<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 1, 1999
FILE NOS. 333-67685
811-07727
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
/X/
PRE-EFFECTIVE AMENDMENT NO. 2 /X/
POST-EFFECTIVE AMENDMENT NO. / /
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 /X/
AMENDMENT NO. 3
(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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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>
<PAGE>
[LOGO]
PROFILE
February 3, 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.
2. INCOME OPTIONS
You can select from one of five income options:
(1) payments for your lifetime;
<PAGE>
(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
<PAGE>
combination of stocks, bonds and cash, to achieve its investment objective. The
four investment STRATEGIES and their underlying investment portfolios are:
GROWTH STRATEGY
MODERATE GROWTH STRATEGY
- - ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO
PUTNAM INVESTMENT MANAGEMENT, INC.
- - STOCK PORTFOLIO
T. ROWE PRICE ASSOCIATES, INC.
- - MULTI-MANAGED GROWTH PORTFOLIO
JANUS CAPITAL CORPORATION
SUNAMERICA ASSET MANAGEMENT CORP.
WELLINGTON MANAGEMENT COMPANY LLP
BALANCED GROWTH STRATEGY
- - ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO
PUTNAM INVESTMENT MANAGEMENT, INC.
- - STOCK PORTFOLIO
T. ROWE PRICE ASSOCIATES, INC.
- - MULTI-MANAGED INCOME/EQUITY PORTFOLIO
JANUS CAPITAL CORPORATION
SUNAMERICA ASSET MANAGEMENT CORP.
WELLINGTON MANAGEMENT COMPANY LLP
CONSERVATIVE GROWTH STRATEGY
- - ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO
PUTNAM INVESTMENT MANAGEMENT, INC.
- - STOCK PORTFOLIO
T. ROWE PRICE ASSOCIATES, INC.
- - MULTI-MANAGED INCOME PORTFOLIO
JANUS CAPITAL CORPORATION
SUNAMERICA ASSET MANAGEMENT CORP.
WELLINGTON MANAGEMENT COMPANY LLP
The percentage allocation which each STRATEGY invests in each underlying
portfolio is depicted on page 11 of the prospectus.
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 age 80 or younger 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 [.85%-1.30%]. Investment
charges may be more or less than the percentages reflected here.
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 enroll in 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 depending on the option you select.
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.
<PAGE>
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% $130 $422
Large-Cap Composite 1.49% (1.40% + .09%) 1.10 2.59 $130 $422
Large-Cap Value 1.49% (1.40% + .09%) 1.10 2.59 $130 $422
Mid-Cap Growth 1.49% (1.40% + .09%) 1.15 2.64 $131 $426
Mid-Cap Value 1.49% (1.40% + .09%) 1.15 2.64 $131 $426
Small-Cap 1.49% (1.40% + .09%) 1.15 2.64 $131 $426
International Equity 1.49% (1.40% + .09%) 1.30 2.79 $132 $439
Diversified Fixed Income 1.49% (1.40% + .09%) 1.00 2.49 $129 $414
Cash Management 1.49% (1.40% + .09%) .85 2.34 $128 $401
<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 are 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% $132 $432
Large-Cap Composite 1.52% (1.52% + .09%) 1.10 2.62 $132 $432
Large-Cap Value 1.52% (1.52% + .09%) 1.10 2.62 $132 $432
Mid-Cap Growth 1.52% (1.52% + .09%) 1.15 2.67 $132 $436
Mid-Cap Value 1.52% (1.52% + .09%) 1.15 2.67 $132 $436
Small-Cap Portfolio 1.52% (1.52% + .09%) 1.15 2.67 $132 $436
International Equity 1.52% (1.52% + .09%) 1.30 2.82 $134 $449
Diversified Fixed Income 1.52% (1.52% + .09%) 1.00 2.52 $131 $424
Cash Management 1.52% (1.52% + .09%) .85 2.37 $129 $411
<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% $43 $442
Moderate Growth 1.52% (1.52% + .09%) 1.21% 2.70% $42 $439
Balanced Growth 1.52% (1.52% + .09%) 1.17% 2.66% $42 $435
Conservative Growth 1.52% (1.52% + .09%) 1.12% 2.61% $41 $431
</TABLE>
(1) Investment related charges for each STRATEGY are 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.
<PAGE>
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
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; or
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 taxes and a
10% IRS tax penalty may apply. Neither withdrawal charges nor the 10% IRS tax
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.
Prior to the date of this prospectus Seasons Select was not available for sales.
Therefore, no performance information is presented here.
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.
<PAGE>
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.
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]
PROSPECTUS
February 3, 1999
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 February 3,
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
The Income Protector Expense.................................................................................... 4
Investment Portfolio Expenses................................................................................... 5
Investment Portfolio Expenses by Strategy....................................................................... 5
Investment Portfolio Expenses for Underlying Portfolios......................................................... 5
EXAMPLES............................................................................................................ 6
THE SEASONS SELECT VARIABLE ANNUITY................................................................................. 8
PURCHASING A SEASONS SELECT VARIABLE ANNUITY CONTRACT............................................................... 8
Allocation of Purchase Payments................................................................................. 9
Accumulation Units.............................................................................................. 9
Free Look....................................................................................................... 10
INVESTMENT OPTIONS.................................................................................................. 10
Variable Investment Options..................................................................................... 10
THE SELECT PORTFOLIO(S)....................................................................................... 10
THE STRATEGY(IES)............................................................................................. 11
Market Value Adjustment......................................................................................... 15
Transfers During the Accumulation Phase......................................................................... 16
Dollar Cost Averaging........................................................................................... 17
Principal Advantage Program..................................................................................... 18
Voting Rights................................................................................................... 19
Substitution.................................................................................................... 19
ACCESS TO YOUR MONEY................................................................................................ 19
Free Withdrawal Provision....................................................................................... 20
Systematic Withdrawal Program................................................................................... 21
Minimum Contract Value.......................................................................................... 21
Qualified Contract Owners....................................................................................... 21
DEATH BENEFIT....................................................................................................... 21
Death of the Annuitant.......................................................................................... 22
EXPENSES............................................................................................................ 22
Insurance Charges............................................................................................... 22
Withdrawal Charges.............................................................................................. 23
Investment Charges.............................................................................................. 23
Contract Maintenance Fee........................................................................................ 23
Transfer Fee.................................................................................................... 24
Premium Tax..................................................................................................... 24
Income Taxes.................................................................................................... 24
Reduction or Elimination of Charges and Expenses, and Additional Amounts Credited............................... 24
INCOME OPTIONS...................................................................................................... 24
Annuity Date.................................................................................................... 24
Income Options.................................................................................................. 25
Allocation of Annuity Payments.................................................................................. 26
Transfers During the Income Phase............................................................................... 26
Deferment of Payments........................................................................................... 27
The Income Protector............................................................................................ 27
TAXES............................................................................................................... 30
Annuity Contracts in General.................................................................................... 30
Tax Treatment of Distributions--Non-qualified Contracts......................................................... 31
Tax Treatment of Distributions--Qualified Contracts............................................................. 31
Minimum Distributions........................................................................................... 31
Diversification................................................................................................. 31
PERFORMANCE......................................................................................................... 32
OTHER INFORMATION................................................................................................... 32
The Separate Account............................................................................................ 33
Custodian....................................................................................................... 33
The General Account............................................................................................. 33
Distribution of the Contract.................................................................................... 33
Administration.................................................................................................. 33
Year 2000....................................................................................................... 34
Legal Proceedings............................................................................................... 34
Additional Information.......................................................................................... 35
State Regulation................................................................................................ 35
Properties...................................................................................................... 36
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION............................................................ 67
APPENDIX A--CONDENSED FINANCIAL INFORMATION......................................................................... A-1
APPENDIX B--MARKET VALUE ADJUSTMENT................................................................................. B-1
APPENDIX C--PREMIUM TAXES........................................................................................... C-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 Program is optional and
if elected the fee is 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 PLUS......................... 0.15%
Income Protector MAX.......................... 0.30%
</TABLE>
4
<PAGE>
INVESTMENT PORTFOLIO EXPENSES
OF SELECT PORTFOLIOS
(Estimated for the current fiscal year as a percentage of daily net asset value
of each investment portfolio)
<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%
- -------------------------------------------------------------------------------------------------------
</TABLE>
INVESTMENT PORTFOLIO EXPENSES BY STRATEGY
(based on the total annual expenses of the underlying investment portfolios
reflected below as of the fiscal year end of the Trust (March 31, 1998))
<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%
- -------------------------------------------------------------------------------------------------------
</TABLE>
IMPORTANT INFORMATION ABOUT PORTFOLIO EXPENSES IF INVESTED IN STRATEGY(IES):
The Investment Portfolio Expenses table set forth below identify 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 table above entitled "Investment Portfolio Expenses by STRATEGY"
shows an approximation of the total investment expenses a contractholder may
incur if invested in each respective STRATEGY, after the automatic quarterly
rebalancing of such STRATEGY as described on page 15. 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
FOR STRATEGY UNDERLYING PORTFOLIOS
(as a percentage of daily net asset value of each investment portfolio as of the
fiscal year end of the Trust (March 31, 1998))
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
FEE EXPENSES EXPENSES
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
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%
- -------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
EXAMPLES
You will pay the following expenses on a $1,000 investment, assuming a 5% annual
return on assets 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 not surrendered or is annuitized and you were 80 or
younger at time of issue.*
(d)If the contract is not surrendered or is annuitized and you were 81 or
older at time of issue.*
<TABLE>
<CAPTION>
TIME PERIODS
SELECT PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Large Cap Growth (a) $130 (a) $192 (a) $266 (a) $422
(b) $132 (b) $196 (b) $272 (b) $432
(c) $40 (c) $122 (c) $206 (c) $422
(d) $42 (d) $126 (d) $212 (d) $432
Large Cap Composite (a) $130 (a) $192 (a) $266 (a) $422
(b) $132 (b) $196 (b) $272 (b) $432
(c) $40 (c) $122 (c) $206 (c) $422
(d) $42 (d) $126 (d) $212 (d) $432
Large Cap Value (a) $130 (a) $192 (a) $266 (a) $422
(b) $132 (b) $196 (b) $272 (b) $432
(c) $40 (c) $122 (c) $206 (c) $422
(d) $42 (d) $126 (d) $212 (d) $432
Mid Cap Growth (a) $131 (a) $194 (a) $268 (a) $426
(b) $132 (b) $197 (b) $274 (b) $436
(c) $41 (c) $124 (c) $208 (c) $426
(d) $42 (d) $127 (d) $214 (d) $436
Mid Cap Value (a) $131 (a) $194 (a) $268 (a) $426
(b) $132 (b) $197 (b) $274 (b) $436
(c) $41 (c) $124 (c) $208 (c) $426
(d) $42 (d) $127 (d) $214 (d) $436
Small Company (a) $131 (a) $194 (a) $268 (a) $426
(b) $132 (b) $197 (b) $274 (b) $436
(c) $41 (c) $124 (c) $208 (c) $426
(d) $42 (d) $127 (d) $214 (d) $436
International Equity (a) $132 (a) $198 (a) $275 (a) $439
(b) $134 (b) $202 (b) $281 (b) $449
(c) $42 (c) $128 (c) $215 (c) $439
(d) $44 (d) $132 (d) $221 (d) $449
Diversified Fixed
Income (a) $129 (a) $190 (a) $261 (a) $414
(b) $131 (b) $193 (b) $267 (b) $424
(c) $39 (c) $120 (c) $201 (c) $414
(d) $41 (d) $123 (d) $207 (d) $424
Cash Management (a) $128 (a) $185 (a) $254 (a) $401
(b) $129 (b) $189 (b) $260 (b) $411
(c) $38 (c) $115 (c) $194 (c) $401
(d) $39 (d) $119 (d) $200 (d) $411
<CAPTION>
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
STRATEGY 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Growth (a) $132 (a) $196 (a) $271 (a) $432
(b) $133 (b) $199 (b) $277 (b) $442
(c) $ 42 (c) $126 (c) $211 (c) $432
(d) $ 43 (d) $129 (d) $217 (d) $442
Moderate Growth (a) $131 (a) $195 (a) $270 (a) $429
(b) $132 (b) $198 (b) $275 (b) $439
(c) $ 41 (c) $125 (c) $210 (c) $429
(d) $ 42 (d) $128 (d) $215 (d) $439
Balanced Growth (a) $131 (a) $194 (a) $268 (a) $426
(b) $132 (b) $197 (b) $273 (b) $435
(c) $ 41 (c) $124 (c) $208 (c) $426
(d) $ 42 (d) $127 (d) $213 (d) $435
Conservative Growth (a) $130 (a) $192 (a) $265 (a) $421
(b) $131 (b) $196 (b) $271 (b) $431
(c) $ 40 (c) $122 (c) $205 (c) $421
(d) $ 41 (d) $126 (d) $211 (d) $431
</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 effected using the Income
Protector program as if you had fully surrendered your contract.
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 Income Protector
Program.
3. For certain investment portfolios in which the SELECT PORTFOLIOS and
STRATEGIES invest SunAmerica Asset Management has voluntarily agreed to
waive fees or reimburse expenses, if necessary, to keep annual operating
expenses at or below the following percentages of each of the following
Portfolios' average net assets: Multi-Managed Growth Portfolio 1.29%,
Multi-Managed Moderate Growth Portfolio 1.21%, Multi-Managed Income/Equity
Portfolio 1.14%, Multi-Managed Income Portfolio 1.06%, Asset Allocation:
Diversified Growth Portfolio 1.21%, Stock Portfolio 1.21%, Large-Cap
Growth Portfolio 1.10%, Large-Cap Composite Portfolio 1.10%, Large-Cap
Value Portfolio 1.10%, Mid-Cap Growth Portfolio 1.15%, Mid-Cap Value
Portfolio 1.15%, Small-Cap Portfolio 1.15%, International Equity Portfolio
1.30%, Diversified Fixed Income Portfolio 1.00% and Cash Management
Portfolio 0.85%. SunAmerica Asset Management also may voluntarily waive or
reimburse additional amounts to increase the investment return to a
Portfolio's investors. SunAmerica may terminate all such waivers and/or
reimbursements at any time. Further, any waivers or reimbursements made by
SunAmerica Asset Management with respect to a Portfolio are subject to
recoupment from that Portfolio within the following two years, provided
that the Portfolio is able to effect such payment to Sun America Asset
Management and remain in compliance with the foregoing expense
limitations.
4. 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 11.
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. Purchase Payments are applied to your
contract based upon the value of the variable investment option next determined
after receipt of your money. SEE INVESTMENT OPTIONS PAGE 11.
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.
9
<PAGE>
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 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 WHICH IS ATTACHED HERETO 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, one of the
underlying portfolios is 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.
Generally, an equal portion of the Purchase Payments received for allocation to
each SELECT PORTFOLIO will 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 interests of contract owners invested in the SELECT
PORTFOLIO. Transfers made as a result of rebalancing a SELECT PORTFOLIO are not
considered a transfer under your contract.
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
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<PAGE>
component managed by SAAMCo and a fixed income component managed by Wellington
Management Company, 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. This
approach is achieved by each STRATEGY investing in distinct percentages in three
specific underlying funds of the Seasons Series Trust. In turn, the underlying
funds invest in a combination of domestic and international stocks, bonds and
cash. Based on the percentage allocation to each specific underlying fund and
each underlying fund's investment approach, each STRATEGY has a neutral asset
allocation mix of stocks, bonds and cash. At the beginning of each quarter a
rebalancing occurs among the underlying funds to realign each STRATEGY with its
distinct percentage investment in the three underlying funds. This rebalancing
is designed to help maintain the neutral asset allocation mix for each STRATEGY.
The pie charts on the following pages demonstrate:
- the neutral asset allocation mix for each STRATEGY; and
- the percentage allocation in which each STRATEGY invests.
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 do not constitute
a transfer under your contract.
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<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
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<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>
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 fixed accounts,
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
fixed 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
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<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 25.
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
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<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
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<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
PAGE 24.
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 prior to the end of a guarantee period. If
you withdraw your entire contract value, we also deduct any applicable premium
taxes and a contract maintenance fee. See EXPENSES 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 full surrender
of your contract we will recoup any surrender charges which would have been due
if your prior free withdrawal(s) 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.
The minimum partial withdrawal 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.
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<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. See TAXES, page 31 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); or
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 the contract
maintenance fee or withdrawal charges under your contract. However the
investment charges under your contract may increase or decrease. Some states may
require that we charge less than the amounts described below.
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 from the value of your contract allocated to the
Variable Portfolios. The insurance charge compensates us for the mortality and
expense risks and the costs of contract distribution assumed by Anchor National.
22
<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
During the Accumulation Phase you may make withdrawals from your contract.
However, a withdrawal charge may apply. We apply a withdrawal charge upon an
early withdrawal against each Purchase Payment you put into the contract. The
withdrawal charge equals a percentage of the Purchase Payment you take out of
the contract. The 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>
After a Purchase Payment has been in the contract for nine complete years, the
withdrawal charge no longer applies.
When calculating the withdrawal charge, we treat withdrawals as coming first
from the Purchase Payments that have been in your contract the longest. However,
for tax purposes, your withdrawals are considered earnings first, then Purchase
Payments.
Whenever possible, we deduct the withdrawal charge from the money remaining in
your contract from each of your investment options on a pro-rata basis. If you
withdraw all of your contract value, we deduct any applicable withdrawal charges
from the amount withdrawn.
The contract provides a free withdrawal amount every year. See ACCESS TO YOUR
MONEY page 20.
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
OPTIONS page 25.
Withdrawals made prior to age 59 1/2 may result in tax penalties. See TAXES page
31.
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 SEASONS SERIES TRUST, ATTACHED.
CONTRACT MAINTENANCE FEE
During the Accumulation Phase, we subtract a contract maintenance fee from your
account once per year. This charge compensates us for the cost of contract
administration. 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.
23
<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. Except as discussed under Option
5, once you begin receiving income payments, you cannot otherwise access your
money through a withdrawal or surrender.
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<PAGE>
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 100% SURVIVOR LIFE ANNUITY WITH 10 OR 20 YEAR PERIOD
CERTAIN
This option is similar to option 2 above, with an additional guarantee of
payments for at least 10 or 20 years. If the Annuitant and the Survivor die
before all of the payments have been made, the remaining payments are made to
the Beneficiary under your Contract.
OPTION 4 - LIFE ANNUITY WITH 10 OR 20 YEAR PERIOD CERTAIN
This option is similar to option 1 above. In addition, this option provides a
guarantee that income payments will be made for at least 10 or 20 years. You
select the number of years. If the Annuitant dies before all guaranteed income
payments are made, the remaining income payments go to the Beneficiary under
your Contract.
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
This option provides income payments for a guaranteed period ranging from 5 to
30 years. If the Annuitant dies before all the guaranteed income payments are
made, the remaining income payments are made to the Beneficiary under your
contract. Additionally, if variable income payments are elected under this
option, you (or the Beneficiary under the contract if the Annuitant dies prior
to all guaranteed payments being made) may redeem the contract value after the
Annuity Date. The amount available upon such redemption would be the discounted
present value of any remaining guaranteed payments.
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<PAGE>
The value of an Annuity Unit, regardless of the option chosen, takes into
account the Mortality and Expense Risk Charge. Since Option 5 does not contain
an element of mortality risk, no benefit is derived from this charge.
We make Income Payments on a monthly, quarterly, semi-annual or annual basis.
You instruct us to send you a check or to have the payments direct deposited
into your bank account. If state law allows, we distribute annuities with a
contract value of $5,000 or less in a lump sum. Also, if the selected income
option results in annuity payments of less than $50 per payment, we may decrease
the frequency of the payments, state law allowing.
ALLOCATION OF ANNUITY PAYMENTS
You can choose income payments that are fixed, variable or both. If payments are
fixed, 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
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<PAGE>
not transfer money from the fixed accounts 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 EXPENSES page 23.
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.
Please read the Statement of Additional Information ("SAI") for a more detailed
discussion of the income options.
THE INCOME PROTECTOR
If elected, this feature provides a future "safety net" in the event that, when
you choose to begin receiving annuity 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 begin taking income
payments, down markets have negatively impacted your contract value. In order to
utilize the benefit of this program, you must follow the provisions discussed
below.
The Income Protector provides two levels of minimum retirement income. The two
available options are the Income Protector PLUS and MAX. If you enroll in the
Income Protector program, we charge a fee based on the level of protection you
select. The amount of the fee and how to enroll are described below.
Certain IRC restrictions on the income options available to qualified retirement
investors may have an impact on your ability to benefit from this feature.
Qualified investors should read NOTE TO QUALIFIED CONTRACT HOLDERS, below.
HOW WE DETERMINE THE AMOUNT OF YOUR MINIMUM GUARANTEED INCOME
We base the amount of minimum income available to you if you annuitize using the
Income Protector upon a calculation we call the Income Benefit Base. At the time
your enrollment in the Income Protector program becomes effective, your Income
Benefit Base is equal to your contract value. Your participation becomes
effective on either the date of issue of the contract (if elected at the time of
application) or at the contract anniversary following your enrollment in the
program.
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, or;
- 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 (excluding any MVA), in an amount proportionate to
the amount by which such withdrawals decreased your contract value.
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<PAGE>
The Income Benefit Base accumulates at one of the following annual growth rates
from the date your enrollment becomes effective through your election to begin
receiving income under the program:
<TABLE>
<CAPTION>
OPTION GROWTH RATE
<S> <C>
THE INCOME PROTECTOR PLUS 3.25%
The Income Protector MAX 5.25%
</TABLE>
The growth rates for the PLUS or MAX features cease on the contract anniversary
following the Annuitant's 90th birthday.
ENROLLING IN THE PROGRAM
If you decide that you want the protection offered by the Income Protector
program, you must elect the option of your choice by completing the Income
Protector Election Form available through our Annuity Service Center. You may
only elect one of the options, you cannot change your election once made, and
you cannot terminate your election. If you enroll in the program at contract
issue your Income Benefit Base will begin accumulating at the applicable growth
rate from the issue date. Otherwise, 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 Income Protector program you may not begin the income phase for at least
seven years following your enrollment. Thus, you must make your election prior
to the later of:
- your 83rd birthday, or
- your 3rd anniversary.
STEP-UP OF YOUR INCOME BENEFIT BASE
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 the next contract anniversary. The seven year waiting
period required prior to electing income 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 anniversary
You must complete the appropriate portion of the contract holders 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 enrollment in the Income Protector program, or
- the contract anniversary of your most recent Step-Up.
The contract anniversary prior to your election to begin receiving income
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 income option you select, to your final
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<PAGE>
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 of your Income Benefit Date, and;
(b) is any partial withdrawals of contract value and any charges applicable
to those withdrawals (excluding any MVA) and any withdrawal charges
otherwise applicable, calculated as if you fully surrender your contract
as the Income Benefit Date, and any applicable premium taxes.
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 the income phase, we will calculate your annual
income using both your final 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 income payments will be fixed in
amount. You are not required to use the Income Protector to receive income
payments. The general provisions of your contract provide other income options.
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.
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 program, you may pay for this guarantee and not be able to
realize the benefit.
Generally, for qualified contracts:
- 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 should consult your tax advisor for information concerning your particular
circumstances.
FEES ASSOCIATED WITH THE INCOME PROTECTOR
We charge a fee for the Income Protector program, as follows:
<TABLE>
<CAPTION>
OPTION 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 enrollment in the program becomes
effective.
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<PAGE>
If you enroll in the Income Protector program at contract issue, we begin
deducting the annual fee for the PLUS or MAX option on the contract anniversary
when your enrollment becomes effective. If you elect to participate in the
Income Protector program at some time after contract issue, we begin deducting
the annual fee on the contract anniversary following of or following election.
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.
We will deduct the 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.
HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR
This table assumes a $100,000 initial investment in a Non-qualified contract
with no further premiums, no withdrawals, no step-ups and no premium taxes; and
the election of optional Income Protector program at contract issue.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
ANNUAL INCOME IF YOU ANNUITIZE ON THE FOLLOWING
IF AT ISSUE YOU CONTRACT ANNIVERSARIES: BENEFIT
ARE... 1-6 7 10 15 20 LEVEL
Male N/A 8,046 9,633 12,971 17,313 Plus
age 60* N/A 9,202 11,670 17,296 25,410 Max
Female N/A 7,145 8,542 11,652 15,948 Plus
Age 60* N/A 8,172 10,349 15,538 23,407 Max
Male, Age 60** N/A 6,290 7,353 9,442 11,785 Plus
Female, Age 60 N/A 7,194 8,908 12,590 17,296 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 program in your
state.
TAXES
- --------------------------------------------------------------------------------
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. Qualified retirement
investments automatically provide tax deferral regardless of whether the
underlying contract is an annuity. 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
30
<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. Failure to satisfy the
minimum distribution requirements may result in a tax penalty. You should
contact your tax advisor for more information.
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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<PAGE>
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
- --------------------------------------------------------------------------------
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 9 and 10 of this prospectus.
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, 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.
32
<PAGE>
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.
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.
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.
No underwriting fees are paid in connection with the distribution of the
contracts.
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.
33
<PAGE>
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 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 recorded on its books, a
$6.2 million provision for estimated programming costs to repair noncompliant
systems. We are making expenditures which we expect will ultimately total $5.0
million to replace certain other noncompliant systems. Total expenditures
relating to the replacement of noncompliant systems will be capitalized by the
Company as software costs and will be amortized 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.
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.
STATE REGULATION
The Company 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 and valuation 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.
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 developed several model laws and
regulations designed to reduce the risk of insurance company insolvencies and
market conduct violations. These initiatives include investment reserve
requirements, risk-based capital ("RBC") 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
35
<PAGE>
developing model laws or regulations relating to product design, product
reserving standards and illustrations of annuity products. Current proposals are
still being debated and the Company is monitoring developments in this area and
the effects any changes would have on the Company.
The RBC standards consist of formulas which establish capital requirements
relating to insurance, business, assets and interest rate risks, and which help
to identify companies which are under-capitalized and require specific
regulatory actions in the event an insurer's RBC falls below specified levels.
The Company has more than enough statutory capital to meet the NAIC's RBC
requirements as of the most recent calendar year-end. The state of Arizona has
adopted these RBC standards, and the Company is in compliance with such laws.
Further, for statutory reporting purposes, the annuity reserves of the Company
are calculated in accordance with statutory requirements and are adequate under
current cash-flow testing models.
SunAmerica Asset Management is registered with the Securities and Exchange
Commission (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 and the
mutual funds are subject to regulation and examination by the SEC. In addition,
variable annuities and the related separate accounts of the Company are subject
to regulation by the SEC under the Securities Act of 1933 and the Investment
Company Act of 1940.
The Company'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 SEC and the NASD have
broad administrative and supervisory powers relative to all aspects of business
and may examine the broker-dealer subsidiary's business and accounts at any
time. The SEC also has broad jurisdiction to oversee various activities of the
Company and its other subsidiaries.
From time to time, Federal initiatives are proposed that could affect the
Company's businesses. Such initiatives include employee benefit plan regulations
and tax law changes affecting the taxation of insurance companies and the tax
treatment of insurance and other investment products. Proposals made in recent
years to limit the tax deferral of annuities or otherwise modify the tax rules
related to the treatment of annuities have not been enacted. While certain of
such proposals, if implemented, could have an adverse effect on the Company's
sales of affected products, and consequently on its results of operations, the
Company believes such proposals have a small likelihood of being enacted,
because they would discourage retirement savings and there is a strong public
and industry opposition to them.
PROPERTIES
The Company's executive offices and its principal office are in leased premises
at 1 SunAmerica Center, Los Angeles, California. The Company, through an
affiliate, also leases office space in Woodland Hills, California. The Company's
broker-dealer and asset management subsidiaries lease offices in New York, New
York.
The Company believes that such properties, including the equipment located
therein, are suitable and adequate to meet the requirements of its businesses.
36
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The directors and principal officers of Anchor National Life Insurance Company
(the "Company") as of December 22, 1998 are listed below, together with
information as to their ages, dates of election and principal business
occupation during the last five years (if other than their present business
occupation).
<TABLE>
<CAPTION>
YEAR ASSUMED
PRESENT OTHER POSITIONS AND OTHER BUSINESS
NAME AGE PRESENT POSITION(S) POSITION(S) EXPERIENCE WITHIN LAST FIVE YEARS** FROM-TO
- --------------------- --- -------------------------------------- ------------ ------------------------------------- ---------
<C> <C> <S> <C> <C> <C>
Eli Broad* 65 Chairman, Chief Executive Officer and 1994 Cofounded SAI in 1957
President of the Company
Chairman, Chief Executive Officer and 1986
President of SunAmerica Inc. ("SAI")
Jay S. Wintrob* 41 Executive Vice President of the 1991 (Joined SAI in 1987)
Company 1998
Vice Chairman and Chief Operating
Officer of SAI
James R. Belardi* 41 Senior Vice President of the Company 1992 (Joined SAI in 1986)
Executive Vice President of SAI 1995
Jana Waring Greer* 46 Senior Vice President of the Company 1991 (Joined SAI in 1974)
and SAI
Peter McMillan, III 41 Director Executive Vice President and Chief 1994-1998
Investment Officer SunAmerica
Investments, Inc. (DE)
Senior Vice President, SunAmerica 1989-1994
Investments, Inc. (DE)
Scott L. Robinson* 52 Senior Vice President of the Company 1991 (Joined SAI in 1978)
Senior Vice President and Controller 1991
of SAI
Susan L. Harris* 41 Senior Vice President and Secretary of 1994 Vice President, General Counsel- 1994-1995
the Company Corporate Affairs and Secretary of
Senior Vice President, General Counsel 1995 SAI 1989-1994
and Secretary of SAI Vice President, Associate General
Counsel and Secretary of SAI
(Joined SAI in 1985)
James Rowan* 36 Senior Vice President of the Company 1996 Vice President of SAI 1993-1995
Senior Vice President of SAI 1995 (Joined SAI in 1992)
N. Scott Gillis 45 Senior Vice President and Controller 1994 Vice President and Controller, 1989-1994
of the Company SunAmerica Life Companies ("SLC")
Vice President of SAI 1997 (Joined SAI in 1985)
Edwin R. Reoliquio 41 Senior Vice President and Chief 1995 Vice President and Actuary, SLC 1990-1995
Actuary of the Company
Victor E. Akin 34 Senior Vice President of the Company 1996 Vice President, SLC 1995-1996
Director, Product Development, SLC 1994-1995
Manager, Business Development, SLC 1993-1994
Scott H. Richland 36 Vice President of the Company 1994 Senior Vice President and Treasurer 1997-1998
of SAI
Senior Vice President of SAI 1997 Vice President and Treasurer of SAI 1995-1997
Vice President and Assistant 1994-1995
Treasurer of SAI
Assistant Treasurer of SAI 1993-1994
(Joined SAI in 1990)
David R. Bechtel 31 Vice President and Treasurer of the 1998 Vice President, Deutsche Morgan 1996-1998
Company Grenfell, Inc.
Vice President and Treasurer of SAI 1998 Associate, UBS Securities LLC 1995-1996
Associate, Wachtell Lipton Rosen & 1994
Katz 1993-1994
Associate, Wells Fargo Nikko
Investment Advisers
J. Franklin Grey 46 Vice President of the Company 1994 Director, Institutional Marketing 1991-1994
Capital Holding Corp. (Providian)
Keith B. Jones 47 Vice President of the Company 1992 (Joined SAI in 1986)
Michael L. Lindquist 45 Vice President of the Company 1993 (Joined SAI in 1983)
Edward P. Nolan, Jr. 49 Vice President of the Company 1993 (Joined SAI in 1989)
Gregory M. Outcalt 36 Vice President of the Company 1993 (Joined SAI in 1986)
</TABLE>
* Also serves as a director
** Unless otherwise indicated, officers
and positions are with SunAmerica Inc.
37
<PAGE>
EXECUTIVE COMPENSATION
All of the executive officers of the Company also serve as employees of
SunAmerica Inc. or its affiliates and receive no compensation directly from the
Company. Some of the officers also serve as officers of other companies
affiliated with the Company. Allocations have been made as to each individual's
time devoted to his or her duties as an executive officer of the Company.
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>
Name of Individual
or Allocated Cash
Number in Group Capacities in Which Served Compensation
- -------------------- ----------------------------------------------- --------------
<S> <C> <C>
Eli Broad Chairman, Chief Executive Officer and President $1,482,778
Jay S. Wintrob Executive Vice President 857,524
Jana Waring Greer Senior Vice President 775,001
Peter McMillan Director 421,457
James R. Belardi Senior Vice President 408,949
</TABLE>
Directors of the Company who are also employees of SunAmerica Inc. or its
affiliates receive no compensation in addition to their compensation as
employees of SunAmerica Inc. or its affiliates.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No shares of the Company are owned by any executive officer or director. The
Company is an indirect wholly owned subsidiary of SunAmerica Inc., which is a
wholly owned subsidiary of American International Group, Inc.
38
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
- --------------------------------------------------------------------------------
FINANCIALS
The following selected consolidated financial data of the Company and its
subsidiaries should be read in conjunction with the consolidated financial
statements and notes thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations, both of which are included
elsewhere herein.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------- ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net investment income $ 86,872 $ 73,201 $ 56,843 $ 50,083 $ 58,996
Net realized investment gains (losses) 19,482 (17,394) (13,355) (4,363) (33,713)
Fee income 290,362 213,146 169,505 145,105 141,753
General and administrative expenses (96,102) (98,802) (81,552) (64,457) (54,363)
Amortization of deferred acquisition costs (72,713) (66,879) (57,520) (58,713) (44,195)
Annual commissions (18,209) (8,977) (4,613) (2,658) (1,158)
------------- ------------- ------------ ------------ ------------
Pretax income 209,692 94,295 69,308 64,997 67,320
Income tax expense (71,051) (31,169) (24,252) (25,739) (22,705)
------------- ------------- ------------ ------------ ------------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES 138,641 63,126 45,056 39,258 44,615
Cumulative effect of change in accounting for
income taxes -- -- -- -- (20,463)
------------- ------------- ------------ ------------ ------------
NET INCOME $ 138,641 $ 63,126 $ 45,056 $ 39,258 $ 24,152
------------- ------------- ------------ ------------ ------------
------------- ------------- ------------ ------------ ------------
FINANCIAL POSITION
Investments $ 2,734,742 $ 2,608,301 $ 2,329,232 $ 2,114,908 $ 1,632,072
Variable annuity assets held in separate accounts 11,133,569 9,343,200 6,311,557 5,230,246 4,486,703
Deferred acquisition costs 539,850 536,155 443,610 383,069 416,289
Other assets 118,203 83,283 120,136 55,474 67,062
------------- ------------- ------------ ------------ ------------
TOTAL ASSETS $ 14,526,364 $ 12,570,939 $ 9,204,535 $ 7,783,697 $ 6,602,126
------------- ------------- ------------ ------------ ------------
------------- ------------- ------------ ------------ ------------
Reserves for fixed annuity contracts $ 2,189,272 $ 2,098,803 $ 1,789,962 $ 1,497,052 $ 1,437,488
Reserves for guaranteed investment contracts 282,267 295,175 415,544 277,095 --
Variable annuity liabilities related to separate
accounts 11,133,569 9,343,200 6,311,557 5,230,246 4,486,703
Other payables and accrued liabilities 133,647 155,256 96,196 227,953 195,134
Subordinated notes payable to Parent 39,182 36,240 35,832 35,832 34,712
Deferred income taxes 95,758 67,047 70,189 73,459 64,567
Shareholder's equity 652,669 575,218 485,255 442,060 383,522
------------- ------------- ------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 14,526,364 $ 12,570,939 $ 9,204,535 $ 7,783,697 $ 6,602,126
------------- ------------- ------------ ------------ ------------
------------- ------------- ------------ ------------ ------------
</TABLE>
39
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management's discussion and analysis of financial condition and results of
operations of Anchor National Life Insurance Company (the "Company") for the
three years in the period ended September 30, 1998 follows. In connection with
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995, the Company cautions readers regarding certain forward-looking statements
contained in this report and in any other statements made by, or on behalf of,
the Company, whether or not in future filings with the Securities and Exchange
Commission (the "SEC"). Forward-looking statements are statements not based on
historical information and which relate to future operations, strategies,
financial results, or other developments. Statements using verbs such as
"expect," "anticipate," "believe" or words of similar import generally involve
forward-looking statements. Without limiting the foregoing, forward-looking
statements include statements which represent the Company's beliefs concerning
future levels of sales and redemptions of the Company's products, investment
spreads and yields, or the earnings and profitability of the Company's
activities.
Forward-looking statements are necessarily based on estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond the Company's control
and many of which are subject to change. These uncertainties and contingencies
could cause actual results to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company. Whether or not
actual results differ materially from forward-looking statements may depend on
numerous foreseeable and unforeseeable developments. Some may be national in
scope, such as general economic conditions, changes in tax law and changes in
interest rates. Some may be related to the insurance industry generally, such as
pricing competition, regulatory developments and industry consolidation. Others
may relate to the Company specifically, such as credit, volatility and other
risks associated with the Company's investment portfolio. Investors are also
directed to consider other risks and uncertainties discussed in documents filed
by the Company with the SEC. The Company disclaims any obligation to update
forward-looking information.
RESULTS OF OPERATIONS
NET INCOME totaled $138.6 million in 1998, compared with $63.1 million in 1997
and $45.1 million in 1996.
PRETAX INCOME totaled $209.7 million in 1998, $94.3 million in 1997 and $69.3
million in 1996. The 122.4% improvement in 1998 over 1997 primarily resulted
from increased fee income and higher net realized investment gains, partially
offset by increased annual commissions and increased amortization of deferred
acquisition costs. The 36.1% improvement in 1997 over 1996 primarily resulted
from increased fee income and net investment income, partially offset by higher
general and administrative expenses and increased amortization of deferred
acquisition costs.
NET INVESTMENT INCOME, which is the spread between the income earned on invested
assets and the interest paid on fixed annuities and other interest-bearing
liabilities, increased to $86.9 million in 1998 from $73.2 million in 1997 and
$56.8 million in 1996. These amounts represent 3.34% on average invested assets
(computed on a daily basis) of $2.60 billion in 1998, 2.77% on average invested
assets of $2.65 billion in 1997 and 2.59% on average invested assets of $2.19
billion in 1996.
Net investment spreads include the effect of income earned on the excess of
average invested assets over average interest-bearing liabilities. This excess
amounted to $140.4 million in 1998, $126.5 million in 1997 and $142.9 million in
1996. The difference between the Company's yield on average invested assets and
the rate paid on average interest-bearing liabilities (the "Spread Difference")
was 3.04% in 1998, 2.51% in 1997 and 2.25% in 1996.
Investment income (and the related yields on average invested assets) totaled
$222.0 million (8.53%) in 1998, compared with $210.8 million (7.97%) in 1997 and
$164.6 million (7.50%) in 1996. These increased yields in 1998
40
<PAGE>
and 1997 include the effects of an increasing proportion of mortgage loans in
the Company's portfolio. On average, mortgage loans have higher yields than that
of the Company's overall portfolio. In addition, the Company experienced higher
returns on its investments in partnerships, particularly in 1998. The increase
in investment income in 1997 also reflects an increase in average invested
assets.
Partnership income increased to $24.3 million (a yield of 174.85% on related
average assets of $13.9 million) in 1998, compared with $6.7 million (a yield of
15.28% on related average assets of $44.0 million) in 1997 and $4.1 million (a
yield of 10.12% on related average assets of $40.2 million) in 1996. Partnership
income is based primarily upon cash distributions received from limited
partnerships, the operations of which the Company does not influence.
Consequently, such income is not predictable and there can be no assurance that
the Company will realize comparable levels of such income in the future.
Total interest expense equalled $135.1 million in 1998, $137.6 million in 1997
and $107.8 million in 1996. The average rate paid on all interest-bearing
liabilities was 5.49% in 1998, compared with 5.46% in 1997 and 5.25% in 1996.
Interest-bearing liabilities averaged $2.46 billion during 1998, compared with
$2.52 billion during 1997 and $2.05 billion during 1996. The increases in the
overall rates paid on interest-bearing liabilities primarily resulted from the
impact of certain promotional one-year interest rates offered on the fixed
account portion of the Company's Polaris and Seasons variable annuity products.
The modest decline in average invested assets in 1998 reflects a similar modest
decline in average interest-bearing liabilities, which results from the net
effect of increased sales of the Company's fixed rate products and net exchanges
from fixed accounts into the separate accounts of variable annuity contracts.
Fixed annuity premiums totaled $1.51 billion in 1998, compared with $1.10
billion in 1997 and $741.8 million in 1996, and are largely premiums for the
fixed accounts of variable annuities. These amounts represent 72%, 61% and 50%
of the fixed annuity reserve balances at the beginning of the respective
periods. The premiums for the fixed accounts of variable annuities have
increased primarily because of increased sales of the Company's variable annuity
products and greater inflows into the one-year fixed account and the new
six-month fixed account of these products, which are used for dollar cost
averaging into the variable accounts. Accordingly, the Company anticipates that
it will see a large portion of these premiums transferred into the variable
funds.
Guaranteed investment contract ("GIC") premiums totaled $5.6 million in 1998,
$55.0 million in 1997 and $135.0 million in 1996. GIC surrenders and maturities
totaled $36.3 million in 1998, $198.1 million in 1997 and $16.5 million in 1996.
The Company does not actively market GICs; consequently, premiums and surrenders
may vary substantially from period to period. The GICs issued by the Company
generally guarantee the payment of principal and interest at fixed or variable
rates for a term of three to five years. GICs that are purchased by banks for
their long-term portfolios or by state and local governmental entities either
prohibit withdrawals or permit scheduled book value withdrawals subject to the
terms of the underlying indenture or agreement. GICs purchased by asset
management firms for their short-term portfolios either prohibit withdrawals or
permit withdrawals with notice ranging from 90 to 270 days. In pricing GICs, the
Company analyzes cash flow information and prices accordingly so that it is
compensated for possible withdrawals prior to maturity.
NET REALIZED INVESTMENT GAINS totaled $19.5 million in 1998, compared with net
realized investment losses of $17.4 million in 1997 and $13.4 million in 1996.
Net realized investment gains (losses) include impairment writedowns of $13.1
million in 1998, $20.4 million in 1997 and $16.0 million in 1996. Thus, net
gains from sales and redemptions of investments totaled $32.6 million in 1998,
$3.0 million in 1997 and $2.6 million in 1996.
The Company sold or redeemed invested assets, principally bonds and notes,
aggregating $2.23 billion in 1998, $2.62 billion in 1997 and $1.60 billion in
1996, respectively. Sales of investments result from the active management of
the Company's investment portfolio. Because redemptions of investments are
generally involuntary and sales of investments are made in both rising and
falling interest rate environments, net gains from sales and redemptions of
investments fluctuate from period to period, and represent 1.25%, 0.11% and
0.12% of average invested assets for 1998, 1997 and 1996, respectively. Active
portfolio management involves the ongoing evaluation of asset sectors,
41
<PAGE>
individual securities within the investment portfolio and the reallocation of
investments from sectors that are perceived to be relatively overvalued to
sectors that are perceived to be relatively undervalued. The intent of the
Company's active portfolio management is to maximize total returns on the
investment portfolio, taking into account credit, option, liquidity and
interest-rate risk.
Impairment writedowns include $9.4 million of provisions applied to partnerships
during 1998 and $15.7 million and $15.2 million of provisions applied to
non-income producing land owned in Arizona during 1997 and 1996, respectively.
The statutory carrying value of this land had been guaranteed by the Company's
ultimate Parent, SunAmerica Inc. ("SunAmerica"). SunAmerica made a capital
contribution of $28.4 million on December 31, 1996 to the Company through the
Company's direct parent in exchange for the termination of its guaranty with
respect to this land. Accordingly, the Company reduced the carrying value of
this land to estimated fair value to reflect the full termination of the
guaranty. Impairment writedowns represent 0.50%, 0.77% and 0.73% of average
invested assets for 1998, 1997 and 1996, respectively. For the five years ended
September 30, 1998, impairment writedowns as a percentage of average invested
assets have ranged from 0.28% to 0.91% and have averaged 0.64%. Such writedowns
are based upon estimates of the net realizable value of the applicable assets.
Actual realization will be dependent upon future events.
VARIABLE ANNUITY FEES are based on the market value of assets in separate
accounts supporting variable annuity contracts. Such fees totaled $200.9 million
in 1998, $139.5 million in 1997 and $104.0 million in 1996. These increased fees
reflect growth in average variable annuity assets, due to increased market
values, the receipt of variable annuity premiums and net exchanges into the
separate accounts from the fixed accounts of variable annuity contracts,
partially offset by surrenders. Variable annuity fees represent 1.9%, 1.8% and
1.8% of average variable annuity assets for 1998, 1997 and 1996, respectively.
Variable annuity assets averaged $10.70 billion during 1998, $7.55 billion
during 1997 and $5.70 billion during 1996. Variable annuity premiums, which
exclude premiums allocated to the fixed accounts of variable annuity products,
have aggregated $1.82 billion in 1998, $1.27 billion in 1997 and $919.8 million
in 1996. These amounts represent 19%, 20% and 18% of variable annuity reserves
at the beginning of the respective periods.
Sales of variable annuity products (which include premiums allocated to the
fixed accounts) ("Variable Annuity Product Sales") amounted to $3.33 billion,
$2.37 billion and $1.66 billion in 1998, 1997 and 1996, respectively, and
primarily reflect sales of the Company's flagship variable annuity, Polaris.
Polaris is a multimanager variable annuity that offers investors a choice of 26
variable funds and 7 guaranteed fixed-rate funds. Increases in Variable Annuity
Product Sales are due, in part, to market share gains through enhanced
distribution efforts and growing consumer demand for flexible retirement savings
products that offer a variety of equity, fixed income and guaranteed fixed
account investment choices. In recent weeks, subsequent to the Company's fiscal
year end, sales of variable annuities have slowed as investors paused to
reevaluate their investment decisions in light of volatile markets. The Company
believes that fluctuating market conditions increase the value of financial
planning services and make the flexibility and security of variable annuities
even more attractive.
The Company has encountered increased competition in the variable annuity
marketplace during recent years and anticipates that the market will remain
highly competitive for the foreseeable future. Also, from time to time, Federal
initiatives are proposed which could affect the taxation of variable annuities
and annuities generally.
NET RETAINED COMMISSIONS are primarily derived from commissions on the sales of
nonproprietary investment products by the Company's broker-dealer subsidiary,
after deducting the substantial portion of such commissions that is passed on to
registered representatives. Net retained commissions totaled $48.6 million in
1998, $39.1 million in 1997 and $31.5 million in 1996. Broker-dealer sales
(mainly sales of general securities, mutual funds and annuities) totaled $14.37
billion in 1998, $11.56 billion in 1997 and $8.75 billion in 1996. The increases
in sales and net retained commissions reflect higher average production per
representative and generally favorable market conditions and, in 1997, a greater
number of registered representatives due primarily to the transfer of
representatives from an affiliated broker-dealer. Increases in net retained
commissions may not be proportionate to increases in sales primarily due to
differences in sales mix.
42
<PAGE>
SURRENDER CHARGES on fixed and variable annuities totaled $7.4 million in 1998,
$5.5 million in 1997 and $5.2 million in 1996. Surrender charges generally are
assessed on annuity withdrawals at declining rates during the first seven years
of an annuity contract. Withdrawal payments, which include surrenders and
lump-sum annuity benefits, totaled $1.14 billion in 1998, $1.06 billion in 1997
and $898.0 million in 1996. These payments represent 9.0%, 11.2% and 12.4%,
respectively, of average fixed and variable annuity reserves. Withdrawals
include variable annuity withdrawals from the separate accounts totaling $952.1
million (8.9% of average variable annuity reserves), $822.0 million (10.9% of
average variable annuity reserves) and $634.1 million (11.2% of average variable
reserves) in 1998, 1997 and 1996, respectively. Management anticipates that
withdrawal rates will remain relatively stable for the foreseeable future.
ASSET MANAGEMENT FEES, which include investment advisory fees and 12b-1
distribution fees, are based on the market value of assets managed in mutual
funds by SunAmerica Asset Management Corp. Such fees totaled $29.6 million on
average assets managed of $2.89 billion in 1998, $25.8 million on average assets
managed of $2.34 billion in 1997 and $25.4 million on average assets managed of
$2.14 billion in 1996. Asset management fees are not proportionate to average
assets managed, principally due to changes in product mix. Sales of mutual
funds, excluding sales of money market accounts, aggregated $853.6 million in
1998, compared with $454.8 million in 1997 and $223.4 million in 1996. The
significant increases in sales principally resulted from sales of the Company's
"Style Select Series" product (which was introduced in November 1996) and the
introduction in June 1998 of the "Dogs" of Wall Street. The "Style Select
Series" is a group of mutual funds which are each managed by three industry-
recognized fund managers. The "Dogs" of Wall Street fund contains 30 large
capitalization value stocks which are selected by strict criteria. Sales of
these products totaled $611.1 million in 1998, compared with $267.8 million in
1997, reflecting the addition of five new Style Select funds, which more than
doubled the number of Style Select funds to nine, and generally favorable market
conditions. Redemptions of mutual funds, excluding redemptions of money market
accounts, amounted to $402.5 million in 1998, $412.8 million in 1997 and $379.9
million in 1996, which represent 17.5%, 22.0% and 21.4%, respectively, of
average mutual fund assets.
GENERAL AND ADMINISTRATIVE EXPENSES totaled $96.1 million in 1998, compared with
$98.8 million in 1997 and $81.6 million in 1996. General and administrative
expenses remain closely controlled through a company-wide cost containment
program and continue to represent less than 1% of average total assets.
AMORTIZATION OF DEFERRED ACQUISITION COSTS totaled $72.7 million in 1998,
compared with $66.9 million in 1997 and $57.5 million in 1996. The increases in
amortization were primarily due to additional fixed and variable annuity and
mutual fund sales and the subsequent amortization of related deferred
commissions and other direct selling costs.
ANNUAL COMMISSIONS represent renewal commissions paid quarterly in arrears to
maintain the persistency of certain of the Company's variable annuity contracts.
Substantially all of the Company's currently available variable annuity products
allow for an annual commission payment option in return for a lower immediate
commission. Annual commissions totaled $18.2 million in 1998, $9.0 million in
1997 and $4.6 million in 1996. The increases in annual commissions since 1996
reflect increased sales of annuities that offer this commission option and
gradual expiration of the initial fifteen-month periods before such payments
begin. The Company estimates that approximately 50% of the average balances of
its variable annuity products is currently subject to such annual commissions.
Based on current sales, this percentage is expected to increase in future
periods.
INCOME TAX EXPENSE totaled $71.1 million in 1998, compared with $31.2 million in
1997 and $24.3 million in 1996, representing effective tax rates of 34% in 1998,
33% in 1997 and 35% in 1996.
43
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
SHAREHOLDER'S EQUITY increased 13.5% to $652.7 million at September 30, 1998
from $575.2 million at September 30, 1997, primarily due to $138.6 million of
net income recorded in 1998, which was partially offset by $51.2 million of
dividends paid in April 1998 and a $10.0 million decrease in net unrealized
gains on debt and equity securities available for sale.
INVESTED ASSETS at September 30, 1998 totaled $2.73 billion, compared with $2.61
billion at September 30, 1997. The Company manages most of its invested assets
internally. The Company's general investment philosophy is to hold fixed-rate
assets for long-term investment. Thus, it does not have a trading portfolio.
However, the Company has determined that all of its portfolio of bonds, notes
and redeemable preferred stocks (the "Bond Portfolio") is available to be sold
in response to changes in market interest rates, changes in relative value of
asset sectors and individual securities, changes in prepayment risk, changes in
the credit quality outlook for certain securities, and the Company's need for
liquidity and other similar factors.
THE BOND PORTFOLIO, which constitutes 71% of the Company's total investment
portfolio, had an aggregate fair value that exceeded its amortized cost by $19.9
million at September 30, 1998, compared with an excess of $43.7 million at
September 30, 1997. The decline in the unrealized gain of the Bond Portfolio in
1998 was due to changes in market value of portions of the non-investment-grade
portfolio.
At September 30, 1998, the Bond Portfolio (excluding $6.9 million of redeemable
preferred stocks) included $1.90 billion of bonds rated by Standard & Poor's
Corporation ("S&P"), Moody's Investors Service ("Moody's"), Duff & Phelps Credit
Rating Co. ("DCR"), Fitch Investors Service, L.P. ("Fitch") or the National
Association of Insurance Commissioners ("NAIC"), and $53.6 million of bonds
rated by the Company pursuant to statutory ratings guidelines established by the
NAIC. At September 30, 1998, approximately $1.78 billion of the Bond Portfolio
was investment grade, including $672.1 million of U.S. government/agency
securities and mortgage-backed securities ("MBSs").
At September 30, 1998, the Bond Portfolio included $167.6 million of bonds that
were not investment grade. These non-investment-grade bonds accounted for 1.2%
of the Company's total assets and 6.1% of its invested assets.
Non-investment-grade securities generally provide higher yields and involve
greater risks than investment-grade securities because their issuers typically
are more highly leveraged and more vulnerable to adverse economic conditions
than investment-grade issuers. In addition, the trading market for these
securities is usually more limited than for investment-grade securities. The
Company had no material concentrations of non-investment-grade securities at
September 30, 1998.
The table on the next page summarizes the Company's rated bonds by rating
classification as of September 30, 1998.
44
<PAGE>
RATED BONDS BY RATING CLASSIFICATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ISSUES NOT RATED BY S&P/MOODY'S/
ISSUES RATED BY S&P/MOODY'S/DCR/FITCH DCR/FITCH, BY NAIC CATEGORY TOTAL
- ---------------------------------------------------------- ----------------------------------------- --------------------------
S&P/(MOODY'S)/[DCR]/{FITCH} AMORTIZED ESTIMATED AMORTIZED ESTIMATED AMORTIZED ESTIMATED
CATEGORY (1) COST FAIR VALUE NAIC CATEGORY (2) COST FAIR VALUE COST FAIR VALUE
- ------------------------------ ------------ ------------ ----------------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
AAA+ to A-
(Aaa to A3)
[AAA to A-]
{AAA to A-} $ 999,052 $ 1,025,861 1 $ 180,548 $ 192,187 $ 1,179,600 $ 1,218,048
BBB+ to BBB-
(Baal to Baa3)
[BBB+ to BBB-]
{BBB+ to BBB-} 420,087 418,723 2 145,025 143,532 565,112 562,255
BB+ to BB-
(Ba1 to Ba3)
[BB+ to BB-]
{BB+ to BB-} 43,156 39,179 3 10,181 9,917 53,337 49,096
B+ to B-
(B1 to B3)
[B+ to B-]
{B+ to B-} 113,376 102,375 4 12,954 12,065 126,330 114,440
CCC+ to C
(Caa to C)
[CCC]
{CCC+ to C-} 760 655 5 3,500 3,274 4,260 3,929
CI to D
[DD]
{D} 0 0 6 99 99 99 99
------------ ------------ ---------- ---------- ------------ ------------
TOTAL RATED ISSUES $ 1,576,431 $ 1,586,793 $ 352,307 $ 361,074 $ 1,928,738 $ 1,947,867
------------ ------------ ---------- ---------- ------------ ------------
------------ ------------ ---------- ---------- ------------ ------------
<CAPTION>
ISSUES RATED BY S&P/
- ------------------------------ PERCENT OF
S&P/(MOODY'S)/[DCR]/{FITCH} INVESTED
CATEGORY (1) ASSETS
- ------------------------------ -----------
<S> <C>
AAA+ to A-
(Aaa to A3)
[AAA to A-]
{AAA to A-} 44.54%
BBB+ to BBB-
(Baal to Baa3)
[BBB+ to BBB-]
{BBB+ to BBB-} 20.56
BB+ to BB-
(Ba1 to Ba3)
[BB+ to BB-]
{BB+ to BB-} 1.80
B+ to B-
(B1 to B3)
[B+ to B-]
{B+ to B-} 4.18
CCC+ to C
(Caa to C)
[CCC]
{CCC+ to C-} 0.14
CI to D
[DD]
{D} --
TOTAL RATED ISSUES
</TABLE>
- ------------------------
(1) S&P and Fitch rate debt securities in rating categories ranging from AAA
(the highest) to D (in payment default). A plus (+) or minus (-) indicates
the debt's relative standing within the rating category. A security rated
BBB- or higher is considered investment grade. Moody's rates debt securities
in rating categories ranging from Aaa (the highest) to C (extremely poor
prospects of ever attaining any real investment standing). The number 1, 2
or 3 (with 1 the highest and 3 the lowest) indicates the debt's relative
standing within the rating category. A security rated Baa3 or higher is
considered investment grade. DCR rates debt securities in rating categories
ranging from AAA (the highest) to DD (in payment default). A plus (+) or
minus (-) indicates the debt's relative standing within the rating category.
A security rated BBB- or higher is considered investment grade. Issues are
categorized based on the highest of the S&P, Moody's, DCR and Fitch ratings
if rated by multiple agencies.
(2) Bonds and short-term promissory instruments are divided into six quality
categories for NAIC rating purposes, ranging from 1 (highest) to 5 (lowest)
for nondefaulted bonds plus one category, 6, for bonds in or near default.
These six categories correspond with the S&P/Moody's/DCR/Fitch rating groups
listed above, with categories 1 and 2 considered investment grade. The NAIC
categories include $53.6 million of assets that were rated by the Company
pursuant to applicable NAIC rating guidelines.
45
<PAGE>
Senior secured loans ("Secured Loans") are included in the Bond Portfolio and
aggregated $186.6 million at September 30, 1998. Secured Loans are senior to
subordinated debt and equity, and are secured by assets of the issuer. At
September 30, 1998, Secured Loans consisted of $71.6 million of publicly traded
securities and $115.0 million of privately traded securities. These Secured
Loans are composed of loans to 62 borrowers spanning 21 industries, with 32% of
these assets concentrated in financial institutions. No other industry
concentration constituted more than 9% of these assets.
While the trading market for the Company's privately traded Secured Loans is
more limited than for publicly traded issues, management believes that
participation in these transactions has enabled the Company to improve its
investment yield. As a result of restrictive financial covenants, these Secured
Loans involve greater risk of technical default than do publicly traded
investment-grade securities. However, management believes that the risk of loss
upon default for these Secured Loans is mitigated by such financial covenants
and the collateral values underlying the Secured Loans. The Company's Secured
Loans are rated by S&P, Moody's, DCR, Fitch, the NAIC or by the Company,
pursuant to comparable statutory ratings guidelines established by the NAIC.
MORTGAGE LOANS aggregated $391.4 million at September 30, 1998 and consisted of
133 commercial first mortgage loans with an average loan balance of
approximately $2.9 million, collateralized by properties located in 29 states.
Approximately 21% of this portfolio was multifamily residential, 17% was office,
14% was manufactured housing, 13% was industrial, 11% was hotels and 24% was
other types. At September 30, 1998, approximately 21% and 14% of this portfolio
were secured by properties located in California and New York, respectively, and
no more than 8% of this portfolio was secured by properties located in any other
single state. At September 30, 1998, there were three mortgage loans with
outstanding balances of $10 million or more, which loans collectively aggregated
approximately 11% of this portfolio. At September 30, 1998, approximately 30% of
the mortgage loan portfolio consisted of loans with balloon payments due before
October 1, 2001. During 1998, 1997 and 1996, loans delinquent by more than 90
days, foreclosed loans and restructured loans have not been significant in
relation to the total mortgage loan portfolio.
At September 30, 1998, approximately 11% of the mortgage loans were seasoned
loans underwritten to the Company's standards and purchased at or near par from
other financial institutions. Such loans generally have higher average interest
rates than loans that could be originated today. The balance of the mortgage
loan portfolio has been originated by the Company under strict underwriting
standards. Commercial mortgage loans on properties such as offices, hotels and
shopping centers generally represent a higher level of risk than do mortgage
loans secured by multifamily residences. This greater risk is due to several
factors, including the larger size of such loans and the more immediate effects
of general economic conditions on these commercial property types. However, due
to the seasoned nature of the Company's mortgage loan portfolio, its emphasis on
multifamily loans and its strict underwriting standards, the Company believes
that it has prudently managed the risk attributable to its mortgage loan
portfolio while maintaining attractive yields.
OTHER INVESTED ASSETS aggregated $30.6 million at September 30, 1998, including
$15.0 million of collateralized bond obligations and collateralized mortgage
obligation residuals, $11.2 million of policy loans and $4.4 million of
investments in limited partnerships. The Company's limited partnership
interests, accounted for by using the cost method of accounting, are invested
primarily in a combination of debt and equity securities.
ASSET-LIABILITY MATCHING is utilized by the Company to minimize the risks of
interest rate fluctuations and disintermediation. The Company believes that its
fixed-rate liabilities should be backed by a portfolio principally composed of
fixed-rate investments that generate predictable rates of return. The Company
does not have a specific target rate of return. Instead, its rates of return
vary over time depending on the current interest rate environment, the slope of
the yield curve, the spread at which fixed-rate investments are priced over the
yield curve, and general economic conditions. Its portfolio strategy is
constructed with a view to achieve adequate risk-adjusted returns consistent
with its investment objectives of effective asset-liability matching, liquidity
and safety. The Company's fixed-rate products incorporate surrender charges or
other restrictions in order to encourage persistency. Approximately 77% of the
Company's fixed annuity and GIC reserves had surrender penalties or other
restrictions at September 30, 1998.
46
<PAGE>
As part of its asset-liability matching discipline, the Company conducts
detailed computer simulations that model its fixed-rate assets and liabilities
under commonly used stress-test interest rate scenarios. With the results of
these computer simulations, the Company can measure the potential gain or loss
in fair value of its interest-rate sensitive instruments and seek to protect its
economic value and achieve a predictable spread between what it earns on its
invested assets and what it pays on its liabilities by designing its fixed-rate
products and conducting its investment operations to closely match the duration
of the fixed-rate assets to that of its fixed-rate liabilities. The Company's
fixed-rate assets include: cash and short-term investments; bonds, notes and
redeemable preferred stocks; mortgage loans; and investments in limited
partnerships that invest primarily in fixed-rate securities and are accounted
for by using the cost method. At September 30, 1998, these assets had an
aggregate fair value of $2.69 billion with a duration of 3.6. The Company's
fixed-rate liabilities include fixed annuities, subordinated notes and GICs. At
September 30, 1998, these liabilities had an aggregate fair value (determined by
discounting future contractual cash flows by related market rates of interest)
of $2.41 billion with a duration of 1.4. The Company's potential exposure due to
a 10% increase in prevailing interest rates from their September 30, 1998 levels
is a loss of $26.7 million in fair value of its fixed-rate assets that is not
offset by a decrease in the fair value of its fixed-rate liabilities. Because
the Company actively manages its assets and liabilities and has strategies in
place to minimize its exposure to loss as interest rate changes occur, it
expects that actual losses would be less than the estimated potential loss.
Duration is a common option-adjusted measure for the price sensitivity of a
fixed-maturity portfolio to changes in interest rates. It measures the
approximate percentage change in the market value of a portfolio if interest
rates change by 100 basis points, recognizing the changes in cash flows
resulting from embedded options such as policy surrenders, investment
prepayments and bond calls. It also incorporates the assumption that the Company
will continue to utilize its existing strategies of pricing its fixed annuity
and GIC products, allocating its available cash flow amongst its various
investment portfolio sectors and maintaining sufficient levels of liquidity.
Because the calculation of duration involves estimation and incorporates
assumptions, potential changes in portfolio value indicated by the portfolio's
duration will likely be different from the actual changes experienced under
given interest rate scenarios, and the differences may be material.
As a component of its asset and liability management strategy, the Company
utilizes interest rate swap agreements ("Swap Agreements") to match assets more
closely to liabilities. Swap Agreements are agreements to exchange with a
counterparty interest rate payments of differing character (for example,
variable-rate payments exchanged for fixed-rate payments) based on an underlying
principal balance (notional principal) to hedge against interest rate changes.
The Company typically utilizes Swap Agreements to create a hedge that
effectively converts floating-rate assets and liabilities into fixed-rate
instruments. At September 30, 1998, the Company had one outstanding Swap
Agreement with a notional principal amount of $21.5 million. This agreement
matures in December 2024.
The Company also seeks to provide liquidity from time to time by using reverse
repurchase agreements ("Reverse Repos") and by investing in MBSs. It also seeks
to enhance its spread income by using Reverse Repos. Reverse Repos involve a
sale of securities and an agreement to repurchase the same securities at a later
date at an agreed upon price and are generally over-collateralized. MBSs are
generally investment-grade securities collateralized by large pools of mortgage
loans. MBSs generally pay principal and interest monthly. The amount of
principal and interest payments may fluctuate as a result of prepayments of the
underlying mortgage loans.
There are risks associated with some of the techniques the Company uses to
provide liquidity, enhance its spread income and match its assets and
liabilities. The primary risk associated with the Company's Reverse Repos and
Swap Agreements is counterparty risk. The Company believes, however, that the
counterparties to its Reverse Repos and Swap Agreements are financially
responsible and that the counterparty risk associated with those transactions is
minimal. It is the Company's policy that these agreements are entered into with
counterparties who have a debt rating of A/A2 or better from both S&P and
Moody's. The Company continually monitors its credit exposure with respect to
these agreements. In addition to counterparty risk, Swap Agreements also have
interest rate risk. However, the Company's Swap Agreements typically hedge
variable-rate assets or liabilities, and interest rate fluctuations that
adversely affect the net cash received or paid under the terms of a Swap
Agreement would be offset by increased interest income earned on the
variable-rate assets or reduced interest expense paid on the
47
<PAGE>
variable-rate liabilities. The primary risk associated with MBSs is that a
changing interest rate environment might cause prepayment of the underlying
obligations at speeds slower or faster than anticipated at the time of their
purchase. As part of its decision to purchase an MBS, the Company assesses the
risk of prepayment by analyzing the security's projected performance over an
array of interest-rate scenarios. Once an MBS is purchased, the Company monitors
its actual prepayment experience monthly to reassess the relative attractiveness
of the security with the intent to maximize total return.
INVESTED ASSETS EVALUATION is routinely conducted by the Company. Management
identifies monthly those investments that require additional monitoring and
carefully reviews the carrying values of such investments at least quarterly to
determine whether specific investments should be placed on a nonaccrual basis
and to determine declines in value that may be other than temporary. In making
these reviews for bonds, management principally considers the adequacy of any
collateral, compliance with contractual covenants, the borrower's recent
financial performance, news reports and other externally generated information
concerning the creditor's affairs. In the case of publicly traded bonds,
management also considers market value quotations, if available. For mortgage
loans, management generally considers information concerning the mortgaged
property and, among other things, factors impacting the current and expected
payment status of the loan and, if available, the current fair value of the
underlying collateral. For investments in partnerships, management reviews the
financial statements and other information provided by the general partners.
The carrying values of investments that are determined to have declines in value
that are other than temporary are reduced to net realizable value and, in the
case of bonds, no further accruals of interest are made. The provisions for
impairment on mortgage loans are based on losses expected by management to be
realized on transfers of mortgage loans to real estate, on the disposition and
settlement of mortgage loans and on mortgage loans that management believes may
not be collectible in full. Accrual of interest is suspended when principal and
interest payments on mortgage loans are past due more than 90 days.
DEFAULTED INVESTMENTS, comprising all investments that are in default as to the
payment of principal or interest, totaled $0.9 million of mortgage loans at
September 30, 1998, and constituted less than 0.1% of total invested assets. At
September 30, 1997, defaulted investments totaled $1.4 million, including $0.5
million of bonds and notes and $0.9 million of mortgage loans, and constituted
less than 0.1% of total invested assets.
SOURCES OF LIQUIDITY are readily available to the Company in the form of the
Company's existing portfolio of cash and short-term investments, Reverse Repo
capacity on invested assets and, if required, proceeds from invested asset
sales. At September 30, 1998, approximately $1.50 billion of the Company's Bond
Portfolio had an aggregate unrealized gain of $59.2 million, while approximately
$456.3 million of the Bond Portfolio had an aggregate unrealized loss of $39.3
million. In addition, the Company's investment portfolio currently provides
approximately $23.6 million of monthly cash flow from scheduled principal and
interest payments. Historically, cash flows from operations and from the sale of
the Company's annuity and GIC products have been more than sufficient in amount
to satisfy the Company's liquidity needs.
Management is aware that prevailing market interest rates may shift
significantly and has strategies in place to manage either an increase or
decrease in prevailing rates. In a rising interest rate environment, the
Company's average cost of funds would increase over time as it prices its new
and renewing annuities and GICs to maintain a generally competitive market rate.
Management would seek to place new funds in investments that were matched in
duration to, and higher yielding than, the liabilities assumed. The Company
believes that liquidity to fund withdrawals would be available through incoming
cash flow, the sale of short-term or floating-rate instruments or Reverse Repos
on the Company's substantial MBS segment of the Bond Portfolio, thereby avoiding
the sale of fixed-rate assets in an unfavorable bond market.
In a declining rate environment, the Company's cost of funds would decrease over
time, reflecting lower interest crediting rates on its fixed annuities and GICs.
Should increased liquidity be required for withdrawals, the Company believes
that a significant portion of its investments could be sold without adverse
consequences in light of the general strengthening that would be expected in the
bond market.
48
<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>
67
<PAGE>
APPENDIX A - CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION TO
STRATEGIES 3/31/98
- ----------------------------------------------------------------------------------- ------------------
<S> <C>
- -------------------------------------------------------------------------------------------------------
Growth (Inception Date 4/15/97)
Beginning AUV.................................................................... 10.00
End AUV.......................................................................... 13.09
Ending Number of AUs............................................................. 3,950,133
- -------------------------------------------------------------------------------------------------------
Moderate Growth (Inception Date 4/15/97)
Beginning AUV.................................................................... 10.00
End AUV.......................................................................... 12.76
Ending Number of AUs............................................................. 3,639,458
- -------------------------------------------------------------------------------------------------------
Balanced Growth (Inception Date 4/15/97)
Beginning AUV.................................................................... 10.00
End AUV.......................................................................... 12.44
Ending Number of AUs............................................................. 2,789,702
- -------------------------------------------------------------------------------------------------------
Conservative Growth (Inception Date 4/15/97)
Beginning AUV.................................................................... 10.00
End AUV.......................................................................... 12.06
Ending Number of AUs............................................................. 1,536,220
- -------------------------------------------------------------------------------------------------------
</TABLE>
A-1
<PAGE>
APPENDIX B - 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 and Florida where it is equal to .0025.
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 the withdrawal requested is less
than the available penalty free withdrawal amount. 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
B-1
<PAGE>
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.
B-2
<PAGE>
APPENDIX C - 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>
C-1
<PAGE>
Please forward a copy (without charge) of the Seasons Select 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>
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>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FIXED AND VARIABLE GROUP DEFERRED
ANNUITY CONTRACTS ISSUED BY
VARIABLE ANNUITY ACCOUNT FIVE (PORTION RELATING TO THE SEASONS SELECT VARIABLE
ANNUITY)
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 FEBRUARY 3, 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."
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.
As of the date of the Prospectus and this SAI sales of this contract had not
yet begun. Therefore, no performance information is contained herein.
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
To determine the initial payment, the initial annuity payment for variable
annuitization is calculated based on our mortality expectations and an
assumed interest rate (AIR) of 3.5%. Thus the initial variable annuity
payment is the same as the initial payment for a fixed interest payout
annuity calculated at an effective rate of 3.5%.
The Net Investment Factor (NIF) measures the performance of the funds that
are the basis for the amount of future annuity payments. This performance is
compared to the AIR, and if the growth in the NIF is the same as the AIR rate
the payment remains the same as the prior month. If the rate of growth of
the NIF is different than the AIR, then the payment is changed
proportionately to the ratio (1+NIF)/(1+AIR), calculated on a monthly basis.
If the NIF is greater than the AIR, then this proportion is greater than one
and payments are increased. If the NIF is less than the AIR, then this
proportion is less than one and payments are decreased.
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.
13
<PAGE>
PART C -- OTHER INFORMATION
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of this Registration Statement.
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The following financial statements are included in Part A of the
Registration Statement:
Consolidated financial statements of Anchor National Life Insurance
Company to be filed by amendment
The following financial statements are included in Part B of the
Registration Statement:
None
(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 Group Certificate....................... *
(b) Individual Variable Annuity Contract..................... *
(5) (a) Enrollment Form for Group Annuity Certificate............ *
(b) Application for Individual Contract...................... *
(6) Depositor -- Corporate Documents
(a) Certificate of Incorporation............................. ****
(b) By-Laws.................................................. ****
(7) Reinsurance Contract......................................... **
(8) Form of Fund Participation Agreement......................... ****
(9) Opinion and 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........................................... ***
</TABLE>
- ------------------------
*Herewith
**Not Applicable
***Previously filed in the initial Registration Statement of Variable Annuity
Account Five (811-7727) and Anchor National Life Insurance Company
(333-67685)
****Previously filed in the Registration Statement of Variable Annuity Account
Five (811-7727) and Anchor National Life Insurance Company (333-08859),
Pre-Effective Amendment No. 1 & 2
II-1
<PAGE>
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
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. As of January 4, 1999, Anchor National
became an indirect wholly-owned subsidiary of American International Group, Inc.
("AIG"). An organizational chart for AIG can be found in Form 10K, SEC file
number 001-08787 filed March 30, 1998.
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 OR
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.
SunAmerica Capital Services, Inc. also acts as the principal underwriter to the
following:
- Variable Separate Account
- Presidential Variable Account One
- FS Variable Separate Account
- Variable Annuity Account One
- Variable Annuity Account Four
- Variable Annuity Account Seven
- SunAmerica Income Funds
- SunAmerica Equity Funds
- SunAmerica Money Market Funds, Inc.
- Style Select Series, Inc.
and will serve as principal underwriter for SunAmerica Strategic Investment
Series, Inc. which is currently in registration.
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.
II-3
<PAGE>
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.
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 1st day
of February, 1999.
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
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
ELI BROAD* Officer and Chairman of
- ------------------------------ the Board (Principal February 1, 1999
Eli Broad Executive Officer)
SCOTT L. ROBINSON* Senior Vice President and
- ------------------------------ Director (Principal
Scott L. Robinson Financial Officer)
N. SCOTT GILLIS* Senior Vice President and
- ------------------------------ Controller (Principal
N. Scott Gillis Accounting Officer)
JAMES R. BELARDI*
- ------------------------------ Director
James R. Belardi
JANA W. GREER*
- ------------------------------ Director
Jana W. Greer
/s/ SUSAN L. HARRIS
- ------------------------------ Director
Susan L. Harris
PETER MCMILLAN*
- ------------------------------ Director
Peter McMillan
JAMES W. ROWAN*
- ------------------------------ Director
James W. Rowan
JAY S. WINTROB*
- ------------------------------ Director
Jay S. Wintrob
/s/ SUSAN L. HARRIS
- ------------------------------ Attorney-in-Fact
Susan L. Harris
</TABLE>
*Attorney-in-Fact
February 1, 1999
II-6
<PAGE>
EXHIBIT 3(a)
DISTRIBUTION AGREEMENT
THIS AGREEMENT, entered into as of this 30th day of December, 1998, is
between ANCHOR NATIONAL LIFE INSURANCE COMPANY ("Anchor"), a life insurance
company organized under the laws of the State of Arizona, on behalf of itself
and VARIABLE ANNUITY ACCOUNT FIVE ("Separate Account"), a Separate Account
established by Anchor pursuant to the insurance laws of the State of Arizona,
and SUNAMERICA CAPITAL SERVICES, INC. ("Distributor"), a corporation
organized under the laws of the State of Delaware.
WITNESSETH:
WHEREAS, Anchor issues to the public certain variable annuity contracts
identified on the contract specification sheet attached hereto as Attachment
A ("Contracts"); and
WHEREAS, Anchor, by resolution adopted on July 3, 1996, established the
Separate Account on its books of account, for the purpose of issuing
Contracts; and
WHEREAS, the Separate Account is registered with the Securities and
Exchange Commission ("Commission") as a unit investment trust under the
Investment Company Act of 1940 (File No. 811-07727); and
WHEREAS, the Contracts to be issued by Anchor are registered with the
Commission under the Securities Act of 1933 (the "Act") (File Nos. 333-67685
and 333-67689) for offer and sale to the public, and otherwise are in
compliance with all applicable laws; and
WHEREAS, the Distributor, a broker-dealer registered under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc., proposes to act as distributor on an agency basis
in the marketing and distribution of the Contracts; and
WHEREAS, Anchor desires to obtain the services of the Distributor as
distributor of said Contracts issued by Anchor through the Separate Account;
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and conditions set forth herein, and for other good and valuable
consideration, Anchor, the Separate Account, and Distributor hereby agree as
follows:
1. The Distributor will serve as distributor on an agency basis for the
Contracts which will be issued by Anchor through the Separate
Account.
2. The Distributor will, either directly or through an affiliate,
provide information and marketing assistance to licensed insurance
agents and broker-dealers on a continuing basis. The Distributor
shall be responsible for compliance with the requirements of state
broker-dealer regulations and the Securities Exchange Act of 1934 as
each applies to Distributor in connection with its duties as
distributor of said Contracts. Moreover, the Distributor shall
conduct its affairs in accordance with the Rules of Fair Practice of
the National Association of Securities Dealers, Inc.
<PAGE>
3. Subject to agreement of Anchor, the Distributor may enter into
dealer agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and authorized by applicable law to
sell variable annuity contracts issued by Anchor through the
Separate Account. Any such contractual arrangement is expressly
made subject to this Agreement, and the Distributor will at all
times be responsible to Anchor for purposes of the federal
securities laws for the distribution of Contracts issued through the
Separate Account. The Distributor will use its respective best
efforts to provide information and marketing assistance to such
broker-dealers on a continuing basis.
4. WARRANTIES
(a) Anchor represents and warrants to Distributor that:
(i) Registration Statements on Form N-4 and Form S-1 for
each of the Contracts identified on Attachment A have
been filed with the Commission in the form previously
delivered to the Distributor and that copies of any and
all amendments thereto will be forwarded to the
Distributor at the time that they are filed with the
Commission;
(ii) The Registration Statement and any further amendments
or supplements thereto will, when they become
effective, conform in all material respects to the
requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, and the rules and
regulations of the Commission under such Acts, and will
not contain an untrue statement of a material fact or
omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading; provided, however, that this representation
and warranty shall not apply to any statement or
omission made in reliance upon and in conformity with
information furnished in writing to Anchor by the
Distributor expressly for use therein;
(iii) Anchor is validly existing as a stock life insurance
company in good standing under the laws of the state of
Arizona, with power (corporate or otherwise) to own its
properties and conduct its business as described in the
Prospectus, and has been duly qualified for the
transaction of business and is in good standing under
the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to
require such qualification;
(iv) The Contracts to be issued through the Separate Account
and offered for sale by the Distributor on behalf of
Anchor hereunder have been duly and validly authorized
and, when issued and delivered against payment therefor
as provided herein, will be duly and validly issued and
will conform to the description of such Contracts
contained in the Prospectuses relating thereto;
(v) Those persons who offer and sell the Contracts are to
be appropriately licensed in a manner as to comply with
the state insurance laws;
-2-
<PAGE>
(vi) The performance of this Agreement and the consummation
of the transactions contemplated by this Agreement will
not result in a breach or violation of any of the terms
and provisions of, or constitute a default under any
statute, any indenture, mortgage, deed of trust, note
agreement or other agreement or instrument to which
Anchor is a party or by which Anchor is bound, Anchor's
Charter as a stock life insurance company or By-laws,
or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over
Anchor or any of its properties; and no consent,
approval, authorization or order of any court or
governmental agency or body is required for the
consummation by Anchor of the transactions contemplated
by this Agreement, except such as may be required under
the Securities Exchange Act of 1934 or state insurance
or securities laws in connection with the distribution
of the Contracts by the Distributor; and
(vii) There are no material legal or governmental proceedings
pending to which Anchor or the Separate Account is a
party or of which any property of Anchor or the
Separate Account is the subject, other than as set
forth in the Prospectus relating to the Contracts, and
other than litigation incident to the kind of business
conducted by Anchor, if determined adversely to Anchor,
would individually or in the aggregate have a material
adverse effect on the financial position, surplus or
operations of Anchor.
(b) The Distributor represents and warrants to Anchor that:
(i) It is a broker-dealer duly registered with the
Commission pursuant to the Securities Exchange Act of
1934 and a member in good standing of the National
Association of Securities Dealers, Inc., and is in
compliance with the securities laws in those states in
which it conducts business as a broker-dealer;
(ii) It shall permit the offer and sale of Contracts to the
public only by and through persons who are
appropriately licensed under both the securities laws
and state insurance laws and who are appointed in
writing by Anchor to be authorized insurance agents;
(iii) The performance of this Agreement and the consummation
of the transactions herein contemplated will not result
in a breach or violation of any of the terms or
provisions of or constitute a default under any
statute, any indenture, mortgage, deed of trust, note
agreement or other agreement or instrument to which the
Distributor is a party or by which the Distributor is
bound, the Certificate of Incorporation or By-laws of
the Distributor, or any order, rule or regulation of
any court or governmental agency or body having
jurisdiction over the Distributor or its property; and
(iv) To the extent that any statements or omissions made in the
-3-
<PAGE>
Registration Statement, or any amendment or supplement
thereto are made in reliance upon and in conformity
with written information furnished to Anchor by the
Distributor expressly for use therein, such
Registration Statement and any amendments or
supplements thereto will, when they become effective or
are filed with the Commission, as the case may be,
conform in all material respects to the requirements of
the Securities Act of 1933 and the rules and
regulations of the Commission thereunder and will not
contain any untrue statement of a material fact or omit
to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading.
5. The Distributor, or an affiliate thereof, shall keep, or cause to be
kept, in a manner and form prescribed or approved by Anchor and in
accordance with Rules 17a-3 and 17a-4 under the Securities Exchange Act
of 1934, correct records and books of account as required to be
maintained by a registered broker-dealer, acting as distributor, of all
transactions entered into on behalf of Anchor and with respect to its
activities under this Agreement for Anchor. The Distributor shall make
such records and books of account available for inspection by the
Commission, and Anchor shall have the right to inspect, make copies of
or take possession of such records and books of account at any time on
demand.
6. Subsequent to having been authorized to commence the activities
contemplated herein, the Distributor, or an affiliate thereof, will
cause the currently effective Prospectus relating to the subject
Contracts in connection with its marketing and distribution efforts to
be utilized. As to the other types of sales material, the Distributor,
or an affiliate thereof, agrees that it will cause to be used only
sales materials as have been authorized for use by Anchor and which
conform to the requirements of federal and state laws and regulations,
and which have been filed where necessary with the appropriate
regulatory authorities, including the National Association of
Securities Dealers, Inc.
7. The Distributor, or such other person as referred to in paragraph 6
above, will not distribute any Prospectus, sales literature, or any
other printed matter or material in the marketing and distribution of
any Contract if, to the knowledge of the Distributor, or such other
person, any of the foregoing misstates the duties, obligation or
liabilities of Anchor or the Distributor.
8. The Distributor shall bear all expenses of providing services pursuant
to this Agreement, including the cost of sales presentations,
mailings, advertising and any other marketing efforts they conduct in
connection with the distribution or sale of the Contracts.
9. The Distributor, as distributor of the Contracts, shall not be entitled
to remuneration for its services.
10. This Distributor shall ensure that all premium payments collected on
the sale of the Contracts, if any, shall be transmitted to Anchor for
immediate allocation to the Separate Account in accordance with the
directions furnished by the purchasers of such Contracts at the time of
purchase.
-4-
<PAGE>
11. If any purchase payment premiums shall be required to be returned by
Anchor or should Anchor become liable for the return thereof for any
cause other than surrenders or withdrawals by Contract Owners pursuant
to the terms of the Contracts either before or after termination of
this Agreement, Distributor agrees to pay Anchor the amount of
remuneration previously paid over to it by Anchor with respect to such
premiums.
12. The Distributor makes no representations or warranties regarding the
number of Contracts to be sold by licensed broker-dealers and insurance
agents or the amount to be paid thereunder. The Distributor does,
however, represent that it will actively engage in its duties under
this Agreement on a continuous basis while there is an effective
registration statement with the Commission.
13. It is understood and agreed that the Distributor may render similar
services or act as a distributor or dealer in the distribution of other
variable contracts.
14. The Distributor shall use its best efforts to ensure that the Contracts
will be offered for sale by licensed broker-dealers and insurance
agents on the terms described in the currently effective Prospectus
describing such Contracts.
15. Anchor will use its best efforts to assure that the Contracts are
continuously registered under the Securities Act of 1933 and, should it
ever be required, under state Blue Sky Laws and to file for approval
under state insurance laws when necessary.
16. Anchor reserves the right at any time to suspend or limit the public
offering of the subject Contracts upon one day's written notice to the
Distributor.
17. Anchor agrees to advise the Distributor immediately of:
(a) any request by the Commission (i) for amendment of the
Registration Statement relating to the Contracts, or (ii) for
additional information;
(b) the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement relating to the
Contracts or the initiation of any proceedings for that purpose;
and
(c) the happening of any material event, if known, which makes untrue
any statement made in the Registration Statement relating to the
Contracts or which requires the making of a change therein in
order to make any statement made therein not misleading.
18. Anchor will furnish to the Distributor such information with respect to
the Separate Account and the Contracts in such form and signed by such
of its officers as the Distributor may reasonably request; and will
warrant that the statements therein contained when so signed will be
true and correct.
19. Each of the undersigned parties agrees to notify the other in writing
upon being apprised of the institution of any proceeding, investigation
or hearing involving the
-5-
<PAGE>
offer or sale of the subject Contracts.
20. This Agreement will terminate automatically upon its assignment.
This Agreement shall terminate, without the payment of any penalty
by either party:
(a) at the option of Anchor, upon sixty days' advance written notice
to the Distributor; or
(b) at the option of the Distributor upon 90 days' written notice to
Anchor; or
(c) at the option of Anchor upon institution of formal proceedings
against the Distributors by the National Association of
Securities Dealers, Inc. or by the Commission; or
(d) at the option of Anchor, if the Distributor or any
representative thereof at any time (i) employs any device,
scheme, or artifice to defraud; makes any untrue statement of
a material fact or omits to state a material fact necessary
in order to make the statements made, in light of the
circumstances under which they were made, not misleading; or
engages in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any
person; or (ii) fails to account and pay over promptly to
Anchor money due it according to its records; or violates the
conditions of this Agreement.
21. Each notice required by this Agreement may be given by telephone
or telefax and confirmed in writing.
22. Anchor agrees to indemnify Distributor for any liability that it
may incur to a Contract Owner or party-in-interest under a
Contract (i) arising out of any act or omission in the course of,
or in connection with, rendering services under this Agreement, or
(ii) arising out of the purchase, retention or surrender of a
contract; provided however that Anchor will not indemnify
Distributor for any such liability that results from the willful
misfeasance, bad faith or gross negligence of such Distributor or
from the reckless disregard, by such Distributor, of its duties
and obligations arising under this Agreement.
23. This Agreement shall be subject to the laws of the State of
California and construed so as to interpret the Contracts and
insurance contracts written within the business operation of
Anchor.
24. This Agreement covers and includes all agreements, verbal and
written, between Anchor and the Distributor with regard to the
marketing and distribution of the Contracts, and supersedes and
annuls any and all agreements between the parties with regard to
the distribution of the Contracts; except that this Agreement
shall not affect the operation of previous or future agreements
entered into between Anchor and the Distributor unrelated to the
sale of the Contracts.
THIS AGREEMENT, along with any Attachment attached hereto and
incorporated herein by reference, may be amended from time to time by the
mutual agreement and consent of the undersigned parties; provided that such
amended shall not affect the rights of existing Contract Owners, and that
such amended be in writing and duly executed.
-6-
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement
to be duly executed and their respective corporate seals to be hereunto
affixed and attested on the date first stated above.
ANCHOR NATIONAL LIFE INSURANCE COMPANY
By:
------------------------------------
Susan L. Harris
Senior Vice President
VARIABLE ANNUITY ACCOUNT FIVE
By: ANCHOR NATIONAL LIFE
INSURANCE COMPANY
By:
------------------------------------
Susan L. Harris
Senior Vice President
SUNAMERICA CAPITAL SERVICES, INC.
By:
------------------------------------
J. Steven Neamtz
President
-7-
<PAGE>
ATTACHMENT A
CONTRACT SPECIFICATION SHEET
----------------------------
The following variable annuity contracts are the subject of the Distribution
Agreement between Anchor National Life Insurance Company and SunAmerica
Capital Services, Inc. dated December 30, 1998 regarding the sale of the
following contracts funded in Variable Annuity Account Five:
1. Seasons Select Variable Annuity
-8-
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
A STOCK COMPANY LOS ANGELES, CALIFORNIA
CERTIFICATE NUMBER P9999999999
<TABLE>
PARTICIPANT JOHN DOE
<S><C>
STATUTORY HOME OFFICE EXECUTIVE OFFICE ANNUITY SERVICE CENTER
2999 NORTH 44TH ST., STE 250 1 SUNAMERICA CENTER P. O. BOX 54299
PHOENIX, AZ 85018 LOS ANGELES, CA 90067-6022 LOS ANGELES, CA 90054--200
</TABLE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY ("We", "Us", the "Company", or "Anchor
National") agrees to provide benefits to the Participant under the Group
Contract, in accordance with the provisions set forth in this Certificate and in
consideration of the Participant's Enrollment Form and Purchase Payments We
received.
THIS CERTIFICATE IS EVIDENCE OF COVERAGE UNDER THE GROUP CONTRACT IF A
PARTICIPANT ENROLLMENT FORM IS ATTACHED. THE COVERAGE WILL BEGIN AS OF THE
CERTIFICATE DATE, SHOWN ON THE CERTIFICATE DATA PAGE.
THE VALUE OF AMOUNTS ALLOCATED TO THE SEPARATE ACCOUNT DURING THE ACCUMULATION
AND ANNUITY PERIODS IS NOT GUARANTEED. THE VALUE WILL INCREASE OR DECREASE BASED
UPON THE INVESTMENT EXPERIENCE OF THE INVESTMENTS UNDERLYING THE SUBACCOUNTS YOU
CHOOSE.
THE CASH SURRENDER BENEFIT OF AMOUNTS ALLOCATED TO ANY FIXED-MVA ACCOUNT OPTION
INCREASES OR DECREASES BASED ON THE APPLICATION OF THE MARKET VALUE ADJUSTMENT.
THE UNADJUSTED CASH SURRENDER BENEFIT IS AVAILABLE FOR 30 DAYS AFTER THE END OF
THE GUARANTEE PERIOD. THERE IS NO MARKET VALUE ADJUSTMENT FOR ANY CASH
SURRENDER BENEFIT OF AMOUNTS ALLOCATED TO NON-MVA FIXED ACCOUNT OPTIONS.
TEN DAY RIGHT TO EXAMINE CERTIFICATE - YOU MAY RETURN THIS CERTIFICATE TO OUR
ANNUITY SERVICE CENTER OR TO THE AGENT THROUGH WHOM THE CERTIFICATE WAS
PURCHASED WITHIN 10 DAYS AFTER YOU RECEIVE IT, IF YOU ARE NOT SATISFIED WITH IT.
THE COMPANY WILL REFUND THE CERTIFICATE VALUE ON THE BUSINESS DAY DURING WHICH
THE CERTIFICATE IS RECEIVED. UPON SUCH REFUND, THE CERTIFICATE SHALL BE VOID.
For Individual Retirement Annuities, a refund of the Purchase Payment(s) may be
required. Therefore, We reserve the right to allocate your Purchase Payment(s)
to the Cash Management Subaccount until the end of the Right To Examine period.
Thereafter, allocations will be made as shown on the Certificate Data Page.
THIS IS A LEGAL DOCUMENT. READ IT CAREFULLY.
/s/ Susan L. Harris /s/ Eli Broad
------------------- --------------
Susan L. Harris Eli Broad
Secretary President
ALLOCATED FIXED AND
VARIABLE GROUP ANNUITY CERTIFICATE
Nonparticipating
1
<PAGE>
TABLE OF CONTENTS
CERTIFICATE DATA PAGE . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 3
PURCHASE PAYMENT ALLOCATION . . . . . . . . . . . . . . . . . . . . . . . PAGE 4
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 5
PURCHASE PAYMENT PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . PAGE 8
Purchase Payments; Deferment of Payments; Suspension of Payments; Substitution
of Investment Portfolios
ACCUMULATION PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 9
Separate Account Accumulation Value; Number of Accumulation Units; Accumulation
Unit Value (AUV); Fixed Account Accumulation Value; Fixed Account Guarantee
Period Options And Interest Crediting ; Market Value Adjustment
CHARGES AND DEDUCTIONS. . . . . . . . . . . . . . . . . . . . . . . . . .PAGE 11
Certificate Administration Charge; Withdrawal Charge; Expense Risk Charge;
Distribution Expense Charge; Mortality Risk Charge
TRANSFER PROVISION. . . . . . . . . . . . . . . . . . . . . . . . . . . .PAGE 11
Transfers of Accumulation Units and Annuity Units Between Subaccounts; Transfers
of Accumulation Units To and From the Fixed Account
WITHDRAWAL PROVISION. . . . . . . . . . . . . . . . . . . . . . . . . . .PAGE 12
Withdrawal Charge
GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .PAGE 14
Entire Contract; Change of Annuitant; Death of Annuitant; Misstatement of Age or
Sex; Proof of Age, Sex or Survival; Conformity With State Laws; Changes in Law;
Assignment; Claims of Creditors; Premium Taxes and Other Taxes; Written Notice;
Periodic Reports; Incontestability; Non-Participating
DEATH PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .PAGE 16
Death of Participant Before the Annuity Date; Due Proof of Death; Amount of
Death Benefit; Death of Participant or Annuitant on or After the Annuity Date;
Beneficiary
ANNUITY PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .PAGE 18
Annuity Date; Payments to Participant; Fixed Annuity Payments; Amount of Fixed
Annuity Payments; Amount of Variable Annuity Payments
ANNUITY PAYMENT OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . .PAGE 20
FIXED ANNUITY PAYMENT OPTIONS TABLE . . . . . . . . . . . . . . . . . . .PAGE 21
VARIABLE ANNUITY PAYMENT OPTIONS TABLE. . . . . . . . . . . . . . . . . .PAGE 24
2
<PAGE>
CERTIFICATE DATA PAGE
CERTIFICATE NUMBER: ANNUITY SERVICE CENTER:
P9999999999 P. O. BOX 54299
LOS ANGELES, CA 90054-0299
PARTICIPANT: AGE AT ISSUE:
JOHN DOE 35
ANNUITANT: FIRST PURCHASE PAYMENT:
JOHN DOE $10,000.00
ANNUITY DATE: CERTIFICATE DATE:
NOVEMBER 1, 2028 NOVEMBER 1, 1998
LATEST ANNUITY DATE: FIXED ACCOUNT -
NOVEMBER 1, 2053 Minimum Guarantee Rate: 3.00%
BENEFICIARY:
As stated in the Participant Enrollment Form
MORTALITY RISK CHARGE: EXPENSE RISK CHARGE:
[1.02%] [0.35%]
ANNUAL CERTIFICATE ADMINISTRATION CHARGE: DISTRIBUTION EXPENSE CHARGE:
$35.00 [0.15%]
SEPARATE ACCOUNT:
VARIABLE ANNUITY ACCOUNT FIVE
FOR INQUIRIES
CALL 1-800-445-SUN2
3
<PAGE>
PURCHASE PAYMENT ALLOCATION
Subaccounts
-----------
80.00% Growth Strategy
0.00% Moderate Growth Strategy
0.00% Balanced Growth Strategy
0.00% Conservative Growth Strategy
0.00% Large Cap Growth Portfolio
0.00% Large Cap Composite Portfolio
0.00% Large Cap Value Portfolio
0.00% Mid Cap Growth Portfolio
0.00% Mid Cap Value Portfolio
0.00% Small Cap Portfolio
0.00% International Equity Portfolio
0.00% Diversified Fixed Income Portfolio
0.00% Cash Management Portfolio
Fixed Account Options
---------------------
Guarantee Initial
Period Interest Rate
------ -------------
20.00% 1 Year Fixed Non-MVA 3.00%
0.00% 3 Year Fixed MVA
0.00% 5 Year Fixed MVA
0.00% 7 Year Fixed MVA
0.00% 10 Year Fixed MVA
DCA Fixed Account Options
-------------------------
0.00% 6 Month DCA Fixed Non-MVA
0.00% 1 Year DCA Fixed Non-MVA
4
<PAGE>
DEFINITIONS
Defined in this section are some of the words and phrases used in this
Certificate. These terms are capitalized when used in the Certificate. Other
capitalized terms in the Certificate refer to the captioned paragraph explaining
that particular concept in the Certificate.
ACCUMULATION UNIT
A unit of measurement used to compute the Certificate Value in a Subaccount
prior to the Annuity Date.
AGE
Age as of last birthday.
ANNUITANT
The natural person or persons (collectively, Joint Annuitants) whose life or
lives is/are used to determine the annuity benefits under the Certificate. If
the Certificate is in force and the Annuitant(s) is/are alive on the Annuity
Date, We will begin payments to the Payee. This Certificate cannot have Joint
Annuitants if it is issued in connection with a tax-qualified retirement plan.
ANNUITY DATE
The date on which annuity payments to the Payee are to start. The Participant
must specify the Annuity Date, which must be at least two years after the
Certificate Date.
ANNUITY SERVICE CENTER
As specified on the Certificate Data Page.
ANNUITY UNIT
A unit of measurement used to compute annuity payments from the Subaccounts.
AUTOMATIC DOLLAR COST AVERAGING PROGRAM (DCA)
You may authorize the automatic transfer of amounts, at the interval selected by
You, from the DCA Fixed Account Option(s) to any Subaccount(s). All amounts
allocated to a DCA Fixed Account Option will be transferred out within the
specified DCA Fixed Account period. You may also authorize the automatic
transfer of amounts at regular intervals and specified amounts or percentages
from the 1-Year Fixed Non-MVA Account Option or any of the Subaccounts to any
other Subaccount(s) (other than the source account). The unit values credited
and applied to Your Certificate are determined on the dates of transfer(s). You
may terminate the DCA program at any time. However, upon termination or
annuitization, any amounts remaining in the DCA Fixed Account Options will be
transferred to the 1-Year Fixed Non-MVA Account Option. We reserve the right to
change the terms and conditions of the DCA program at any time.
BENEFICIARY
The Beneficiary is as designated on the Participant Enrollment Form unless later
changed by the Participant.
CERTIFICATE
The Certificate describes Your interest as a Participant under the group annuity
contract.
5
<PAGE>
CERTIFICATE DATE
The date Your Certificate is issued, as shown on the Certificate Data Page. It
is the date from which Certificate Years and anniversaries are measured.
CERTIFICATE VALUE
The sum of: (1) Your share of the Subaccounts' Accumulation Unit values and (2)
the value of amounts allocated to the Fixed Account Options.
CERTIFICATE YEAR
A year starting from the Certificate Date in one calendar year and ending on the
day preceding the anniversary of such date in the succeeding calendar years.
CONTRIBUTION YEAR
A year starting from the date of the Purchase Payment in one calendar year and
ending on the day preceding the anniversary of such date in the succeeding
calendar years.
CURRENT INTEREST RATE
The rates of interest declared by Us applicable to allocations of Subsequent
Purchase Payments to the Fixed Account Options. The Current Interest Rate will
not be less than the Minimum Guarantee Rate as shown on the Certificate Data
Page.
FIXED ACCOUNT OPTIONS
The investment options under this Certificate that are credited with a fixed
rate of interest declared by the Company. All Purchase Payments allocated to
the Fixed Account Options become part of the Company's general asset account.
The general asset account contains all the assets of the Company except for the
Separate Account and other segregated asset accounts. The Fixed Account Options
for this Certificate are shown on page 4.
FIXED ANNUITY
A series of periodic annuity payments of predetermined amounts that do not vary
with investment experience. Such payments are made from the Company's general
asset account.
GUARANTEE PERIOD
The period for which either the Initial Interest Rate, the Current Interest Rate
or the Renewal Interest Rate is credited to the amounts allocated to the Fixed
Account Options.
INITIAL INTEREST RATE
The rates of interest credited to the first Purchase Payment as described in the
Accumulation Provisions section. The Initial Interest Rate for this
Certificate's first Purchase Payment is listed on page 4. The Initial Interest
Rate may not be less than the Minimum Guarantee Rate as shown on the Certificate
Data Page.
IRC
The Internal Revenue Code of 1986, as amended, as the same may be amended or
superseded.
JOINT PARTICIPANT
If Joint Participants are named, they must be spouses. Each Joint Participant
has an equal ownership interest in the Certificate unless we are advised
otherwise in writing.
6
<PAGE>
NYSE
New York Stock Exchange
PARTICIPANT
The person or entity named in the Certificate who is entitled to exercise all
rights and privileges of ownership under the Certificate. Participant means
both Joint Participants, if applicable, and any reference to the Participant's
age shall be the younger of the Joint Participants.
PAYEE
The person receiving payment of annuity benefits under this Certificate.
PURCHASE PAYMENTS
Payments in U.S. currency made by or on behalf of the Participant to the Company
for the Certificate.
RENEWAL INTEREST RATE
The rate(s) of interest declared by Us applicable to transfers from the
Subaccounts into any of the Fixed Account Options and to amounts previously
allocated to a Fixed Account Option wherein the Guarantee Period has expired.
The Renewal Interest Rate may not be less than the Minimum Guarantee Rate as
shown on the Certificate Data Page.
SEPARATE ACCOUNT
The segregated asset account named on the Certificate Data Page. The Separate
Account consists of several Subaccounts. The assets of the Separate Account are
not commingled with the general assets and liabilities of the Company. Each
Subaccount is not chargeable with liabilities arising out of any other
Subaccount. The value of amounts allocated to the Subaccounts of the Separate
Account is not guaranteed.
SUBACCOUNT
A variable investment option available under the Certificate, comprising a
division of the Separate Account. The available Subaccounts are shown on page
4.
SUBSEQUENT PURCHASE PAYMENTS
Purchase Payments made subsequent to the first Purchase Payment.
TOTAL INVESTED AMOUNT
The sum of all Purchase Payments less amounts previously withdrawn that incurred
a Withdrawal Charge, less Purchase Payments withdrawn that were no longer
subject to a Withdrawal Charge.
VARIABLE ANNUITY
A series of periodic annuity payments, which vary in amount according to the
investment experience of one or more Subaccounts, as selected by You.
7
<PAGE>
WE, OUR, US, THE COMPANY
Anchor National Life Insurance Company.
YOU, YOUR
The Participant.
PURCHASE PAYMENT PROVISIONS
PURCHASE PAYMENTS
Purchase Payments are flexible. This means that, subject to Company declared
minimums and maximums, You may change the amounts, frequency or timing of
Purchase Payments. Purchase Payments may be allocated to the Fixed Account
Options and one or more Subaccounts in accordance with instructions from You. We
reserve the right to specify the minimum Purchase Payment that may be allocated
to a Subaccount under the Certificate.
DEFERMENT OF PAYMENTS
We may defer making payments from the Fixed Account Options for up to six (6)
months. Interest, subject to state requirements, will be credited during the
deferral period.
SUSPENSION OF PAYMENTS
We may suspend or postpone any payments from the Subaccounts if any of the
following occur:
(a) the NYSE is closed,
(b) trading on the NYSE is restricted,
(c) an emergency exists such that it is not reasonably practical to dispose of
or determine the value of the assets held in a Subaccount, or
(d) the Securities and Exchange Commission, by order, so permits for the
protection of Participants.
Conditions in (b) and (c) will be decided by or in accordance with rules of the
Securities and Exchange Commission.
SUBSTITUTION OF INVESTMENT PORTFOLIOS
If: (a) the shares of the underlying investment portfolios in which the
Subaccounts invest should no longer be available for investment by the Separate
Account; or (b) if further investment in the shares of an investment portfolio
is no longer appropriate in view of the purpose of the Certificate, then We may
substitute shares of another underlying investment series, for shares already
purchased, or to be purchased in the future by Purchase Payments under the
Certificate. No substitution of securities may take place without prior approval
of the Securities and Exchange Commission and under such requirements as it may
impose.
8
<PAGE>
ACCUMULATION PROVISIONS
SEPARATE ACCOUNT ACCUMULATION VALUE
The Separate Account Accumulation Value under the Certificate shall be the sum
of the values of the Accumulation Units held in the Subaccounts for the
Participant.
NUMBER OF ACCUMULATION UNITS
For each Subaccount, the number of Accumulation Units is the sum of each
Purchase Payment and transfer allocated to the Subaccount, reduced by premium
taxes, if any:
DIVIDED BY
The Accumulation Unit Value for that Subaccount as of the NYSE business day in
which the Purchase Payment or transfer amount is received.
The number of Accumulation Units will be similarly adjusted for withdrawals,
annuitizations, transfers, Certificate Administration Charge and Withdrawal
Charge. Adjustments will be made as of the end of the NYSE business day in
which We receive all requirements for the transaction, as appropriate.
ACCUMULATION UNIT VALUE (AUV)
The AUV of a Subaccount for any NYSE business day is calculated by subtracting
(2) from (1) and dividing the result by (3) where:
(1) is the total value at the end of the given NYSE business day of the assets
attributable to the Accumulation Units of the Subaccount minus the total
liabilities;
(2) is the cumulative unpaid charge for assumption of Expense Risk,
Distribution Expense and Mortality Risk charges (See CHARGES AND
DEDUCTIONS);
(3) is the number of Accumulation Units outstanding at the end of the given
NYSE business day.
FIXED ACCOUNT ACCUMULATION VALUE
Under a Certificate, the Fixed Account Accumulation Value shall be the sum of
all monies allocated or transferred to the Fixed Account Option(s), reduced by
any applicable premium taxes, plus all interest credited on the Fixed Account
Option(s) during the period that the Certificate has been in effect. This
amount shall be adjusted for withdrawals, annuitizations, transfers, Certificate
Administration Charge and Withdrawal Charge. The Fixed Account Accumulation
Value shall not be less than the minimum values required by law in the state
where this Certificate is issued.
FIXED ACCOUNT GUARANTEE PERIOD OPTIONS AND INTEREST CREDITING
Any amounts allocated to the Fixed Account Options from the first Purchase
Payment will earn interest at the Initial Interest Rate for the Fixed Account
Option(s) selected for the duration of the Guarantee Period.
Subsequent Purchase Payments allocated to the Fixed Account Options will earn
interest at the Current Interest Rate for the Fixed Account Option(s) selected
for the duration of the Guarantee Period.
9
<PAGE>
Transfers to the Fixed Account Options from the Subaccounts and amounts renewed
into the Fixed Account Options will earn interest at the Renewal Interest Rate
for the Fixed Account Option(s) selected for the duration of the Guarantee
Period.
For thirty (30) days following the date of expiration of a Guarantee Period, You
may renew for the same or any other Guarantee Period at the Renewal Interest
Rate or You may transfer all or a portion of the amount to the Subaccounts. If
the Participant does not specify a Guarantee Period at the time of renewal, We
will select the same Guarantee Period as has just expired, crediting the
Certificate with the Renewal Interest Rate in effect on the date of expiration
of the Guarantee Period, so long as such Guarantee Period does not extend beyond
the Annuity Date. If a renewal occurs within one year of the latest Annuity
Date, We will credit interest up to the Annuity Date at the Renewal Interest
Rate for the One Year Fixed Account Option.
If You are participating in the DCA program, Purchase Payments may be allocated
to a DCA Fixed Account Option or the 1-Year Fixed Account Option. Upon
termination of the DCA program, any amounts remaining in the DCA Fixed Account
Options will be automatically transferred to the 1-Year Fixed Account Option.
Such amounts will earn interest at the Renewal Interest Rate for the 1-Year
Fixed Account Option.
MARKET VALUE ADJUSTMENT (MVA)
Any payments and values based on a multi-year Fixed Account Option may be
subject to a MVA, the operation of which may result in upward or downward
adjustments in the Certificate Value, if withdrawn, transferred or annuitized
prior to the end of the respective Guarantee Period. The MVA will be calculated
by multiplying the amount withdrawn, transferred or annuitized by the formula
described below:
N/12
{(1 + I)/(1+J+0.0050)} -1
I = The interest rate currently in effect for that Guarantee Period.
J = The Initial Interest Rate available for the Guarantee Period equal to the
number of years (rounded up to an integer) remaining in the current Guarantee
Period at the time of withdrawal, transfer or annuitization. In the
determination of J, if the Company currently does not offer the applicable
Guarantee Period, then the rate will be determined by linear interpolation of
the Initial Interest Rate for the nearest two Guarantee Periods that are
available.
N = The number of full months remaining in the current Guarantee Period at the
time the withdrawal or annuitization request is processed.
If a Withdrawal Charge is applied to a withdrawal, then the MVA will be applied
to the withdrawal amount net of the Withdrawal Charge.
There will be no MVA on withdrawals from the Fixed Account Options in the
following situations: (1) to pay a Death Benefit paid upon death of the
Participant; (2) on amounts withdrawn to pay fees or charges; (3) on amounts
withdrawn from the Fixed Account Options within thirty (30) days after the end
of the Guarantee Period; (4) on annuitizations on the Latest Annuity Date; (5)
on amounts withdrawn from the DCA Fixed Account Options or the 1-Year Fixed
Account Option.
10
<PAGE>
CHARGES AND DEDUCTIONS
We will deduct the following charges from the Certificate:
CERTIFICATE ADMINISTRATION CHARGE
The charge specified on the Certificate Data Page will be deducted on each
Certificate anniversary that occurs on or prior to the Annuity Date. It will
also be deducted when the Certificate Value is withdrawn in full if withdrawal
is not on the Certificate anniversary. We reserve the right to assess a charge
on a class basis which is less than the charge specified on the Certificate Data
Page.
WITHDRAWAL CHARGE
This charge may be deducted upon withdrawal of the Certificate Value, in whole
or in part. See WITHDRAWAL PROVISIONS.
EXPENSE RISK CHARGE
On an annual basis this charge, as shown on the Certificate Data Page, equals a
percentage of the average daily total net asset value of the Subaccounts to
which Your Purchase Payments are allocated. This charge is to compensate Us for
assuming the expense risks under the Certificate.
DISTRIBUTION EXPENSE CHARGE
On an annual basis this charge, as shown on the Certificate Data Page, equals a
percentage of the average daily total net asset value of the Subaccounts to
which Your Purchase Payments are allocated. This charge is to compensate Us for
all distribution expenses associated with the Certificate.
MORTALITY RISK CHARGE
On an annual basis this charge, as shown on the Certificate Data Page, equals a
percentage of the average daily total net asset value of the Subaccounts to
which Your Purchase Payments are allocated. This charge is to compensate Us for
assuming the mortality risks under the Certificate.
TRANSFER PROVISION
Prior to the Annuity Date, You may transfer all or part of Your Certificate
Value to any of the Subaccounts or the Fixed Account Options, subject to certain
restrictions. We reserve the right to charge a fee for transfers if the number
of transfers exceeds the limit specified by Us.
TRANSFERS OF ACCUMULATION AND ANNUITY UNITS BETWEEN SUBACCOUNTS
Prior to the Annuity Date, You may transfer all or a portion of Your Certificate
Value from one Subaccount to another Subaccount. A transfer will result in the
purchase of Accumulation Units in a Subaccount and the redemption of
Accumulation Units in the other Subaccount. Transfers will be effected at the
end of the NYSE business day in which We receive Your completed request for the
transfer.
After the Annuity Date, You may transfer all or a portion of Your Certificate
Value from one Subaccount to another Subaccount. A transfer will result in the
purchase of Annuity Units in a Subaccount and the redemption of Annuity Units in
the other Subaccount. Transfers will be
11
<PAGE>
effected at the end of the NYSE business day in which We receive Your completed
request for the transfer.
The minimum amount that can be transferred between Subaccounts and the amount
that can remain in the Subaccount are subject to Company limits.
TRANSFERS OF ACCUMULATION UNITS TO AND FROM THE FIXED ACCOUNT
Prior to the Annuity Date, You may transfer all or any part of Your Certificate
Value from the Subaccount(s) to any Fixed Account Option(s) other than the DCA
Fixed Account Options or from the Fixed Account Option(s) to the Subaccount(s)
of the Certificate.
After the Annuity Date, transfers into or out of the Fixed Account Options are
not allowed.
WITHDRAWAL PROVISION
On or before the Annuity Date and while the Participant is living, You may
withdraw all or part of Your Certificate Value under this Certificate by
informing Us at Our Annuity Service Center. For a full withdrawal, this
Certificate must be returned to Our Annuity Service Center.
Without a written notice to the contrary, withdrawals will be deducted from the
Certificate Value in proportion to their allocation among the Fixed Account
Options and the Subaccounts. Withdrawals will be based on values at the end of
the NYSE business day in which the request for withdrawal and the Certificate
(in the case of a full withdrawal), are received at the Annuity Service Center.
Unless the SUSPENSION OF PAYMENTS or DEFERMENT OF PAYMENTS sections are in
effect, payment of withdrawals will be made within seven calendar days.
WITHDRAWAL CHARGE
Withdrawals of all or a portion of the Certificate Value may be subject to a
Withdrawal Charge as shown in the chart below. The Withdrawal Charge applied to
any withdrawal will depend on how long the Purchase Payment to which the
withdrawal is attributed has been in the Certificate. No Withdrawal Charge is
made on an amount withdrawn which is considered to be a withdrawal of
penalty-free earnings.
For the purpose of determining the Withdrawal Charge, a withdrawal will be
attributed to amounts in the following order: (1) penalty-free earnings in the
Certificate; (2) Purchase Payments which are both no longer subject to the
Withdrawal Charge and are not yet withdrawn; (3) any remaining Penalty-Free
Withdrawal amount (except in the case of a full surrender); and (4) Purchase
Payments subject to a Withdrawal Charge. Purchase Payments, when withdrawn, are
assumed to be withdrawn on a first-in-first-out (FIFO) basis. You will not
receive the benefit of a Penalty-Free Withdrawal in a full surrender.
12
<PAGE>
Number of Years Elapsed Withdrawal Charge as a
Between Purchase Payment Contribution Percentage of Withdrawn
and Date of Withdrawal Purchase Payment
- --------------------------------------------------------------------------------
0 9%
1 8%
2 7%
3 6%
4 6%
5 5%
6 4%
7 3%
8 2%
9+ 0%
The Withdrawal Charge will be assessed against the Subaccounts and the Fixed
Account Options in the same proportion as the remaining Certificate Value is
allocated unless You request that the withdrawal come from a particular Fixed
Account Option or Subaccount. If the remaining Certificate Value is
insufficient to cover the Withdrawal Charge, any remaining balance will be
deducted from the withdrawal amount requested.
PENALTY-FREE WITHDRAWALS
As of any day, You may make a withdrawal of up to the Penalty-Free Withdrawal
amount for that day without incurring a Withdrawal Charge. Any Penalty-Free
Withdrawal made in excess of penalty-free earnings in the Certificate is
considered to be a withdrawal of future penalty-free earnings and is therefore
not a withdrawal of the Total Invested Amount. On any day, penalty-free earnings
in the Certificate are calculated as the Certificate Value at the end of that
day less the Total Invested Amount.
During the first Certificate Year, the Penalty-Free Withdrawal amount is equal
to the penalty-free earnings in the Certificate as of the date of withdrawal.
Alternatively, during the first Certificate Year, You may make withdrawals of
the Penalty-Free Withdrawal amount through the Systematic Withdrawal Program.
The Penalty-Free Withdrawal amount as of any systematic withdrawal date is 10%
of the Total Invested Amount less any withdrawals already made during the
Certificate Year.
After the first Certificate Year, the maximum Penalty-Free Withdrawal amount as
of the date of the withdrawal is the greater of:
(a) penalty-free earnings in the Certificate as of that date; or
(b) 10% of the Total Invested Amount on deposit for at least one year, less any
withdrawals already made during the year.
Although amounts withdrawn free of a Withdrawal Charge may reduce principal,
they do not reduce the Total Invested Amount for purposes of calculating the
Withdrawal Charge or for the purposes of calculating penalty-free earnings in
the Certificate. As a result, You will not receive the benefit of a
Penalty-Free Withdrawal in a full surrender.
13
<PAGE>
SYSTEMATIC WITHDRAWAL PROGRAM
Prior to the Annuity Date, You may elect to participate in the Systematic
Withdrawal Program by informing Us at Our Annuity Service Center. The
Systematic Withdrawal Program allows You to make automatic withdrawals from your
account monthly, quarterly, semiannually or annually. The minimum systematic
withdrawal amount is $250 per withdrawal. Any amount withdrawn through the
Systematic Withdrawal Program may be subject to a Withdrawal Charge and a Market
Value Adjustment as discussed in the WITHDRAWAL CHARGE, PENALTY-FREE WITHDRAWALS
and MARKET VALUE ADJUSTMENT provisions. You may terminate Your participation in
the Systematic Withdrawal Program at any time by sending a written request to
Us.
Systematic withdrawals will be deducted from the Penalty-Free Withdrawal amount
available each Certificate Year.
GENERAL PROVISIONS
ENTIRE CONTRACT
The entire contract between You and Us consists of the group annuity contract,
the application, the Participant Enrollment Form as completed by You at the time
of purchase, this Certificate and any attached endorsement(s). An agent cannot
change the terms or conditions of this contract. Any change must be in writing
and approved by Us. Only Our President, Secretary, or one of Our
Vice-Presidents can give Our approval.
CHANGE OF ANNUITANT
If the Participant is an individual, the Participant may change the Annuitant at
any time prior to the Annuity Date. To make a change, the Participant must send
a written notice to Us at least 30 days before the Annuity Date. If the
Participant is not an individual, the Participant may not change the Annuitant.
DEATH OF ANNUITANT
If the Participant and Annuitant are different and the Annuitant dies before the
Annuity Date, the Participant becomes the Annuitant until such time as the
Participant elects a new Annuitant. If there are Joint Annuitants, upon the
death of any Annuitant prior to the Annuity Date, the Participant may elect a
new Joint Annuitant. However, if the Participant is a non-natural person, We
will treat the death of any Annuitant as the death of the "primary Annuitant"
and as the death of the Participant, see DEATH PROVISIONS.
MISSTATEMENT OF AGE OR SEX
If the Age or sex of any Annuitant has been misstated, future annuity payments
will be adjusted using the correct Age and sex, according to Our rates in effect
on the date that annuity payments were determined. Any overpayment from the
Fixed Account Options, plus interest at the rate of 4% per year, will be
deducted from the next payment(s) due. Any underpayment from the Fixed Account
Options, plus interest at the rate of 4% per year, will be paid in full with the
next payment due. Any overpayment from the Subaccounts will be deducted from
the next payment(s) due. Any underpayment from the Subaccounts will be paid in
full with the next payment due.
14
<PAGE>
PROOF OF AGE, SEX, OR SURVIVAL
The Company may require satisfactory proof of correct Age or sex at any time.
If any payment under this Certificate depends on the Annuitant being alive, the
Company may require satisfactory proof of survival.
CONFORMITY WITH STATE LAWS
The provisions of this Certificate will be interpreted by the laws of the state
in which the enrollment form was signed or such state as is required by law.
Any provision which, on the Certificate Date, is in conflict with the law of
such state is amended to conform to the minimum requirements of such law.
CHANGES IN LAW
If the laws governing this Certificate or the taxation of benefits under the
Certificate change, We reserve the right to amend this Certificate to comply
with these changes.
ASSIGNMENT
You may assign this Certificate before the Annuity Date, but We will not be
bound by an assignment unless it is received by Us in writing. Your rights and
those of any other person referred to in this Certificate will be subject to the
assignment. Certain assignments may be taxable. We do not assume any
responsibility for the validity or tax consequences of any assignment.
CLAIMS OF CREDITORS
To the extent permitted by law, no right or proceeds payable under this
Certificate will be subject to claims of creditors or legal process.
PREMIUM TAXES AND OTHER TAXES
The Company may deduct from Your Certificate Value any premium tax or other
taxes payable to a state or other government entity, if applicable. Should We
advance any amount so due, We are not waiving any right to collect such amount
at a later date. The Company will deduct any withholding taxes required by
applicable law.
WRITTEN NOTICE
Any notice We send to You will be sent to Your address shown in the Participant
Enrollment Form unless You request otherwise. Any written request or notice to
Us must be sent to Our Annuity Service Center, as specified on the Certificate
Data Page.
PERIODIC REPORTS
During each Certificate Year, We will send You quarterly statements of the
account activity of the Certificate as well as confirmation reports after each
financial transaction. The statement will include all transactions which have
occurred during the quarterly accounting period shown on the statement.
15
<PAGE>
INCONTESTABILITY
This Certificate will be incontestable from the Certificate Date.
NONPARTICIPATING
This Certificate does not share in Our surplus.
DEATH PROVISIONS
Notwithstanding any provision of this Certificate to the contrary, all payments
of benefits under this Certificate will be made in a manner that satisfies IRC
Section 72(s), as amended from time to time. If the Certificate is owned by a
trust or other non-natural person, We will treat the death of the Annuitant as
the death of the "primary Annuitant", as defined in IRC Section 72(s)(6), and as
the death of any Participant.
DEATH OF PARTICIPANT BEFORE THE ANNUITY DATE.
We will pay a death benefit to the Beneficiary upon Our receiving: (a) due
proof that a Participant died before the Annuity Date; and (b) an election form
selecting the death benefit option. If no election form is received within 60
days of our receipt of due proof of death, the death benefit will be paid in
accordance with death benefit option 1 below. The Beneficiary must select one of
the following death benefit options:
1. Immediately collect the death benefit in a lump sum payment. If a
lump sum payment is elected, payment will be in accordance with any
applicable laws and regulations governing payments and death; or
2. Collect the death benefit in the form of one of the Annuity Payment
Options. The payments must be over the life of the Beneficiary or
over a period not extending beyond the life expectancy of the
Beneficiary. Payments under this death benefit option must commence
within one year after the Participant's death, otherwise, the death
benefit will be paid in accordance with death benefit option 1; or
3. If the Beneficiary is the Participant's spouse, the Beneficiary may
elect to become the Participant and continue the Certificate in force,
however, no death benefit is paid. Upon the new Participant's
subsequent death, the entire interest must be distributed immediately.
In any event, the entire interest in the Certificate will be distributed within
five years from the date of death of the Participant.
DUE PROOF OF DEATH
Due Proof of Death means:
1. a certified copy of a death certificate; or
2. a certified copy of a decree of a court of competent jurisdiction as
to the finding of death; or
3. a written statement by a medical doctor who attended the deceased
Participant at the time of death; or
4. any other proof satisfactory to Us.
16
<PAGE>
AMOUNT OF DEATH BENEFIT
If You are age 80 or younger at issue, the amount of the death benefit is equal
to the greatest of:
1. the Certificate Value at the end of the NYSE business day during which
We receive, at Our Annuity Service Center, due proof of the
Participant's death and an election of the type of payment to be made;
or
2. Purchase Payments, reduced for partial withdrawals in the same
proportion that the Certificate Value was reduced on the date of any
such withdrawals, compounded until the date of death at 4% interest;
or
3. the Certificate Value at the seventh Certificate anniversary, plus any
subsequent Purchase Payments, reduced for subsequent partial
withdrawals in the same proportion that the Certificate value was
reduced on the date of any such withdrawals subsequent to that
Certificate anniversary, compounded until the date of death at 4%
interest; or
4. the maximum anniversary value prior to the Participant's attainment of
age 81. The maximum anniversary value is equal to the greatest
anniversary value attained from the following:
As of the date of receipt of due proof of death and an election of the
type of payment to be made at our Annuity Service Center, We will
calculate an anniversary value for each Certificate anniversary prior
to the Participant's 81st birthday. The anniversary value is the
Certificate Value at each Certificate anniversary increased by any
Purchase Payments, reduced for partial withdrawals in the same
proportion that the Certificate Value was reduced on the date of any
such withdrawals since that anniversary.
If the Participant was between age 70 and 80 inclusive at issue, both (2) and
(3) above will be compounded at 3%, rather than 4%. If the death benefit is
paid on the death of a Participant who was not originally named in the
Participant Enrollment Form and was age 70 or older on the Certificate Date,
both (2) and (3) above will be compounded at 3%, rather than 4%.
If You are age 81 or older at issue, the death benefit will be the greater of:
1. the Certificate Value at the end of the NYSE business day during which We
receive, at Our Annuity Service Center, due proof of the Participant's
death and an election of the type of payment to be made; or
2. Purchase Payments reduced for partial withdrawals in the same proportion
that the Certificate value was reduced on the date of any such withdrawals,
compounded until the date of death at 3% interest.
DEATH OF PARTICIPANT OR ANNUITANT ON OR AFTER THE ANNUITY DATE. If the
Participant or Annuitant dies on or after the Annuity Date and before the entire
interest in the Certificate has been distributed, We will pay the remaining
portion of the interest of the Certificate as under the annuity payment option
being used on the date of death. For further information pertaining to death of
the Annuitant, see ANNUITY PAYMENT OPTIONS.
17
<PAGE>
BENEFICIARY
The Beneficiary is as designated on the Participant Enrollment Form unless later
changed by the Participant. While: (a) the Participant is living and (b)
before the Annuity Date, the Participant may change the Beneficiary by written
notice in a form satisfactory to Us. The change will take effect on the date We
record the notice subject to any payments We have made. If two or more persons
are named: (a) those surviving the Participant will share equally unless
otherwise stated; and (b) the Beneficiaries must elect to receive their
respective portions of the death benefit according to the death benefit options.
If the Annuitant survives the Participant, and there are no surviving
Beneficiaries, the Annuitant will be deemed the Beneficiary.
Joint Participants, if applicable, shall be each other's primary Beneficiary.
Joint Annuitants, if any, when the Participant is a non-natural person, shall be
each other's primary Beneficiary. Any other Beneficiary designated on the
Participant Enrollment Form will be treated as a contingent Beneficiary.
If the Participant is also the Annuitant and there are no surviving
Beneficiaries at the death of the Participant, the death benefit will be paid to
the estate of the Participant in accordance with option 1, under DEATH OF
PARTICIPANT BEFORE THE ANNUITY DATE.
ANNUITY PROVISIONS
ANNUITY DATE
The Participant selects an Annuity Date (the date on which annuity payments are
to begin) at the time of application. The Participant may change the Annuity
Date at any time, at least seven days prior to the Annuity Date, by written
notice to the Company at its Annuity Service Center. The Annuity Date must
always be the first day of the calendar month and must be at least two years
after the Certificate Date, but not beyond the later of the Participant's 90th
birthday or ten years after the Certificate Date. If the Participant is a
non-natural person, the latest annuity date is the later of the Annuitant's 90th
birthday or ten years after the Certificate Date. If no Annuity Date is
selected, the Annuity Date will be the latest Annuity Date, as set by the
Company.
PAYMENTS TO PARTICIPANT
Unless You request otherwise, We will make annuity payments to You. If You want
the annuity payments to be made to some other Payee, We will make such payments
subject to receipt of a written request filed at the Annuity Service Center no
later than thirty (30) days before the date of the first annuity payment.
Any such request is subject to the rights of any assignee. No payments
available to or being paid to the Payee while the Annuitant is alive can be
transferred, commuted, anticipated or encumbered.
FIXED ANNUITY PAYMENTS
If a Fixed Annuity payment option has been elected, the proceeds payable under
this Certificate less any applicable premium taxes, shall be applied to the
payment of the Fixed Annuity payment option elected at rates which are at least
equal to the annuity rates based upon the applicable tables in the Certificate.
In no event will the Fixed Annuity payments be changed once they begin.
18
<PAGE>
AMOUNT OF FIXED ANNUITY PAYMENTS
The amount of each Fixed Annuity payment will be determined by applying the
portion of the Certificate Value allocated to Fixed Annuity payments less any
applicable premium taxes to the annuity table applicable to the Fixed Annuity
payment option chosen.
AMOUNT OF VARIABLE ANNUITY PAYMENTS
(a) FIRST VARIABLE ANNUITY PAYMENT: The dollar amount of the first Variable
Annuity payment will be determined by applying the portion of the
Certificate Value allocated to the Subaccount, less any applicable premium
taxes, to the annuity table applicable to the Variable Annuity payment
option chosen. If the Certificate Value is allocated to more than one
Subaccount, the value of Your interest in each Subaccount is applied
separately to the Variable Annuity payment option table to determine the
amount of the first annuity payment attributable to each Subaccount.
(b) NUMBER OF VARIABLE ANNUITY UNITS: The number of Annuity Units for each
applicable Subaccount is the amount of the first annuity payment
attributable to that Subaccount divided by the value of the applicable
Annuity Unit for that Subaccount as of the Annuity Date. The number will
not change as a result of investment experience.
(c) VALUE OF EACH VARIABLE ANNUITY UNIT: The initial value of an Annuity Unit
of each Subaccount was set at $10 when the Subaccounts were established.
The value may increase or decrease from one month to the next. For any
month, the value of an Annuity Unit of a particular Subaccount is the value
of that Annuity Unit as of the last NYSE business day of the preceding
month, multiplied by the Net Investment Factor for that Subaccount for the
last NYSE business day of the current month.
The Net Investment Factor for any Subaccount for a certain month is determined
by dividing (1) by (2) where:
(1) the Accumulation Unit Value of the Subaccount determined as of
the last business day at the end of that month;
(2) the Accumulation Unit value of the Subaccount determined as of
the last business day at the end of the preceding month.
The result is then multiplied by a factor that neutralizes the assumed
investment rate of 3.5%.
(d) SUBSEQUENT VARIABLE ANNUITY PAYMENTS: After the first Variable Annuity
payment, payments will vary in amount according to the investment
performance of the applicable Subaccount(s) to which your Purchase Payments
are allocated. The amount may change from month to month. The amount of
each subsequent payment for each Subaccount is:
The number of Annuity Units for each Subaccount as determined for the first
annuity payment
MULTIPLIED BY
The value of an Annuity Unit for that Subaccount at the end of the month
immediately preceding the month in which payment is due.
We guarantee that the amount of each Variable Annuity payment will not be
affected by variations in expenses or mortality experience.
19
<PAGE>
ANNUITY PAYMENT OPTIONS
During the Annuitant's life, upon written election and the return of this
Certificate to the Company at its Annuity Service Center, the Certificate Value
may be applied to provide one of the following options or any annuity payment
option that is mutually agreeable. After two years from the Certificate Date,
and prior to the Annuity Date, You can choose one of the options described
below. If no option has been elected by the Annuity Date, You will
automatically receive Option 4 below with 120 monthly payments guaranteed.
OPTIONS 1 & 1V - LIFE ANNUITY, LIFETIME MONTHLY PAYMENTS GUARANTEED
Payments payable to a Payee during the lifetime of the Annuitant. No further
payments are payable after the death of the Annuitant.
OPTIONS 2 & 2V - JOINT AND SURVIVOR LIFE ANNUITY
Payments payable to the Payee during the lifetime of the Annuitant and during
the lifetime of a designated second person. No further payments are payable
after the deaths of both the Annuitant and the designated second person.
OPTIONS 3 & 3V - JOINT AND SURVIVOR LIFE ANNUITY - 120 OR 240 MONTHLY PAYMENTS
GUARANTEED
Payments are payable to the Payee during the lifetime of the Annuitant and
during the lifetime of a designated second person. If, at the death of the
survivor, payments have been made for less than 120 or 240 monthly periods, the
remaining guaranteed annuity payments will be continued to the Beneficiary.
OPTIONS 4 & 4V - LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED
Payments payable to the Payee during the lifetime of the Annuitant. If, at the
death of the Annuitant, payments have been made for less than the 120 or 240
monthly periods, as selected at the time of annuitization, the remaining
guaranteed annuity payments will be continued to the Beneficiary.
OPTIONS 5 & 5V - FIXED PAYMENTS FOR A SPECIFIED PERIOD CERTAIN
Payments payable to the Payee for any specified period of time for five (5)
years or more, but not exceeding thirty (30) years, as selected at the time of
annuitization. The selection must be made for full twelve month periods. In
the event of death of the Annuitant, any remaining guaranteed annuity payments
will be continued to the Beneficiary.
20
<PAGE>
FIXED ANNUITY PAYMENT OPTIONS TABLE
BASIS OF COMPUTATION
The actuarial basis for the Table of Annuity Rates is the 1983a Annuity
Mortality Table with projection and a guaranteed interest rate of 3%. The
mortality table is projected using Projection Scale G factors, assuming
annuitization in the year 2000. The Fixed Annuity Payment Options Table does
not included any applicable premium tax.
OPTIONS 1 & 4 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
<TABLE>
<CAPTION>
OPTION 1 OPTION 4 OPTION 4
LIFE ANNUITY LIFE ANNUITY
AGE OF (W/120 PAYMENTS (W/240 PAYMENTS
ANNUITANT LIFE ANNUITY GUARANTEED) GUARANTEED)
<S> <C> <C> <C> <C> <C> <C>
MALE FEMALE MALE FEMALE MALE FEMALE
55 4.23 3.84 4.19 3.82 4.05 3.76
56 4.32 3.91 4.27 3.88 4.11 3.81
57 4.41 3.98 4.35 3.95 4.17 3.87
58 4.51 4.05 4.44 4.02 4.24 3.93
59 4.61 4.13 4.54 4.10 4.31 4.00
60 4.72 4.22 4.64 4.18 4.37 4.06
61 4.84 4.31 4.74 4.27 4.44 4.13
62 4.96 4.40 4.85 4.36 4.51 4.20
63 5.10 4.51 4.97 4.45 4.58 4.27
64 5.24 4.62 5.10 4.55 4.65 4.35
65 5.40 4.73 5.22 4.66 4.72 4.42
66 5.56 4.86 5.36 4.78 4.79 4.50
67 5.74 4.99 5.50 4.90 4.86 4.57
68 5.93 5.14 5.65 5.02 4.92 4.65
69 6.13 5.29 5.80 5.16 4.99 4.73
70 6.35 5.46 5.96 5.30 5.05 4.80
71 6.58 5.64 6.13 5.46 5.10 4.88
72 6.82 5.84 6.29 5.62 5.16 4.95
73 7.08 6.05 6.47 5.78 5.20 5.02
74 7.36 6.28 6.64 5.96 5.25 5.08
75 7.66 6.53 6.82 6.14 5.29 5.14
76 7.98 6.80 7.00 6.33 5.33 5.19
77 8.33 7.09 7.19 6.53 5.36 5.24
78 8.69 7.41 7.37 6.73 5.39 5.29
79 9.09 7.75 7.55 6.94 5.41 5.33
80 9.51 8.11 7.73 7.14 5.43 5.36
81 9.97 8.51 7.91 7.35 5.45 5.39
82 10.45 8.94 8.08 7.55 5.47 5.42
83 10.97 9.41 8.24 7.76 5.48 5.44
84 11.52 9.92 8.40 7.95 5.49 5.46
85 12.10 10.47 8.54 8.13 5.50 5.48
</TABLE>
21
<PAGE>
OPTION 2 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
JOINT & 100% SURVIVOR LIFE ANNUITY
<TABLE>
<CAPTION>
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
--------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 60 65 70 75 80 85
55 3.54 3.69 3.84 3.96 4.06 4.13 4.17
60 3.63 3.83 4.04 4.23 4.39 4.52 4.60
65 3.70 3.95 4.23 4.51 4.78 5.00 5.16
70 3.75 4.04 4.39 4.78 5.18 5.56 5.85
75 3.78 4.11 4.51 5.01 5.57 6.14 6.65
80 3.81 4.15 4.60 5.18 5.89 6.70 7.52
85 3.82 4.18 4.66 5.30 6.14 7.18 8.35
</TABLE>
OPTION 3 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT & 100% SURVIVOR LIFE ANNUITY (W/120 PAYMENTS GUARANTEED)
<TABLE>
<CAPTION>
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
--------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 60 65 70 75 80 85
55 3.54 3.69 3.83 3.96 4.05 4.12 4.16
60 3.63 3.83 4.03 4.22 4.38 4.50 4.57
65 3.70 3.95 4.22 4.50 4.76 4.97 5.10
70 3.75 4.04 4.38 4.76 5.15 5.48 5.72
75 3.78 4.10 4.50 4.98 5.50 6.00 6.40
80 3.80 4.14 4.58 5.13 5.78 6.46 7.04
85 3.81 4.16 4.62 5.22 5.97 6.80 7.55
</TABLE>
OPTION 3 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT & 100% SURVIVOR LIFE ANNUITY (W/240 PAYMENTS GUARANTEED)
<TABLE>
<CAPTION>
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
--------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 60 65 70 75 80 85
55 3.53 3.68 3.81 3.92 3.99 4.03 4.04
60 3.62 3.81 4.00 4.16 4.27 4.34 4.37
65 3.68 3.92 4.16 4.39 4.56 4.66 4.71
70 3.72 3.99 4.29 4.58 4.81 4.96 5.03
75 3.74 4.03 4.36 4.70 4.99 5.17 5.26
80 3.75 4.05 4.40 4.77 5.09 5.30 5.40
85 3.76 4.06 4.42 4.80 5.13 5.35 5.46
</TABLE>
22
<PAGE>
OPTION 5 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
FIXED PAYMENT FOR SPECIFIED PERIOD
<TABLE>
<CAPTION>
NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY
OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
10 9.61 17 6.23 24 4.84
11 8.86 18 5.96 25 4.71
5 17.91 12 8.24 19 5.73 26 4.59
6 15.14 13 7.71 20 5.51 27 4.47
7 13.16 14 7.26 21 5.32 28 4.37
8 11.68 15 6.87 22 5.15 29 4.27
9 10.53 16 6.53 23 4.99 30 4.18
</TABLE>
23
<PAGE>
VARIABLE ANNUITY PAYMENT OPTIONS TABLE
BASIS OF COMPUTATION
The actuarial basis for the Table of Annuity Rates is the 1983a Annuity
Mortality Table with projection and an effective annual Assumed Investment Rate
of 3.5%. The mortality table is projected using Projection Scale G factors,
assuming annuitization in the year 2000. The Variable Annuity Payment Options
Table does not include any applicable premium tax.
OPTIONS 1v& 4v - TABLE OF MONTHLY INSTALLMENTS PER $1,000
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
<TABLE>
<CAPTION>
OPTION 1v OPTION 4v OPTION 4v
LIFE ANNUITY LIFE ANNUITY
AGE OF (W/120 PAYMENTS (W/240 PAYMENTS
ANNUITANT LIFE ANNUITY GUARANTEED) GUARANTEED)
<S> <C> <C> <C> <C> <C> <C>
MALE FEMALE MALE FEMALE MALE FEMALE
55 4.53 4.13 4.48 4.11 4.33 4.05
56 4.62 4.20 4.56 4.18 4.39 4.10
57 4.71 4.27 4.64 4.24 4.45 4.16
58 4.80 4.34 4.73 4.31 4.52 4.22
59 4.90 4.42 4.82 4.39 4.58 4.28
60 5.01 4.51 4.92 4.47 4.65 4.34
61 5.13 4.60 5.03 4.55 4.71 4.41
62 5.26 4.69 5.14 4.64 4.78 4.48
63 5.39 4.80 5.25 4.74 4.85 4.55
64 5.54 4.91 5.38 4.84 4.92 4.62
65 5.69 5.02 5.51 4.94 4.99 4.69
66 5.86 5.15 5.64 5.06 5.05 4.77
67 6.03 5.28 5.78 5.18 5.12 4.84
68 6.22 5.43 5.93 5.30 5.18 4.92
69 6.43 5.58 6.08 5.44 5.24 4.99
70 6.64 5.75 6.23 5.58 5.30 5.06
71 6.87 5.93 6.40 5.73 5.36 5.14
72 7.12 6.13 6.56 5.89 5.41 5.21
73 7.38 6.34 6.73 6.06 5.46 5.27
74 7.66 6.57 6.91 6.23 5.50 5.33
75 7.96 6.82 7.09 6.41 5.54 5.39
76 8.28 7.09 7.27 6.60 5.57 5.44
77 8.63 7.38 7.45 6.79 5.61 5.49
78 9.00 7.70 7.63 6.99 5.63 5.54
79 9.40 8.04 7.81 7.19 5.66 5.58
80 9.82 8.41 7.98 7.40 5.68 5.61
81 10.28 8.81 8.16 7.60 5.70 5.64
82 10.76 9.24 8.32 7.81 5.71 5.66
83 11.28 9.71 8.48 8.00 5.72 5.69
84 11.83 10.23 8.64 8.19 5.73 5.70
85 12.42 10.78 8.78 8.38 5.74 5.72
</TABLE>
24
<PAGE>
OPTION 2v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
JOINT & 100% SURVIVOR LIFE ANNUITY
<TABLE>
<CAPTION>
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
- --------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 60 65 70 75 80 85
55 3.83 3.98 4.12 4.24 4.34 4.42 4.46
60 3.92 4.11 4.32 4.51 4.67 4.80 4.89
65 3.99 4.23 4.50 4.79 5.05 5.28 5.44
70 4.04 4.33 4.67 5.05 5.46 5.83 6.13
75 4.07 4.39 4.79 5.28 5.84 6.41 6.93
80 4.10 4.44 4.88 5.45 6.16 6.97 7.79
85 4.11 4.47 4.94 5.57 6.41 7.45 8.61
</TABLE>
OPTION 3v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT AND 100% SURVIVOR LIFE ANNUITY (W/120 PAYMENTS GUARANTEED)
<TABLE>
<CAPTION>
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
- --------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 60 65 70 75 80 85
55 3.83 3.98 4.12 4.24 4.34 4.40 4.45
60 3.92 4.11 4.31 4.50 4.66 4.78 4.86
65 3.99 4.23 4.50 4.78 5.03 5.24 5.38
70 4.04 4.32 4.66 5.03 5.41 5.75 5.99
75 4.07 4.38 4.78 5.25 5.77 6.26 6.66
80 4.09 4.43 4.86 5.40 6.05 6.72 7.29
85 4.10 4.45 4.90 5.50 6.24 7.05 7.80
</TABLE>
OPTION 3v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT & 100% SURVIVOR LIFE ANNUITY (W/240 PAYMENTS GUARANTEED)
<TABLE>
<CAPTION>
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
--------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 60 65 70 75 80 85
55 3.82 3.97 4.10 4.20 4.27 4.31 4.33
60 3.91 4.09 4.28 4.44 4.55 4.61 4.64
65 3.97 4.20 4.44 4.66 4.83 4.93 4.97
70 4.01 4.27 4.56 4.84 5.07 5.21 5.28
75 4.03 4.31 4.64 4.97 5.25 5.42 5.51
80 4.04 4.33 4.67 5.03 5.34 5.55 5.65
85 4.05 4.34 4.69 5.06 5.38 5.60 5.70
</TABLE>
25
<PAGE>
OPTION 5v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
PAYMENTS FOR A SPECIFIED PERIOD
<TABLE>
<CAPTION>
NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY
OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
10 9.83 17 6.47 24 5.09
11 9.09 18 6.20 25 4.96
5 18.12 12 8.46 19 5.97 26 4.84
6 15.35 13 7.94 20 5.75 27 4.73
7 13.38 14 7.49 21 5.56 28 4.63
8 11.90 15 7.10 22 5.39 29 4.53
9 10.75 16 6.76 23 5.24 30 4.45
</TABLE>
26
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
A STOCK COMPANY LOS ANGELES, CALIFORNIA
ALLOCATED FIXED AND
VARIABLE GROUP ANNUITY CERTIFICATE
Nonparticipating
27
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
A STOCK COMPANY LOS ANGELES, CALIFORNIA
CONTRACT NUMBER P9999999999
OWNER JOHN DOE
STATUTORY HOME OFFICE EXECUTIVE OFFICE ANNUITY SERVICE CENTER
2999 NORTH 44TH ST., STE 1 SUNAMERICA CENTER P. O. BOX 54299
250 LOS ANGELES, CA 90067- LOS ANGELES, CA 90054-
PHOENIX, AZ 85018 6022 0299
ANCHOR NATIONAL LIFE INSURANCE COMPANY ("We", "Us", the "Company", or "Anchor
National") agrees to provide benefits to the Owner in accordance with the
provisions set forth in this Contract and in consideration of the Application
and Purchase Payments We received.
THE VALUE OF AMOUNTS ALLOCATED TO THE SEPARATE ACCOUNT DURING THE ACCUMULATION
AND ANNUITY PERIODS IS NOT GUARANTEED. THE VALUE WILL INCREASE OR DECREASE BASED
UPON THE INVESTMENT EXPERIENCE OF THE INVESTMENTS UNDERLYING THE SUBACCOUNTS YOU
CHOOSE.
THE CASH SURRENDER BENEFIT OF AMOUNTS ALLOCATED TO ANY FIXED-MVA ACCOUNT OPTION
INCREASES OR DECREASES BASED ON THE APPLICATION OF THE MARKET VALUE ADJUSTMENT.
THE UNADJUSTED CASH SURRENDER BENEFIT IS AVAILABLE FOR 30 DAYS AFTER THE END OF
THE GUARANTEE PERIOD. THERE IS NO MARKET VALUE ADJUSTMENT FOR ANY CASH
SURRENDER BENEFIT OF AMOUNTS ALLOCATED TO NON-MVA FIXED ACCOUNT OPTIONS.
TEN DAY RIGHT TO EXAMINE CONTRACT - YOU MAY RETURN THIS CONTRACT TO OUR ANNUITY
SERVICE CENTER OR TO THE AGENT THROUGH WHOM THE CONTRACT WAS PURCHASED WITHIN 10
DAYS AFTER YOU RECEIVE IT, IF YOU ARE NOT SATISFIED WITH IT. THE COMPANY WILL
REFUND THE CONTRACT VALUE ON THE BUSINESS DAY DURING WHICH THE CONTRACT IS
RECEIVED. UPON SUCH REFUND, THE CONTRACT SHALL BE VOID.
For Individual Retirement Annuities, a refund of the Purchase Payment(s) may be
required. Therefore, We reserve the right to allocate your Purchase Payment(s)
to the Cash Management Subaccount until the end of the Right To Examine period.
Thereafter, allocations will be made as shown on the Contract Data Page.
THIS IS A LEGAL DOCUMENT. READ IT CAREFULLY.
/s/Susan L. Harris /s/Eli Broad
----------------------- -------------------
Susan L. Harris Eli Broad
Secretary President
INDIVIDUAL FIXED AND
VARIABLE ANNUITY CONTRACT
Nonparticipating
1
<PAGE>
TABLE OF CONTENTS
CONTRACT DATA PAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 3
PURCHASE PAYMENT ALLOCATION. . . . . . . . . . . . . . . . . . . . . . . PAGE 4
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 5
PURCHASE PAYMENT PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . PAGE 8
Purchase Payments; Deferment of Payments; Suspension of Payments; Substitution
of Investment Portfolios
ACCUMULATION PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . PAGE 8
Separate Account Accumulation Value; Number of Accumulation Units; Accumulation
Unit Value (AUV); Fixed Account Accumulation Value; MVA Account Accumulation
Value; Fixed Account Guarantee Period Options And Interest Crediting ; Market
Value Adjustment
CHARGES AND DEDUCTIONS . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 10
Contract Administration Charge; Withdrawal Charge; Expense Risk Charge;
Distribution Expense Charge; Mortality Risk Charge
TRANSFER PROVISION . . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 11
Transfers of Accumulation Units and Annuity Units Between Subaccounts; Transfers
of Accumulation Units To and From the Fixed Account
WITHDRAWAL PROVISION . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 12
Withdrawal Charge
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 14
Entire Contract; Change of Annuitant; Death of Annuitant; Misstatement of Age or
Sex; Proof of Age, Sex or Survival; Conformity With State Laws; Changes in Law;
Assignment; Claims of Creditors; Premium Taxes and Other Taxes; Written Notice;
Periodic Reports; Incontestability; Non-Participating
DEATH PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 15
Death of Owner Before the Annuity Date; Due Proof of Death; Amount of Death
Benefit; Death of Owner or Annuitant on or After the Annuity Date; Beneficiary
ANNUITY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 18
Annuity Date; Payments to Owner; Fixed Annuity Payments; Amount of Fixed Annuity
Payments; Amount of Variable Annuity Payments
ANNUITY PAYMENT OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . PAGE 20
FIXED ANNUITY PAYMENT OPTIONS TABLE. . . . . . . . . . . . . . . . . . . PAGE 21
VARIABLE ANNUITY PAYMENT OPTIONS TABLE . . . . . . . . . . . . . . . . . PAGE 24
2
<PAGE>
CONTRACT DATA PAGE
CONTRACT NUMBER: ANNUITY SERVICE CENTER:
P9999999999 P. O. BOX 54299
LOS ANGELES, CA 90054-0299
OWNER: AGE AT ISSUE:
JOHN DOE 35
ANNUITANT: FIRST PURCHASE PAYMENT:
JOHN DOE $10,000.00
ANNUITY DATE: CONTRACT DATE:
NOVEMBER 1, 2028 NOVEMBER 1, 1998
LATEST ANNUITY DATE: FIXED ACCOUNT -
NOVEMBER 1, 2053 Minimum Guarantee Rate: 3.0%
BENEFICIARY:
As stated in the Application Form
MORTALITY RISK CHARGE: EXPENSE RISK CHARGE:
[1.02%] [0.35%]
ANNUAL CONTRACT ADMINISTRATION CHARGE: DISTRIBUTION EXPENSE CHARGE:
$35.00 [0.15%]
SEPARATE ACCOUNT:
VARIABLE ANNUITY ACCOUNT FIVE
FOR INQUIRIES
CALL 1-800-445-SUN2
3
<PAGE>
CONTRACT DATA PAGE
PURCHASE PAYMENT ALLOCATION
<TABLE>
<CAPTION>
SUBACCOUNTS
-----------
<S> <C>
80.00% Growth Strategy
0.00% Moderate Growth Strategy
0.00% Balanced Growth Strategy
0.00% Conservative Growth Strategy
0.00% Large Cap Growth Portfolio
0.00% Large Cap Composite Portfolio
0.00% Large Cap Value Portfolio
0.00% Mid Cap Growth Portfolio
0.00% Mid Cap Value Portfolio
0.00% Small Cap Portfolio
0.00% International Equity Portfolio
0.00% Diversified Fixed Income Portfolio
0.00% Cash Management Portfolio
</TABLE>
<TABLE>
<CAPTION>
FIXED ACCOUNT OPTIONS
---------------------
GUARANTEE INITIAL
PERIOD INTEREST RATE
------ -------------
<S> <C> <C>
20.00% 1 Year Fixed Non-MVA 3.00%
0.00% 3 Year Fixed MVA
0.00% 5 Year Fixed MVA
0.00% 7 Year Fixed MVA
0.00% 10 Year Fixed MVA
</TABLE>
<TABLE>
<CAPTION>
DCA FIXED ACCOUNT OPTIONS
--------------------------
<S> <C>
0.00% 6 Month DCA Fixed Non-MVA
0.00% 1 Year DCA Fixed Non-MVA
</TABLE>
4
<PAGE>
DEFINITIONS
Defined in this section are some of the words and phrases used in this Contract.
These terms are capitalized when used in the Contract. Other capitalized terms
in the Contract refer to the captioned paragraph explaining that particular
concept in the Contract.
ACCUMULATION UNIT
A unit of measurement used to compute the Contract Value in a Subaccount prior
to the Annuity Date.
AGE
Age as of last birthday.
ANNUITANT
The natural person or persons (collectively, Joint Annuitants) whose life or
lives is/are used to determine the annuity benefits under the Contract. If the
Contract is in force and the Annuitant(s) is/are alive on the Annuity Date, We
will begin payments to the Payee. This Contract cannot have Joint Annuitants if
it is issued in connection with a tax-qualified retirement plan.
ANNUITY DATE
The date on which annuity payments to the Payee are to start. The Owner must
specify the Annuity Date, which must be at least two years after the Contract
Date.
ANNUITY SERVICE CENTER
As specified on the Contract Data Page.
ANNUITY UNIT
A unit of measurement used to compute annuity payments from the Subaccounts.
AUTOMATIC DOLLAR COST AVERAGING PROGRAM (DCA)
You may authorize the automatic transfer of amounts, at the interval selected by
You, from the DCA Fixed Account Option(s) to any Subaccount(s). All amounts
allocated to a DCA Fixed Account Option will be transferred out within the
specified DCA Fixed Account period. You may also authorize the automatic
transfer of amounts at regular intervals and specified amounts or percentages
from the 1-Year Fixed Non-MVA Account Option or any of the Subaccounts to any
other Subaccount(s) (other than the source account). The unit values credited
and applied to Your Contract are determined on the dates of transfer(s). You
may terminate the DCA program at any time. However, upon termination or
annuitization, any amounts remaining in the DCA Fixed Account Options will be
transferred to the 1-Year Fixed Non-MVA Account Option. We reserve the right to
change the terms and conditions of the DCA program at any time.
BENEFICIARY
The Beneficiary is as designated on the Application Form unless later changed by
the Owner.
CONTRACT DATE
The date Your Contract is issued, as shown on the Contract Data Page. It is the
date from which Contract Years and anniversaries are measured.
5
<PAGE>
CONTRACT VALUE
The sum of: (1) Your share of the Subaccounts' Accumulation Unit values and (2)
the value of amounts allocated to the Fixed Account Options.
CONTRACT YEAR
A year starting from the Contract Date in one calendar year and ending on the
day preceding the anniversary of such date in the succeeding calendar years.
CONTRIBUTION YEAR
A year starting from the date of the Purchase Payment in one calendar year and
ending on the day preceding the anniversary of such date in the succeeding
calendar years.
CURRENT INTEREST RATE
The rates of interest declared by Us applicable to allocations of Subsequent
Purchase Payments to the Fixed Account Options. The Current Interest Rate will
not be less than the Minimum Guarantee Rate as shown on the Contract Data Page.
FIXED ACCOUNT OPTIONS
The investment options under this Contract that are credited with a fixed rate
of interest declared by the Company. All Purchase Payments allocated to the
Fixed Account Options become part of the Company's general asset account. The
general asset account contains all the assets of the Company except for the
Separate Account and other segregated asset accounts. The Fixed Account Options
for this Contract are shown on page 4.
FIXED ANNUITY
A series of periodic annuity payments of predetermined amounts that do not vary
with investment experience. Such payments are made from the Company's general
asset account.
GUARANTEE PERIOD
The period for which either the Initial Interest Rate, the Current Interest Rate
or the Renewal Interest Rate is credited to the amounts allocated to the Fixed
Account Options.
INITIAL INTEREST RATE
The rates of interest credited to the first Purchase Payment as described in the
Accumulation Provisions section. The Initial Interest Rate for this Contract's
first Purchase Payment is listed on page 4. The Initial Interest Rate may not
be less than the Minimum Guarantee Rate as shown on the Contract Data Page.
IRC
The Internal Revenue Code of 1986, as amended, as the same may be amended or
superseded.
JOINT OWNER
If Joint Owners are named, they must be spouses. Each Joint Owner has an equal
ownership interest in the Contract unless we are advised otherwise in writing.
NYSE
New York Stock Exchange
6
<PAGE>
OWNER
The person or entity named in the Contract who is entitled to exercise all
rights and privileges of ownership under the Contract. Owner means both Joint
Owners, if applicable, and any reference to the Owner's age shall be the younger
of the Joint Owners.
PAYEE
The person receiving payment of annuity benefits under this Contract.
PURCHASE PAYMENTS
Payments in U.S. currency made by or on behalf of the Owner to the Company for
the Contract.
RENEWAL INTEREST RATE
The rate(s) of interest declared by Us applicable to transfers from the
Subaccounts into any of the Fixed Account Options and to amounts previously
allocated to a Fixed Account Option wherein the Guarantee Period has expired.
The Renewal Interest Rate may not be less than the Minimum Guarantee Rate as
shown on the Contract Data Page.
SEPARATE ACCOUNT
The segregated asset account named on the Contract Data Page. The Separate
Account consists of several Subaccounts. The assets of the Separate Account are
not commingled with the general assets and liabilities of the Company. Each
Subaccount is not chargeable with liabilities arising out of any other
Subaccount. The value of amounts allocated to the Subaccounts of the Separate
Account is not guaranteed.
SUBACCOUNT
A variable investment option available under the Contract, comprising a division
of the Separate Account. The available Subaccounts are shown on page 4.
SUBSEQUENT PURCHASE PAYMENTS
Purchase Payments made subsequent to the first Purchase Payment.
TOTAL INVESTED AMOUNT
The sum of all Purchase Payments less amounts previously withdrawn that incurred
a Withdrawal Charge, less Purchase Payments withdrawn that were no longer
subject to a Withdrawal Charge.
VARIABLE ANNUITY
A series of periodic annuity payments, which vary in amount according to the
investment experience of one or more Subaccounts, as selected by You.
WE, OUR, US, THE COMPANY
Anchor National Life Insurance Company.
YOU, YOUR
The Owner.
7
<PAGE>
PURCHASE PAYMENT PROVISIONS
PURCHASE PAYMENTS
Purchase Payments are flexible. This means that, subject to Company declared
minimums and maximums, You may change the amounts, frequency or timing of
Purchase Payments. Purchase Payments may be allocated to the Fixed Account
Options and one or more Subaccounts in accordance with instructions from You. We
reserve the right to specify the minimum Purchase Payment that may be allocated
to a Subaccount under the Contract.
DEFERMENT OF PAYMENTS
We may defer making payments from the Fixed Account Options for up to six (6)
months. Interest, subject to state requirements, will be credited during the
deferral period.
SUSPENSION OF PAYMENTS
We may suspend or postpone any payments from the Subaccounts if any of the
following occur:
(a) the NYSE is closed,
(b) trading on the NYSE is restricted,
(c) an emergency exists such that it is not reasonably practical to dispose of
or determine the value of the assets held in a Subaccount, or
(d) the Securities and Exchange Commission, by order, so permits for the
protection of Owners.
Conditions in (b) and (c) will be decided by or in accordance with rules of the
Securities and Exchange Commission.
SUBSTITUTION OF INVESTMENT PORTFOLIOS
If: (a) the shares of the underlying investment portfolios in which the
Subaccounts invest should no longer be available for investment by the Separate
Account; or (b) if further investment in the shares of an investment portfolio
is no longer appropriate in view of the purpose of the Contract, then We may
substitute shares of another underlying investment series, for shares already
purchased, or to be purchased in the future by Purchase Payments under the
Contract. No substitution of securities may take place without prior approval of
the Securities and Exchange Commission and under such requirements as it may
impose.
ACCUMULATION PROVISIONS
SEPARATE ACCOUNT ACCUMULATION VALUE
The Separate Account Accumulation Value under the Contract shall be the sum of
the values of the Accumulation Units held in the Subaccounts for the Owner.
NUMBER OF ACCUMULATION UNITS
For each Subaccount, the number of Accumulation Units is the sum of each
Purchase Payment and transfer allocated to the Subaccount, reduced by premium
taxes, if any:
DIVIDED BY
The Accumulation Unit Value for that Subaccount as of the NYSE business day in
which the Purchase Payment or transfer amount is received.
8
<PAGE>
The number of Accumulation Units will be similarly adjusted for withdrawals,
annuitizations, transfers, Contract Administration Charge and Withdrawal Charge.
Adjustments will be made as of the end of the NYSE business day in which We
receive all requirements for the transaction, as appropriate.
ACCUMULATION UNIT VALUE (AUV)
The AUV of a Subaccount for any NYSE business day is calculated by subtracting
(2) from (1) and dividing the result by (3) where:
(1) is the total value at the end of the given NYSE business day of the assets
attributable to the Accumulation Units of the Subaccount minus the total
liabilities;
(2) is the cumulative unpaid charge for assumption of Expense Risk,
Distribution Expense and Mortality Risk charges (See CHARGES AND
DEDUCTIONS);
(3) is the number of Accumulation Units outstanding at the end of the given
NYSE business day.
FIXED ACCOUNT ACCUMULATION VALUE
Under a Contract, the Fixed Account Accumulation Value shall be the sum of all
monies allocated or transferred to the Fixed Account Option(s), reduced by any
applicable premium taxes, plus all interest credited on the Fixed Account
Option(s) during the period that the Contract has been in effect. This amount
shall be adjusted for withdrawals, annuitizations, transfers, Contract
Administration Charge and Withdrawal Charge. The Fixed Account Accumulation
Value shall not be less than the minimum values required by law in the state
where this Contract is issued.
FIXED ACCOUNT GUARANTEE PERIOD OPTIONS AND INTEREST CREDITING
Any amounts allocated to the Fixed Account Options from the first Purchase
Payment will earn interest at the Initial Interest Rate for the Fixed Account
Option(s) selected for the duration of the Guarantee Period.
Subsequent Purchase Payments allocated to the Fixed Account Options will earn
interest at the Current Interest Rate for the Fixed Account Option(s) selected
for the duration of the Guarantee Period.
Transfers to the Fixed Account Options from the Subaccounts and amounts renewed
into the Fixed Account Options will earn interest at the Renewal Interest Rate
for the Fixed Account Option(s) selected for the duration of the Guarantee
Period.
For thirty (30) days following the date of expiration of a Guarantee Period, You
may renew for the same or any other Guarantee Period at the Renewal Interest
Rate or You may transfer all or a portion of the amount to the Subaccounts. If
the Owner does not specify a Guarantee Period at the time of renewal, We will
select the same Guarantee Period as has just expired, crediting the Contract
with the Renewal Interest Rate in effect on the date of expiration of the
Guarantee Period, so long as such Guarantee Period does not extend beyond the
Annuity Date. If a renewal occurs within one year of the latest Annuity Date,
We will credit interest up to the Annuity Date at the Renewal Interest Rate for
the One Year Fixed Account Option.
9
<PAGE>
If You are participating in the DCA program, Purchase Payments may be allocated
to a DCA Fixed Account Option or the 1-Year Fixed Account Option. Upon
termination of the DCA program, any amounts remaining in the DCA Fixed Account
Options will be automatically transferred to the 1-Year Fixed Account Option.
Such amounts will earn interest at the Renewal Interest Rate for the 1-Year
Fixed Account Option.
MARKET VALUE ADJUSTMENT (MVA)
Any payments and values based on a multi-year Fixed Account Option may be
subject to a MVA, the operation of which may result in upward or downward
adjustments in the Contract Value, if withdrawn, transferred or annuitized prior
to the end of the respective Guarantee Period. The MVA will be calculated by
multiplying the amount withdrawn, transferred or annuitized by the formula
described below:
N/12
{(1 + I)/(1+J+0.0050)} -1
I = The interest rate currently in effect for that Guarantee Period.
J = The Initial Interest Rate available for the Guarantee Period equal to the
number of years (rounded up to an integer) remaining in the current Guarantee
Period at the time of withdrawal, transfer or annuitization. In the
determination of J, if the Company currently does not offer the applicable
Guarantee Period, then the rate will be determined by linear interpolation of
the Initial Interest Rate for the nearest two Guarantee Periods that are
available.
N = The number of full months remaining in the current Guarantee Period at the
time the withdrawal or annuitization request is processed.
If a Withdrawal Charge is applied to a withdrawal, then the MVA will be applied
to the withdrawal amount net of the Withdrawal Charge.
There will be no MVA on withdrawals from the Fixed Account Options in the
following situations: (1) to pay a Death Benefit paid upon death of the Owner;
(2) on amounts withdrawn to pay fees or charges; (3) on amounts withdrawn from
the Fixed Account Options within thirty (30) days after the end of the Guarantee
Period; (4) on annuitizations on the Latest Annuity Date; (5) on amounts
withdrawn from the DCA Fixed Account Options or the 1-Year Fixed Account Option.
CHARGES AND DEDUCTIONS
We will deduct the following charges from the Contract:
CONTRACT ADMINISTRATION CHARGE
The charge specified on the Contract Data Page will be deducted on each Contract
anniversary that occurs on or prior to the Annuity Date. It will also be
deducted when the Contract Value is withdrawn in full if withdrawal is not on
the Contract anniversary. We reserve the right to assess a charge on a class
basis which is less than the charge specified on the Contract Data Page.
WITHDRAWAL CHARGE
This charge may be deducted upon withdrawal of the Contract Value, in whole or
in part. See WITHDRAWAL PROVISIONS.
10
<PAGE>
EXPENSE RISK CHARGE
On an annual basis this charge, as shown on the Contract Data Page, equals a
percentage of the average daily total net asset value of the Subaccounts to
which Your Purchase Payments are allocated. This charge is to compensate Us for
assuming the expense risks under the Contract.
DISTRIBUTION EXPENSE CHARGE
On an annual basis this charge, as shown on the Contract Data Page, equals a
percentage of the average daily total net asset value of the Subaccounts to
which Your Purchase Payments are allocated. This charge is to compensate Us for
all distribution expenses associated with the Contract.
MORTALITY RISK CHARGE
On an annual basis this charge, as shown on the Contract Data Page, equals a
percentage of the average daily total net asset value of the Subaccounts to
which Your Purchase Payments are allocated. This charge is to compensate Us for
assuming the mortality risks under the Contract.
TRANSFER PROVISION
Prior to the Annuity Date, You may transfer all or part of Your Contract Value
to any of the Subaccounts or the Fixed Account Options, subject to certain
restrictions. We reserve the right to charge a fee for transfers if the number
of transfers exceeds the limit specified by Us.
TRANSFERS OF ACCUMULATION AND ANNUITY UNITS BETWEEN SUBACCOUNTS
Prior to the Annuity Date, You may transfer all or a portion of Your Contract
Value from one Subaccount to another Subaccount. A transfer will result in the
purchase of Accumulation Units in a Subaccount and the redemption of
Accumulation Units in the other Subaccount. Transfers will be effected at the
end of the NYSE business day in which We receive Your completed request for the
transfer.
After the Annuity Date, You may transfer all or a portion of Your Contract Value
from one Subaccount to another Subaccount. A transfer will result in the
purchase of Annuity Units in a Subaccount and the redemption of Annuity Units in
the other Subaccount. Transfers will be effected at the end of the NYSE
business day in which We receive Your completed request for the transfer.
The minimum amount that can be transferred between Subaccounts and the amount
that can remain in the Subaccount are subject to Company limits.
TRANSFERS OF ACCUMULATION UNITS TO AND FROM THE FIXED ACCOUNT
Prior to the Annuity Date, You may transfer all or any part of Your Contract
Value from the Subaccount(s) to any Fixed Account Option(s) other than the DCA
Fixed Account Options or from the Fixed Account Option(s) to the Subaccount(s)
of the Contract.
After the Annuity Date, transfers into or out of the Fixed Account Options are
not allowed.
11
<PAGE>
WITHDRAWAL PROVISION
On or before the Annuity Date and while the Owner is living, You may withdraw
all or part of Your Contract Value under this Contract by informing Us at Our
Annuity Service Center. For a full withdrawal, this Contract must be returned
to Our Annuity Service Center.
Without a written notice to the contrary, withdrawals will be deducted from the
Contract Value in proportion to their allocation among the Fixed Account Options
and the Subaccounts. Withdrawals will be based on values at the end of the NYSE
business day in which the request for withdrawal and the Contract (in the case
of a full withdrawal), are received at the Annuity Service Center. Unless the
SUSPENSION OF PAYMENTS or DEFERMENT OF PAYMENTS sections are in effect, payment
of withdrawals will be made within seven calendar days.
WITHDRAWAL CHARGE
Withdrawals of all or a portion of the Contract Value may be subject to a
Withdrawal Charge as shown in the chart below. The Withdrawal Charge applied to
any withdrawal will depend on how long the Purchase Payment to which the
withdrawal is attributed has been in the Contract. No Withdrawal Charge is
made on an amount withdrawn which is considered to be a withdrawal of penalty-
free earnings.
For the purpose of determining the Withdrawal Charge, a withdrawal will be
attributed to amounts in the following order: (1) penalty-free earnings in the
Contract; (2) Purchase Payments which are both no longer subject to the
Withdrawal Charge and are not yet withdrawn; (3) any remaining Penalty-Free
Withdrawal amount (except in the case of a full surrender); and (4) Purchase
Payments subject to a Withdrawal Charge. Purchase Payments, when withdrawn, are
assumed to be withdrawn on a first-in-first-out (FIFO) basis. You will not
receive the benefit of a Penalty-Free Withdrawal in a full surrender.
<TABLE>
<CAPTION>
Number of Years Elapsed Withdrawal Charge as a
Between Purchase Payment Contribution Percentage of Withdrawn
and Date of Withdrawal Purchase Payment
- --------------------------------------------------------------------------------
<S> <C>
0 9%
1 8%
2 7%
3 6%
4 6%
5 5%
6 4%
7 3%
8 2%
9+ 0%
</TABLE>
The Withdrawal Charge will be assessed against the Subaccounts and the Fixed
Account Options in the same proportion as the remaining Contract Value is
allocated unless You request that the withdrawal come from a particular Fixed
Account Option or Subaccount. If the remaining
12
<PAGE>
Contract Value is insufficient to cover the Withdrawal Charge, any remaining
balance will be deducted from the withdrawal amount requested.
PENALTY-FREE WITHDRAWALS
As of any day, You may make a withdrawal of up to the Penalty-Free Withdrawal
amount for that day without incurring a Withdrawal Charge. Any Penalty-Free
Withdrawal made in excess of penalty-free earnings in the Contract is considered
to be a withdrawal of future penalty-free earnings and is therefore not a
withdrawal of the Total Invested Amount. On any day, penalty-free earnings in
the Contract are calculated as the Contract Value at the end of that day less
the Total Invested Amount.
During the first Contract Year, the Penalty-Free Withdrawal amount is equal to
the penalty-free earnings in the Contract as of the date of withdrawal.
Alternatively, during the first Contract Year, You may make withdrawals of the
Penalty-Free Withdrawal amount through the Systematic Withdrawal Program. The
Penalty-Free Withdrawal amount as of any systematic withdrawal date is 10% of
the Total Invested Amount less any withdrawals already made during the Contract
Year.
After the first Contract Year, the maximum Penalty-Free Withdrawal amount as of
the date of the withdrawal is the greater of:
(a) penalty-free earnings in the Contract as of that date; or
(b) 10% of the Total Invested Amount on deposit for at least one year, less
any withdrawals already made during the year.
Although amounts withdrawn free of a Withdrawal Charge may reduce principal,
they do not reduce the Total Invested Amount for purposes of calculating the
Withdrawal Charge or for the purposes of calculating penalty-free earnings in
the Contract. As a result, You will not receive the benefit of a Penalty-Free
Withdrawal in a full surrender.
SYSTEMATIC WITHDRAWAL PROGRAM
Prior to the Annuity Date, You may elect to participate in the Systematic
Withdrawal Program by informing Us at Our Annuity Service Center. The
Systematic Withdrawal Program allows You to make automatic withdrawals from your
account monthly, quarterly, semiannually or annually. The minimum systematic
withdrawal amount is $250 per withdrawal. Any amount withdrawn through the
Systematic Withdrawal Program may be subject to a Withdrawal Charge and a Market
Value Adjustment as discussed in the WITHDRAWAL CHARGE, PENALTY-FREE WITHDRAWALS
and MARKET VALUE ADJUSTMENT provisions. You may terminate Your participation in
the Systematic Withdrawal Program at any time by sending a written request to
Us.
Systematic withdrawals will be deducted from the Penalty-Free Withdrawal amount
available each Contract Year.
13
<PAGE>
GENERAL PROVISIONS
ENTIRE CONTRACT
The entire contract between You and Us consists of the Application as completed
by You at the time of purchase, this Contract and any attached endorsement(s).
An agent cannot change the terms or conditions of this contract. Any change
must be in writing and approved by Us. Only Our President, Secretary, or one of
Our Vice-Presidents can give Our approval.
CHANGE OF ANNUITANT
If the Owner is an individual, the Owner may change the Annuitant at any time
prior to the Annuity Date. To make a change, the Owner must send a written
notice to Us at least 30 days before the Annuity Date. If the Owner is not an
individual, the Owner may not change the Annuitant.
DEATH OF ANNUITANT
If the Owner and Annuitant are different and the Annuitant dies before the
Annuity Date, the Owner becomes the Annuitant until such time as the Owner
elects a new Annuitant. If there are Joint Annuitants, upon the death of any
Annuitant prior to the Annuity Date, the Owner may elect a new Joint Annuitant.
However, if the Owner is a non-natural person, We will treat the death of any
Annuitant as the death of the "primary Annuitant" and as the death of the Owner,
see DEATH PROVISIONS.
MISSTATEMENT OF AGE OR SEX
If the Age or sex of any Annuitant has been misstated, future annuity payments
will be adjusted using the correct Age and sex, according to Our rates in effect
on the date that annuity payments were determined. Any overpayment from the
Fixed Account Options, plus interest at the rate of 4% per year, will be
deducted from the next payment(s) due. Any underpayment from the Fixed Account
Options, plus interest at the rate of 4% per year, will be paid in full with the
next payment due. Any overpayment from the Subaccounts will be deducted from
the next payment(s) due. Any underpayment from the Subaccounts will be paid in
full with the next payment due.
PROOF OF AGE, SEX, OR SURVIVAL
The Company may require satisfactory proof of correct Age or sex at any time.
If any payment under this Contract depends on the Annuitant being alive, the
Company may require satisfactory proof of survival.
CONFORMITY WITH STATE LAWS
The provisions of this Contract will be interpreted by the laws of the state in
which the Application Form was signed or such state as is required by law. Any
provision which, on the Contract Date, is in conflict with the law of such state
is amended to conform to the minimum requirements of such law.
CHANGES IN LAW
If the laws governing this Contract or the taxation of benefits under the
Contract change, We reserve the right to amend this Contract to comply with
these changes.
14
<PAGE>
ASSIGNMENT
You may assign this Contract before the Annuity Date, but We will not be bound
by an assignment unless it is received by Us in writing. Your rights and those
of any other person referred to in this Contract will be subject to the
assignment. Certain assignments may be taxable. We do not assume any
responsibility for the validity or tax consequences of any assignment.
CLAIMS OF CREDITORS
To the extent permitted by law, no right or proceeds payable under this Contract
will be subject to claims of creditors or legal process.
PREMIUM TAXES AND OTHER TAXES
The Company may deduct from Your Contract Value any premium tax or other taxes
payable to a state or other government entity, if applicable. Should We advance
any amount so due, We are not waiving any right to collect such amount at a
later date. The Company will deduct any withholding taxes required by
applicable law.
WRITTEN NOTICE
Any notice We send to You will be sent to Your address shown in the Application
unless You request otherwise. Any written request or notice to Us must be sent
to Our Annuity Service Center, as specified on the Contract Data Page.
PERIODIC REPORTS
During each Contract Year, We will send You quarterly statements of the account
activity of the Contract as well as confirmation reports after each financial
transaction. The statement will include all transactions which have occurred
during the quarterly accounting period shown on the statement.
INCONTESTABILITY
This Contract will be incontestable from the Contract Date.
NONPARTICIPATING
This Contract does not share in Our surplus.
DEATH PROVISIONS
Notwithstanding any provision of this Contract to the contrary, all payments of
benefits under this Contract will be made in a manner that satisfies IRC Section
72(s), as amended from time to time. If the Contract is owned by a trust or
other non-natural person, We will treat the death of the Annuitant as the death
of the "primary Annuitant", as defined in IRC Section 72(s)(6), and as the death
of any Owner.
DEATH OF OWNER BEFORE THE ANNUITY DATE.
We will pay a death benefit to the Beneficiary upon Our receiving: (a) due
proof that the Owner died before the Annuity Date; and (b) an election form
selecting the death benefit option. If no election form is received within 60
days of our receipt of due proof of death, the death benefit
15
<PAGE>
will be paid in accordance with death benefit option 1 below. The Beneficiary
must select one of the following death benefit options:
1. Immediately collect the death benefit in a lump sum payment. If
a lump sum payment is elected, payment will be in accordance with
any applicable laws and regulations governing payments and death;
or
2. Collect the death benefit in the form of one of the Annuity
Payment Options. The payments must be over the life of the
Beneficiary or over a period not extending beyond the life
expectancy of the Beneficiary. Payments under this death benefit
option must commence within one year after the Owner's death,
otherwise, the death benefit will be paid in accordance with
death benefit option 1; or
3. If the Beneficiary is the Owner's spouse, the Beneficiary may
elect to become the Owner and continue the Contract in force,
however, no death benefit is paid. Upon the new Owner's
subsequent death, the entire interest must be distributed
immediately.
In any event, the entire interest in the Contract will be distributed within
five years from the date of death of the Owner.
DUE PROOF OF DEATH
Due Proof of Death means:
1. a certified copy of a death certificate; or
2. a certified copy of a decree of a court of competent jurisdiction
as to the finding of death; or
3. a written statement by a medical doctor who attended the deceased
Owner at the time of death; or
4. any other proof satisfactory to Us.
AMOUNT OF DEATH BENEFIT
If You are age 80 or younger at issue, the amount of the death benefit is equal
to the greatest of:
1. the Contract Value at the end of the NYSE business day during which
We receive, at Our Annuity Service Center, due proof of the Owner's death
and an election of the type of payment to be made; or
2. Purchase Payments, reduced for partial withdrawals in the same
proportion that the Contract Value was reduced on the date of any such
withdrawals, compounded until the date of death at 4% interest; or
3. the Contract Value at the seventh Contract anniversary, plus any
subsequent Purchase Payments, reduced for subsequent partial withdrawals in
the same proportion that the Contract value was reduced on the date of any
such withdrawals subsequent to that Contract anniversary, compounded until
the date of death at 4% interest; or
16
<PAGE>
4. the maximum anniversary value prior to the Owner's attainment of
age 81. The maximum anniversary value is equal to the greatest anniversary
value attained from the following:
As of the date of receipt of due proof of death and an election of the type
of payment to be made at our Annuity Service Center, We will calculate an
anniversary value for each Contract anniversary prior to the Owner's 81st
birthday. The anniversary value is the Contract Value at each Contract
anniversary increased by any Purchase Payments, reduced for partial
withdrawals in the same proportion that the Contract Value was reduced on the
date of any such withdrawals since that anniversary.
If the Owner was between age 70 and 80 inclusive at issue, both (2) and (3)
above will be compounded at 3%, rather than 4%. If the death benefit is paid on
the death of an Owner who was not originally named in the Application Form and
was age 70 or older on the Contract Date, both (2) and (3) above will be
compounded at 3%, rather than 4%.
If You are age 81 or older at issue, the death benefit will be the greater of:
1. the Contract Value at the end of the NYSE business day during which We
receive, at Our Annuity Service Center, due proof of the Owner's death and
an election of the type of payment to be made; or
2. Purchase Payments reduced for partial withdrawals in the same proportion
that the Contract value was reduced on the date of any such withdrawals,
compounded until the date of death at 3% interest.
DEATH OF OWNER OR ANNUITANT ON OR AFTER THE ANNUITY DATE.
If the Owner or Annuitant dies on or after the Annuity Date and before the
entire interest in the Contract has been distributed, We will pay the remaining
portion of the interest of the Contract as under the annuity payment option
being used on the date of death. For further information pertaining to death of
the Annuitant, see ANNUITY PAYMENT OPTIONS.
BENEFICIARY
The Beneficiary is as designated on the Application Form unless later changed by
the Owner. While: (a) the Owner is living; and (b) before the Annuity Date,
the Owner may change the Beneficiary by written notice in a form satisfactory to
Us. The change will take effect on the date We record the proper notice subject
to any payments We have made. If two or more persons are named: (a) those
surviving the Owner will share equally unless otherwise stated; and (b) the
Beneficiaries must elect to receive their respective portions of the death
benefit according to the options listed under DEATH OF OWNER BEFORE THE ANNUITY
DATE. If the Annuitant survives the Owner, and there are no surviving
Beneficiaries, the Annuitant will be deemed the Beneficiary.
Joint Owners, if applicable, shall be each other's primary Beneficiary. Joint
Annuitants, if any, when the Owner is a non-natural person, shall be each
other's primary Beneficiary. Any other Beneficiary designated on the
Application Form will be treated as a contingent Beneficiary.
17
<PAGE>
If the Owner is also the Annuitant and there are no surviving Beneficiaries at
the death of the Owner, the death benefit will be paid to the estate of the
Owner in accordance with option 1, under DEATH OF OWNER BEFORE THE ANNUITY DATE.
ANNUITY PROVISIONS
ANNUITY DATE
The Owner selects an Annuity Date (the date on which annuity payments are to
begin) at the time of application. The Owner may change the Annuity Date at any
time, at least seven days prior to the Annuity Date, by written notice to the
Company at its Annuity Service Center. The Annuity Date must always be the
first day of the calendar month and must be at least two years after the
Contract Date, but not beyond the later of the Owner's 90th birthday or ten
years after the Contract Date. If the Owner is a non-natural person, the latest
annuity date is the later of the Annuitant's 90th birthday or ten years after
the Contract Date. If no Annuity Date is selected, the Annuity Date will be the
latest Annuity Date, as set by the Company.
PAYMENTS TO OWNER
Unless You request otherwise, We will make annuity payments to You. If You want
the annuity payments to be made to some other Payee, We will make such payments
subject to receipt of a written request filed at the Annuity Service Center no
later than thirty (30) days before the date of the first annuity payment.
Any such request is subject to the rights of any assignee. No payments
available to or being paid to the Payee while the Annuitant is alive can be
transferred, commuted, anticipated or encumbered.
FIXED ANNUITY PAYMENTS
If a Fixed Annuity payment option has been elected, the proceeds payable under
this Contract less any applicable premium taxes, shall be applied to the payment
of the Fixed Annuity payment option elected at rates which are at least equal to
the annuity rates based upon the applicable tables in the Contract. In no event
will the Fixed Annuity payments be changed once they begin.
AMOUNT OF FIXED ANNUITY PAYMENTS
The amount of each Fixed Annuity payment will be determined by applying the
portion of the Contract Value allocated to Fixed Annuity payments less any
applicable premium taxes to the annuity table applicable to the Fixed Annuity
payment option chosen.
AMOUNT OF VARIABLE ANNUITY PAYMENTS
(a) FIRST VARIABLE ANNUITY PAYMENT: The dollar amount of the first Variable
Annuity payment will be determined by applying the portion of the Contract
Value allocated to the Subaccount, less any applicable premium taxes, to
the annuity table applicable to the Variable Annuity payment option chosen.
If the Contract Value is allocated to more than one Subaccount, the value
of Your interest in each Subaccount is applied separately to the Variable
Annuity payment option table to determine the amount of the first annuity
payment attributable to each Subaccount.
(b) NUMBER OF VARIABLE ANNUITY UNITS: The number of Annuity Units for each
applicable Subaccount is the amount of the first annuity payment
attributable to that
18
<PAGE>
Subaccount divided by the value of the applicable Annuity Unit for that
Subaccount as of the Annuity Date. The number will not change as a result
of investment experience.
(c) VALUE OF EACH VARIABLE ANNUITY UNIT: The initial value of an Annuity Unit
of each Subaccount was set at $10 when the Subaccounts were established.
The value may increase or decrease from one month to the next. For any
month, the value of an Annuity Unit of a particular Subaccount is the value
of that Annuity Unit as of the last NYSE business day of the preceding
month, multiplied by the Net Investment Factor for that Subaccount for the
last NYSE business day of the current month.
The Net Investment Factor for any Subaccount for a certain month is determined
by dividing (1) by (2) where:
(1) the Accumulation Unit Value of the Subaccount determined as of
the last business day at the end of that month;
(2) the Accumulation Unit value of the Subaccount determined as of
the last business day at the end of the preceding month.
The result is then multiplied by a factor that neutralizes the assumed
investment rate of 3.5%.
(d) SUBSEQUENT VARIABLE ANNUITY PAYMENTS: After the first Variable Annuity
payment, payments will vary in amount according to the investment
performance of the applicable Subaccount(s) to which your Purchase Payments
are allocated. The amount may change from month to month. The amount of
each subsequent payment for each Subaccount is:
The number of Annuity Units for each Subaccount as determined for the first
annuity payment
MULTIPLIED BY
The value of an Annuity Unit for that Subaccount at the end of the month
immediately preceding the month in which payment is due.
We guarantee that the amount of each Variable Annuity payment will not be
affected by variations in expenses or mortality experience.
19
<PAGE>
ANNUITY PAYMENT OPTIONS
During the Annuitant's life, upon written election and the return of this
Contract to the Company at its Annuity Service Center, the Contract Value may be
applied to provide one of the following options or any annuity payment option
that is mutually agreeable. After two years from the Contract Date, and prior
to the Annuity Date, You can choose one of the options described below. If no
option has been elected by the Annuity Date, You will automatically receive
Option 4 below with 120 monthly payments guaranteed.
OPTIONS 1 & 1v - LIFE ANNUITY, LIFETIME MONTHLY PAYMENTS GUARANTEED
Payments payable to a Payee during the lifetime of the Annuitant. No further
payments are payable after the death of the Annuitant.
OPTIONS 2 & 2v - JOINT AND SURVIVOR LIFE ANNUITY
Payments payable to the Payee during the lifetime of the Annuitant and during
the lifetime of a designated second person. No further payments are payable
after the deaths of both the Annuitant and the designated second person.
OPTIONS 3 & 3v - JOINT AND SURVIVOR LIFE ANNUITY - 120 OR 240 MONTHLY PAYMENTS
GUARANTEED
Payments are payable to the Payee during the lifetime of the Annuitant and
during the lifetime of a designated second person. If, at the death of the
survivor, payments have been made for less than 120 or 240 monthly periods, the
remaining guaranteed annuity payments will be continued to the Beneficiary.
OPTIONS 4 & 4v - LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED
Payments payable to the Payee during the lifetime of the Annuitant. If, at the
death of the Annuitant, payments have been made for less than the 120 or 240
monthly periods, as selected at the time of annuitization, the remaining
guaranteed annuity payments will be continued to the Beneficiary.
OPTIONS 5 & 5v - FIXED PAYMENTS FOR A SPECIFIED PERIOD CERTAIN
Payments payable to the Payee for any specified period of time for five (5)
years or more, but not exceeding thirty (30) years, as selected at the time of
annuitization. The selection must be made for full twelve month periods. In
the event of death of the Annuitant, any remaining guaranteed annuity payments
will be continued to the Beneficiary.
20
<PAGE>
FIXED ANNUITY PAYMENT OPTIONS TABLE
BASIS OF COMPUTATION
The actuarial basis for the Table of Annuity Rates is the 1983a Annuity
Mortality Table with projection and a guaranteed interest rate of 3%. The
mortality table is projected using Projection Scale G factors, assuming
annuitization in the year 2000. The Fixed Annuity Payment Options Table does
not included any applicable premium tax.
OPTIONS 1 & 4 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
<TABLE>
<CAPTION>
OPTION 1 OPTION 4 OPTION 4
LIFE ANNUITY LIFE ANNUITY
AGE OF (W/120 PAYMENTS (W/240 PAYMENTS
ANNUITANT LIFE ANNUITY GUARANTEED) GUARANTEED)
MALE FEMALE MALE FEMALE MALE FEMALE
<S> <C> <C> <C> <C> <C> <C>
55 4.23 3.84 4.19 3.82 4.05 3.76
56 4.32 3.91 4.27 3.88 4.11 3.81
57 4.41 3.98 4.35 3.95 4.17 3.87
58 4.51 4.05 4.44 4.02 4.24 3.93
59 4.61 4.13 4.54 4.10 4.31 4.00
60 4.72 4.22 4.64 4.18 4.37 4.06
61 4.84 4.31 4.74 4.27 4.44 4.13
62 4.96 4.40 4.85 4.36 4.51 4.20
63 5.10 4.51 4.97 4.45 4.58 4.27
64 5.24 4.62 5.10 4.55 4.65 4.35
65 5.40 4.73 5.22 4.66 4.72 4.42
66 5.56 4.86 5.36 4.78 4.79 4.50
67 5.74 4.99 5.50 4.90 4.86 4.57
68 5.93 5.14 5.65 5.02 4.92 4.65
69 6.13 5.29 5.80 5.16 4.99 4.73
70 6.35 5.46 5.96 5.30 5.05 4.80
71 6.58 5.64 6.13 5.46 5.10 4.88
72 6.82 5.84 6.29 5.62 5.16 4.95
73 7.08 6.05 6.47 5.78 5.20 5.02
74 7.36 6.28 6.64 5.96 5.25 5.08
75 7.66 6.53 6.82 6.14 5.29 5.14
76 7.98 6.80 7.00 6.33 5.33 5.19
77 8.33 7.09 7.19 6.53 5.36 5.24
78 8.69 7.41 7.37 6.73 5.39 5.29
79 9.09 7.75 7.55 6.94 5.41 5.33
80 9.51 8.11 7.73 7.14 5.43 5.36
81 9.97 8.51 7.91 7.35 5.45 5.39
82 10.45 8.94 8.08 7.55 5.47 5.42
83 10.97 9.41 8.24 7.76 5.48 5.44
84 11.52 9.92 8.40 7.95 5.49 5.46
85 12.10 10.47 8.54 8.13 5.50 5.48
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
OPTION 2 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
JOINT & 100% SURVIVOR LIFE ANNUITY
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
55 60 65 70 75 80 85
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.54 3.69 3.84 3.96 4.06 4.13 4.17
60 3.63 3.83 4.04 4.23 4.39 4.52 4.60
65 3.70 3.95 4.23 4.51 4.78 5.00 5.16
70 3.75 4.04 4.39 4.78 5.18 5.56 5.85
75 3.78 4.11 4.51 5.01 5.57 6.14 6.65
80 3.81 4.15 4.60 5.18 5.89 6.70 7.52
85 3.82 4.18 4.66 5.30 6.14 7.18 8.35
<CAPTION>
OPTION 3 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT & 100% SURVIVOR LIFE ANNUITY (W/120 PAYMENTS GUARANTEED)
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
55 60 65 70 75 80 85
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.54 3.69 3.83 3.96 4.05 4.12 4.16
60 3.63 3.83 4.03 4.22 4.38 4.50 4.57
65 3.70 3.95 4.22 4.50 4.76 4.97 5.10
70 3.75 4.04 4.38 4.76 5.15 5.48 5.72
75 3.78 4.10 4.50 4.98 5.50 6.00 6.40
80 3.80 4.14 4.58 5.13 5.78 6.46 7.04
85 3.81 4.16 4.62 5.22 5.97 6.80 7.55
<CAPTION>
OPTION 3 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT & 100% SURVIVOR LIFE ANNUITY (W/240 PAYMENTS GUARANTEED)
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
55 60 65 70 75 80 85
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.53 3.68 3.81 3.92 3.99 4.03 4.04
60 3.62 3.81 4.00 4.16 4.27 4.34 4.37
65 3.68 3.92 4.16 4.39 4.56 4.66 4.71
70 3.72 3.99 4.29 4.58 4.81 4.96 5.03
75 3.74 4.03 4.36 4.70 4.99 5.17 5.26
80 3.75 4.05 4.40 4.77 5.09 5.30 5.40
85 3.76 4.06 4.42 4.80 5.13 5.35 5.46
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
FIXED PAYMENT FOR A SPECIFIED PERIOD
NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY
OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT
<S> <C> <C> <C> <C> <C> <C> <C>
10 9.61 17 6.23 24 4.84
11 8.86 18 5.96 25 4.71
5 17.91 12 8.24 19 5.73 26 4.59
6 15.14 13 7.71 20 5.51 27 4.47
7 13.16 14 7.26 21 5.32 28 4.37
8 11.68 15 6.87 22 5.15 29 4.27
9 10.53 16 6.53 23 4.99 30 4.18
</TABLE>
23
<PAGE>
VARIABLE ANNUITY PAYMENT OPTIONS TABLE
BASIS OF COMPUTATION
The actuarial basis for the Table of Annuity Rates is the 1983a Annuity
Mortality Table with projection and an effective annual Assumed Investment Rate
of 3.5%. The mortality table is projected using Projection Scale G factors,
assuming annuitization in the year 2000. The Variable Annuity Payment Options
Table does not include any applicable premium tax.
OPTIONS 1v& 4v - TABLE OF MONTHLY INSTALLMENTS PER $1,000
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
<TABLE>
<CAPTION>
OPTION 1v OPTION 4v OPTION 4v
LIFE ANNUITY LIFE ANNUITY
AGE OF (W/120 PAYMENTS (W/240 PAYMENTS
ANNUITANT LIFE ANNUITY GUARANTEED) GUARANTEED)
MALE FEMALE MALE FEMALE MALE FEMALE
<S> <C> <C> <C> <C> <C> <C>
55 4.53 4.13 4.48 4.11 4.33 4.05
56 4.62 4.20 4.56 4.18 4.39 4.10
57 4.71 4.27 4.64 4.24 4.45 4.16
58 4.80 4.34 4.73 4.31 4.52 4.22
59 4.90 4.42 4.82 4.39 4.58 4.28
60 5.01 4.51 4.92 4.47 4.65 4.34
61 5.13 4.60 5.03 4.55 4.71 4.41
62 5.26 4.69 5.14 4.64 4.78 4.48
63 5.39 4.80 5.25 4.74 4.85 4.55
64 5.54 4.91 5.38 4.84 4.92 4.62
65 5.69 5.02 5.51 4.94 4.99 4.69
66 5.86 5.15 5.64 5.06 5.05 4.77
67 6.03 5.28 5.78 5.18 5.12 4.84
68 6.22 5.43 5.93 5.30 5.18 4.92
69 6.43 5.58 6.08 5.44 5.24 4.99
70 6.64 5.75 6.23 5.58 5.30 5.06
71 6.87 5.93 6.40 5.73 5.36 5.14
72 7.12 6.13 6.56 5.89 5.41 5.21
73 7.38 6.34 6.73 6.06 5.46 5.27
74 7.66 6.57 6.91 6.23 5.50 5.33
75 7.96 6.82 7.09 6.41 5.54 5.39
76 8.28 7.09 7.27 6.60 5.57 5.44
77 8.63 7.38 7.45 6.79 5.61 5.49
78 9.00 7.70 7.63 6.99 5.63 5.54
79 9.40 8.04 7.81 7.19 5.66 5.58
80 9.82 8.41 7.98 7.40 5.68 5.61
81 10.28 8.81 8.16 7.60 5.70 5.64
82 10.76 9.24 8.32 7.81 5.71 5.66
83 11.28 9.71 8.48 8.00 5.72 5.69
84 11.83 10.23 8.64 8.19 5.73 5.70
85 12.42 10.78 8.78 8.38 5.74 5.72
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
OPTION 2v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
JOINT & 100% SURVIVOR LIFE ANNUITY
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
55 60 65 70 75 80 85
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.83 3.98 4.12 4.24 4.34 4.42 4.46
60 3.92 4.11 4.32 4.51 4.67 4.80 4.89
65 3.99 4.23 4.50 4.79 5.05 5.28 5.44
70 4.04 4.33 4.67 5.05 5.46 5.83 6.13
75 4.07 4.39 4.79 5.28 5.84 6.41 6.93
80 4.10 4.44 4.88 5.45 6.16 6.97 7.79
85 4.11 4.47 4.94 5.57 6.41 7.45 8.61
<CAPTION>
OPTION 3v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT AND 100% SURVIVOR LIFE ANNUITY (W/120 PAYMENTS GUARANTEED)
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
55 60 65 70 75 80 85
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.83 3.98 4.12 4.24 4.34 4.40 4.45
60 3.92 4.11 4.31 4.50 4.66 4.78 4.86
65 3.99 4.23 4.50 4.78 5.03 5.24 5.38
70 4.04 4.32 4.66 5.03 5.41 5.75 5.99
75 4.07 4.38 4.78 5.25 5.77 6.26 6.66
80 4.09 4.43 4.86 5.40 6.05 6.72 7.29
85 4.10 4.45 4.90 5.50 6.24 7.05 7.80
<CAPTION>
OPTION 3v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT & 100% SURVIVOR LIFE ANNUITY (W/240 PAYMENTS GUARANTEED)
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
55 60 65 70 75 80 85
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.82 3.97 4.10 4.20 4.27 4.31 4.33
60 3.91 4.09 4.28 4.44 4.55 4.61 4.64
65 3.97 4.20 4.44 4.66 4.83 4.93 4.97
70 4.01 4.27 4.56 4.84 5.07 5.21 5.28
75 4.03 4.31 4.64 4.97 5.25 5.42 5.51
80 4.04 4.33 4.67 5.03 5.34 5.55 5.65
85 4.05 4.34 4.69 5.06 5.38 5.60 5.70
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
OPTION 5v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
PAYMENTS FOR A SPECIFIED PERIOD
NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY
OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT
<S> <C> <C> <C> <C> <C> <C> <C>
10 9.83 17 6.47 24 5.09
11 9.09 18 6.20 25 4.96
5 18.12 12 8.46 19 5.97 26 4.84
6 15.35 13 7.94 20 5.75 27 4.73
7 13.38 14 7.49 21 5.56 28 4.63
8 11.90 15 7.10 22 5.39 29 4.53
9 10.75 16 6.76 23 5.24 30 4.45
</TABLE>
26
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
A STOCK COMPANY LOS ANGELES, CALIFORNIA
INDIVIDUAL FIXED AND
VARIABLE ANNUITY CONTRACT
Nonparticipating
27
<PAGE>
<TABLE>
<S><C>
Anchor National Life New Business Documents New Business Documents
Insurance Company with checks: without checks: [LOGO]
1 Sun America Center P. O. Box 100330 P. O. Box 54299
Los Angeles, CA 90067-6022 Pasadena, CA 91189-0001 Los Angeles, CA 90054-0299
- ----------------------------------------------------------------------------------------------------------------------------------
PARTICIPANT ENROLLMENT FORM ANG-534 (11/98)
DO NOT USE HIGHLIGHTER. Please print or type.
A. PARTICIPANT / /Mr. / /Mrs. / /Ms. / /Miss / /Dr. / /Sr. / /Jr.
---------------------------------------------------------------------------------------------------------
LAST NAME/CUSTODIAN/TRUST/PLAN NAME FIRST NAME MIDDLE INITIAL
---------------------------------------------------------------------------------------------------------
STREET ADDRESS CITY STATE ZIP CODE
MO DAY YR. / /M / /F ( )
---------------------------- --------------- --------------------------- --------------------
DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER
JOINT ---------------------------------------------------------------------------------------------------------
PARTICIPANT LAST NAME FIRST NAME MIDDLE INITIAL
(If applicable must MO DAY YR. / /M / /F
be spouse of Participant)-------------------- --------------- ------------------------------------------------------------
DATE OF BIRTH SEX SOCIAL SECURITY OR TAX ID NUMBER
B. ANNUITANT / /Mr. / /Mrs. / /Ms. / /Miss / /Dr. / /Sr. / /Jr.
(Complete only if ---------------------------------------------------------------------------------------------------------
different from LAST NAME FIRST NAME MIDDLE INITIAL
Participant)
---------------------------------------------------------------------------------------------------------
STREET ADDRESS CITY STATE ZIP CODE
MO DAY YR. / /M / /F ( )
---------------------------- --------------- --------------------------- --------------------
DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER
JOINT ANNUITANT(IF ANY)
----------------------------------------------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL
MO DAY YR. / /M / /F ( )
---------------------------- --------------- ------------------------- --------------------
DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER
C. BENEFICIARY PRIMARY/CONTINGENT
---------------------------------------------------------------------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL CIRCLE ONE
PRIMARY/CONTINGENT
---------------------------------------------------------------------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL CIRCLE ONE
D. TYPE OF / / NONQUALIFIED. If nonqualified, is this a 1035 Exchange? / / YES / / NO
CONTRACT Is this a Transfer of Assets (funds to be transferred from a mutual fund, CD, etc.)? / / YES / / NO
If either of the above is yes, please complete a "Request for Transfer or 1035 Exchange" (SA-2500RL)
/ / QUALIFIED, as indicated below. Is this a direct transfer? / / YES / / NO
If yes, please complete a "Request for Transfer or 1035 Exchange" (form SA-2500RL).
An appropriate retirement plan/prototype must be established for purposes of qualified monies
/ /SEP / / 403(b) / / Terminal funding / / 457 plan / / 401 retirement plan / / IRA Tax Year________
/ / IRA rollover / / IRA transfer / / Roth IRA Roth IRA origination date_________ / /Other___________
PLEASE SPECIFY
E. ANNUITY DATE MO. DAY YR. Date annuity payments begin. (Must be at least 2 years after the Certificate Date.
------------------- Maximum age is the later of the Participant's Age 90 or 10 years after Certificate
ANNUITY DATE Date. NOTE: If left blank that date will default to maximum for nonqualified and to
70 1/2 for qualified contracts.)
F. PURCHASE / / INITIAL PAYMENT: $___________________
PAYMENT(S) Minimum initial payment is [$5,000] for nonqualified contracts; [$2,000] for qualified contracts.
Payments may be wired or mailed. Make check payable to Anchor National Life Insurance Company.
/ / AUTOMATIC PAYMENTS: $________________
To establish automatic bank drafts for future payments, include a completed "Automatic Payment
Authorization" form (G-2233POS), and a voided check and the initial payment for the policy
G. SPECIAL / / SYSTEMATIC WITHDRAWAL: Check the box at left and include a "Systematic Withdrawal Application" form
FEATURES (SEA-5550SW).
/ / AUTOMATIC DOLLAR COST AVERAGING: Check the box at left and include a completed "Dollar Cost
Averaging Application" form (SEA-5551DCA).
/ / PRINCIPAL ADVANTAGE: Check the box at left. Under Investment Instructions, indicate the fixed
account desired and specify other allocations as percentages.
ANG-534 (11/98) OVER
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
PARTICIPANT ENROLLMENT FORM ANG-534 (11/98) SIDE 2
- ----------------------------------------------------------------------------------------------------------------------------------
H. TELEPHONE / Do you wish to authorize telephone TRANSFERS, subject to the conditions set forth below? / / YES / / NO
INTERNET Do you wish to authorize Internet TRANSFERS, subject to the conditions set forth below? / / YES / / NO
TRANSFERS (If no election is indicated the Company will default to YES for transfers or Internet.) If indicated
AUTHORIZATION above, I authorize the Company to accept telephone and/or Internet instructions for transfers in any
amount among subaccounts from anyone providing proper identification subject to restrictions and
limitations contained in the certificate and related prospectus, if any. I understand that I bear the
risk of loss in the event of a telephone or Internet instruction not authorized by me. The Company will
not be responsible for any losses resulting from unauthorized transactions if it follows reasonable
procedures designed to verify the identity of the requestor and therefore, the Company will record
telephone conversations containing transaction instructions, request personal identification information
before acting upon telephone instructions and send written confirmation statements of transactions to the
address of record. For Internet transfers the Company will require proper password or Internet
authentication, keep records of all such transactions and send confirmations to the address of record.
Do you wish to have the prospectus delivered through the Internet instead of a mailed document?
/ / YES / / NO
If YES, You MUST indicate Your Internet Address in the space provided.
-----------------------------------
Internet Address
I. SPECIAL ---------------------------------------------------------------------------------------------------------
INSTRUCTIONS ---------------------------------------------------------------------------------------------------------
J. STATEMENT OF This Certificate / / WILL / / WILL NOT replace in whole or in part an existing life insurance or annuity
PARTICIPANT contract. (If this will replace an existing policy, please indicate name of issuing company and
contract number below.)
-------------------------------------------------- ----------------------------------------
COMPANY NAME CONTRACT NUMBER
I hereby represent my answers to the above questions to be correct and true to the best of my knowledge
and belief and agree that this Enrollment Form shall be a part of any Certificate issued by the Company.
I VERIFY MY UNDERSTANDING THAT THE VALUE OF PURCHASE PAYMENTS DIRECTED INTO THE VARIABLE INVESTMENT
OPTIONS ARE VARIABLE AND NOT GUARANTEED AS TO DOLLAR AMOUNT. I UNDERSTAND THAT THE VALUE OF PURCHASE
PAYMENTS DIRECTED INTO THE MULTI-YEAR FIXED ACCOUNT OPTIONS, IF PREMATURELY WITHDRAWN, MAY BE SUBJECT TO
A MARKET VALUE ADJUSTMENT, WHICH MAY RESULT IN UPWARD AND DOWNWARD ADJUSTMENTS IN THE VALUE OF SUCH
AMOUNTS. I ACKNOWLEDGE RECEIPT OF THE CURRENT PROSPECTUSES FOR SEASONS SELECT VARIABLE ANNUITY AND
SEASONS SERIES TRUST. I HAVE READ THEM CAREFULLY AND UNDERSTAND THEIR CONTENTS.
Signed at
-------------------------------------------------------------- -------------------------
CITY STATE DATE
------------------------------------------------------- ----------------------------------------
PARTICIPANT'S SIGNATURE REGISTERED REPRESENTATIVE'S SIGNATURE
------------------------------------------------------- ----------------------------------------
JOINT PARTICIPANT'S SIGNATURE(IF APPLICABLE)
K. LICENSED / Will this Certificate replace in whole or in part any existing life insurance or annuity contract?
REGISTERED / / YES / / NO
REPRESENTATIVE
INFORMATION ---------------------------------------------------------------------- ------------------------------
REPRESENTATIVE'S LAST NAME FIRST NAME MIDDLE INITIAL SOC. SEC. NUMBER
---------------------------------------------------------------------- ------------------------------
REPRESENTATIVE'S STREET ADDRESS CITY STATE ZIP CODE
------------------------- ---------------------------------------- ------------------------------
BROKER/DEALER FIRM NAME REPRESENTATIVE'S TELEPHONE NO. LICENSED AGENT ID NUMBER
FRAUD WARNING: ANY PERSON WHO, WITH INTENT TO DEFRAUD OR KNOWING THAT HE IS FACILITATING A FRAUD AGAINST
AN INSURER, SUBMITS AN APPLICATION OR FILES A CLAIM CONTAINING A FALSE OR DECEPTIVE STATEMENT MAY BE
GUILTY OF INSURANCE FRAUD.
- ----------------------------------------------------------------------------------------------------------------------------------
OFFICE USE ONLY BOX
SEASONS SELECT
- ----------------------------------------------------------------------------------------------------------------------------------
ANG-534 (11/98)
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INSTRUCTIONS FOR FIXED ACCOUNT OPTIONS AND VARIABLE SUBACCOUNTS ANG-534 (11/98)
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INSTRUCTIONS: Choose from Fixed Account Options and Variable SubAccounts below. If Dollar Cost Averaging Fixed
- ------------------------- Account Options are selected, Form [TBD-5551DCA] must accompany this Participant Enrollment Form.
Allocations must be expressed in whole percentages and total allocation must equal 100%.
_____ SUBACCOUNTS _____ _____ SUBACCOUNTS _____
____% Growth Strategy ____% Mid Cap Growth Portfolio
____% Moderate Growth Strategy ____% Mid Cap Value Portfolio
____% Balanced Growth Strategy ____% Small Cap Portfolio
____% Conservative Growth Strategy ____% International Equity Portfolio
____% Large Cap Growth Portfolio ____% Diversified Fixed Income Portfolio
____% Large Cap Composite Portfolio ____% Cash Management Portfolio
____% Large Cap Value Portfolio
I understand that my initial Purchase Payment may be allocated to the Cash Management Subaccount until the end of my Right to
Examine period, at which point it will be allocated as shown above.
FIXED ACCOUNT OPTION GUARANTEE PERIODS
____% 1 yr. ____% 3 yr. ____% 5 yr. ____% 7 yr. ____% 10 yr.
DCA ALLOCATIONS: ______% 6 Month DCA ______% 1 Year DCA
------------------------------------------ ---------------------------------------- ------------
PARTICIPANT'S SIGNATURE REGISTERED REPRESENTATIVE'S SIGNATURE DATE
LICENSED/ REGISTERED REPRESENTATIVE INFORMATION
------------------------------------ ------------------------- -----------------------
REPRESENTATIVE'S TELEPHONE NO. LICENSED AGENT ID NUMBER BROKER/DEALER FIRM NAME
- ----------------------------------------------------------------------------------------------------------------------------------
FOR OFFICE USE ONLY
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ANG-534 (11/98)
<PAGE>
<TABLE>
<S><C>
Anchor National Life New Business Documents New Business Documents
Insurance Company with checks: without checks: [LOGO] ANCHOR NATIONAL
1 Sun America Center P. O. Box 100330 P. O. Box 54299 A SUN AMERICA COMPANY
Los Angeles, CA 90067-6022 Pasadena, CA 91189-0001 Los Angeles, CA 90054-0299
- ---------------------------------------------------------------- -------------------------------------------------------
DEFERRED ANNUITY APPLICATION ANA-535 (11/98)
DO NOT USE HIGHLIGHTER. Please print or type.
A. OWNER / /Mr. / /Mrs. / /Ms. / /Miss / /Dr. / /Sr. / /Jr.
---------------------------------------------------------------------------------------------------------
LAST NAME/CUSTODIAN/TRUST/PLAN NAME FIRST NAME MIDDLE INITIAL
---------------------------------------------------------------------------------------------------------
STREET ADDRESS CITY STATE ZIP CODE
MO DAY YR. / /M / /F ( )
---------------------------- ---------- -------------------------- ---- --------------
DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER
JOINT ---------------------------------------------------------------------------------------------------------
OWNER LAST NAME FIRST NAME MIDDLE INITIAL
(If applicable must MO DAY YR. / /M / /F
be spouse of Owner) ---------------------- ----------- -------------------------------------------------------
DATE OF BIRTH SEX SOCIAL SECURITY OR TAX ID NUMBER
B. ANNUITANT / /Mr. / /Mrs. / /Ms. / /Miss / /Dr. / /Sr. / /Jr.
(Complete only if ---------------------------------------------------------------------------------------------------------
different from LAST NAME FIRST NAME MIDDLE INITIAL
Owner)
---------------------------------------------------------------------------------------------------------
STREET ADDRESS CITY STATE ZIP CODE
MO DAY YR. / /M / /F ( )
---------------------- ----------- ------------------------------ --- -----------------
DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER
JOINT ANNUITANT(IF ANY)
--------------------------------------------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL
MO DAY YR. / /M / /F ( )
---------------------- ----------- ------------------------------- --- -----------------
DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER
C. BENEFICIARY PRIMARY/CONTINGENT
---------------------------------------------------------------------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL CIRCLE ONE
PRIMARY/CONTINGENT
---------------------------------------------------------------------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL CIRCLE ONE
D. TYPE OF / / NONQUALIFIED. If nonqualified, is this a 1035 Exchange? / / YES / / NO
CONTRACT Is this a Transfer of Assets (funds to be transferred from a mutual fund, CD, etc.)? / / YES / / NO
If either of the above is yes, please complete a "Request for Transfer or 1035 Exchange" (SA-2500RL).
/ / QUALIFIED, as indicated below. Is this a direct transfer? / / YES / / NO
If yes, please complete a "Request for Transfer or 1035 Exchange" (form SA-2500RL).
An appropriate retirement plan/prototype must be established for purposes of qualified monies
/ / SEP / / 403(b) / / Terminal funding / / 457 plan / / 401 retirement plan / / IRA Tax Year ____
/ / IRA rollover / / IRA transfer / / Roth IRA Roth IRA origination date_______ / /Other_______
PLEASE SPECIFY
E. ANNUITY DATE MO. DAY YR. Date annuity payments begin. (Must be at least 2 years after the Contract Date.
--------------------- Maximum age is the later of the Owner's Age 90 or 10 years after Contract Date.
ANNUITY DATE NOTE: If left blank that date will default to maximum for nonqualified and to
70 1/2 for qualified contracts.)
F. PURCHASE / / INITIAL PAYMENT: $_____________________
PAYMENT(S) Minimum initial payment is [$5,000] for nonqualified contracts; [$2,000] for qualified contracts.
Payments may be wired or mailed. Make check payable to Anchor National Life Insurance Company.
/ / AUTOMATIC PAYMENTS: $_____________________
To establish automatic bank drafts for future payments, include a completed "Automatic Payment
Authorization" form (G-2233POS), and a voided check and the initial payment for the policy.
G. SPECIAL / / SYSTEMATIC WITHDRAWAL: Check the box at left and include a "Systematic Withdrawal Application" form
FEATURES (SEA-5550SW).
/ / AUTOMATIC DOLLAR COST AVERAGING: Check the box at left and include a completed "Dollar Cost
Averaging Application" form (SEA-5551DCA).
/ / PRINCIPAL ADVANTAGE: Check the box at left. Under Investment Instructions, indicate the fixed account
desired and specify other allocations as percentages.
ANA-535(11/98) OVER
<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
DEFERRED ANNUITY APPLICATION ANA-535 (11/98) SIDE 2
- -----------------------------------------------------------------------------------------------------------------------------------
H. TELEPHONE / Do you wish to authorize telephone TRANSFERS, subject to the conditions set forth below? / / YES / / NO
INTERNET Do you wish to authorize Internet TRANSFERS, subject to the conditions set forth below? / / YES / / NO
TRANSFERS (If no election is indicated the Company will default to YES for transfers or Internet.) If indicated
AUTHORIZATION above, I authorize the Company to accept telephone and/or Internet instructions for transfers in any amount
among subaccounts from anyone providing proper identification subject to restrictions and limitations
contained in the Contract and related prospectus, if any. I understand that I bear the risk of loss in
the event of a telephone or Internet instruction not authorized by me. The Company will not be responsible
for any losses resulting from unauthorized transactions if it follows reasonable procedures designed to
verify the identity of the requestor and therefore, the Company will record telephone conversations
containing transaction instructions, request personal identification information before acting upon
telephone instructions and send written confirmation statements of transactions to the address of record.
For Internet transfers the Company will require proper password or Internet authentication, keep records of
all such transactions and send confirmations to the address of record.
Do you wish to have the prospectus delivered through the Internet instead of a mailed document?
/ / YES / / NO
If YES, You MUST indicate Your Internet Address in the space provided.____________________________________
Internet Address
I. SPECIAL
INSTRUCTIONS ----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
J. STATEMENT OF This Contract / / WILL / / WILL NOT replace in whole or in part an existing life insurance or annuity
OWNER contract.
(If this will replace an existing policy, please indicate name of issuing company and contract number
below.)
------------------------------------------------------- -----------------------------------------
COMPANY NAME CONTRACT NUMBER
I hereby represent my answers to the above questions to be correct and true to the best of my knowledge and
belief and agree that this Deferred Annuity Application Form shall be a part of any Contract issued by the
Company. I VERIFY MY UNDERSTANDING THAT THE VALUE OF PURCHASE PAYMENTS DIRECTED INTO THE VARIABLE
INVESTMENT OPTIONS ARE VARIABLE AND NOT GUARANTEED AS TO DOLLAR AMOUNT. I UNDERSTAND THAT THE VALUE OF
PURCHASE PAYMENTS DIRECTED INTO THE MULTI-YEAR FIXED ACCOUNT OPTIONS, IF PREMATURELY WITHDRAWN, MAY BE
SUBJECT TO A MARKET VALUE ADJUSTMENT, WHICH MAY RESULT IN UPWARD AND DOWNWARD ADJUSTMENTS IN THE VALUE OF
SUCH AMOUNTS. I ACKNOWLEDGE RECEIPT OF THE CURRENT PROSPECTUSES FOR SEASONS SELECT VARIABLE ANNUITY AND
SEASONS SERIES TRUST. I HAVE READ THEM CAREFULLY AND UNDERSTAND THEIR CONTENTS.
Signed at
-------------------------------------------------------- ------------------------------------
CITY STATE DATE
----------------------------------------------------- ----------------------------------------------
OWNER'S SIGNATURE REGISTERED REPRESENTATIVE'S SIGNATURE
-----------------------------------------------------
JOINT OWNER'S SIGNATURE(IF APPLICABLE)
K. LICENSED / Will this Contract replace in whole or in part any existing life insurance or annuity contract?
REGISTERED / / YES / / NO
REPRESENTATIVE --------------------------------------------------------------------- -------------------------------
INFORMATION REPRESENTATIVE'S LAST NAME FIRST NAME MIDDLE INITIAL SOC. SEC. NUMBER
--------------------------------------------------------------------- -------------------------------
REPRESENTATIVE'S STREET ADDRESS CITY STATE ZIP CODE
------------------------------ ---------------------------------- -------------------------------
BROKER/DEALER FIRM NAME REPRESENTATIVE'S TELEPHONE NO. LICENSED AGENT ID NUMBER
FRAUD WARNING: ANY PERSON WHO, WITH INTENT TO DEFRAUD OR KNOWING THAT HE IS FACILITATING A FRAUD AGAINST
AN INSURER, SUBMITS AN APPLICATION OR FILES A CLAIM CONTAINING A FALSE OR DECEPTIVE STATEMENT MAY BE
GUILTY OF INSURANCE FRAUD.
- -----------------------------------------------------------------------------------------------------------------------------------
OFFICE USE ONLY BOX
SEASONS SELECT
- -----------------------------------------------------------------------------------------------------------------------------------
ANA-535 (11/98)
<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INSTRUCTIONS FOR FIXED ACCOUNT OPTIONS AND VARIABLE SUBACCOUNTS ANA-535 (11/98)
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INSTRUCTIONS: Choose from Fixed Account Options and Variable SubAccounts below. If Dollar Cost Averaging Fixed
Account Options are selected, Form [TBD-5551DCA] must accompany this Deferred Annuity Application Form. Allocations must be
expressed in whole percentages and total allocation must equal 100%.
______ SUBACCOUNTS ____ ______ SUBACCOUNTS ____
____ % Growth Strategy ____ % Mid Cap Growth Portfolio
____ % Moderate Growth Strategy ____ % Mid Cap Value Portfolio
____ % Balanced Growth Strategy ____ % Small Cap Portfolio
____ % Conservative Growth Strategy ____ % International Equity Portfolio
____ % Large Cap Growth Portfolio ____ % Diversified Fixed Income Portfolio
____ % Large Cap Composite Portfolio ____ % Cash Management Portfolio
____ % Large Cap Value Portfolio
I understand that my initial Purchase Payment may be allocated to the Cash Management Subaccount until the end of my Right to
Examine period, at which point it will be allocated as shown above.
FIXED ACCOUNT OPTION GUARANTEE PERIODS
____% 1 yr. ____% 3 yr. ____% 5 yr. ____% 7 yr. ____% 10 yr.
DCA ALLOCATIONS: ______% 6 Month DCA ______% 1 Year DCA
---------------------------------------------------- -------------------------------------- ---------------------
OWNER'S SIGNATURE REGISTERED REPRESENTATIVE'S SIGNATURE DATE
LICENSED/ REGISTERED REPRESENTATIVE INFORMATION
--------------------------------------------- ------------------------- -----------------------
REPRESENTATIVE'S TELEPHONE NO. LICENSED AGENT ID NUMBER BROKER/DEALER FIRM NAME
------------------------------------------------------------------------------------------------------------------------------
FOR OFFICE USE ONLY
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ANA-535 (11/98)
<PAGE>
EXHIBIT 9(a)
January 4, 1998
Division of Investment Management
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Madam/Sir:
Referring to this Registration Statement on behalf of Variable Annuity
Account Five (the "Account") and the Registration Statement on Form N-4 filed
November 20, 1998 (the "Registration Statements") on behalf of Variable
Annuity Account Five and having examined and being familiar with the articles
of incorporation and by-laws of Anchor National, the applicable resolutions
relating to the Account and other pertinent records and documents, I am of
the opinion that:
1) Anchor National is a duly organized and existing stock life
insurance company under the laws of the State of Arizona;
2) the Account is a duly organized and existing separate account
of Anchor National;
3) the annuity contracts being registered by the Registration
Statements will, upon sale thereof, be legally issued, fully
paid and nonassessable, and, to the extent that they are
construed to constitute debt securities, will be binding
obligations of Anchor National, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or similar
laws affecting the rights of creditors generally.
I am licensed to practice only in the State of California, and the foregoing
opinions are limited to the laws of the State of California, the general
opinions are limited to the laws of the State of California, the general
corporate law of the State of Arizona and federal law. I hereby consent to
the filing of this opinion with the Securities and Exchange Commission in
connection with the Registration Statements on Form N-4 of the Account.
Very truly yours,
Susan L. Harris
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form N-4 and Form S-1 for Variable Annuity Account
Five (Portion Relating to the Seasons Select Variable Annuity) of Anchor
National Life Insurance Company of our report dated November 9, 1998, which
appears in such prospectus. We also consent to the reference to us under the
heading "Independent Accountants" in such Prospectus.
PricewaterhouseCoopers LLP
Los Angeles, California
January 27, 1999
<PAGE>
Exhibit 14
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 Initial Registration Statement of Variable
Annuity Account Seven and Anchor National, File Nos.: 333-65965 and 811-09003
(N-4) and 333-65953 (S-1). On January 4, 1999, Anchor National became an
indirect, wholly owned subsidiary of American International Group, Inc.
("AIG"). For a listing of those persons/entities under the control of AIG see
Form 10K, SEC file no.: 001-08787, filed on March 30, 1998.
