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[LOGO]
PROFILE
July 5, 2000
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. Seasons 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. Of
course, certain qualified contracts automatically provide tax deferral
regardless of whether they are funded with an annuity.
The Seasons Select Variable Annuity is designed as a long term retirement
investment and helps you meet these goals by offering variable investment
options. There are nine multimanaged portfolios called SELECT PORTFOLIOS and one
multi-managed FOCUSED PORTFOLIO 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 PORTFOLIO(S), FOCUSED PORTFOLIO(S) and/or STRATEGY(IES)
will fluctuate up or down based on the performance of the 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 two 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, FOCUSED 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, FOCUSED
PORTFOLIOS, STRATEGIES and/or fixed investment options. You may transfer between
the SELECT PORTFOLIOS, FOCUSED PORTFOLIOS, STRATEGIES and/or the fixed
investment options fifteen 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), FOCUSED
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.
The Seasons Select Variable Annuity is available in all states except New York
and Oregon.
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2. INCOME OPTIONS
You can select from one of five income options:
(1) payments for your lifetime;
(2) payments for your lifetime and your survivor's lifetime;
(3) payments for your lifetime and your survivor's lifetime, but for not
less than 10 or 20 years;
(4) payments for your lifetime, but for not less than 10 or 20 years; and
(5) payments for a specified period of 5 to 30 years.
Other options may be available.
You will also need to decide if you want your payments to fluctuate with
investment performance or remain constant, and the date on which your payments
will begin. Once you begin receiving payments, you cannot change your income
option. If your contract is non-qualified, payments during the Income Phase are
considered partly a return of your original investment. The "original
investment" part of each payment is not taxable but any gain to your original
investment is currently taxable as ordinary income upon distribution. For
qualified contracts, the entire payment is currently taxable as ordinary income.
In addition to the above income options, if elected by you, you may also take
income payments under the Income Protector program subject to the provisions
thereof.
3. PURCHASING A SEASONS SELECT 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, one FOCUSED PORTFOLIO, 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 and each FOCUSED PORTFOLIO has a distinct investment
objective utilizing a disciplined investing style to achieve its objective. Each
SELECT PORTFOLIO and each FOCUSED 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 CORPORATION
MANAGEMENT ("GOLDMAN ("SAAMCO")
SACHS") T. ROWE PRICE ASSOCIATES, INC.
JANUS CAPITAL CORPORATION("JANUS") ("T. ROWE PRICE")
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 ABBETT") SAAMCO
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>
The FOCUSED PORTFOLIO and its managers are:
FOCUS GROWTH
FRED ALGER MANAGEMENT ("FRED ALGER")
JENNISON ASSOCIATES ("JENNISON")
MARISCO CAPITAL MANAGEMENT ("MARISCO CAPITAL")
Each STRATEGY has a different investment objective. The STRATEGIES use an asset
allocation investment approach. Each STRATEGY invests in a combination of
underlying investment portfolios which in turn invest in a combination of
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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. ("PUTNAM")
- STOCK PORTFOLIO
T. ROWE PRICE
- MULTI-MANAGED MODERATE GROWTH PORTFOLIO
JANUS
SAAMCO
WELLINGTON
BALANCED GROWTH STRATEGY
- ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO
PUTNAM
- STOCK PORTFOLIO
T. ROWE PRICE
- MULTI-MANAGED INCOME/EQUITY PORTFOLIO
JANUS
SAAMCO
WELLINGTON
CONSERVATIVE GROWTH STRATEGY
- ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO
PUTNAM
- STOCK PORTFOLIO
T. ROWE PRICE
- MULTI-MANAGED INCOME PORTFOLIO
JANUS
SAAMCO
WELLINGTON
The percentage allocation which each STRATEGY invests in each underlying
portfolio is depicted on pages 15-16 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), FOCUSED 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), FOCUSED PORTFOLIO(S) and/or
STRATEGY(IES). There are also investment charges and other expenses if you put
money into the SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) or STRATEGY(IES), which
are estimated to range from 0.85% to 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), FOCUSED PORTFOLIO(S),
STRATEGY(IES) and/or fixed investment options more than fifteen (15) 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 0.10% 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, FOCUSED
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>
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<S> <C> <C> <C> <C> <C> <C>
Total Annual
Insurance EXAMPLES
Related Total Annual Total Total Total
Charges Investment Annual Expenses Expenses
SELECT PORTFOLIOS Related Charges at end at end
Charges of of
1 YEAR 10 YEARS
---------------------------------------------------------------------------------------------------------------
Large Cap Growth 1.49% (1.40% + .09%) 1.10% 2.59% $116 $289
Large Cap Composite 1.49% (1.40% + .09%) 1.10% 2.59% $116 $289
Large Cap Value 1.49% (1.40% + .09%) 1.10% 2.59% $116 $289
Mid Cap Growth 1.49% (1.40% + .09%) 1.15% 2.64% $116 $294
Mid Cap Value 1.49% (1.40% + .09%) 1.15% 2.64% $116 $294
Small Cap 1.49% (1.40% + .09%) 1.15% 2.64% $116 $294
International Equity 1.49% (1.40% + .09%) 1.30% 2.79% $118 $308
Diversified Fixed Income 1.49% (1.40% + .09%) 1.00% 2.49% $115 $279
Cash Management 1.49% (1.40% + .09%) 0.85% 2.34% $113 $264
<CAPTION>
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FOCUSED PORTFOLIOS
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Focus Growth(2) 1.49% (1.40% + .09%) 1.30% 2.79% $118 $308
<CAPTION>
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EXAMPLES
Total Annual Total Annual Total Total
Insurance Investment Total Expenses Expenses
Related Related Annual at end of at end of
Charges Charges(1) Charges 1 YEAR 10 YEARS
STRATEGIES
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
Growth 1.49% (1.40% + .09%) 1.14% 2.63% $116 $293
Moderate Growth 1.49% (1.40% + .09%) 1.12% 2.61% $116 $291
Balanced Growth 1.49% (1.40% + .09%) 1.12% 2.61% $116 $291
Conservative Growth 1.49% (1.40% + .09%) 1.10% 2.59% $116 $289
-----------------------------------------------------------------------------------------------------------------
</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.
(2) This portfolio was not available for sale during fiscal year 2000. The Total
Annual Investment Related Charges are based on estimated amounts for the
current fiscal year.
<PAGE>
If you are age 81 or older at contract issue:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Annual
Insurance EXAMPLES
Related Total Annual Total Total Total
Charges Investment Annual Expenses Expenses
SELECT PORTFOLIO(S) Related Charges at end at end
Charges of of
1 YEAR 10 YEARS
---------------------------------------------------------------------------------------------------------------
Large Cap Growth 1.61% (1.52% + .09%) 1.10% 2.71% $117 $300
Large Cap Composite 1.61% (1.52% + .09%) 1.10% 2.71% $117 $300
Large Cap Value 1.61% (1.52% + .09%) 1.10% 2.71% $117 $300
Mid Cap Growth 1.61% (1.52% + .09%) 1.15% 2.76% $118 $305
Mid Cap Value 1.61% (1.52% + .09%) 1.15% 2.76% $118 $305
Small Cap Portfolio 1.61% (1.52% + .09%) 1.15% 2.76% $118 $305
International Equity 1.61% (1.52% + .09%) 1.30% 2.91% $119 $320
Diversified Fixed Income 1.61% (1.52% + .09%) 1.00% 2.61% $116 $291
Cash Management 1.61% (1.52% + .09%) 0.85% 2.46% $115 $276
<CAPTION>
---------------------------------------------------------------------------------------------------------------
FOCUSED PORTFOLIOS
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Focus Growth(2) 1.61% (1.52% + .09%) 1.30% 2.91% $119 $320
<CAPTION>
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EXAMPLES
Total Annual Total Annual Total Total
Insurance Investment Total Expenses Expenses
Related Related Annual at end of at end of
Charges Charges(1) Charges 1 YEAR 10 YEARS
STRATEGY(IES)
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
Growth 1.61% (1.52% + .09%) 1.14% 2.75% $117 $304
Moderate Growth 1.61% (1.52% + .09%) 1.12% 2.73% $117 $302
Balanced Growth 1.61% (1.52% + .09%) 1.12% 2.73% $117 $302
Conservative Growth 1.61% (1.52% + .09%) 1.10% 2.71% $117 $300
-----------------------------------------------------------------------------------------------------------------
</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.
(2) This portfolio was not available for sale during fiscal year 2000. The Total
Annual Investment Related Charges are based on estimated amounts for the
current fiscal year.
<PAGE>
If you are age 80 or younger at contract issue and you elect to enroll in the
OPTIONAL Income Protector Program (0.10%):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Annual
Insurance EXAMPLES
Related Total Annual Total Total Total
Charges Investment Annual Expenses Expenses
Related Charges at end at end
Charges of of
1 YEAR 10 YEARS
SELECT PORTFOLIOS
------------------------------------------------------------------------------------------------------------------------
Large Cap Growth 1.59% (1.40% + .09% + .10%) 1.10% 2.69% $117 $300
Large Cap Composite 1.59% (1.40% + .09% + .10%) 1.10% 2.69% $117 $300
Large Cap Value 1.59% (1.40% + .09% + .10%) 1.10% 2.69% $117 $300
Mid Cap Growth 1.59% (1.40% + .09% + .10%) 1.15% 2.74% $117 $305
Mid Cap Value 1.59% (1.40% + .09% + .10%) 1.15% 2.74% $117 $305
Small Cap 1.59% (1.40% + .09% + .10%) 1.15% 2.74% $117 $305
International Equity 1.59% (1.40% + .09% + .10%) 1.30% 2.89% $119 $319
Diversified Fixed Income 1.59% (1.40% + .09% + .10%) 1.00% 2.59% $116 $290
Cash Management 1.59% (1.40% + .09% + .10%) 0.85% 2.44% $114 $275
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
FOCUSED PORTFOLIOS
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Focus Growth(2) 1.59% (1.40% + .09% + .10%) 1.30% 2.89% $119 $319
<CAPTION>
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EXAMPLES
Total Annual Total Annual Total Total
Insurance Investment Total Expenses Expenses
Related Related Annual at end of at end of
Charges Charges(1) Charges 1 YEAR 10 YEARS
STRATEGIES
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------
Growth 1.59% (1.40% + .09% + .10%) 1.14% 2.73% $117 $304
Moderate Growth 1.59% (1.40% + .09% + .10%) 1.12% 2.71% $117 $302
Balanced Growth 1.59% (1.40% + .09% + .10%) 1.12% 2.71% $117 $302
Conservative Growth 1.59% (1.40% + .09% + .10%) 1.10% 2.69% $117 $300
--------------------------------------------------------------------------------------------------------------------------
</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.
(2) This portfolio was not available for sale during fiscal year 2000. The Total
Annual Investment Related Charges are based on estimated amounts for the
current fiscal year.
<PAGE>
If you are age 81 or older at contract issue and you elect to enroll in the
OPTIONAL Income Protector Program (0.10%):
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Annual
Insurance EXAMPLES
Related Total Annual Total Total Total
Charges Investment Annual Expenses Expenses
Related Charges at end at end
Charges of of
1 YEAR 10 YEARS
SELECT PORTFOLIO(S)
-----------------------------------------------------------------------------------------------------------------
Large Cap Growth 1.71% (1.52% + .09% + .10%) 1.10% 2.81% $118 $312
Large Cap Composite 1.71% (1.52% + .09% + .10%) 1.10% 2.81% $118 $312
Large Cap Value 1.71% (1.52% + .09% + .10%) 1.10% 2.81% $118 $312
Mid Cap Growth 1.71% (1.52% + .09% + .10%) 1.15% 2.86% $119 $316
Mid Cap Value 1.71% (1.52% + .09% + .10%) 1.15% 2.86% $119 $316
Small Cap Portfolio 1.71% (1.52% + .09% + .10%) 1.15% 2.86% $119 $316
International Equity 1.71% (1.52% + .09% + .10%) 1.30% 3.01% $120 $331
Diversified Fixed Income 1.71% (1.52% + .09% + .10%) 1.00% 2.71% $117 $302
Cash Management 1.71% (1.52% + .09% + .10%) 0.85% 2.56% $116 $287
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
FOCUSED PORTFOLIOS
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Focus Growth(2) 1.71% (1.52% + .09% + .10%) 1.30% 3.01% $120 $331
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
EXAMPLES
Total Annual Total Annual Total Total
Insurance Investment Total Expenses Expenses
Related Related Annual at end of at end of
Charges Charges(1) Charges 1 YEAR 10 YEARS
STRATEGY(IES)
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------
Growth 1.71% (1.52% + .09% + .10%) 1.14% 2.85% $118 $315
Moderate Growth 1.71% (1.52% + .09% + .10%) 1.12% 2.83% $118 $313
Balanced Growth 1.71% (1.52% + .09% + .10%) 1.12% 2.83% $118 $313
Conservative Growth 1.71% (1.52% + .09% + .10%) 1.10% 2.81% $118 $312
-------------------------------------------------------------------------------------------------------------------
</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.
(2) This portfolio was not available for sale during fiscal year 2000. The Total
Annual Investment Related Charges are based on estimated amounts for the
current fiscal year.
The examples assume that you invested $1,000 in a SELECT PORTFOLIO, FOCUSED
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
<PAGE>
a surrender penalty. However, upon a future full surrender of your contract we
will recoup any surrender charges which would have been due at the time the free
withdrawals were taken if your free withdrawal had not been free.
To determine your free withdrawal amount and your surrender charge, we refer to
two special terms. These are penalty free earnings and the Total Invested
Amount.
The penalty-free earnings portion of your contract is simply your account value
less your Total Invested Amount. The total invested amount is the total of all
Purchase Payments you have made into the contract less portions of some prior
withdrawals you made.
During the first year after we issue your contract your free withdrawal amount
is the greater of:
1. Your penalty-free earnings; or
2. If you are participating in the Systematic Withdrawal program, a total of
10% of your Total Invested Amount, less any withdrawals taken during the
contract year.
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, less any withdrawals taken during the
contract year.
If you withdraw your entire contract value and you have purchase payments still
subject to a surrender penalty, 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), FOCUSED PORTFOLIO(S) and/or
STRATEGY(IES) you select. From time to time we may advertise a SELECT
PORTFOLIO'S, FOCUSED PORTFOLIO'S or STRATEGY'S total return. The total return
figures are based on historical data and are not intended to indicate future
performance.
<TABLE>
<CAPTION>
<S> <C> <C>
-------------------------------------------------
<CAPTION>
1999 1999
(reflects (reflects
age 80 age 81
or or
Strategy younger) older)
<S> <C> <C>
-------------------------------------------------
Growth................... 35.32% 35.21%
Moderate Growth.......... 29.61% 29.48%
Balanced Growth.......... 16.90% 16.79%
Conservative Growth...... 10.57% 10.44%
-------------------------------------------------
</TABLE>
9. DEATH BENEFIT
If you, or the joint annuitant, if one exists, 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); 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 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% to date of death.
<PAGE>
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), FOCUSED PORTFOLIO(S) and/or STRATEGY(IES) plus any money you put
into the fixed investment options. Its value may be more or less than the money
you initially invested. Thus, the investment risk is borne by you during the
free look period.
SYSTEMATIC WITHDRAWAL PROGRAM: If selected by you, this program allows you to
receive either monthly, quarterly, semi-annual or annual checks during the
Accumulation Phase. Systematic withdrawals may also be electronically
transferred to your bank account. Of course, withdrawals during the Accumulation
Phase may be taxable and a 10% IRS tax penalty may apply if you are under age
59 1/2.
DOLLAR COST AVERAGING: If selected by you, this program allows you to invest
gradually into one or more of the SELECT PORTFOLIO(S), FOCUSED 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), FOCUSED
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: During the accumulation phase, you will
receive confirmation of transactions within your contract. Transactions made
pursuant to contractual or systematic agreements, such as deduction of the
annual maintenance fee and dollar cost averaging, may be confirmed quarterly.
Purchase payments received through the automatic payment plan or a salary
reduction arrangement, may also be confirmed quarterly. For all other
transactions, we send confirmations immediately.
During the Accumulation and Income Phases, you will receive a 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
July 5, 2000
ALLOCATED FIXED AND VARIABLE GROUP ANNUITY
issued by
VARIABLE ANNUITY ACCOUNT FIVE
and
ANCHOR NATIONAL LIFE INSURANCE COMPANY
The annuity contract has 21 investment choices - 7 fixed investment options
which offer interest rates guaranteed by Anchor National for different periods
of time, 9 variable investment SELECT PORTFOLIOS, 1 variable investment FOCUSED
PORTFOLIO and 4 variable investment STRATEGIES:
<TABLE>
<CAPTION>
SELECT PORTFOLIOS FOCUSED PORTFOLIOS STRATEGIES
<S> <C> <C>
LARGE CAP GROWTH FOCUS GROWTH GROWTH
LARGE CAP COMPOSITE MODERATE GROWTH
LARGE CAP VALUE BALANCED GROWTH
MID CAP GROWTH CONSERVATIVE GROWTH
MID CAP VALUE
SMALL CAP
INTERNATIONAL EQUITY
DIVERSIFIED FIXED INCOME
CASH MANAGEMENT
</TABLE>
all of which invest in the underlying portfolios of
SEASONS SERIES TRUST
which is managed by:
<TABLE>
<CAPTION>
SELECT PORTFOLIOS FOCUSED PORTFOLIOS STRATEGIES
<S> <C> <C>
BANKERS TRUST COMPANY FRED ALGER MANAGEMENT PUTNAM INVESTMENT MANAGEMENT, INC.
GOLDMAN SACHS ASSET MANAGEMENT JENNISON ASSOCIATES T. ROWE PRICE ASSOCIATES, INC.
JANUS CAPITAL CORPORATION MARISCO CAPITAL MANAGEMENT JANUS CAPITAL CORPORATION
LORD, ABBETT & COMPANY SUNAMERICA ASSET MANAGEMENT CORPORATION
SUNAMERICA ASSET MANAGEMENT CORPORATION WELLINGTON MANAGEMENT COMPANY, LLP
T. ROWE PRICE ASSOCIATES, INC.
GOLDMAN SACHS MANAGEMENT INTERNATIONAL
WELLINGTON MANAGEMENT COMPANY, LLP
</TABLE>
You can put your money into any one or all of the SELECT PORTFOLIO(S), FOCUSED
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 July 5, 2000. The
SAI has been filed with the Securities and Exchange Commission ("SEC") and can
be considered part of this prospectus.
The table of contents of the SAI appears on page 37 of this prospectus. For a
free copy of the SAI, call us at 800/445-SUN2 or write our Annuity Service
Center at, P.O. Box 54299, Los Angeles, California 90054-0299.
A registration statement has been filed with the SEC under the Securities Act of
1933 relating to the contract. This prospectus does not contain all the
information in the registration statement as permitted by SEC regulations. The
omitted information can be obtained from the SEC's principal office in
Washington, D.C., upon payment of a prescribed fee.
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>
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE
Anchor National's Annual Report on Form 10-K for the year ended
December 31, 1999 is incorporated herein by reference.
All documents or reports filed by Anchor National under Section 13(a), 13(c),
14, or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") after the effective date of this prospectus are also incorporated by
reference. Statements contained in this prospectus and subsequently filed
documents which are incorporated by reference or deemed to be incorporated by
reference are deemed to modify or supersede documents incorporated herein by
reference.
Anchor National files its Exchange Act documents and reports, including its
annual and quarterly reports on Form 10-K and Form 10-Q, electronically pursuant
to EDGAR under CIK No. 0000006342.
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 registration
statements and exhibits. For further information regarding the separate account,
Anchor National and its general account, the Variable Portfolios and the
contract, please refer to the registration statements and exhibits.
The SEC also maintains a website (http://www.sec.gov) that contains the SAI,
materials incorporated by reference and other information filed electronically
with the SEC by Anchor National.
Anchor National will provide without charge to each person to whom this
prospectus is delivered, upon written or oral request, a copy of the documents
incorporated by reference. Requests for these documents should be directed to
Anchor National's Annuity Service Center, as follows:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Telephone Number: (800) 445-SUN2
SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION
Indemnification for liabilities arising under the Securities Act of 1933 (the
"Act") is provided to Anchor National's officers, directors and controlling
persons. The SEC has advised that it believes such indemnification is against
public policy under the Act and unenforceable. If a claim for indemnification
against such liabilities (other than for Anchor National's payment of expenses
incurred or paid by its directors, officers or controlling persons in the
successful defense of any legal action) is asserted by a director, officer or
controlling person of Anchor National in connection with the securities
registered under this prospectus, Anchor National will submit to a court with
jurisdiction to determine whether the indemnification is against public policy
under the Act. Anchor National will be governed by final judgment of the issue.
However, if in the opinion of Anchor National's counsel this issue has been
determined by controlling precedent, Anchor National will not submit the issue
to a court for determination.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY.................................................... 4
FEE TABLES.................................................. 5
Owner Transaction Expenses.............................. 5
Annual Separate Account Expenses........................ 5
The Income Protector Fee................................ 5
Investment Portfolio Expenses of Portfolios............. 6
Investment Portfolio Expenses by Strategy............... 6
Investment Portfolio Expenses for Strategy Underlying
Portfolios............................................. 6
EXAMPLES.................................................... 7
THE SEASONS SELECT VARIABLE ANNUITY......................... 10
PURCHASING A SEASONS SELECT VARIABLE ANNUITY................ 11
Allocation of Purchase Payments......................... 11
Accumulation Units...................................... 11
Free Look............................................... 12
INVESTMENT OPTIONS.......................................... 12
Variable Investment Options............................. 12
THE PORTFOLIOS........................................ 13
THE STRATEGIES........................................ 14
Market Value Adjustment................................. 17
Transfers During the Accumulation Phase................. 18
Dollar Cost Averaging................................... 19
Principal Advantage Program............................. 20
Voting Rights........................................... 21
Substitution............................................ 21
ACCESS TO YOUR MONEY........................................ 21
Free Withdrawal Provision............................... 21
Systematic Withdrawal Program........................... 23
Minimum Contract Value.................................. 23
Qualified Contract Owners............................... 23
DEATH BENEFIT............................................... 23
Death of the Annuitant.................................. 24
EXPENSES.................................................... 25
Insurance Charges....................................... 25
Withdrawal Charges...................................... 25
Investment Charges...................................... 26
Contract Maintenance Fee................................ 26
Transfer Fee............................................ 26
Premium Tax............................................. 26
Income Taxes............................................ 26
Reduction or Elimination of Charges and Expenses, and
Additional Amounts Credited............................ 26
INCOME OPTIONS.............................................. 27
Annuity Date............................................ 27
Income Options.......................................... 27
Allocation of Annuity Payments.......................... 28
Transfers During the Income Phase....................... 29
Deferment of Payments................................... 29
The Income Protector.................................... 29
TAXES....................................................... 32
Annuity Contracts in General............................ 32
Tax Treatment of Distributions--Non-qualified
Contracts.............................................. 32
Tax Treatment of Distributions--Qualified Contracts..... 32
Minimum Distributions................................... 33
Diversification......................................... 33
PERFORMANCE................................................. 33
OTHER INFORMATION........................................... 34
Anchor National......................................... 34
The Separate Account.................................... 34
Custodian............................................... 34
The General Account..................................... 35
Distribution of the Contract............................ 35
Administration.......................................... 35
Legal Proceedings....................................... 35
INDEPENDENT ACCOUNTANTS..................................... 36
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.... 37
APPENDIX A--CONDENSED FINANCIAL INFORMATION................. A-1
APPENDIX B--MARKET VALUE ADJUSTMENT......................... B-1
APPENDIX C--PREMIUM TAXES................................... C-1
</TABLE>
3
<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
portfolios 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.
PORTFOLIO(S)--A sub-account of Variable Annuity Account Five which provides for
the variable investment options available under the contract. Each 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
different advisors.
4
<PAGE>
SEASONS SELECT 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 fifteen 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 FEE
(The Income Protector Program is optional and
if elected the fee is deducted annually from your contract value.)
<TABLE>
<S> <C>
Fee as a percentage of your Income
Benefit Base*....................... 0.10%
</TABLE>
* The Income Benefit Base is calculated by using your contract value on the date
of your effective enrollment in the program and then each subsequent contract
anniversary, adding purchase payments made since the prior contract anniversary,
less proportional withdrawals, and fees and charges applicable to those
withdrawals.
5
<PAGE>
INVESTMENT PORTFOLIO EXPENSES OF PORTFOLIOS
(based on the total annual expenses of the underlying investment portfolios
reflected below as of the fiscal year end of the
Trust ending March 31, 2000)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
FEE EXPENSES EXPENSES
<S> <C> <C> <C>
---------------------------------------------------------------------------------
SELECT PORTFOLIOS
---------------------------------------
Large Cap Growth 0.80% 0.30% 1.10%
Large Cap Composite 0.80% 0.30% 1.10%
Large Cap Value 0.80% 0.30% 1.10%
Mid Cap Growth 0.85% 0.30% 1.15%
Mid Cap Value 0.85% 0.30% 1.15%
Small Company 0.85% 0.30% 1.15%
International Equity 1.00% 0.30% 1.30%
Diversified Fixed Income 0.70% 0.30% 1.00%
Cash Management 0.55% 0.30% 0.85%
---------------------------------------------------------------------------------
FOCUSED PORTFOLIOS
---------------------------------------
Focus Growth* 1.00% 0.30% 1.30%
---------------------------------------------------------------------------------
</TABLE>
* This portfolio was not available for sale during fiscal year 2000. The
percentages are based on estimated amounts for the current fiscal year.
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 ending March 31, 2000)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
FEE EXPENSES EXPENSES
<S> <C> <C> <C>
--------------------------------------------------------------------------------
Growth 0.87% 0.27% 1.14%
Moderate Growth 0.85% 0.27% 1.12%
Balanced Growth 0.83% 0.29% 1.12%
Conservative Growth 0.80% 0.30% 1.10%
--------------------------------------------------------------------------------
</TABLE>
IMPORTANT INFORMATION ABOUT PORTFOLIO EXPENSES IF INVESTED IN STRATEGIES:
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 14. 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 ending March 31, 2000)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
FEE EXPENSES EXPENSES
<S> <C> <C> <C>
--------------------------------------------------------------------------------
Stock 0.85% 0.21% 1.06%
Asset Allocation: Diversified
Growth 0.85% 0.36% 1.21%
Multi-Managed Growth 0.89% 0.26% 1.15%
Multi-Managed Moderate Growth 0.85% 0.25% 1.10%
Multi-Managed Income/Equity 0.81% 0.29% 1.10%
Multi-Managed Income 0.77% 0.29% 1.06%
--------------------------------------------------------------------------------
</TABLE>
THE ABOVE INVESTMENT PORTFOLIO EXPENSES WERE PROVIDED BY SEASONS SERIES TRUST.
WE HAVE NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
6
<PAGE>
EXAMPLES
You will pay the following expenses on a $1,000 investment, assuming a 5% annual
return on assets, Investment Portfolio Expenses after any waiver, reimbursement
or recoupment, if applicable, and:
(a) If the contract is surrendered at the end of the stated time period and if
you were 80 or younger at time of issue.
(b) If the contract is surrendered at the end of the stated time period and 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> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------
Large Cap Growth (a) $116 (a) $150 (a) $196 (a) $289
(b) $117 (b) $153 (b) $202 (b) $300
(c) $26 (c) $ 80 (c) $136 (c) $289
(d) $27 (d) $ 83 (d) $142 (d) $300
Large Cap Composite (a) $116 (a) $150 (a) $196 (a) $289
(b) $117 (b) $153 (b) $202 (b) $300
(c) $26 (c) $ 80 (c) $136 (c) $289
(d) $27 (d) $ 83 (d) $142 (d) $300
Large Cap Value (a) $116 (a) $150 (a) $196 (a) $289
(b) $117 (b) $153 (b) $202 (b) $300
(c) $26 (c) $ 80 (c) $136 (c) $289
(d) $27 (d) $ 83 (d) $142 (d) $300
Mid Cap Growth (a) $116 (a) $151 (a) $198 (a) $294
(b) $118 (b) $155 (b) $204 (b) $305
(c) $26 (c) $ 81 (c) $138 (c) $294
(d) $28 (d) $ 85 (d) $144 (d) $305
Mid Cap Value (a) $116 (a) $151 (a) $198 (a) $294
(b) $118 (b) $155 (b) $204 (b) $305
(c) $26 (c) $ 81 (c) $138 (c) $294
(d) $28 (d) $ 85 (d) $144 (d) $305
Small Company (a) $116 (a) $151 (a) $198 (a) $294
(b) $118 (b) $155 (b) $204 (b) $305
(c) $26 (c) $ 81 (c) $138 (c) $294
(d) $28 (d) $ 85 (d) $144 (d) $305
International Equity (a) $118 (a) $155 (a) $206 (a) $308
(b) $119 (b) $159 (b) $212 (b) $320
(c) $28 (c) $ 85 (c) $146 (c) $308
(d) $29 (d) $ 89 (d) $152 (d) $320
Diversified Fixed Income (a) $115 (a) $147 (a) $191 (a) $279
(b) $116 (b) $150 (b) $197 (b) $291
(c) $25 (c) $ 77 (c) $131 (c) $279
(d) $26 (d) $ 80 (d) $137 (d) $291
Cash Management (a) $113 (a) $142 (a) $183 (a) $264
(b) $115 (b) $146 (b) $189 (b) $276
(c) $23 (c) $ 72 (c) $123 (c) $264
(d) $25 (d) $ 76 (d) $129 (d) $276
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
<CAPTION>
FOCUSED PORTFOLIOS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Focus Growth** (a) $118 (a) $155 (a) $206 (a) $308
(b) $119 (b) $159 (b) $212 (b) $320
(c) $28 (c) $ 85 (c) $146 (c) $308
(d) $29 (d) $ 89 (d) $152 (d) $320
----------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
TIME PERIODS
STRATEGY 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Growth (a) $116 (a) $151 (a) $198 (a) $293
(b) $117 (b) $154 (b) $204 (b) $304
(c) $26 (c) $ 81 (c) $138 (c) $293
(d) $27 (d) $ 84 (d) $144 (d) $304
Moderate Growth (a) $116 (a) $150 (a) $197 (a) $291
(b) $117 (b) $154 (b) $203 (b) $302
(c) $26 (c) $ 80 (c) $137 (c) $291
(d) $27 (d) $ 84 (d) $143 (d) $302
Balanced Growth (a) $116 (a) $150 (a) $197 (a) $291
(b) $117 (b) $154 (b) $203 (b) $302
(c) $26 (c) $ 80 (c) $137 (c) $291
(d) $27 (d) $ 84 (d) $143 (d) $302
Conservative Growth (a) $116 (a) $150 (a) $196 (a) $289
(b) $117 (b) $153 (b) $202 (b) $300
(c) $26 (c) $ 80 (c) $136 (c) $289
(d) $27 (d) $ 83 (d) $142 (d) $300
------------------------------------------------------------------------------------------
</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.
** This portfolio was not available for sale during fiscal year 2000. The
figures are based on estimated amounts for the current fiscal year.
You will pay the following expenses on a $1,000 investment, assuming a 5% annual
return on assets, Investment Portfolio Expenses after any waiver, reimbursement
or recoupment, if applicable, election of the OPTIONAL Income Protector Program
and:
(a) If the contract is surrendered at the end of the stated time period and if
you were 80 or younger at time of issue.
(b) If the contract is surrendered at the end of the stated time period and if
you were age 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> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------
Large Cap Growth (a) $117 (a) $153 (a) $201 (a) $300
(b) $118 (b) $156 (b) $207 (b) $312
Large Cap Composite (a) $117 (a) $153 (a) $201 (a) $300
(b) $118 (b) $156 (b) $207 (b) $312
Large Cap Value (a) $117 (a) $153 (a) $201 (a) $300
(b) $118 (b) $156 (b) $207 (b) $312
Mid Cap Growth (a) $117 (a) $154 (a) $203 (a) $305
(b) $119 (b) $158 (b) $209 (b) $316
Mid Cap Value (a) $117 (a) $154 (a) $203 (a) $305
(b) $119 (b) $158 (b) $209 (b) $316
Small Company (a) $117 (a) $154 (a) $203 (a) $305
(b) $119 (b) $158 (b) $209 (b) $316
International Equity (a) $119 (a) $159 (a) $211 (a) $319
(b) $120 (b) $162 (b) $217 (b) $331
Diversified Fixed Income (a) $116 (a) $150 (a) $196 (a) $290
(b) $117 (b) $153 (b) $202 (b) $302
Cash Management (a) $114 (a) $145 (a) $189 (a) $275
(b) $116 (b) $149 (b) $195 (b) $287
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
<CAPTION>
FOCUSED PORTFOLIOS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Focus Growth** (a) $119 (a) $159 (a) $211 (a) $319
(b) $120 (b) $162 (b) $217 (b) $331
----------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
TIME PERIODS
STRATEGY 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Growth (a) $117 (a) $154 (a) $203 (a) $304
(b) $118 (b) $157 (b) $209 (b) $315
Moderate Growth (a) $117 (a) $153 (a) $202 (a) $302
(b) $118 (b) $157 (b) $208 (b) $313
Balanced Growth (a) $117 (a) $153 (a) $202 (a) $302
(b) $118 (b) $157 (b) $208 (b) $313
Conservative Growth (a) $117 (a) $153 (a) $201 (a) $300
(b) $118 (b) $156 (b) $207 (b) $312
------------------------------------------------------------------------------------------
</TABLE>
** This portfolio was not available for sale during fiscal year 2000. The
figures are based on estimated amounts for the current fiscal year.
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, FOCUSED 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, FOCUSED
PORTFOLIOS and STRATEGIES invest, SAAMCo 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%, Focus Growth 1.30% and
Cash Management Portfolio 0.85%. SAAMCo also may voluntarily waive or
reimburse additional amounts to increase the investment return to a
Portfolio's investors. SAAMCo may terminate all such waivers and/or
reimbursements at any time. Further, any waivers or reimbursements made by
SAAMCo 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 SAAMCo and remain in compliance with the
foregoing expense limitations. During the time period reflected in this
Fee Table, the adviser did not rely on any of these waiver and/or
reimbursement agreements.
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 SELECT PORTFOLIOS, FOCUSED
PORTFOLIOS and STRATEGY(IES) are contained in Appendix A--Condensed Financial
Information.
9
<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: This means that you do not pay taxes on your earnings from
the annuity until you withdraw them.
- Death Benefit: If you die during the Accumulation Phase, the insurance
company pays a death benefit to your Beneficiary.
- Guaranteed Income: If elected, you receive a stream of income for your
lifetime, or another available period you select.
Tax-qualified retirement plans (e.g., IRAs, 401(k) or 403(b) plans) defer
payment of taxes on earnings until withdrawal. If you are considering funding a
tax-qualified retirement plan with an annuity, you should know that an annuity
does not provide any additional tax deferral treatment of earnings beyond the
treatment provided by the tax-qualified retirement plan itself. However,
annuities do provide other features and benefits which may be valuable to you.
You should fully discuss this decision with your financial advisor.
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, FOCUSED
PORTFOLIOS and/or STRATEGIES. The SELECT PORTFOLIOS, FOCUSED 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, FOCUSED PORTFOLIOS or STRATEGIES. The amount
of money you accumulate in your contract depends on the performance of the
SELECT PORTFOLIO(S), FOCUSED 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), FOCUSED PORTFOLIO(S), STRATEGY(IES)
and fixed account options available under this contract, SEE INVESTMENT OPTIONS
PAGE 12.
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 and Oregon. Anchor
National is an indirect, wholly owned subsidiary of American International
Group, Inc., a Delaware corporation. Seasons Select may not currently be
available in all states.
This annuity is designed for investors whose personal circumstances allow for a
long-term investment time horizon, to assist in contributing to retirement
savings. As a function of the federal tax code you may be assessed a 10% federal
tax penalty on any withdrawal made prior to your reaching age 59 1/2.
Additionally, this contract provides
10
<PAGE>
that you will be charged a withdrawal charge on each Purchase Payment withdrawn
if that Purchase Payment has not been invested in this contract for at least 9
years. Because of these potential penalties, you should fully discuss all of the
benefits and risks of this contract with your financial adviser prior to
purchase.
PURCHASING A SEASONS SELECT VARIABLE ANNUITY
--------------------------------------------------------------------------------
An initial Purchase Payment is the money you give us to buy a contract. Any
additional money you give us to invest in the contract after purchase is a
subsequent Purchase Payment.
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
$1,500,000. The Company reserves the right to refuse any Purchase Payment
including one which would cause the contact value or Purchase Payments to exceed
$1,500,000 at the time of the Purchase Payment. 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, we will not issue a Qualified contract to anyone who is age 70 1/2
or older, unless they certify to us that the minimum distribution required by
the federal tax code 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),
FOCUSED 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 12.
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), FOCUSED 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.
11
<PAGE>
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,
SELECT PORTFOLIO or FOCUSED PORTFOLIO after the NYSE closes each day. We do this
by:
1. determining the total value of money invested in a particular STRATEGY,
SELECT PORTFOLIO or FOCUSED PORTFOLIO;
2. subtracting from that amount any asset-based charges and any other
charges such as taxes we have deducted; and
3. dividing this amount by the number of outstanding Accumulation Units.
FREE LOOK
You may cancel your contract within ten days after receiving it (or longer if
required by state law). We call this a "free look." To cancel, you must mail the
contract along with your free look request to our Annuity Service Center at
P.O. Box 54299, Los Angeles, California 90054-0299. Unless otherwise required by
state law, you will receive back the value of the money allocated to the SELECT
PORTFOLIO(S), FOCUSED 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 the greater of (1) your Purchase Payments, or (2) the value of your
contract. 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 PORTFOLIOS,
FOCUSED PORTFOLIOS and STRATEGIES, and fixed investment options. We designed the
contract to meet your varying investment needs over time. You can achieve this
by using the SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and/or STRATEGIES alone or in
concert with the fixed investment options. The SELECT PORTFOLIOS, FOCUSED
PORTFOLIOS and STRATEGIES 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 PORTFOLIOS, FOCUSED PORTFOLIOS and/or STRATEGIES 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. 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 TRUST PROSPECTUS WHICH IS ATTACHED HERETO CONTAINS DETAILED
INFORMATION ABOUT THE UNDERLYING INVESTMENT PORTFOLIOS INCLUDING INVESTMENT
OBJECTIVE AND RISK FACTORS.
THE PORTFOLIOS
The contract offers nine SELECT PORTFOLIOS, each with a distinct investment
objective, utilizing a disciplined investing style to achieve its objective.
Each SELECT PORTFOLIO invests in an underlying investment portfolio
12
<PAGE>
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
component of the underlying portfolios is an unmanaged component that tracks a
particular target index or subset of an index. The other two components are
actively managed. The unmanaged component of each underlying portfolio is
intended to balance some of the risks associated with an actively traded
portfolio.
The contract also currently offers one FOCUSED PORTFOLIO. Each multi-managed
FOCUSED PORTFOLIO offers you at least two different professional managers, one
of which may be SAAMCo, and each of which advises a separate portion of the
FOCUSED PORTFOLIO. Each manager actively selects a limited number of stocks that
represent their best ideas. This approach to investing results in a more
concentrated portfolio, which will be less diversified than the SELECT
PORTFOLIOS, and may be subject to greater market risks.
Each underlying PORTFOLIO and the respective managers are:
<TABLE>
<S> <C>
SELECT PORTFOLIOS LARGE CAP COMPOSITE
LARGE CAP GROWTH Bankers Trust
Bankers Trust SAAMCo
Goldman Sachs T. Rowe Price
Janus
LARGE CAP VALUE MID CAP GROWTH
Bankers Trust Bankers Trust
T. Rowe Price T. Rowe Price
Wellington Wellington
MID CAP VALUE SMALL CAP
Bankers Trust Bankers Trust
Goldman Sachs Lord Abbett
Lord Abbett SAAMCo
INTERNATIONAL EQUITY DIVERSIFIED FIXED INCOME
Bankers Trust Bankers Trust
Goldman Sachs Int'l SAAMCo
Lord Abbett Wellington
CASH MANAGEMENT
SAAMCo
FOCUSED PORTFOLIO
FOCUS GROWTH
Fred Alger
Jennison
Marisco Capital
</TABLE>
PORTFOLIO OPERATION
Each 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 PORTFOLIO
will be allocated among the three managers for that PORTFOLIO. Each quarter
SAAMCo will evaluate the asset allocation between the three managers of each
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
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 PORTFOLIO. Transfers made as a result of
rebalancing a PORTFOLIO are not considered a transfer under your contract.
13
<PAGE>
THE STRATEGIES
The contract offers four multi-manager variable investment STRATEGIES, each with
a different investment objective. We designed the STRATEGIES 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
STRATEGIES 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. The
Stock Portfolio is managed by T. Rowe Price. All of the Multi-Managed Portfolios
include the same three basic investment components: a growth component managed
by Janus, a balanced component managed by SAAMCo and a fixed income component
managed by Wellington, 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 initially 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) your money 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 rebalancing is, deemed necessary and not adverse to
the interests of contract owners invested in such STRATEGY. Rebalancing a
STRATEGY may involve shifting a portion of assets out of underlying investment
portfolios with higher returns into underlying investment portfolios with
relatively lower returns. Transfers made as a result of rebalancing a STRATEGY
are not counted against your fifteen free transfers per year.
14
<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.
<TABLE>
<S> <C>
Stocks.............................. 80%
Bonds............................... 15%
Cash................................ 5%
</TABLE>
UNDERLYING INVESTMENT
PORTFOLIOS & MANAGERS
<TABLE>
<S> <C>
MULTI-MANAGED GROWTH PORTFOLIO 50%
Managed by:
Janus Capital Corporation
SunAmerica Asset Management Corp.
Wellington Management Company, LLP
STOCK PORTFOLIO 25%
Managed by T. Rowe Price Associates,
Inc.
ASSET ALLOCATION: DIVERSIFIED GROWTH
PORTFOLIO 25%
Managed by Putnam Investment
Management, Inc.
</TABLE>
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.
<TABLE>
<S> <C>
Stocks.............................. 70%
Bonds............................... 25%
Cash................................ 5%
</TABLE>
UNDERLYING INVESTMENT
PORTFOLIOS & MANAGERS
<TABLE>
<S> <C>
MULTI-MANAGED MODERATE GROWTH PORTFOLIO 55%
Managed by:
Janus Capital Corporation
SunAmerica Asset Management Corp.
Wellington Management Company, LLP
STOCK PORTFOLIO 20%
Managed by T. Rowe Price Associates,
Inc.
ASSET ALLOCATION: DIVERSIFIED GROWTH
PORTFOLIO 25%
Managed by Putnam Investment
Management, Inc.
</TABLE>
15
<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.
<TABLE>
<S> <C>
Stocks.............................. 55%
Bonds............................... 40%
Cash................................ 5%
</TABLE>
UNDERLYING INVESTMENT
PORTFOLIOS & MANAGERS
<TABLE>
<S> <C>
MULTI-MANAGED INCOME/EQUITY PORTFOLIO 55%
Managed by:
Janus Capital Corporation
SunAmerica Asset Management Corp.
Wellington Management Company, LLP
STOCK PORTFOLIO 20%
Managed by T. Rowe Price Associates,
Inc.
ASSET ALLOCATION: DIVERSIFIED GROWTH
PORTFOLIO 25%
Managed by Putnam Investment
Management, Inc.
</TABLE>
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.
<TABLE>
<S> <C>
Stocks.............................. 42%
Bonds............................... 53%
Cash................................ 5%
</TABLE>
UNDERLYING INVESTMENT
PORTFOLIOS & MANAGERS
<TABLE>
<S> <C>
MULTI-MANAGED INCOME PORTFOLIO 60%
Managed by:
Janus Capital Corporation
SunAmerica Asset Management Corp.
Wellington Management Company, LLP
STOCK PORTFOLIO 15%
Managed by T. Rowe Price Associates,
Inc.
ASSET ALLOCATION: DIVERSIFIED GROWTH
PORTFOLIO 25%
Managed by Putnam Investment
Management, Inc.
</TABLE>
16
<PAGE>
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 and Washington only the one year fixed account option is available.
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 page 19 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. Rates for specified payments are declared at the
beginning of the guarantee period and do not change during the specified period.
There are three scenarios in which you may put money into the fixed account
options. In each scenario your money may be credited a different rate of
interest as follows:
- INITIAL RATE: Rate credited to new Purchase Payments allocated to the
fixed account when you purchase your contract.
- CURRENT RATE: Rate credited to subsequent Purchase Payments allocated to
the fixed account.
- RENEWAL RATE: Rate credited to money transferred from a fixed account or
one of the STRATEGIES into a fixed account and to money remaining in a
fixed account after expiration of a guarantee period.
Each of these rates may differ from one and other. Although once declared the
applicable rate is guaranteed until the guarantee period expires.
The DCA fixed accounts also credit a fixed rate of interest. Interest is
credited to amounts allocated to the 1-year or 6-month DCA fixed account while
your investment is systematically transferred to the variable Portfolios. The
rates applicable to the DCA fixed accounts may differ from each other and/or the
other fixed account options but will never be less than an effective rate of 3%.
SEE DOLLAR COST AVERAGING ON PAGE 19 for more information.
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), FOCUSED
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.
17
<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" or "MVA"). 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), FOCUSED PORTFOLIO(S),
STRATEGY(IES) and the fixed investment options by written request or by
telephone. Although you may transfer money out of the DCA fixed accounts, you
may not transfer money into the DCA fixed account from any SELECT PORTFOLIO,
FOCUSED PORTFOLIO, STRATEGY or fixed investment option. You can make fifteen
(15) 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
fifteen (15) 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, FOCUSED PORTFOLIO, STRATEGY or a
fixed investment option. Any money remaining in a SELECT PORTFOLIO, FOCUSED
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 fixed accounts.
18
<PAGE>
We will accept transfers by telephone unless you specify otherwise on your
contract application. When receiving 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.
We will accept transfers over the internet unless you specify otherwise on your
contract application. When receiving internet account transfers, 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 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,
PAGE 27.
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
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, FOCUSED PORTFOLIO and/or
STRATEGY or from the 1-year fixed account option (source accounts) to any other
SELECT PORTFOLIO, FOCUSED PORTFOLIO or STRATEGY. Transfers may be monthly or
quarterly. You may change the frequency at any time by notifying us in writing.
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
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),
FOCUSED 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. The minimum transfer amount if you use the 1-year or 6-month DCA fixed
accounts to provide dollar cost averaging is $100.
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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 count against your fifteen (15) free transfers
per year. However, transfers resulting from a termination of this program do not
count towards your fifteen (15) free transfers.
The DCA program is designed to lessen the impact of market fluctuations on your
investment. However, we cannot ensure that you will make a profit. When you
elect the DCA Program, you are continuously investing in securities regardless
of fluctuating price levels. You should consider your tolerance for investing
through periods of fluctuating price levels.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to gradually move $750 each quarter from the Cash
Management Portfolio to the 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), FOCUSED PORTFOLIO(S) or STRATEGY(IES) without putting your
principal at direct risk. The program accomplishes this by allocating your
investment strategically between the fixed investment options (other than the
DCA fixed accounts) and the SELECT PORTFOLIO, FOCUSED PORTFOLIO or STRATEGY you
select. You
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<PAGE>
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
$71,069 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
may be allocated among the SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) or
STRATEGY(IES), as determined by you, to provide opportunity for greater
growth.
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 27.
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 25. 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.
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
at the time the free withdrawals were taken if your prior free withdrawal(s) had
not been free.
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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, or;
2. If you are participating in the Systematic Withdrawal program, a total
of 10% of your Total Invested Amount less any withdrawals taken during
the contract year.
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 less any withdrawals taken during the
contract year.
Purchase payments, above and beyond the amount of your free withdrawal amount,
that are invested for less than 9 years and withdrawn will result in your paying
a penalty in the form of a surrender charge. The amount of the charge and how it
applies are discussed more fully below. You should consider, before purchasing
this contract, the effect this charge will have on your investment if you need
to withdraw more money than the free withdrawal amount. You should fully discuss
this decision with your financial advisor.
The withdrawal charge percentage is determined by the age of the Purchase
Payment remaining in the contract at the time of the withdrawal. For the purpose
of calculating the withdrawal charge, any prior Free Withdrawal is not
subtracted from the total Purchase Payments still subject to withdrawal charges.
For example, you make an initial Purchase Payment of $100,000. For purposes of
this example we will assume a 0% growth rate over the life of the contract and
no subsequent Purchase Payments. In contract year 2 and year 3, you take out
your maximum free withdrawal of $10,000 for each year. After that free
withdrawal your contract value is $80,000. In contract year 5 you request a full
surrender of your contract. We will apply the following calculation,
A - (B X C) = D, where:
A = Your contract value at the time of your request for surrender ($80,000)
B = The amount of your Purchase Payments still subject to withdrawal charge
($100,000)
C = The withdrawal charge percentage applicable to the age of each Purchase
Payment (6%) [B X C = $6,000]
D = Your full surrender value ($74,000)
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The minimum partial withdrawal amount is $1,000. We require that the value left
in any SELECT PORTFOLIO, FOCUSED 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, FOCUSED 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.
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 32 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
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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
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 27.
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 payment must begin 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.
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<PAGE>
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), FOCUSED 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), FOCUSED
PORTFOLIO(S) and/or STRATEGY(IES).
We deduct the charge daily, on a pro-rata basis, from the value of your contract
allocated to the SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) and/or STRATEGY(IES).
The insurance charge compensates us for the mortality and expense risks and the
costs of contract distribution assumed by Anchor National.
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 9 10
--------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Withdrawal Charge 9% 8% 7% 6% 6% 5% 4% 3% 2% 0%
</TABLE>
After a Purchase Payment has been in the contract for nine complete years, the
withdrawal charge no longer applies to that payment.
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 21.
We will not assess a withdrawal charge for money withdrawn to pay a death
benefit. We do not currently assess a withdrawal charge upon election to receive
income payments from your contract.
Withdrawals made prior to age 59 1/2 may result in tax penalties. SEE TAXES
PAGE 32.
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<PAGE>
INVESTMENT CHARGES
Charges are deducted from the assets of the investment portfolios underlying the
SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) or STRATEGY(IES) for the advisory and
other expenses of the portfolios. THE FEE TABLE BEGINNING ON PAGE 5 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 on a pro-rata basis from your account value on your contract
anniversary. In the states of Pennsylvania, Texas and Washington a contract
maintenance fee will be deducted pro-rata from the SELECT PORTFOLIO(S), FOCUSED
PORTFOLIO(S) and/or STRATEGY(IES) in which you are invested, only. If you
withdraw your entire contract value, we deduct the fee from that withdrawal.
If your contract value is $50,000 or more on your contract anniversary date, we
will waive the charge. This waiver is subject to change without notice.
TRANSFER FEE
We currently permit fifteen free transfers between investment options, every
contract year. We charge you $25 for each transfer over fifteen in any one year
($10 in Pennsylvania and Texas). We deduct the transfer fee from the SELECT
PORTFOLIO(S), FOCUSED PORTFOLIO(S), STRATEGY(IES) and/or fixed investment option
from which you request the transfer. SEE INVESTMENT OPTIONS, PAGE 12.
INCOME PROTECTOR FEE
Please see page 29 of this prospectus for additional information regarding the
Income Protector Fee.
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 C 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
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<PAGE>
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
second 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.
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 32.
INCOME OPTIONS
Currently, this Contract offers five 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.
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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 (in full or
in part) after the Annuity Date. The amount available upon such redemption would
be the discounted present value of any remaining guaranteed payments.
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), FOCUSED 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), FOCUSED
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),
FOCUSED PORTFOLIO(S) and/or STRATEGY(IES) after the Annuity date depending on
four things:
- for life options, your age when payments begin, and;
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<PAGE>
- the value of your contract in the SELECT PORTFOLIO(S), FOCUSED
PORTFOLIO(S) and/or STRATEGY(IES) on the Annuity Date, and;
- the 3.5% assumed investment rate for variable income payments used in the
annuity table for the contract, and;
- the performance of the SELECT PORTFOLIO(S), FOCUSED 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), FOCUSED PORTFOLIO(S) and/or STRATEGY(IES) after the Annuity Date,
the allocation of funds between the fixed accounts and SELECT PORTFOLIO(S),
FOCUSED PORTFOLIO(S) and/or STRATEGY(IES) also impacts the amount of your
annuity payments.
TRANSFERS DURING THE INCOME PHASE
During the Income Phase, one (1) transfer per month is permitted between the
SELECT PORTFOLIO(S), FOCUSED PORTFOLIO(S) and STRATEGY(IES). No other transfers
are allowed during the income phase.
DEFERMENT OF PAYMENTS
We may defer making fixed payments for up to six months, or less if required by
law. Interest is credited to you during the deferral period.
Please read the Statement of Additional Information for a more detailed
discussion of the income options.
THE INCOME PROTECTOR
If you purchase your contract after July 5, 2000, you may elect to enroll in the
Income Protector Program. The Income Protector Program provides a future "safety
net" which offers you the ability to receive a guaranteed fixed minimum
retirement income when you choose to begin receiving income payments. With the
Income Protector you can know the level of minimum income that will be available
to you upon annuitization, regardless of fluctuating market conditions. In order
to utilize the program, you must follow the provisions discussed below.
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 income
payments under the general provisions of your contract. YOU MAY NEVER NEED TO
RELY UPON INCOME PROTECTOR IF YOUR CONTRACT PERFORMS WITHIN A HISTORICALLY
ANTICIPATED RANGE. HOWEVER, PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
Certain federal tax code 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 DO WE DETERMINE THE AMOUNT OF YOUR MINIMUM GUARANTEED INCOME?
We base the amount of minimum retirement income available to you if you take
income payments 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 Initial Income Benefit Base is equal to your contract
value. Your participation becomes effective on either the date of issue of the
contract (if the feature is elected at the time of application) or on the
contract anniversary following your enrollment in the program.
29
<PAGE>
The Income Benefit Base is only a calculation. It does not represent a contract
value, nor does it guarantee performance of the SELECT PORTFOLIOS, FOCUSED
PORTFOLIOS or STRATEGIES 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 equal to, for the first year of calculation, your contract value on
the date your participation became effective, and for each subsequent
year of calculation, the Income Benefit Base of your prior contract
anniversary, and;
(b) is equal to the sum of all subsequent Purchase Payments made into the
contract since the prior contract anniversary, and;
(c) is equal to all withdrawals and applicable fees, charges and any
negative MVA (but excluding administration fees, mortality and expense
charges and the fee for enrollment into the program) since the prior
contract anniversary, including premium taxes, in an amount proportionate
to the amount by which such withdrawals decreased your contract value.
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. You can not terminate your enrollment once elected.
ELECTING TO RECEIVE INCOME
In order to exercise the Income Protector feature, you may not begin the income
phase for at least nine years following the date your enrollment in the program
became effective. Further, you may begin taking income payments using the Income
Protector feature only within 30 days after the ninth or later contract
anniversary following the effective date of your enrollment in the Income
Protector program.
The contract anniversary prior to your election to begin receiving income
payments is your Income Benefit Date. We calculate your Income Benefit Base as
of that date to use in determining your guaranteed minimum fixed retirement
income. To determine the minimum guaranteed retirement income available to you,
we apply your final Income Benefit Base to the annuity rates stated in your
Income Protector endorsement for the income option you select. You then choose
if you would like to receive the income annually, semi-annually, quarterly or
monthly for the time guaranteed under your selected income 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 (including any negative MVA) and any withdrawal
charges otherwise applicable, calculated as if you fully surrender your
contract as of the Income Benefit Date, and any applicable premium taxes.
The income options available when using the Income Protector feature to receive
your retirement income are:
- Life Annuity with 10 years guaranteed, or
- Joint and 100% Survivor Life Annuity with 20 years guaranteed
At the time you elect to begin receiving income payments, we will calculate your
income payments using both your income benefit base and your contract value. We
will use the same income option for each calculation; however, the
30
<PAGE>
annuity factors used to calculate your income under the Income Protector feature
will be different. You will receive whichever provides a greater stream of
income. If you elect to receive income payments using the Income Protector
feature your income payments will be fixed in amount.
NOTE TO QUALIFIED CONTRACT HOLDERS
Qualified contracts generally require that you select an income option that does
not exceed your life expectancy. That restriction, if it applies to you, may
limit the benefit of the Income Protector program. To utilize the Income
Protector feature, you must take income payments under one of the two income
options described above. 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 minimum guarantee
and not be able to realize the benefit.
Generally, for qualified contracts:
- for the Life Annuity with 10 years guaranteed, you must annuitize before
age 79, and;
- for the Joint and 100% Survivor Annuity with 20 years guaranteed, both
annuitants must be 70 or younger or one of the annuitants must be 65 or
younger upon annuitization. Other age combinations may be available.
You may wish to consult your tax advisor for information concerning your
particular circumstances.
FEES ASSOCIATED WITH THE INCOME PROTECTOR PROGRAM
If you elect to participate in the Income Protector program we deduct a fee
equal to 0.10% of your Income Benefit Base from your contract value on each
contract anniversary beginning with the contract anniversary following the
anniversary on which your enrollment in the program becomes effective. We will
deduct this charge from your contract value on every contract anniversary up to
and including your Income Benefit Date. Additionally, if you fully surrender
your contract prior to your contract anniversary, we will deduct the fee at the
time of surrender based on your Income Benefit Base as of the surrender date.
Once elected, the Income Protector Program and its corresponding charges may not
be terminated until full surrender or annuitization of the contract occurs.
HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR PROGRAM:
This table assumes a $100,000 initial investment in a non-qualified contract
with no further premiums, no withdrawals, and no premium taxes, and the election
of the Income Protector program at contract issue.
<TABLE>
<CAPTION>
ANNUAL INCOME IF YOU ANNUITIZE ON THE FOLLOWING CONTRACT ANNIVERSARIES:
IF AT ISSUE YOU ARE... 1-8 9 10 15 20
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------
Male (M), Age 60* N/A 6,480 6,672 7,716 8,832
----------------------------------------------------------------------------------------------------
Female (F), Age 60* N/A 5,700 5,880 6,900 8,112
----------------------------------------------------------------------------------------------------
M and F, Age 60** N/A 4,920 5,028 5,544 5,928
----------------------------------------------------------------------------------------------------
</TABLE>
* Life Annuity with 10 Year Period Certain
** Joint and 100% Survivor Annuity with 20 Year Period Certain
The Income Protector program is not available in California and may not be
available in other states. Check with your financial adviser for availability in
your state.
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<PAGE>
We reserve the right to modify, suspend or terminate the program at any time.
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 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 federal tax code
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 federal tax
code 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 federal tax code); (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 federal tax code 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 federal tax code); (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 federal tax code for amounts paid during the taxable year for medical care;
(6) to fund higher
32
<PAGE>
education expenses (as defined in federal tax code); (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 federal tax code 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 federal tax code); 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.
We currently waive surrender charges and MVA on withdrawals taken to meet
minimum distribution requirements. Current operational practice is to provide a
free withdrawal of the greater of the contract's maximum penalty free amount or
the required minimum distribution amount for a particular contract (but not
both).
DIVERSIFICATION
The federal tax code 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.
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 PORTFOLIOS,
FOCUSED PORTFOLIOS and/or STRATEGIES. Any such performance results are based on
historical earnings and are not intended to indicate future performance.
We advertise the Cash Management Portfolio's yield and effective yield. In
addition, the other SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and STRATEGIES
advertise total return, gross yield and yield-to-maturity. These figures
represent past performance of the SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and
STRATEGIES. These performance numbers do not indicate future results.
33
<PAGE>
We may show performance of each SELECT PORTFOLIO, FOCUSED 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
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, SunAmerica Asset Management, SunAmerica Trust
Company, and the SunAmerica Financial Network, Inc. (comprising six wholly owned
broker-dealers), specialize in retirement savings and investment products and
services. Business focuses include, fixed and variable annuities, mutual funds,
broker-dealer services and trust administration services.
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.
34
<PAGE>
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. During the
accumulation phase, you will receive confirmation of transactions within your
contract. Transactions made pursuant to contractual or systematic agreements,
such as deduction of the annual maintenance fee and dollar cost averaging, may
be confirmed quarterly. Purchase payments received through the automatic payment
plan or a salary reduction arrangement, may also be confirmed quarterly. For all
other transactions, we send confirmations immediately.
During the Accumulation and Income Phases, you will receive a statement of your
transactions over the past quarter and a summary of your account values. 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.
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.
35
<PAGE>
INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
The consolidated financial statements of Anchor National Life Insurance Company
as of December 31, 1999, December 31, 1998, and September 30, 1998 and for the
year ended December 31, 1999, and for the three months ended December 31, 1998,
and for each of the two fiscal years in the period ended September 30, 1998, and
the financial statements of Variable Annuity Account Five (Portion Relating to
the SEASONS SELECT Variable Annuity), as of April 30, 2000 and March 31, 2000,
and for the one month ended April 30, 2000, and for the fiscal year ended
March 31, 2000, and for the period from inception to March 31, 1999, are
incorporated by reference in this prospectus and have been so included in
reliance on the reports of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
36
<PAGE>
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
Separate Account............................................ 3
General Account............................................. 4
Performance Data............................................ 4
Annuity Payments............................................ 8
Annuity Unit Values......................................... 8
Taxes....................................................... 11
Distribution of Contracts................................... 16
Financial Statements........................................ 16
</TABLE>
37
<PAGE>
APPENDIX A - CONDENSED FINANCIAL INFORMATION
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL 3/31/00
YEAR TO
STRATEGIES INCEPTION TO 3/31/99 3/31/00 4/30/00
------------------------------------------------- ---------------------- ----------- -----------
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
Growth (Inception Date: (a) 3/4/99 (b) 4/6/99)
Beginning AUV.................................. (a) 15.05 15.89 21.30
(b) 0 16.27 21.27
End AUV........................................ (a) 15.89 21.30 20.24
(b) 0 21.27 20.22
Ending Number of AUs........................... (a) 31,169 1,653,495 1,871,300
(b) 0 126,216 132,445
---------------------------------------------------------------------------------------------------------
Moderate Growth (Inception Date: (a) 3/3/99 (b) 4/26/99)
Beginning AUV.................................. (a) 14.25 15.09 19.48
(b) 0 15.79 19.46
End AUV........................................ (a) 15.09 19.48 18.62
(b) 0 19.46 18.59
Ending Number of AUs........................... (a) 93,136 1,559,019 1,760,865
(b) 0 53,392 69,503
---------------------------------------------------------------------------------------------------------
Balanced Growth (Inception Date: (a) 3/5/99 (b) 4/5/99)
Beginning AUV.................................. (a) 13.80 14.05 16.68
(b) 0 14.26 16.66
End AUV........................................ (a) 14.05 16.68 16.11
(b) 0 16.66 16.09
Ending Number of AUs........................... (a) 85,553 991,695 1,061,795
(b) 0 113,160 109,857
---------------------------------------------------------------------------------------------------------
Conservative Growth (Inception Date: (a) 3/5/99 (b) 3/19/99)
Beginning AUV.................................. (a) 13.03 13.21 14.89
(b) 13.25 13.21 14.89
End AUV........................................ (a) 13.21 14.89 14.50
(b) 13.21 14.87 14.48
Ending Number of AUs........................... (a) 33,892 623,175 629,067
(b) 5,689 77,606 81,771
---------------------------------------------------------------------------------------------------------
</TABLE>
AUV-Accumulation Unit Value
AU-Accumulation Units
(a) Reflects age 80 or younger
(b) Reflects age 81 or older
A-1
<PAGE>
<TABLE>
<CAPTION>
FISCAL 3/31/00
YEAR TO
SELECT PORTFOLIOS INCEPTION TO 3/31/99 3/31/00 4/30/00
------------------------------------------------- ---------------------- ----------- -----------
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
Large Cap Growth (Inception Date: (a) 3/1/99 (b) 4/6/99)
Beginning AUV.................................. (a) 10.00 10.68 14.94
(b) 0 10.00 13.53
End AUV........................................ (a) 10.68 14.94 13.99
(b) 0 13.53 12.67
Ending Number of AUs........................... (a) 85,647 1,058,317 1,158,071
(b) 0 59,510 77,385
---------------------------------------------------------------------------------------------------------
Large Cap Composite (Inception Date: (a) 3/1/99 (b) 4/8/99)
Beginning AUV.................................. (a) 10.00 10.41 12.88
(b) 0 10.00 11.87
End AUV........................................ (a) 10.41 12.88 12.30
(b) 0 11.87 11.34
Ending Number of AUs........................... (a) 33,347 316,855 361,941
(b) 0 17,244 18,966
---------------------------------------------------------------------------------------------------------
Large Cap Value (Inception Date: (a) 3/1/99 (b) 4/6/99)
Beginning AUV.................................. (a) 10.00 10.32 10.75
(b) 0 10.00 10.32
End AUV........................................ (a) 10.32 10.75 10.79
(b) 0 10.32 10.35
Ending Number of AUs........................... (a) 34,004 531,732 571,490
(b) 0 9,381 11,064
---------------------------------------------------------------------------------------------------------
Mid Cap Growth (Inception Date: (a) 3/1/99 (b) 4/8/99)
Beginning AUV.................................. (a) 10.00 10.62 18.41
(b) 0 10.00 16.95
End AUV........................................ (a) 10.62 18.41 16.85
(b) 0 16.95 15.50
Ending Number of AUs........................... (a) 27,096 529,844 612,249
(b) 0 22,616 35,007
---------------------------------------------------------------------------------------------------------
Mid Cap Value (Inception Date: (a) 3/1/99 (b) 4/8/99)
Beginning AUV.................................. (a) 10.00 10.10 10.93
(b) 0 10.00 10.78
End AUV........................................ (a) 10.10 10.93 11.14
(b) 0 10.78 10.98
Ending Number of AUs........................... (a) 11,278 297,306 318,151
(b) 0 18,247 33,708
---------------------------------------------------------------------------------------------------------
</TABLE>
AUV-Accumulation Unit Value
AU-Accumulation Units
(a) Reflects age 80 or younger
(b) Reflects age 81 or older
A-2
<PAGE>
<TABLE>
<CAPTION>
FISCAL 3/31/00
YEAR TO
SELECT PORTFOLIOS INCEPTION TO 3/31/99 3/31/00 4/30/00
------------------------------------------------- ---------------------- ----------- -----------
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
Small Cap (Inception Date: (a) 3/1/99 (b) 4/8/99)
Beginning AUV.................................. (a) 10.00 10.35 15.00
(b) 0 10.00 14.46
End AUV........................................ (a) 10.35 15.00 13.56
(b) 0 14.46 13.07
Ending Number of AUs........................... (a) 22,807 432,850 481,239
(b) 0 17,502 32,914
---------------------------------------------------------------------------------------------------------
International Equity (Inception Date: (a) 3/1/99 (b) 4/6/99)
Beginning AUV.................................. (a) 10.00 10.51 13.61
(b) 0 10.00 12.71
End AUV........................................ (a) 10.51 13.61 12.46
(b) 0 12.71 11.63
Ending Number of AUs........................... (a) 23,961 314,634 384,946
(b) 0 9,229 23,901
---------------------------------------------------------------------------------------------------------
Diversified Fixed Income (Inception Date: (a) 3/10/99 (b) 4/8/99)
Beginning AUV.................................. (a) 10.00 10.02 10.00
(b) 0 10.00 9.87
End AUV........................................ (a) 10.02 10.00 9.96
(b) 0 9.87 9.82
Ending Number of AUs........................... (a) 31,762 474,014 513,721
(b) 0 12,327 13,385
---------------------------------------------------------------------------------------------------------
Cash Management (Inception Date: (a) 3/26/99 (b) 4/8/99)
Beginning AUV.................................. (a) 10.00 10.00 10.32
(b) 0 10.00 10.30
End AUV........................................ (a) 10.00 10.32 10.35
(b) 0 10.30 10.33
Ending Number of AUs........................... (a) 970 380,169 235,608
(b) 0 19,302 26,880
---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOCUSED PORTFOLIOS
------------------------------------------------- ------------------ ----------- -----------
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------
Focus Growth*
Beginning AUV.................................. (a) 0 0 0
(b) 0 0 0
End AUV........................................ (a) 0 0 0
(b) 0 0 0
Ending Number of AUs........................... (a) 0 0 0
(b) 0 0 0
* This portfolio was not available for sale until July 5, 2000.
-----------------------------------------------------------------------------------------------------
</TABLE>
AUV-Accumulation Unit Value
AU-Accumulation Units
(a) Reflects age 80 or younger
(b) Reflects age 81 or older
A-3
<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 5%;
(2) You make a partial withdrawal of $4,000 when 1 year (12 months) remain
in the 10-year term you initially agreed to leave your money in the fixed
investment option (N=12); and
(3) You have not made any other transfers, additional Purchase Payments, or
withdrawals.
No withdrawal charges are reflected because your Purchase Payment has been in
the contract for nine full years. If a withdrawal charge applies, it is deducted
before the market value adjustment. The market value adjustment is assessed on
the amount withdrawn less any withdrawal charges.
NEGATIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 1-year fixed investment option is 6%.
The market value adjustment factor is
= [(1+I)/(1+J+0.005)](to the power of N/12) - 1
= [(1.05)/(1.06+0.005)](to the power of 12/12) - 1
= (0.985915)(to the power of 1) - 1
= 0.985915 - 1
= -0.014085
The requested withdrawal amount is multiplied by the market value adjustment
factor to determine the market value adjustment:
$4,000 X (-0.014085) = -$56.34
B-1
<PAGE>
$56.34 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 4%.
The market value adjustment factor is
= [(1+I/(1+J+0.005)](to the power of N/12) - 1
= [(1.05)/(1.04+0.005)](to the power of 12/12) - 1
= (1.004785)(to the power of 1) - 1
= 1.004785 - 1
= +0.004785
The requested withdrawal amount is multiplied by the market value adjustment
factor to determine the market value adjustment:
$4,000 x (+0.004785) = +$19.14
$19.14 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.................................................. 0.50% 2.35%
Maine....................................................... 0% 2.0%
Nevada...................................................... 0% 3.5%
South Dakota................................................ 0% 1.25%
West Virginia............................................... 1.0% 1.0%
Wyoming..................................................... 0% 1.0%
</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>
[LOGO]
SUNAMERICA
THE RETIREMENT SPECIALIST
ANCHOR NATIONAL LIFE INSURANCE COMPANY
1 SUNAMERICA CENTER
LOS ANGELES, CA 90067-6022
1-800-445-SUN2
WWW.SUNAMERICA.COM
J-2004-PRO (R 7/00)
[LOGO] AIG MEMBER of AMERICAN INTERNATIONAL GROUP, INC.
[LOGO]
RETIRE ON YOUR TERMS -TM-
VARIABLE ANNUITIES
[LOGO] SUNAMERICA Presorted
THE RETIREMENT SPECIALIST Standard
1 SunAmerica Center U.S. Postage Paid
Los Angeles, CA 90067-6022 Towne, Inc.
ADDRESS SERVICE REQUESTED
<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 dated July 5, 2000, 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 JULY 5, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Separate Account............................................ 3
General Account............................................. 3
Performance Data............................................ 4
Annuity Payments............................................ 7
Annuity Unit Values......................................... 7
Taxes....................................................... 10
Distribution of Contracts................................... 14
Financial Statements........................................ 14
</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, FOCUSED PORTFOLIOS and
STRATEGIES, with the assets of each SELECT PORTFOLIO, FOCUSED 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, FOCUSED 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, FOCUSED 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 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
3
<PAGE>
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, FOCUSED 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, FOCUSED 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, FOCUSED 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
Inception of the Cash Management portfolio occurred on March 26, 1999, for
contracts issued to those under age 80 and on April 8, 1999, for contracts
issued to those over age 80. The annualized current yield and effective yield
for the Cash Management Portfolio for the seven day period ended April 26, 2000,
were as follows:
<TABLE>
<CAPTION>
CURRENT YIELD EFFECTIVE YIELD
------------- ---------------
<S> <C> <C>
A. Issue Age Under 80..................................... 3.94 4.02
B. Issue Age Over 80...................................... 3.82 3.89
</TABLE>
4
<PAGE>
Current yield is computed by first determining the Base Period Return
attributable to a hypothetical contract having a balance of one Accumulation
Unit at the beginning of a 7 day period using the formula:
Base Period Return = (EV-SV-CMF)/(SV)
where:
SV = value of one Accumulation Unit at the start of a 7 day period
EV = value of one Accumulation Unit at the end of the 7 day period
CMF = an allocated portion of the $35 annual Contract Maintenance Fee,
prorated for 7 days
The change in the value of an Accumulation Unit during the 7 day period reflects
the income received minus any expenses accrued, during such 7 day period. The
Contract Maintenance Fee (CMF) is first allocated among the SELECT PORTFOLIOS,
FOCUSED PORTFOLIOS and/or STRATEGIES and the general account so that each SELECT
PORTFOLIO'S, FOCUSED PORTFOLIO'S and/or STRATEGY's allocated portion of the fee
is proportional to the percentage of the number of accounts that have money
allocated to that SELECT PORTFOLIO, FOCUSED PORTFOLIO and/or STRATEGY. The fee
is further reduced, for purposes of the yield computation, by multiplying it by
the ratio that the value of the hypothetical contract bears to the value of an
account of average size for contracts funded by the Cash Management Portfolio.
Finally, as is done with the other charges discussed above, the result is
multiplied by the fraction 7/365 to arrive at the portion attributable to the 7
day period.
The current yield is then obtained by annualizing the Base Period Return:
Current Yield = (Base Period Return) x (365/7)
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:
P (1 + T) TO THE POWER OF n = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1,5 or 10 year period as of the end of the period
(or fractional portion thereof)
5
<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. Variable Annuity Account Five also funds
another contract (Seasons) which has been in existence longer than the Seasons
Select Variable Annuity. The Strategies in Seasons Select are also available in
that other contract and have been since 4/15/97. Sales of Seasons Select began
on February 18, 1999. The one year and since inception numbers for the
strategies are based on Season's historical data (which is adjusted for the fees
and charges applicable to Seasons Select) and represent adjusted actual
performance of the separate account.
TOTAL ANNUAL RETURN FOR THE PERIOD ENDING APRIL 30, 2000 (RETURN WITH/WITHOUT
REDEMPTION) ISSUE AGE UNDER 80
<TABLE>
<CAPTION>
1 YEAR RETURN SINCE FUND INCEPTION**
----------------------------------- ----------------------------------
STRATEGIES INCEPTION DATE W W/O W W/O
---------- -------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Growth................... 4/15/97 14.68 23.68 24.83 26.07
Moderate Growth.......... 4/15/97 11.17 20.17 21.32 22.64
Balanced Growth.......... 4/15/97 3.37 12.37 15.50 16.95
Conservative Growth...... 4/15/97 -1.07 7.93 11.39 12.95
<CAPTION>
1 YEAR RETURN SINCE FUND INCEPTION
----------------------------------- ----------------------------------
SELECT PORTFOLIOS INCEPTION DATE W W/O W W/O
----------------- -------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Large Cap Growth......... 3/1/99 18.56 27.56 26.74 33.31
Large Cap Composite...... 3/1/99 5.42 14.42 12.67 19.36
Large Cap Value.......... 3/1/99 -13.73 -4.73 -0.20 6.62
Mid Cap Growth........... 3/1/99 44.20 53.20 49.94 56.33
Mid Cap Value............ 3/1/99 -8.18 0.82 2.80 9.59
Small Cap................ 3/1/99 14.47 23.47 23.19 29.79
International Equity..... 3/1/99 3.46 12.46 13.98 20.66
Diversified Fixed
Income................... 3/10/99 -9.93 -0.93 -7.48 -0.44
FOCUSED PORTFOLIOS
-------------------------
Focus Growth*............ N/A N/A N/A N/A N/A
</TABLE>
TOTAL ANNUAL RETURN FOR THE PERIOD ENDING APRIL 30, 2000 (RETURN WITH/WITHOUT
REDEMPTION) ISSUE AGE OVER 80
<TABLE>
<CAPTION>
1 YEAR RETURN SINCE FUND INCEPTION**
----------------------------------- ----------------------------------
STRATEGIES INCEPTION DATE W W/O W W/O
---------- -------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Growth................... 4/15/97 14.53 23.53 24.71 25.95
Moderate Growth.......... 4/15/97 11.02 20.02 21.19 22.51
Balanced Growth.......... 4/15/97 3.24 12.24 15.38 16.83
Conservative Growth...... 4/15/97 -1.20 7.80 11.27 12.83
<CAPTION>
1 YEAR RETURN SINCE FUND INCEPTION***
----------------------------------- ----------------------------------
SELECT PORTFOLIOS INCEPTION DATE W W/O W W/O
----------------- -------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Large Cap Growth......... 3/1/99 18.40 27.40 26.64 33.18
Large Cap Composite...... 3/1/99 5.28 14.28 12.55 19.23
Large Cap Value.......... 3/1/99 -13.98 -4.98 -0.45 6.37
Mid Cap Growth........... 3/1/99 43.98 52.98 49.85 56.19
Mid Cap Value............ 3/1/99 -8.29 0.71 2.71 9.50
Small Cap................ 3/1/99 14.31 23.31 23.09 29.67
International Equity..... 3/1/99 3.26 12.26 13.85 20.52
Diversified Fixed
Income................... 3/10/99 -10.10 -1.10 -7.66 -0.61
FOCUSED PORTFOLIOS
-------------------------
Focus Growth*............ N/A N/A N/A N/A N/A
</TABLE>
* This portfolio was not available for sale in fiscal year 2000.
** These rates of return were calculated utilizing Seasons rates for the
related periods, adjusting for differences in fees.
*** These rates of return were calculated utilizing Seasons Select (under 80)
rates for the related periods, adjusting for differences in fees.
6
<PAGE>
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.
INCOME PAYMENTS UNDER THE INCOME PROTECTOR FEATURE
If contract holders elect to begin Income Payments using the Income Protector
feature, the Income Benefit Base is determined as described in the prospectus.
The initial monthly Income Payment is determined by applying the annuitization
factor specifically designated for use in conjunction with the Income Protector
feature (either in the Contract or in the Endorsement) to the Income Benefit
Base and then dividing by 1,000. The Income Benefit Base must be divided by
1,000 since the annuitization factors included in those tables are based on a
set amount per $1,000 of Income Benefit Base. The amount of the second and each
subsequent Income Payment is the same as the first monthly payment. The
appropriate rate must be determined by the gender (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
Joint Annuitant, if any, and the Income Option selected.
ANNUITY UNIT VALUES
--------------------------------------------------------------------------------
The value of an Annuity Unit is determined independently for each SELECT
PORTFOLIO, FOCUSED 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, FOCUSED PORTFOLIO or
STRATEGY exceeds 3.5010, variable annuity payments derived from allocations to
that SELECT PORTFOLIO, FOCUSED 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
7
<PAGE>
variable annuity payments will remain constant. If a higher assumed investment
rate had been used, the initial monthly payment would be higher, but the actual
net investment rate would also have to be higher in order for annuity payments
to increase (or not to decrease).
The payee receives the value of a fixed number of Annuity Units each month. The
value of a fixed number of Annuity Units will reflect the investment performance
of the SELECT PORTFOLIOS, FOCUSED PORTFOLIOS and/or STRATEGIES elected, and the
amount of each annuity payment will vary accordingly.
For each SELECT PORTFOLIO, FOCUSED 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, FOCUSED 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, FOCUSED 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, FOCUSED PORTFOLIO or
STRATEGY determined as of the end of that month, and
(b) is the Accumulation Unit value of the SELECT PORTFOLIO, FOCUSED PORTFOLIO or
STRATEGY determined as of the end of the preceding month.
The NIF for a SELECT PORTFOLIO, FOCUSED PORTFOLIO or STRATEGY for a given month
is a measure of the net investment performance of the SELECT PORTFOLIO, FOCUSED
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, FOCUSED PORTFOLIO or STRATEGY invests; it is also
reduced by separate account asset charges.
ILLUSTRATIVE EXAMPLE
Assume that one share of a given SELECT PORTFOLIO, FOCUSED 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
ILLUSTRATIVE EXAMPLE
The change in Annuity Unit value for a SELECT PORTFOLIO, FOCUSED 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,
FOCUSED 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
8
<PAGE>
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, FOCUSED 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,
FOCUSED 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, FOCUSED
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, FOCUSED
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 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
9
<PAGE>
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, FOCUSED PORTFOLIO or STRATEGY
on the Annuity Date and thus reflects the investment performance of the SELECT
PORTFOLIO, FOCUSED 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, FOCUSED PORTFOLIO or STRATEGY). The net
investment performance of the SELECT PORTFOLIO, FOCUSED 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.
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
10
<PAGE>
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.
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.
11
<PAGE>
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.
PARTIAL 1035 EXCHANGES
Section 1035 of the Code provides that an annuity contract may be exchanged in a
tax-free transaction for another annuity contract. Historically, it was presumed
that only the exchange of an entire contract, as opposed to a partial exchange,
would be accorded tax-free status. In 1998 in CONWAY VS. COMMISSIONER, the Tax
Court held that the direct transfer of a portion of an annuity contract into
another annuity contract qualified as a non-taxable exchange. On November 22,
1999, the Internal Revenue Service filed an Action on Decision which indicated
that it acquiesced in the Tax Court decision in CONWAY. However, in its
acquiescence with the decision of the Tax Court, the Internal Revenue Service
stated that it will challenge transactions where taxpayers enter into a series
of partial exchanges and annuitizations as part of a design to avoid application
of the 10% premature distribution penalty or other limitations imposed on
annuity contracts under Section 72 of the Code. In the absence of further
guidance from the Internal Revenue Service it is unclear what specific types of
partial exchange designs and transactions will be challenged by the Internal
Revenue Service. Due to the uncertainty in this area owners should seek their
own tax advice.
QUALIFIED PLANS
The contracts offered by this prospectus are designed to be suitable for use
under various types of Qualified plans. Taxation of owners in each Qualified
plan varies with the type of plan and terms and conditions of each specific
plan. Owners, Annuitants and Beneficiaries are cautioned that benefits under a
Qualified plan may be subject to the terms and conditions of the plan,
regardless of the terms and conditions of the contracts issued pursuant to the
plan.
Following are general descriptions of the types of Qualified plans with which
the contracts may be used. Such descriptions are not exhaustive and are for
general information purposes only. The tax rules regarding Qualified plans are
very complex and will have differing applications depending on individual facts
and circumstances. Each purchaser should obtain competent tax advice prior to
purchasing a contract issued under a Qualified plan.
Contracts issued pursuant to Qualified plans include special provisions
restricting contract provisions that may otherwise be available and described in
this prospectus. Generally, contracts issued pursuant to Qualified plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified contracts.
(a) H.R. 10 PLANS
Section 401 of the Code permits self-employed individuals to establish Qualified
plans for themselves and their employees, commonly referred to as "H.R. 10" or
"Keogh" Plans. Contributions made to the plan for the benefit of the employees
will not be included in the gross income of the employees until distributed from
the plan. The tax consequences to owners may vary depending upon the particular
plan design. However, the Code places limitations and restrictions on all plans
on such items as: amounts of allowable contributions; form, manner and timing of
distributions; vesting and nonforfeitability of interests; nondiscrimination in
eligibility and participation; and the tax treatment of distributions,
withdrawals and surrenders. Purchasers of contracts for use with an H.R. 10 Plan
should obtain competent tax advice as to the tax treatment and suitability of
such an investment.
12
<PAGE>
(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 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
13
<PAGE>
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. As of January 1, 1999 all 457 plans of state and
local governments must hold assets and income in trust (or custodial accounts or
an annuity contract) for the exclusive benefit of participants and their
beneficiaries.
DISTRIBUTION OF CONTRACTS
--------------------------------------------------------------------------------
The contracts are offered through SunAmerica Capital Services, Inc., located at
733 Third Avenue, 4th Floor, New York, New York 10017. SunAmerica Capital
Services, Inc. is registered as a broker-dealer under the Securities Exchange
Act of 1934, as amended, and is a member of the National Association of
Securities Dealers, Inc. The Company and SunAmerica Capital Services, Inc. are
each an indirect wholly owned subsidiary of SunAmerica Inc. No underwriting fees
are paid in connection with the distribution of the contracts. Contracts are
offered on a continuous basis.
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The audited consolidated financial statements of the Company as of December 31,
1999, December 31, 1998 and September 30, 1998 and for the year ended December
31, 1999, and for the three months ended December 31, 1998, and for each of the
two fiscal years in the period ended September 30, 1998 are presented in this
Statement of Additional Information. Effective December 31, 1999, the Company
changed its fiscal year end from September 30, to December 31. The financial
statements of the Company should be considered only as bearing on the ability of
the Company to meet its obligation under the contracts. The financial statements
of Variable Annuity Account Five (Portion Relating to the SEASONS SELECT
Variable Annuity) as of April 30, 2000 and March 31, 2000, and for the one month
ended April 30, 2000 and for the fiscal year ended March 31, 2000, and for the
period from inception to March 31, 1999, are presented in this Statement of
Additional Information.
Documents incorporated by reference for filing purposes will still appear at the
end of this document when it is distributed upon request.
PricewaterhouseCoopers LLP, 400 South Hope Street, Los Angeles, California
90071, serves as the independent accountants for the Separate Account and the
Company. The financial statements referred to above have been so included in
reliance on the reports of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
14
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholder of
Anchor National Life Insurance Company:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and comprehensive income and of cash flows
present fairly, in all material respects, the financial position of Anchor
National Life Insurance Company and its subsidiaries (the "Company") at December
31, 1999, December 31, 1998, and September 30, 1998, and the results of their
operations and their cash flows for the year ended December 31, 1999, for the
three months ended December 31, 1998 and for each of the two fiscal years in the
period ended September 30, 1998, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Los Angeles, California
January 31, 2000
F-2
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31, December 31, September 30,
1999 1998 1998
--------------- --------------- --------------
<S> <C> <C> <C>
ASSETS
Investments:
Cash and short-term investments $ 475,162,000 $ 3,303,454,000 $ 333,735,000
Bonds, notes and redeemable
preferred stocks available for sale,
at fair value (amortized cost:
December 1999, $4,155,728,000;
December 1998, $4,252,740,000;
September 1998, $1,934,863,000) 3,953,169,000 4,248,840,000 1,954,754,000
Mortgage loans 674,679,000 388,780,000 391,448,000
Policy loans 260,066,000 320,688,000 11,197,000
Separate account seed money 141,499,000 --- ---
Common stocks available for sale,
at fair value (cost: December 1999,
$0; December 1998, $1,409,000;
September 1998, $115,000) --- 1,419,000 169,000
Partnerships 4,009,000 4,577,000 4,403,000
Real estate 24,000,000 24,000,000 24,000,000
Other invested assets 19,385,000 15,185,000 15,036,000
--------------- --------------- ---------------
Total investments 5,551,969,000 8,306,943,000 2,734,742,000
Variable annuity assets held in separate
accounts 19,949,145,000 13,767,213,000 11,133,569,000
Accrued investment income 60,584,000 73,441,000 26,408,000
Deferred acquisition costs 1,089,979,000 866,053,000 539,850,000
Receivable from brokers for sales of
securities 54,760,000 22,826,000 23,904,000
Income taxes currently receivable --- --- 5,869,000
Deferred income taxes 53,445,000 --- ---
Other assets 114,612,000 109,857,000 85,926,000
--------------- --------------- ---------------
TOTAL ASSETS $26,874,494,000 $23,146,333,000 $14,550,268,000
=============== =============== ===============
</TABLE>
See accompanying notes
F-3
<PAGE>
<TABLE>
<CAPTION>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET (Continued)
December 31, December 31, September 30,
1999 1998 1998
--------------- --------------- --------------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Reserves, payables and accrued liabilities:
Reserves for fixed annuity contracts $ 3,254,895,000 $ 5,500,157,000 $ 2,189,272,000
Reserves for universal life insurance
contracts 1,978,332,000 2,339,194,000 ---
Reserves for guaranteed investment
contracts 305,570,000 306,461,000 282,267,000
Payable to brokers for purchases of
securities 139,000 --- 50,957,000
Income taxes currently payable 23,490,000 11,123,000 ---
Modified coinsurance deposit liability 140,757,000 --- ---
Other liabilities 249,224,000 160,020,000 106,594,000
--------------- --------------- ---------------
Total reserves, payables
and accrued liabilities 5,952,407,000 8,316,955,000 2,629,090,000
--------------- --------------- ---------------
Variable annuity liabilities related to
separate accounts 19,949,145,000 13,767,213,000 11,133,569,000
--------------- --------------- ---------------
Subordinated notes payable to affiliates 37,816,000 209,367,000 39,182,000
--------------- --------------- ---------------
Deferred income taxes --- 105,772,000 95,758,000
--------------- --------------- ---------------
Shareholder's equity:
Common Stock 3,511,000 3,511,000 3,511,000
Additional paid-in capital 493,010,000 378,674,000 308,674,000
Retained earnings 551,158,000 366,460,000 332,069,000
Accumulated other comprehensive
income (loss) (112,553,000) (1,619,000) 8,415,000
--------------- --------------- ---------------
Total shareholder's equity 935,126,000 747,026,000 652,669,000
--------------- --------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $26,874,494,000 $23,146,333,000 $14,550,268,000
=============== =============== ===============
</TABLE>
See accompanying notes
F-4
<PAGE>
<TABLE>
<CAPTION>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
Years Ended September 30,
Year Ended Three Months Ended -----------------------------------
December 31, 1999 December 31, 1998 1998 1997
----------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Investment income $ 521,953,000 $ 54,278,000 $ 221,966,000 $ 210,759,000
------------- ------------ ------------- -------------
Interest expense on:
Fixed annuity contracts (231,929,000) (22,828,000) (112,695,000) (109,217,000)
Universal life insurance
contracts (102,486,000) --- --- ---
Guaranteed investment
contracts (19,649,000) (3,980,000) (17,787,000) (22,650,000)
Senior indebtedness (199,000) (34,000) (1,498,000) (2,549,000)
Subordinated notes payable
to affiliates (3,474,000) (853,000) (3,114,000) (3,142,000)
------------- ------------ ------------- -------------
Total interest expense (357,737,000) (27,695,000) (135,094,000) (137,558,000)
------------- ------------ ------------- -------------
NET INVESTMENT INCOME 164,216,000 26,583,000 86,872,000 73,201,000
------------- ------------ ------------- -------------
NET REALIZED INVESTMENT
GAINS (LOSSES) (19,620,000) 271,000 19,482,000 (17,394,000)
------------- ------------ ------------- -------------
Fee income:
Variable annuity fees 306,417,000 58,806,000 200,867,000 139,492,000
Net retained commissions 51,039,000 11,479,000 48,561,000 39,143,000
Asset management fees 43,510,000 8,068,000 29,592,000 25,764,000
Universal life insurance
fees 23,290,000 --- --- ---
Surrender charges 17,137,000 3,239,000 7,404,000 5,529,000
Other fees 13,999,000 1,738,000 3,938,000 3,218,000
------------- ------------ ------------- -------------
TOTAL FEE INCOME 455,392,000 83,330,000 290,362,000 213,146,000
------------- ------------ ------------- -------------
GENERAL AND ADMINISTRATIVE
EXPENSES (154,665,000) (21,993,000) (96,102,000) (98,802,000)
------------- ------------ ------------- -------------
AMORTIZATION OF DEFERRED
ACQUISITION COSTS (116,840,000) (27,070,000) (72,713,000) (66,879,000)
------------- ------------ ------------- -------------
ANNUAL COMMISSIONS (40,760,000) (6,624,000) (18,209,000) (8,977,000)
------------- ------------ ------------- -------------
PRETAX INCOME 287,723,000 54,497,000 209,692,000 94,295,000
Income tax expense (103,025,000) (20,106,000) (71,051,000) (31,169,000)
------------- ------------ ------------- -------------
NET INCOME 184,698,000 34,391,000 138,641,000 63,126,000
------------- ------------ ------------- -------------
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses)
on debt and equity securities
available for sale:
Net unrealized gains
(losses) identified in
the current period (118,669,000) (10,249,000) (4,027,000) 16,605,000
Less reclassification
adjustment for net
realized (gains) losses
included in net income 7,735,000 215,000 (5,963,000) 7,321,000
------------- ------------ ------------- -------------
OTHER COMPREHENSIVE INCOME
(LOSS) (110,934,000) (10,034,000) (9,990,000) 23,926,000
------------- ------------ ------------- -------------
COMPREHENSIVE INCOME $ 73,764,000 $ 24,357,000 $ 128,651,000 $ 87,052,000
============= ============ ============= =============
</TABLE>
See accompanying notes
F-5
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended -------------------------------------
December 31, 1999 December 31, 1998 1998 1997
----------------- ------------------ --------------- ---------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 184,698,000 $ 34,391,000 $ 138,641,000 $ 63,126,000
Adjustments to reconcile net
income to net cash provided
by operating activities:
Interest credited to:
Fixed annuity contracts 231,929,000 22,828,000 112,695,000 109,217,000
Universal life insurance
contracts 102,486,000 --- --- ---
Guaranteed investment
contracts 19,649,000 3,980,000 17,787,000 22,650,000
Net realized investment
losses (gains) 19,620,000 (271,000) (19,482,000) 17,394,000
Amortization (accretion) of
net premiums (discounts)
on investments (18,343,000) (1,199,000) 447,000 (18,576,000)
Universal life insurance
fees (23,290,000) --- --- ---
Amortization of goodwill 776,000 356,000 1,422,000 1,187,000
Provision for deferred
income taxes (100,013,000) 15,945,000 34,087,000 (16,024,000)
Change in:
Accrued investment income 9,155,000 (1,512,000) (4,649,000) (2,084,000)
Deferred acquisition costs (208,228,000) (34,328,000) (160,926,000) (113,145,000)
Other assets (5,661,000) (21,070,000) (19,374,000) (14,598,000)
Income taxes currently
payable 12,367,000 16,992,000 (38,134,000) 10,779,000
Other liabilities 49,504,000 5,617,000 (2,248,000) 14,187,000
Other, net 15,087,000 5,510,000 (5,599,000) 418,000
--------------- -------------- --------------- ---------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 289,736,000 47,239,000 54,667,000 74,531,000
--------------- -------------- --------------- ---------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of:
Bonds, notes and redeemable
preferred stocks (4,130,682,000) (392,515,000) (1,970,502,000) (2,566,211,000)
Mortgage loans (331,398,000) (4,962,000) (131,386,000) (266,771,000)
Other investments, excluding
short-term investments (227,268,000) (1,992,000) --- (75,556,000)
Sales of:
Bonds, notes and redeemable
preferred stocks 2,660,931,000 265,039,000 1,602,079,000 2,299,063,000
Other investments, excluding
short-term investments 65,395,000 142,000 42,458,000 6,421,000
Redemptions and maturities of:
Bonds, notes and redeemable
preferred stocks 1,274,764,000 37,290,000 424,393,000 376,847,000
Mortgage loans 46,760,000 7,699,000 80,515,000 25,920,000
Other investments, excluding
short-term investments 33,503,000 853,000 67,213,000 23,940,000
Cash and short-term investments
acquired in coinsurance
transaction with MBL Life
Assurance Corporation --- 3,083,211,000 --- ---
Short-term investments
transferred to First
SunAmerica Life Insurance
Company in assumption
reinsurance transaction with
MBL Life Assurance Corporation (371,634,000) --- --- ---
--------------- -------------- --------------- ---------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (979,629,000) 2,994,765,000 114,770,000 (176,347,000)
--------------- -------------- --------------- ---------------
</TABLE>
F-6
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended -------------------------------------
December 31, 1999 December 31, 1998 1998 1997
----------------- ------------------ --------------- ---------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Premium receipts on:
Fixed annuity contracts $ 2,016,851,000 $ 351,616,000 $ 1,512,994,000 $1,097,937,000
Universal life insurance
contracts 78,864,000 --- --- ---
Guaranteed investment
contracts --- --- 5,619,000 55,000,000
Net exchanges from the fixed
accounts of variable annuity
contracts (1,821,324,000) (448,762,000) (1,303,790,000) (620,367,000)
Withdrawal payments on:
Fixed annuity contracts (2,232,374,000) (41,554,000) (191,690,000) (242,589,000)
Universal life insurance
contracts (81,634,000) --- --- ---
Guaranteed investment
contracts (19,742,000) (3,797,000) (36,313,000) (198,062,000)
Claims and annuity payments on:
Fixed annuity contracts (46,578,000) (9,333,000) (40,589,000) (35,731,000)
Universal life insurance
contracts (158,043,000) --- --- ---
Net receipts from (repayments
of) other short-term
financings (129,512,000) 9,545,000 (10,944,000) 34,239,000
Net receipt/(payment) related
to a modified coinsurance
transaction 140,757,000 (170,436,000) 166,631,000 ---
Receipts from issuance of
subordinated note payable
to affiliate --- 170,436,000 --- ---
Net of capital contributions
and return of capital 114,336,000 70,000,000 --- 28,411,000
Dividends paid --- --- (51,200,000) (25,500,000)
--------------- -------------- --------------- --------------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (2,138,399,000) (72,285,000) 50,718,000 93,338,000
--------------- -------------- --------------- --------------
NET INCREASE (DECREASE) IN CASH
AND SHORT-TERM INVESTMENTS (2,828,292,000) 2,969,719,000 220,155,000 (8,478,000)
CASH AND SHORT-TERM INVESTMENTS
AT BEGINNING OF PERIOD 3,303,454,000 333,735,000 113,580,000 122,058,000
--------------- -------------- --------------- --------------
CASH AND SHORT-TERM INVESTMENTS
AT END OF PERIOD $ 475,162,000 $3,303,454,000 $ 333,735,000 $ 113,580,000
=============== ============== =============== ==============
SUPPLEMENTAL CASH FLOW
INFORMATION:
Interest paid on indebtedness $ 3,787,000 $ 1,169,000 $ 3,912,000 $ 7,032,000
=============== ============== =============== ==============
Net income taxes paid
(refunded) $ 190,126,000 $ (12,302,000) $ 74,932,000 $ 36,420,000
=============== ============== =============== ==============
</TABLE>
See accompanying notes
F-7
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
Anchor National Life Insurance Company, including its wholly owned
subsidiaries, (the "Company") is an Arizona-domiciled life insurance
company which conducts its business through three segments: annuity
operations, asset management operations and broker-dealer operations.
Annuity operations include the sale and administration of deposit-type
insurance contracts, including fixed and variable annuities, universal
life contracts and guaranteed investment contracts. Asset management
operations, which include the distribution and management of mutual
funds, are conducted by SunAmerica Asset Management Corp. Broker-dealer
operations include the sale of securities and financial services
products, and are conducted by Royal Alliance Associates, Inc.
The Company is an indirect wholly owned subsidiary of American
International Group, Inc. ("AIG"), an international insurance and
financial services holding company. At December 31, 1998, the Company
was a wholly owned indirect subsidiary of SunAmerica Inc., a Maryland
Corporation. On January 1, 1999, SunAmerica Inc. merged with and into
AIG in a tax-free reorganization that has been treated as a pooling of
interests for accounting purposes. Thus, SunAmerica Inc. ceased to
exist on that date. However, immediately prior to the date of the
merger, substantially all of the net assets of SunAmerica Inc. were
contributed to a newly formed subsidiary of AIG named SunAmerica
Holdings, Inc., a Delaware Corporation. SunAmerica Holdings, Inc.
subsequently changed its name to SunAmerica Inc. ("SunAmerica").
The operations of the Company are influenced by many factors, including
general economic conditions, monetary and fiscal policies of the
federal government, and policies of state and other regulatory
authorities. The level of sales of the Company's financial products is
influenced by many factors, including general market rates of interest,
the strength, weakness and volatility of equity markets, and terms and
conditions of competing financial products. The Company is exposed to
the typical risks normally associated with a portfolio of fixed-income
securities, namely interest rate, option, liquidity and credit risk.
The Company controls its exposure to these risks by, among other
things, closely monitoring and matching the duration of its assets and
liabilities, monitoring and limiting prepayment and extension risk in
its portfolio, maintaining a large percentage of its portfolio in
highly liquid securities, and engaging in a disciplined process of
underwriting, reviewing and monitoring credit risk. The Company also is
exposed to market risk, as market volatility may result in reduced fee
income in the case of assets managed in mutual funds and held in
separate accounts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The accompanying consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles and include the accounts of the Company and all
of its wholly owned subsidiaries. All significant intercompany accounts
and transactions are eliminated in consolidation. Certain items have
been reclassified to conform to the current period's presentation.
F-8
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Under generally accepted accounting principles, premiums collected on
the non-traditional life and annuity insurance products, such as those
sold by the Company, are not reflected as revenues in the Company's
statement of earnings, as they are recorded directly to policyholders
liabilities upon receipt.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and
assumptions that affect the amounts reported in the financial
statements and the accompanying notes. Actual results could differ from
those estimates.
INVESTED ASSETS: Cash and short-term investments primarily include
cash, commercial paper, money market investments, repurchase agreements
and short-term bank participations. All such investments are carried at
cost plus accrued interest, which approximates fair value, have
maturities of three months or less and are considered cash equivalents
for purposes of reporting cash flows.
Bonds, notes and redeemable preferred stocks available for sale and
common stocks are carried at aggregate fair value and changes in
unrealized gains or losses, net of tax, are credited or charged
directly to shareholder's equity. Bonds, notes and redeemable preferred
stocks are reduced to estimated net realizable value when necessary for
declines in value considered to be other than temporary. Estimates of
net realizable value are subjective and actual realization will be
dependent upon future events.
Mortgage loans are carried at amortized unpaid balances, net of
provisions for estimated losses. Policy loans are carried at unpaid
balances. Separate account seed money consists of seed money for mutual
funds used as investment vehicles for the Company's variable annuity
separate accounts and is valued at market. Limited partnerships are
accounted for by the cost method of accounting. Real estate is carried
at cost, reduced by impairment provisions. Other invested assets
include collateralized bond obligations.
Realized gains and losses on the sale of investments are recognized in
operations at the date of sale and are determined by using the specific
cost identification method. Premiums and discounts on investments are
amortized to investment income by using the interest method over the
contractual lives of the investments.
INTEREST RATE SWAP AGREEMENTS: The net differential to be paid or
received on interest rate swap agreements ("Swap Agreements") entered
into to reduce the impact of changes in interest rates is recognized
over the lives of the agreements, and such differential is classified
as Investment Income or Interest Expense in the income statement.
Initially, Swap Agreements are designated as hedges and, therefore, are
not marked to market. However, when a hedged asset/liability is sold or
repaid before the related Swap Agreement matures, the Swap Agreement is
marked to market and any gain/loss is classified with any gain/loss
realized on the disposition of the hedged asset/liability.
Subsequently, the Swap Agreement is marked to market and the resulting
change in fair value is included in Investment Income in the income
F-9
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
statement. When a Swap Agreement that is designated as a hedge is
terminated before its contractual maturity, any resulting gain/loss is
credited/charged to the carrying value of the asset/liability that it
hedged and is treated as a premium/discount for the remaining life of
the asset/liability.
DEFERRED ACQUISITION COSTS: Policy acquisition costs are deferred and
amortized, with interest, in relation to the incidence of estimated
gross profits to be realized over the estimated lives of the annuity
contracts. Estimated gross profits are composed of net interest income,
net realized investment gains and losses, variable annuity fees,
universal life insurance fees, surrender charges and direct
administrative expenses. Costs incurred to sell mutual funds are also
deferred and amortized over the estimated lives of the funds obtained.
Deferred acquisition costs ("DAC") consist of commissions and other
costs that vary with, and are primarily related to, the production or
acquisition of new business.
As debt and equity securities available for sale are carried at
aggregate fair value, an adjustment is made to DAC equal to the change
in amortization that would have been recorded if such securities had
been sold at their stated aggregate fair value and the proceeds
reinvested at current yields. The change in this adjustment, net of
tax, is included with the change in accumulated other comprehensive
income/(loss) that is credited or charged directly to shareholder's
equity. DAC has been increased by $29,400,000 at December 31, 1999,
increased by $1,400,000 at December 31, 1998, and decreased by
$7,000,000 at September 30, 1998 for this adjustment.
VARIABLE ANNUITY ASSETS AND LIABILITIES: The assets and liabilities
resulting from the receipt of variable annuity premiums are segregated
in separate accounts. The Company receives administrative fees for
managing the funds and other fees for assuming mortality and certain
expense risks. Such fees are included in Variable Annuity Fees in the
income statement.
GOODWILL: Goodwill, amounting to $22,206,000 at December 31, 1999, is
amortized by using the straight-line method over periods averaging 25
years and is included in Other Assets in the balance sheet. Goodwill is
evaluated for impairment when events or changes in economic conditions
indicate that the carrying amount may not be recoverable.
CONTRACTHOLDER RESERVES: Contractholder reserves for fixed annuity
contracts, universal life insurance contracts and guaranteed investment
contracts are accounted for as investment-type contracts in accordance
with Statement of Financial Accounting Standards No. 97, "Accounting
and Reporting by Insurance Enterprises for Certain Long-Duration
Contracts and for Realized Gains and Losses from the Sale of
Investments," and are recorded at accumulated value (premiums received,
plus accrued interest, less withdrawals and assessed fees).
MODIFIED COINSURANCE DEPOSIT LIABILITY: Cash received as part of the
modified coinsurance transaction described in Note 8 is recorded as a
deposit liability.
F-10
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
FEE INCOME: Variable annuity fees, asset management fees, universal
life insurance fees and surrender charges are recorded in income as
earned. Net retained commissions are recognized as income on a trade
date basis.
INCOME TAXES: The Company files as a "life insurance company" under the
provisions of the Internal Revenue Code of 1986. Its federal income tax
return is consolidated with those of its direct parent, SunAmerica Life
Insurance Company (the "Parent"), and its affiliate, First SunAmerica
Life Insurance Company. Income taxes have been calculated as if the
Company filed a separate return. Deferred income tax assets and
liabilities are recognized based on the difference between financial
statement carrying amounts and income tax bases of assets and
liabilities using enacted income tax rates and laws.
RECENTLY ISSUED ACCOUNTING STANDARDS: In June 1998, the FASB issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133
addresses the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and hedging
activities. SFAS 133 was postponed by SFAS 137, and now will be
effective for the Company as of January 1, 2001. Therefore, it is not
included in the accompanying financial statements. The Company has not
completed its analysis of the effect of SFAS 133, but management
believes that it will not have a material impact on the Company's
results of operations, financial condition or liquidity.
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information," was adopted for the
year ended December 31, 1999 and is included in Note 14 of the
accompanying financial statements.
3. FISCAL YEAR CHANGE
Effective December 31, 1998, the Company changed its fiscal year end
from September 30 to December 31. Accordingly, the consolidated
financial statements include the results of operations and cash flows
for the three-month transition period ended December 31, 1998. Such
results are not necessarily indicative of operations for a full year.
The consolidated financial statements as of and for the three months
ended December 31, 1998 were originally filed as the Company's
unaudited Transition Report on Form 10-Q.
Results for the comparable prior year period are summarized below.
<TABLE>
<CAPTION>
Three Months Ended
December 31, 1997
------------------
<S> <C>
Investment income 59,855,000
Net investment income 26,482,000
Net realized investment gains 20,935,000
Total fee income 63,984,000
Pretax income 67,654,000
Net income 44,348,000
==========
</TABLE>
F-11
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. ACQUISITION
On December 31, 1998, the Company acquired the individual life business
and the individual and group annuity business of MBL Life Assurance
Corporation ("MBL Life") ("the Acquisition"), via a 100% coinsurance
transaction, for a cash purchase price of $128,420,000. As part of this
transaction, the Company acquired assets having an aggregate fair value
of $5,718,227,000, composed primarily of invested assets totaling
$5,715,010,000. Liabilities assumed in this acquisition totaled
$5,831,266,000, including $3,460,503,000 of fixed annuity reserves,
$2,308,742,000 of universal life reserves and $24,011,000 of guaranteed
investment contract reserves. The excess of the purchase price over the
fair value of net assets received amounted to $104,509,000 at December
31, 1999, after adjustment for the transfer of the New York business to
First SunAmerica Life Insurance Company (see below), and is included in
Deferred Acquisition Costs in the accompanying consolidated balance
sheet. The income statement for the year ended December 31, 1999
includes the impact of the Acquisition. On a pro forma basis, assuming
the Acquisition had been consummated on October 1, 1996, the beginning
of the prior-year periods discussed within, investment income would
have been $517,606,000 and net income would have been $158,887,000 for
the year ended September 30, 1998. For the year ended September 30,
1997, investment income would have been $506,399,000 and net income
would have been $83,372,000.
Included in the block of business acquired from MBL Life were policies
whose owners are residents of New York State ("the New York Business").
On July 1, 1999, the New York Business was acquired by the Company's
New York affiliate, First SunAmerica Life Insurance Company ("FSA"),
via an assumption reinsurance agreement, and the remainder of the
business converted to assumption reinsurance in the Company, which
superseded the coinsurance agreement. As part of this transfer,
invested assets equal to $678,272,000, life reserves equal to
$282,247,000, group pension reserves equal to $406,118,000, and other
net assets of $10,093,000 were transferred to FSA.
The $128,420,000 purchase price was allocated between the Company and
FSA based on the estimated future gross profits of the two blocks of
business. The portion allocated to FSA was $10,000,000.
As part of the Acquisition, the Company received $242,473,000 from MBL
to pay policy enhancements guaranteed by the MBL Life rehabilitation
agreement to policyholders meeting certain requirements. A primary
requirement was that annuity policyholders must have converted their
MBL Life policy to a policy type currently offered by the Company or
one of its affiliates by December 31, 1999. The enhancements are to be
credited in four installments on January 1, 2000, June 30, 2001, June
30, 2002 and June 30, 2003, to eligible policies still active on each
of those dates. On December 31, 1999, the enhancement reserve for such
payments totaled $223,032,000, which includes interest accredited at
6.75% on the original reserve. Of this amount, $69,836,000 was credited
to policyholders in February 2000 for the January 1, 2000 installment.
F-12
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENTS
The amortized cost and estimated fair value of bonds, notes and
redeemable preferred stocks available for sale by major category
follow:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
-------------- --------------
<S> <C> <C>
AT DECEMBER 31, 1999:
Securities of the United States
Government $ 24,688,000 $ 22,884,000
Mortgage-backed securities 1,505,729,000 1,412,134,000
Securities of public utilities 114,933,000 107,596,000
Corporate bonds and notes 1,676,006,000 1,596,469,000
Redeemable preferred stocks 4,375,000 4,547,000
Other debt securities 829,997,000 809,539,000
-------------- --------------
Total $4,155,728,000 $3,953,169,000
============== ==============
AT DECEMBER 31, 1998:
Securities of the United States
Government $ 6,033,000 $ 6,272,000
Mortgage-backed securities 546,790,000 553,990,000
Securities of public utilities 208,074,000 205,119,000
Corporate bonds and notes 2,624,330,000 2,616,073,000
Redeemable preferred stocks 6,125,000 7,507,000
Other debt securities 861,388,000 859,879,000
-------------- --------------
Total $4,252,740,000 $4,248,840,000
============== ==============
AT SEPTEMBER 30, 1998:
Securities of the United States
Government $ 84,377,000 $ 88,239,000
Mortgage-backed securities 569,613,000 584,007,000
Securities of public utilities 108,431,000 106,065,000
Corporate bonds and notes 883,890,000 884,209,000
Redeemable preferred stocks 6,125,000 6,888,000
Other debt securities 282,427,000 285,346,000
-------------- --------------
Total $1,934,863,000 $1,954,754,000
============== ==============
</TABLE>
F-13
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENTS (Continued)
The amortized cost and estimated fair value of bonds, notes and
redeemable preferred stocks available for sale by contractual maturity,
as of December 31, 1999, follow:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
-------------- --------------
<S> <C> <C>
Due in one year or less $ 199,679,000 $ 199,198,000
Due after one year through
five years 552,071,000 530,289,000
Due after five years through
ten years 1,243,298,000 1,187,044,000
Due after ten years 654,951,000 624,504,000
Mortgage-backed securities 1,505,729,000 1,412,134,000
-------------- --------------
Total $4,155,728,000 $3,953,169,000
============== ==============
</TABLE>
Actual maturities of bonds, notes and redeemable preferred stocks will
differ from those shown above due to prepayments and redemptions.
F-14
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
5. INVESTMENTS (Continued)
Gross unrealized gains and losses on bonds, notes and redeemable
preferred stocks available for sale by major category follow:
Gross Gross
Unrealized Unrealized
Gains Losses
----------- --------------
<S> <C> <C>
AT DECEMBER 31, 1999:
Securities of the United States
Government $ 47,000 $ (1,852,000)
Mortgage-backed securities 3,238,000 (96,832,000)
Securities of public utilities 13,000 (7,350,000)
Corporate bonds and notes 10,222,000 (89,758,000)
Redeemable preferred stocks 172,000 ---
Other debt securities 4,275,000 (24,734,000)
----------- -------------
Total $17,967,000 $(220,526,000)
=========== =============
AT DECEMBER 31, 1998:
Securities of the United States
Government $ 239,000 $ ---
Mortgage-backed securities 9,398,000 (2,198,000)
Securities of public utilities 926,000 (3,881,000)
Corporate bonds and notes 22,227,000 (30,484,000)
Redeemable preferred stocks 1,382,000 ---
Other debt securities 2,024,000 (3,533,000)
----------- -------------
Total $36,196,000 $ (40,096,000)
=========== =============
AT SEPTEMBER 30, 1998:
Securities of the United States
Government $ 3,862,000 $ ---
Mortgage-backed securities 15,103,000 (709,000)
Securities of public utilities 2,420,000 (4,786,000)
Corporate bonds and notes 31,795,000 (31,476,000)
Redeemable preferred stocks 763,000 ---
Other debt securities 5,235,000 (2,316,000)
----------- -------------
Total $59,178,000 $ (39,287,000)
=========== =============
</TABLE>
There were no gross unrealized gains on equity securities available for
sale at December 31, 1999. Gross unrealized gains on equity securities
available for sale aggregated $10,000 and $54,000 at December 31, 1998
and September 30, 1998, respectively. There were no unrealized losses
at December 31, 1999, December 31, 1998, or September 30, 1998.
F-15
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENTS (Continued)
Gross realized investment gains and losses on sales of investments are
as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended ----------------------------------
December 31, 1999 December 31, 1998 1998 1997
----------------- ------------------ ------------ ------------
<S> <C> <C> <C> <C>
BONDS, NOTES AND
REDEEMABLE PREFERRED
STOCKS:
Realized gains $ 8,333,000 $ 6,669,000 $ 28,086,000 $ 22,179,000
Realized losses (26,113,000) (5,324,000) (4,627,000) (25,310,000)
COMMON STOCKS:
Realized gains 4,239,000 12,000 337,000 4,002,000
Realized losses (11,000) (9,000) --- (312,000)
OTHER INVESTMENTS:
Realized gains --- 573,000 8,824,000 2,450,000
IMPAIRMENT WRITEDOWNS (6,068,000) (1,650,000) (13,138,000) (20,403,000)
------------- ----------- ------------ ------------
Total net realized
investment gains
and losses $(19,620,000) $ 271,000 $ 19,482,000 $(17,394,000)
============ =========== ============ ============
</TABLE>
The sources and related amounts of investment income are as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended ----------------------------------
December 31,1999 December 31, 1998 1998 1997
----------------- ------------------ ------------ ------------
<S> <C> <C> <C> <C>
Short-term investments $ 61,764,000 $ 4,649,000 $ 12,524,000 $ 11,780,000
Bonds, notes and
redeemable preferred
stocks 348,373,000 39,660,000 156,140,000 163,038,000
Mortgage loans 47,480,000 7,904,000 29,996,000 17,632,000
Common stocks 7,000 --- 34,000 16,000
Real estate (525,000) 13,000 (467,000) (296,000)
Cost-method partnerships 6,631,000 352,000 24,311,000 6,725,000
Other invested assets 58,223,000 1,700,000 (572,000) 11,864,000
------------ ----------- ------------ ------------
Total investment
income $521,953,000 $54,278,000 $221,966,000 $210,759,000
============ =========== ============ ============
</TABLE>
Expenses incurred to manage the investment portfolio amounted to
$10,014,000 for the year ended December 31, 1999, $500,000 for the
three months ended December 31, 1998, $1,910,000 for the year ended
September 30, 1998 and $2,050,000 for the year ended September 30,
1997, and are included in General and Administrative Expenses in the
income statement. Investment expenses have increased significantly
because the size of the portfolio increased as a result of the
Acquisition.
F-16
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENTS (Continued)
At December 31, 1999, the following investments exceeded 10% of the
Company's consolidated shareholder's equity of $935,126,000:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
------------ ------------
<S> <C> <C>
Provident Institutional Funds Inc.
Del Treasury Trust Fund 113,000,000 113,000,000
Salomon Smith Barney Repurchase
Agreement 97,000,000 97,000,000
------------ ------------
Total $210,000,000 $210,000,000
============ ============
</TABLE>
At December 31, 1999, mortgage loans were collateralized by properties
located in 29 states, with loans totaling approximately 36% of the
aggregate carrying value of the portfolio secured by properties located
in California and approximately 11% by properties located in New York.
No more than 8% of the portfolio was secured by properties in any other
single state.
At December 31, 1999, bonds, notes and redeemable preferred stocks
included $377,149,000 of bonds and notes not rated investment grade.
The Company had no material concentrations of non-investment-grade
assets at December 31, 1999.
At December 31, 1999, the carrying value of investments in default as
to the payment of principal or interest was $1,529,000, composed of
$870,000 of bonds and $659,000 of mortgage loans. Such nonperforming
investments had an estimated fair value of $872,000.
As a component of its asset and liability management strategy, the
Company utilizes 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 to fixed-rate instruments. At December 31, 1999,
the Company had one outstanding Swap Agreement with a notional
principal amount of $21,538,000, which matures in December 2024. The
net interest paid amounted to $215,000 for the year ended December 31,
1999, $54,000 for the three months ended December 31, 1998, $278,000
for the year ended September 30, 1998, and $125,000 for the year ended
September 30, 1997, and is included in Interest Expense on Guaranteed
Investment Contracts in the income statement.
At December 31, 1999, $7,418,000 of bonds, at amortized cost, were on
deposit with regulatory authorities in accordance with statutory
requirements.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value disclosures are limited to
F-17
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
reasonable estimates of the fair value of only the Company's financial
instruments. The disclosures do not address the value of the Company's
recognized and unrecognized nonfinancial assets (including its real
estate investments and other invested assets except for cost-method
partnerships) and liabilities or the value of anticipated future
business. The Company does not plan to sell most of its assets or
settle most of its liabilities at these estimated fair values.
The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. Selling expenses
and potential taxes are not included. The estimated fair value amounts
were determined using available market information, current pricing
information and various valuation methodologies. If quoted market
prices were not readily available for a financial instrument,
management determined an estimated fair value. Accordingly, the
estimates may not be indicative of the amounts the financial
instruments could be exchanged for in a current or future market
transaction.
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is
practicable to estimate that value:
CASH AND SHORT-TERM INVESTMENTS: Carrying value is considered to be a
reasonable estimate of fair value.
BONDS, NOTES AND REDEEMABLE PREFERRED STOCKS: Fair value is based
principally on independent pricing services, broker quotes and other
independent information.
MORTGAGE LOANS: Fair values are primarily determined by discounting
future cash flows to the present at current market rates, using
expected prepayment rates.
SEPARATE ACCOUNT SEED MONEY: Carrying value is the market value of the
underlying securities.
COMMON STOCKS: Fair value is based principally on independent pricing
services, broker quotes and other independent information.
COST-METHOD PARTNERSHIPS: Fair value of limited partnerships accounted
for by using the cost method is based upon the fair value of the net
assets of the partnerships as determined by the general partners.
VARIABLE ANNUITY ASSETS HELD IN SEPARATE ACCOUNTS: Variable annuity
assets are carried at the market value of the underlying securities.
RESERVES FOR FIXED ANNUITY CONTRACTS: Deferred annuity contracts are
assigned a fair value equal to current net surrender value. Annuitized
contracts are valued based on the present value of future cash flows at
current pricing rates.
RESERVES FOR UNIVERSAL LIFE INSURANCE CONTRACTS: Universal life and
F-18
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
single life premium life contracts are assigned a fair value equal to
current net surrender value.
RESERVES FOR GUARANTEED INVESTMENT CONTRACTS: Fair value is based on
the present value of future cash flows at current pricing rates and is
net of the estimated fair value of a hedging Swap Agreement, determined
from independent broker quotes.
RECEIVABLE FROM/PAYABLE TO BROKERS FOR PURCHASES OF SECURITIES: Such
obligations represent transactions of a short-term nature for which the
carrying value is considered a reasonable estimate of fair value.
MODIFIED COINSURANCE DEPOSIT LIABILITY: Fair value is based on
discounting the liability by the appropriate cost of funds, and
therefore approximates carrying value.
VARIABLE ANNUITY LIABILITIES RELATED TO SEPARATE ACCOUNTS: Fair values
of contracts in the accumulation phase are based on net surrender
values. Fair values of contracts in the payout phase are based on the
present value of future cash flows at assumed investment rates.
SUBORDINATED NOTES PAYABLE TO AFFILIATES: Fair value is estimated based
on the quoted market prices for similar issues.
F-19
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
The estimated fair values of the Company's financial instruments at
December 31, 1999, December 31, 1998 and September 30, 1998 compared
with their respective carrying values, are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Value Value
--------------- ---------------
<S> <C> <C>
DECEMBER 31, 1999:
ASSETS:
Cash and short-term investments $ 475,162,000 $ 475,162,000
Bonds, notes and redeemable
preferred stocks 3,953,169,000 3,953,169,000
Mortgage loans 674,679,000 673,781,000
Separate account seed money 141,499,000 141,499,000
Common stocks --- ---
Cost-method partnerships 4,009,000 9,114,000
Variable annuity assets held in
separate accounts 19,949,145,000 19,949,145,000
Receivable from brokers for sales
of securities 54,760,000 54,760,000
LIABILITIES:
Reserves for fixed annuity contracts 3,254,895,000 3,053,660,000
Reserves for universal life insurance
contracts 1,978,332,000 1,853,442,000
Reserves for guaranteed investment
contracts 305,570,000 305,570,000
Payable to brokers for purchases
of securities 139,000 139,000
Modified coinsurance deposit
liability 140,757,000 140,757,000
Variable annuity liabilities related
to separate accounts 19,949,145,000 19,367,834,000
Subordinated notes payable to
affiliates 37,816,000 38,643,000
=============== ===============
DECEMBER 31, 1998:
ASSETS:
Cash and short-term investments $ 3,303,454,000 $ 3,303,454,000
Bonds, notes and redeemable
preferred stocks 4,248,840,000 4,248,840,000
Mortgage loans 388,780,000 411,230,000
Separate account seed money --- ---
Common stocks 1,419,000 1,419,000
Cost-method partnerships 4,577,000 12,802,000
Variable annuity assets held in
separate accounts 13,767,213,000 13,767,213,000
Receivable from brokers for sales
of securities 22,826,000 22,826,000
LIABILITIES:
Reserves for fixed annuity contracts 5,500,157,000 5,437,045,000
Reserves for universal life
insurance contracts 2,339,194,000 2,339,061,000
Reserves for guaranteed investment
contracts 306,461,000 306,461,000
Variable annuity liabilities related
to separate accounts 13,767,213,000 13,287,434,000
Subordinated notes payable to
affiliates 209,367,000 211,058,000
=============== ===============
</TABLE>
F-20
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
<TABLE>
<CAPTION>
Carrying Fair
Value Value
--------------- ---------------
<S> <C> <C>
SEPTEMBER 30, 1998:
ASSETS:
Cash and short-term investments $ 333,735,000 $ 333,735,000
Bonds, notes and redeemable
preferred stocks 1,954,754,000 1,954,754,000
Mortgage loans 391,448,000 415,981,000
Separate account seed money --- ---
Common stocks 169,000 169,000
Cost-method partnerships 4,403,000 12,744,000
Variable annuity assets held in
separate accounts 11,133,569,000 11,133,569,000
Receivable from brokers for sales
of securities 23,904,000 23,904,000
LIABILITIES:
Reserves for fixed annuity contracts 2,189,272,000 2,116,874,000
Reserves for guaranteed investment
contracts 282,267,000 282,267,000
Payable to brokers for purchases
of securities 50,957,000 50,957,000
Variable annuity liabilities related
to separate accounts 11,133,569,000 10,696,607,000
Subordinated notes payable to
affiliates 39,182,000 41,272,000
=============== ===============
</TABLE>
7. SUBORDINATED NOTES PAYABLE TO AFFILIATES
At December 31, 1998, Subordinated Notes Payable to Affiliates included
a surplus note (the "Note") payable to its immediate parent, SunAmerica
Life Insurance Company (the "Parent"), for $170,436,000. On June 30,
1999, the Parent cancelled the Note and forgave the interest earned.
Funds received were reclassified to Additional Paid-in Capital in the
accompanying consolidated balance sheet.
Subordinated notes and accrued interest payable to affiliates totaled
$37,816,000 at interest rates ranging from 8% to 9% at December 31,
1999, and require principal payments of $5,400,000 in 2000, $10,000,000
in 2001 and $22,060,000 in 2002.
8. REINSURANCE
The business which was assumed from MBL Life is subject to existing
reinsurance ceded agreements. At December 31, 1998, the maximum
retention on any single life was $2,000,000, and a total credit of
$5,057,000 was taken against the life insurance reserves, representing
predominantly yearly renewable term reinsurance. In order to limit even
further the exposure to loss on any single insured and to recover an
additional portion of the benefits paid over such limits, the Company
entered into a reinsurance treaty effective January 1, 1999 under which
the Company retains no more than $100,000 of risk on any
F-21
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. REINSURANCE (Continued)
one insured life. At December 31, 1999, a total reserve credit of
$3,560,000 was taken against the life insurance reserves. With respect
to these coinsurance agreements, the Company could become liable for
all obligations of the reinsured policies if the reinsurers were to
become unable to meet the obligations assumed under the respective
reinsurance agreements. The Company monitors its credit exposure with
respect to these agreements. However, due to the high credit ratings of
the reinsurers, such risks are considered to be minimal.
On August 1, 1999, the Company entered into a modified coinsurance
transaction, approved by the Arizona Department of Insurance, which
involved the ceding of approximately $6,000,000,000 of variable
annuities to ANLIC Insurance Company (Hawaii), a non-affiliated stock
life insurer. The transaction is accounted for as reinsurance for
statutory reporting purposes. As part of the transaction, the Company
received cash in the amount of $150,000,000 and recorded a
corresponding deposit liability. As payments are made to the reinsurer,
the deposit liability is relieved. The cost of this program, $3,621,000
in 1999, is classified as General and Administrative Expenses in the
income statement.
On August 11, 1998, the Company entered into a similar modified
coinsurance transaction, approved by the Arizona Department of
Insurance, which involved the ceding of approximately $6,000,000,000 of
variable annuities to ANLIC Insurance Company (Cayman), a Cayman
Islands stock life insurance company, effective December 31, 1997. As a
part of this transaction, the Company received cash amounting to
approximately $188,700,000, and recorded a corresponding reduction of
DAC related to the coinsured annuities. As payments were made to the
reinsurer, the reduction of DAC was relieved. Certain expenses related
to this transaction were charged directly to DAC amortization in the
income statement. The net effect of this transaction in the income
statement was not material.
On December 31, 1998, the Company recaptured this business. As part of
this recapture, the Company paid cash of $170,436,000 and recorded an
increase in DAC of $167,202,000 with the balance of $3,234,000 being
recorded as DAC amortization in the income statement.
9. CONTINGENT LIABILITIES
The Company has entered into four agreements in which it has provided
liquidity support for certain short-term securities of municipalities
and non-profit organizations by agreeing to purchase such securities in
the event there is no other buyer in the short-term marketplace. In
return the Company receives a fee. The maximum liability under these
guarantees is $359,400,000. The Company's Parent currently shares in
the liabilities and fees of two of these agreements. The Parent's share
in these liabilities will increase by $150,000,000 subsequent to
December 31, 1999, and the Company's share will decrease to
$209,400,000. Management does not anticipate any material future losses
with respect to these liquidity support facilities.
F-22
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. CONTINGENT LIABILITIES (Continued)
The Company is involved in various kinds of litigation common to its
businesses. These cases are in various stages of development and, based
on reports of counsel, management believes that provisions made for
potential losses relating to such litigation are adequate and any
further liabilities and costs will not have a material adverse impact
upon the Company's financial position, results of operations or cash
flows.
The Company's current financial strength and counterparty credit
ratings from Standard & Poor's are based in part on a guarantee (the
"Guarantee") of the Company's insurance policy obligations by American
Home Assurance Company ("American Home"), a subsidiary of AIG, and a
member of an AIG intercompany pool, and the belief that the Company is
viewed as a strategically important member of AIG. The Guarantee is
unconditional and irrevocable, and policyholders have the right to
enforce the Guarantee directly against American Home.
The Company's current financial strength rating from Moody's is based
in part on a support agreement between the Company and AIG (the
"Support Agreement"), pursuant to which AIG has agreed that AIG will
cause the Company to maintain a policyholder's surplus of not less than
$1 million or such greater amount as shall be sufficient to enable the
Company to perform its obligations under any policy issued by it. The
Support Agreement also provides that if the Company needs funds not
otherwise available to it to make timely payment of its obligations
under policies issued by it, AIG will provide such funds at the request
of the Company. The Support Agreement is not a direct or indirect
guarantee by AIG to any person of any obligation of the Company. AIG
may terminate the Support Agreement with respect to outstanding
obligations of the Company only under circumstances where the Company
attains, without the benefit of the Support Agreement, a financial
strength rating equivalent to that held by the Company with the benefit
of the support agreement. Policyholders have the right to cause the
Company to enforce its rights against AIG and, if the Company fails or
refuses to take timely action to enforce the Support Agreement or if
the Company defaults in any claim or payment owed to such policyholder
when due, have the right to enforce the Support Agreement directly
against AIG.
American Home does not publish financial statements, although it files
statutory annual and quarterly reports with the New York State
Insurance Department, where such reports are available to the public.
AIG is a reporting company under the Securities Exchange Act of 1934,
and publishes annual reports on Form 10-K and quarterly reports on Form
10-Q, which are available from the Securities and Exchange Commission.
F-23
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. SHAREHOLDER'S EQUITY
The Company is authorized to issue 4,000 shares of its $1,000 par value
Common Stock. At December 31, 1999, December 31, 1998 and September 30,
1998, 3,511 shares were outstanding.
Changes in shareholder's equity are as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended ----------------------------------
December 31, 1999 December 31, 1998 1998 1997
----------------- ------------------ ------------ ------------
<S> <C> <C> <C> <C>
ADDITIONAL PAID-IN
CAPITAL:
Beginning balances $ 378,674,000 $308,674,000 $308,674,000 $280,263,000
Reclassification of
Note by the Parent 170,436,000 --- --- ---
Return of capital (170,500,000) --- --- ---
Capital contributions
received 114,250,000 70,000,000 --- 28,411,000
Contribution of
partnership
investment 150,000 --- --- ---
------------- ------------ ------------ ------------
Ending balances $ 493,010,000 $378,674,000 $308,674,000 $308,674,000
============= ============ ============ ============
RETAINED EARNINGS:
Beginning balances $ 366,460,000 $332,069,000 $244,628,000 $207,002,000
Net income 184,698,000 34,391,000 138,641,000 63,126,000
Dividends paid --- --- (51,200,000) (25,500,000)
------------- ------------ ------------ ------------
Ending balances $ 551,158,000 $366,460,000 $332,069,000 $244,628,000
============= ============ ============ ============
ACCUMULATED OTHER
COMPREHENSIVE INCOME
(LOSS):
Beginning balances $ (1,619,000) $ 8,415,000 $ 18,405,000 $ (5,521,000)
Change in net
unrealized gains
(losses) on debt
securities
available for sale (198,659,000) (23,791,000) (23,818,000) 57,463,000
Change in net
unrealized gains
(losses) on equity
securities
available for sale (10,000) (44,000) (950,000) (55,000)
Change in adjustment
to deferred
acquisition costs 28,000,000 8,400,000 9,400,000 (20,600,000)
Tax effects of net
changes $ 59,735,000 5,401,000 5,378,000 (12,882,000)
------------- ------------ ------------ ------------
Ending balances $(112,553,000) $ (1,619,000) $ 8,415,000 $ 18,405,000
============= ============ ============ ============
</TABLE>
F-24
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. SHAREHOLDER'S EQUITY (Continued)
Dividends that the Company may pay to its shareholder in any year
without prior approval of the Arizona Department of Insurance are
limited by statute. The maximum amount of dividends which can be paid
to shareholders of insurance companies domiciled in the state of
Arizona without obtaining the prior approval of the Insurance
Commissioner is limited to the lesser of either 10% of the preceding
year's statutory surplus or the preceding year's statutory net gain
from operations less equity in undistributed income or loss of
subsidiaries included in net investment income if, after paying the
dividend, the Company's capital and surplus would be adequate in the
opinion of the Arizona Department of Insurance. No dividends were paid
in the year ended December 31, 1999 or the three months ended December
31, 1998. Dividends in the amounts of $51,200,000 and $25,500,000 were
paid on June 4, 1998 and April 1, 1997, respectively. Dividends of
$69,000,000 were paid on March 1, 2000.
Under statutory accounting principles utilized in filings with
insurance regulatory authorities, the Company's net income for the year
ended December 31, 1999 was $261,539,000. The statutory net loss for
the year ended December 31, 1998 was $98,766,000. The statutory net
income for the year ended December 31, 1997 totaled $74,407,000. The
Company's statutory capital and surplus totaled $694,621,000 at
December 31, 1999, $443,394,000 at December 31, 1998 and $537,542,000
at September 30, 1998.
On June 30, 1999, the Parent cancelled the Company's surplus note
payable of $170,436,000 and funds received were reclassified to
Additional Paid-in Capital in the accompanying consolidated balance
sheet. On September 9, 1999, the Company paid $170,500,000 to its
Parent as a return of capital. On September 14, 1999 and October 25,
1999, the Parent contributed additional capital to the Company in the
amounts of $54,250,000 and $60,000,000, respectively. Also on December
31, 1999, the Parent made a $150,000 contribution of partnership
investments.
F-25
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES
The components of the provisions for federal income taxes on pretax
income consist of the following:
<TABLE>
<CAPTION>
Net Realized
Investment
Gains (Losses) Operations Total
-------------- ---------- -------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999:
Currently payable $ 6,846,000 $196,192,000 $ 203,038,000
Deferred (13,713,000) (86,300,000) (100,013,000)
------------ ------------ -------------
Total income tax expense
(benefit) $ (6,867,000) $109,892,000 $ 103,025,000
============ ============ =============
THREE MONTHS ENDED DECEMBER 31, 1998:
Currently payable $ 740,000 $ 3,421,000 $ 4,161,000
Deferred (620,000) 16,565,000 15,945,000
------------ ------------ -------------
Total income tax expense $ 120,000 $ 19,986,000 $ 20,106,000
============ ============ =============
YEAR ENDED SEPTEMBER 30, 1998:
Currently payable $ 4,221,000 $ 32,743,000 $ 36,964,000
Deferred (550,000) 34,637,000 34,087,000
------------ ------------ -------------
Total income tax expense $ 3,671,000 $ 67,380,000 $ 71,051,000
============ ============ =============
YEAR ENDED SEPTEMBER 30, 1997:
Currently payable $ (3,635,000) $ 50,828,000 $ 47,193,000
Deferred (2,258,000) (13,766,000) (16,024,000)
------------ ------------ -------------
Total income tax expense
(benefit) $ (5,893,000) $ 37,062,000 $ 31,169,000
============ ============ =============
</TABLE>
F-26
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES (Continued)
Income taxes computed at the United States federal income tax rate of
35% and income taxes provided differ as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
Year Ended Three Months Ended ---------------------------------
December 31, 1999 December 31, 1998 1998 1997
----------------- ------------------ ----------- -----------
<S> <C> <C> <C> <C>
Amount computed at
statutory rate $100,703,000 $19,074,000 $73,392,000 $33,003,000
Increases (decreases)
resulting from:
Amortization of
differences between
book and tax bases
of net assets
acquired 609,000 146,000 460,000 666,000
State income taxes,
net of federal tax
benefit 7,231,000 1,183,000 5,530,000 1,950,000
Dividends-received
deduction (3,618,000) (345,000) (7,254,000) (4,270,000)
Tax credits (1,346,000) (1,296,000) (318,000)
Other, net (554,000) 48,000 219,000 138,000
------------ ----------- ----------- -----------
Total income tax
expense $103,025,000 $20,106,000 $71,051,000 $31,169,000
============ =========== =========== ===========
</TABLE>
For United States federal income tax purposes, certain amounts from
life insurance operations are accumulated in a memorandum
policyholders' surplus account and are taxed only when distributed to
shareholders or when such account exceeds prescribed limits. The
accumulated policyholders' surplus was $14,300,000 at December 31,
1999. The Company does not anticipate any transactions which would
cause any part of this surplus to be taxable.
F-27
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES (Continued)
<TABLE>
<CAPTION>
December 31, December 31, September 30,
1999 1998 1998
------------- ------------- -------------
<S> <C> <C> <C>
DEFERRED TAX LIABILITIES:
Investments $ 23,208,000 $ 18,174,000 $ 17,643,000
Deferred acquisition costs 272,697,000 222,943,000 223,392,000
State income taxes 5,203,000 3,143,000 2,873,000
Other liabilities 18,658,000 13,906,000 144,000
Net unrealized gains on debt
and equity securities
available for sale --- --- 4,531,000
------------- ------------- -------------
Total deferred tax liabilities $ 319,766,000 258,166,000 248,583,000
------------- ------------- -------------
DEFERRED TAX ASSETS:
Contractholder reserves (261,781,000) (148,587,000) (149,915,000)
Guaranty fund assessments (2,454,000) (2,935,000) (2,910,000)
Deferred income (48,371,000) --- ---
Other assets --- --- ---
Net unrealized losses on
debt and equity securities
available for sale (60,605,000) ( 872,000) ---
------------- ------------- -------------
Total deferred tax assets (373,211,000) (152,394,000) (152,825,000)
------------- ------------- -------------
Deferred income taxes $ (53,445,000) $ 105,772,000 $ 95,758,000
============= ============= =============
</TABLE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
reporting purposes. The significant components of the liability for
Deferred Income Taxes are as follows:
12. COMPREHENSIVE INCOME
Effective October 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130") which requires the reporting of comprehensive income in addition
to net income from operations. Comprehensive income is a more inclusive
financial reporting methodology that includes disclosure of certain
financial information that historically has not been recognized in the
calculation of net income. The adoption of SFAS 130 did not have an
impact on the Company's results of operations, financial condition or
liquidity. Comprehensive income amounts for the prior years are
disclosed to conform to the current year's presentation.
F-28
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. COMPREHENSIVE INCOME (Continued)
The before tax, after tax, and tax benefit (expense) amounts for each
component of the increase or decrease in unrealized losses or gains on
debt and equity securities available for sale for both the current and
prior periods are summarized below:
<TABLE>
<CAPTION>
Tax Benefit
Before Tax (Expense) Net of Tax
----------- ----------- -----------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1999:
Net unrealized losses on debt and
equity securities available
for sale identified in the
current period $(217,259,000) $ 76,041,000 $(141,218,000)
Increase in deferred acquisition
cost adjustment identified in
the current period 34,690,000 (12,141,000) 22,549,000
------------- ------------ -------------
Subtotal (182,569,000) 63,900,000 (118,669,000)
------------- ------------ -------------
Reclassification adjustment for:
Net realized losses included
in net income 18,590,000 (6,507,000) 12,083,000
Related change in deferred
acquisition costs (6,690,000) 2,342,000 (4,348,000)
------------- ------------ -------------
Total reclassification
adjustment 11,900,000 (4,165,000) 7,735,000
------------- ------------ -------------
Total other comprehensive
loss $(170,669,000) $ 59,735,000 $(110,934,000)
============= ============ =============
THREE MONTHS ENDED DECEMBER 31,
1998:
Net unrealized losses on debt
and equity securities available
for sale identified in the
current period $ (24,345,000) $ 8,521,000 $ (15,824,000)
Increase in deferred acquisition
cost adjustment identified in
the current period 8,579,000 (3,004,000) 5,575,000
------------- ------------ -------------
Subtotal (15,766,000) 5,517,000 (10,249,000)
------------- ------------ -------------
Reclassification adjustment for:
Net realized losses included
in net income 510,000 (179,000) 331,000
Related change in deferred
acquisition costs (179,000) 63,000 (116,000)
------------- ------------ -------------
Total reclassification
adjustment 331,000 (116,000) 215,000
------------- ------------ -------------
Total other comprehensive loss $ (15,435,000) $ 5,401,000 $ (10,034,000)
============= ============ =============
</TABLE>
F-29
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. COMPREHENSIVE INCOME (Continued)
<TABLE>
<CAPTION>
Tax Benefit
Before Tax (Expense) Net of Tax
------------ ------------ ------------
<S> <C> <C> <C>
YEAR ENDED SEPTEMBER 30,
1998:
Net unrealized losses on debt and
equity securities available
for sale identified in the
current period $(10,281,000) $ 3,598,000 $(6,683,000)
Increase in deferred acquisition
cost adjustment identified in
the current period 4,086,000 (1,430,000) 2,656,000
------------ ------------ -----------
Subtotal (6,195,000) 2,168,000 (4,027,000)
------------ ------------ -----------
Reclassification adjustment for:
Net realized losses included
in net income (14,487,000) 5,070,000 (9,417,000)
Related change in deferred
acquisition costs 5,314,000 (1,860,000) 3,454,000
------------ ------------ -----------
Total reclassification
adjustment (9,173,000) 3,210,000 (5,963,000)
------------ ------------ -----------
Total other comprehensive loss $(15,368,000) $ 5,378,000 $(9,990,000)
============ ============ ===========
YEAR ENDED SEPTEMBER 30,
1997:
Net unrealized gains on debt
and equity securities available
for sale identified in the
current period $ 40,575,000 $(14,201,000) $26,374,000
Decrease in deferred acquisition
cost adjustment identified in
the current period (15,031,000) 5,262,000 (9,769,000)
------------ ------------ -----------
Subtotal 25,544,000 (8,939,000) 16,605,000
------------ ------------ -----------
Reclassification adjustment for:
Net realized losses included
in net income 16,832,000 (5,891,000) 10,941,000
Related change in deferred
acquisition costs (5,569,000) 1,949,000 (3,620,000)
------------ ------------ -----------
Total reclassification
adjustment 11,263,000 (3,942,000) 7,321,000
------------ ------------ -----------
Total other comprehensive
income $ 36,807,000 $(12,881,000) $23,926,000
============ ============ ===========
</TABLE>
F-30
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. RELATED-PARTY MATTERS
The Company pays commissions to five affiliated companies: SunAmerica
Securities, Inc.; Advantage Capital Corp.; Financial Services Corp.;
Sentra Securities Corp.; and Spelman & Co. Inc. Commissions paid to
these broker-dealers totaled $37,435,000 in the year ended December 31,
1999, $6,977,000 in the three months ended December 31, 1998, and
$32,946,000 in the year ended September 30, 1998 and $25,492,000 in the
year ended September 30, 1997. These broker-dealers, when combined with
the Company's wholly owned broker-dealer, represent a significant
portion of the Company's business, amounting to approximately 35.6% of
premiums in the year ended December 31, 1999 and the three months ended
December 31, 1998, 33.6% in the year ended September 30, 1998 and 36.1%
in the year ended September 30, 1997.
The Company purchases administrative, investment management,
accounting, marketing and data processing services from its Parent and
SunAmerica, an indirect parent. Amounts paid for such services totaled
$105,059,000 for the year ended December 31, 1999, $21,593,000 for the
three months ended December 31, 1998, $84,975,000 for the year ended
September 30, 1998 and $86,116,000 for the year ended September 30,
1997. The marketing component of such costs during these periods
amounted to $53,385,000, $9,906,000, $39,482,000 and $31,968,000,
respectively, and are deferred and amortized as part of Deferred
Acquisition Costs. The other components of such costs are included in
General and Administrative Expenses in the income statement.
At December 31, 1999 and 1998, the Company held bonds with a fair value
of $50,000 and $84,965,000, respectively, which were issued by its
affiliate, International Lease Finance Corp. The amortized cost of
these bonds is equal to the fair value. At September 30, 1998 and 1997,
the Company held no investments issued by any of its affiliates.
During the year ended December 31, 1999, the Company transferred
short-term investments and bonds to FSA with an aggregate fair value of
$634,596,000 as part of the transfer of the New York Business from the
Acquisition (See Note 4). The Company recorded a net realized loss of
$5,144,000 on the transfer of these assets.
During the year ended December 31, 1999, the Company purchased certain
invested assets from SunAmerica for cash equal to their current market
value of $161,159,000.
For the three months ended December 31, 1998, the Company made no
purchases or sales of invested assets from or to the Parent or its
affiliates.
During the year ended September 30, 1998, the Company sold various
invested assets to SunAmerica for cash equal to their current market
value of $64,431,000. The Company recorded a net gain aggregating
$16,388,000 on such transactions.
During the year ended September 30, 1998, the Company purchased certain
invested assets from SunAmerica, the Parent and CalAmerica Life
Insurance Company ("CalAmerica"), a wholly-owned subsidiary of the
Parent that has since merged into the Parent, for cash equal to their
current market value which aggregated $20,666,000, $10,468,000
F-31
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. RELATED-PARTY MATTERS (Continued)
and $61,000, respectively.
During the year ended September 30, 1997, the Company sold various
invested assets to the Parent and CalAmerica for cash equal to their
current market value of $15,776,000 and $15,000, respectively. The
Company recorded a net gain aggregating $276,000 on such transactions.
During the year ended September 30, 1997, the Company purchased certain
invested assets from the Parent and CalAmerica for cash equal to their
current market value of $8,717,000 and $284,000, respectively.
14. BUSINESS SEGMENTS
Effective January 1, 1999, the Company adopted Statement of Financial
Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments
of an Enterprise and Related Information," which requires the reporting
of certain financial information by business segment. For the purpose
of providing segment information, the Company has three business
segments: annuity operations, asset management operations and
broker-dealer operations. The annuity operations focus primarily on the
marketing of variable annuity products and the administration of the
universal life business acquired from MBL Life in 1998 (See Note 4).
The Company's variable annuity products offer investors a broad
spectrum of fund alternatives, with a choice of investment managers, as
well as guaranteed fixed-rate account options. The Company earns fee
income on investments in the variable options and net investment income
on the fixed-rate options. The asset management operations are
conducted by the Company's registered investment advisor subsidiary,
SunAmerica Asset Management Corp. ("SunAmerica Asset Management"), and
its related distributor. SunAmerica Asset Management earns fee income
by distributing and managing a diversified family of mutual funds, by
managing certain subaccounts within the Company's variable annuity
products and by providing professional management of individual,
corporate and pension plan portfolios. The broker-dealer operations are
conducted by the Company's broker-dealer subsidiary, Royal Alliance
Associates, Inc. ("Royal"), which sells proprietary annuities and
mutual funds, as well as a full range of non-proprietary investment
products.
F-32
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
Summarized data for the Company's business segments follow:
<TABLE>
<CAPTION>
Asset Broker
Annuity Management Dealer
Operations Operations Operations Total
--------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999:
Total assets $26,649,310,000 $150,966,000 $74,218,000 $26,874,494,000
Expenditures for long-
lived assets --- 2,563,000 2,728,000 5,291,000
Investment in subsidiaries --- --- --- ---
Revenue from external
customers 790,697,000 54,652,000 41,185,000 886,534,000
Intersegment revenue --- 62,998,000 8,193,000 71,191,000
--------------- ------------ ----------- ---------------
Total revenue 790,697,000 117,650,000 49,378,000 957,725,000
=============== ============ =========== ===============
Investment income 511,914,000 9,072,000 967,000 521,953,000
Interest expense (354,263,000) (3,085,000) (389,000) (357,737,000)
Depreciation and
amortization expense (95,408,000) (23,249,000) (3,234,000) (121,891,000)
Income from unusual
transactions --- --- --- ---
Pretax income 199,333,000 67,779,000 20,611,000 287,723,000
Income tax expense (65,445,000) (28,247,000) (9,333,000) (103,025,000)
Income from extraordinary
items --- --- --- ---
Net income $ 133,888,000 $ 39,532,000 $11,278,000 $ 184,698,000
=============== ============ =========== ===============
Significant non-cash
items $ --- $ --- $ --- $ ---
=============== ============ =========== ===============
</TABLE>
F-33
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
<TABLE>
<CAPTION>
Asset Broker-
Annuity Management Dealer
Operations Operations Operations Total
-------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
THREE MONTHS ENDED
DECEMBER 31, 1998:
Total assets $22,982,323,000 $104,473,000 $59,537,000 $23,146,333,000
Expenditures for long-
lived assets --- 328,000 1,005,000 1,333,000
Investment in subsidiaries --- --- --- ---
Revenue from external
customers 103,626,000 11,103,000 9,605,000 124,334,000
Intersegment revenue --- 11,871,000 1,674,000 13,545,000
--------------- ------------ ----------- ---------------
Total revenue 103,626,000 22,974,000 11,279,000 137,879,000
=============== ============ =========== ===============
Investment income 53,149,000 971,000 158,000 54,278,000
Interest expense (26,842,000) (752,000) (101,000) (27,695,000)
Depreciation and
amortization expense (23,236,000) (4,204,000) (561,000) (28,001,000)
Income from unusual
transactions --- --- --- ---
Pretax income 36,961,000 13,092,000 4,444,000 54,497,000
Income tax expense (12,978,000) (5,181,000) (1,947,000) (20,106,000)
Income from extraordinary
items --- --- --- ---
Net income $ 23,983,000 $ 7,911,000 $ 2,497,000 $ 34,391,000
=============== ============ =========== ===============
Significant non-cash
items $ --- $ --- $ --- $ ---
=============== ============ =========== ===============
</TABLE>
F-34
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
<TABLE>
<CAPTION>
Asset Broker-
Annuity Management Dealer
Operations Operations Operations TOTAL
-------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1998:
Total assets $14,389,922,000 $104,476,000 $ 55,870,000 $14,550,268,000
Expenditures for long-
lived assets --- 477,000 5,289,000 5,766,000
Investment in subsidiaries --- --- --- ---
Revenue from external
customers 410,011,000 34,396,000 39,729,000 484,136,000
Intersegment revenue --- 40,040,000 7,634,000 47,674,000
--------------- ------------ ------------ ---------------
Total revenue 410,011,000 74,436,000 47,363,000 531,810,000
=============== ============ ============ ===============
Investment income 218,044,000 2,839,000 1,083,000 221,966,000
Interest expense (131,980,000) (2,709,000) (405,000) (135,094,000)
Depreciation and
amortization expense (60,731,000) (14,780,000) (1,770,000) (77,281,000)
Income from unusual
transactions --- --- --- ---
Pretax income 148,084,000 39,207,000 22,401,000 209,692,000
Income tax expense (44,706,000) (15,670,000) (10,675,000) (71,051,000)
Income from extraordinary
items --- --- --- ---
Net income $ 103,378,000 $ 23,537,000 $ 11,726,000 $ 138,641,000
=============== ============ ============ ===============
Significant non-cash
items $ --- $ --- $ --- $ ---
=============== ============ ============ ===============
</TABLE>
F-35
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
<TABLE>
<CAPTION>
Asset Broker-
Annuity Management Dealer
Operations Operations Operations Total
-------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1997:
Total assets $12,440,311,000 $ 81,518,000 $51,400,000 $12,573,229,000
Expenditures for long-
lived assets --- 804,000 4,527,000 5,331,000
Investment in subsidiaries --- --- --- ---
Revenue from external
customers 317,061,000 28,655,000 31,678,000 377,394,000
Intersegment revenue --- 22,790,000 6,327,000 29,117,000
--------------- ------------ ----------- ---------------
Total revenue 317,061,000 51,445,000 38,005,000 406,511,000
=============== ============ =========== ===============
Investment income 208,382,000 1,445,000 932,000 210,759,000
Interest expense (134,416,000) (2,737,000) (405,000) (137,558,000)
Depreciation and
amortization expense (55,675,000) (16,357,000) (689,000) (72,721,000)
Income from unusual
transactions --- --- --- ---
Pretax income 58,291,000 19,299,000 16,705,000 94,295,000
Income tax expense (16,318,000) (7,850,000) (7,001,000) (31,169,000)
Income from extraordinary
items --- --- --- ---
Net income $ 41,973,000 $ 11,449,000 $ 9,704,000 $ 63,126,000
=============== ============ =========== ===============
Significant non-cash
items $ --- $ --- $ --- $ ---
=============== ============ =========== ===============
</TABLE>
Substantially all of the Company's revenues are derived from the United
States.
The accounting policies of the segments are as described in the summary
of significant accounting policies (Note 2). The Parent makes
expenditures for long-lived assets for the annuity operations segment
and allocates depreciation of such assets to the annuity operations
segment. The annuity operations and asset management operations pay
commissions to Royal for sales of their proprietary products.
Approximately 90% of these commission payments are in turn paid to
registered representatives of Royal, with the remainder of the revenue
reflected in Net Retained Commissions. In addition, premiums from
variable annuity policies sold by the Company are held in trusts that
are owned by the Company, although the assets directly support
policyholder obligations. SunAmerica Asset Management is the Investment
Advisor for all of the subaccounts of these trusts, for which service
it receives fees which are direct expenses of the trusts. Such fees are
reported as Variable Annuity Fees in the consolidated income statement
and are shown as intersegment revenues in the business segments
disclosure above, although there is no corresponding expense on the
books of any segment.
The annuity operations segment's products are marketed through over 800
independent broker-dealers, full-service securities firms and financial
institutions, in addition to the Company's affiliated broker-dealers.
Those independent selling organizations
F-36
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. BUSINESS SEGMENTS (Continued)
responsible for over 10% of sales represented 12.0% of sales in the
year ended December 31, 1999, 14.7% in the three months ended December
31, 1998, 16.8% in the year ended September 30, 1998, and 18.4% and
10.2% in the year ended September 30, 1997. Registered representatives
sell products for the Company's asset management operations and sell
products offered by the broker-dealer operations. Revenue from any
single registered representative or group of registered representatives
do not compose a material percentage of total revenues in either the
asset management operations or the broker-dealer operations.
15. SUBSEQUENT EVENTS
On March 1, 2000, the Company paid dividends of $69,000,000 to the
Parent.
F-37
<PAGE>
VARIABLE ANNUITY ACCOUNT FIVE
(PORTION RELATING TO THE SEASONS SELECT VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
FINANCIAL STATEMENTS
APRIL 30, 2000 AND MARCH 31, 2000
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Anchor National Life Insurance Company
and the Contractholders of its separate account, Variable Annuity Account Five
(Portion Relating to the SEASONS SELECT Variable Annuity)
In our opinion, the accompanying statements of net assets, including the
schedules of portfolio investments, and the related statements of operations and
of changes in net assets present fairly, in all material respects, the financial
position of each of the Variable Accounts constituting Variable Annuity Account
Five (Portion Relating to the SEASONS SELECT Variable Annuity), a separate
account of Anchor National Life Insurance Company (the "Separate Account") at
April 30, 2000 and March 31, 2000, the results of their operations for the one
month ended April 30, 2000 and for the fiscal year ended March 31, 2000, and the
changes in their net assets for the one month ended April 30, 2000, for the
fiscal year ended March 31, 2000, and for the period from inception to
March 31, 1999, in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility of the
Separate Account's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities owned at April 30, 2000 and
March 31, 2000 by correspondence with the custodian, provides a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Los Angeles, California
June 19, 2000
----------------
1
<PAGE>
----------------
VARIABLE ANNUITY ACCOUNT FIVE
(PORTION RELATING TO THE SEASONS SELECT VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
APRIL 30, 2000
<TABLE>
<CAPTION>
MODERATE BALANCED CONSERVATIVE LARGE CAP LARGE CAP
GROWTH GROWTH GROWTH GROWTH GROWTH COMPOSITE
STRATEGY STRATEGY STRATEGY STRATEGY PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
ASSETS:
Investments in Seasons
Series Trust, at
market value......... $40,561,635 $34,070,875 $18,876,478 $10,303,489 $17,180,132 $4,667,134
Liabilities.............. 0 0 0 0 0 0
----------------------------------------------------------------------------
Net Assets............... $40,561,635 $34,070,875 $18,876,478 $10,303,489 $17,180,132 $4,667,134
============================================================================
Accumulation units
outstanding............ 2,003,745 1,830,368 1,171,652 710,838 1,235,456 380,907
============================================================================
SELECT 140:
Net Assets............. $37,883,793 $32,778,665 $17,108,625 $ 9,119,646 $16,199,910 $4,452,080
Accumulation units
outstanding.......... 1,871,300 1,760,865 1,061,795 629,067 1,158,071 361,941
Unit value of
accumulation units... $ 20.24 $ 18.62 $ 16.11 $ 14.50 $ 13.99 $ 12.30
SELECT 152:
Net Assets............. $ 2,677,842 $ 1,292,210 $ 1,767,853 $ 1,183,843 $ 980,222 $ 215,054
Accumulation units
outstanding.......... 132,445 69,503 109,857 81,771 77,385 18,966
Unit value of
accumulation units... $ 20.22 $ 18.59 $ 16.09 $ 14.48 $ 12.67 $ 11.34
</TABLE>
See accompanying notes to financial statements.
----------------
2
<PAGE>
<TABLE>
<CAPTION>
LARGE CAP MID CAP MID CAP INTERNATIONAL DIVERSIFIED CASH
VALUE GROWTH VALUE SMALL CAP EQUITY FIXED INCOME MANAGEMENT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments in Seasons
Series Trust, at
market value......... $6,278,480 $10,856,760 $3,914,164 $6,957,249 $5,074,441 $5,245,985 $2,717,232 $166,704,054
Liabilities.............. 0 0 0 0 0 0 0 0
------------------------------------------------------------------------------------------------------
Net Assets............... $6,278,480 $10,856,760 $3,914,164 $6,957,249 $5,074,441 $5,245,985 $2,717,232 $166,704,054
======================================================================================================
Accumulation units
outstanding............ 582,554 647,256 351,859 514,153 408,847 527,106 262,488
======================================================================================================
SELECT 140:
Net Assets............. $6,163,983 $10,314,065 $3,543,953 $6,527,140 $4,796,358 $5,114,512 $2,439,525
Accumulation units
outstanding.......... 571,490 612,249 318,151 481,239 384,946 513,721 235,608
Unit value of
accumulation units... $ 10.79 $ 16.85 $ 11.14 $ 13.56 $ 12.46 $ 9.96 $ 10.35
SELECT 152:
Net Assets............. $ 114,497 $ 542,695 $ 370,211 $ 430,109 $ 278,083 $ 131,473 $ 277,707
Accumulation units
outstanding.......... 11,064 35,007 33,708 32,914 23,901 13,385 26,880
Unit value of
accumulation units... $ 10.35 $ 15.50 $ 10.98 $ 13.07 $ 11.63 $ 9.82 $ 10.33
</TABLE>
See accompanying notes to financial statements.
----------------
3
<PAGE>
----------------
VARIABLE ANNUITY ACCOUNT FIVE
(PORTION RELATING TO THE SEASONS SELECT VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
MARCH 31, 2000
<TABLE>
<CAPTION>
MODERATE BALANCED CONSERVATIVE LARGE CAP LARGE CAP
GROWTH GROWTH GROWTH GROWTH GROWTH COMPOSITE
STRATEGY STRATEGY STRATEGY STRATEGY PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
ASSETS:
Investments in Seasons
Series Trust, at
market value......... $37,896,647 $31,415,401 $18,421,809 $10,432,593 $16,611,415 $4,284,975
Liabilities.............. 0 0 0 0 0 0
----------------------------------------------------------------------------
Net Assets............... $37,896,647 $31,415,401 $18,421,809 $10,432,593 $16,611,415 $4,284,975
============================================================================
Accumulation units
outstanding............ 1,779,711 1,612,411 1,104,855 700,781 1,117,827 334,099
============================================================================
SELECT 140:
Net Assets............. $35,212,010 $30,376,271 $16,537,045 $ 9,278,553 $15,806,509 $4,080,266
Accumulation units
outstanding.......... 1,653,495 1,559,019 991,695 623,175 1,058,317 316,855
Unit value of
accumulation units... $ 21.30 $ 19.48 $ 16.68 $ 14.89 $ 14.94 $ 12.88
SELECT 152:
Net Assets............. $ 2,684,637 $ 1,039,130 $ 1,884,764 $ 1,154,040 $ 804,906 $ 204,709
Accumulation units
outstanding.......... 126,216 53,392 113,160 77,606 59,510 17,244
Unit value of
accumulation units... $ 21.27 $ 19.46 $ 16.66 $ 14.87 $ 13.53 $ 11.87
</TABLE>
See accompanying notes to financial statements.
----------------
4
<PAGE>
<TABLE>
<CAPTION>
LARGE CAP MID CAP MID CAP INTERNATIONAL DIVERSIFIED CASH
VALUE GROWTH VALUE SMALL CAP EQUITY FIXED INCOME MANAGEMENT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments in Seasons
Series Trust, at
market value......... $5,814,724 $10,140,129 $3,447,014 $6,747,163 $4,400,113 $4,862,880 $4,123,318 $158,598,181
Liabilities.............. 0 0 0 0 0 0 0 0
------------------------------------------------------------------------------------------------------
Net Assets............... $5,814,724 $10,140,129 $3,447,014 $6,747,163 $4,400,113 $4,862,880 $4,123,318 $158,598,181
======================================================================================================
Accumulation units
outstanding............ 541,113 552,460 315,553 450,352 323,863 486,341 399,471
======================================================================================================
SELECT 140:
Net Assets............. $5,717,921 $ 9,756,840 $3,250,303 $6,494,154 $4,282,790 $4,741,220 $3,924,476
Accumulation units
outstanding.......... 531,732 529,844 297,306 432,850 314,634 474,014 380,169
Unit value of
accumulation units... $ 10.75 $ 18.41 $ 10.93 $ 15.00 $ 13.61 $ 10.00 $ 10.32
SELECT 152:
Net Assets............. $ 96,803 $ 383,289 $ 196,711 $ 253,009 $ 117,323 $ 121,660 $ 198,842
Accumulation units
outstanding.......... 9,381 22,616 18,247 17,502 9,229 12,327 19,302
Unit value of
accumulation units... $ 10.32 $ 16.95 $ 10.78 $ 14.46 $ 12.71 $ 9.87 $ 10.30
</TABLE>
See accompanying notes to financial statements.
----------------
5
<PAGE>
----------------
VARIABLE ANNUITY ACCOUNT FIVE
(PORTION RELATING TO THE SEASONS SELECT VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
SCHEDULE OF PORTFOLIO INVESTMENTS
APRIL 30, 2000
<TABLE>
<CAPTION>
MARKET VALUE
PORTFOLIO INVESTMENT SHARES PER SHARE MARKET VALUE COST
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Multi-Managed Growth Portfolio................... 981,175 $20.16 $ 19,781,274 $ 18,970,991
Multi-Managed Moderate Growth Portfolio.......... 1,045,607 17.66 18,470,465 17,702,647
Multi-Managed Income/Equity Portfolio............ 751,037 13.85 10,405,332 10,281,383
Multi-Managed Income Portfolio................... 521,402 11.97 6,242,100 6,295,910
Asset Allocation: Diversified Growth Portfolio... 1,967,600 13.42 26,412,350 26,147,671
Stock Portfolio.................................. 1,186,952 18.96 22,500,956 20,753,966
Large Cap Growth Portfolio....................... 1,226,151 14.01 17,180,132 15,332,715
Large Cap Composite Portfolio.................... 373,913 12.48 4,667,134 4,291,612
Large Cap Value Portfolio........................ 600,394 10.46 6,278,480 6,351,961
Mid Cap Growth Portfolio......................... 660,675 16.43 10,856,760 9,154,342
Mid Cap Value Portfolio.......................... 364,816 10.73 3,914,164 3,749,461
Small Cap Portfolio.............................. 545,778 12.75 6,957,249 6,686,901
International Equity Portfolio................... 419,572 12.09 5,074,441 5,045,315
Diversified Fixed Income Portfolio............... 546,573 9.60 5,245,985 5,312,371
Cash Management Portfolio........................ 264,161 10.29 2,717,232 2,707,510
---------------------------
$166,704,054 $158,784,756
===========================
</TABLE>
----------------
6
<PAGE>
------------------
VARIABLE ANNUITY ACCOUNT FIVE
(PORTION RELATING TO THE SEASONS SELECT VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
MARKET VALUE
PORTFOLIO INVESTMENT SHARES PER SHARE MARKET VALUE COST
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Multi-Managed Growth Portfolio................... 869,253 $21.48 $ 18,676,175 $ 16,729,692
Multi-Managed Moderate Growth Portfolio.......... 920,030 18.60 17,110,867 15,493,685
Multi-Managed Income/Equity Portfolio............ 709,123 14.29 10,131,124 9,699,380
Multi-Managed Income Portfolio................... 514,662 12.19 6,275,329 6,215,002
Asset Allocation: Diversified Growth Portfolio... 1,789,167 13.95 24,958,072 23,723,078
Stock Portfolio.................................. 1,072,237 19.60 21,014,883 18,592,450
Large Cap Growth Portfolio....................... 1,111,683 14.95 16,611,415 13,726,321
Large Cap Composite Portfolio.................... 328,297 13.05 4,284,975 3,718,188
Large Cap Value Portfolio........................ 558,366 10.41 5,814,724 5,911,188
Mid Cap Growth Portfolio......................... 565,160 17.95 10,140,129 7,619,693
Mid Cap Value Portfolio.......................... 327,727 10.52 3,447,014 3,364,261
Small Cap Portfolio.............................. 479,045 14.08 6,747,163 5,865,531
International Equity Portfolio................... 333,405 13.20 4,400,113 3,968,024
Diversified Fixed Income Portfolio............... 504,886 9.63 4,862,880 4,909,559
Cash Management Portfolio........................ 402,530 10.24 4,123,318 4,123,766
---------------------------
$158,598,181 $143,659,818
===========================
</TABLE>
----------------
7
<PAGE>
----------------
VARIABLE ANNUITY ACCOUNT FIVE
(PORTION RELATING TO THE SEASONS SELECT VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE ONE MONTH ENDED
APRIL 30, 2000
<TABLE>
<CAPTION>
MODERATE BALANCED CONSERVATIVE LARGE CAP
GROWTH GROWTH GROWTH GROWTH GROWTH
STRATEGY STRATEGY STRATEGY STRATEGY STRATEGY
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends and capital
gains
distributions........ $ 0 $ 0 $ 0 $ 0 $ 0
--------------------------------------------------------------
Total investment
income............. 0 0 0 0 0
--------------------------------------------------------------
Expenses:
Mortality risk
charge............... (28,338) (23,889) (13,553) (7,620) (12,120)
Additional mortality
risk charge (issue
ages over 80)........ (256) (122) (178) (115) (84)
Expense risk charge.... (11,020) (9,290) (5,271) (2,964) (4,714)
Distribution expense
charge............... (4,723) (3,982) (2,259) (1,270) (2,020)
--------------------------------------------------------------
Total expenses....... (44,337) (37,283) (21,261) (11,969) (18,938)
--------------------------------------------------------------
Net investment income
(loss)................. (44,337) (37,283) (21,261) (11,969) (18,938)
--------------------------------------------------------------
Net realized gains
(losses) from
securities
transactions:
Proceeds from shares
sold................. 77,484 76,318 99,541 338,645 72,147
Cost of shares sold.... (76,053) (74,001) (100,542) (333,642) (65,837)
--------------------------------------------------------------
Net realized gains
(losses) from
securities
transactions........... 1,431 2,317 (1,001) 5,003 6,310
--------------------------------------------------------------
Net unrealized
appreciation
(depreciation) of
investments:
Beginning of period.... 3,478,157 2,746,914 1,108,020 380,072 2,885,094
End of period.......... 1,659,434 1,385,806 504,395 110,274 1,847,417
--------------------------------------------------------------
Change in net unrealized
appreciation/depreciation
of investments......... (1,818,723) (1,361,108) (603,625) (269,798) (1,037,677)
--------------------------------------------------------------
Increase (decrease) in
net assets from
operations............. $(1,861,629) $(1,396,074) $(625,887) $ (276,764) $(1,050,305)
==============================================================
</TABLE>
See accompanying notes to financial statements.
----------------
8
<PAGE>
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP MID CAP MID CAP INTERNATIONAL DIVERSIFIED CASH
COMPOSITE VALUE GROWTH VALUE SMALL CAP EQUITY FIXED INCOME MANAGEMENT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends and capital
gains
distributions........ $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
-------------------------------------------------------------------------------------------------
Total investment
income............. 0 0 0 0 0 0 0 0
-------------------------------------------------------------------------------------------------
Expenses:
Mortality risk
charge............... (3,220) (4,477) (7,336) (2,685) (4,768) (3,520) (3,751) (2,211)
Additional mortality
risk charge (issue
ages over 80)........ (23) (11) (41) (27) (30) (17) (13) (27)
Expense risk charge.... (1,252) (1,741) (2,853) (1,044) (1,854) (1,369) (1,459) (860)
Distribution expense
charge............... (537) (746) (1,223) (447) (795) (587) (625) (368)
-------------------------------------------------------------------------------------------------
Total expenses....... (5,032) (6,975) (11,453) (4,203) (7,447) (5,493) (5,848) (3,466)
-------------------------------------------------------------------------------------------------
Net investment income
(loss)................. (5,032) (6,975) (11,453) (4,203) (7,447) (5,493) (5,848) (3,466)
-------------------------------------------------------------------------------------------------
Net realized gains
(losses) from
securities
transactions:
Proceeds from shares
sold................. 159,827 90,074 23,248 744 43,348 8,208 3,859 1,845,591
Cost of shares sold.... (168,226) (91,684) (20,691) (727) (42,632) (7,807) (3,891) (1,843,296)
-------------------------------------------------------------------------------------------------
Net realized gains
(losses) from
securities
transactions........... (8,399) (1,610) 2,557 17 716 401 (32) 2,295
-------------------------------------------------------------------------------------------------
Net unrealized
appreciation
(depreciation) of
investments:
Beginning of period.... 566,787 (96,464) 2,520,436 82,753 881,632 432,089 (46,679) (448)
End of period.......... 375,522 (73,481) 1,702,418 164,703 270,348 29,126 (66,386) 9,722
-------------------------------------------------------------------------------------------------
Change in net unrealized
appreciation/depreciation
of investments......... (191,265) 22,983 (818,018) 81,950 (611,284) (402,963) (19,707) 10,170
-------------------------------------------------------------------------------------------------
Increase (decrease) in
net assets from
operations............. $(204,696) $ 14,398 $ (826,914) $ 77,764 $(618,015) $(408,055) $(25,587) $ 8,999
=================================================================================================
<CAPTION>
TOTAL
<S> <C>
-------------------------
INVESTMENT INCOME:
Dividends and capital
gains
distributions........ $ 0
-------------
Total investment
income............. 0
-------------
Expenses:
Mortality risk
charge............... (117,488)
Additional mortality
risk charge (issue
ages over 80)........ (944)
Expense risk charge.... (45,691)
Distribution expense
charge............... (19,582)
-------------
Total expenses....... (183,705)
-------------
Net investment income
(loss)................. (183,705)
-------------
Net realized gains
(losses) from
securities
transactions:
Proceeds from shares
sold................. 2,839,034
Cost of shares sold.... (2,829,029)
-------------
Net realized gains
(losses) from
securities
transactions........... 10,005
-------------
Net unrealized
appreciation
(depreciation) of
investments:
Beginning of period.... 14,938,363
End of period.......... 7,919,298
-------------
Change in net unrealized
appreciation/depreciation
of investments......... (7,019,065)
-------------
Increase (decrease) in
net assets from
operations............. $(7,192,765)
=============
</TABLE>
See accompanying notes to financial statements.
----------------
9
<PAGE>
----------------
VARIABLE ANNUITY ACCOUNT FIVE
(PORTION RELATING TO THE SEASONS SELECT VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
MARCH 31, 2000
<TABLE>
<CAPTION>
MODERATE BALANCED CONSERVATIVE LARGE CAP
GROWTH GROWTH GROWTH GROWTH GROWTH
STRATEGY STRATEGY STRATEGY STRATEGY STRATEGY
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends and capital
gains
distributions........ $ 2,631,412 $ 1,900,409 $ 1,015,374 $ 538,831 $ 239,281
---------------------------------------------------------------
Total investment
income............. 2,631,412 1,900,409 1,015,374 538,831 239,281
---------------------------------------------------------------
Expenses:
Mortality risk
charge............... (139,148) (121,708) (76,739) (47,183) (63,750)
Additional mortality
risk charge (issue
ages over 80)........ (884) (454) (974) (597) (251)
Expense risk charge.... (54,113) (47,331) (29,843) (18,349) (24,792)
Distribution expense
charge............... (23,192) (20,285) (12,789) (7,864) (10,625)
---------------------------------------------------------------
Total expenses....... (217,337) (189,778) (120,345) (73,993) (99,418)
---------------------------------------------------------------
Net investment income
(loss)................. 2,414,075 1,710,631 895,029 464,838 139,863
---------------------------------------------------------------
Net realized gains
(losses) from
securities
transactions:
Proceeds from shares
sold................. 2,290,673 1,392,922 1,309,210 1,006,195 670,294
Cost of shares sold.... (2,059,586) (1,264,161) (1,244,897) (969,307) (571,910)
---------------------------------------------------------------
Net realized gains
(losses) from
securities
transactions........... 231,087 128,761 64,313 36,888 98,384
---------------------------------------------------------------
Net unrealized
appreciation
(depreciation) of
investments:
Beginning of period.... 4,547 10,347 6,153 1,660 15,593
End of period.......... 3,478,157 2,746,914 1,108,020 380,072 2,885,094
---------------------------------------------------------------
Change in net unrealized
appreciation/depreciation
of investments......... 3,473,610 2,736,567 1,101,867 378,412 2,869,501
---------------------------------------------------------------
Increase (decrease) in
net assets from
operations............. $ 6,118,772 $ 4,575,959 $ 2,061,209 $ 880,138 $3,107,748
===============================================================
</TABLE>
See accompanying notes to financial statements.
----------------
10
<PAGE>
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP MID CAP MID CAP INTERNATIONAL DIVERSIFIED CASH
COMPOSITE VALUE GROWTH VALUE SMALL CAP EQUITY FIXED INCOME MANAGEMENT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends and capital
gains
distributions........ $ 8,945 $138,315 $ 136,055 $ 86,216 $ 133,229 $ 71,035 $ 131,181 $ 82,000
--------------------------------------------------------------------------------------------------
Total investment
income............. 8,945 138,315 136,055 86,216 133,229 71,035 131,181 82,000
--------------------------------------------------------------------------------------------------
Expenses:
Mortality risk
charge............... (17,207) (25,288) (34,977) (14,894) (24,902) (16,337) (19,088) (14,724)
Additional mortality
risk charge (issue
ages over 80)........ (83) (45) (66) (81) (83) (18) (83) (17)
Expense risk charge.... (6,692) (9,834) (13,602) (5,792) (9,684) (6,353) (7,423) (5,726)
Distribution expense
charge............... (2,867) (4,215) (5,830) (2,483) (4,151) (2,723) (3,181) (2,454)
--------------------------------------------------------------------------------------------------
Total expenses....... (26,849) (39,382) (54,475) (23,250) (38,820) (25,431) (29,775) (22,921)
--------------------------------------------------------------------------------------------------
Net investment income
(loss)................. (17,904) 98,933 81,580 62,966 94,409 45,604 101,406 59,079
--------------------------------------------------------------------------------------------------
Net realized gains
(losses) from
securities
transactions:
Proceeds from shares
sold................. 343,988 75,181 314,507 121,660 236,847 217,162 231,944 1,876,088
Cost of shares sold.... (327,847) (77,571) (253,696) (120,955) (208,676) (195,731) (236,732) (1,879,067)
--------------------------------------------------------------------------------------------------
Net realized gains
(losses) from
securities
transactions........... 16,141 (2,390) 60,811 705 28,171 21,431 (4,788) (2,979)
--------------------------------------------------------------------------------------------------
Net unrealized
appreciation
(depreciation) of
investments:
Beginning of period.... 3,018 (1,264) 7,672 819 3,799 5,452 (68) 1
End of period.......... 566,787 (96,464) 2,520,436 82,753 881,632 432,089 (46,679) (448)
--------------------------------------------------------------------------------------------------
Change in net unrealized
appreciation/depreciation
of investments......... 563,769 (95,200) 2,512,764 81,934 877,833 426,637 (46,611) (449)
--------------------------------------------------------------------------------------------------
Increase (decrease) in
net assets from
operations............. $562,006 $ 1,343 $2,655,155 $145,605 $1,000,413 $ 493,672 $ 50,007 $ 55,651
==================================================================================================
<CAPTION>
TOTAL
<S> <C>
-------------------------
INVESTMENT INCOME:
Dividends and capital
gains
distributions........ $ 7,112,283
------------
Total investment
income............. 7,112,283
------------
Expenses:
Mortality risk
charge............... (615,945)
Additional mortality
risk charge (issue
ages over 80)........ (3,636)
Expense risk charge.... (239,534)
Distribution expense
charge............... (102,659)
------------
Total expenses....... (961,774)
------------
Net investment income
(loss)................. 6,150,509
------------
Net realized gains
(losses) from
securities
transactions:
Proceeds from shares
sold................. 10,086,671
Cost of shares sold.... (9,410,136)
------------
Net realized gains
(losses) from
securities
transactions........... 676,535
------------
Net unrealized
appreciation
(depreciation) of
investments:
Beginning of period.... 57,729
End of period.......... 14,938,363
------------
Change in net unrealized
appreciation/depreciation
of investments......... 14,880,634
------------
Increase (decrease) in
net assets from
operations............. $21,707,678
============
</TABLE>
See accompanying notes to financial statements.
----------------
11
<PAGE>
----------------
VARIABLE ANNUITY ACCOUNT FIVE
(PORTION RELATING TO THE SEASONS SELECT VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE ONE MONTH ENDED
APRIL 30, 2000
<TABLE>
<CAPTION>
MODERATE BALANCED CONSERVATIVE LARGE CAP
GROWTH GROWTH GROWTH GROWTH GROWTH
STRATEGY STRATEGY STRATEGY STRATEGY PORTFOLIO
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss).......... $ (44,337) $ (37,283) $ (21,261) $ (11,969) $ (18,938)
Net realized gains (losses) from
securities transactions............. 1,431 2,317 (1,001) 5,003 6,310
Change in net unrealized
appreciation/depreciation of
investments......................... (1,818,723) (1,361,108) (603,625) (269,798) (1,037,677)
----------------------------------------------------------------
Increase (decrease) in net assets
from operations................... (1,861,629) (1,396,074) (625,887) (276,764) (1,050,305)
----------------------------------------------------------------
From Select 140 capital transactions:
Net proceeds from units sold.......... 1,960,629 1,652,633 275,350 18,253 579,951
Cost of units redeemed................ (279,893) (163,761) (86,354) (37,026) (129,779)
Net transfers......................... 2,721,213 2,258,155 941,316 105,549 951,215
----------------------------------------------------------------
Increase (decrease) in net assets... 4,401,949 3,747,027 1,130,312 86,776 1,401,387
----------------------------------------------------------------
From Select 152 capital transactions:
Net proceeds from units sold.......... 151,887 286,504 0 0 167,025
Cost of units redeemed................ (49,031) (1,788) (35,673) (1,915) (2,262)
Net transfers......................... 21,812 19,805 (14,083) 62,799 52,872
----------------------------------------------------------------
Increase (decrease) in net assets... 124,668 304,521 (49,756) 60,884 217,635
----------------------------------------------------------------
Total increase (decrease) in net assets
from capital transactions............. 4,526,617 4,051,548 1,080,556 147,660 1,619,022
Increase (decrease) in net assets....... 2,664,988 2,655,474 454,669 (129,104) 568,717
Net assets at beginning of period....... 37,896,647 31,415,401 18,421,809 10,432,593 16,611,415
----------------------------------------------------------------
Net assets at end of period............. $40,561,635 $34,070,875 $18,876,478 $10,303,489 $17,180,132
================================================================
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Select 140:
Units sold............................ 97,984 89,613 17,121 1,273 42,080
Units redeemed........................ (13,924) (8,862) (5,375) (2,534) (9,437)
Units transferred..................... 133,745 121,095 58,354 7,153 67,111
----------------------------------------------------------------
Increase (decrease) in units
outstanding........................... 217,805 201,846 70,100 5,892 99,754
Beginning units......................... 1,653,495 1,559,019 991,695 623,175 1,058,317
----------------------------------------------------------------
Ending units............................ 1,871,300 1,760,865 1,061,795 629,067 1,158,071
================================================================
Select 152:
Units sold............................ 7,602 15,116 0 0 13,889
Units redeemed........................ (2,452) (98) (2,236) (132) (175)
Units transferred..................... 1,079 1,093 (1,067) 4,297 4,161
----------------------------------------------------------------
Increase (decrease) in units
outstanding........................... 6,229 16,111 (3,303) 4,165 17,875
Beginning units......................... 126,216 53,392 113,160 77,606 59,510
----------------------------------------------------------------
Ending units............................ 132,445 69,503 109,857 81,771 77,385
================================================================
</TABLE>
See accompanying notes to financial statements.
----------------
12
<PAGE>
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP MID CAP MID CAP INTERNATIONAL DIVERSIFIED
COMPOSITE VALUE GROWTH VALUE SMALL CAP EQUITY FIXED INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss).......... $ (5,032) $ (6,975) $ (11,453) $ (4,203) $ (7,447) $ (5,493) $ (5,848)
Net realized gains (losses) from
securities transactions............. (8,399) (1,610) 2,557 17 716 401 (32)
Change in net unrealized
appreciation/depreciation of
investments......................... (191,265) 22,983 (818,018) 81,950 (611,284) (402,963) (19,707)
----------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations................... (204,696) 14,398 (826,914) 77,764 (618,015) (408,055) (25,587)
----------------------------------------------------------------------------------------
From Select 140 capital transactions:
Net proceeds from units sold.......... 287,192 227,333 464,756 64,999 295,895 241,297 94,270
Cost of units redeemed................ (27,491) (94,948) (18,223) (12,697) (16,183) (19,489) (8,288)
Net transfers......................... 287,893 299,354 922,998 175,011 363,978 691,708 312,251
----------------------------------------------------------------------------------------
Increase (decrease) in net assets... 547,594 431,739 1,369,531 227,313 643,690 913,516 398,233
----------------------------------------------------------------------------------------
From Select 152 capital transactions:
Net proceeds from units sold.......... 177,274 6,229 167,025 6,229 167,025 164,948 0
Cost of units redeemed................ (32) (106) (527) (68) (577) (423) 0
Net transfers......................... (137,981) 11,496 7,516 155,912 17,963 4,342 10,459
----------------------------------------------------------------------------------------
Increase (decrease) in net assets... 39,261 17,619 174,014 162,073 184,411 168,867 10,459
----------------------------------------------------------------------------------------
Total increase (decrease) in net assets
from capital transactions............. 586,855 449,358 1,543,545 389,386 828,101 1,082,383 408,692
Increase (decrease) in net assets....... 382,159 463,756 716,631 467,150 210,086 674,328 383,105
Net assets at beginning of period....... 4,284,975 5,814,724 10,140,129 3,447,014 6,747,163 4,400,113 4,862,880
----------------------------------------------------------------------------------------
Net assets at end of period............. $4,667,134 $6,278,480 $10,856,760 $3,914,164 $6,957,249 $5,074,441 $5,245,985
========================================================================================
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Select 140:
Units sold............................ 23,977 21,150 28,953 6,027 22,748 19,078 9,416
Units redeemed........................ (2,177) (8,850) (1,081) (1,153) (1,189) (1,496) (828)
Units transferred..................... 23,286 27,458 54,533 15,971 26,830 52,730 31,119
----------------------------------------------------------------------------------------
Increase (decrease) in units
outstanding........................... 45,086 39,758 82,405 20,845 48,389 70,312 39,707
Beginning units......................... 316,855 531,732 529,844 297,306 432,850 314,634 474,014
----------------------------------------------------------------------------------------
Ending units............................ 361,941 571,490 612,249 318,151 481,239 384,946 513,721
========================================================================================
Select 152:
Units sold............................ 15,116 597 11,910 578 14,080 14,346 0
Units redeemed........................ (3) (10) (37) (6) (46) (36) 0
Units transferred..................... (13,391) 1,096 518 14,889 1,378 362 1,058
----------------------------------------------------------------------------------------
Increase (decrease) in units
outstanding........................... 1,722 1,683 12,391 15,461 15,412 14,672 1,058
Beginning units......................... 17,244 9,381 22,616 18,247 17,502 9,229 12,327
----------------------------------------------------------------------------------------
Ending units............................ 18,966 11,064 35,007 33,708 32,914 23,901 13,385
========================================================================================
<CAPTION>
CASH
MANAGEMENT
PORTFOLIO TOTAL
<S> <C> <C>
----------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss).......... $ (3,466) $ (183,705)
Net realized gains (losses) from
securities transactions............. 2,295 10,005
Change in net unrealized
appreciation/depreciation of
investments......................... 10,170 (7,019,065)
-------------------------
Increase (decrease) in net assets
from operations................... 8,999 (7,192,765)
-------------------------
From Select 140 capital transactions:
Net proceeds from units sold.......... 5 6,162,563
Cost of units redeemed................ (39,824) (933,956)
Net transfers......................... (1,453,315) 8,577,326
-------------------------
Increase (decrease) in net assets... (1,493,134) 13,805,933
-------------------------
From Select 152 capital transactions:
Net proceeds from units sold.......... 171,028 1,465,174
Cost of units redeemed................ (165,167) (257,569)
Net transfers......................... 72,188 285,100
-------------------------
Increase (decrease) in net assets... 78,049 1,492,705
-------------------------
Total increase (decrease) in net assets
from capital transactions............. (1,415,085) 15,298,638
Increase (decrease) in net assets....... (1,406,086) 8,105,873
Net assets at beginning of period....... 4,123,318 158,598,181
-------------------------
Net assets at end of period............. $2,717,232 $166,704,054
=========================
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Select 140:
Units sold............................ 1 379,421
Units redeemed........................ (3,853) (60,759)
Units transferred..................... (140,709) 478,676
-------------------------
Increase (decrease) in units
outstanding........................... (144,561) 797,338
Beginning units......................... 380,169 9,163,105
-------------------------
Ending units............................ 235,608 9,960,443
=========================
Select 152:
Units sold............................ 16,589 109,823
Units redeemed........................ (16,009) (21,240)
Units transferred..................... 6,998 22,471
-------------------------
Increase (decrease) in units
outstanding........................... 7,578 111,054
Beginning units......................... 19,302 555,732
-------------------------
Ending units............................ 26,880 666,786
=========================
</TABLE>
See accompanying notes to financial statements.
----------------
13
<PAGE>
----------------
VARIABLE ANNUITY ACCOUNT FIVE
(PORTION RELATING TO THE SEASONS SELECT VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
MARCH 31, 2000
<TABLE>
<CAPTION>
MODERATE BALANCED CONSERVATIVE LARGE CAP
GROWTH GROWTH GROWTH GROWTH GROWTH
STRATEGY STRATEGY STRATEGY STRATEGY PORTFOLIO
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss).......... $ 2,414,075 $ 1,710,631 $ 895,029 $ 464,838 $ 139,863
Net realized gains (losses) from
securities transactions............. 231,087 128,761 64,313 36,888 98,384
Change in net unrealized
appreciation/depreciation of
investments......................... 3,473,610 2,736,567 1,101,867 378,412 2,869,501
----------------------------------------------------------------
Increase (decrease) in net assets
from operations................... 6,118,772 4,575,959 2,061,209 880,138 3,107,748
----------------------------------------------------------------
From Select 140 capital transactions:
Net proceeds from units sold.......... 14,935,138 16,466,282 5,292,821 3,464,200 5,696,792
Cost of units redeemed................ (597,209) (406,693) (671,408) (206,472) (349,355)
Net transfers......................... 14,583,055 8,481,242 8,861,783 4,772,250 6,538,417
----------------------------------------------------------------
Increase (decrease) in net assets... 28,920,984 24,540,831 13,483,196 8,029,978 11,885,854
----------------------------------------------------------------
From Select 152 capital transactions:
Net proceeds from units sold.......... 1,956,180 292,812 1,044,959 566,494 150,488
Cost of units redeemed................ (37,392) (22,995) (45,997) (24,113) (5,363)
Net transfers......................... 442,918 623,509 676,787 457,223 558,362
----------------------------------------------------------------
Increase (decrease) in net assets... 2,361,706 893,326 1,675,749 999,604 703,487
----------------------------------------------------------------
Total increase (decrease) in net assets
from capital transactions............. 31,282,690 25,434,157 15,158,945 9,029,582 12,589,341
Increase (decrease) in net assets....... 37,401,462 30,010,116 17,220,154 9,909,720 15,697,089
Net assets at beginning of period....... 495,185 1,405,285 1,201,655 522,873 914,326
----------------------------------------------------------------
Net assets at end of period............. $37,896,647 $31,415,401 $18,421,809 $10,432,593 $16,611,415
================================================================
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Select 140:
Units sold............................ 845,259 996,472 363,764 255,923 485,076
Units redeemed........................ (31,227) (23,618) (44,203) (15,141) (27,544)
Units transferred..................... 808,294 493,029 586,581 348,501 515,138
----------------------------------------------------------------
Increase (decrease) in units
outstanding........................... 1,622,326 1,465,883 906,142 589,283 972,670
Beginning units......................... 31,169 93,136 85,553 33,892 85,647
----------------------------------------------------------------
Ending units............................ 1,653,495 1,559,019 991,695 623,175 1,058,317
================================================================
Select 152:
Units sold............................ 105,090 17,029 71,599 40,570 12,545
Units redeemed........................ (1,995) (1,240) (3,020) (1,741) (438)
Units transferred..................... 23,121 37,603 44,581 33,088 47,403
----------------------------------------------------------------
Increase (decrease) in units
outstanding........................... 126,216 53,392 113,160 71,917 59,510
Beginning units......................... 0 0 0 5,689 0
----------------------------------------------------------------
Ending units............................ 126,216 53,392 113,160 77,606 59,510
================================================================
</TABLE>
See accompanying notes to financial statements.
----------------
14
<PAGE>
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP MID CAP MID CAP
COMPOSITE VALUE GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss).......... $ (17,904) $ 98,933 $ 81,580 $ 62,966
Net realized gains (losses) from
securities transactions............. 16,141 (2,390) 60,811 705
Change in net unrealized
appreciation/depreciation of
investments......................... 563,769 (95,200) 2,512,764 81,934
-----------------------------------------------
Increase (decrease) in net assets
from operations................... 562,006 1,343 2,655,155 145,605
-----------------------------------------------
From Select 140 capital transactions:
Net proceeds from units sold.......... 1,204,016 2,214,833 4,087,013 1,403,066
Cost of units redeemed................ (158,469) (180,583) (150,584) (119,794)
Net transfers......................... 2,149,452 3,331,506 2,910,384 1,718,532
-----------------------------------------------
Increase (decrease) in net assets... 3,194,999 5,365,756 6,846,813 3,001,804
-----------------------------------------------
From Select 152 capital transactions:
Net proceeds from units sold.......... 22,379 21,570 330,930 32,288
Cost of units redeemed................ (333) (8,013) (810) (255)
Net transfers......................... 158,676 82,974 20,218 153,630
-----------------------------------------------
Increase (decrease) in net assets... 180,722 96,531 350,338 185,663
-----------------------------------------------
Total increase (decrease) in net assets
from capital transactions............. 3,375,721 5,462,287 7,197,151 3,187,467
Increase (decrease) in net assets....... 3,937,727 5,463,630 9,852,306 3,333,072
Net assets at beginning of period....... 347,248 351,094 287,823 113,942
-----------------------------------------------
Net assets at end of period............. $4,284,975 $5,814,724 $10,140,129 $3,447,014
===============================================
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Select 140:
Units sold............................ 109,971 198,625 309,864 130,020
Units redeemed........................ (14,321) (16,813) (11,306) (10,875)
Units transferred..................... 187,858 315,916 204,190 166,883
-----------------------------------------------
Increase (decrease) in units
outstanding........................... 283,508 497,728 502,748 286,028
Beginning units......................... 33,347 34,004 27,096 11,278
-----------------------------------------------
Ending units............................ 316,855 531,732 529,844 297,306
===============================================
Select 152:
Units sold............................ 2,201 2,104 21,344 3,031
Units redeemed........................ (32) (860) (48) (25)
Units transferred..................... 15,075 8,137 1,320 15,241
-----------------------------------------------
Increase (decrease) in units
outstanding........................... 17,244 9,381 22,616 18,247
Beginning units......................... 0 0 0 0
-----------------------------------------------
Ending units............................ 17,244 9,381 22,616 18,247
===============================================
<CAPTION>
INTERNATIONAL DIVERSIFIED CASH
SMALL CAP EQUITY FIXED INCOME MANAGEMENT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO TOTAL
<S> <C> <C> <C> <C> <C>
----------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss).......... $ 94,409 $ 45,604 $ 101,406 $ 59,079 $ 6,150,509
Net realized gains (losses) from
securities transactions............. 28,171 21,431 (4,788) (2,979) 676,535
Change in net unrealized
appreciation/depreciation of
investments......................... 877,833 426,637 (46,611) (449) 14,880,634
-----------------------------------------------------------------
Increase (decrease) in net assets
from operations................... 1,000,413 493,672 50,007 55,651 21,707,678
-----------------------------------------------------------------
From Select 140 capital transactions:
Net proceeds from units sold.......... 2,506,704 1,688,782 1,202,976 1,477,318 61,639,941
Cost of units redeemed................ (99,799) (59,820) (64,253) (10,326) (3,074,765)
Net transfers......................... 2,881,478 1,910,221 3,235,235 2,392,631 63,766,186
-----------------------------------------------------------------
Increase (decrease) in net assets... 5,288,383 3,539,183 4,373,958 3,859,623 122,331,362
-----------------------------------------------------------------
From Select 152 capital transactions:
Net proceeds from units sold.......... 116,296 91,726 88,238 5,000 4,719,360
Cost of units redeemed................ (874) (942) (1,230) (446) (148,763)
Net transfers......................... 106,886 24,632 33,651 193,789 3,533,255
-----------------------------------------------------------------
Increase (decrease) in net assets... 222,308 115,416 120,659 198,343 8,103,852
-----------------------------------------------------------------
Total increase (decrease) in net assets
from capital transactions............. 5,510,691 3,654,599 4,494,617 4,057,966 130,435,214
Increase (decrease) in net assets....... 6,511,104 4,148,271 4,544,624 4,113,617 152,142,892
Net assets at beginning of period....... 236,059 251,842 318,256 9,701 6,455,289
-----------------------------------------------------------------
Net assets at end of period............. $6,747,163 $4,400,113 $4,862,880 $4,123,318 $158,598,181
=================================================================
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Select 140:
Units sold............................ 202,804 141,058 121,074 146,093 4,306,003
Units redeemed........................ (7,798) (4,590) (6,480) (1,015) (214,931)
Units transferred..................... 215,037 154,205 327,658 234,121 4,557,411
-----------------------------------------------------------------
Increase (decrease) in units
outstanding........................... 410,043 290,673 442,252 379,199 8,648,483
Beginning units......................... 22,807 23,961 31,762 970 514,622
-----------------------------------------------------------------
Ending units............................ 432,850 314,634 474,014 380,169 9,163,105
=================================================================
Select 152:
Units sold............................ 9,274 7,309 9,016 500 301,612
Units redeemed........................ (60) (80) (126) (44) (9,709)
Units transferred..................... 8,288 2,000 3,437 18,846 258,140
-----------------------------------------------------------------
Increase (decrease) in units
outstanding........................... 17,502 9,229 12,327 19,302 550,043
Beginning units......................... 0 0 0 0 5,689
-----------------------------------------------------------------
Ending units............................ 17,502 9,229 12,327 19,302 555,732
=================================================================
</TABLE>
See accompanying notes to financial statements.
----------------
15
<PAGE>
----------------
VARIABLE ANNUITY ACCOUNT FIVE
(PORTION RELATING TO THE SEASONS SELECT VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION
TO MARCH 31, 1999
<TABLE>
<CAPTION>
MODERATE BALANCED CONSERVATIVE LARGE CAP
GROWTH GROWTH GROWTH GROWTH GROWTH
STRATEGY STRATEGY STRATEGY STRATEGY PORTFOLIO
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss).......... $ (195) $ (614) $ (336) $ (214) $ (565)
Net realized gains (losses) from
securities transactions............. (5) (27) 362 17 1
Change in net unrealized
appreciation/depreciation of
investments......................... 4,547 10,347 6,153 1,660 15,593
---------------------------------------------------------
Increase (decrease) in net assets
from operations................... 4,347 9,706 6,179 1,463 15,029
---------------------------------------------------------
From Select 140 capital transactions:
Net proceeds from units sold.......... 491,086 1,395,579 1,245,810 446,051 884,374
Cost of units redeemed................ (248) 0 (150) 0 (132)
Net transfers......................... 0 0 (50,184) 0 15,055
---------------------------------------------------------
Increase (decrease) in net assets... 490,838 1,395,579 1,195,476 446,051 899,297
---------------------------------------------------------
From Select 152 capital transactions:
Net proceeds from units sold.......... 0 0 0 75,359 0
Cost of units redeemed................ 0 0 0 0 0
Net transfers......................... 0 0 0 0 0
---------------------------------------------------------
Increase (decrease) in net assets... 0 0 0 75,359 0
---------------------------------------------------------
Total increase (decrease) in net assets
from capital transactions............. 490,838 1,395,579 1,195,476 521,410 899,297
Increase (decrease) in net assets....... 495,185 1,405,285 1,201,655 522,873 914,326
Net assets at beginning of period....... 0 0 0 0 0
---------------------------------------------------------
Net assets at end of period............. $495,185 $1,405,285 $1,201,655 $522,873 $914,326
=========================================================
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Select 140:
Units sold............................ 31,185 93,136 89,122 33,892 84,261
Units redeemed........................ (16) 0 (11) 0 (12)
Units transferred..................... 0 0 (3,558) 0 1,398
---------------------------------------------------------
Increase (decrease) in units
outstanding........................... 31,169 93,136 85,553 33,892 85,647
Beginning units......................... 0 0 0 0 0
---------------------------------------------------------
Ending units............................ 31,169 93,136 85,553 33,892 85,647
=========================================================
Select 152:
Units sold............................ 0 0 0 5,689 0
Units redeemed........................ 0 0 0 0 0
Units transferred..................... 0 0 0 0 0
---------------------------------------------------------
Increase (decrease) in units
outstanding........................... 0 0 0 5,689 0
Beginning units......................... 0 0 0 0 0
---------------------------------------------------------
Ending units............................ 0 0 0 5,689 0
=========================================================
</TABLE>
See accompanying notes to financial statements.
----------------
16
<PAGE>
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP MID CAP MID CAP
COMPOSITE VALUE GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss).......... $ (240) $ (203) $ (163) $ (102)
Net realized gains (losses) from
securities transactions............. 3 1 1 1
Change in net unrealized
appreciation/depreciation of
investments......................... 3,018 (1,264) 7,672 819
------------------------------------------
Increase (decrease) in net assets
from operations................... 2,781 (1,466) 7,510 718
------------------------------------------
From Select 140 capital transactions:
Net proceeds from units sold.......... 344,467 337,505 280,413 113,224
Cost of units redeemed................ 0 0 (100) 0
Net transfers......................... 0 15,055 0 0
------------------------------------------
Increase (decrease) in net assets... 344,467 352,560 280,313 113,224
------------------------------------------
From Select 152 capital transactions:
Net proceeds from units sold.......... 0 0 0 0
Cost of units redeemed................ 0 0 0 0
Net transfers......................... 0 0 0 0
------------------------------------------
Increase (decrease) in net assets... 0 0 0 0
------------------------------------------
Total increase (decrease) in net assets
from capital transactions............. 344,467 352,560 280,313 113,224
Increase (decrease) in net assets....... 347,248 351,094 287,823 113,942
Net assets at beginning of period....... 0 0 0 0
------------------------------------------
Net assets at end of period............. $347,248 $351,094 $287,823 $113,942
==========================================
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Select 140:
Units sold............................ 33,347 32,572 27,105 11,278
Units redeemed........................ 0 0 (9) 0
Units transferred..................... 0 1,432 0 0
------------------------------------------
Increase (decrease) in units
outstanding........................... 33,347 34,004 27,096 11,278
Beginning units......................... 0 0 0 0
------------------------------------------
Ending units............................ 33,347 34,004 27,096 11,278
==========================================
Select 152:
Units sold............................ 0 0 0 0
Units redeemed........................ 0 0 0 0
Units transferred..................... 0 0 0 0
------------------------------------------
Increase (decrease) in units
outstanding........................... 0 0 0 0
Beginning units......................... 0 0 0 0
------------------------------------------
Ending units............................ 0 0 0 0
==========================================
<CAPTION>
INTERNATIONAL DIVERSIFIED CASH
SMALL CAP EQUITY FIXED INCOME MANAGEMENT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO TOTAL
<S> <C> <C> <C> <C> <C>
----------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss).......... $ (139) $ (157) $ (130) $ 0 $ (3,058)
Net realized gains (losses) from
securities transactions............. 1 1 0 0 356
Change in net unrealized
appreciation/depreciation of
investments......................... 3,799 5,452 (68) 1 57,729
----------------------------------------------------------------
Increase (decrease) in net assets
from operations................... 3,661 5,296 (198) 1 55,027
----------------------------------------------------------------
From Select 140 capital transactions:
Net proceeds from units sold.......... 232,398 246,546 298,380 9,850 6,325,683
Cost of units redeemed................ 0 0 0 (150) (780)
Net transfers......................... 0 0 20,074 0 0
----------------------------------------------------------------
Increase (decrease) in net assets... 232,398 246,546 318,454 9,700 6,324,903
----------------------------------------------------------------
From Select 152 capital transactions:
Net proceeds from units sold.......... 0 0 0 0 75,359
Cost of units redeemed................ 0 0 0 0 0
Net transfers......................... 0 0 0 0 0
----------------------------------------------------------------
Increase (decrease) in net assets... 0 0 0 0 75,359
----------------------------------------------------------------
Total increase (decrease) in net assets
from capital transactions............. 232,398 246,546 318,454 9,700 6,400,262
Increase (decrease) in net assets....... 236,059 251,842 318,256 9,701 6,455,289
Net assets at beginning of period....... 0 0 0 0 0
----------------------------------------------------------------
Net assets at end of period............. $236,059 $251,842 $318,256 $9,701 $6,455,289
================================================================
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Select 140:
Units sold............................ 22,807 23,961 29,755 985 513,406
Units redeemed........................ 0 0 0 (15) (63)
Units transferred..................... 0 0 2,007 0 1,279
----------------------------------------------------------------
Increase (decrease) in units
outstanding........................... 22,807 23,961 31,762 970 514,622
Beginning units......................... 0 0 0 0 0
----------------------------------------------------------------
Ending units............................ 22,807 23,961 31,762 970 514,622
================================================================
Select 152:
Units sold............................ 0 0 0 0 5,689
Units redeemed........................ 0 0 0 0 0
Units transferred..................... 0 0 0 0 0
----------------------------------------------------------------
Increase (decrease) in units
outstanding........................... 0 0 0 0 5,689
Beginning units......................... 0 0 0 0 0
----------------------------------------------------------------
Ending units............................ 0 0 0 0 5,689
================================================================
</TABLE>
See accompanying notes to financial statements.
----------------
17
<PAGE>
----------------
VARIABLE ANNUITY ACCOUNT FIVE
(PORTION RELATING TO THE SEASONS SELECT VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Variable Annuity
Account Five (Portion Relating to the SEASONS SELECT Variable Annuity) of Anchor
National Life Insurance Company (the "Separate Account") is a segregated
investment account of Anchor National Life Insurance Company (the "Company").
The Company is an indirect, wholly owned subsidiary of American International
Group, Inc. ("AIG"), an international insurance and financial services company.
At December 31, 1998, the Company was a wholly owned indirect subsidiary of
SunAmerica Inc., a Maryland corporation. On January 1, 1999, SunAmerica Inc.
merged with and into AIG in a tax-free reorganization that has been treated as a
pooling of interests for accounting purposes. Thus, SunAmerica Inc. ceased to
exist on that date. However, immediately prior to the effectiveness of the
merger, substantially all of the net assets of SunAmerica Inc. were contributed
to a newly formed subsidiary of AIG named SunAmerica Holdings, Inc., a Delaware
corporation. SunAmerica Holdings, Inc. subsequently changed its name to
SunAmerica Inc. The Separate Account is registered as a segregated unit
investment trust pursuant to the provisions of the Investment Company Act of
1940, as amended.
The Separate Account is composed of four multi-managed variable investment
strategies (the "Strategies") and nine variable portfolios (the "Select
Portfolios") each with a distinct investment objective. The Strategies are
comprised of Growth, Moderate Growth, Balanced Growth, and Conservative Growth.
Each strategy invests in the shares of a designated multi-managed portfolio of
the Seasons Series Trust (the "Trust") and in two other portfolios of the Trust.
Each of the Select Portfolios is invested solely in the shares of a designated
portfolio of the Trust. The Trust is a diversified, open-end, affiliated
investment company, which retains an investment advisor to assist in its
investment activities. The contractholder may elect to have payments allocated
to any of seven guaranteed-interest funds of the Company (the "General
Account"), which are not a part of the Separate Account. The financial
statements include balances allocated by the participant to the four Strategies
and nine Select Portfolios and do not include balances allocated to the General
Account.
The Company offers two versions of Seasons Select depending upon the age of
the contractholder at the issue date. If the contractholder is age 80 or younger
at the issue date, the insurance charge amounts to 1.40% annually of the average
daily value of the contract ("Select 140"). If the contractholder is 81 years of
age or older at the issue date, the amount of the insurance charge is 1.52%
annually ("Select 152"). The 0.12% additional insurance charges for Select 152
results in slightly reduced accumulation unit values. The two accumulation unit
values for each Strategy and Select Portfolio are computed daily based on the
total net assets applicable to Select 140 and Select 152 policies, respectively.
The accumulation unit values, the transactions, the number of units, and the
separate account assets related to Select 140 and Select 152 policies are shown
separately in the financial statements.
The inception dates of Select 140 Strategies and Select Portfolios are
summarized below:
The inception date of the Cash Management Portfolio was March 26, 1999. The
inception date of the Diversified Fixed Income Portfolio was March 10, 1999. The
inception date of the Balanced Growth and Conservative Growth Strategies was
March 5, 1999. The inception date of the Growth Strategy was March 4, 1999. The
inception date of the Moderate Growth Strategy was March 3, 1999. The inception
date of the remaining portfolios was March 1, 1999.
The inception dates of Select 152 Strategies and Select Portfolios are
summarized below:
The inception date of the Moderate Growth Strategy was April 26, 1999. The
inception date of the Large-Cap Composite, Mid-Cap Growth, Mid-Cap Value, Small
Cap, Diversified Fixed Income, and Cash Management Portfolios was April 8, 1999.
The inception date of the Growth Strategy, Large-Cap Growth Portfolio, Large-Cap
Value Portfolio, and International Equity Portfolio was April 6, 1999. The
inception date of the Balanced Growth Strategy was April 5, 1999. The inception
date of the Conservative Growth Strategy was March 19, 1999.
The four strategies differ in their investment objectives, levels of risk and
anticipated growth over time. Each strategy invests in a multi-managed portfolio
specific for that strategy and in the two jointly utilized portfolios of the
Trust, according to a
----------------
18
<PAGE>
predetermined allocation designed to achieve its investment objective. The
investment allocation to the underlying portfolios is maintained by rebalancing
the strategies quarterly.
The investment objectives of the four strategies of the Separate Account are
described below:
The GROWTH STRATEGY seeks long-term growth of capital. The Growth Strategy
invests in the Multi-Managed Growth Portfolio, the Asset Allocation: Diversified
Growth Portfolio, and the Stock Portfolio.
The MODERATE GROWTH STRATEGY seeks growth of capital, with conservation of
principal as a secondary objective. The Moderate Growth Strategy invests in the
Multi-Managed Moderate Growth Portfolio, the Asset Allocation: Diversified
Growth Portfolio, and the Stock Portfolio.
The BALANCED GROWTH STRATEGY focuses on conservation of principal, with high
total return as a secondary objective. The Balanced Growth Strategy invests in
the Multi-Managed Income/Equity Portfolio, the Asset Allocation: Diversified
Growth Portfolio, and the Stock Portfolio.
The CONSERVATIVE GROWTH STRATEGY focuses on capital preservation while
maintaining some potential for growth over the long term. The Conservative
Growth Strategy invests in the Multi-Managed Income Portfolio, the Asset
Allocation: Diversified Growth Portfolio, and the Stock Portfolio.
The investment objectives of the six underlying portfolios of the Strategies
are summarized below:
The MULTI-MANAGED GROWTH PORTFOLIO seeks long-term growth of capital.
The MULTI-MANAGED MODERATE GROWTH PORTFOLIO seeks long-term growth of capital,
with capital preservation as a secondary objective.
The MULTI-MANAGED INCOME/EQUITY PORTFOLIO seeks conservation of principal
while maintaining some potential for long-term growth of capital.
The MULTI-MANAGED INCOME PORTFOLIO seeks capital preservation.
The Asset Allocation: Diversified Growth Portfolio seeks capital appreciation.
This portfolio invests primarily in equity securities of U.S. and foreign
issuers which the advisor believes have the potential for appreciation. This
portfolio is an investment of all four strategies.
The STOCK PORTFOLIO seeks long-term capital appreciation and, secondarily,
increasing dividend income. This portfolio invests primarily in common stocks of
well-established growth companies. This portfolio is an investment of all four
strategies.
The four multi-managed portfolios described above pursue their investment
goals by allocating their assets among three or four managed components. The
assets of each multi-managed portfolio are allocated among the same three
investment managers in differing percentages, depending on the portfolio's
overall investment objective. Janus Capital Corporation manages a growth
component, SunAmerica Asset Management Corp., a wholly owned subsidiary of
SunAmerica Inc., manages a balanced component, and Wellington Management
Company, LLP manages a fixed income component. SunAmerica Asset Management Corp.
also manages an aggressive growth component that is available only in the Growth
and Moderate Growth strategies. The investment policies relating to each of the
four managed Strategy components are described below:
The SUNAMERICA/AGGRESSIVE GROWTH COMPONENT primarily consists of equity
securities of small, lesser known or new growth companies or industries such as
technology, telecommunications, media and healthcare.
The JANUS/GROWTH COMPONENT primarily consists of common stocks selected for
their growth potential.
The SUNAMERICA/BALANCED COMPONENT, over the long term, will consist of a
diversified selection of equity investments in companies of medium to large
capitalizations that are thought to be undervalued in the marketplace and long
term bonds and other debt securities.
The WELLINGTON MANAGEMENT COMPANY/FIXED INCOME COMPONENT primarily consists of
U.S. and foreign fixed income securities of varying maturities and risk/return
characteristics.
----------------
19
<PAGE>
The investment objectives and policies of the nine Select Portfolios are
summarized below:
The LARGE CAP GROWTH PORTFOLIO seeks long-term growth of capital. This
portfolio invests primarily in equity securities of large companies selected
through a growth strategy.
The LARGE CAP COMPOSITE PORTFOLIO seeks long-term growth of capital and growth
of dividend income. This portfolio invests primarily in equity securities of
large companies that offer the potential for long-term growth of capital or
dividends.
The LARGE CAP VALUE PORTFOLIO seeks long-term growth of capital. This
portfolio invests primarily in equity securities of large companies selected
through a value strategy.
The MID CAP GROWTH PORTFOLIO seeks long-term growth of capital. This portfolio
invests primarily in equity securities of medium-sized companies selected
through a growth strategy.
The MID CAP VALUE PORTFOLIO seeks long-term growth of capital. This portfolio
invests primarily in equity securities of medium-sized companies selected
through a value strategy.
The SMALL CAP PORTFOLIO seeks long-term growth of capital. This portfolio
invests in equity securities of small companies.
The INTERNATIONAL EQUITY PORTFOLIO seeks long-term growth of capital. This
portfolio invests primarily in equity securities of issuers in at least three
countries other than the United States.
The DIVERSIFIED FIXED INCOME PORTFOLIO seeks relatively high current income,
and secondarily, capital appreciation. This portfolio invests primarily in fixed
income securities, including U.S. and foreign government securities,
mortgaged-backed securities, investment grade debt securities, and
high-yield/high-risk bonds.
The CASH MANAGEMENT PORTFOLIO seeks high current yield while preserving
capital. This portfolio invests in a diversified selection of money market
instruments.
Purchases and sales of shares of the portfolios of the Trust are valued at the
net asset values of the shares on the date the shares are purchased or sold.
Dividends and capital gains distributions are recorded when received. Realized
gains and losses on the sale of investments in the Trust are recognized at the
date of sale and are determined on an average cost basis.
2. CHARGES AND DEDUCTIONS Charges and deductions are applied against the
current value of the Separate Account and are paid as follows:
WITHDRAWAL CHARGE: The contract value may be withdrawn at any time during the
accumulation period. There is a free withdrawal amount for the first withdrawal
during each contract year. The free withdrawal amount is determined using
penalty free earnings and the total invested amount. Penalty free earnings is
the account value less the total invested amount. The total invested amount is
the total of all purchase payments less portions of some prior withdrawals. The
free withdrawal amount is equal to the greater of penalty free earnings plus any
portion of the total invested amount no longer subject to withdrawal charges or
10% of the total invested amount that has been in the contract for at least one
year, less any withdrawals taken during the contract year. Should a withdrawal
exceed the free withdrawal amount, a withdrawal charge, in certain
circumstances, is imposed and paid to the Company.
Withdrawal charges vary in amount depending upon the number of years since the
purchase payment being withdrawn was made. The withdrawal charge is deducted
from the remaining contract value so that the actual reduction in contract value
as a result of the withdrawal will be greater than the withdrawal amount
requested and paid. For purposes of determining the withdrawal charge,
withdrawals will be allocated to the oldest purchase payments first so that all
withdrawals are allocated to
----------------
20
<PAGE>
purchase payments to which the lowest (if any) withdrawal charge applies. Any
amount withdrawn which exceeds a free withdrawal may be subject to a withdrawal
charge in accordance with the withdrawal charge table shown below:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE APPLICABLE WITHDRAWAL
PAYMENT CHARGE PERCENTAGE
<S> <C>
-------------------------------------------------------------------------
First............................................. 9%
Second............................................ 8%
Third............................................. 7%
Fourth............................................ 6%
Fifth............................................. 6%
Sixth............................................. 5%
Seventh........................................... 4%
Eighth............................................ 3%
Ninth............................................. 2%
Tenth and beyond.................................. 0%
</TABLE>
CONTRACT MAINTENANCE CHARGE: An annual contract maintenance fee of $35 ($30 in
North Dakota) is charged against each contract, which reimburses the Company for
expenses incurred in establishing and maintaining records relating to a
contract. The contract maintenance fee will be assessed on each anniversary
during the accumulation phase. In the event that a total surrender of contract
value is made, the entire charge will be assessed as of the date of surrender.
TRANSFER FEE: A transfer fee of $25 ($10 in Pennsylvania and Texas) is
assessed on each transfer of funds in excess of four transactions within a
contract year.
PREMIUM TAXES: Premium taxes or other taxes payable to a state or other
governmental entity will be charged against the contract values. Some states
assess premium taxes at the time purchase payments are made; others assess
premium taxes at the time annuity payments begin or at the time of surrender.
The Company currently intends to deduct premium taxes at the time of surrender
or upon annuitization; however, it reserves the right to deduct any premium
taxes when incurred or upon payment of the death benefit.
MORTALITY AND EXPENSE RISK CHARGE: The Company deducts mortality and expense
risk charges, which total to an annual rate of 1.25% and 1.37% of the net asset
value of each Strategy/Select Portfolio, computed on a daily basis, for Select
140 and Select 152, respectively. The mortality risk charge of 0.90% and 1.02%,
respectively is compensation for the mortality risks assumed by the Company from
its contractual obligations to make annuity payments after the contract has
annuitized for the life of the annuitant and to provide death benefits. The
expense risk charge of 0.35% is compensation for assuming the risk that the
current charges will be insufficient in the future to cover the cost of
administering the contract.
DISTRIBUTION EXPENSE CHARGE: The Company deducts a distribution expense charge
at an annual rate of 0.15% of the net asset value of each Strategy/Select
Portfolio, computed on a daily basis. This charge is for all expenses associated
with the distribution of the contract. These expenses include preparing the
contract, confirmations and statements, providing sales support and maintaining
contract records. If this charge is not enough to cover the cost of distributing
the contract, the Company will bear the loss.
SEPARATE ACCOUNT INCOME TAXES: The Company currently does not maintain a
provision for taxes, but has reserved the right to establish such a provision
for taxes in the future if it determines, in its sole discretion, that it will
incur a tax as a result of the operation of the Separate Account.
----------------
21
<PAGE>
3. INVESTMENT IN SEASONS SERIES TRUST The aggregate cost of the shares acquired
and the aggregate proceeds from shares sold during the one month ended
April 30, 2000 consist of the following:
<TABLE>
<CAPTION>
COST OF SHARES PROCEEDS FROM
PORTFOLIO INVESTMENT ACQUIRED SHARES SOLD
<S> <C> <C>
-----------------------------------------------------------------------
Multi-Managed Growth Portfolio.......... 2,279,883 38,742
Multi-Managed Moderate Growth
Portfolio............................. 2,249,821 41,976
Multi-Managed Income/Equity Portfolio... 637,358 54,747
Multi-Managed Income Portfolio.......... 284,602 203,187
Asset Allocation: Diversified Growth
Portfolio............................. 2,570,881 147,998
Stock Portfolio......................... 2,260,974 105,338
Large-Cap Growth Portfolio.............. 1,672,231 72,147
Large-Cap Composite Portfolio........... 741,650 159,827
Large-Cap Value Portfolio............... 532,457 90,074
Mid-Cap Growth Portfolio................ 1,555,340 23,248
Mid-Cap Value Portfolio................. 385,927 744
Small-Cap Portfolio..................... 864,002 43,348
International Equity Portfolio.......... 1,805,098 8,208
Diversified Fixed Income Portfolio...... 406,703 3,859
Cash Management Portfolio............... 427,040 1,845,591
</TABLE>
The aggregate cost of the shares acquired and the aggregate proceeds from
shares sold during the year ended March 31, 2000 consist of the following:
<TABLE>
<CAPTION>
COST OF SHARES PROCEEDS FROM
PORTFOLIO INVESTMENT ACQUIRED SHARES SOLD
<S> <C> <C>
-----------------------------------------------------------------------
Multi-Managed Growth Portfolio.......... 17,983,420 1,690,289
Multi-Managed Moderate Growth
Portfolio............................. 15,613,158 980,032
Multi-Managed Income/Equity Portfolio... 9,621,641 595,059
Multi-Managed Income Portfolio.......... 6,372,089 469,690
Asset Allocation: Diversified Growth
Portfolio............................. 23,710,275 918,566
Stock Portfolio......................... 19,088,364 1,345,364
Large-Cap Growth Portfolio.............. 13,399,498 670,294
Large-Cap Composite Portfolio........... 3,701,805 343,988
Large-Cap Value Portfolio............... 5,636,401 75,181
Mid-Cap Growth Portfolio................ 7,593,238 314,507
Mid-Cap Value Portfolio................. 3,372,092 121,660
Small-Cap Portfolio..................... 5,841,947 236,847
International Equity Portfolio.......... 3,917,365 217,162
Diversified Fixed Income Portfolio...... 4,827,967 231,944
Cash Management Portfolio............... 5,993,133 1,876,088
</TABLE>
4. FEDERAL INCOME TAXES The Company qualifies for federal income tax treatment
granted to life insurance companies under subchapter L of the Internal Revenue
Service Code (the "Code"). The operations of the Separate Account are part of
the total operations of the Company and are not taxed separately. The Separate
Account is not treated as a regulated investment company under the Code.
5. FISCAL YEAR CHANGE Effective April 30, 2000, the Separate Account changed
its fiscal year end from March 31 to April 30. Accordingly, the financial
statements include the results of operations for the transition period, which
are not necessarily indicative of operations for a full year.
----------------
22
<PAGE>
Results for comparable prior period are summarized below.
<TABLE>
<CAPTION>
ONE MONTH ENDED
APRIL 30, 1999
---------------
<S> <C>
Total investment income..................................... $ 0
---------------
Net investment income (loss)................................ (12,179)
Net realized gains (losses) from securities transactions.... 221
Change in net unrealized appreciation/depreciation of
investments............................................... 223,860
---------------
Increase (decrease) in net assets from operations........... $211,902
===============
</TABLE>
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23
