrawals decreased contract values, since the seventh
contract anniversary, all compounded at a 4% annual growth rate until the
date of death (3% growth rate if age 70 or older at the time of contract
issue).
4. the maximum anniversary value on any contract anniversary prior to your
81st birthday. The anniversary value equals the value of your contract on
a contract anniversary plus any Purchase Payments and less any
withdrawals (and any fees or charges applicable to such withdrawals) in
an amount proportionate to the amount by which such withdrawals decreased
contract values, since that contract anniversary.
If at the time we issue your contract, you were 81 years old or older, the death
benefit is the greater of:
1. the value of your contract at the time we receive satisfactory proof of
death; or
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<PAGE>
2. total Purchase Payments less withdrawals (and any fees or charges
applicable to such withdrawals) in an amount proportionate to the amount
by which such withdrawals decreased contract values, compounded at a 3%
annual growth rate until the date of death.
The death benefit is not paid after you switch to the Income Phase. If you die
during the Income Phase, your Beneficiary will receive any remaining guaranteed
income payments in accordance with the income option you choose. See INCOME
OPTIONS, page .
You select the Beneficiary 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 is not effective until we
record the change.
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.
The death benefit must begin payment immediately upon receipt of all necessary
documents and, in any event, must be paid within 5 years of the date of death.
The Beneficiary may in the alternative elect to have the death benefit payable
in the form of an annuity. If the Beneficiary elects an income option, it must
be paid over the Beneficiary's lifetime or for a period not extending beyond the
Beneficiary's life expectancy. Income payments must begin within one year of
your death. If the Beneficiary is the spouse of the owner, he or she can elect
to continue the contract at the then current value, rather than receive a death
benefit.
If the Beneficiary does not make a specific election as to how they want the
death benefit distributed within sixty days of our receipt of adequate proof of
death, it will be paid in a lump sum.
DEATH OF THE ANNUITANT
If the Annuitant dies before annuity payments begin, you can name a new
Annuitant. If no Annuitant is named within 30 days, you will become the
Annuitant. However, if the owner is a non-natural person (for example, a
corporation), then the death of the Annuitant will be treated as the death of
the owner, no new Annuitant may be named and the death benefit will be paid.
EXPENSES
- --------------------------------------------------------------------------------
There are charges and expenses associated with your contract. These charges and
expenses reduce your investment return. We will not increase these fees and
charges under your contract. Some states may require that we charge less than
the amounts described below.
INSURANCE CHARGES
If you are age 80 or younger when your contract is issued, the amount of this
charge is 1.40% annually of the value of your contract invested in the SELECT
PORTFOLIO(S) and/or STRATEGY(IES). If you are are 81 or older at the time of
contract issue, the insurance charge is 1.52% annually of the value of your
contract invested in the SELECT PORTFOLIO(S) and/or STRATEGY(IES).
We deduct the charge daily. The insurance charge compensates us for the
mortality and expense risks and the costs of contract distribution assumed by
Anchor National.
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<PAGE>
If these charges do not cover all of our expenses, we will pay the difference.
Likewise, if these charges exceed our expenses, we will keep the difference.
WITHDRAWAL CHARGES
The contract provides a free withdrawal amount every year. See ACCESS TO YOUR
MONEY page . If you take money out in excess of the free withdrawal amount,
you may incur a withdrawal charge.
We apply a withdrawal charge against each Purchase Payment you put into the
contract. After a Purchase Payment has been in the contract for nine complete
years, no withdrawal charge applies. The withdrawal charge equals a percentage
of the Purchase Payment you take out of the contract. The withdrawal charge
percentage declines each year a purchase payment is in the contract, as follows
<TABLE>
<CAPTION>
YEAR 1 2 3 4 5 6 7 8
- ------------------ ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WITHDRAWAL CHARGE 9% 8% 7% 6% 6% 5% 4% 3%
<CAPTION>
YEAR 9 10
- ------------------ ----- -----
<S> <C> <C>
WITHDRAWAL CHARGE 2% 0%
</TABLE>
When calculating the withdrawal charge, we treat withdrawals as coming first
from the Purchase Payments that have been in your contract the longest. However,
for tax purposes, your withdrawals are considered earnings first, then Purchase
Payments.
Whenever possible, we deduct the withdrawal charge from the money remaining in
your contract. If you withdraw all of your contract value, we deduct any
applicable withdrawal charges from the amount withdrawn.
We will not assess a withdrawal charge for money withdrawn to pay a death
benefit. We will not assess a withdrawal charge upon election to receive income
payments from your contract, except when you elect to begin the Income Phase
using the Income Protector program. If you annuitize using the Income Protector
program, we assess the entire withdrawal charge applicable to Purchase Payments
remaining in your contract when calculating your Income Benefit Base, as if you
fully surrendered your contract as of the Income Benefit Date. See INCOME PHASE
page .
Withdrawals made prior to age 59 1/2 may result in tax penalties. See TAXES page
.
INVESTMENT CHARGES
Charges are deducted from the assets of the investment portfolios underlying the
SELECT PORTFOLIO(S) or STRATEGY(IES) for the advisory and other expenses of the
portfolios. THE FEE TABLE BEGINNING ON PAGE 4 ILLUSTRATES THESE CHARGES AND
EXPENSES. FOR MORE DETAILED INFORMATION ON THESE INVESTMENT CHARGES, REFER TO
THE PROSPECTUS FOR THE TRUST, ENCLOSED OR ATTACHED.
CONTRACT MAINTENANCE FEE
During the Accumulation Phase, we subtract a contract maintenance fee from your
account once per year. This charge compensates us for the cost of contract
administration. We will deduct the $35 ($30 in North Dakota) contract
maintenance fee from your account value on your contract anniversary. If you
withdraw your entire contract value, we deduct the fee from that withdrawal.
If your contract value is $50,000 or more on your contract anniversary date, we
will waive the charge. This waiver is subject to change without notice.
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<PAGE>
TRANSFER FEE
We currently permit four free transfers between investment options, every
contract year. We charge you $25 for each transfer over four in any one year
($10 in Pennsylvania and Texas). We deduct the transfer fee from the SELECT
PORTFOLIO(S), STRATEGY and/or fixed investment option from which you request the
transfer. See INVESTMENT OPTIONS, page .
PREMIUM TAX
Certain states charge the Company a tax on the premiums you pay into the
contract. We deduct from your contract these premium tax charges. Currently we
deduct the charge for premium taxes when you take a full withdrawal or annuitize
the contract. In the future, we may assess this deduction at the time you put
Purchase Payment(s) into the contract or upon payment of a death benefit.
APPENDIX B provides more information about premium taxes.
INCOME TAXES
We do not currently deduct income taxes from your contract. We reserve the right
to do so in the future.
REDUCTION OR ELIMINATION OF CHARGES AND EXPENSES, AND ADDITIONAL AMOUNTS
CREDITED
Sometimes sales of the contracts to groups of similarly situated individuals may
lower our administrative and/or sales expenses. We reserve the right to reduce
or waive certain charges and expenses when this type of sale occurs. In
addition, we may also credit additional interest to policies sold to such
groups. We determine which groups are eligible for such treatment. Some of the
criteria we evaluate to make a determination are: size of the group; amount of
expected Purchase Payments; relationship existing between us and prospective
purchaser; nature of the purchase; length of time a group of contracts is
expected to remain active; purpose of the purchase and whether that purpose
increases the likelihood that our expenses will be reduced; and/or any other
factors that we believe indicate that administrative and/or sales expenses may
be reduced.
Anchor National may make such a determination regarding sales to its employees,
it affiliates' employees and employees of currently contracted broker-dealers;
its registered representatives and immediate family members of all of those
described.
We reserve the right to change or modify any such determination or the treatment
applied to a particular group, at any time.
INCOME OPTIONS
- --------------------------------------------------------------------------------
ANNUITY DATE
During the Income Phase, the money in your Contract is used to make regular
income payments to you. You may switch to the Income Phase any time after your
2nd contract anniversary. You select the month and year in which you want income
payments to begin. The first day of that month is the Annuity Date. You may
change your Annuity Date, so long as you do so at least seven days before the
income payments are scheduled to begin. Once you begin receiving income
payments, you cannot change your Income Option.
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Income payments must begin on or before your 90th birthday or on your tenth
contract anniversary, whichever occurs later. If you do not choose an Annuity
Date, your income payments will automatically begin on this date. Certain states
may require your income payments to start earlier.
If the Annuity Date is past your 85th birthday, your contract could lose its
status as an annuity under Federal tax laws. This may cause you to incur adverse
tax consequences. In addition, certain Qualified contracts require you to take
minimum distributions after you reach age 70 1/2. See TAXES, page .
INCOME OPTIONS
Currently, this Contract offers 5 Income Options. If you elect to receive income
payments but do not select an option, your income payments will be made in
accordance with option 4 for a period of 10 years. For income payments selected
for joint lives, we pay according to option 3.
We base our calculation of income payments on the life of the Annuitant and the
annuity rates set forth in your contract. As the contract owner, you may change
the Annuitant at any time prior to the Annuity Date. You must notify us if the
Annuitant dies before the Annuity Date and then designate a new Annuitant.
OPTION 1 - LIFE INCOME ANNUITY
This option provides income payments for the life of the Annuitant. Income
payments stop when the Annuitant dies.
OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY
This option provides income payments for the life of the Annuitant and for the
life of another designated person. Upon the death of either person, we will
continue to make income payments during the lifetime of the survivor. Income
payments stop whenever the survivor dies.
OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY WITH 10 OR 20 YEAR PERIOD CERTAIN
This option is similar to option 2 above, with an additional guarantee of
payments for at least 10 or 20 years. If the Annuitant and the Survivor die
before all of the payments have been made, the remaining payments are made to
the Beneficiary under your Contract.
OPTION 4 - LIFE ANNUITY WITH 10 OR 20 YEAR PERIOD CERTAIN
This option is similar to option 1 above. In addition, this option provides a
guarantee that income payments will be made for at least 10 or 20 years. You
select the number of years. If the Annuitant dies before all guaranteed income
payments are made, the remaining income payments go to the Beneficiary under
your Contract.
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
This option provides income payments for a period ranging from 5 to 30 years. If
the Annuitant dies before all of the guaranteed income payments are made, the
remaining income payments will be made to the Beneficiary for the rest of the
selected number of years.
We make Income Payments on a monthly, quarterly, semi-annual or annual basis.
You instruct us to send you a check or to have the payments direct deposited
into your bank account. If state law allows, we distribute annuities with a
contract value of $5,000 or less in a lump sum. Also, if the selected income
option results in annuity payments of less than $50 per payment, we may decrease
the frequency of the payments, state law allowing.
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ALLOCATION OF ANNUITY PAYMENTS
You can choose income payments that are fixed, variable or both. If payments are
fixed, Anchor National guarantees the amounts of each payment. If the payments
are variable, the amounts are not guaranteed. They will go up and/or down based
upon the performance of the SELECT PORTFOLIO(S) or STRATEGY(IES) in which you
invest.
FIXED OR VARIABLE INCOME PAYMENTS
You can choose income payments that are fixed, variable or both. If at the date
when income payments begin you are invested in the SELECT PORTFOLIO(S) and/or
STRATEGY(IES) only, your income payments will be variable. If your money is only
in fixed accounts at that time, your income payments will be fixed in amount. If
you are invested in both fixed and variable options at the time you begin the
Income Phase, a portion of your income payments will be fixed and a portion will
be variable.
INCOME PAYMENTS
Your income payments will vary if you are invested in the SELECT PORTFOLIO(S)
and/or STRATEGY(IES) after the Annuity date depending on four things:
- for life options, your age when payments begin, and;
- the value of your contract in the SELECT PORTFOLIO(S) and/or STRATEGY(IES)
on the Annuity Date, and;
- the 3.5% assumed investment rate for variable income payments and 3%
guaranteed minimum investment rate for fixed income payments used in the
annuity table for the contract, and;
- the performance of the SELECT PORTFOLIO(S) and/or STRATEGY(IES) in which
you are invested during the time you receive income payments.
If you are invested in both the fixed account options and the SELECT
PORTFOLIO(S) and/or STRATEGY(IES) after the Annuity Date, the allocation of
funds between the fixed accounts and SELECT PORTFOLIO(S) and/or STRATEGY(IES)
also impacts the amount of your annuity payments.
We make income payments on a monthly, quarterly, semi-annual or annual basis.
You instruct us to send you a check or to have the payments directly deposited
into your bank account. If state law allows, we distribute annuities with a
contract value of $5,000 or less in a lump sum. Also, if the selected income
option results in income payments of less than $50 per payment, we may decrease
the frequency of the payments, state law allowing.
TRANSFERS DURING THE INCOME PHASE
You may transfer money among the SELECT PORTFOLIO(S) and/or STRATEGY(IES) during
the Income Phase. Transfers are subject to the same limitations as transfers
during the Accumulation Phase. However, you may not transfer money from the
fixed account into the SELECT PORTFOLIO(S) and/or STRATEGY(IES) or from the
SELECT PORTFOLIO(S) and/or STRATEGY(IES) into the fixed accounts during the
Income Phase. See Section 5 EXPENSES page .
DEFERMENT OF PAYMENTS
We may defer making fixed payments for up to six months, or less if required by
law. Interest is credited to you during the deferral period.
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Please read the Statement of Additional Information ("SAI") for a more detailed
discussion of the income options.
THE INCOME PROTECTOR
This feature provides a future "safety net" in the event that, when you choose
to begin receiving income payments, your contract has not performed within a
historically anticipated range. The Income Protector feature offers you the
ability to receive a guaranteed fixed minimum retirement income upon
annuitization. With the Income Protector you can know the level of minimum
income that will be available to you if, when you chose to retire, down markets
have negatively impacted your contract value. To begin the Income Phase using
this feature you must follow the appropriate steps set forth below.
The Income Protector provides three alternative levels of minimum retirement
income. The BASE Income Protector is a standard feature of all Seasons Select
contracts issued after January , 1999, if the feature is available for sale in
your state. There is no additional charge associated with the BASE feature. If
elected, The Income Protector PLUS and Income Protector MAX alternatives can
provide increased levels of minimum guaranteed income. We charge a fee for each
of these alternatives. The amount of the fee and how to select an alternative
level of income protection, if that is appropriate for you, is described below.
HOW WE DETERMINE THE AMOUNT OF YOUR MINIMUM GUARANTEED INCOME
We base the amount of minimum income available to you if you begin the Income
Phase using the Income Protector upon a calculation we call the Income Benefit
Base. At the time your participation in the Income Protector program becomes
effective, your Income Benefit Base is equal to your contract value. For the
BASE, participation is effective on the date of issue of your contract. For the
PLUS or MAX alternatives, participation is effective on either the date of issue
of the contract (if elected) or at the contract anniversary following your
election of the PLUS or MAX alternative.
The Income Benefit Base is only a calculation. It does not represent a contract
value, nor does it guarantee performance of the variable Portfolios in which you
invest.
Your Income Benefit Base increases if you make subsequent Purchase Payments and
decreases if you withdraw money from your contract. The exact Income Benefit
Base calculation is equal to (a) plus (b) minus (c) where:
(a) is,
- for the first year of calculation, your contract value on the date
your participation in the program became effective, and;
- for each subsequent year of calculation, the Income Benefit Base on
the prior contract anniversary, and;
(b) is the sum of all subsequent Purchase Payments made into the contract
since the last contract anniversary, and;
(c) is all withdrawals and applicable fees and charges since the last
contract anniversary, in an amount proportionate to the amount by which
such withdrawals decreased your contract value.
For the PLUS or MAX alternatives, the Income Benefit Base accumulates at one of
the following annual growth rates from the date your election in the alternative
becomes effective through your Income Benefit Date (see below):
<TABLE>
<CAPTION>
ALTERNATIVE GROWTH RATE
<S> <C>
THE INCOME PROTECTOR PLUS 3.25%
The Income Protector MAX 6.50%
</TABLE>
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<PAGE>
The growth rates for the PLUS or MAX features cease on the contract anniversary
following the Annuitant's 90th birthday.
CHOOSING THE APPROPRIATE LEVEL OF PROTECTION FOR YOU
If you decide that you want the protection offered by the Income Protector PLUS
or MAX feature, you must elect the alternative by completing the Income
Protector Election Form available through our Annuity Service Center. You may
only elect one of the alternatives and you can never change your election once
made. Your Income Benefit Base will begin accumulating at the applicable growth
rate on the contract anniversary following our receipt of your completed
election form. In order to obtain the benefit of the PLUS or MAX alternative you
may not begin the income phase for at least seven years following your election
of the PLUS or MAX feature. Thus, you must make your election prior to the later
of:
- your 83rd birthday, or
- your 3rd contract anniversary.
STEP-UP OF YOUR INCOME BENEFIT BASE
If you have elected to pay for the higher levels of protection available through
the Income Protector PLUS or MAX, you may also have the opportunity to "Step-Up"
your Income Benefit Base. The Step-Up feature allows you to increase your Income
Benefit Base to the amount of your contract value on your contract anniversary.
You can only elect to Step-Up within the 30 days before your next contract
anniversary. A seven year waiting period required prior to electing annuity
payments through the Income Protector is restarted if you step-up your Income
Benefit Base. Thus, your last opportunity to step up is the later of:
- your 83rd birthday, or
- your 3rd contract anniversary.
You must complete the Income Protector Election Form to effect a Step-Up. The
form is available from our Annuity Service Center.
ELECTING TO RECEIVE INCOME PAYMENTS
You may elect to begin the Income Phase of your contract using the Income
Protector Program ONLY within the 30 days after the seventh or later contract
anniversary following the later of,
- the effective date of your Income Protector participation, or
- the contract anniversary of your most recent Step-Up.
The contract anniversary of, or prior to, your election to begin receiving
annuity payments is your Income Benefit Date. This is the date as of which we
calculate your Income Benefit Base to use in determining your guaranteed minimum
fixed retirement income. To arrive at the minimum guaranteed fixed retirement
income available to you, we apply the annuity rates stated in your Income
Protector Endorsement for the annuity option you select to your final Income
Benefit Base. You then choose if you would like to receive that income annually,
quarterly or monthly for the time guaranteed under your selected annuity option.
Your final Income Benefit Base is equal to (a) minus (b) where:
a) is your Income Benefit Base as your Income Benefit Date, and;
b) is any partial withdrawals of contract value and any charges applicable
to those withdrawals and any withdrawal charges otherwise applicable,
calculated as if you fully surrender your contract as the Income Benefit
Date, and any applicable premium taxes.
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The income options available when using the Income Protector Program to receive
your retirement income are:
Life Annuity with 10 Year Period Certain, or
Joint and 100% Survivor Annuity with 20 Year Period Certain
At the time you elect to begin receiving annuity payments, we will calculate
your annual income using both your Income Benefit Base and your contract value.
We will use the same income option for each calculation, however, the annuity
factors used to calculate your income under the Income Protector will be
different. You will receive whichever provides a greater stream of income. If
you annuitize using the Income Protector your annuity payments will be fixed in
amount. You are not required to use the Income Protector to receive annuity
payments. However, we will not refund fees paid for the Income Protector if you
begin taking annuity payments under the general provisions of your contract. YOU
MAY NEVER NEED TO RELY UPON THE INCOME PROTECTOR, IF YOUR CONTRACT PERFORMS
WITHIN A HISTORICALLY ANTICIPATED RANGE. HOWEVER, PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS.
FEES ASSOCIATED WITH THE INCOME PROTECTOR
The BASE Income Protector is a standard feature of your contract at no extra
charge. If you elect the Income Protector PLUS or MAX, we charge a fee, as
follows:
<TABLE>
<CAPTION>
ALTERNATIVE FEE AS A % OF YOUR INCOME BENEFIT BASE
<S> <C>
Income Protector PLUS .15%
Income Protector MAX .30%
</TABLE>
Since the Income Benefit Base is only a calculation and does not provide a
contract value, we deduct the fee from your actual contract value beginning on
the contract anniversary on which your participation in the program becomes
effective.
After a Step-Up, the fee for the Income Protector MAX or PLUS will be based on
your Stepped-Up Income Benefit Base, and will be deducted from your contract
value beginning on the effective date of the step-up.
If your contract is issued with the Income Protector program, and you elect the
PLUS or MAX alternative (either at contract issue or some later date) we begin
deducting the annual fee for the PLUS or MAX alternative on the contract
anniversary when your alternative election becomes effective. If your contract
is not issued with the Income Protector program and you elect the PLUS or MAX
alternative at some later date, we begin deducting the annual fee on the
contract anniversary following the date on which your participation in the
program becomes effective.
It is important to note that once you elect either alternative, you may not
change or cancel your election. We will deduct this charge from your contract
value on every contract anniversary up to and including your Income Benefit
Date. Additionally, we deduct the entire annual fee from any full surrender of
your contract requested prior to your contract anniversary based on the Income
Benefit Base at the time of surrender.
NOTE TO QUALIFIED CONTRACT HOLDERS
Qualified contracts generally require that you select an annuity income option
which does not exceed your life expectancy. That restriction, if it applies to
you, may limit the benefit of the Income Protector program. As discussed above,
in order to utilize the Income Protector you must annuitize under one of two
annuity income options. If those income options exceed your life expectancy you
may be prohibited from receiving your guaranteed fixed income under the program.
If you own a Qualified contract to which this restriction applies and you elect
the Income Protector MAX or PLUS, you may pay for this guarantee and not be able
to realize the benefit.
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Generally,
- for the Life Annuity with 10 Year Period Certain, you must annuitize
before age 79, and
- for the Joint and 100% Survivor Annuity with 20 Year Period Certain, both
Annuitants must be 70 or younger or one of the annuitants must be 65 or
younger upon annuitization. Other age combinations may be available.
You may wish to consult your tax advisor for information concerning your
particular circumstances.
HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR
This table assumes a $100,000 initial investment in a Non-qualified contract
with no withdrawals, additional payments or premium taxes, no step-up; and the
election of optional Income Protector benefits at contract issue.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
INCOME
MINIMUM ANNUAL INCOME IF YOU ANNUITIZE ON PROTECTOR
IF AT ISSUE YOU CONTRACT ANNIVERSARY... BENEFIT
ARE... 7 10 15 20 LEVEL
Male 6,108 6,672 7,716 8,832 Base
age 60* 8,046 9,633 12,971 17,313 Plus
9,995 13,132 20,647 32,178 Max
Female 5,388 5,880 6,900 8,112 Base
age 60* 7,145 8,542 11,652 15,948 Plus
8,876 11,646 18,548 29,641 Max
Joint** 4,716 5,028 5,544 5,928 Base
Male-60 6,290 7,353 9,442 11,785 Plus
Female-60 7,813 10,024 15,030 21,903 Max
</TABLE>
* 10 year and life
** Joint and 100% survivor with 20 year certain
The Income Protector may not be available in your state. Please consult your
financial adviser for information regarding availability of this feature in your
state.
TAXES
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NOTE: WE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL DISCUSSION OF
THE SUBJECT. IT IS NOT TAX ADVICE. WE CAUTION YOU TO SEEK COMPETENT TAX ADVICE
ABOUT YOUR OWN CIRCUMSTANCES. WE DO NOT GUARANTEE THE TAX STATUS OF YOUR
ANNUITY. TAX LAWS CONSTANTLY CHANGE, THEREFORE WE CANNOT GUARANTEE THAT THE
INFORMATION CONTAINED HEREIN IS COMPLETE AND/OR ACCURATE.
ANNUITY CONTRACTS IN GENERAL
The Internal Revenue Code ("IRC") provides for special rules regarding the tax
treatment of annuity contracts. Generally, taxes on the earnings in your annuity
contract are deferred until you take the money out. Different rules apply
depending on how you take the money out and whether your contract is Qualified
or Non-qualified.
If you do not purchase your contract under a pension plan, a specially sponsored
employer program or an individual retirement account, your contract is referred
to as a Non-qualified contract. A Non-qualified contract
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<PAGE>
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, a specially sponsored
employer program or as an individual retirement account, your contract is
referred to as a Qualified contract. Examples of qualified plans are: Individual
Retirement Accounts ("IRAs"), Roth IRAs, 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 provides for a
10% penalty tax on any earnings that are withdrawn other than in conjunction
with the following circumstances: (1) after reaching age 59 1/2; (2) when paid
to your Beneficiary after you die; (3) after you become disabled (as defined in
the IRC); (4) in a series of substantially equal installments made for your life
or for the joint lives of you and you 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. Any amount of money you take out as a withdrawal or as
income payments is taxable income. The IRC further provides for a 10% penalty
tax on any withdrawal or income payment paid to you other than in conjunction
with the following circumstances: (1) after reaching age 59 1/2; (2) when paid
to your Beneficiary after you die; (3) after you become disabled (as defined in
the IRC); (4) in a series of substantially equal installments made for your life
or for the joint lives of you and your Beneficiary; (5) to the extent such
withdrawals do not exceed limitations set by the IRC for amounts paid during the
taxable year for medical care; (6) to fund higher education expenses (as defined
in IRC); (7) to fund certain first-time home purchase expenses; and, except in
the case of an IRA; (8) when you separate from service after attaining age 55;
and (9) when paid 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 Purchase Payments.
MINIMUM DISTRIBUTIONS
If you have a Qualified contract, distributions must begin by April 1 of the
calendar year following the later of (1) the calendar year in which you attain
age 70 1/2 or (2) the calendar year in which you retire.
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity. We believe that the underlying Portfolios'
management monitors the variable Portfolios so as to comply with these
requirements. To be treated as a variable annuity for tax purposes, the
underlying investments must meet these requirements.
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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 Anchor National, 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 underlying 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.
PERFORMANCE
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From time to time we will advertise the performance of the SELECT PORTFOLIO(S)
and/or STRATEGY(IES). Any such performance results are based on historical
earnings and are not intended to indicate future performance.
We advertise the Cash Management SELECT PORTFOLIO's yield and effective yield.
In addition, the other SELECT PORTFOLIO(S) and STRATEGY(IES) advertise total
return, gross yield and yield-to-maturity. These figures represent past
performance of the SELECT PORTFOLIO(S) and STRATEGY(IES). These performance
numbers do not indicate future results.
For each STRATEGY we may show performance against a comparison index which is
made up of the S&P 500 Index, the Lehman Brothers Corporate/Government Index and
the Lipper Money Market Index. The comparison index will blend the referenced
indices in proportion to the neutral allocation of stocks, bonds and cash within
each STRATEGY as indicated on PAGES AND of this prospectus.
Additionally, we may show performance of each SELECT PORTFOLIO and/or STRATEGY
in comparison to various appropriate indexes and the performance of other
similar variable annuity products with similar objectives as reported by such
independent reporting services as Morningstar, Inc., Lipper Analytical Services,
Inc. and the Variable Annuity Research Data Service ("VARDS").
Please see the Statement of Additional Information for additional information
regarding the methods used to calculate performance data.
Anchor National may also advertise the rating and other information assigned to
it by independent industry ratings organizations. Some of those organizations
are A.M. Best Company ("A.M. Best"), Moody's Investor's Service ("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 and 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.
These two ratings do not measure the insurer's ability to meet non-policy
obligations. Ratings in general do not relate to the performance of the variable
Portfolios.
OTHER INFORMATION
- --------------------------------------------------------------------------------
Anchor National is a stock life insurance company originally organized under the
laws of the state of California in April 1965. On January 1, 1996, Anchor
National redomesticated under the laws of the state of Arizona.
Anchor National and its affiliates, SunAmerica Life Insurance Company, First
SunAmerica Life Insurance Company, CalAmerica Life Insurance Company, SunAmerica
National Life Insurance Company, SunAmerica Asset Management, Imperial Premium
Finance, Inc., Resources Trust Company, and five broker-dealers, specialize in
retirement savings and investment products and services. Business focuses
includes, fixed and variable annuities, mutual funds, premium finance,
broker-dealer services and trust administration services.
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THE SEPARATE ACCOUNT
Anchor National originally established a separate account, Variable Annuity
Account Five (the "Separate Account"), under Arizona law on July 8, 1996. The
Separate Account is registered with the SEC as a unit investment trust under the
Investment Company Act of 1940, as amended.
Anchor National owns the assets in the Separate Account. However, the assets in
the Separate Account are not chargeable with liabilities arising out of any
other business conducted by Anchor National. Income gains and losses (realized
and unrealized) resulting from assets in the Separate Account are credited to or
charged against the Separate Account without regard to other income, gains or
losses of Anchor National.
THE GENERAL ACCOUNT
Money allocated to the fixed account options goes into Anchor National's general
account. The general account consists of all of Anchor National'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 Anchor National contract holders
as well as all of its creditors. The general account funds are invested as
permitted under state insurance laws.
DISTRIBUTION OF THE CONTRACT
Registered representatives of broker-dealers sell the contract. We pay
commissions to these representatives for the sale of the contracts. We do not
expect the total commissions to exceed 7.5% of your Purchase Payments. We may
also pay a bonus to representatives for contracts which stay active for a
particular period of time, in addition to standard commissions. We do not deduct
commissions paid to registered representatives directly from your Purchase
Payments.
From time to time, we may pay or allow additional promotional incentives in the
form of cash or other compensation. We reserve the right to offer these
additional incentives only to certain broker-dealers that sell or are expected
to sell, certain minimum amounts of the contract, or other contracts offered by
us. Promotional incentives may change at any time.
SunAmerica Capital Services, Inc., 733 Third Avenue, 4th Floor, New York, New
York 10017 distributes the contracts. SunAmerica Capital Services is an
affiliate of Anchor National, and is a registered as a broker-dealer under the
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc.
ADMINISTRATION
We are responsible for the administrative servicing of your contract. Please
contact our Annuity Service Center at 1-800-445-SUN2, if you have any comment,
question or service request.
We send out transaction confirmations and quarterly statements. It is your
responsibility to review these documents carefully and notify us of any
inaccuracies immediately. We investigate all inquiries. To the extent that we
believe we made an error, we retroactively adjust your contract, provided you
notify us within 30 days of receiving the transaction confirmation or quarterly
statement. Any other adjustments we deem warranted are made as of the time we
receive notice of the error.
YEAR 2000
We rely significantly on computer systems and applications in our daily
operations. Many of our systems are not presently year 2000 compliant, which
means that because they have historically used only two digits to identify the
year in a date, they will fail to distinguish dates in the "2000s" from dates in
the "1900s." Anchor National's
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business, financial condition and results of operations could be materially and
adversely affected by the failure of our systems and applications (and those
operated by third parties interfacing with our systems and applications) to
properly operate or manage these dates.
Anchor National has a coordinated plan to repair or replace these noncompliant
systems and to obtain similar assurances from third parties interfacing with our
systems and applications. In fiscal 1997, the Company's parent recorded on its
books, a $15.0 million provision for estimated programming costs to repair
noncompliant systems, of which $6.2 million was allocated to us. We are making
expenditures which we expect will ultimately total $5.0 million to replace
certain other noncompliant systems. Total expenditures relating to the repair of
noncompliant systems will be capitalized by the Company's parent as software
costs and will be paid for over future periods. Both phases of the project are
progressing according to plan and we expect to substantially complete them by
the end of calendar 1998. We will test both the repaired and replacement systems
during calendar 1999.
In addition, we distributed a year 2000 questionnaire to our significant
suppliers, distributors, financial institutions, lessors and others we do
business with to evaluate their year 2000 compliance plans and state of
readiness and to determine how our systems and applications may be affected by
their failure to solve their own year 2000 issues. To date, however, we have
only received preliminary feedback from such parties and have not independently
confirmed any information received from other parties with respect to the year
2000 issues. Therefore, we cannot assure that such other parties will complete
their year 2000 conversions in a timely fashion or will not suffer a year 2000
business disruption that may adversely affect our financial condition and
results of operations.
Because we expect to complete our year 2000 conversion prior to any potential
disruption to our business, we have not developed a comprehensive year 2000
contingency plan. Anchor National closely monitors the progression of its plan
for compliance, and if necessary, would devote additional resources to assure
the timely completion of our year 2000 plan. If we determine that our business
is at material risk of disruption due to the year 2000 issue or anticipate that
we will not complete our year 2000 conversion in a timely fashion, we will work
to enhance our contingency plans.
The above statements are forward-looking. The costs of our year 2000 conversion,
the date which we have set to complete such conversion and the possible risks
associated with the year 2000 issue are based on our current estimates and are
subject to various uncertainties that could cause the actual results to differ
materially from our expectations. Such uncertainties include, among others, our
success in identifying systems and applications that are not year 2000
compliant, the nature and amount of programming required to upgrade or replace
each of the affected systems and applications, the availability of qualified
personnel, consultants and other resources, and the success of the year 2000
conversion efforts of others.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Separate Account. Anchor
National and its subsidiaries engage in various kinds of routine litigation. In
management's opinion, these matters are not of material importance to their
respective total assets nor are they material with respect to the Separate
Account.
CUSTODIAN
State Street Bank and Trust Company, 255 Franklin Street, Boston, Massachusetts
02110, serves as the custodian of the assets of the Separate Account. Anchor
National pays State Street Bank for services provided, based on a schedule of
fees.
34
<PAGE>
ADDITIONAL INFORMATION
Anchor National is subject to the informational requirements of the Securities
and Exchange Act of 1934 (as amended). We file reports and other information
with the SEC to meet those requirements. You can inspect and copy this
information at SEC public facilities at the following locations:
WASHINGTON, DISTRICT OF COLUMBIA
450 Fifth Street, N.W., Room 1024
Washington, D.C. 20549
CHICAGO, ILLINOIS
500 West Madison Street
Chicago, IL 60661
NEW YORK, NEW YORK
7 World Trade Center, 13th Fl.
New York, NY 10048
To obtain copies by mail contact the Washington, D.C. location. After you pay
the fees as prescribed by the rules and regulations of the SEC, the required
documents are mailed.
Registration Statements under the Securities Act of 1933, as amended, related to
the contracts offered by this prospectus are on file with the SEC. This
prospectus does not contain all of the information contained in the
Registrations Statement and its exhibits. For further information regarding the
Separate Account, Anchor National and its general account, the Portfolios and
the contract, please refer to the registration statement and its exhibits.
The SEC also maintains a website (http://www.sec.gov) that contains the SAI,
materials incorporated by reference and other information filed electronically
with the SEC by Anchor National.
PROPERTIES
Anchor National's executive offices and principal office are in leased premises
at 1 SunAmerica Center, Los Angeles, California. Anchor National, through
affiliates, also leases office space in Torrance and Woodland Hills, California.
Anchor National believes that such properties, including the equipment located
therein are suitable and adequate to meet the requirements of its businesses.
STATE REGULATION
Anchor National is subject to regulation and supervision by the insurance
regulatory agencies of the states in which it is authorized to transact
business. State insurance laws establish supervisory agencies with broad
administrative and supervisory powers. Principal among these powers are 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, market conduct
and other examinations, determining the reasonableness and adequacy of statutory
capital and surplus, defining acceptable accounting principles, regulating the
type, valuation and amount of investments permitted, and limiting the amount of
dividends that can be paid and the size of transactions that can be consummated
without first obtaining regulatory approval.
35
<PAGE>
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 or allowing combinations between insurance companies, banks and other
entities. 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, codification of insurance accounting principles, 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 we are monitoring developments in this area and the
effects any changes would have on Anchor National.
SunAmerica Asset Management Co. is registered with the SEC as a registered
investment advisor under the Investment Advisors Act of 1940. The mutual funds
that it markets are subject to regulation under the Investment Company Act of
1940. SunAmerica Asset Management Co. and the mutual funds are subject to
regulation and examination by the SEC. In addition, variable annuities and the
related separate accounts of Anchor National are subject to regulation by the
SEC under the Securities Act of 1933 and the Investment Company Act of 1940.
Anchor National's broker-dealer subsidiary is subject to regulation and
supervision by the states in which it transacts business, as well as by the SEC
and the National Association of Securities Dealers ("NASD"). The NASD has broad
administrative and supervisory powers relative to all aspects of business and
may examine the subsidiary's business and accounts at any time.
36
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS (TO BE UPDATED BY AMENDMENT)
Anchor National's directors and executive officers as of September 30, 1998 are
listed below:
<TABLE>
<CAPTION>
YEAR ASSUMED
PRESENT OTHER POSITIONS AND OTHER BUSINESS
NAME AGE PRESENT POSITION POSITION EXPERIENCE WITHIN LAST FIVE YEARS** FROM-TO
- --------------------- --- -------------------------------------- ------------ ------------------------------------- ---------
<C> <C> <S> <C> <C> <C>
Eli Broad* 65 Chairman, CEO and President of Anchor 1994 Cofounded SunAmerica Inc. ("SAI") in
National; 1957
Chairman, CEO and President of SAI 1986
Jay S. Wintrob* 41 EVP of Anchor National; 1991 SVP 1989-1991
Vice Chairman of SAI 1995 (Joined SAI in 1987)
Victor E. Akin 33 SVP of Anchor National 1996 VP, SunAmerica Life Companies 1995-1996
Director, SunAmerica Life Companies 1994-1995
Manager, SunAmerica Life Companies 1993-1994
Actuary, Milliman & Robertson 1992-1993
Consultant, Chalke Inc. 1991-1992
David R. Bechtel 30 VP and Treasurer of Anchor National 1998 VP, Deutsche Morgan Grenfell 1996-1998
VP and Treasurer of SAI Associate, UBS Securities 1995-1996
Associate, Wachtell, Lipton, Rosen & 1994
Katz
Associate, Wells Fargo Nikko Inv. 1993-1994
Adv. 1990-1992
Associate, Alex Brown & Sons
James R. Belardi* 41 SVP of Anchor National; 1992 VP and Treasurer 1989-1992
EVP of SAI 1995 (Joined SAI in 1986)
Lorin M. Fife* 44 SVP, General Counsel and Asst. 1994 VP and General Counsel- Regulatory 1994-1995
Secretary of Anchor National; Affairs;
SVP, General Counsel-Regulatory 1995 VP and Associate General Counsel 1989-1994
Affairs and Asst. Secretary of SAI (Joined SAI in 1989)
N. Scott Gillis 44 SVP and Controller of Anchor National 1994 VP and Controller, SunAmerica Life 1989-1994
Companies
VP of SAI 1997 (Joined SAI in 1985)
Jana Waring Greer* 45 SVP of Anchor National and SAI; 1991 VP 1981-1991
President of SunAmerica Marketing 1995 (Joined SAI in 1974)
Susan L. Harris* 41 SVP and Secretary of Anchor National; 1994 VP, General Counsel-Corporate Affairs 1994-1995
and Secretary;
SVP, General Counsel-Corporate Affairs 1995 VP, Associate General Counsel and 1989-1994
and Secretary of SAI Secretary
(Joined SAI in 1985)
Peter McMillan, III* 40 EVP and Chief Investment Officer of 1994 SVP of SunAmerica Investments, Inc. 1989-1994
SunAmerica Investments, Inc.
Edwin R. Reoliquio* 40 SVP and Chief Actuary of Anchor 1995 VP and Actuary, SunAmerica Life 1989-1994
National Companies
Scott H. Richland 35 VP of Anchor National 1994 VP and Treasuer 1995-1997
SVP of SAI VP and Asst. Treasurer 1994-1995
1997 Asst. Treasurer 1993-1994
(Joined SAI in 1990) 1990-1993
Scott L. Robinson* 52 SVP of Anchor National; 1991 VP and Controller 1986-1991
SVP and Controller of SAI (Joined SAI in 1978)
James W. Rowan* 35 SVP of Anchor National and SAI 1996 VP; 1993-1995
Asst. to the Chairman; 1992
SVP, Security Pacific Corp. 1990-1992
</TABLE>
* Also serves as a director CEO = Chief Executive Officer
** Unless otherwise noted, positions EVP = Executive Vice President
with SunAmerica Inc. SVP = Senior Vice President
VP = Vice President
37
<PAGE>
EXECUTIVE COMPENSATION (TO BE UPDATED BY AMENDMENT)
All of Anchor National's executive officers are also employees of SunAmerica
Inc. or its affiliates and do not receive direct compensation from Anchor
National. Allocations have been made as to each individual's time devoted to his
or her duties as an executive officer of Anchor National during fiscal year
1998.
The following table shows the cash compensation paid or earned, based on these
allocations, to the chief executive officer and top four executive officers of
the Company whose allocated compensation exceeds $100,000 for services rendered
in all capacities to the Company during 1998:
<TABLE>
<CAPTION>
Allocated Cash
Name of Individual Capacities in Which Served Compensation
<S> <C> <C>
Eli Broad Chairman, Chief Executive Officer and President $
Jay S. Wintrob Executive Vice President
James R. Belardi Senior Vice President
Jana Waring Greer Senior Vice President
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (TO BE UPDATED BY
AMENDMENT)
No shares of Anchor National are owned by any executive officer or director.
Anchor National is an indirect wholly owned subsidiary of SunAmerica Inc. Except
for Mr. Eli Broad, Chairman and Chief Executive Officer of SunAmerica Inc., the
percentage of shares of SunAmerica Inc. beneficially owned by any director does
not exceed one percent of the class outstanding. At September 30, 1998, Mr.
Broad was the beneficial owner of shares of Common Stock ( % of the
class outstanding) and shares of Class B Common Stock ( % of the
class outstanding). Of the Common Stock, shares represent restricted
shares granted under SunAmerica Inc.'s employee stock plans as to which Mr.
Broad has no investment power, shares are registered in the name of a
corporation of which Mr. Broad is a director and has sole voting and dispositive
powers, shares are held by a foundation of which Mr. Broad is a
director and shares voting and dispositive powers; and shares represent
employee stock options held by Mr. Broad which are or will become exercisable on
or before August 30, 1998 and as to which he has no voting or investment power.
Of the Class B Stock, shares are held directly by Mr. Broad; and
shares are registered in the name of a corporation as to which Mr.
Broad exercises sole voting and dispositive powers. At June 30, 1998, all
directors and officers as a group beneficially owned shares of Common
Stock ( % of the class outstanding) and shares of Class B Common
Stock ( % of the class outstanding).
38
<PAGE>
FINANCIALS (TO BE UPDATED BY AMENDMENT)
- --------------------------------------------------------------------------------
SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS)
The following selected consolidated financial information for Anchor National
Life Insurance Company, insofar as it relates to each of the years 1994-1998,
has been derived from audited annual financial statements, including the
consolidated balance sheets at September 30, 1997 and 1998 and the related
consolidated statements of income and of cash flows for each of the three years
in the period ended September 30, 1998 and the notes thereto appearing elsewhere
herein.
39
<PAGE>
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
Separate Account..............................................................................
General Account...............................................................................
Performance Data..............................................................................
Annuity Payments..............................................................................
Annuity Unit Values...........................................................................
Taxes.........................................................................................
Distribution of Contracts.....................................................................
Financial Statements..........................................................................
</TABLE>
40
<PAGE>
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:
[(1+I/(1+J+L)](to the power of N/12) - 1
THE MARKET VALUE ADJUSTMENT FORMULA
MAY DIFFER IN CERTAIN STATES
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
L is equal to 0.005, except in Pennsylvania where it is equal to
zero.
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); and
(3) 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 charges.
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%.
The market value adjustment factor is
= [(1+I)/(1+J+0.005)](to the power of N/12) - 1
= [(1.07)/(1.08+0.005)](to the power of 18/12) - 1
= (0.986175)(1.5) - 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%.
The market value adjustment factor is
= [(1+I/(1+J+0.005)](N/12) - 1
= [(1.07)/(1.06+0.005)](18/12) - 1
= (1.004695)(1.5) - 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.
A-41
<PAGE>
APPENDIX B - PREMIUM TAXES
- --------------------------------------------------------------------------------
Premium taxes vary according to the state and are subject to change without
notice. In many states, there is no tax at all. Listed below are the current
premium tax rates in those states that assess a premium tax. For current
information, you should consult your tax adviser.
<TABLE>
<CAPTION>
QUALIFIED NON-QUALIFIED
STATE CONTRACT CONTRACT
- ----------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
California................................................................... .50% 2.35%
District of Columbia......................................................... 2.25% 2.25%
Kentucky..................................................................... 2% 2%
Maine........................................................................ 0% 2%
Nevada....................................................................... 0% 3.5%
South Dakota................................................................. 0% 1.25%
West Virginia................................................................ 1% 1%
Wyoming...................................................................... 0% 1%
</TABLE>
B-42
<PAGE>
Please forward a copy (without charge) of the Seasons 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: Anchor National Life Insurance Company, Annuity Service Center, P.O.
Box 52499, Los Angeles, California 90054-0299
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FIXED AND VARIABLE GROUP DEFERRED
ANNUITY CONTRACTS ISSUED BY
VARIABLE ANNUITY ACCOUNT FIVE
DEPOSITOR: ANCHOR NATIONAL LIFE INSURANCE COMPANY
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 which may be obtained without charge by calling 800/445-SUN2 or by
written request addressed to:
Anchor National Life Insurance Company
Annuity Service Center
PO. Box 54299
Los Angeles, California 90054-0299
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS JANUARY , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Separate Account. . . . . . . . . . . . . . . . . . . . . . . . . . .3
General Account . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Performance Data. . . . . . . . . . . . . . . . . . . . . . . . . . .4
Annuity Payments. . . . . . . . . . . . . . . . . . . . . . . . . . .5
Annuity Unit Values . . . . . . . . . . . . . . . . . . . . . . . . .5
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Distribution of Contracts . . . . . . . . . . . . . . . . . . . . . 12
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
2
<PAGE>
SEPARATE ACCOUNT
Variable Annuity Account Five was originally established by Anchor National
Life Insurance Company (the "Company") on July 3, 1996 pursuant to the
provisions of Arizona 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 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 SELECT PORTFOLIOS and STRATEGIES, with
the assets of each SELECT PORTFOLIO and STRATEGY invested in the shares of
one or more underlying investment portfolios. The Company does not guarantee
the investment performance of the separate account, its SELECT PORTFOLIOS and
STRATEGIES or the underlying investment portfolios. Values allocated to the
separate account and the amount of variable annuity payments will vary with
the values of shares of the underlying investment portfolios, and are also
reduced by insurance charges and fees.
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 investment portfolios, 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 SELECT
PORTFOLIOS and STRATEGIES 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 the actual
3
<PAGE>
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
one, three, five, seven or ten year fixed investment option and/or the one
year or 6-month DCA fixed account(s) available in connection with the general
account, as elected by the owner purchasing a contract. Assets supporting
amounts allocated to a fixed investment option 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 Seasons 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.
The Separate Account may advertise "total return" data for its SELECT
PORTFOLIOS and STRATEGIES. Total return figures are based on historical data
and are not intended to indicate future performance. The "total return" for
a SELECT PORTFOLIO or STRATEGY 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 contract funded by that SELECT PORTFOLIO
or STRATEGY 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.) The effect of applicable Withdrawal
Charges due to the assumed redemption will be reflected in the return
figures, but may be omitted in additional return figures given for comparison.
CASH MANAGEMENT PORTFOLIO
As sales of this SELECT PORTFOLIO contract have not yet begun there is
no yield figures to report here.
OTHER PORTFOLIOS
The Portfolios of the separate account other than the Cash Management
Portfolio compute their performance data as "total return."
The total returns since each STRATEGY'S inception date and last 12
months are shown on the following page, both with and without an assumed
complete redemption at the end of the period. The SELECT PORTFOLIOS were not
available for sale prior to the date of this Prospectus and Statement of
Additional Information, therefore no performance information is shown. When
standardized performance information is available for the SELECT PORTFOLIOS
we may advertise that information.
TOTAL ANNUAL RETURN (IN PERCENT) FOR
PERIOD ENDING ON SEPTEMBER 30, 1998
(RETURN WITH/WITHOUT REDEMPTION)
<TABLE>
<CAPTION>
INCEPTION SINCE
SELECT PORTFOLIOS DATE 1 YEAR INCEPTION
- ----------------- --------- -------- ---------
<S> <C> <C> <C>
Large-Cap Growth 1/__/99 N/A N/A
Large-Cap Composite 1/__/99 N/A N/A
Large-Cap Value 1/__/99 N/A N/A
Mid-Cap Growth 1/__/99 N/A N/A
Mid-Cap Value 1/__/99 N/A N/A
Small-Cap 1/__/99 N/A N/A
International Equity 1/__/99 N/A N/A
Diversified Fixed Income 1/__/99 N/A N/A
Cash Management 1/__/99 N/A N/A
STRATEGIES
- ----------
Growth 4/15/97 -4.64%/2.36% 11.32%/15.20%
Moderate Growth 4/15/97 -4.68%/2.32% 10.15%/14.05%
Balanced Growth 4/15/97 -1.69%/5.31% 10.07%/13.97%
Conservative Growth 4/15/97 -1.79%/5.21% 8.60%/12.53%
</TABLE>
- -----------------------
TOTAL RETURN FIGURES ARE BASED ON HISTORICAL DATA AND ARE NOT INTENDED TO
INDICATE FUTURE PERFORMANCE.
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
4
<PAGE>
The total return figures reflect the effect of both non-recurring and
recurring charges. The applicable Withdrawal Charge (if any) is deducted as
of the end of the period, to reflect the effect of the assumed complete
redemption. Total return figures are derived from historical data and are
not intended to be a projection of future performance.
ANNUITY PAYMENTS
INITIAL ANNUITY PAYMENT
The initial annuity payment is determined by taking the contract value, less
any premium tax, less any Market Value Adjustment that may apply in the case
of a premature annuitization of CERTAIN guarantee amounts, and then applying
it to the annuity table specified in the contract. Those tables are based on
a set amount per $1,000 of proceeds applied. The appropriate rate must be
determined by the sex (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.
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
variable annuity payments, assuming that no reallocation of contract values
is made.
SUBSEQUENT MONTHLY PAYMENTS
For a fixed annuity, the amount of the second and each subsequent monthly
annuity payment is the same as that determined above for the first monthly
payment.
The amount of the second and each subsequent monthly variable 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 SELECT
PORTFOLIO and STRATEGY. 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 SELECT PORTFOLIO or STRATEGY exceeds 3.5010,
variable annuity payments derived from allocations to that SELECT PORTFOLIO
or STRATEGY 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
5
<PAGE>
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 SELECT PORTFOLIOS and/or STRATEGIES elected, and the
amount of each annuity payment will vary accordingly.
For each SELECT PORTFOLIO and/or STRATEGY, 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 SELECT PORTFOLIO or STRATEGY from one month 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 SELECT PORTFOLIO or STRATEGY for a certain month is
determined by dividing (a) by (b) where:
(a) is the Accumulation Unit value of the SELECT PORTFOLIO or STRATEGY
determined as of the end of that month, and
(b) is the Accumulation Unit value of the SELECT PORTFOLIO or STRATEGY
determined as of the end of the preceding month.
The NIF for a SELECT PORTFOLIO or STRATEGY for a given month is a measure of
the net investment performance of the SELECT PORTFOLIO or STRATEGY from the
end of the prior month to the end of the given month. A NIF of 1.000 results
from no change; a NIF greater than 1.000 results from an increase; and a NIF
less than 1.000 results from a decrease. The NIF is increased (or decreased)
in accordance with the increases (or decreases, respectively) in the value of
the shares of the underlying investment portfolios in which the SELECT
PORTFOLIO or STRATEGY invests; it is also reduced by separate account asset
charges.
ILLUSTRATIVE EXAMPLE
Assume that one share of a given SELECT PORTFOLIO or STRATEGY 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
6
<PAGE>
ILLUSTRATIVE EXAMPLE
The change in Annuity Unit value for a SELECT PORTFOLIO or STRATEGY 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 SELECT PORTFOLIO or STRATEGY 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 SELECT PORTFOLIO or STRATEGY (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/[(1.035) ^ (1/12)] = 0.99713732
In the example given above, if the Annuity Unit value for the SELECT
PORTFOLIO or STRATEGY 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 SELECT PORTFOLIO or STRATEGY.
P is also the sole Annuitant and, at age 60, has elected to annuitize his
contract as 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 SELECT PORTFOLIO or STRATEGY 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 rate tables
in P's contract, using the information assumed above. From the tables, which
supply monthly annuity payments for each $1,000 of applied contract value,
P's first variable annuity payment is determined by multiplying the monthly
installment of $5.42 (Option 4 tables, male Annuitant age 60 at the Annuity
Date) by the result of dividing P's account value by $1,000:
First Payment = $5.42 x ($116,412.31/$1,000) = $630.95
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
7
<PAGE>
first variable annuity payment divided by the value of an Annuity Unit on the
day immediately prior to annuitization:
Annuity Units = $630.95/$13.256932 = 47.593968
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 = 47.593968 x $13.327695 = $634.32
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 SELECT PORTFOLIO or STRATEGY on the Annuity
Date and thus reflects the investment performance of the SELECT PORTFOLIO or
STRATEGY 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 SELECT
PORTFOLIO or STRATEGY). The net investment performance of the SELECT
PORTFOLIO or STRATEGY 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. A contract 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
payment 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
Non-qualified 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. Contract owners, Annuitants
and Beneficiaries under the contracts should seek competent financial advice
about the tax consequences of distributions under the retirement plan under
which the contracts are purchased.
8
<PAGE>
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the separate account is not a separate entity from the
Company and its operations form a part of the Company.
WITHHOLDING TAX ON DISTRIBUTIONS
The Code generally requires the Company (or, in some cases, a plan
administrator) to withhold tax on the taxable portion of any distribution or
withdrawal from a contract. For "eligible rollover distributions" from
contracts issued under certain types of Qualified plans, 20% of the
distribution must be withheld, unless the payee elects to have the
distribution "rolled over" to another eligible plan in a direct "trustee to
trustee" transfer. This requirement is mandatory and cannot be waived by the
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 "rollover" 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 payments under the contract. The Code contains a
safe harbor provision which provides that annuity contracts such as the
contracts meet the diversification requirements if, as of the close of each
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.
9
<PAGE>
The Treasury Department has issued regulations which establish
diversification requirements for the investment portfolios underlying annuity
variable contracts such as the contracts. The regulations amplify the
diversification requirements for variable annuity contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the regulations an investment portfolio will be deemed adequately
diversified if (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90%
of the value of the total assets of the portfolio is represented by any four
investments. For purposes of determining whether or not the diversification
standards imposed on the underlying assets of variable contracts by Section
817(h) of the Code have been met, "each United States government agency or
instrumentality shall be treated as a separate issuer."
MULTIPLE CONTRACTS
Multiple annuity contracts which are issued within a calendar year to the
same contract owner by one company or its affiliates are treated as one
annuity contract for purposes of determining the tax consequences of any
distribution. Such treatment may result in adverse tax consequences including
more rapid taxation of the distributed amounts from such 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
10
<PAGE>
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 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,
non-discrimination 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
11
<PAGE>
persons desiring to establish an IRA. Purchasers of contracts to be qualified
as IRAs should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
(d) ROTH IRA
Section 408A of the Code permits an individual to contribute to an individual
retirement program called a Roth IRA. Unlike contributions to a regular IRA
under Section 408(b) of the Code, contributions to a Roth IRA are not made on
a tax deferred basis, but distributions are tax-free if certain requirements
are satisfied. Like regular IRAs, Roth IRAs are subject to limitations on
the amount that may be contributed, those who may be eligible and the time
when distributions may commence without tax penalty. Certain persons may be
eligible to convert a regular IRA into a Roth IRA, and the resulting income
tax may be spread over four years if the conversion occurs before January 1,
1999. If and when Contracts are made available for use with Roth IRAs they
may be subject to special requirements imposed by the Internal Revenue
Service. Purchasers of the Contracts for this purpose will be provided with
such supplementary information as may be required by the Internal Revenue
Service or other appropriate agency.
(e) CORPORATE PENSION AND PROFIT-SHARING PLANS
Sections 401(a) and 401(k) of the Code permit corporate employers to
establish various types of retirement plans for employees. These retirement
plans may permit the purchase of the contracts to provide benefits under the
plan. Contributions to the plan for the benefit of employees will not be
includible in the gross income of the employee until distributed from the
plan. The tax consequences to owners may vary depending upon the particular
plan design. However, the Code places limitations on all plans on such items
as amount of allowable contributions; form, manner and timing of
distributions; vesting and nonforfeitability of interests; nondiscrimination
in eligibility and participation; and the tax treatment of distributions,
withdrawals and surrenders. Purchasers of contracts for use with corporate
pension or profit sharing plans should obtain competent tax advice as to the
tax treatment and suitability of such an investment.
(f) DEFERRED COMPENSATION PLANS - SECTION 457
Under Section 457 of the Code, governmental and certain other tax-exempt
employers may establish, for the benefit of their employees, deferred
compensation plans which may invest, in annuity contracts. The Code, as in
the case of Qualified plans, establishes limitations and restrictions on
eligibility, contributions and distributions. Under these plans,
contributions made for the benefit of the employees will not be includible in
the employees' gross income until distributed from the plan. However, under
a 457 plan all the plan assets shall remain solely the property of the
employer, subject only to the claims of the employer's general creditors
until such time as made available to an owner or a Beneficiary.
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
12
<PAGE>
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 consolidated financial statements of the Company as of September
30, 1998 and 1997 and for each of the three years in the period ended
September 30, 1998 are presented in the prospectus. The consolidated
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 fixed investment options. The financial statements
of Variable Annuity Account Five as of March 31, 1998 and for the period from
inception to March 31, 1998, are included in this Statement of Additional
Information.
PricewaterhouseCoopers LLP, 400 South Hope Street, Los Angeles, California
90071, serves as the independent accountants for the Separate Account and the
Company. The financial statements referred to above have been so included in
reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting. (TO BE ADDED BY AMENDMENT)
13
<PAGE>
PART C -- OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The following financial statements are included in Part A of the
Registration Statement:
None
The following financial statements are included in Part B of the
Registration Statement:
Consolidated financial statements of Anchor National Life Insurance
Company to be filed by amendment
(b) Exhibits
<TABLE>
<C> <S> <C>
(1) Resolutions Establishing Separate Account............................ ****
(2) Custody Agreements................................................... **
(3) (a) Form of Distribution Contract.................................... ****
(b) Form of Selling Agreement........................................ ***
(4) (a) Variable Annuity Contract........................................ ***
(5) (a) Application for Contract......................................... ***
(6) Depositor -- Corporate Documents
(a) Certificate of Incorporation..................................... ****
(b) By-Laws.......................................................... ****
(7) Reinsurance Contract................................................. **
(8) Form of Fund Participation Agreement................................. ***
(9) Opinion of Counsel................................................... ***
Consent of Counsel................................................... ***
(10) Consent of Independent Accountants................................... ***
(11) Financial Statements Omitted from Item 23............................ **
(12) Initial Capitalization Agreement..................................... **
(13) Performance Computations............................................. **
(14) Diagram and Listing of All Persons Directly or Indirectly Controlled
By or Under Common Control with Anchor National Life Insurance
Company, the Depositor of Registrant................................ ****
(15) Powers of Attorney................................................... * (included
with signature
page)
</TABLE>
- ------------------------
*Herewith
**Not Applicable
***To Be Filed By Amendment
****Incorporated herein by reference to the Registration Statement of Variable
Annuity Account Five (811-7727) and Anchor National Life Insurance Company
(333-08850)
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The officers and directors of Anchor National Life Insurance Company are listed
below. Their principal business address is 1 SunAmerica Center, Los Angeles,
California 90067-6022, unless otherwise noted.
<TABLE>
<CAPTION>
NAME POSITION
- --------------------------------------------------- ---------------------------------------------------
<S> <C>
Eli Broad Chairman, President and Chief Executive Officer
Jay S. Wintrob Director and Executive Vice President
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION
- --------------------------------------------------- ---------------------------------------------------
<S> <C>
Jana W. Greer Director and Senior Vice President
Peter McMillan Director
James R. Belardi Director and Senior Vice President
Susan L. Harris Director, Senior Vice President and Secretary
Scott L. Robinson Director and Senior Vice President
N. Scott Gillis Senior Vice President and Controller
Edwin R. Reoliquio Senior Vice President and Chief Actuary
James W. Rowan Senior Vice President
Victor E. Akin Senior Vice President
J. Franklin Grey Vice President
Keith B. Jones Vice President
Michael L. Lindquist Vice President
Edward P. Nolan* Vice President
Gregory M. Outcalt Vice President
Scott H. Richland Vice President
David R. Bechtel Vice President and Treasurer
</TABLE>
- ------------------------
*88 Bradley Road, P.O. Box 4005, Woodbridge, Connecticut 06525
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR
REGISTRANT
The Registrant is a Separate Account of Anchor National 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 of the Registration Statement of Anchor National Life
Insurance Company and Variable Annuity Account Five (333-08859, 811-7727) which
is incorporated herein by reference.
ITEM 27. NUMBER OF CONTRACT OWNERS
None.
ITEM 28. INDEMNIFICATION
None.
II-2
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITER
SunAmerica Capital Services, Inc. serves as distributor to the Registrant.
Its principal business address is 733 Third Avenue, 4th Floor, New York, New
York 10017. The following are the directors and officers of SunAmerica Capital
Services, Inc.
<TABLE>
<CAPTION>
NAME POSITION WITH DISTRIBUTOR
- --------------------------------------------------- ---------------------------------------------------
<S> <C>
Peter A. Harbeck President
Robert M. Zakem Executive Vice President, General Counsel &
Assistant Secretary
Steven Rothstein Treasurer
Susan L. Harris Secretary
J. Steven Neamtz President
</TABLE>
<TABLE>
<CAPTION>
NET DISTRIBUTION COMPENSATION ON
DISCOUNTS AND REDEMPTION OR BROKERAGE
NAME OF DISTRIBUTOR COMMISSIONS ANNUITIZATION COMMISSIONS COMMISSIONS*
- ------------------------------------------------- ----------------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C>
SunAmerica Capital Services, Inc. None None None None
</TABLE>
- ------------------------
*Distribution fee is paid by Anchor National Life Insurance Company.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Anchor National Life Insurance Company, the Depositor for the Registrant, is
located at 1 SunAmerica Center, Los Angeles, California 90067-6022. SunAmerica
Capital Services, Inc., the distributor of the Contracts, is located at 733
Third Avenue, 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 a Statement of Additional Information and any
financial statements required to be made available under this Form N-4 promptly
upon written or oral request.
II-3
<PAGE>
ITEM 33. REPRESENTATION
a) 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
concerning the redeemability of Section 403(b) annuity Contracts (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 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.
b) REPRESENTATION PURSUANT TO SECTION 26(e) OF THE INVESTMENT COMPANY ACT OF
1940: The Company and Registrant represent that the fees and charges to be
deducted under the variable annuity contract described in the prospectus
contained in this registration statement are, in the aggregate, reasonable
in relation to the services rendered, the expenses expected to be incurred,
and the risks assumed in connection with the contract.
II-4
<PAGE>
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 20th
day of November, 1998.
VARIABLE ANNUITY ACCOUNT FIVE
(Registrant)
By: ANCHOR NATIONAL LIFE INSURANCE COMPANY
(Depositor)
By: /s/ JAY S. WINTROB
-------------------------------------------
Jay S. Wintrob
EXECUTIVE VICE PRESIDENT
ANCHOR NATIONAL 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 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.
II-5
<PAGE>
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President, Chief Executive
/s/ ELI BROAD Officer and Chairman of
- ------------------------------ the Board (Principal November 20, 1998
Eli Broad Executive Officer)
/s/ SCOTT L. ROBINSON Senior Vice President and
- ------------------------------ Director (Principal November 20, 1998
Scott L. Robinson Financial Officer)
/s/ N. SCOTT GILLIS Senior Vice President and
- ------------------------------ Controller (Principal November 20, 1998
N. Scott Gillis Accounting Officer)
/s/ JAMES R. BELARDI
- ------------------------------ Director November 20, 1998
James R. Belardi
/s/ JANA W. GREER
- ------------------------------ Director November 20, 1998
Jana W. Greer
/s/ SUSAN L. HARRIS
- ------------------------------ Director November 20, 1998
Susan L. Harris
/s/ PETER MCMILLAN
- ------------------------------ Director November 20, 1998
Peter McMillan
/s/ JAMES W. ROWAN
- ------------------------------ Director November 20, 1998
James W. Rowan
/s/ JAY S. WINTROB
- ------------------------------ Director November 20, 1998
Jay S. Wintrob
</TABLE>
II-6
