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File Nos. 333-63511
811-09003
As filed with the Securities and Exchange Commission on December 4, 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [X]
Pre-Effective Amendment No. 2 [X]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No. 3
(Check appropriate box or boxes)
VARIABLE ANNUITY ACCOUNT SEVEN
(Exact Name of Registrant)
Anchor National Life Insurance Company
(Name of Depositor)
1 SunAmerica Center
Los Angeles, California 90067-6022
(Address of Depositor's Principal Offices) (Zip Code)
Depositor's Telephone Number, including Area Code
(310) 772-6000
Susan L. Harris, Esq.
Anchor National Life Insurance Company
1 SunAmerica Center
Los Angeles, California 90067-6022
(Name and Address of Agent for Service)
Approximate date of proposed public offering:
As soon as practicable after effectiveness of the Registration Statement.
Title of securities being registered:
Interests in a Separate Account under group and individual flexible
payment deferred annuity contracts.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
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VARIABLE ANNUITY ACCOUNT SEVEN
Cross Reference Sheet
PART A - PROSPECTUS
<TABLE>
<CAPTION>
Item Number in Form N-4 Caption
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<S> <C> <C>
1. Cover Page............................. Cover Page
2. Definitions............................ Glossary
3. Synopsis............................... Profile; Fee Tables;
Portfolio Expenses;
Examples
4. Condensed Financial Information........ Examples
5. General Description of Registrant,
Depositor and Portfolio Companies...... The Polaris Plus
Variable Annuity;
Other Information
6. Deductions............................. Expenses
7. General Description of
Variable Annuity Contracts............. The Polaris Plus
Variable Annuity;
Purchasing a Polaris
Plus Variable Annuity;
Investment Options
8. Annuity Period......................... Income Options
9. Death Benefit.......................... Death Benefit
10. Purchases and Contract Value........... Purchasing a Polaris Plus
Variable Annuity
11. Redemptions............................ Access To Your Money
12. Taxes.................................. Taxes
13. Legal Proceedings...................... Other Information - Legal
Proceedings
14. Table of Contents of Statement
of Additional Information.............. Table of Contents of
Statement of Additional
Information
</TABLE>
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PART B - STATEMENT OF ADDITIONAL INFORMATION
Certain information required in part B of the Registration Statement has
been included within the Prospectus forming part of this Registration Statement;
the following cross-references suffixed with a "P" are made by reference to the
captions in the Prospectus.
<TABLE>
<CAPTION>
Item Number in Form N-4 Caption
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<S> <C> <C>
15. Cover Page............................. Cover Page
16. Table of Contents...................... Table of Contents
17. General Information and History........ The Variable
Annuity (P); Separate
Account; General Account;
Investment Options (P);
Other Information
18. Services............................... Other Information (P)
19. Purchase of Securities Being Offered... Purchasing a Polaris Plus
Variable Annuity (P)
20. Underwriters........................... Distribution of Contracts
21. Calculation of Performance Data........ Performance Data
22. Annuity Payments....................... Income Options (P);
Income Payments;
Annuity Unit Values
23. Financial Statements................... Depositor: Other
Information - Financial
Statements; Registrant:
Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
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POLARIS PLUS LOGO
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD
KNOW AND CONSIDER BEFORE PURCHASING THE POLARIS PLUS VARIABLE ANNUITY. THE
ANNUITY IS MORE FULLY DESCRIBED IN THE PROSPECTUS. PLEASE READ THE PROSPECTUS
CAREFULLY.
December 10, 1998
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1. THE POLARIS PLUS VARIABLE ANNUITY
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The Polaris Plus Variable Annuity is issued by Anchor National Life Insurance
Company to Participants in certain employer sponsored retirement plans qualified
subject to Section 403(b) of the Internal Revenue Code (the "IRC"). An annuity
qualified under Section 403(b) of the IRC is also known as a tax sheltered
annuity ("TSA"). It is designed to help you invest to meet long-term financial
goals, such as retirement funding. In addition to a wide range of underlying
investment options, a variable annuity provides a guaranteed death benefit and
an option to receive income for your lifetime.
Polaris Plus offers a diverse selection of money managers and investment
options. You may divide your money among any or all of our 26 variable
investment portfolios and 5 fixed account options. Your investment is not
guaranteed. The value of your Polaris Plus contract can fluctuate up or down,
based on the performance of the underlying investments you select. You may
experience a loss.
The variable investment portfolios offer professionally managed investment
choices with goals ranging from capital preservation to aggressive growth. Your
choices for the various investment options are found on the next page.
The contract also offers 5 fixed account options, for different time periods.
Each may have a different interest rate. Interest rates are guaranteed by Anchor
National.
Like most annuities, the contract has an accumulation phase and an income phase.
During the accumulation phase, you invest money in your contract. Your earnings
are based on the investment performance of the variable investment Portfolios to
which your money is allocated and/or the interest rate(s) earned on the fixed
account option(s) in which you invest. Subject to certain IRC restrictions you
may withdraw money from your contract during the accumulation phase. However, as
with other tax-deferred investments, your ability to withdraw money is
restricted and you will pay taxes on earnings and untaxed contributions when you
withdraw them. A federal tax penalty may apply if you make withdrawals before
age 59 1/2.
During the income phase, you receive income payments from your annuity. Among
other factors, the amount of money you are able to accumulate in your contract
during the accumulation phase will affect the amount of your income payments
during the income phase.
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2. INCOME OPTIONS
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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 years;
(4) payments for your lifetime, but for not less than 10, 15 or 20 years; and
(5) payments for a specified period of 5 to 30 years.
You will also need to decide when your income payments begin and if you want
your income payments to fluctuate with investment performance or remain
constant. Once you begin receiving income payments, you cannot change your
income option.
For contracts which are part of a qualified retirement Plan (including those
issued under IRC Section 403(b)) funded with money on which you had not paid
taxes, the entire income payment is generally taxable as income. In addition,
under certain qualified contracts your income option may not exceed your life
expectancy.
If your contract is part of a non-qualified retirement plan (one that is
established with after tax dollars), payments during the Income Phase are
considered partly a return of your original investment. The "original
investment" part of each payment is not taxable as income.
In addition to the above income options, you may also elect to take income
payments under the Income Protector program, subject to the provisions thereof.
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3. PURCHASING A POLARIS PLUS VARIABLE
ANNUITY CONTRACT
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You can buy a contract with money from a direct transfer or a direct rollover
from an existing retirement plan or by establishing a salary reduction agreement
with your employer.
For qualified contracts issued under IRC Section 403(b) there is no minimum
initial purchase payment if you establish a salary reduction agreement with your
employer. If you fund a contract through a direct transfer or direct rollover
only, the minimum initial purchase payment is $2,000.
For Non-qualified contracts, the minimum initial purchase payment is $5,000 and
subsequent amounts of $500 or more may be added to your contract at any time
during the Accumulation Phase.
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4. INVESTMENT OPTIONS
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You may allocate money to the following variable investment Portfolios of the
Anchor Series Trust and/or the SunAmerica Series Trust:
ANCHOR SERIES TRUST
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Capital Appreciation Portfolio
- Growth Portfolio
- Government and Quality Bond Portfolio
SUNAMERICA SERIES TRUST
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Global Equities Portfolio
- Alliance Growth Portfolio
- Growth-Income Portfolio
MANAGED BY DAVIS SELECTED ADVISERS, L.P.
- Venture Value Portfolio
- Real Estate Portfolio
FIRST AMERICAN ASSET MANAGEMENT
- Equity Income Portfolio
- Equity Index Portfolio
- Small Company Value Portfolio
MANAGED BY FEDERATED INVESTORS
- Federated Value Portfolio
- Utility Portfolio
- Corporate Bond Portfolio
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT/
GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
- Asset Allocation Portfolio
- Global Bond Portfolio
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT INC.
- International Diversified Equities Portfolio
- Worldwide High Income Portfolio
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
- Putnam Growth Portfolio
- International Growth and Income Portfolio
- Emerging Markets Portfolio
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio
- "Dogs" of Wall Street Portfolio
- SunAmerica Balanced Portfolio
- High-Yield Bond Portfolio
- Cash Management Portfolio
You may also allocate money to the 1, 3 and 5 year market value adjustment
("MVA") fixed account options and, under certain circumstances, the 6-month and
1-year DCA fixed account options. (The 6-month DCA fixed account may not yet be
available in your state. Please contact your financial representative for more
information.)
Your contract value will be adjusted up or down for withdrawals or transfers
from the 1, 3 and 5 year MVA fixed account options prior to the end of the
guarantee period. The interest rates applicable for these fixed account options
may differ from time to time, however, we will never credit less than a 3%
annual effective rate. Once established, the rate will not change during the
selected period.
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5. EXPENSES
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We deduct insurance charges which equal 1.25% annually of the average daily
value of your contract allocated to the variable portfolios.
As with other professionally managed investments, there are also investment
charges imposed on contracts with money allocated to the variable portfolios. We
estimate these fees to range from .55 to 1.90.
If you take money out of your contract, you may be assessed a withdrawal charge
which is a percentage of purchase payments based on the number of years the
withdrawn purchase payments have been invested in the contract. The percentage
declines over the time the money is in the contract. The applicable withdrawal
charge schedule also varies dependent upon your employment status at the time of
contract issue.
RETIRED OR SEPARATED FROM SERVICE AT TIME OF ISSUE
(SCHEDULE A)
<TABLE>
<CAPTION>
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Year 1 2 3 4 5 6
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<S> <C> <C> <C> <C> <C> <C>
WITHDRAWAL CHARGE 6% 6% 5% 5% 4% 0%
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</TABLE>
EMPLOYED AT TIME OF ISSUE (SCHEDULE B)
<TABLE>
<CAPTION>
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Year 1 2 3 4 5 6 7
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<S> <C> <C> <C> <C> <C> <C> <C>
WITHDRAWAL
CHARGE 6% 6% 5% 5% 4% 4% 0%
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</TABLE>
Each year, you are allowed to make 15 transfers without charge. After your first
15 free transfers, a $25 transfer fee ($10 in Pennsylvania and Texas) applies to
each subsequent transfer.
In a limited number of states, you may also be assessed a state premium tax of
up to 3.5% depending upon the state.
The following charts are designed to help you understand the charges in your
contract. The column "Total Annual Charges" shows the total of the 1.25%
insurance charges and the investment charges for each variable portfolio.
The next two columns show two examples of the charges you would pay under the
contract. The examples assume that you invested $1,000 in a contract which earns
5% annually and that you withdraw your money: (1) at the end of year 1, and (2)
at the end of year 10. The premium tax is assumed to be 0% in both examples.
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<TABLE>
<CAPTION>
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EXAMPLES:
TOTAL ANNUAL TOTAL ANNUAL TOTAL EXPENSES TOTAL EXPENSES
INSURANCE INVESTMENT TOTAL ANNUAL AT END OF AT END OF
ANCHOR SERIES TRUST PORTFOLIO CHARGES CHARGES CHARGES 1 YEAR 10 YEARS
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<S> <C> <C> <C> <C> <C>
Capital Appreciation 1.25% .71% 1.96% $ 80 $229
Growth 1.25% .78% 2.03% $ 81 $236
Government and Quality Bond 1.25% .71% 1.96% $ 80 $229
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SUNAMERICA SERIES TRUST PORTFOLIO
Emerging Markets* 1.25% 1.90% 3.15% $ 92 $346
International Diversified Equities 1.25% 1.35% 2.60% $ 86 $293
Global Equities 1.25% .95% 2.20% $ 82 $253
International Growth and Income* 1.25% 1.60% 2.85% $ 89 $318
Aggressive Growth* 1.25% .90% 2.15% $ 82 $248
Small Company Value* 1.25% 1.40% 2.66% $ 87 $298
Real Estate* 1.25% 1.25% 2.50% $ 85 $284
Putnam Growth 1.25% .91% 2.16% $ 82 $249
Alliance Growth 1.25% .65% 1.90% $ 79 $222
"Dogs" of Wall Street* 1.25% .85% 2.10% $ 81 $243
Venture Value 1.25% .79% 2.04% $ 81 $237
Federated Value* 1.25% 1.03% 2.28% $ 83 $262
Growth-Income 1.25% .65% 1.90% $ 79 $222
Equity Index* 1.25% .55% 1.80% $ 78 $209
Utility* 1.25% 1.05% 2.30% $ 83 $264
Equity Income* 1.25% .95% 2.20% $ 82 $253
Asset Allocation 1.25% .68% 1.93% $ 80 $225
SunAmerica Balanced* 1.25% 1.00% 2.25% $ 83 $258
Worldwide High Income 1.25% 1.10% 2.35% $ 84 $269
High-Yield Bond 1.25% .75% 2.00% $ 80 $233
Corporate Bond 1.25% .91% 2.16% $ 82 $249
Global Bond 1.25% .90% 2.15% $ 82 $249
Cash Management 1.25% .63% 1.88% $ 79 $220
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</TABLE>
* For these Portfolios, the adviser, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or reimburse expenses, if necessary, to keep
operating expenses at or below an established maximum amount. All waivers or
reimbursements may be terminated at any time. For more detailed information,
see Fee Tables and Examples in the prospectus.
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6. TAXES
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Unlike taxable investments where earnings are taxed in the year they are earned,
taxes on amounts contributed to and earned in a qualified contract (one
purchased with before-tax dollars, like a TSA), are taxable when withdrawn. In a
non-qualified contract (one that is purchased with after-tax dollars) taxes on
amounts earned are taxed upon withdrawal.
You may be subject to a 10% federal tax penalty for distributions or withdrawals
before age 59 1/2.
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7. ACCESS TO YOUR MONEY
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During the accumulation phase withdrawals from your contract may be limited by
the IRC, any applicable employer plan and this contract. Contracts issued
pursuant to Section 403(b) of the IRC are subject to specific withdrawal
restrictions. SEE ACCESS TO YOUR MONEY ON PAGE 12 for details regarding
restrictions applicable to withdrawals.
Under this contract, certain types of withdrawals are subject to a withdrawal
charge if taken within the first five or six years a purchase payment has been
in the contract. We determine the exact schedule of withdrawal charges based on
your employment status as of the date of the contract issue. Some types of
withdrawals may be exempt from these Company imposed withdrawal charges. SEE
EXPENSES ON PAGE 14 for details regarding possible withdrawal charge exceptions.
In all cases after your tenth Contract anniversary, Company imposed withdrawal
charges no longer apply. However the IRC or any applicable Plan may still impose
restrictions on withdrawals at that point in time.
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8. PERFORMANCE
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The value of your contract will fluctuate depending upon the investment
performance of the portfolio(s) you choose.
When you invest in the Polaris Plus Variable Annuity, your money is actually
invested in the underlying portfolios of the Anchor Series Trust and/or the
SunAmerica Series Trust. These trusts are older than the annuity itself and have
served as underlying investments for other variable annuity contracts. Some of
the advertised historical performance for this annuity will be derived from the
performance of the corresponding portfolios of the trusts modified to reflect
the charges and expenses associated with this contract, as if this contract had
been in existence during the time period advertised. Of course, past performance
does not guarantee future results.
As of the date of this prospectus, the sale of this contract has not yet begun.
Therefore, no performance is presented here.
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9. DEATH BENEFIT
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If you should die during the accumulation phase, your beneficiary will receive a
death benefit. The death benefit will be the greater of:
1. Total purchase payments minus total withdrawals at the time we receive
satisfactory proof of death, or;
2. The contract value at the time we receive satisfactory proof of death.
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10. OTHER INFORMATION
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FREE LOOK: You may cancel your contract within ten days (or longer if 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 your contract on the date (unless otherwise required by state
law). Its value may be more or less than the money you initially invested.
ASSET ALLOCATION REBALANCING: If selected by you, this program maintains your
specified allocation mix in the variable investment portfolio by readjusting
your money on a calendar quarterly, semiannual or annual basis.
SYSTEMATIC WITHDRAWAL PROGRAM: If selected by you, this program allows you to
receive either monthly, quarterly, semiannual or annual checks during the
accumulation phase. Systematic withdrawals may also be electronically
transferred to your bank account. Of course, withdrawals may be subject to a
withdrawal charge and taxable and a 10% federal tax penalty may apply if you are
under age 59 1/2. This program is not available if you are not eligible to make
withdrawals under the IRC or an applicable employer plan.
DOLLAR COST AVERAGING: If selected by you, this program allows you to invest
gradually in the equity and bond portfolios from any of the variable investment
portfolios, the 1-year MVA fixed account option, and under certain circumstances
the 6-month or the 1-year DCA fixed account options.
CONFIRMATIONS AND QUARTERLY STATEMENTS: You will receive a confirmation of each
transaction within your contract. On a quarterly basis, you will receive a
complete statement of your transactions over the past quarter and a summary of
your account values.
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11. INQUIRIES
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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
Telephone Number: 877-999-9205
If money accompanies your correspondence, you should direct it to:
Anchor National Life Insurance Company
P.O. Box 100330
Pasadena, California 91189-0001
<PAGE> 8
POLARIS PLUS LOGO
PROSPECTUS
DECEMBER 10, 1998
<TABLE>
<S> <C> <C>
Please read this prospectus carefully FLEXIBLE PAYMENT GROUP AND INDIVIDUAL DEFERRED ANNUITY
before investing and keep it for CONTRACTS
future reference. It contains issued by
important information about the ANCHOR NATIONAL LIFE INSURANCE COMPANY
Polaris Plus Variable Annuity. in connection with
VARIABLE ANNUITY ACCOUNT SEVEN
To learn more about the annuity The annuity has 31 investment choices - 5 fixed account
offered by this prospectus, obtain a options and 26 variable investment Portfolios listed below.
copy of the Statement of Additional The 5 fixed account options include market value adjustment
Information ("SAI") dated December fixed accounts for specified periods of 1, 3, and 5 years.
10, 1998. The SAI is on file with the In addition there are 2 Dollar Cost Averaging Accounts for
Securities and Exchange Commission 6-month and 1-year periods. The 26 variable investment
("SEC") and is incorporated by portfolios are part of the Anchor Series Trust or the
reference into this prospectus. The SunAmerica Series Trust.
Table of Contents of the SAI appears
on page 22 of this prospectus. For a ANCHOR SERIES TRUST:
free copy of the SAI, call us at MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
(877) 999-9205 or write to us at our - Capital Appreciation Portfolio
Annuity Service Center, P.O. Box - Growth Portfolio
54299, Los Angeles, California 90054- - Government and Quality Bond Portfolio
0299.
SUNAMERICA SERIES TRUST:
In addition, the SEC maintains a MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
website (http://www.sec.gov) that - Global Equities Portfolio
contains the SAI, materials - Alliance Growth Portfolio
incorporated by reference and other - Growth-Income Portfolio
information filed electronically with MANAGED BY DAVIS SELECTED ADVISERS, L.P.
the SEC by Anchor National. - Venture Value Portfolio
- Real Estate Portfolio
ANNUITIES INVOLVE RISKS, INCLUDING MANAGED BY FEDERATED INVESTORS
POSSIBLE LOSS OF PRINCIPAL. ANNUITIES - Federated Value Portfolio
ARE NOT A DEPOSIT OR OBLIGATION OF, - Utility Portfolio
OR GUARANTEED OR ENDORSED BY, ANY - Corporate Bond Portfolio
BANK. THEY ARE NOT FEDERALLY INSURED MANAGED BY FIRST AMERICAN ASSET MANAGEMENT
BY THE FEDERAL DEPOSIT INSURANCE - Equity Income Portfolio
CORPORATION, THE FEDERAL RESERVE - Equity Index Portfolio
BOARD OR ANY OTHER AGENCY. - Small Company Value Portfolio
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT/
GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
- Asset Allocation Portfolio
- Global Bond Portfolio
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT INC.
- International Diversified Equities Portfolio
- Worldwide High Income Portfolio
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
- Putnam Growth Portfolio
- International Growth and Income Portfolio
- Emerging Markets Portfolio
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio
- "Dogs" of Wall Street Portfolio
- SunAmerica Balanced Portfolio
- High-Yield Bond Portfolio
- Cash Management Portfolio
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 9
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TABLE OF CONTENTS
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<TABLE>
<S> <C> <C>
GLOSSARY............................................. 3
FEE TABLES........................................... 4
Owner Transaction Expenses........................... 4
Annual Separate Account Expenses..................... 4
The Income Protector Expense......................... 4
Portfolio Expenses................................... 4
EXAMPLES............................................. 5
THE POLARIS PLUS VARIABLE ANNUITY.................... 7
PURCHASING A POLARIS PLUS VARIABLE ANNUITY........... 7
Allocation of Purchase Payments...................... 8
Accumulation Units................................... 8
Free Look............................................ 8
INVESTMENT OPTIONS................................... 8
Variable Portfolios.................................. 8
Anchor Series Trust.............................. 9
SunAmerica Series Trust.......................... 9
Fixed Account Options................................ 9
Market Value Adjustment ("MVA")...................... 10
Transfers During the Accumulation Phase.............. 10
Dollar Cost Averaging................................ 11
Asset Allocation Rebalancing......................... 11
Voting Rights........................................ 12
Substitution......................................... 12
ACCESS TO YOUR MONEY................................. 12
Withdrawal Restrictions.............................. 12
Systematic Withdrawal Program........................ 13
Loans................................................ 13
Minimum Contract Value............................... 13
DEATH BENEFIT........................................ 13
EXPENSES............................................. 14
Insurance Charges.................................... 14
Withdrawal Charges................................... 14
Exceptions to Withdrawal Charge...................... 14
Investment Charges................................... 14
Transfer Fee......................................... 14
Premium Tax.......................................... 14
Income Taxes......................................... 14
Reduction or Elimination of Charges and Expenses, and
Additional Amounts Credited........................ 15
INCOME OPTIONS....................................... 15
Annuity Date......................................... 15
Income Options....................................... 15
Fixed or Variable Income Payments.................... 16
Income Payments...................................... 16
Transfers During the Income Phase.................... 16
Deferment of Payments................................ 16
The Income Protector................................. 16
TAXES................................................ 19
Annuity Contracts in General......................... 19
Tax Treatment of Distributions -
Qualified Contracts................................ 19
Section 403(b) Plans................................. 19
Tax Treatment of Distributions -
Non-Qualified Contracts............................ 20
Minimum Distributions................................ 20
Diversification...................................... 20
PERFORMANCE.......................................... 20
OTHER INFORMATION.................................... 20
The Separate Account................................. 21
The General Account.................................. 21
Distribution of the Contract......................... 21
Administration....................................... 21
Year 2000............................................ 21
Legal Proceedings.................................... 22
Custodian............................................ 22
Additional Information............................... 22
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL
INFORMATION.......................................... 22
APPENDIX A -- PREMIUM TAXES.......................... A-1
</TABLE>
2
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GLOSSARY
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We have capitalized some of the technical terms used in this prospectus. To help
you understand these terms, we have defined them in this glossary.
ACCUMULATION PHASE - The period during which you invest money in your contract.
ACCUMULATION UNITS - A measurement we use to calculate the value of the variable
portion of your contract during the Accumulation Phase.
ANNUITANT(S) - The person(s) on whose life (lives) we base annuity payments. For
a contract issued pursuant to IRC Section 403(b), the Participant must be the
Annuitant.
ANNUITY DATE - The date on which annuity payments are to begin, as selected by
you.
ANNUITY UNITS - A measurement we use to calculate the mount 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
insurer that issues this contract.
CONTRACT - The variable annuity contract issued by Anchor National Life
Insurance Company ("Anchor National"). This includes any applicable group master
contract, certificate and endorsement.
CONTRACTHOLDER - The party named as the Contractholder on the annuity Contract
issued by Anchor National. The Contractholder may be an Employer, a retirement
plan trust, an association or any other entity allowed under the law.
EMPLOYER - The organization specified in the Contract which offers the Plan to
its employees.
INCOME PHASE - The period during which we make annuity payments to you.
IRC - The Internal Revenue Code of 1986, as amended, and all regulations
thereto.
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").
PARTICIPANT - An employee or other person affiliated with the Contractholder on
whose behalf an account is maintained under the terms of the Contract.
PLAN - A retirement program offered by an Employer to its employees for which a
Contract is used to accumulate funds.
VARIABLE PORTFOLIO(S) - The variable investment options available under the
contract. Each Portfolio has its own investment objective and is invested in the
underlying investments of the Anchor Series Trust or the SunAmerica Series
Trust.
PURCHASE PAYMENTS - The money you give us to buy the contract, as well as any
additional money you give us to invest in the contract after you own it.
QUALIFIED (CONTRACT) - A contract purchased with pretax dollars. These contracts
are generally purchased under a pension plan, specially sponsored program or
individual retirement account ("IRA").
TRUSTS - Refers to the Anchor Series Trust and the SunAmerica Series Trust
collectively.
TSA - A tax sheltered annuity, one issued in accordance with the provisions of
Section 403(b) of the IRC.
3
<PAGE> 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FEE TABLES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OWNER TRANSACTION EXPENSES
WITHDRAWAL CHARGE (AS A PERCENTAGE OF PURCHASE PAYMENTS)
<TABLE>
<CAPTION>
YEARS: 1 2 3 4 5 6 7
<S> <C> <C> <C> <C> <C> <C> <C>
Schedule A* 6% 6 % 5 % 5 % 4 % 0 % 0%
Schedule B** 6% 6 % 5 % 5 % 4 % 4 % 0%
</TABLE>
* This Withdrawal Charge schedule applies to participants who reach normal
retirement or are separated from service at the time of contract issue.
** This Withdrawal Charge schedule applies to all other participants.
THE INCOME PROTECTOR EXPENSE
(THE PLUS AND MAX FEATURES ARE OPTIONAL AND IF ELECTED THE FEE IS DEDUCTED
ANNUALLY FROM CONTRACT VALUE)
<TABLE>
<CAPTION>
THE INCOME PROTECTOR FEE AS A PERCENTAGE OF YOUR
ALTERNATIVES INCOME BENEFIT BASE
-------------------- ---------------------------
<S> <C>
Income Protector Base.................. 0%
Income Protector Plus.................. .15%
Income Protector Max................... .30%
</TABLE>
ANNUAL SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge Insurance Charge...... 1.25%
-----
TOTAL SEPARATE ACCOUNT EXPENSES 1.25%
=====
</TABLE>
PORTFOLIO EXPENSES
ANCHOR SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S TWELVE-MONTH PERIOD ENDED
NOVEMBER 30, 1997)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Capital Appreciation .65% .06% .71%
- -----------------------------------------------------------------------------------------------------------
Growth .72% .06% .78%
- -----------------------------------------------------------------------------------------------------------
Government and Quality Bond .62% .09% .71%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
SUNAMERICA SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER REIMBURSEMENT OR WAIVER OF EXPENSES
FOR THE TRUST'S FISCAL YEAR ENDED
NOVEMBER 30, 1997)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Emerging Markets**** 1.25% .65% 1.90%*
- -----------------------------------------------------------------------------------------------------------
International Diversified Equities 1.00% .35% 1.35%
- -----------------------------------------------------------------------------------------------------------
Global Equities .76% .19% .95%
- -----------------------------------------------------------------------------------------------------------
International Growth and Income**** 1.00% .60% 1.60%*
- -----------------------------------------------------------------------------------------------------------
Aggressive Growth .76% .14% .90%
- -----------------------------------------------------------------------------------------------------------
Small Company Value*** 1.00% .40% 1.40%
- -----------------------------------------------------------------------------------------------------------
Real Estate**** .80% .45% 1.25%*
- -----------------------------------------------------------------------------------------------------------
Putnam Growth .83% .08% .91%
- -----------------------------------------------------------------------------------------------------------
Alliance Growth .59% .06% .65%
- -----------------------------------------------------------------------------------------------------------
"Dogs" of Wall Street** .60% .25% .85%*
- -----------------------------------------------------------------------------------------------------------
Venture Value .74% .05% .79%
- -----------------------------------------------------------------------------------------------------------
Federated Value .80% .23% 1.03%
- -----------------------------------------------------------------------------------------------------------
Growth-Income .60% .05% .65%
- -----------------------------------------------------------------------------------------------------------
Equity Index*** .40% .15% .55%
- -----------------------------------------------------------------------------------------------------------
Utility**** .75% .30% 1.05%
- -----------------------------------------------------------------------------------------------------------
Equity Income*** .65% .30% .95%
- -----------------------------------------------------------------------------------------------------------
Asset Allocation .61% .07% .68%
- -----------------------------------------------------------------------------------------------------------
SunAmerica Balanced .74% .26% 1.00%
- -----------------------------------------------------------------------------------------------------------
Worldwide High Income 1.00% .10% 1.10%
- -----------------------------------------------------------------------------------------------------------
High-Yield Bond .66% .09% .75%
- -----------------------------------------------------------------------------------------------------------
Corporate Bond .70% .21% .91%
- -----------------------------------------------------------------------------------------------------------
Global Bond .72% .18% .90%
- -----------------------------------------------------------------------------------------------------------
Cash Management .54% .09% .63%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Contracts offering sales of the "Dogs" of Wall Street Portfolio did not
begin until April 1, 1998. The percentages are estimated amounts for the
current fiscal year.
*** As of the date of this prospectus, the sale of contracts offering the Small
Company Value, Equity Index and Equity Income Portfolios has not begun. The
percentages are based on estimated amounts for the current fiscal year.
**** We estimate that absent fee waivers or reimbursement of expenses by the
adviser, you would have incurred the following expenses during the last
fiscal year: Utility (1.24%); Emerging Markets (2.60%); International
Growth and Income (2.02%); and Real Estate (1.36%).
THE ABOVE PORTFOLIO EXPENSES WERE PROVIDED BY THE TRUSTS. WE HAVE NOT
INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
4
<PAGE> 12
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXAMPLES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You will pay the following expenses on a $1,000 investment in each Portfolio,
assuming a 5% annual return on assets and:
(a) Surrender of the contract at the end of the stated time period under
schedule A* or B**;
(b) If the contract is not Surrendered or is annuitized.+
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS
<S> <C> <C>
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Capital Appreciation (a) $80 (a) $112
(b) $20 (b) $ 62
- ----------------------------------------------------------------------------------
Growth (a) $81 (a) $114
(b) $21 (b) $ 64
- ----------------------------------------------------------------------------------
Government and Quality Bond (a) $80 (a) $112
(b) $20 (b) $ 62
- ----------------------------------------------------------------------------------
Emerging Markets (a) $92 (a) $147
(b) $32 (b) $ 97
- ----------------------------------------------------------------------------------
International Diversified Equities (a) $86 (a) $131
(b) $26 (b) $ 81
- ----------------------------------------------------------------------------------
Global Equities (a) $82 (a) $119
(b) $22 (b) $ 69
- ----------------------------------------------------------------------------------
International Growth and Income (a) $89 (a) $138
(b) $29 (b) $ 88
- ----------------------------------------------------------------------------------
Aggressive Growth (a) $82 (a) $117
(b) $22 (b) $ 67
- ----------------------------------------------------------------------------------
Small Company Value (a) $87 (a) $132
(b) $27 (b) $ 82
- ----------------------------------------------------------------------------------
Real Estate (a) $85 (a) $128
(b) $25 (b) $ 78
- ----------------------------------------------------------------------------------
Putnam Growth (a) $82 (a) $118
(b) $22 (b) $ 68
- ----------------------------------------------------------------------------------
Alliance Growth (a) $79 (a) $110
(b) $19 (b) $ 60
- ----------------------------------------------------------------------------------
"Dogs" of Wall Street (a) $81 (a) $116
(b) $21 (b) $ 66
- ----------------------------------------------------------------------------------
Venture Value (a) $81 (a) $114
(b) $21 (b) $ 64
- ----------------------------------------------------------------------------------
Federated Value (a) $83 (a) $121
(b) $23 (b) $ 71
- ----------------------------------------------------------------------------------
Growth-Income (a) $79 (a) $110
(b) $19 (b) $ 60
- ----------------------------------------------------------------------------------
Equity Index (a) $78 (a) $106
(b) $18 (b) $ 56
- ----------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 13
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS
<S> <C> <C>
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Utility (a) $83 (a) $122
(b) $23 (b) $ 72
- ----------------------------------------------------------------------------------
Equity Income (a) $78 (a) $107
(b) $18 (b) $ 59
- ----------------------------------------------------------------------------------
Asset Allocation (a) $80 (a) $111
(b) $20 (b) $ 61
- ----------------------------------------------------------------------------------
SunAmerica Balanced (a) $83 (a) $120
(b) $23 (b) $ 70
- ----------------------------------------------------------------------------------
Worldwide High Income (a) $84 (a) $123
(b) $24 (b) $ 73
- ----------------------------------------------------------------------------------
High-Yield Bond (a) $80 (a) $113
(b) $20 (b) $ 63
- ----------------------------------------------------------------------------------
Corporate Bond (a) $82 (a) $118
(b) $22 (b) $ 68
- ----------------------------------------------------------------------------------
Global Bond (a) $82 (a) $117
(b) $22 (b) $ 67
- ----------------------------------------------------------------------------------
Cash Management (a) $79 (a) $109
(b) $19 (b) $ 59
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
* See Page 4 above for an explanation of Schedule A.
** See Page 4 above for an explanation of Schedule B.
+ 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 fully surrender your contract.
6
<PAGE> 14
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you would
incur directly and indirectly by investing in the contract.
2. For certain Portfolios, the adviser, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or reimburse certain expenses, if
necessary, to keep annual operating expenses at or below the lesser of the
maximum allowed by any applicable state expense limitations or the following
percentages of each Portfolio's average net assets: SunAmerica Balanced
(1.00%); Equity Index (.55%); Equity Income (.95%);"Dogs" of Wall Street
(.85%); Aggressive Growth (.90%); Federated Value (1.03%); Utility (1.05%);
Emerging Markets (1.90%); Small Company Value (1.40%); International Growth
and Income (1.60%); and Real Estate (1.25%). The adviser also may
voluntarily waive or reimburse additional amounts to increase a Portfolio's
investment return. All waivers and/or reimbursements may be terminated at
any time. Furthermore, the adviser may recoup any waivers or reimbursements
within two years after such waivers or reimbursements are granted, provided
that the Portfolio is able to make such payment and remain in compliance
with the foregoing expense limitations.
3. The Examples assume that no transfer fees were imposed. Although premium
taxes may apply in certain states, they are not reflected in the Examples.
In addition, the examples do not reflect the fees associated with the
optional Income Protector Plus and Max features. SEE INCOME OPTIONS ON PAGE
15.
4. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
AS OF THE DATE OF THIS PROSPECTUS SALES OF THIS CONTRACT HAD NOT BEGUN,
THEREFORE NO CONDENSED FINANCIAL INFORMATION APPEARS IN THIS PROSPECTUS.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
THE POLARIS PLUS VARIABLE ANNUITY
- ----------------------------------------------------------------
- ----------------------------------------------------------------
We issue Polaris Plus, a group Contract to a Contractholder (usually your
employer) for the benefit of the Participants in the group (you and other
employees in the group), under Section 403(b) of the IRC. As a Participant in
the group, you will receive a certificate that evidences your ownership. When
you see the term Contract in this prospectus we are referring to your
certificate. In some states we issue a Contract directly to you instead of a
certificate. Such contracts are identical to the contracts described in this
prospectus, except we issue it to you directly.
An annuity is a contract between you and an insurance company. You are the owner
of the contract. The contract provides certain benefits. You should decide
whether the benefits are right for you. Among other features the contract
offers:
- Investment Options: Various investment options available in one contract,
including both variable and fixed rate investing.
- 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.
We developed this variable annuity to help you contribute to your retirement
savings. Your contributions may come from payroll deductions arranged through
your employer and/or from direct transfers or direct rollovers from other
retirement savings plans.
This Contract has two stages, the Accumulation Phase and the Income Phase. Your
Contract is in the Accumulation Phase when you make payments into the Contract.
The Income Phase begins when you request that we start making income 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 Portfolios which, like mutual funds, have different investment
objectives and performance which varies with market conditions. You can gain or
lose money if you invest in these Variable Portfolios. The amount of money you
accumulate in your Contract depends on the performance of the Portfolios in
which you invest. This Contract currently offers 26 variable investment
Portfolios.
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 the Contract depends on the total interest credited to
the particular fixed account option(s) in which you are invested.
For more information on investment options available under this contract SEE
INVESTMENT OPTIONS ON PAGE 8.
Anchor National is a stock life insurance company organized under the laws of
the state of Arizona. Its principal place of business is 1 SunAmerica Center,
Los Angeles, California 90067. The Company conducts life insurance and annuity
business in the District of Columbia and all states except New York. Anchor
National is an indirect, wholly owned subsidiary of SunAmerica Inc., a Maryland
corporation.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
PURCHASING A POLARIS PLUS VARIABLE ANNUITY
- ----------------------------------------------------------------
- ----------------------------------------------------------------
A Purchase Payment is the money you give us to buy a contract. Any additional
money you give us to invest in your contract after purchase is a subsequent
Purchase Payment. You make payments into your Contract in two ways:
- - salary reduction contributions, arranged through your employer; and/or
7
<PAGE> 15
- - direct transfer or direct rollover from an existing retirement plans.
If you enter into a salary reduction agreement with your employer to make
Purchase Payments, there is no minimum initial payment. If you do not establish
such a salary reduction agreement, and only contribute through direct transfer
or direct rollover, the minimum initial Purchase Payment is $2,000.
You must have prior Company approval before we can accept Purchase Payments
greater than $1,000,000. We may refuse any Purchase Payment.
In general, for Qualified contracts we will not issue you a contract if you are
age 70 1/2 or older, unless you certify that the minimum distributions required
by the IRS are being made. Upon proof satisfactory to Us that minimum
distribution requirements are being satisfied or are not yet required, we may
issue you a contract prior to your reaching age 80.
ALLOCATION OF PURCHASE PAYMENTS
We invest your Purchase Payments in the fixed and variable investment options
according to your instructions. If we receive a Purchase Payment without
allocation instructions, we will invest the money according to your last
allocation instructions. SEE INVESTMENTS OPTIONS ON PAGE 8.
In order to issue your Contract, we must receive your completed enrollment form,
Purchase Payment, allocation instructions and any other required paper work at
our principal place of business. We allocate your initial purchase payment
within two days of receiving it. If we do not have the 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 and down dependent
on the investment performance of the Portfolios you choose. To calculate the
value of your Contract, we use a measure called an Accumulation Unit.
We calculate the value of an Accumulation Unit each day that the New York Stock
Exchange ("NYSE") is open, as follows:
1. We determine the total value of money invested in a particular
Portfolio;
2. We subtract from that amount all applicable contract charges; and
3. We divide this amount by the number of outstanding Accumulation Units.
When you make a Purchase Payment, we credit your Contract with Accumulation
Units. We determine the number of Accumulation Units credited by dividing the
Purchase Payment by the Accumulation Unit value for the specific Portfolio.
EXAMPLE:
We receive a $25,000 Purchase Payment from you on Wednesday. You allocate
the money to the Global Bond Portfolio. We determine that the value of an
Accumulation Unit for the Global Bond Portfolio is $11.10 when the NYSE
closes on Wednesday. We then divide $25,000 by $11.10 and credit your
Contract on Wednesday night with 2252.25 Accumulation Units for the Global
Bond Portfolio.
Performance of the Portfolios in which you are invested and the charges and
expenses under your contract affect your Accumulation Unit values. These factors
may cause the value of your Contract to go up or down.
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. We will refund to you the value
of your Contract on the day we receive your request. The amount refunded to you
may be more or less than the amount you originally invested.
Certain states (and all contracts issued as IRAs) require us to return your
Purchase Payments upon a free look request. With respect to those contracts, we
reserve the right to put your money in the Cash Management Portfolio or the
1-year fixed account option during the free look period. If you cancel your
Contract during the free look period, we return your Purchase Payments or the
value of your Contract, whichever is larger. At the end of the free look period,
we reallocate your money according to your instructions.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
INVESTMENT OPTIONS
- ----------------------------------------------------------------
- ----------------------------------------------------------------
VARIABLE PORTFOLIOS
The Contract currently offers 26 variable investment Portfolios. These
Portfolios invest in shares of the Anchor Series Trust and the SunAmerica Series
Trust (the "Trusts"). Additional Portfolios may be available in the future.
These Portfolios operate similarly to a mutual fund but are only available
through the purchase of certain insurance contracts.
SunAmerica Asset Management Corp., an indirect wholly owned subsidiary of
SunAmerica Inc., is the investment adviser to the Trusts. The Trusts serve as
the underlying investment vehicles for other variable annuity contracts issued
by Anchor National Life Insurance Company, and other affiliated/unaffiliated
insurance companies. Neither Anchor
8
<PAGE> 16
National nor the Trusts believe that offering shares of the Trusts in this
manner is disadvantageous to you. The fund's management monitors the Trusts for
any conflicts between contract owners.
The Portfolios along with their respective subadvisers are listed below:
ANCHOR SERIES TRUST
Wellington Management Company, LLP serves as subadviser to the Anchor Series
Trust Portfolios. Anchor Series Trust has Portfolios in addition to those listed
below which are not available for investment under the contract. The 3 available
Portfolios are:
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Capital Appreciation Portfolio
- Growth Portfolio
- Government and Quality Bond Portfolio
SUNAMERICA SERIES TRUST
Various subadvisers provide investment advice for the SunAmerica Series Trust
Portfolios. The 23 Portfolios and the subadvisers are:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Global Equities Portfolio
- Alliance Growth Portfolio
- Growth-Income Portfolio
MANAGED BY DAVIS SELECTED ADVISERS, L.P.
- Venture Value Portfolio
- Real Estate Portfolio
MANAGED BY FEDERATED INVESTORS
- Federated Value Portfolio
- Utility Portfolio
- Corporate Bond Portfolio
MANAGED BY FIRST AMERICAN ASSET MANAGEMENT
- Equity Income Portfolio
- Equity Index Portfolio
- Small Company Value Portfolio
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT/GOLDMAN
SACHS ASSET MANAGEMENT INTERNATIONAL
- Asset Allocation Portfolio
- Global Bond Portfolio
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT INC.
- International Diversified Equities Portfolio
- Worldwide High Income Portfolio
MANAGED BY PUTNAM INVESTMENT MANAGEMENT
- Putnam Growth Portfolio
- International Growth and Income Portfolio
- Emerging Markets Portfolio
MANAGED BY SUNAMERICA ASSET MANAGEMENT, INC.
- Aggressive Growth Portfolio
- "Dogs" of Wall Street Portfolio
- SunAmerica Balanced Portfolio
- High-Yield Bond Portfolio
- Cash Management Portfolio
YOU SHOULD READ THE PROSPECTUSES FOR THE TRUSTS CAREFULLY. THESE PROSPECTUSES
CONTAIN DETAILED INFORMATION ABOUT THE PORTFOLIOS, INCLUDING EACH PORTFOLIO'S
INVESTMENT OBJECTIVE AND RISK FACTORS.
FIXED ACCOUNT OPTIONS
The Contract offers fixed account options; the 1, 3 and 5 year fixed market
value adjustment ("MVA") accounts. In addition we have two Dollar Cost Averaging
("DCA") fixed accounts available under the contract.
The 1, 3 and 5 year MVA fixed account options and the 6 month and 1-year DCA
fixed accounts are not registered under the Securities Act of 1933 and are not
subject to other provisions of the Investment Company Act of 1940.
The 1, 3 and 5 year MVA fixed accounts pay interest at rates set and guaranteed
by Anchor National. Interest rates may differ from time to time and are set at
Anchor National's sole discretion. We will never credit less than a 3% annual
effective rate to any of the fixed investment options.
Each guarantee period may offer a different interest rate. Once established the
rates for specified payments do not change during the guarantee period. The
guarantee period is that period for which we credit the applicable rate (one,
three or five years).
There are three scenarios in which you may put money into the MVA 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 one fixed account
to one of the Variable Portfolios or another fixed account.
Each of these rates may differ from one another. Although once declared, the
applicable rate is guaranteed until the end of the calendar year in which the
guarantee period expires.
When a guarantee period ends, you may leave your money in the same fixed account
option. You may also reallocate your money to another fixed account option or to
the Variable Portfolios. If you want to reallocate your money to a different
fixed or variable investment option, you must contact us within 30 days after
the end of the current interest guarantee period and instruct us how to
reallocate the money.
9
<PAGE> 17
We do not contact you. If we do not hear from you, your money will remain in the
same fixed account option, where it will earn interest at the renewal rate then
in effect for the fixed account option.
The DCA fixed accounts also credit a fixed rate of interest for a predetermined
amount of time. The interest rate in the 1-year or 6-month DCA fixed account is
credited for one year or 6 months 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. See
DOLLAR COST AVERAGING (below) for more information.
See your Contract for details relating to the fixed account options.
MARKET VALUE ADJUSTMENT ("MVA")
If you take money out of the 1, 3, or 5 year MVA fixed investment options before
the end of the interest crediting or guarantee period, we may make an adjustment
to your Contract. We call this a market value adjustment or "MVA". This market
value adjustment reflects any difference in the interest rates between the time
you originally place your money in the fixed investment option and the time when
you withdraw or transfer that money. This adjustment can increase or decrease
your Contract value. However, the market value adjustment will never result in
your earning less than 3% in any particular guarantee period.
We calculate the market value adjustment by comparing the current interest rates
being offered by us for subsequent Purchase Payments made to the same fixed
account option and the interest rate earned in your current fixed investment
option.
Generally, if interest rates drop more than one half of a percent 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. Conversely, 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 adjustment is
positive, we add the adjustment to your withdrawal from the fixed investment
option.
Please see Appendix B for more information on how we calculate the Market Value
Adjustment.
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase you may transfer funds between the Variable
Portfolios and/or the fixed account options. Funds already in your Contract
cannot be transferred into the DCA fixed accounts. You must transfer at least
$100 and at least $100 must remain in any Portfolio after a transfer.
You may request transfers of your account value between the Variable Portfolios
and/or the fixed account options in writing or by telephone. We currently allow
15 free transfers per contract year. We charge $25 ($10 in Pennsylvania and
Texas) for each additional transfer in any contract year. Transfers resulting
from your participation in the DCA program count against your 15 free transfers
per contract year. However, transfers resulting from your participation in the
Automatic Asset Rebalancing program do not count against your 15 free transfers.
We accept transfer requests by telephone unless you tell us not to on your
contract enrollment form. Additionally, in the future you may be able to execute
transfers or other financial transactions over the internet.
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.
Upon implementation of internet account transfers we will have appropriate
procedures in place to provide reasonable assurance that the transactions
executed are genuine. Thus, we would not be responsible for any claim, loss or
expense from any error resulting from instructions received over the internet.
If we fail to follow our procedures, we may be liable for any losses due to
unauthorized or fraudulent instructions.
We can limit the number of transfers in any contract year for all existing and
new owners. We can also 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; or
- The underlying Portfolios inform us that they need to restrict the
purchase or redemption of the shares because of excessive trading or
because a specific transfer or group of transfers is deemed to have a
detrimental effect on share prices of affected underlying 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
10
<PAGE> 18
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 for you or appointed by 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.
For information regarding transfers during the Income Phase, SEE INCOME OPTIONS
ON PAGE 15.
We reserve the right to modify, suspend, waive or terminate these transfer
provisions at any time.
DOLLAR COST AVERAGING
The Dollar Cost Averaging ("DCA") program allows you to invest gradually in the
Variable Portfolios. Under the program you systematically transfer a set dollar
amount or percentage of investment option value from one Variable Portfolio or
the 1-year fixed account option (source accounts) to any other Variable
Portfolio(s). Transfers may be monthly or quarterly and count against your 15
free transfers per contract year. You may change the frequency at any time by
notifying us in writing. The minimum transfer amount under the DCA program is
$100, regardless of the source account.
We also offer a 6-month and a 1-year DCA fixed account exclusively to facilitate
DCA of your direct transfer and/or direct rollover purchase payments. If you
allocate a Purchase Payment into a DCA fixed account, we transfer all your money
allocated to that account into the Variable Portfolios over the selected 6-month
or 1-year period. You cannot change the option or the frequency of transfers
once selected.
Any single allocation of funds placed into the 6-month DCA fixed account must be
$600.00 or larger. We transfer all of your money out of the 6-month DCA fixed
account to the Variable Portfolio(s) you select by the end of the six month
period.
Transfers out of the 1-year DCA fixed account must be made quarterly or monthly.
If you select monthly transfers the minimum amount you must place in the account
is $1,200. If you select quarterly transfers the minimum amount you must place
in the account is $400. The amount of each transfer from the 1-year DCA fixed
account equals the total amount of money allocated to the account divided by the
frequency of transfers selected.
You may terminate your DCA program at any time. If money remains in the DCA
fixed accounts, we transfer the remaining money to the 1-year fixed account
option, unless we receive different instructions from you. Transfers resulting
from a termination of this program do not count towards your 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 Aggressive Growth Portfolio over six quarters.
You set up dollar cost averaging and purchase Accumulation Units at the
following values:
<TABLE>
<CAPTION>
- -------------------------------------------
ACCUMULATION UNITS
QUARTER UNIT 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.
ASSET ALLOCATION REBALANCING
Earnings in your Contract may cause the percentage of your investment in each
investment option to differ from your original allocations. The Automatic Asset
Rebalancing program addresses this situation. At your election, we periodically
rebalance your investments in the Variable Portfolios to return your allocations
to their original percentages. You request quarterly, semi annual or annual
rebalancing. Transfers resulting from your participation in this program do not
count against your 15 free transfers per year.
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<PAGE> 19
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want your initial Purchase Payment split between two
Portfolios. You want 50% in the Corporate Bond Portfolio and 50% in the
Growth Portfolio. Over the next calendar quarter, the bond market does very
well while the stock market performs poorly. At the end of the calendar
quarter, the Corporate Bond Portfolio now represents 60% of your holdings
because it has increased in value and the Growth Portfolio represents 40%
of your holdings. If you had chosen quarterly rebalancing, on the last day
of that quarter, we would sell some of your units in the Corporate Bond
Portfolio to bring its holdings back to 50% and use the money to buy more
units in the Growth Portfolio to increase those holdings to 50%.
VOTING RIGHTS
Anchor National is the legal owner of the Trusts' shares. However, when a
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 Portfolios become unavailable for investment, we may be required to
substitute shares of another 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 three ways:
- by receiving income payments during the Income Phase, SEE INCOME OPTIONS
ON PAGE 15; or
- by taking a loan in accordance with the provisions of your Plan and/or
this Contract; or
- subject to the restrictions described below, by making a partial or total
withdrawal.
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 account option. Such deferrals are limited to no longer than six months.
We may deduct a withdrawal charge applicable to any total or partial withdrawal,
and a market value adjustment if a total or partial withdrawal comes from the 1,
3 or 5 year MVA fixed account unless the withdrawal qualifies for withdrawal
charge exception. SEE INVESTMENT OPTIONS ON PAGE 8 AND EXPENSES ON PAGE 14.
We may establish certain minimum withdrawal amounts or require that a minimum
amount remain in a Portfolio upon withdrawal. Please consult the Annuity Service
Center for additional information. You must send a written withdrawal request.
Unless you provide us with different instructions, partial withdrawals will be
made pro rata from each Variable Portfolio and each fixed account option in
which you are invested.
WITHDRAWAL RESTRICTIONS
Withdrawals under Section 403(b) Contracts are subject to the limitations under
Section 403(b)(11) of the IRC and any applicable Plan document. Section 403(b)
provides that salary reduction contributions deposited and earnings credited on
any salary reduction contributions after December 31, 1988 may only be withdrawn
upon (1) death; (2) disability; (3) reaching age 59 1/2; (4) separation from
service; or (5) occurrence of a hardship. Amounts accumulated in one Section
403(b)(1) Contract may be transferred to another Section 403(b)(1) Contract or
Section 403(b)(7) custodial account without a penalty under the IRC. Amounts
accumulated in a Section 403(b)(7) custodial account and deposited in a
contract, will be subject to the same withdrawal restrictions as are applicable
to post-1988 salary reduction contributions. For more information on these
provisions. SEE TAXES ON PAGE 19.
If your Plan is subject to Title I of ERISA your withdrawal request must be
authorized by the Contractholder on your behalf. All withdrawal requests will
require the Contractholder's written authorization and written documentation
specifying the portion of your Contract value which is available for
distribution to you.
If your Plan is not subject to Title I of ERISA, you must certify to Anchor
National that, one of the events listed in the IRC has occurred (and provide
supporting information, if requested) and that Anchor National may rely on such
representation in granting such a withdrawal request. The above does not apply
to transfers to other Qualified investment alternatives. SEE TAXES ON PAGE 19.
You should consult your tax adviser as well as review the provisions of any
applicable Plan before requesting a withdrawal.
In addition to the restrictions noted above, a Plan may contain additional
withdrawal or transfer restrictions.
12
<PAGE> 20
Early withdrawals, as defined under Section 72(q) and 72(t) of the IRC, may be
subject to 10% penalty tax.
SYSTEMATIC WITHDRAWAL PROGRAM
If you elect and the terms of your TSA and the IRC allow, then we use money in
your contract to pay you monthly, quarterly, semiannual or annual payments
during the Accumulation Phase. Electronic transfer of these funds to your bank
account is also available. However, any such payments you elect to receive are
subject to all applicable withdrawal charges, market value adjustments, income
taxes, tax penalties and other withdrawal restrictions affecting your contract.
The minimum amount of each withdrawal is $50. There must be a 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. 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.
WITHDRAWAL CHARGES, MARKET VALUE ADJUSTMENTS, INCOME TAXES, TAX PENALTIES AND
CERTAIN WITHDRAWAL RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL YOU MAKE, INCLUDING
SYSTEMATIC WITHDRAWALS.
LOANS
If your Plan permits, you may take a loan from your Contract during the
Accumulation Period. You may apply for a loan under the contract by completing a
loan application available from Anchor National. Loans are secured by a portion
of your Contract value. Under certain Contracts, we may charge a one-time fee of
up to $75 to set up a loan. More information about loans, including interest
rates, restrictions, terms of repayment and applicable fees and charges is
available in the Certificate, Endorsement and the Loan Agreement as well as from
Anchor National's Annuity Service Center.
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.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
DEATH BENEFIT
- ----------------------------------------------------------------
- ----------------------------------------------------------------
If you die during the Accumulation Phase of your contract, we pay a death
benefit to your Beneficiary. The death benefit equals the greater of:
1. Total Purchase Payments minus total withdrawals (and any fees and
charges applicable to those withdrawals) at the time we receive
satisfactory proof of death, or;
2. Contract Value at the time we receive satisfactory proof of death.
We do not pay the death benefit if you die after you switch to the Income Phase.
However, if you die during the Income Phase, your Beneficiary receives any
remaining guaranteed income payments in accordance with the income option you
selected. SEE INCOME OPTIONS ON PAGE 15.
You name your Beneficiary. You may change the Beneficiary at any time, unless
you previously made an irrevocable Beneficiary designation. Plans subject to
Title 1 of ERISA may impose additional restrictions on beneficiary designation
which are discussed in the Beneficiary Designation Form.
We pay the death benefit when we receive satisfactory proof of death. We
consider the following satisfactory proof of death:
1. a certified copy of the death certificate; or
2. a certified copy of a decree of a court of competent jurisdiction as to
the finding of death; or
3. a written statement by a medical doctor who attended the deceased at the
time of death; or
4. any other proof satisfactory to us.
We may require additional proof before we pay the death benefit.
The death benefit payment must begin immediately upon receipt of all necessary
documents. In any event, the death benefit must be paid by December 31 of the
calendar year containing the fifth anniversary of the date of death unless the
Beneficiary elects to have it payable in the form of an income option. 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.
Payments must begin on or before December 31 of the calendar year immediately
following the year of your death.
If the Beneficiary is the Participant's surviving spouse, the surviving spouse
may elect to receive the entire death benefit in equal or substantially equal
payments over their life or over a period not longer than their life expectancy,
commencing at any date prior to the later of:
(i) December 31 of the calendar year immediately following the calendar
year in which the Participant died, and
(ii) December 31 of the calendar year in which the Participant would have
attained age 70 1/2.
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<PAGE> 21
- ----------------------------------------------------------------
- ----------------------------------------------------------------
EXPENSES
- ----------------------------------------------------------------
- ----------------------------------------------------------------
There are charges and expenses associated with your contract. These charges and
expenses reduce your investment return. We will not increase these fees and
charges under your contract. Some states may require that we charge less than
the amounts described below.
INSURANCE CHARGES
The amount of the insurance charge is 1.25% annually of the value of your
contract invested in the Variable Portfolios. We deduct this charge daily.
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
A withdrawal charge applies against each Purchase Payment you put into the
contract if you seek withdrawal of that payment prior to the end of the fifth or
sixth year it has been in the contract. The withdrawal charge equals a
percentage of the Purchase Payment you take out of the contract. The withdrawal
charge percentage declines over time for each Purchase Payment in the contract.
The applicable withdrawal charge schedule depends on your employment status at
the time your contract is issued.
RETIRED OR SEPARATED FROM SERVICE AT CONTRACT ISSUE
(SCHEDULE A)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Year 1 2 3 4 5 6
- ----------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
WITHDRAWAL CHARGE 6% 6% 5% 5% 4% 0%
- ----------------------------------------------------------------
</TABLE>
EMPLOYED AT CONTRACT ISSUE
(SCHEDULE B)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Year 1 2 3 4 5 6 7
- ----------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
WITHDRAWAL CHARGE 6% 6% 5% 5% 4% 4% 0%
- ----------------------------------------------------------------
</TABLE>
When calculating the withdrawal charge, we treat withdrawals as coming first
from the Purchase Payments that have been in your contract the longest. However,
for tax purposes, your withdrawals are considered earnings first, then Purchase
Payments.
Whenever possible, we deduct the withdrawal charge from the money remaining in
your contract. If you withdraw all of your contract value, we deduct any
applicable withdrawal charge from the amount withdrawn.
We calculate charges due on a total withdrawal on the day after we receive your
request and your contract. We return your contract value less any applicable
fees and charges. However, you will not receive the benefit of any available
free withdrawal amounts if you make a complete withdrawal of your contract.
EXCEPTIONS TO WITHDRAWAL CHARGE
A withdrawal charge is not applicable to withdrawals requested in the following
situations:
- Annuitization (except if under the Income Protector Program) SEE ANNUITY
INCOME OPTIONS ON PAGE 15;
- Death Benefits, SEE DEATH BENEFIT ON PAGE 13;
- After your 10th contract anniversary;
- If you are subject to withdrawal charge Schedule A, 15% of your Purchase
Payments each contract year;
- Disability occurring after contract issue;
- Hardship occurring after contract issue;
- Normal retirement occurring after contract issue;
- Separation from service occurring after contract issue.
Withdrawals made prior to age 59 1/2 may result in tax penalties. SEE TAXES ON
PAGE 19.
INVESTMENT CHARGES
Charges are deducted from your Variable Portfolios for the advisory and other
expenses of the Portfolios. THE FEE TABLES LOCATED ON PAGE 4 illustrate these
charges and expenses. For more detailed information on these investment charges,
refer to the prospectuses for the Trusts, enclosed or attached.
TRANSFER FEE
We currently permit 15 free transfers between investment options, every year. We
may charge you $25 for each transfer over 15 in any one year ($10 in
Pennsylvania and Texas). SEE INVESTMENT OPTIONS ON PAGE 8.
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 make 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 A 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.
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<PAGE> 22
REDUCTION OR ELIMINATION OF CHARGES AND EXPENSES, AND ADDITIONAL AMOUNTS
CREDITED
Sometimes sales of the contracts to groups of similarly situated individuals may
lower our administrative and/or sales expenses. We reserve the right to reduce
or waive certain charges and expenses when this type of sale occurs. In
addition, we may also credit additional interest to policies sold to such
groups. We determine which groups are eligible for such treatment. Some of the
criteria we evaluate to make a determination are: size of the group; amount of
expected Purchase Payments; relationship existing between us and prospective
purchaser; nature of the purchase; length of time a group of contracts is
expected to remain active; purpose of the purchase and whether that purpose
increases the likelihood that our expenses will be reduced; and/or any other
factors that we believe indicate that administrative and/or sales expenses may
be reduced.
Anchor National may make a similar determination regarding sales to its
employees, its 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, or sooner if the Company waives this two year
requirement. 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.
Generally, for Qualified contracts, the Annuity Date may be any day after you
reach age 59 1/2 but not later than age 75. However, you may be required to
begin taking minimum distributions by April 1 following the later of, the year
in which you turn age 70 1/2 or the calendar year in which you retire. SEE TAXES
ON PAGE 19.
For Non-qualified contracts, 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
the latest allowable date. Certain states may require your income payments to
start earlier.
Under Section 403(b) of the IRC, an income payment is considered a withdrawal.
Therefore, IRC withdrawal restrictions limit the time at which income payments
may begin. SEE ACCESS TO YOUR MONEY ON PAGE 12.
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.
INCOME OPTIONS
Currently, this contract offers 5 income options. If you elect to receive income
payments but do not select an option, your income payments will be made in
accordance with option 4 for a period of 10 years. For income payments selected
for joint lives, we pay according to option 3.
We base our calculation of income payments on the life of the Annuitant and the
annuity rates set forth in your contract. Under a TSA you, as the Participant,
are always the Annuitant. UNDER CERTAIN QUALIFIED CONTRACTS THE INCOME OPTION
YOU SELECT MAY NOT EXCEED YOUR LIFE EXPECTANCY.
OPTION 1 - LIFE INCOME ANNUITY
This option provides income payments for the life of the Annuitant. Income
payments stop when the Annuitant dies.
OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY
This option provides income payments for the life of the Annuitant and for the
life of another designated person. Upon the death of either person, we will
continue to make income payments during the lifetime of the survivor. Income
payments stop whenever the survivor dies.
OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY WITH
10 YEARS GUARANTEED
This option is similar to option 2 above, with an additional guarantee of income
payments for at least 10 years. If the Annuitant and the Survivor die before all
of the guaranteed income payments have been made, the remaining payments are
made to the Beneficiary under your contract.
OPTION 4 - LIFE ANNUITY WITH 10, 15 OR 20 YEARS GUARANTEED
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, 15 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 annuity income payments for a period ranging from 5 to 30
years. If the Annuitant dies before all of the guaranteed income payments are
made, the remaining income payments will be made to the Beneficiary for the rest
of the selected number of years.
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<PAGE> 23
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 Variable Portfolios 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. Further, if you are
invested in both fixed and variable investment options when income payments
begin, your payments will be fixed and variable. If income payments are fixed,
Anchor National guarantees the amount of each payment. If the income payments
are variable the amount is not guaranteed.
INCOME PAYMENTS
Your income payments will vary if you are invested in the Variable Portfolios
after the Annuity Date depending on four things:
- for life options, your age when payments begin, and;
- the value of your contract in the Variable Portfolios on the Annuity
Date, and;
- the 3.5% assumed investment rate used in the annuity table for the
contract, and;
- the performance of the Portfolios in which you are invested during the
time you receive income payments.
If you are invested in both the fixed account options and the Variable
Portfolios after the Annuity Date, the allocation of funds between the fixed and
variable options also impacts the amount of your annuity payments.
We make income payments on a monthly, quarterly, semi-annual or annual basis.
You instruct us to send you a check or to have the payments directly deposited
into your bank account. If state law allows, we distribute annuities with a
contract value of $5,000 or less in a lump sum. Also, if the selected income
option results in income payments of less than $50 per payment, we may decrease
the frequency of the payments, state law allowing.
TRANSFERS DURING THE INCOME PHASE
If you are invested in the Variable Portfolios during the Income Phase, one
transfer per month is permitted between the Variable Portfolios. 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 ("SAI") for a more detailed
discussion of the income options.
THE INCOME PROTECTOR
This feature provides a future "safety net" in the event that, when you choose
to begin receiving income payments, your contract has not performed within a
historically anticipated range. The Income Protector feature offers you the
ability to receive a guaranteed fixed minimum retirement income upon
annuitization. With the Income Protector you can know the level of minimum
income that will be available to you if, when you chose to retire, down markets
have negatively impacted your contract value. To annuitize using this feature
you must follow the appropriate steps set forth below.
The Income Protector provides three alternative levels of minimum retirement
income. The Base Income Protector is a standard feature of all Polaris Plus
contracts issued after December 10, 1998, if the feature is available for sale
in your state. There is no additional charge associated with the Base feature.
If elected, The Income Protector Plus and Income Protector Max alternatives can
provide increased levels of minimum guaranteed income. We charge a fee for each
of these alternatives. The amount of the fee and how to select an alternative
level of income protection, if that is appropriate for you, is described below.
HOW WE DETERMINE THE AMOUNT OF YOUR MINIMUM GUARANTEED INCOME
We base the amount of minimum income available to you if you annuitize using the
Income Protector upon a calculation we call the Income Benefit Base. At the time
your participation in the Income Protector program becomes effective, your
Income Benefit Base is equal to your Contract value. For the Base, participation
is effective on the date of issue of your Contract. For the Plus or Max
alternatives, participation is effective on either the date of issue of the
Contract (if elected) or at the contract anniversary following your election of
the Plus or Max alternative.
The Income Benefit Base is only a calculation. It does not represent a contract
value, nor does it guarantee performance of the Variable Portfolios in which you
invest.
Your Income Benefit Base increases if you make subsequent Purchase Payments and
decreases if you withdraw money from your Contract. The exact Income Benefit
Base calculation is equal to (a) plus (b) minus (c) where:
(a) is,
- for the first year of calculation, your contract value on the date
your participation in the program becomes effective, and;
- for each subsequent year of calculation, the Income Benefit Base on
the prior contract anniversary, and;
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<PAGE> 24
(b) is the sum of all subsequent Purchase Payments made into the contract
since the last contract anniversary, and;
(c) is all withdrawals and applicable fees and charges since the last
contract anniversary, in an amount proportionate to the amount by which
such withdrawals decreased your contract value.
For the Plus or Max alternatives, the Income Benefit Base accumulates at one of
the following annual growth rates from the date your election in the alternative
becomes effective through your Income Benefit Date (see below):
<TABLE>
<CAPTION>
- ----------------------------------------------------
Alternative Growth Rate
- ----------------------------------------------------
<S> <C>
The Income Protector Plus 3.25%
- ----------------------------------------------------
The Income Protector Max 6.50%
- ----------------------------------------------------
</TABLE>
The growth rates for the Plus or Max features cease on the contract anniversary
following the Annuitant's 90th birthday.
CHOOSING THE APPROPRIATE LEVEL OF PROTECTION FOR YOU
If you decide that you want the protection offered by the Income Protector Plus
or Max feature, you must elect the alternative by completing the Income
Protector Election Form available through our Annuity Service Center. You may
only elect one of the alternatives and you can never change your election once
made. Your Income Benefit Base will begin accumulating at the applicable growth
rate on the contract anniversary following our receipt of your completed
election form. In order to obtain the benefit of the Plus or Max alternative you
may not begin the Income Phase for at least seven years following your election
of the Plus or Max feature. Thus, you must make your election prior to the later
of:
- your 83rd birthday, or
- your 3rd contract anniversary.
STEP-UP OF YOUR INCOME BENEFIT BASE
If you have elected to pay for the higher levels of protection available through
the Income Protector Plus or Max, you may also have the opportunity to "Step-Up"
your Income Benefit Base. The Step-Up feature allows you to increase your Income
Benefit Base to the amount of your contract value on your contract anniversary.
You can only elect to Step-Up within the 30 days before your next contract
anniversary. A seven year waiting period required prior to electing annuity
payments through the Income Protector is restarted if you step-up your Income
Benefit Base. Thus, your last opportunity to step up is the later of :
- your 83rd birthday, or
- your 3rd contract anniversary.
You must complete the Income Protector Election Form to effect a Step-Up. The
form is available from our Annuity Service Center.
ELECTING TO RECEIVE INCOME PAYMENTS
You may elect to begin the Income Phase of your contract using the Income
Protector Program ONLY within the 30 days after the seventh or later contract
anniversary following the later of,
- the effective date of your Income Protector participation, or
- the contract anniversary of your most recent Step-Up.
The contract anniversary of, or prior to, your election to begin receiving
annuity payments is your Income Benefit Date. This is the date as of which we
calculate your Income Benefit Base to use in determining your guaranteed minimum
fixed retirement income. To arrive at the minimum guaranteed retirement income
available to you we apply the annuity rates stated in your Income Protector
Endorsement for the annuity option you select to your final Income Benefit Base.
You then choose if you would like to receive that income annually, quarterly or
monthly for the time guaranteed under your selected annuity option. Your final
Income Benefit Base is equal to (a) minus (b) where:
(a) is your Income Benefit Base as your Income Benefit Date, and;
(b) is any partial withdrawals of contract value and any charges applicable
to those withdrawals and any withdrawal charges otherwise applicable,
calculated as if you fully surrender your contract as of the Income
Benefit Date, and any applicable premium taxes.
The annuity options available when using the Income Protector Program to receive
your fixed retirement income are:
- Life Annuity with 10 Year Period Certain, or
- Joint and 100% Survivor Annuity with 20 Year Period Certain
At the time you elect to begin receiving annuity payments, we will calculate
your annual income using both your final Income Benefit Base and your contract
value. We will use the same income option for each calculation, however, the
annuity factors used to calculate your income under the Income Protector will be
different. You will receive whichever provides a greater stream of income. If
you annuitize using the Income Protector your income payments will be fixed in
amount. You are not required to use the Income Protector to receive income
payments. However, we will not refund fees paid for the Income Protector if you
annuitize under the general provisions of your contract. YOU MAY NEVER NEED TO
RELY UPON THE INCOME PROTECTOR, IF YOUR CONTRACT
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<PAGE> 25
PERFORMS WITHIN A HISTORICALLY ANTICIPATED RANGE. HOWEVER, PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS.
FEES ASSOCIATED WITH THE INCOME PROTECTOR
The Base Income Protector is a standard feature of your Contract at no extra
charge. If you elect the Income Protector Plus or Max, we charge a fee, as
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------
Fee As a % of
Your Income
Alternative Benefit Base
- -------------------------------------------------------
<S> <C>
Income Protector Plus .15%
- -------------------------------------------------------
Income Protector Max .30%
- -------------------------------------------------------
</TABLE>
Since the Income Benefit Base is only a calculation and does not provide a
Contract value, we deduct the fee from your actual Contract value beginning on
the Contract anniversary on which your participation in the program becomes
effective.
After a Step-Up, the fee for the Income Protector Max or Plus will be based on
your Stepped-Up Income Benefit Base, and will be deducted from your contract
value beginning on the effective date of the step-up.
If your Contract is issued with the Income Protector program, and you elect the
Plus or Max alternative (either at Contract issue or some later date) we begin
deducting the annual fee for the Plus or Max alternative on the Contract
anniversary when your alternative election becomes effective. If your Contract
is not issued with the Income Protector program and you elect the Plus or Max
alternative at some later date, we begin deducting the annual fee on the
Contract anniversary following the date on which your participation in the
program becomes effective.
It is important to note that once you elect either alternative, you may not
cancel your election. We will deduct the charge from your Contract value on
every Contract anniversary up to and including your Income Benefit Date.
Additionally, we deduct the full annual fee from any full surrender of your
Contract requested prior to your Contract anniversary based on the Income
Benefit Base at time of surrender.
NOTE TO QUALIFIED CONTRACT HOLDERS
Qualified contracts generally require that you select an income option which
does not exceed your life expectancy. That restriction, if it applies to you,
may limit the benefit of the Income Protector program. As discussed above, in
order to utilize the Income Protector you must annuitize under one of two income
options. If those income options exceed your life expectancy you may be
prohibited from receiving your guaranteed fixed income under the program. If you
own a Qualified contract to which this restriction applies and you elect the
Income Protector Max or Plus, you may pay for this guarantee and not be able to
realize the benefit.
Generally,
- for the Life Annuity with 10 Year Period Certain, you must annuitize
before age 79, and
- for the Joint and 100% Survivor Annuity with 20 Year Period Certain, both
Annuitants must be 70 or younger or one of the annuitants must be 65 or
younger upon annuitization. Other age combinations may be available.
You may wish to consult your tax advisor for information concerning your
particular circumstances.
HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR
This table assumes a $100,000 initial investment in a Non-qualified contract
with no withdrawals, additional payments or premium taxes, no step-up; and the
election of optional Income Protector alternatives at contract issue.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
INCOME
IF AT ISSUE MINIMUM ANNUAL INCOME IF YOU ANNUITIZE ON CONTRACT ANNIVERSARY PROTECTOR
YOU ARE 7 10 15 20 BENEFIT LEVEL
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Male 6,108 6,672 7,716 8,832 Base
age 60* 8,046 9,633 12,971 17,313 Plus
9,995 13,132 20,647 32,178 Max
- --------------------------------------------------------------------------------------------------------
Female 5,388 5,880 6,900 8,112 Base
age 60* 7,145 8,542 11,652 15,948 Plus
8,876 11,646 18,548 29,641 Max
- --------------------------------------------------------------------------------------------------------
Joint** 4,716 5,028 5,544 5,928 Base
Male -- 60 6,290 7,353 9,442 11,785 Plus
Female -- 60 7,813 10,024 15,030 21,903 Max
- --------------------------------------------------------------------------------------------------------
</TABLE>
* 10 year and life
** Joint and 100% survivor with 20 year certain
The Income Protector may not be available in your state. Please consult your
financial adviser.
18
<PAGE> 26
- ----------------------------------------------------------------
- ----------------------------------------------------------------
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 CAN NOT GUARANTEE THAT THE
INFORMATION CONTAINED HEREIN IS COMPLETE AND/OR ACCURATE.
ANNUITY CONTRACTS IN GENERAL
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: IRAs,
TSAs, H.R. 10 Plans (referred to as Keogh Plans) as well as 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.
The IRC provides for special rules regarding the tax treatment of annuity
contracts. Generally, taxes on the earnings in your annuity contract are
deferred until you take the money out. Different rules apply depending on how
you take the money out and whether your contract is Qualified or Non-qualified.
If you do not purchase your contract under a pension plan, a specially sponsored
employer program or an individual retirement account, your contract is referred
to as a Non-qualified contract. A Non-qualified contract 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.
TAX TREATMENT OF DISTRIBUTIONS -
QUALIFIED CONTRACTS
Generally, you have not paid any taxes on the Purchase Payments used to buy a
Qualified contract. Any amount of money you take out as a withdrawal or as
income payments is taxable income. The IRC further provides for a 10% penalty
tax on any withdrawal or income payment paid to you other than in conjunction
with the following circumstances: (1) after reaching age 59 1/2; (2) when paid
to your Beneficiary after you die; (3) after you become disabled (as defined in
the IRC); (4) in a series of substantially equal installments made for your life
or for the joint lives of you and your Beneficiary; (5) to the extent such
withdrawals do not exceed limitations set by the IRC for amounts paid during the
taxable year for medical care; (6) to fund higher education expenses (as defined
in IRC); (7) to fund certain first-time home purchase expenses; and, except in
the case of an IRA; (8) when you separate from service after attaining age 55;
and (9) when paid to an alternate payee pursuant to a qualified domestic
relations order.
SECTION 403(b) PLANS
Section 403(b) of the IRC permits the purchase of TSA by public schools and
certain charitable, educational and scientific organizations described in
Section 501(c)(3) of the IRC. A qualifying Employer may make contributions to
the Contract for the benefit of an employee who is a Participant, and/or the
Participant may enter into a salary reduction agreement with the Participant's
Employer authorizing the Employer to contribute a percentage of the
Participant's salary to the Section 403(b) contract. All contributions made to a
Section 403(b) contract are subject to the limitations described in IRC Sections
402(g) regarding elective deferral amounts, 403(b)(2) regarding the maximum
exclusion allowance, and 415(a)(2) and 415(c) regarding the limitations on
annual additions. Most contributions to a 403(b) contract are not includible in
the Participant's gross income until the Participant receives distributions from
the Contract.
A Participant who makes a withdrawal from a Section 403(b) contract must declare
that amount in current income, therefore it is taxed at ordinary income tax
rates. In addition, Section 403(b)(11) of the IRC requires that salary reduction
contributions made, and/or earnings credited on any salary reduction
contributions after December 31, 1988, may not be withdrawn from the
Participant's Section 403(b) contract prior to an "eligible event", such as the
Participant having (1) attained age 59 1/2, (2) separated from service, (3)
become disabled (as defined by the IRC), (4) died or (5) incurred a hardship (as
defined by the IRC). Hardship withdrawals may not include any earnings credited
after December 31, 1988 attributable to salary reduction contributions. The
Internal Revenue Service has decided in Revenue Ruling 90-24 that amounts may be
transferred between Section 403(b) investment vehicles as long as the
transferred funds retain withdrawal restrictions at least as restrictive as that
of the transferring investment vehicle. Such transferred amounts are considered
withdrawals under the Contract and will be subject to withdrawal charges, if
applicable. (SEE EXPENSES ON PAGE 14 for more complete information).
Section 403(b)(8) of the IRC permits tax-free rollovers from Section 403(b)
contracts to IRAs or other Section 403(b) contracts under certain circumstances.
Qualified distributions eligible for rollover treatment may be subject to a 20%
federal tax withholding depending on whether or not the distribution is paid
directly to an eligible retirement plan.
The IRC sets forth additional restrictions governing Section 403(b) contracts on
such items as transferability, distributions, nondiscrimination and withdrawals.
Competent
19
<PAGE> 27
tax advice should be obtained as to the tax treatment and suitability of
purchasing a Contract.
TAX TREATMENT OF DISTRIBUTIONS - NON-QUALIFIED CONTRACTS
If you make a withdrawal from a Non-qualified contract, the IRC treats such a
withdrawal as first coming from the earnings and then as coming from your
Purchase Payments. For annuity payments, any portion of each payment that is
considered a return of your Purchase Payment will not be taxed. Withdrawn
earnings are treated as income to you and are taxable. The IRC provides for a
10% tax penalty on any earnings that are withdrawn other than in conjunction
with the following circumstances: (1) after reaching age 59 1/2; (2) when paid
to your Beneficiary after you die; (3) after you become disabled (as defined in
the IRC); (4) in a series of substantially equal installments made for your life
or for the joint lives of you and you Beneficiary; (5) under an immediate
annuity; or (6) which come from Purchase Payments made prior to August 14, 1982.
MINIMUM DISTRIBUTIONS
If your Contract is issued under a Section 403(b) or other Qualified Plan,
generally the IRS requires that you begin taking annual minimum distributions
from qualified annuity contracts by April 1 of the calendar year following the
later of (1) the calendar year in which the Participant attains age 70 1/2 or
(2) the calendar year in which the Participant retires. Failure to satisfy the
minimum distribution requirements may result in a federal tax penalty. You
should consult your tax adviser for more information.
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity. We believe that each 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 an 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
- ----------------------------------------------------------------
- ----------------------------------------------------------------
We advertise the Cash Management Portfolio's yield and effective yield. In
addition, the other Variable Portfolios advertise total return, gross yield and
yield-to-maturity. These figures represent past performance of the Portfolios.
These performance numbers do not indicate future results.
When we advertise performance for periods prior to the date the contracts were
first issued, we derive the figures from the performance of the corresponding
Portfolios for the Trusts, if available. We modify these numbers to reflect
charges and expenses as if the contract was in existence during the period
stated in the advertisement. Figures calculated in this manner do not represent
actual historic performance of the particular Portfolio. Consult the SAI for
more detailed information regarding the calculation of performance data.
The performance of each Portfolio may also be measured against unmanaged market
indices. The indices we use include but are not limited to the Dow Jones
Industrial Average, the Standard & Poor's 500, the Russell 1000 Growth Index,
the Morgan Stanley Capital International Europe, Australia and Far East Index
("EAFE") and the Morgan Stanley Capital International World Index. We may
compare the Portfolios' performance to that of other variable annuities with
similar objectives and policies as reported by independent ranking agencies such
as Morningstar, Inc., Lipper Analytical Services, Inc. or Variable Annuity
Research & Data Service ("VARDS").
Anchor National may also advertise the rating and other information assigned to
it by independent industry ratings organizations. Some of those organizations
are A.M. Best Company ("A.M. Best"), Moody's Investor's Service ("Moody's"),
Standard & Poor's Insurance Rating Services ("S&P"), and Duff & Phelps. A.M.
Best's and Moody's ratings reflect their current opinion of our financial
strength and performance in comparison to others in the life and health
insurance industry. S&P's and Duff & Phelps' ratings measure the ability of an
insurance company to meet its obligations under insurance policies it issues.
These two ratings do not measure the insurer's ability to meet non-policy
obligations. Ratings in general do not relate to the performance of the Variable
Portfolios.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
OTHER INFORMATION
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Anchor National is a stock life insurance company originally organized under the
laws of the state of California in April 1965. On January 1, 1996, Anchor
National redomesticated under the laws of the state of Arizona.
20
<PAGE> 28
Anchor National and its affiliates, SunAmerica Life Insurance Company, First
SunAmerica Life Insurance Company, CalAmerica Life Insurance Company, SunAmerica
National Life Insurance Company, SunAmerica Asset Management Company, Imperial
Premium Finance, Inc., Resources Trust Company, and five broker-dealers,
specialize in retirement savings and investment products and services. Business
focuses include, fixed and variable annuities, mutual funds, premium finance,
broker-dealer services and trust administration services.
THE SEPARATE ACCOUNT
Anchor National established a separate account, Variable Annuity Account Seven
("Separate Account"), under Arizona law on August 28, 1998. The Separate Account
is registered with the SEC as a unit investment trust under the Investment
Company Act of 1940, as amended.
Anchor National owns the assets in the Separate Account. However, the assets in
the Separate Account are not chargeable with liabilities arising out of any
other business conducted by Anchor National. Income gains and losses (realized
and unrealized) resulting from assets in the Separate Account are credited to or
charged against the Separate Account without regard to other income, gains or
losses of Anchor National.
THE GENERAL ACCOUNT
Money allocated to the fixed account options goes into Anchor National's general
account. The general account consists of all of Anchor National's assets other
than assets attributable to a separate account. All of the assets in the general
account are chargeable with the claims of any Anchor National contract holders
as well as all of its creditors. The general account funds are invested as
permitted under state insurance laws.
DISTRIBUTION OF THE CONTRACT
Registered representatives of broker-dealers sell the contract. We pay
commissions to these representatives for the sale of the contracts. We do not
expect the total commissions to exceed 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, is registered as a broker-dealer under the
Exchange Act of 1934 and is a member of the National Association of Securities
Dealers, Inc.
ADMINISTRATION
We are responsible for the administrative servicing of your contract. Please
contact our Annuity Service Center at 1-877-999-9205, if you have any comment,
question or service request.
We send out transaction confirmations and quarterly statements. It is your
responsibility to review these documents carefully and notify us of any
inaccuracies immediately. We investigate all inquiries. To the extent that we
believe we made an error, we retroactively adjust your contract, provided you
notify us within 30 days of receiving the transaction confirmation or quarterly
statement. Any other adjustments we deem warranted are made as of the time we
receive notice of the error.
YEAR 2000
We rely significantly on computer systems and applications in our daily
operations. Many of our systems are not presently year 2000 compliant, which
means that because they have historically used only two digits to identify the
year in a date, they will fail to distinguish dates in the "2000s" from dates in
the "1900s." Anchor National's business, financial condition and results of
operations could be materially and adversely affected by the failure of our
systems and applications (and those operated by third parties interfacing with
our systems and applications) to properly operate or manage these dates.
Anchor National has a coordinated plan to repair or replace these noncompliant
systems and to obtain similar assurances from third parties interfacing with our
systems and applications. In fiscal 1997, the Company's parent recorded on its
books, a $15.0 million provision for estimated programming costs to repair
noncompliant systems, of which $6.2 million was allocated to us. We are making
expenditures which we expect will ultimately total $5.0 million to replace
certain other noncompliant systems. Total expenditures relating to the repair of
noncompliant systems will be capitalized by the Company's parent as software
costs and will be paid for over future periods. Both phases of the project are
progressing according to plan and we expect to substantially complete them by
the end of calendar 1998. We will test both the repaired and replacement systems
during calendar 1999.
In addition, we distributed a year 2000 questionnaire to our significant
suppliers, distributors, financial institutions, lessors and others we do
business with to evaluate their year 2000 compliance plans and state of
readiness and to determine how our systems and applications may be affected by
their failure to solve their own year 2000 issues. To date, however, we have
only received preliminary feedback from such parties
21
<PAGE> 29
and have not independently confirmed any information received from other parties
with respect to the year 2000 issues. Therefore, we cannot assure that such
other parties will complete their year 2000 conversions in a timely fashion or
will not suffer a year 2000 business disruption that may adversely affect our
financial condition and results of operations.
Because we expect to complete our year 2000 conversion prior to any potential
disruption to our business, we have not developed a comprehensive year 2000
contingency plan. Anchor National closely monitors the progression of its plan
for compliance, and if necessary, would devote additional resources to assure
the timely completion of our year 2000 plan. If we determine that our business
is at material risk of disruption due to the year 2000 issue or anticipate that
we will not complete our year 2000 conversion in a timely fashion, we will work
to enhance our contingency plans.
The above statements are forward-looking. The costs of our year 2000 conversion,
the date which we have set to complete such conversion and the possible risks
associated with the year 2000 issue are based on our current estimates and are
subject to various uncertainties that could cause the actual results to differ
materially from our expectations. Such uncertainties include, among others, our
success in identifying systems and applications that are not year 2000
compliant, the nature and amount of programming required to upgrade or replace
each of the affected systems and applications, the availability of qualified
personnel, consultants and other resources, and the success of the year 2000
conversion efforts of others.
LEGAL PROCEEDINGS
There are no pending legal proceeding affecting the Separate Account. Anchor
National and its subsidiaries engage in various kinds of routine litigation. In
management's opinion, these matters are not of material importance to their
respective total assets nor are they material with respect to the Separate
Account.
CUSTODIAN
State Street Bank and Trust Company, 255 Franklin Street, Boston, Massachusetts
02110, serves as the custodian of the assets of the Separate Account. Anchor
National pays State Street Bank for services provided, based on a schedule of
fees.
ADDITIONAL INFORMATION
Anchor National is subject to the informational requirements of the Securities
and Exchange Act of 1934 (as amended). We file reports and other information
with the SEC to meet those requirements. You can inspect and copy this
information at SEC public facilities at the following locations:
WASHINGTON, DISTRICT OF COLUMBIA
450 Fifth Street, N.W., Room 1024
Washington, D.C. 20549
CHICAGO, ILLINOIS
500 West Madison Street
Chicago, IL 60661
NEW YORK, NEW YORK
7 World Trade Center, 13th Fl.
New York, NY 10048
To obtain copies by mail, contact the Washington, D.C. location. After you pay
the fees as prescribed by the rules and regulations of the SEC, the requested
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
statement and its exhibits. For further information regarding the Separate
Account, Anchor National and its general account, the Portfolios and the
contract, please refer to the registration statement and its exhibits.
The SEC also maintains a website (http://www.sec.gov) that contains the SAI,
materials incorporated by reference and other information filed electronically
with the SEC by Anchor National.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
- ----------------------------------------------------------------
- ----------------------------------------------------------------
<TABLE>
<S> <C>
Separate Account.............................. 3
General Account............................... 3
Performance Data.............................. 4
Annuity Payments.............................. 8
Annuity Unit Values........................... 8
Taxes......................................... 11
Distribution of Contracts..................... 14
Financial Statements.......................... 15
</TABLE>
22
<PAGE> 30
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX A - PREMIUM TAXES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Premium taxes vary according to the state and are subject to change without
notice. In many states, there is no tax at all. Listed below are the current
premium tax rates in those states that assess a premium tax. For current
information, you should consult your tax adviser.
<TABLE>
<CAPTION>
QUALIFIED NON-QUALIFIED
STATE CONTRACT CONTRACT
<S> <C> <C>
========================================================================================
California .50% 2.35%
- ----------------------------------------------------------------------------------------
District of Columbia 2.25% 2.25%
- ----------------------------------------------------------------------------------------
Kentucky 2% 2%
- ----------------------------------------------------------------------------------------
Maine 0% 2%
- ----------------------------------------------------------------------------------------
Nevada 0% 3.5%
- ----------------------------------------------------------------------------------------
South Dakota 0% 1.25%
- ----------------------------------------------------------------------------------------
West Virginia 1% 1%
- ----------------------------------------------------------------------------------------
Wyoming 0% 1%
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
A-1
<PAGE> 31
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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:
(N/12)
[(1+I/(1+J+0.005)] - 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
N is the number of full months remaining in the term you initially
agreed to leave your money in the fixed investment option.
EXAMPLES OF THE MARKET VALUE ADJUSTMENT
The examples below assume the following:
(1) You made an initial Purchase Payment of $10,000 and allocated it to the
10-year fixed investment option at a rate of 7%;
(2) You make a partial withdrawal of $4,000 when 1 1/2 years (18 months)
remain in the 10-year term you initially agreed to leave your money in
the fixed investment option (N=18); and
(3) You have not made any other transfers, additional Purchase Payments, or
withdrawals.
No withdrawal charges are reflected because your Purchase Payment has been in
the contract for seven full years. If a withdrawal charge applies, it is
deducted before the market value adjustment. The market value adjustment is
assessed on the amount withdrawn less any withdrawal charges.
NEGATIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 1-year fixed investment option is 7.5% and the 3-year
fixed investment option is 8.5%. By linear interpolation, the interest rate for
the remaining 2 years (1 1/2 years rounded up to the next full year) in the
contract is calculated to be 8%.
(N/12)
The market value adjustment factor is = [(1+I)/(1+J+0.005)] - 1
(18/12)
= [(1.07)/(1.08+0.005)] - 1
(1.5)
= (0.986175) - 1
= 0.979335 - 1
= - 0.020665
The requested withdrawal amount is multiplied by the market value adjustment
factor to determine the market value adjustment:
$4,000 X (- 0.020665) = -$82.66
$82.66 represents the market value adjustment that will be deducted from the
money remaining in the 10-year fixed investment option.
POSITIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for a new
Purchase Payments in the 1-year fixed investment option is 5.5% and the 3-year
fixed investment option is 6.5%. By linear interpolation, the interest rate for
the remaining 2 years (1 1/2 years rounded up to the next full year) in the
contract is calculated to be 6%.
(N/12)
The market value adjustment factor is = [(1+I/(1+J+0.005)] - 1
(18/12)
= [(1.07)/(1.06+0.005)] - 1
(1.5)
= (1.004695) - 1
= 1.007051 - 1
= + 0.007051
The requested withdrawal amount is multiplied by the market value adjustment
factor to determine the market value adjustment:
$4,000 x (+0.007051) = +$28.20
$28.20 represents the market value adjustment that would be added to your
withdrawal.
B-1
<PAGE> 32
- --------------------------------------------------------------------------------
Please forward a copy (without charge) of the Polaris Plus Variable Annuity
Statement of Additional Information to:
(Please print or type and fill in all information.)
------------------------------------------------------------------------
Name
------------------------------------------------------------------------
Address
------------------------------------------------------------------------
City/State/Zip
<TABLE>
<S> <C> <C> <C>
Date: ------------------------------------ Signed: ---------------------------------------
</TABLE>
Return to: Anchor National Life Insurance Company, Annuity Service Center,
P.O. Box 52499, Los Angeles, California 90054-0299
- --------------------------------------------------------------------------------
<PAGE> 33
STATEMENT OF ADDITIONAL INFORMATION
GROUP & INDIVIDUAL
FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACTS
ISSUED BY
ANCHOR NATIONAL LIFE INSURANCE COMPANY
IN CONNECTION WITH
VARIABLE ANNUITY ACCOUNT SEVEN
This Statement of Additional Information is not a prospectus; it should be read
with the prospectus relating to the annuity contracts described above. A copy of
the prospectus may be obtained without charge by calling (877)999-9205 or
writing us at:
ANCHOR NATIONAL LIFE INSURANCE COMPANY
ANNUITY SERVICE CENTER
P.O. BOX 54299
LOS ANGELES, CALIFORNIA 90054-0299
December 10, 1998
<PAGE> 34
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Separate Account........................................... 3
General Account............................................ 3
Performance Data .......................................... 4
Annuity Payments........................................... 8
Annuity Unit Values........................................ 8
Taxes...................................................... 11
Distribution of Contracts.................................. 14
Financial Statements....................................... 15
</TABLE>
-2-
<PAGE> 35
SEPARATE ACCOUNT
Variable Annuity Account Seven (the "Separate Account") was originally
established by Anchor National Life Insurance Company (the "Company") on August
28, 1998, 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 Securities
and Exchange Commission (the "SEC") as a unit investment trust under the
Investment Company Act of 1940. This registration does not involve supervision
of the management of the Separate Account or the Company by the SEC.
The assets of the Separate Account are the property of the Company.
However, the assets of the Separate Account, equal to its reserves and other
contract liabilities, are not chargeable with liabilities arising out of any
other business the Company may conduct. Income, gains, and losses, whether or
not realized, from assets allocated to the Separate Account are credited to or
charged against the Separate Account without regard to other income, gains, or
losses of the Company.
The Separate Account is divided into Portfolios, with the assets of each
Portfolio invested in the shares of one of the underlying funds. The Company
does not guarantee the investment performance of the Separate Account, its
Portfolios or the underlying funds. Values allocated to the Separate Account and
the amount of variable annuity payments will vary with the values of shares of
the underlying funds, and are also reduced by contract charges.
The basic objective of a variable annuity contract is to provide
variable annuity payments which will be to some degree responsive to changes in
the economic environment, including inflationary forces and changes in rates of
return available from various types of investments. The contract is designed to
seek to accomplish this objective by providing that variable annuity payments
will reflect the investment performance of the Separate Account with respect to
amounts allocated to it both before and after the Annuity Date. Since the
Separate Account is always fully invested in shares of the underlying funds, its
investment performance reflects the investment performance of those entities.
The values of such shares held by the Separate Account fluctuate and are subject
to the risks of changing economic conditions as well as the risk inherent in the
ability of the underlying funds' managements to make necessary changes in their
Portfolios to anticipate changes in economic conditions. Therefore, the owner
bears the entire investment risk that the basic objectives of the contract may
not be realized, and that the adverse effects of inflation may not be lessened.
There can be no assurance that the aggregate amount of variable annuity payments
will equal or exceed the Purchase Payments made with respect to a particular
account for the reasons described above, or because of the premature death of an
Annuitant.
Another important feature of the contract related to its basic objective
is the Company's promise that the dollar amount of variable annuity payments
made during the lifetime of the Annuitant will not be adversely affected by the
actual mortality experience of the Company or by the actual expenses incurred by
the Company in excess of expense deductions provided for in the contract
(although the Company does not guarantee the amounts of the variable annuity
payments).
GENERAL ACCOUNT
The general account is made up of all of the general assets of the
Company other than those
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<PAGE> 36
allocated to the Separate Account or any other segregated asset account of the
Company. A Purchase Payment may be allocated to the 1, 3, or 5 year market value
adjustment fixed account options and the DCA fixed account options available
in connection with the general account, as elected by the owner at the time of
purchasing a contract or when making a subsequent Purchase Payment. Assets
supporting amounts allocated to fixed investment options become part of the
Company's general account assets and are available to fund the claims of all
classes of customers of the Company, as well as of its creditors. Accordingly,
all of the Company's assets held in the general account will be available to
fund the Company's obligations under the contracts as well as such other claims.
The Company will invest the assets of the general account in the manner
chosen by the Company and allowed by applicable state laws regarding the nature
and quality of investments that may be made by life insurance companies and the
percentage of their assets that may be committed to any particular type of
investment. In general, these laws permit investments, within specified limits
and subject to certain qualifications, in federal, state and municipal
obligations, corporate bonds, preferred and common stocks, real estate
mortgages, real estate and certain other investments.
PERFORMANCE DATA
PERFORMANCE INFORMATION
From time to time the Separate Account may advertise the Cash Management
Portfolio's "yield" and "effective yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of the Cash Management Portfolio refers to the net income generated for
a contract funded by an investment in the Portfolio (which invests in shares of
the Cash Management Portfolio of SunAmerica Series Trust) over a seven-day
period (which period will be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the
Portfolio is assumed to be reinvested at the end of each seven day period. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. Neither the yield nor the
effective yield takes into consideration the effect of any capital changes that
might have occurred during the seven day period, nor do they reflect the impact
of premium taxes or any withdrawal charges. The impact of other recurring
charges (including the mortality and expense risk charge, distribution expense
charge and contract maintenance fee) on both yield figures is, however,
reflected in them to the same extent it would affect the yield (or effective
yield) for a contract of average size.
In addition, the Separate Account may advertise "total return" data for
its other Portfolios. Like the yield figures described above, total return
figures are based on historical data and are not intended to indicate future
performance. The "total return" is a computed rate of return that, when
compounded annually over a stated period of time and applied to a hypothetical
initial investment in a Portfolio made at the beginning of the period, will
produce the same contract value at the end of the period that the hypothetical
investment would have produced over the same period (assuming a complete
redemption of the contract at the end of the period). Recurring contract charges
are reflected in the total return figures in the same manner as they are
reflected in the yield data for contracts funded through the Cash Management
Portfolio.
The Accumulation Units of the Separate Account are new and therefore
have no performance history. However, the underlying Funds have been in
existence for some time and consequently have investment performance history. In
order to demonstrate how the historical investment experience of the Funds
affects Accumulation Unit values, the following performance information was
developed. The information is based upon the historical experience of the Funds
and is for the periods shown.
ACTUAL PERFORMANCE WILL VARY AND THE HYPOTHETICAL RESULTS SHOWN ARE NOT
NECESSARILY REPRESENTATIVE OF FUTURE RESULTS. Performance for periods ending
after those shown may vary substantially from the examples shown below. Chart 1
shows the performance of the Accumulation Units calculated for a specified
period of time assuming an initial Purchase Payment of $1,000 allocated to each
Portfolio and a deduction of all charges and deductions (see "Expenses" in the
prospectus). Chart 2 is identical to Chart 1 except that it does not reflect the
deduction of the withdrawal charge. The performance figures in both charts also
reflect the actual fees and expenses paid by each Portfolio.
HISTORICAL PERFORMANCE FOR PERIODS ENDING NOVEMBER 30, 1998:
CHART 1
AVERAGE ANNUAL TOTAL RETURN (AFTER REDEMPTION)
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS OR SINCE INCEPTION DATE*
INCEPTION
<S> <C> <C> <C> <C>
ANCHOR SERIES TRUST
Capital Appreciation Portfolio 5.88% 16.18% 18.05% 3-13-87
Growth Portfolio 14.45% 17.62% 15.87% 8-13-84
Government and Quality Bond Portfolio 2.23% 5.41% 7.89% 8-13-84
SUNAMERICA SERIES TRUST
Global Equities Portfolio 7.91% 11.88% 11.77% 2-9-93
Alliance Growth Portfolio 28.15% 24.88% 22.71% 2-9-93
Growth-Income Portfolio 14.38% 19.57% 17.61% 2-9-93
Venture Value Portfolio 3.95% N/A 22.85% 10-31-94
Real Estate Portfolio -20.10% N/A -5.09% 6-2-97
Federated Value Portfolio 10.75% N/A 19.12% 6-3-96
Utility Portfolio 8.49% N/A 14.97% 6-3-96
Corporate Bond Portfolio -0.81% 4.92% 4.86% 7-1-93
Equity Income Portfolio N/A N/A N/A N/A
Equity Index Portfolio N/A N/A N/A N/A
Small Company Value Portfolio N/A N/A N/A N/A
Asset Allocation Portfolio -4.42% 11.81% 11.53% 7-1-93
Global Bond Portfolio 4.35% 6.62% 6.69% 7-1-93
International Diversified Equities Portfolio 10.78% N/A 7.17% 10-31-94
Worldwide High Income Portfolio -20.78% N/A 7.27% 10-31-94
Putnam Growth Portfolio 14.96% 17.45% 14.71% 2-9-93
International Growth and Income Portfolio 2.24% N/A 4.02% 6-2-97
Emerging Markets Portfolio -28.75% N/A -32.32% 6-2-97
Aggressive Growth Portfolio -2.64% N/A 5.59% 6-3-96
"Dogs" of Wall Street Portfolio N/A N/A -11.42% 4-1-98
SunAmerica Balanced Portfolio 12.30% N/A 18.30% 6-3-96
High-Yield Bond Portfolio -8.49% 5.00% 6.06% 2-9-93
</TABLE>
* For portfolios with six years of performance withdrawal charge Schedule B was
used. Under withdrawal charge Schedule A no surrender charge would apply.
Year six is the only year in which the schedules differ.
CASH MANAGEMENT PORTFOLIO
The annualized current yield and the effective yield for the Cash
Management Portfolio for the 7 day period ending November 30, 1998, were 3.28%
and 3.33%, respectively.
CHART 2
AVERAGE ANNUAL TOTAL RETURN (BEFORE REDEMPTION)
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS OR SINCE INCEPTION DATE
INCEPTION
<S> <C> <C> <C> <C>
ANCHOR SERIES TRUST
Capital Appreciation Portfolio 11.88% 16.62% 18.05% 3-13-87
Growth Portfolio 20.45% 18.04% 15.87% 8-13-84
Government and Quality Bond Portfolio 8.23% 6.05% 7.89% 8-13-84
SUNAMERICA SERIES TRUST
Global Equities Portfolio 13.91% 12.38% 12.17% 2-9-93
Alliance Growth Portfolio 34.15% 25.21% 22.96% 2-9-93
Growth-Income Portfolio 20.38% 19.96% 17.92% 2-9-93
Venture Value Portfolio 9.95% N/A 23.36% 10-31-94
Real Estate Portfolio -14.10% N/A -1.02% 6-2-97
Federated Value Portfolio 16.75% N/A 20.65% 6-3-96
Utility Portfolio 14.49% N/A 16.59% 6-3-96
Corporate Bond Portfolio 5.19% 5.58% 5.45% 7-1-93
Equity Income Portfolio N/A N/A N/A N/A
Equity Index Portfolio N/A N/A N/A N/A
Small Company Value Portfolio N/A N/A N/A N/A
Asset Allocation Portfolio 1.58% 12.32% 11.98% 7-1-93
Global Bond Portfolio 10.35% 7.23% 7.24% 7-1-93
International Diversified Equities Portfolio 16.78% N/A 7.96% 10-31-94
Worldwide High Income Portfolio -14.78% N/A 8.05% 10-31-94
Putnam Growth Portfolio 20.96% 17.87% 15.07% 2-9-93
International Growth and Income Portfolio 8.24% N/A 7.92% 6-2-97
Emerging Markets Portfolio -22.75% N/A -27.53% 6-2-97
Aggressive Growth Portfolio 3.36% N/A 7.41% 6-3-96
"Dogs" of Wall Street Portfolio N/A N/A -2.62% 4-1-98
SunAmerica Balanced Portfolio 18.30% N/A 19.85% 6-3-96
High-Yield Bond Portfolio -2.49% 5.65% 6.57% 2-9-93
</TABLE>
CASH MANAGEMENT PORTFOLIO
The annualized current yield and the effective yield for the Cash
Management Portfolio for the 7 day period ending November 30, 1998, were 3.28%
and 3.33%, respectively.
For periods starting prior to the date the contracts were first offered
to the public, the total return data for the Portfolios of the Separate Account
will be derived from the performance of the corresponding Portfolios of Anchor
Series Trust and SunAmerica Series Trust, modified to reflect the charges and
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<PAGE> 37
expenses as if the Separate Account Portfolio had been in existence since the
inception date of each respective Anchor Series Trust and SunAmerica Series
Trust Portfolio. Thus, such performance figures should not be construed to be
actual historic performance of the relevant Separate Account Portfolio. Rather,
they are intended to indicate the historical performance of the corresponding
Portfolios of Anchor Series Trust and SunAmerica Series Trust, adjusted to
provide direct comparability to the performance of the Portfolios after the date
the contracts were first offered to the public (which will reflect the effect of
fees and charges imposed under the contracts). Anchor Series Trust and
SunAmerica Series Trust have served since their inception as underlying
investment media for Separate Accounts of other insurance companies in
connection with variable contracts not having the same fee and charge schedules
as those imposed under the contracts.
Performance data for the various Portfolios are computed in the manner
described below.
CASH MANAGEMENT PORTFOLIO
The annualized current yield and the effective yield for the Cash
Management Portfolio for the 7 day period ending November 30, 1997, were 3.79%
and 3.86%, respectively.
Current yield is computed by first determining the Base Period Return
attributable to a hypothetical contract having a balance of one Accumulation
Unit at the beginning of a 7 day period using the formula:
Base Period Return = (EV-SV-RMC)/(SV)
where:
SV = value of one Accumulation Unit at the start of a 7 day period
EV = value of one Accumulation Unit at the end of the 7 day period
RMC = an allocated portion of the $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 Records Maintenance Charge (RMC) is first allocated among the
Portfolios and the general account so that each Portfolio's allocated portion of
the charge is proportional to the percentage of the number of contract owners'
accounts that have money allocated to that Portfolio. The portion of the charge
allocable to the Cash Management Portfolio is further reduced, for purposes of
the yield computation, by multiplying it by the ratio that the value of the
hypothetical contract bears to the value of an account of average size for
contracts funded by the Cash Management Portfolio. Finally, the result is
multiplied by the fraction 7/365 to arrive at the portion attributable to the 7
day period.
The current yield is then obtained by annualizing the Base Period
Return:
Current Yield = (Base Period Return) x (365/7)
The Cash Management Portfolio also quotes an "effective yield" that
differs from the current yield given above in that it takes into account the
effect of dividend reinvestment in the underlying fund. The
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<PAGE> 38
effective yield, like the current yield, is derived from the Base Period Return
over a 7 day period. However, the effective yield accounts for dividend
reinvestment by compounding the current yield according to the formula:
365/7
Effective Yield = [(Base Period Return + 1) - 1]
The yield quoted should not be considered a representation of the yield
of the Cash Management Portfolio in the future since the yield is not fixed.
Actual yields will depend on the type, quality and maturities of the investments
held by the underlying fund and changes in interest rates on such investments.
Yield information may be useful in reviewing the performance of the Cash
Management Portfolio and for providing a basis for comparison with other
investment alternatives. However, the Cash Management Portfolio's yield
fluctuates, unlike bank deposits or other investments that typically pay a fixed
yield for a stated period of time.
OTHER PORTFOLIOS
The Portfolios of the Separate Account other than the Cash Management
Portfolio also compute their performance data as "total return."
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<PAGE> 39
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)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
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<PAGE> 40
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5, or 10 year period as of
the end of the period (or fractional portion thereof).
The total return figures reflect the effect of recurring charges, as
discussed herein. Recurring charges are taken into account in a manner similar
to that used for the yield computations for the Cash Management Portfolio,
described above. As with the Cash Management Portfolio yield figures, total
return figures are derived from historical data and are not intended to be a
projection of future performance.
INCOME PAYMENTS
INITIAL MONTHLY ANNUITY PAYMENTS
The initial income payment is determined by applying separately that
portion of the contract value allocated to the fixed account options and the
Variable Portfolio(s), less any premium tax, and then applying it to the annuity
table specified in the contract for fixed and variable annuity payments. Those
tables are based on a set amount per $1,000 of proceeds applied. The appropriate
rate must be determined by the sex (except where, as in the case of certain
Qualified contracts and other employer-sponsored retirement plans, such
classification is not permitted) and age of the Annuitant and designated second
person, if any, and the income option selected.
The dollars applied are then divided by 1,000 and the result multiplied
by the appropriate annuity factor appearing in the table to compute the amount
of the first monthly annuity payment. In the case of a variable annuity, that
amount is divided by the value of an Annuity Unit as of the Annuity Date to
establish the number of Annuity Units representing each variable annuity
payment. The number of Annuity Units determined for the first variable annuity
payment remains constant for the second and subsequent monthly variable annuity
payments, assuming that no reallocation of contract values is made.
SUBSEQUENT MONTHLY PAYMENTS
For fixed income payments, the amount of the second and each subsequent
monthly income payment is the same as that determined above for the first
monthly payment.
For variable income payments, the amount of the second and each
subsequent monthly annuity payment is determined by multiplying the number of
Annuity Units, as determined in connection with the determination of the initial
monthly payment, above, by the Annuity Unit value as of the day preceding the
date on which each income payment is due.
ANNUITY UNIT VALUES
The value of an Annuity Unit is determined independently for each
Portfolio.
The annuity tables contained in the contract are based on a 3.5% per
annum assumed investment rate. If the actual net investment rate experienced by
a Portfolio exceed 3.5%, variable income payments derived from allocations to
that Portfolio will increase over time. Conversely, if the actual rate is less
than 3.5%, variable income payments will decrease over time. If the net
investment rate equals 3.5%, the variable income payments will remain constant.
If a higher assumed investment rate had been used, the
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<PAGE> 41
initial monthly payment would be higher, but the actual net investment rate
would also have to be higher in order for income 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 Variable Portfolios elected, and the amount of each income
payment will vary accordingly.
For each Variable Portfolio, the value of an Annuity Unit is determined
by multiplying the Annuity Unit value for the preceding month by the Net
Investment Factor for the month for which the Annuity Unit value is being
calculated. The result is then multiplied by a second factor which offsets the
effect of the assumed net investment rate of 3.5% per annum which is assumed in
the annuity tables contained in the contract.
NET INVESTMENT FACTOR
The Net Investment Factor ("NIF") is an index applied to measure the net
investment performance of a Portfolio from one day to the next. The NIF may be
greater or less than or equal to one; therefore, the value of an Annuity Unit
may increase, decrease or remain the same.
The NIF for any Portfolio for a certain month is determined by dividing
(a) by (b) where:
(a) is the Accumulation Unit value of the Portfolio determined as of
the end of that month, and
(b) is the Accumulation Unit value of the Portfolio determined as of
the end of the preceding month.
The NIF for a Portfolio for a given month is a measure of the net
investment performance of the Portfolio from the end of the prior month to the
end of the given month. A NIF of 1.000 results in no change; a NIF greater than
1.000 results in an increase; and a NIF less than 1.000 results in a decrease.
The NIF is increased (or decreased) in accordance with the increases (or
decreases, respectively) in the value of a share of the underlying fund in which
the Portfolio invests; it is also reduced by Separate Account asset charges.
ILLUSTRATIVE EXAMPLE
Assume that one share of a given Portfolio had an Accumulation Unit
value of $11.46 as of the close of the New York Stock Exchange ("NYSE") on the
last business day in September; that its Accumulation Unit value had been $11.44
at the close of the NYSE on the last business day at the end of the previous
month. The NIF for the month of September is:
NIF = ($11.46/$11.44)
= 1.00174825
The change in Annuity Unit value for a Portfolio from one month to the
next is determined in part by multiplying the Annuity Unit value at the prior
month end by the NIF for that Portfolio for the new month. In addition, however,
the result of that computation must also be multiplied by an additional factor
that takes into account, and neutralizes, the assumed investment rate of 3.5
percent per annum upon which the annuity payment tables are based. For example,
if the net investment rate for a Portfolio (reflected in the NIF) were equal to
the assumed investment rate, the variable annuity payments should remain
constant (i.e., the Annuity Unit value should not change). The monthly factor
that neutralizes the assumed
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<PAGE> 42
investment rate of 3.5 percent per annum is:
(1/12)
1/[(1.035) ] = 0.99713732
In the example given above, if the Annuity Unit value for the Portfolio
was $10.103523 on the last business day in August, the Annuity Unit value on the
last business day in September would have been:
$10.103523 x 1.00174825 x 0.99713732 = $10.092213
VARIABLE INCOME PAYMENTS
ILLUSTRATIVE EXAMPLE
Assume that a male owner, P, owns a contract in connection with which P
has allocated all of his contract value to a single Portfolio. P is also the
sole Annuitant and, at age 60, has elected to annuitize his contract under
Option 4, a Life Annuity With 120 Monthly Payments Guaranteed. As of the last
valuation preceding the Annuity Date, P's Account was credited with 7543.2456
Accumulation Units each having a value of $15.432655, (i.e., P's account value
is equal to 7543.2456 x $15.432655 = $116,412.31). Assume also that the Annuity
Unit value for the Portfolio on that same date is $13.256932, and that the
Annuity Unit value on the day immediately prior to the second income payment
date is $13.327695.
P's first variable income payment is determined from the annuity factor
tables in P's contract, using the information assumed above. From these tables,
which supply monthly annuity factors for each $1,000 of applied contract value,
P's first variable annuity payment is determined by multiplying the factor of
$4.92 (Option 4 tables, male Annuitant age 60 at the Annuity Date) by the result
of dividing P's account value by $1,000:
First Payment = $4.92 x ($116,412.31/$1,000) = $572.75
The number of P's Annuity Units (which will be fixed; i.e., it will not
change unless he transfers his Account to another Account) is also determined at
this time and is equal to the amount of the first variable income payment
divided by the value of an Annuity Unit on the day immediately prior to
annuitization:
Annuity Units = $572.75/$13.256932 = 43.203812
P's second variable annuity payment is determined by multiplying the
number of Annuity Units by the Annuity Unit value as of the day immediately
prior to the second payment due date:
Second Payment = 43.203812 x $13.327695 = $575.81
The third and subsequent variable income payments are computed in a
manner similar to the second variable annuity payment.
Note that the amount of the first variable income payment depends on
the contract value in the relevant Portfolio on the Annuity Date and thus
reflects the investment performance of the Portfolio net of fees and charges
during the Accumulation Phase. The amount of that payment determines the number
of Annuity Units, which will remain constant during the Annuity Phase (assuming
no transfers from the Portfolio). The net investment performance of the
Portfolio during the Annuity Phase is reflected in continuing changes during
this phase in the Annuity Unit value, which determines the amounts of the
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second and subsequent variable annuity payments.
TAXES
GENERAL
Section 72 of the Internal Revenue Code of 1986, as amended (the "Code")
governs taxation of annuities in general. An owner is not taxed on increases in
the value of a contract until distribution occurs, either in the form of a
non-annuity distribution or as annuity payments under the annuity option
elected. For a lump sum payment received as a total surrender (total
redemption), the recipient is taxed on the portion of the payment that exceeds
the cost basis of the contract. For a payment received as a withdrawal (partial
redemption), federal tax liability is determined on a last-in, first-out basis,
meaning taxable income is withdrawn before the cost basis of the contract is
withdrawn. For contracts issued in connection with Nonqualified plans, the cost
basis is generally the Purchase Payments, while for contracts issued in
connection with Qualified plans there may be no cost basis. The taxable portion
of the lump sum payment is taxed at ordinary income tax rates. Tax penalties may
also apply.
For annuity payments, the taxable portion is determined by a formula
which establishes the ratio that the cost basis of the contract bears to the
total value of annuity payments for the term of the annuity contract. The
taxable portion is taxed at ordinary income tax rates. Owners, Annuitants and
Beneficiaries under the 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
Section 403(b) of the Code (other than (1) annuity payments for the life (or
life expectancy) of the employee, or joint lives (or joint life expectancies) of
the employee and his or her designated Beneficiary, or for a specified period of
ten years or more; and (2) distributions required to be made under the Code).
Failure to "roll over" the entire amount of an eligible rollover distribution
(including an amount equal to the 20% portion of the distribution that was
withheld) could have adverse tax consequences, including the imposition of a
penalty tax on premature withdrawals, described later in this section.
Withdrawals or distributions from a contract other than eligible
rollover distributions are also subject to withholding on the estimated taxable
portion of the distribution, but the owner may elect in such cases to waive the
withholding requirement. If not waived, withholding is imposed (1) for periodic
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<PAGE> 44
payments, at the rate that would be imposed if the payments were wages, or (2)
for other distributions, at the rate of 10%. If no withholding exemption
certificate is in effect for the payee, the rate under (1) above is computed by
treating the payee as a married individual claiming 3 withholding exemptions.
DIVERSIFICATION - SEPARATE ACCOUNT INVESTMENTS
Section 817(h) of the Code imposes certain diversification standards on
the underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not adequately
diversified, in accordance with regulations prescribed by the United States
Treasury Department ("Treasury Department"). Disqualification of the contract as
an annuity contract would result in imposition of federal income tax to the
owner with respect to earnings allocable to the contract prior to the receipt of
any payments under the contract. The Code contains a safe harbor provision which
provides that annuity contracts, such as your contract, meet the diversification
requirements if, as of the close of each calendar quarter, the underlying assets
meet the diversification standards for a regulated investment company, and no
more than 55% of the total assets consist of cash, cash items, U.S. government
securities and securities of other regulated investment companies.
The Treasury Department has issued regulations which establish
diversification requirements for the investment portfolios underlying variable
contracts such as the contracts. The regulations amplify the diversification
requirements for variable contracts set forth in the Code and provide an
alternative to the safe harbor provision described above. Under the regulations
an investment portfolio will be deemed adequately diversified if (1) no more
than 55% of the value of the total assets of the portfolio is represented by any
one investment; (2) no more than 70% of the value of the total assets of the
portfolio is represented by any two investments; (3) no more than 80% of the
value of the total assets of the portfolio is represented by any three
investments; and (4) no more than 90% of the value of the total assets of the
portfolio is represented by any four investments. For purposes of determining
whether or not the diversification standards imposed on the underlying assets of
variable contracts by Section 817(h) of the Code have been met, "each United
States government agency or instrumentality shall be treated as a separate
issuer."
MULTIPLE CONTRACTS
Multiple annuity contracts which are issued within a calendar year to
the same contract owner by one company or its affiliates are treated as one
annuity contract for purposes of determining the tax consequences of any
distribution. Such treatment may result in adverse tax consequences including
more rapid taxation of the distributed amounts from such multiple contracts. The
Company believes that Congress intended to affect the purchase of multiple
deferred annuity contracts which may have been purchased to avoid withdrawal
income tax treatment. Owners should consult a tax adviser prior to purchasing
more than one annuity contract in any calendar year.
TAX TREATMENT OF ASSIGNMENTS
An assignment of a contract may have tax consequences, and may also be
prohibited by ERISA in some circumstances. Owners should therefore consult
competent legal advisers should they wish to assign their contracts.
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<PAGE> 45
DISTRIBUTION OF CONTRACTS
The contracts are offered through SunAmerica Capital Services, Inc.,
located at 733 Third Avenue, 4th Floor, New York, New York 10017. SunAmerica
Capital Services, Inc. is registered as a broker-dealer under the Securities
Exchange Act of 1934, as amended, and is a member of the National Association of
Securities Dealers, Inc. The Company and SunAmerica Capital Services, Inc. are
each an indirect wholly owned subsidiary of SunAmerica Inc.
Contracts are offered on a continuous basis.
FINANCIAL STATEMENTS
The audited consolidated financial statements of the Company as of
September 30, 1997 and 1996 and for each of the three years in the period ended
September 30, 1997 are presented in this Statement of Additional Information.
The consolidated financial statements of the Company should be considered only
as bearing on the ability
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<PAGE> 46
of the Company to meet its obligation under the contracts for amounts allocated
to the 1, 3, and 5 year market value adjustment fixed account options and the
1-year and 6-month DCA fixed accounts. As of the date of this Statement of
Additional Information, sales of this contract have not yet begun. Therefore
financial statements for Variable Annuity Account Seven are not included.
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 of the Company have been so included
in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
-14-
<PAGE> 47
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 income statement and statement of cash flows present fairly, in all
material respects, the financial position of Anchor National Life Insurance
Company and its subsidiaries at September 30, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Los Angeles, California
November 7, 1997
-15-
<PAGE> 48
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------------
1997 1996
--------------- --------------
<S> <C> <C>
ASSETS
INVESTMENTS:
Cash and short-term investments......................... $ 113,580,000 $ 122,058,000
Bonds, notes and redeemable preferred stocks:
Available for sale, at fair value (amortized cost:
1997, $1,942,485,000; 1996, $2,001,024,000)........ 1,986,194,000 1,987,271,000
Mortgage loans.......................................... 339,530,000 98,284,000
Common stocks, at fair value (cost: 1997, $271,000;
1996, $2,911,000).................................... 1,275,000 3,970,000
Real estate............................................. 24,000,000 39,724,000
Other invested assets................................... 143,722,000 77,925,000
-------------- -------------
Total investments....................................... 2,608,301,000 2,329,232,000
Variable annuity assets................................... 9,343,200,000 6,311,557,000
Receivable from brokers for sales of securities........... -- 52,348,000
Accrued investment income................................. 21,759,000 19,675,000
Deferred acquisition costs................................ 536,155,000 443,610,000
Other assets.............................................. 61,524,000 48,113,000
-------------- -------------
TOTAL ASSETS.............................................. $12,570,939,000 $9,204,535,000
============== =============
</TABLE>
See accompanying notes.
-16-
<PAGE> 49
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------------
1997 1996
--------------- --------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Reserves, payables and accrued liabilities:
Reserves for fixed annuity contracts.................... $ 2,098,803,000 $1,789,962,000
Reserves for guaranteed investment contracts............ 295,175,000 415,544,000
Payable to brokers for purchases of securities.......... 263,000 --
Income taxes currently payable.......................... 32,265,000 21,486,000
Other liabilities....................................... 122,728,000 74,710,000
-------------- -------------
Total reserves, payables and accrued liabilities........ 2,549,234,000 2,301,702,000
-------------- -------------
Variable annuity liabilities.............................. 9,343,200,000 6,311,557,000
-------------- -------------
Subordinated notes payable to Parent...................... 36,240,000 35,832,000
-------------- -------------
Deferred income taxes..................................... 67,047,000 70,189,000
-------------- -------------
Shareholder's equity:
Common Stock............................................ 3,511,000 3,511,000
Additional paid-in capital.............................. 308,674,000 280,263,000
Retained earnings....................................... 244,628,000 207,002,000
Net unrealized gains (losses) on debt and equity
securities available for sale........................ 18,405,000 (5,521,000)
-------------- -------------
Total shareholder's equity.............................. 575,218,000 485,255,000
-------------- -------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY................ $12,570,939,000 $9,204,535,000
============== =============
</TABLE>
See accompanying notes.
-17-
<PAGE> 50
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED INCOME STATEMENT
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------------
1997 1996 1995
------------- ------------- ------------
<S> <C> <C> <C>
Investment income.......................... $ 210,759,000 $ 164,631,000 $129,466,000
------------- ------------- ------------
Interest expense on:
Fixed annuity contracts.................. (109,217,000) (82,690,000) (72,975,000)
Guaranteed investment contracts.......... (22,650,000) (19,974,000) (3,733,000)
Senior indebtedness...................... (2,549,000) (2,568,000) (227,000)
Subordinated notes payable to Parent..... (3,142,000) (2,556,000) (2,448,000)
------------- ------------- ------------
Total interest expense................... (137,558,000) (107,788,000) (79,383,000)
------------- ------------- ------------
NET INVESTMENT INCOME...................... 73,201,000 56,843,000 50,083,000
------------- ------------- ------------
NET REALIZED INVESTMENT LOSSES............. (17,394,000) (13,355,000) (4,363,000)
------------- ------------- ------------
Fee income:
Variable annuity fees.................... 139,492,000 103,970,000 84,171,000
Net retained commissions................. 39,143,000 31,548,000 24,108,000
Surrender charges........................ 5,529,000 5,184,000 5,889,000
Asset management fees.................... 25,764,000 25,413,000 26,935,000
Other fees............................... 3,218,000 3,390,000 4,002,000
------------- ------------- ------------
TOTAL FEE INCOME........................... 213,146,000 169,505,000 145,105,000
------------- ------------- ------------
GENERAL AND ADMINISTRATIVE EXPENSES........ (98,802,000) (81,552,000) (64,457,000)
------------- ------------- ------------
AMORTIZATION OF DEFERRED ACQUISITION
COSTS.................................... (66,879,000) (57,520,000) (58,713,000)
------------- ------------- ------------
ANNUAL COMMISSIONS......................... (8,977,000) (4,613,000) (2,658,000)
------------- ------------- ------------
PRETAX INCOME.............................. 94,295,000 69,308,000 64,997,000
Income tax expense......................... (31,169,000) (24,252,000) (25,739,000)
------------- ------------- ------------
NET INCOME................................. $ 63,126,000 $ 45,056,000 $ 39,258,000
============= ============= ============
</TABLE>
See accompanying notes
-18-
<PAGE> 51
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 63,126,000 $ 45,056,000 $ 39,258,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Interest credited to:
Fixed annuity contracts.............................. 109,217,000 82,690,000 72,975,000
Guaranteed investment contracts...................... 22,650,000 19,974,000 3,733,000
Net realized investment losses....................... 17,394,000 13,355,000 4,363,000
Accretion of net discounts on investments............ (18,576,000) (8,976,000) (6,865,000)
Amortization of goodwill............................. 1,187,000 1,169,000 1,168,000
Provision for deferred income taxes.................. (16,024,000) (3,351,000) (1,489,000)
Change in:
Accrued investment income................................. (2,084,000) (5,483,000) 3,373,000
Deferred acquisition costs................................ (113,145,000) (60,941,000) (7,180,000)
Other assets.............................................. (14,598,000) (8,000,000) 7,047,000
Income taxes currently payable............................ 10,779,000 5,766,000 3,389,000
Other liabilities......................................... 14,187,000 5,474,000 4,063,000
Other, net.................................................. 418,000 (129,000) 7,000
------------- ------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES..................... 74,531,000 86,604,000 123,842,000
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Premium receipts on:
Fixed annuity contracts................................... 1,097,937,000 651,649,000 245,320,000
Guaranteed investment contracts........................... 55,000,000 134,967,000 275,000,000
Net exchanges to (from) the fixed accounts of variable
annuity contracts......................................... (620,367,000) (236,705,000) 10,475,000
Withdrawal payments on:
Fixed annuity contracts................................... (242,589,000) (173,489,000) (237,977,000)
Guaranteed investment contracts........................... (198,062,000) (16,492,000) (1,638,000)
Claims and annuity payments on fixed annuity contracts...... (35,731,000) (31,107,000) (31,237,000)
Net receipts from (repayments of) other short-term
financings................................................ 34,239,000 (119,712,000) 3,202,000
Capital contribution received............................... 28,411,000 27,387,000 --
Dividends paid.............................................. (25,500,000) (29,400,000) --
------------- ------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES..................... 93,338,000 207,098,000 263,145,000
------------- ------------- -------------
</TABLE>
See accompanying notes.
-19-
<PAGE> 52
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of:
Bonds, notes and redeemable preferred stocks.............. $(2,566,211,000) $(1,937,890,000) $(1,556,586,000)
Mortgage loans............................................ (266,771,000) (15,000,000) --
Other investments, excluding short-term investments....... (75,556,000) (36,770,000) (13,028,000)
Sales of:
Bonds, notes and redeemable preferred stocks.............. 2,299,063,000 1,241,928,000 1,026,078,000
Real estate............................................... -- 900,000 36,813,000
Other investments, excluding short-term investments....... 6,421,000 4,937,000 5,130,000
Redemptions and maturities of:
Bonds, notes and redeemable preferred stocks.............. 376,847,000 288,969,000 178,688,000
Mortgage loans............................................ 25,920,000 11,324,000 14,403,000
Other investments, excluding short-term investments....... 23,940,000 20,749,000 13,286,000
------------- ------------- -------------
NET CASH USED BY INVESTING ACTIVITIES......................... (176,347,000) (420,853,000) (295,216,000)
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS.... (8,478,000) (127,151,000) 91,771,000
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD........ 122,058,000 249,209,000 157,438,000
------------- ------------- -------------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD.............. $ 113,580,000 $ 122,058,000 $ 249,209,000
============= ============= =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid on indebtedness............................... $ 7,032,000 $ 5,982,000 $ 3,235,000
============= ============= =============
Net income taxes paid....................................... $ 36,420,000 $ 22,031,000 $ 23,656,000
============= ============= =============
</TABLE>
See accompanying notes.
-20-
<PAGE> 53
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
Anchor National Life Insurance Company (the "Company") is a wholly owned
indirect subsidiary of SunAmerica, Inc. (the "Parent"). The Company is an
Arizona-domiciled life insurance company and conducts its business through three
segments: annuity operations, asset management and broker-dealer operations.
Annuity operations include the sale and administration of fixed and variable
annuities and guaranteed investment contracts. Asset management, which includes
the sale and management of mutual funds, is 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 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; 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 prior period amounts have been reclassified
to conform with the 1997 presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
that affect the amounts reported in the financial statements and the
accompanying notes. Actual results could differ from those estimates.
-21-
<PAGE> 54
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS: Cash and short-term investments primarily include cash,
commercial paper, money market investments, repurchase agreements and short-term
bank participations. All such investments are carried at cost plus accrued
interest, which approximates fair value, have maturities of three months or less
and are considered cash equivalents for purposes of reporting cash flows.
Bonds, 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. Real estate is carried at the lower of cost or fair value.
Other invested assets include investments in limited partnerships, which are
accounted for by using the cost method of accounting; Separate Account
investments; leveraged leases; policy loans, which are carried at unpaid
balances; and collateralized mortgage obligation residuals.
Realized gains and losses on the sale of investments are recognized in
operations at the date of sale and are determined using the specific cost
identification method. Premiums and discounts on investments are amortized to
investment income using the interest method over the contractual lives of the
investments.
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 Interest Expense in the
income statement. All outstanding Swap Agreements are designated as hedges and,
therefore, are not marked to market. However, in the event that a hedged
asset/liability were to be sold or repaid before the related Swap Agreement
matures, the Swap Agreement would be marked to market and any gain/loss
classified with any gain/loss realized on the disposition of the hedged
asset/liability. Subsequently, the Swap Agreement would be marked to market and
the resulting change in fair value would be included in Investment Income in the
income statement. In the event that a Swap Agreement that is designated as a
hedge were to be terminated before its contractual maturity, any resulting
gain/loss would be credited/charged to the carrying value of the asset/liability
that it hedged.
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
-22-
<PAGE> 55
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
investment gains and losses, variable annuity 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 consist of commissions and other costs that vary with, and are
primarily related to, the production or acquisition of new business.
As debt and equity securities available for sale are carried at aggregate
fair value, an adjustment is made to deferred acquisition costs equal to the
change in amortization that would have been recorded if such securities had been
sold at their stated aggregate fair value and the proceeds reinvested at current
yields. The change in this adjustment, net of tax, is included with the change
in net unrealized gains or losses on debt and equity securities available for
sale that is credited or charged directly to shareholder's equity. Deferred
Acquisition Costs have been decreased by $16,400,000 at September 30, 1997 and
increased by $4,200,000 at September 30, 1996 for this adjustment.
VARIABLE ANNUITY ASSETS AND LIABILITIES: The assets and liabilities
resulting from the receipt of variable annuity premiums are segregated in
Separate Accounts. The Company receives 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 $18,311,000 at September 30, 1997, 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 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).
FEE INCOME: Variable annuity fees, asset management 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 is included in the consolidated federal income
tax return of the Parent and files as a "life insurance company" under the
provisions of the Internal Revenue Code of 1986. Income taxes have been
calculated as if the Company filed a separate return. Deferred
-23-
<PAGE> 56
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
3. 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 SEPTEMBER 30, 1997:
Securities of the United States
Government.............................. $ 18,496,000 $ 18,962,000
Mortgage-backed securities................. 636,018,000 649,196,000
Securities of public utilities............. 22,792,000 22,893,000
Corporate bonds and notes.................. 984,573,000 1,012,559,000
Redeemable preferred stocks................ 6,125,000 6,681,000
Other debt securities...................... 274,481,000 275,903,000
-------------- --------------
Total available for sale................... $1,942,485,000 $1,986,194,000
============== ==============
AT SEPTEMBER 30, 1996:
Securities of the United States
Government.............................. $ 311,458,000 $ 304,538,000
Mortgage-backed securities................. 747,653,000 741,876,000
Securities of public utilities............. 3,684,000 3,672,000
Corporate bonds and notes.................. 590,071,000 591,148,000
Redeemable preferred stocks................ 9,064,000 8,664,000
Other debt securities...................... 339,094,000 337,373,000
-------------- --------------
Total available for sale................... $2,001,024,000 $1,987,271,000
============== ==============
</TABLE>
-24-
<PAGE> 57
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVESTMENTS (CONTINUED)
The amortized cost and estimated fair value of bonds, notes and redeemable
preferred stocks available for sale by contractual maturity, as of September 30,
1997, follow:
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED FAIR
COST VALUE
-------------- --------------
<S> <C> <C>
Due in one year or less...................... $ 19,067,000 $ 20,575,000
Due after one year through five years........ 277,350,000 281,296,000
Due after five years through ten years....... 631,083,000 650,242,000
Due after ten years.......................... 378,967,000 384,885,000
Mortgage-backed securities................... 636,018,000 649,196,000
-------------- --------------
Total available for sale..................... $1,942,485,000 $1,986,194,000
============== ==============
</TABLE>
Actual maturities of bonds, notes and redeemable preferred stocks will
differ from those shown above due to prepayments and redemptions.
-25-
<PAGE> 58
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVESTMENTS (CONTINUED)
Gross unrealized gains and losses on bonds, notes and redeemable preferred
stocks available for sale by major category follow:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED
GAINS LOSSES
----------- ------------
<S> <C> <C>
AT SEPTEMBER 30, 1997:
Securities of the United States Government..... $ 498,000 $ (32,000)
Mortgage-backed securities..................... 14,998,000 (1,820,000)
Securities of public utilities................. 141,000 (40,000)
Corporate bonds and notes...................... 28,691,000 (705,000)
Redeemable preferred stocks.................... 556,000 --
Other debt securities.......................... 1,569,000 (147,000)
----------- ------------
Total available for sale....................... $46,453,000 $ (2,744,000)
=========== ============
AT SEPTEMBER 30, 1996:
Securities of the United States Government..... $ 284,000 $ (7,204,000)
Mortgage-backed securities..................... 7,734,000 (13,511,000)
Securities of public utilities................. 1,000 (13,000)
Corporate bonds and notes...................... 11,709,000 (10,632,000)
Redeemable preferred stocks.................... 16,000 (416,000)
Other debt securities.......................... 431,000 (2,152,000)
----------- ------------
Total available for sale....................... $20,175,000 $(33,928,000)
=========== ============
</TABLE>
At September 30, 1997, gross unrealized gains on equity securities
available for sale aggregated $1,004,000 and there were no unrealized losses. At
September 30, 1996, gross unrealized gains on equity securities available for
sale aggregated $1,368,000 and gross unrealized losses aggregated $309,000.
-26-
<PAGE> 59
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVESTMENTS (CONTINUED)
Gross realized investment gains and losses on sales of investments are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
BONDS, NOTES AND REDEEMABLE
PREFERRED STOCKS:
Available for sale:
Realized gains............................... $ 22,179,000 $ 14,532,000 $ 15,983,000
Realized losses.............................. (25,310,000) (10,432,000) (21,842,000)
Held for investment:
Realized gains............................... -- -- 2,413,000
Realized losses.............................. -- -- (586,000)
COMMON STOCKS:
Realized gains.................................. 4,002,000 511,000 994,000
Realized losses................................. (312,000) (3,151,000) (114,000)
OTHER INVESTMENTS:
Realized gains.................................. 2,450,000 1,135,000 3,561,000
Realized losses................................. -- -- (12,000)
IMPAIRMENT WRITEDOWNS............................. (20,403,000) (15,950,000) (4,760,000)
------------ ------------ ------------
Total net realized investment losses.............. $(17,394,000) $(13,355,000) $ (4,363,000)
============ ============ ============
</TABLE>
-27-
<PAGE> 60
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVESTMENTS (CONTINUED)
The sources and related amounts of investment income are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Short-term investments............................ $ 11,780,000 $ 10,647,000 $ 8,308,000
Bonds, notes and redeemable preferred stocks...... 163,038,000 140,387,000 107,643,000
Mortgage loans.................................... 17,632,000 8,701,000 7,419,000
Common stocks..................................... 16,000 8,000 3,000
Real estate....................................... (296,000) (196,000) (51,000)
Limited partnerships.............................. 6,725,000 4,073,000 5,128,000
Other invested assets............................. 11,864,000 1,011,000 1,016,000
------------ ------------ ------------
Total investment income......................... $210,759,000 $164,631,000 $129,466,000
============ ============ ============
</TABLE>
Expenses incurred to manage the investment portfolio amounted to $2,050,000
for the year ended September 30, 1997, $1,737,000 for the year ended September
30, 1996, and $1,983,000 for the year ended September 30, 1995 and are included
in General and Administrative Expenses in the income statement.
At September 30, 1997, no investment exceeded 10% of the Company's
consolidated shareholder's equity.
At September 30, 1997, mortgage loans were collateralized by properties
located in 21 states, with loans totaling approximately 13% of the aggregate
carrying value of the portfolio secured by properties located in New York and
approximately 12% by properties located in California. No more than 10% of the
portfolio was secured by properties in any other single state.
At September 30, 1997, bonds, notes and redeemable preferred stocks
included $216,877,000 (fair value of $227,169,000) of bonds and notes not rated
investment grade. The Company had no material concentrations of
non-investment-grade assets at September 30, 1997.
At September 30, 1997, the amortized cost of investments in default as to
the payment of principal or interest was $1,378,000, consisting of $500,000 of
non-investment-grade bonds and $878,000 of mortgage loans. Such nonperforming
investments had an estimated fair value of $1,378,000.
-28-
<PAGE> 61
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVESTMENTS (CONTINUED)
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 September 30,
1997, the Company had one outstanding Swap Agreement with a notional principal
amount of $15.9 million, which matures in December, 2024. The net interest paid
amounted to $0.1 million for the year ended September 30, 1997, and is included
in Interest Expense on Guaranteed Investment Contracts in the income statement.
At September 30, 1997, $5,276,000 of bonds, at amortized cost, were on
deposit with regulatory authorities in accordance with statutory requirements.
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value disclosures are limited to reasonable
estimates of the fair value of only the Company's financial instruments. The
disclosures do not address the value of the Company's recognized and
unrecognized nonfinancial assets (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.
COMMON STOCKS: Fair value is based principally on independent pricing
services, broker quotes and other independent information.
-29-
<PAGE> 62
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
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: Variable annuity assets are carried at the market
value of the underlying securities.
RECEIVABLE FROM (PAYABLE TO) BROKERS FOR SALES (PURCHASES) OF
SECURITIES: Such obligations represent net transactions of a short-term nature
for which the carrying value is considered a reasonable estimate of fair value.
RESERVES FOR FIXED ANNUITY CONTRACTS: Deferred annuity contracts and single
premium life 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 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 hedging Swap Agreements, determined from independent
broker quotes.
VARIABLE ANNUITY LIABILITIES: Fair values of contracts in the accumulation
phase are based on net surrender values. Fair values of contracts in the payout
phase are based on the present value of future cash flows at assumed investment
rates.
SUBORDINATED NOTES PAYABLE TO PARENT: Fair value is estimated based on the
quoted market prices for similar issues.
-30-
<PAGE> 63
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Company's financial instruments at
September 30, 1997 and 1996, compared with their respective carrying values, are
as follows:
<TABLE>
<CAPTION>
CARRYING
VALUE FAIR VALUE
-------------- --------------
<S> <C> <C>
1997:
ASSETS:
Cash and short-term investments........ $ 113,580,000 $ 113,580,000
Bonds, notes and redeemable preferred
stocks.............................. 1,986,194,000 1,986,194,000
Mortgage loans......................... 339,530,000 354,495,000
Common stocks.......................... 1,275,000 1,275,000
Cost-method partnerships............... 46,880,000 84,186,000
Variable annuity assets................ 9,343,200,000 9,343,200,000
LIABILITIES:
Reserves for fixed annuity contracts... 2,098,803,000 2,026,258,000
Reserves for guaranteed investment
contracts........................... 295,175,000 295,175,000
Payable to brokers for purchases of
securities.......................... 263,000 263,000
Variable annuity liabilities........... 9,343,200,000 9,077,200,000
Subordinated notes payable to Parent... 36,240,000 37,393,000
============== ==============
1996:
ASSETS:
Cash and short-term investments........ $ 122,058,000 $ 122,058,000
Bonds, notes and redeemable preferred
stocks.............................. 1,987,271,000 1,987,271,000
Mortgage loans......................... 98,284,000 102,112,000
Common stocks.......................... 3,970,000 3,970,000
Cost-method partnerships............... 45,070,000 70,553,000
Receivable from brokers for sales of
securities.......................... 52,348,000 52,348,000
Variable annuity assets................ 6,311,557,000 6,311,557,000
LIABILITIES:
Reserves for fixed annuity contracts... 1,789,962,000 1,738,784,000
Reserves for guaranteed investment
contracts........................... 415,544,000 416,695,000
Variable annuity liabilities........... 6,311,557,000 6,117,508,000
Subordinated notes payable to Parent... 35,832,000 37,339,000
============== ==============
</TABLE>
-31-
<PAGE> 64
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. SUBORDINATED NOTES PAYABLE TO PARENT
Subordinated notes payable to Parent equalled $36,240,000 at an interest
rate of 9% at September 30, 1997 and require principal payments of $7,500,000
in 1998, $23,060,000 in 1999 and $5,400,000 in 2000.
6. CONTINGENT LIABILITIES
The Company has entered into three agreements in which it has provided
liquidity support for certain short-term securities of three municipalities 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 $242,600,000. Management does not anticipate
any material future losses with respect to these liquidity support facilities.
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 or results of operations.
7. SHAREHOLDER'S EQUITY
The Company is authorized to issue 4,000 shares of its $1,000 par value
Common Stock. At September 30, 1997 and 1996, 3,511 shares were outstanding.
Changes in shareholder's equity are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
ADDITIONAL PAID-IN CAPITAL:
Beginning balance......... $280,263,000 $252,876,000 $252,876,000
Capital contributions
received............... 28,411,000 27,387,000 --
----------- ----------- -----------
Ending balance............ $308,674,000 $280,263,000 $252,876,000
=========== =========== ===========
RETAINED EARNINGS:
Beginning balance......... 207,002,000 191,346,000 152,088,000
Net income................ 63,126,000 45,056,000 39,258,000
Dividend paid............. (25,500,000) (29,400,000) --
----------- ----------- -----------
Ending balance............ $244,628,000 $207,002,000 $191,346,000
=========== =========== ===========
</TABLE>
-32-
<PAGE> 65
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. SHAREHOLDER'S EQUITY (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
NET UNREALIZED GAINS/LOSSES
ON DEBT AND EQUITY
SECURITIES AVAILABLE FOR
SALE:
Beginning balance......... $ (5,521,000) $ (5,673,000) $(24,953,000)
Change in net unrealized
gains/losses on debt
securities available
for sale............... 57,463,000 (2,904,000) 71,302,000
Change in net unrealized
gains/losses on equity
securities available
for sale............... (55,000) 3,538,000 (1,240,000)
Change in adjustment to
deferred acquisition
costs.................. (20,600,000) (400,000) (40,400,000)
Tax effects of net
changes................ (12,882,000) (82,000) (10,382,000)
----------- ----------- -----------
Ending balance............ $ 18,405,000 $ (5,521,000) $ (5,673,000)
=========== =========== ===========
</TABLE>
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. Dividends in the amounts of $25,500,000 and $29,400,000 were
paid on April 1, 1997 and March 18, 1996, respectively. No dividends were paid
in fiscal year 1995.
Under statutory accounting principles utilized in filings with insurance
regulatory authorities, the Company's net income for the nine months ended
September 30, 1997 was $45,743,000. The statutory net income for the year ended
December 31, 1996 was $27,928,000 and for the year ended December 31, 1995 was
$30,673,000. The Company's statutory capital and surplus was $325,712,000 at
September 30, 1997, $311,176,000 at December 31, 1996 and $294,767,000 at
December 31, 1995.
-33-
<PAGE> 66
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. 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>
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............... $ (5,893,000) $ 37,062,000 $ 31,169,000
============ ============ ============
1996:
Currently payable................. $ 5,754,000 $ 21,849,000 $ 27,603,000
Deferred.......................... (10,347,000) 6,996,000 (3,351,000)
------------ ------------ ------------
Total income tax
expense............... $ (4,593,000) $ 28,845,000 $ 24,252,000
============ ============ ============
1995:
Currently payable................. $ 4,248,000 $ 22,980,000 $ 27,228,000
Deferred.......................... (6,113,000) 4,624,000 (1,489,000)
------------ ------------ ------------
Total income tax
expense............... $ (1,865,000) $ 27,604,000 $ 25,739,000
============ ============ ============
</TABLE>
-34-
<PAGE> 67
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. 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
-------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Amount computed at statutory
rate........................... $33,003,000 $24,258,000 $22,749,000
Increases (decreases) resulting
from:
Amortization of differences
between book and tax bases
of net assets acquired...... 666,000 464,000 3,049,000
State income taxes, net of
federal tax benefit......... 1,950,000 2,070,000 437,000
Dividends-received deduction... (4,270,000) (2,357,000) --
Tax credits.................... (318,000) (257,000) (168,000)
Other, net..................... 138,000 74,000 (328,000)
----------- ----------- -----------
Total income tax
expense.............. $31,169,000 $24,252,000 $25,739,000
=========== =========== ===========
</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 September 30, 1997. The Company does not anticipate any
transactions which would cause any part of this surplus to be taxable.
-35-
<PAGE> 68
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax reporting purposes. The significant
components of the liability for Deferred Income Taxes are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------------
1997 1996
------------- ------------
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Investments.................................... $ 13,160,000 $ 15,036,000
Deferred acquisition costs..................... 154,949,000 136,747,000
State income taxes............................. 1,777,000 1,466,000
Net unrealized gains on debt and equity
securities available for sale................ 9,910,000 --
------------- ------------
Total deferred tax liabilities....... 179,796,000 153,249,000
------------- ------------
DEFERRED TAX ASSETS:
Contractholder reserves........................ (108,090,000) (77,522,000)
Guaranty fund assessments...................... (2,707,000) (1,031,000)
Other assets................................... (1,952,000) (1,534,000)
Net unrealized losses on debt and equity
securities available for sale................ -- (2,973,000)
------------- ------------
Total deferred tax assets............ (112,749,000) (83,060,000)
------------- ------------
Deferred income taxes.......................... $ 67,047,000 $ 70,189,000
============= ============
</TABLE>
-36-
<PAGE> 69
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. RELATED PARTY MATTERS
The Company pays commissions to two affiliated companies, SunAmerica
Securities, Inc. and Advantage Capital Corp. Commissions paid to these
broker-dealers totaled $25,492,000 in 1997, $16,906,000 in 1996, and $9,435,000
in 1995. 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 36.1%, 38.3%, and 40.6% of premiums in 1997, 1996,
and 1995, respectively. The Company also sells its products through unaffiliated
broker-dealers, the largest two of which represented approximately 19.2% and
10.1% of premiums in 1997, 19.7% and 10.2% in 1996, and 18.8% and 4.3% in 1995,
respectively.
The Company purchases administrative, investment management, accounting,
marketing and data processing services from SunAmerica Financial, Inc., whose
purpose is to provide services to the SunAmerica companies. Amounts paid for
such services totaled $86,116,000 for the year ended September 30, 1997,
$65,351,000 for the year ended September 30, 1996 and $42,083,000 for the year
ended September 30, 1995. Such amounts are included in General and
Administrative Expenses in the income statement.
The Parent made capital contributions of $28,411,000 in December, 1996 and
$27,387,000 in December 1995 to the Company, through the Company's direct
parent, in exchange for the termination of its guaranty with respect to certain
real estate owned in Arizona. Accordingly, the Company reduced the carrying
value of this real estate to estimated fair value to reflect the termination of
the guaranty.
During the year ended September 30, 1995, the Company sold to the Parent
real estate for cash equal to its carrying value of $29,761,000.
During the year ended September 30, 1997, the Company sold various invested
assets to SunAmerica Life Insurance Company and to CalAmerica Life Insurance
Company for cash equal to their current market values of $15,776,000 and
$15,000, respectively. The Company recorded net gains aggregating $276,000 on
such transactions.
During the year ended September 30, 1997, the Company also purchased
certain invested assets from SunAmerica Life Insurance Company and from
CalAmerica Life Insurance Company for cash equal to their current market values
of $8,717,000 and $284,000, respectively.
During the year ended September 30, 1996, the Company sold various invested
assets to the Parent and to SunAmerica Life Insurance Company for cash equal to
their current market values of $274,000 and $47,321,000, respectively. The
Company recorded net losses aggregating $3,000 on such transactions.
During the year ended September 30, 1996, the Company also purchased
certain invested assets from SunAmerica Life Insurance Company for cash equal to
their current market values, which aggregated $28,379,000.
-37-
<PAGE> 70
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. BUSINESS SEGMENTS
Summarized data for the Company's business segments follow:
<TABLE>
<CAPTION>
TOTAL
DEPRECIATION
AND
TOTAL AMORTIZATION PRETAX TOTAL
REVENUES EXPENSE INCOME ASSETS
------------ ------------ ----------- ---------------
<S> <C> <C> <C> <C>
1997:
Annuity operations................ $332,845,000 $55,675,000 $74,792,000 $12,438,021,000
Broker-dealer operations.......... 38,005,000 689,000 16,705,000 51,400,000
Asset management.................. 35,661,000 16,357,000 2,798,000 81,518,000
------------ ----------- ----------- ---------------
Total................... $406,511,000 $72,721,000 $94,295,000 $12,570,939,000
============ =========== =========== ===============
1996:
Annuity operations................ $256,681,000 $43,974,000 $53,827,000 $ 9,092,770,000
Broker-dealer operations.......... 31,053,000 449,000 13,033,000 37,355,000
Asset management.................. 33,047,000 18,295,000 2,448,000 74,410,000
------------ ----------- ----------- ---------------
Total................... $320,781,000 $62,718,000 $69,308,000 $ 9,204,535,000
============ =========== =========== ===============
1995:
Annuity operations................ $211,587,000 $38,350,000 $55,462,000 $ 7,667,946,000
Broker-dealer operations.......... 24,194,000 411,000 9,025,000 29,241,000
Asset management.................. 34,427,000 24,069,000 510,000 86,510,000
------------ ----------- ----------- ---------------
Total................... $270,208,000 $62,830,000 $64,997,000 $ 7,783,697,000
============ =========== =========== ===============
</TABLE>
11. SUBSEQUENT EVENTS (unaudited)
On August 11, 1998, the Company entered into a modified coinsurance
transaction, approved by the Arizona Department of Insurance, which involves
the ceding of approximately $5,000,000,000 of variable annuities to ANLIC
Insurance Company (Cayman), a Cayman Islands stock life insurance company. As a
part of this transaction, the Company received cash amounting to approximately
$188,700,000, and recorded a corresponding reduction of deferred acquisition
costs related to the coinsured annuities.
On July 15, 1998, the Company entered into a definitive agreement to
acquire the individual life business and the individual and group annuity
business of MBL Life Assurance Corporation ("MBL Life") via a 100% coinsurance
transaction for approximately $130,000,000 in cash. The transaction will
include approximately $2,000,000,000 of universal life reserves and
$3,000,000,000 of fixed annuity reserves. The Company plans to reinsure a large
portion of the mortality risk associated with the acquired block of universal
life business. Completion of this acquisition is expected by the end of
calendar year 1998 and is subject to customary conditions and required
approvals. Included in this block of business is approximately $250,000,000 of
individual life business and $500,000,000 of group annuity business whose
contractowners are residents of New York State ("the New York Business)".
Approximately six months subsequent to completion of the transaction, the New
York Business will be acquired by the Company's New York affiliate, First
SunAmerica Life Insurance Company, and the remainder of the business will be
acquired by the Company via assumption reinsurance agreements between MBL Life
and the respective companies, which will supersede the coinsurance agreement.
The $130,000,000 purchase price will be allocated between the Company and its
affiliate based on their respective assumed reserves.
-38-
<PAGE> 71
PART C -- OTHER INFORMATION
Item 24. Financial Statements And Exhibits
(a) Financial Statements
The following financial statements are included in Part A of the
Registration Statement:
None
The following financial statements are included in Part B of the
Registration Statement:
Consolidated financial statements of Anchor National Life
Insurance Company
(b) Exhibits
(1) Resolutions Establishing Separate Account.......... Previously Filed
(2) Custody Agreements................................. Not Applicable
(3) (a) Form of Distribution Contract.................. Filed Herewith
(b) Form of Selling Agreement...................... Filed Herewith
(4) (a) Variable Annuity Contract...................... Filed Herewith
(b) Variable Annuity Certificate................... Filed Herewith
(c) Tax Sheltered Annuity (403(b)) Endorsement..... Filed Herewith
(5) Application for Contract........................... Filed Herewith
(6) Depositor -- Corporate Documents
(a) Certificate of Incorporation................... *
(b) By-Laws........................................ *
(7) Reinsurance Contract............................... Not Applicable
(8) Form of Fund Participation Agreement............... Filed Herewith
(a) Anchor Series Trust............................
(b) SunAmerica Series Trust........................
(9) Opinion of Counsel................................. Filed Herewith
Consent of Counsel................................. Filed Herewith
(10) Consent of Independent Accountants................. Previously Filed
(11) Financial Statements Omitted from Item 23.......... None
(12) Initial Capitalization Agreement................... Not Applicable
(13) Performance Computations........................... Not Applicable
(14) Diagram and Listing of All Persons Directly
or Indirectly Controlled By or Under Common
Control with Anchor National Life Insurance
Company, the Depositor of Registrant............... *
(15) Powers of Attorney................................. Previously Filed
* Incorporated by reference to Registration Statement
of Anchor National and Variable Separate Account
(File Nos. 333-25473 and 811-3859).................
Item 25. Directors and Officers of the Depositor
The officers and directors of Anchor National Life Insurance Company
are listed below. Their principal business address is 1 SunAmerica Center, Los
Angeles, California 90067-6022, unless otherwise noted.
NAME POSITION
- ---- --------
Eli Broad Chairman, President and
Chief Executive Officer
Jay S. Wintrob Director and Executive Vice
President
Jana W. Greer Director and Senior Vice President
Peter McMillan Director
James R. Belardi Director and Senior Vice President
Susan L. Harris Director, Senior Vice President
and Secretary
Scott L. Robinson Director and Senior Vice President
N. Scott Gillis Senior Vice President and Controller
II-1
<PAGE> 72
NAME POSITION
- ---- --------
Edwin R. Reoliquio Senior Vice President and
Chief Actuary
James W. Rowan Senior Vice President
Victor E. Akin Senior Vice President
J. Franklin Grey Vice President
Keith B. Jones Vice President
Michael L. Lindquist Vice President
Edward P. Nolan* Vice President
Gregory M. Outcalt Vice President
Scott H. Richland Vice President
David R. Bechtel Vice President and Treasurer
- ------------------------
* 88 Bradley Road, P.O. Box 4005, Woodbridge, Connecticut 06525
Item 26. Persons Controlled By or Under Common Control With Depositor or
Registrant
The Registrant is a Separate Account of Anchor National Life Insurance
Company (Depositor). For a complete listing and diagram of all persons directly
or indirectly controlled by or under common control with the Depositor or
Registrant, see Exhibit 14 which is incorporated herein by reference.
Item 27. Number Of Contract Owners
None.
Item 28. Indemnification
None.
Item 29. Principal Underwriter
SunAmerica Capital Services, Inc. serves as distributor to the
Registrant.
Its principal business address is 733 Third Avenue, 4th Floor, New York,
New York 10017. The following are the directors and officers of SunAmerica
Capital Services, Inc.
Name Position with Distributor
- ---- -------------------------
J. Steven Neamtz Director & President
Robert M. Zakem Director, Executive Vice President,
General Counsel &
Assistant Secretary
Peter A. Harbeck Director
Debbie Potash-Turner Controller
Peter Furmark Vice President
James Nichols Vice President
Susan L. Harris Secretary
Net Distribution Compensation on
Name of Discounts and Redemption or Brokerage
Distributor Commissions Annuitization Commissions Commissions*
- ----------- ---------------- --------------- ----------- ------------
SunAmerica None None None None
Capital
Services, Inc.
- --------------------
*Distribution fee is paid by Anchor National Life Insurance Company.
Item 30. Location of Accounts and Records
Anchor National Life Insurance Company, the Depositor for the
Registrant, is located at 1 SunAmerica Center, Los Angeles, California
90067-6022. SunAmerica Capital Services, Inc., the distributor of the Contracts,
is located at 733 Third Avenue, New York, New York 10017. Each maintains those
accounts and records required to be maintained by it pursuant to Section 31(a)
of the Investment Company Act and the rules promulgated thereunder.
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02100, maintains certain accounts and records pursuant to the
instructions of the Registrant.
II-2
<PAGE> 73
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
Registrant undertakes to (1) file post-effective amendments to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old for so long as payments under the variable annuity Contracts may be
accepted; (2) include either (A) as part of any application to purchase a
Contract offered by the prospectus forming a part of the Registration Statement,
a space that an applicant can check to request a Statement of Additional
Information, or (B) a postcard or similar written communication affixed to or
included in the Prospectus that the Applicant can remove to send for a Statement
of Additional Information; and (3) deliver a Statement of Additional Information
and any financial statements required to be made available under this Form N-4
promptly upon written or oral request.
Item 33. Representation
(a) The Company hereby represents that it is relying upon a No-Action
Letter issued to the American Council of Life Insurance dated November 28, 1988
concerning the redeemability of Section 403(b) annuity Contracts (Commission
ref. IP-6-88) and that the following provisions have been complied with:
1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including
the prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in
connection with the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase the
contract specifically to bring the redemption restrictions imposed by
Section 403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed
statement acknowledging the participant's understanding of (1) the
restrictions on redemption imposed by Section 403(b)(11), and (2) other
investment alternatives available under the employer's Section 403(b)
arrangement to which the participant may elect to transfer his contract
value.
(b) REPRESENTATION PURSUANT TO SECTION 26(e) OF THE INVESTMENT COMPANY ACT
OF 1940: The Company and Registrant represent that the fees and
charges to be deducted under the variable annuity contract described
in the prospectus contained in this registration statement are, in the
aggregate, reasonable in relation to the services rendered, the
expenses expected to be incurred, and the risks assumed in connection
with the contract.
II-3
<PAGE> 74
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant has caused this pre-effective amendment to the
Registration Statement to be signed on its behalf, in the City of Los Angeles,
and the State of California, on this 3rd day of December, 1998.
VARIABLE ANNUITY ACCOUNT SEVEN
(Registrant)
By: ANCHOR NATIONAL LIFE INSURANCE COMPANY
(Depositor)
By: /s/ JAY S. WINTROB
--------------------------
Jay S. Wintrob
Executive Vice President
ANCHOR NATIONAL LIFE INSURANCE COMPANY
(Depositor)
By: /s/ JAY S. WINTROB
--------------------------
Jay S. Wintrob
Executive Vice President
<PAGE> 75
As required by the Securities Act of 1933, this Pre-Effective Amendment
to the Registration Statement has been signed by the following persons in the
capacity and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
Eli Broad* President, Chief
- -------------------- Executive Officer and
Eli Broad Chairman of the Board
(Principal Executive
Officer)
Scott L. Robinson* Senior Vice President
- --------------------- and Director
Scott L. Robinson (Principal Financial
Officer)
N. Scott Gillis* Senior Vice President
- -------------------- and Controller
N. Scott Gillis (Principal Accounting
Officer)
James R. Belardi* Director
- --------------------
James R. Belardi
Jana W. Greer* Director
- --------------------
Jana W. Greer
/s/ Susan L. Harris Director December 4, 1998
- --------------------
Susan L. Harris
Peter McMillan* Director
- --------------------
Peter McMillan
James W. Rowan* Director
- --------------------
James W. Rowan
Jay S. Wintrob* Director
- --------------------
Jay S. Wintrob
/s/ Susan L. Harris Attorney-in-Fact
- --------------------
Susan L. Harris
Date: December 4, 1998
*Attorney in Fact
<PAGE> 1
Exhibit 3(a)
DISTRIBUTION AGREEMENT
THIS AGREEMENT, entered into as of this 16th day of November, 1998, is
between ANCHOR NATIONAL LIFE INSURANCE COMPANY ("Anchor"), a life insurance
company organized under the laws of the State of Arizona, on behalf of itself
and VARIABLE ANNUITY ACCOUNT SEVEN ("Separate Account"), a Separate Account
established by Anchor pursuant to the insurance laws of the State of Arizona,
and SUNAMERICA CAPITAL SERVICES, INC. ("Distributor"), a corporation organized
under the laws of the State of Delaware.
WITNESSETH:
WHEREAS, Anchor issues to the public certain variable annuity contracts
identified on the contract specification sheet attached hereto as Attachment A
("Contracts"); and
WHEREAS, Anchor, by resolution adopted on August 28, 1998, established
the Separate Account on its books of account, for the purpose of issuing
variable annuity contracts; and
WHEREAS, the Separate Account is registered with the Securities and
Exchange Commission ("Commission") as a unit investment trust under the
Investment Company Act of 1940 (File No. 811-09003); and
WHEREAS, the Contracts to be issued by Anchor are registered with the
Commission under the Securities Act of 1933 (the "Act") (File No. 33-63511) for
offer and sale to the public, and otherwise are in compliance with all
applicable laws; and
WHEREAS, the Distributor, a broker-dealer registered under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc., proposes to act as distributor on an agency basis in
the marketing and distribution of the Contracts;
WHEREAS, Anchor desires to obtain the services of the Distributor as
distributor of said Contracts issued by Anchor through the Separate Account;
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and conditions set forth herein, and for other good and valuable
consideration, Anchor, the Separate Account and Distributor hereby agree as
follows:
1. The Distributor will serve as distributor on an agency basis for the
Contracts which will be issued by Anchor through the Separate
Account.
2. The Distributor will, either directly or through an affiliate,
provide information and marketing assistance to licensed insurance
agents and broker-dealers on a continuing basis. The Distributor
shall be responsible for compliance with the requirements of state
broker-dealer regulations and the Securities Exchange Act of 1934 as
each applies to Distributor in connection with its duties as
distributor of said Contracts. Moreover, the Distributor shall
conduct its affairs in accordance with the Rules of Fair Practice of
the National Association of Securities Dealers, Inc.
<PAGE> 2
3. Subject to agreement of Anchor, the Distributor may enter into
dealer agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and authorized by applicable law to
sell variable annuity contracts issued by Anchor through the
Separate Account. Any such contractual arrangement is expressly made
subject to this Agreement, and the Distributor will at all times be
responsible to Anchor for purposes of the federal securities laws
for the distribution of Contracts issued through the Separate
Account.
4. Warranties
(a) Anchor represents and warrants to Distributor that:
(i) Registration Statements on Form N-4 (and, if applicable,
Form S-1) for each of the Contracts identified on
Attachment A have been filed with the Commission in the
form previously delivered to the Distributor and that
copies of any and all amendments thereto will be forwarded
to the Distributor at the time that they are filed with
the Commission;
(ii) The Registration Statement and any further amendments or
supplements thereto will, when they become effective,
conform in all material respects to the requirements of
the Securities Act of 1933 and the Investment Company Act
of 1940, and the rules and regulations of the Commission
under such Acts, and will not contain an untrue statement
of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any
statement or omission made in reliance upon and in
conformity with information furnished in writing to Anchor
by the Distributor expressly for use therein;
(iii) Anchor is validly existing as a stock life insurance
company in good standing under the laws of the state of
Arizona, with power (corporate or otherwise) to own its
properties and conduct its business as described in the
Prospectus, and has been duly qualified for the
transaction of business and is in good standing under the
laws of each other jurisdiction, or conducts any business,
so as to require such qualification;
(iv) The Contracts to be issued through the Separate Account
and offered for sale by the Distributor on behalf of
Anchor hereunder have been duly and validly authorized
and, when issued and delivered against payment therefor as
provided herein, will be duly and validly issued and will
conform to the description of such Contracts contained in
the Prospectuses relating thereto;
(v) Those persons who offer and sell the Contracts are to be
appropriately licensed in a manner as to comply with the
state insurance laws;
(vi) The performance of this Agreement and the consummation of
the transactions contemplated by this Agreement will not
result in a breach
-2-
<PAGE> 3
or violation of any of the terms and provisions of, or
constitute a default under any statute, any indenture,
mortgage, deed of trust, note agreement or other agreement
or instrument to which Anchor is a party or by which
Anchor is bound, Anchor's Charter as a stock life
insurance company or By-laws, or any order, rule or
regulation of any court or governmental agency or body
having jurisdiction over Anchor or any of its properties;
and no consent, approval, authorization or order of any
court or governmental agency or body is required for the
consummation by Anchor of the transactions contemplated by
this Agreement, except such as may be required under the
Securities Exchange Act of 1934 or state insurance or
securities laws in connection with the distribution of the
Contracts by the Distributor; and
(vii) There are no material legal or governmental proceedings
pending to which Anchor or the Separate Account is a party
or of which any property of Anchor or the Separate Account
is the subject, other than as set forth in the Prospectus
relating to the Contracts, and other than litigation
incident to the kind of business conducted by Anchor, if
determined adversely to Anchor, would individually or in
the aggregate have a material adverse effect on the
financial position, surplus or operations of Anchor.
(b) The Distributor represents and warrants to Anchor that;
(i) It is a broker-dealer duly registered with the Commission
pursuant to the Securities Exchange Act of 1934 and a
member in good standing of the National Association of
Securities Dealers, Inc., and is in compliance with the
securities laws in those states in which it conducts
business as a broker-dealer;
(ii) The performance of this Agreement and the consummation of
the transactions herein contemplated will not result in a
breach or violation of any of the terms or provisions of
or constitute a default under any statute, any indenture,
mortgage, deed of trust, note agreement or other agreement
or instrument to which the Distributor is a party or by
which the Distributor is bound, the Certificate of
Incorporation or By-laws of the Distributor, or any order,
rule or regulation of any court or governmental agency or
body having jurisdiction over the Distributor or its
property; and
(iii) To the extent that any statements or omissions made in the
Registration Statement, or any amendment or supplement
thereto are made in reliance upon and in conformity with
written information furnished to Anchor by the Distributor
expressly for use therein, such Registration Statement and
any amendments or supplements thereto will, when they
become effective or are filed with the Commission, as the
case may be, conform in all material respects to the
requirements of the Securities Act of 1933 and the rules
and regulations of the Commission thereunder and will not
contain any untrue statement of a material fact
-3-
<PAGE> 4
or omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading.
5. The Distributor, or an affiliate thereof, shall keep, or cause to be
kept, in a manner and form prescribed or approved by Anchor and in
accordance with Rules 17a-3 and 17a-4 under the Securities Exchange
Act of 1934, correct records and books of account as required to be
maintained by a registered broker-dealer, acting as distributor, of
all transactions entered into on behalf of Anchor and with respect
to its activities under this Agreement for Anchor. The party
maintaining the books and records required hereunder shall make such
records and books of account available for inspection by the
Commission, and Anchor shall have the right to inspect, make copies
of or take possession of such records and books of account at any
time on demand.
6. Subsequent to having been authorized to commence the activities
contemplated herein, the Distributor, or an affiliate thereof, will
cause the currently effective Prospectus relating to the subject
Contracts in connection with its marketing and distribution efforts
to be utilized. As to the other types of sales material, the
Distributor, or an affiliate thereof, agrees that it will cause to
be used only sales materials as have been authorized for use by
Anchor and which conform to the requirements of federal and state
laws and regulations, and which have been filed where necessary with
the appropriate regulatory authorities, including the National
Association of Securities Dealers, Inc.
7. The Distributor, or such other person as referred to in paragraph 6
above, will not distribute any Prospectus, sales literature, or any
other printed matter or material in the marketing and distribution
of any Contract if, to the knowledge of the Distributor, or such
other person, any of the foregoing misstates the duties, obligation
or liabilities of Anchor or the Distributor.
8. Expenses of providing sales presentations, mailings, advertising and
any other marketing efforts conducted in connection with the
distribution or sale of the Contracts shall be borne by Anchor.
9. The Distributor, as distributor of the Contracts, shall not be
entitled to remuneration for its services.
10. All premium payments collected on the sale of the Contracts by the
Distributor, if any, shall be transmitted to Anchor for immediate
allocation to the Separate Account in accordance with the directions
furnished by the purchasers of such Contracts at the time of
purchase.
11. The Distributor makes no representations or warranties regarding the
number of Contracts to be sold by licensed broker-dealers and
insurance agents or the amount to be paid thereunder. The
Distributor does, however, represent that it will actively engage in
its duties under this Agreement on a continuous basis while there is
an effective registration statement with the Commission.
-4-
<PAGE> 5
12. It is understood and agreed that the Distributor may render similar
services or act as a distributor or dealer in the distribution of
other variable contracts.
13. Anchor will use its best efforts to assure that the Contracts are
continuously registered under the Securities Act of 1933 and, should
it ever be required, under state Blue Sky Laws and to file for
approval under state insurance laws when necessary.
14. Anchor reserves the right at any time to suspend or limit the public
offering of the subject Contracts.
15. Anchor agrees to advise the Distributor immediately of:
(a) any request by the Commission (i) for amendment of the
Registration Statement relating to the Contracts, or (ii) for
additional information;
(b) the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement relating to the
Contracts or the initiation of any proceedings for that purpose;
and
(c) the happening of any material event, if known, which makes
untrue any statement made in the Registration Statement relating
to the Contracts or which requires the making of a change
therein in order to make any statement made therein not
misleading.
16. Anchor will furnish to the Distributor such information with respect
to the Separate Account and the Contracts in such form and signed by
such of its officers as the Distributor may reasonably request; and
will warrant that the statements therein contained when so signed
will be true and correct.
17. Each of the undersigned parties agrees to notify the other in
writing upon being apprised of the institution of any proceeding,
investigation or hearing involving the offer or sale of the subject
Contracts.
18. This Agreement will terminate automatically upon its assignment to
any person other than a person which is a wholly owned subsidiary of
SunAmerica Inc. This Agreement shall terminate, without the payment
of any penalty by either party:
(a) at the option of Anchor, upon sixty days' advance written notice
to the Distributor; or
(b) at the option of the Distributor upon 90 days' written notice to
Anchor; or
(c) at the option of Anchor upon institution of formal proceedings
against the Distributors by the National Association of
Securities Dealers, Inc. or by the Commission; or
-5-
<PAGE> 6
(d) at the option of either party, if the other party or any
representative thereof at any time (i) employs any device,
scheme, or artifice to defraud; makes any untrue statement of a
material fact or omits to state a material fact necessary in
order to make the statements made, in light of the circumstances
under which they were made, not misleading; or engages in any
act, practice, or course of business which operates or would
operate as a fraud or deceit upon any person; or (ii) violates
the conditions of this Agreement.
19. Each notice required by this Agreement may be given by telephone or
telefax and confirmed in writing.
20. (a) Anchor shall indemnify and hold harmless the Distributor and
each person, if any, who controls the Distributor within the
meaning of the Act against any losses, claims, damages or
liabilities to which the Distributor or such controlling person
may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement, Prospectus or Statement of Additional
Information or any other written sales material prepared by
Anchor which is utilized by the Distributor in connection with
the sale of Contracts or arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein (in the case of the Registration
Statement, Prospectus and Statement of Additional Information),
or in the case of such other sales material, necessary to make
the statements therein not misleading in the light of the
circumstances under which they were made and will reimburse the
Distributor and each such controlling person for any legal or
other expenses reasonably incurred by the Distributor or such
controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action, provided,
however, that Anchor will not be liable in any such case to the
extent that any such loss, claim, omission or alleged omission
made in such Registration Statement, Prospectus or Statement of
Additional Information is in conformity with information
furnished to Anchor specifically for use therein; and provided,
further, that nothing herein shall be so construed as to protect
the Distributor against any liability to Anchor or the Contract
Owners to which the Distributor would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in
the performance of his or her duties, or by reason of his or her
reckless disregard by the Distributor of its obligations and
duties under this Agreement.
(b) The Distributor will likewise indemnify and hold harmless
Anchor, each of its directors and officers and each person, if
any, who controls the Trust within the meaning of the Act to the
extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was
made in conformity with written information furnished to the
Trust by the Distributor specifically for use therein.
-6-
<PAGE> 7
21. This Agreement shall be subject to the laws of the State of
California and construed so as to interpret the Contracts and
insurance contracts written within the business operation of Anchor.
22. This Agreement covers and includes all agreements, verbal and
written, between Anchor and the Distributor with regard to the
marketing and distribution of the Contracts, and supersedes and
annuls any and all agreements between the parties with regard to the
distribution of the Contracts; except that this Agreement shall not
affect the operation of previous or future agreements entered into
between Anchor and the Distributor unrelated to the sale of the
Contracts.
THIS AGREEMENT, along with any Attachment attached hereto and
incorporated herein by reference, may be amended from time to time by the mutual
agreement and consent of the undersigned parties; provided that such amended
shall not affect the rights of existing Contract Owners, and that such amended
be in writing and duly executed.
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement
to be duly executed and their respective corporate seals to be hereunto affixed
and attested on the date first stated above.
ANCHOR NATIONAL LIFE INSURANCE COMPANY
By:
----------------------------------------
Susan L. Harris
Senior Vice President
VARIABLE ANNUITY ACCOUNT SEVEN
By: ANCHOR NATIONAL LIFE
INSURANCE COMPANY
By:
----------------------------------------
Susan L. Harris
Senior Vice President
SUNAMERICA CAPITAL SERVICES, INC.
By:
----------------------------------------
J. Steven Neamtz
President
-7-
<PAGE> 8
ATTACHMENT A
CONTRACT SPECIFICATION SHEET
The following variable annuity contracts are the subject of the Distribution
Agreement between Anchor National Life Insurance Company and SunAmerica Capital
Services, Inc. dated November 16, 1998 regarding the sale of the following
contracts funded in Variable Annuity Account Seven:
1. Polaris Plus Variable Annuity
-8-
<PAGE> 1
Exhibit 3(b)
ANCHOR NATIONAL LIFE INSURANCE COMPANY
1 SunAmerica Center
Los Angeles, CA 90067-6022
Mailing Address:
P. O. Box 54299
Los Angeles, CA 90054-0299
- ---------------------------------------------------------
SELLING
AGREEMENT
<PAGE> 2
SELLING AGREEMENT
-------------------------------------------------------------------------------
This SELLING AGREEMENT ("Agreement"), dated _____________________, is by and
among ANCHOR NATIONAL LIFE INSURANCE COMPANY ("Insurer"), SUNAMERICA CAPITAL
SERVICES, INC. ("Distributor") and ___________________________________________,
together with its duly licensed insurance affiliates indicated on the attached
Annex I (the "Affiliates" and collectively, "Broker/Dealer").
Where permitted by state law, Broker/Dealer is acting as general agent hereunder
and shall be responsible for the duties of broker/dealer and general agent
hereunder. If state law does not permit Broker/Dealer to hold a corporate
insurance license, the appropriate duly licensed insurance affiliate identified
on Annex I shall act as general agent hereunder. Upon execution of Annex I, such
entity or entities agree to be bound by the terms hereof as if it were included
in the definition of Broker/Dealer.
1. Appointment. This Agreement is for the purpose of arranging for the
distribution of certain variable and fixed annuity contracts and any other life
insurance products identified on Exhibit 1 (the "Contracts"), issued by the
Insurer and, in the case of variable contracts, for which Distributor is
distributor, through sales people who are licensed agents of the Insurer for
insurance purposes, are associated with and registered representatives of
Broker/Dealer (each, a "Subagent"). In consideration of the mutual promises and
covenants contained in this Agreement, the Insurer and Distributor each appoint
Broker/Dealer and, as provided in Section 3, its Subagents, to solicit and
procure applications for the Contracts. This appointment is not deemed to be
exclusive in any manner, unless as otherwise stated in a written addendum to
this Agreement, and only extends to those jurisdictions where the Contracts have
been approved for sale and in which Insurer and Broker/Dealer are both licensed
as required by prevailing regulatory requirements.
2. Representations and Warranties.
A. Each party hereto represents and warrants to each other party, as
follows:
(i) It is duly organized, validly existing and in good standing under
the laws of the state of its incorporation or other corresponding applicable law
and has all requisite power, corporate or otherwise to carry on its business as
now being conducted and to perform its obligations as contemplated by this
Agreement.
(ii) It has all licenses, approvals, permits and authorizations of,
and registrations with, all authorities and agencies, including non-governmental
self-regulatory agencies, required under all federal, state, and local laws and
regulations to enable it to perform its obligations as contemplated by this
Agreement.
(iii) The execution, delivery and performance of this Agreement have
been duly and validly authorized by all necessary corporate action, if
applicable, and this Agreement constitutes the legal, valid and binding
agreement of such party, enforceable against it in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and general principles of equity.
B. Broker/Dealer additionally represents and warrants as follows:
(i) It is registered as a broker and dealer under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and is a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD").
(ii) It will comply with all applicable laws, rules and regulations
of, as well as any and all directives and guidelines issued by any agency or
other regulatory body with authority over Broker/Dealer or over the premises on
which Broker/Dealer and its Subagents are soliciting the sale of Contracts.
2
<PAGE> 3
(iii) It is duly licensed as a corporate insurance agent, or it has
identified on Annex I hereto its Affiliates which hold such licenses and are
permitted to do so under applicable laws.
3. Subagents. Broker/Dealer is authorized to recommend Subagents for
appointment to solicit sales of the Contracts. Broker/Dealer is responsible for
investigating the character, work experience and background of any proposed
Subagent prior to recommending appointment by Insurer. No Subagent shall act on
behalf of Insurer until properly appointed by Insurer. To the extent that
Exhibit 1 does not include all annuity Contracts of Insurer which are registered
as securities under the Federal Securities laws, Broker/Dealer is responsible
for ensuring that its Subagents, unless otherwise agreed to with Insurer in
writing, do not offer to sell any other variable annuity contracts issued by
Insurer. Broker/Dealer is responsible for supervising the activities of its
Subagents and for ensuring that Subagents are properly licensed and in
compliance with all applicable federal, state and local laws and regulations and
all rules and procedures of Insurer. Broker/Dealer shall notify Insurer
promptly, in writing, of any giving or receiving of notice of termination of any
Subagent. Insurer reserves the right to refuse to appoint any proposed Subagent
and to terminate any relationship with any Subagent, with or without cause, at
any time. By submitting a Subagent for appointment, Broker/Dealer warrants that:
(1) such Subagent is recommended for appointment; (2) such Subagent is fully
licensed under applicable laws to transact business with Insurer and is a duly
registered representative of Broker/Dealer; (3) all background investigations
required by state and federal laws have been made with respect to such Subagent;
and (4) appointment of such Subagent does not violate the Violent Crime Control
and Law Enforcement act of 1994.
4. Sales Material.
A. Broker/Dealer shall not use any written or audiovisual sales material
(including prepared scripts for oral presentations) in connection with the sales
of the Contracts or solicitations thereof, unless such material has been
provided by, or approved in writing in advance of such use by, the Insurer and
Distributor.
B. In accordance with the requirements of federal and certain state laws,
Broker/Dealer shall, to the extent required by such laws, maintain complete
records indicating the manner and extent of distribution of any such sales
material. This material shall be made available to appropriate federal and state
regulatory agencies as required by law or regulation and to Distributor and
Insurer upon written request.
5. Prospectuses. For any Contract which is a registered security,
Broker/Dealer warrants that solicitation will be made by use of a currently
effective prospectus for the Contract and the underlying funds; and if required
by state law, the Statement of Additional Information for the Contract; that the
prospectus will be delivered concurrently with each sales presentation and that
no statements shall be made to a client superseding or controverting or
otherwise inconsistent with any statement made in the prospectus. The Insurer
and Distributor shall furnish Broker/Dealer, at no cost to such party,
reasonable quantities of currently effective prospectus available for sale under
this Agreement.
6. Conduct of Business.
A. Broker/Dealer will fully comply with the requirements of all
applicable laws, rules and regulations of regulatory authorities (including
self-regulatory organizations) having jurisdiction over the activities of
Broker/Dealer or over the activities contemplated by this Agreement to be
conducted by Broker/Dealer.
B. Neither Broker/Dealer nor any Subagent shall solicit an application
from, or recommend the purchase of a Contract to, an applicant without having
reasonable grounds to believe, in accordance with, among other things,
applicable regulations of any state insurance commission, the Securities and
Exchange Commission ("SEC") and the NASD, that such purchase is suitable for the
applicant. While not limited to the following, a determination of suitability
shall be based on information supplied after a reasonable inquiry concerning the
applicant's insurance and investment objectives and financial situation and
needs.
C. Broker/Dealer has or will have established, prior to its commencement
of any solicitation
3
<PAGE> 4
of sales of Contracts pursuant to the terms of this Agreement, such rules,
procedures, supervisory and inspection techniques as necessary to diligently
supervise the activities of its Subagents pursuant to this Agreement and to
ensure compliance with the terms of this Agreement necessary to establish
diligent supervision. Broker/Dealer shall be responsible for securities
training, supervision and control of its Subagents in connection with their
solicitation activities with respect to the Contracts and shall supervise
compliance with applicable federal and state securities laws and NASD
requirements in connection with such solicitation activities. Broker/Dealer will
observe, and will comply with, all requirements of any Employer on whose
premises Broker/Dealer engages in sales activities pursuant to this Agreement.
Upon request by Insurer or Distributor, Broker/Dealer will furnish appropriate
records as are necessary to establish diligent supervision.
D. Broker/Dealer will fully comply with the requirements of applicable
state insurance laws and regulations and will maintain all books and records and
file all reports required thereunder to be maintained or filed by a licensed
insurance agent. Broker/Dealer shall comply with the terms and conditions of any
letter issued by the Staff of the SEC with respect to the non-registration as a
broker-dealer under the 1934 Act of a corporation licensed as an insurance agent
and associated with a registered broker-dealer. Broker/Dealer shall notify
Distributor immediately in writing if Broker/Dealer fails to comply with any
such terms and conditions and shall take such measures as may be necessary to
comply with any such terms and conditions.
E. Broker/Dealer shall promptly notify Insurer and Distributor of any
written customer complaint or notice of any regulatory investigation or
proceeding received by Broker/Dealer or any Subagent relating to a Contract or
any activities undertaken in connection with this Agreement. Insurer and
Broker/Dealer shall each cooperate fully in any investigation or proceeding
including but not limited to any securities or insurance regulatory
investigation or proceeding or judicial proceeding arising in connection with
the Contracts. No person other than the Insurer has the authority to enter into
any proceeding in a court of law or before a regulatory agency in the name of or
on behalf of the Insurer.
F. Broker/Dealer shall pay all expenses incurred by it in the performance
of this Agreement unless otherwise specifically provided for in this Agreement
or in a writing signed by Insurer and/or Distributor and Broker/Dealer.
G. All forms required for contract issuance shall be taken only on
preprinted forms supplied by the Insurer, which includes forms supplied through
the internet site. The Contract forms and applications are the sole property of
the Insurer. No person other than the Insurer has the authority to make, alter
or discharge any policy, Contract application, Contract certificate,
supplemental contract, endorsement or form issued by the Insurer. No person
other than the Insurer has the right to waive any provision with respect to any
Contract or policy. If Broker/Dealer or its Subagents perform maximum exclusion
allowance calculations using Insurer provided forms or software, Broker/Dealer
will ensure that such software and/or forms are accurately used and completed,
as appropriate, in accordance with the Insurer's rules and procedures.
Broker/Dealer is responsible for completing, executing and submitting all
required forms to Insurer, as discussed in this provision.
H. Broker/Dealer and Subagent shall not directly accept premiums for any
Contract to be issued as Tax Sheltered Annuity under Section 403(b) of the
Internal Revenue Code ("403(b) Contracts") Broker/Dealer shall ensure that all
payment arrangements between the applicable Employer, trust or plan sponsor are
remitted to the Insurer. On all other business, Broker/Dealer and Subagent shall
accept premiums in the form of a check or money order made payable to Insurer.
Broker/Dealer shall ensure that all checks and money orders and applications for
the Contracts received by it or any Subagent are remitted promptly to Insurer.
In the event that any other premiums are sent to a Subagent or Broker/Dealer
rather than to Insurer, they shall promptly remit such premiums to Insurer.
Broker/Dealer acknowledges that if any premium is held at any time by it, such
premium shall be held on behalf of Insurer in trust, and Broker/Dealer shall
segregate such premium from its own funds and promptly remit such premium to
Insurer. All such premiums, whether by check, money order or wire, shall at all
times be the property of Insurer.
I. Upon issuance of a Contract by Insurer and delivery of such Contract
to Broker/Dealer, Broker/Dealer shall promptly deliver such Contract to its
purchaser. For purposes of this provision, "promptly" shall be deemed to mean
not later than five calendar days, or such shorter period as is
4
<PAGE> 5
reasonable under the circumstances. Broker/Dealer shall return promptly to
Insurer all receipts for delivered Contracts, all undelivered Contracts and all
receipts for cancellation, in accordance with the instructions from Insurer. In
the case of 403(b) Contracts, Insurer will mail group contracts directly to the
employer, trust or plan sponsor, as applicable.
J. Unless required by a determination of suitability, during the term of
this Agreement and after termination hereof, Broker/Dealer covenants on behalf
of itself and any Subagent appointed hereunder, that they shall not solicit,
induce or attempt to solicit or induce Contract owners to terminate, surrender,
cancel, replace or exchange such Contract. Broker/Dealer acknowledges and agrees
that the provisions contained in this Section 6 may be enforced by an action for
an injunction, as well as or in addition to any action for damages.
7. Commission Payments.
A. Broker/Dealer shall be entitled to receive a commission based upon
premiums received and accepted by the Insurer for Contracts issued pursuant to
this Agreement, based on the applicable rate of commission set forth in the
Commission Schedule attached hereto as Exhibit 1 which is incorporated herein by
reference. Broker/Dealer shall be solely responsible for the payment of any
commission or consideration of any kind to Subagents.
B. In no event shall the Insurer be liable for the payment of any
commissions with respect to any solicitation made, in whole or in part, by any
person not appropriately licensed and registered prior to the commencement of
such solicitation.
C. If a Contract is returned to the Insurer pursuant to the "Free Look"
provision or any other right to examine provision of the Contract, the full
commission paid by the Insurer will be unearned and shall be returned to the
Insurer upon demand or, in the absence of such demand, charged back to the
recipient of the commission. Broker/Dealer covenants and agrees to promptly
deliver Contracts, as required by Section 6. I., and to hold the Insurer
harmless from and against any claim arising from market loss resulting from
their breach of this covenant.
D. In no event shall Insurer incur obligations under this Agreement to
issue any Contracts or pay any commission in connection therewith if the
Contract owner is over the maximum issue age at the time of contract issue, with
respect to that product or contribution, respectively. With respect to such
Contracts, the full commission paid by the Insurer will be unearned and shall be
returned to the Insurer upon demand or, in the absence of such demand, charged
back to the recipient of the commission
E. With respect to any Contract that is rescinded, as determined by the
Insurer in its sole discretion (other than a rescission with respect to which a
surrender charge applies), or if the Insurer otherwise determines that a
purchase payment must be refunded, including without limitation in circumstances
where a purchase payment exceeds the applicable maximum exclusion allowance or
is otherwise forfeited upon surrender of a Contract, or that a commission
otherwise has not been earned (but such determination may not contravene any
other provision of this Agreement), 100% of such unearned commission will be
returned to the Insurer upon demand or, in the absence of such demand, charged
back to the recipient of the commission.
F. Compensation for the sale of any Contract which is renewed, changed,
exchanged or otherwise converted from any other contract issued by the Company
shall be paid according to the Insurer's guidelines and practices.
G. Excluding 403(b) arrangements, with respect to any Contract, or group
of Contracts which the Insurer in its sole discretion deems to be a single case,
and which at the time of application submission the initial purchase payment is
greater than $500,000, the Insurer may determine in its sole discretion that the
commissions set forth on Exhibit 1 not apply. In the event the Insurer
determines that the commission(s) do not apply, the Insurer may establish an
alternate commission for such Contract or Contracts.
8. Indemnification
5
<PAGE> 6
A. Broker/Dealer shall indemnify, defend and hold harmless Insurer and
Distributor and each person who controls or is associated with Insurer or
Distributor within the meaning of the federal securities laws and any director,
officer, corporate agent, employee, attorney and any representative thereof,
from and against all losses, expenses, claims, damages and liabilities
(including any costs of investigation and legal expenses and any amounts paid in
settlement of any action, suit or proceeding of any claim asserted) which result
from, arise out of or are based upon:
(i) any breach by Broker/Dealer or its Affiliates of any
representation, warranty or other provision of this Agreement, including any
acts or omissions of Broker/Dealer, Affiliates, Subagents and other associated
persons; or
(ii) any violation by Broker/Dealer, any Affiliate or any Subagent of
any federal or state securities law or regulation, insurance law or regulation
or any rule or requirement of the NASD;
(iii) the use by Broker/Dealer, any Affiliate or any Subagent of any
sales or promotional material which has not received specific written approval
of Insurer and Distributor as provided in Section 4 of this Agreement, any oral
or written misrepresentations or any unlawful sales practices concerning the
Contracts by Broker/Dealer, any Affiliate or any Subagent; or
(iv) Claims by Subagents or other agents or representatives of
Broker/Dealer for commissions or other compensation or remuneration of any type.
B. The indemnification provided for herein shall survive termination of
this Agreement.
9. Fidelity Bond. Broker/Dealer represents that all directors, officers,
employees, representatives and/or Subagents who are appointed pursuant to this
Agreement or who have access to funds of the Insurer are and will continue to be
covered by a blanket fidelity bond including coverage for larceny, embezzlement
or any other defalcation, issued by a reputable bonding company. This bond shall
be maintained at Broker/Dealer's expense. Such bond shall be at least equivalent
to the minimal coverage required under the NASD Rules of Fair Practice, endorsed
to extend coverage to life insurance and annuity transactions. Broker/Dealer
acknowledges that the Insurer may require evidence that such coverage is in
force and Broker/Dealer shall promptly give notice to the Insurer of any notice
of cancellation or change of coverage. Broker/Dealer assigns any proceeds
received from the fidelity bond company to the Insurer to the extent of the
Insurer's loss is due to activities covered by the bond. If there is any
deficiency, Broker/Dealer will promptly pay the Insurer that amount on demand,
and Broker/Dealer shall indemnify and hold harmless the Insurer from any
deficiency and from the cost of collection.
10. Market Timer Program. Insurer has available a Market Timer Program which
allows a market timer service to effect multiple transfers or other
transactions. Parties may use this program at the discretion of Insurer and upon
execution of a Market Timer Agreement. Among other provisions, the Market Timer
Agreement specifies that if the impact of processing exchange transactions
received from all outside sources is deemed to be injurious to one of the
separate accounts or a subaccount thereof, then Insurer in its sole discretion
may elect not to process the exchanges and that Insurer will notify the Market
Timer Service of the inability to process the requested exchange. Insurer
reserves the right to terminate participation in or the entire Market Timer
Program at any time and for any reason.
11. RapidApp Program. If applications are transmitted to the Insurer pursuant
to the Insurer's RapidApp Program, the following provisions shall apply to such
applications and Contracts issued pursuant to the RapidApp Program.
A. Broker/Dealer agrees to communicate with owners of the Contracts
issued through the RapidApp Program in order to obtain and deliver to the
Insurer the signed confirmation for the Contract. Broker/Dealer further agrees
to provide any assistance or cooperation required to enforce a Contract issued
under the RapidApp Program which shall include, but not be limited to, providing
the Insurer access to recordings of telephone conversations with customers
containing their consent to the purchase of Contracts, or providing statements
or affidavits from such Subagents as to the customer's consent to the making of
the Contract.
B. In the event the owner of a Contract repudiates or rescinds the
Contract and the Insurer,
6
<PAGE> 7
in its sole discretion, waives any surrender charges, the full commission paid
by the Insurer will be returned to the Insurer upon demand or, in the absence of
such demand, charged back to the recipient of the commission. In addition, all
amounts equal to any market loss arising from such rescission or repudiation
will be paid by Broker/Dealer on demand, or in the absence of such demand,
charged back to Broker/Dealer.
C. Broker/Dealer agrees that it will be solely responsible for the
transmission or failure of transmission of application information to the
Insurer. Broker/Dealer warrants that all application information will be
accurate and can be relied upon by the Insurer.
D. Broker/Dealer agrees to pay the Insurer all amounts equal to any
market loss resulting from the misallocation of the initial purchase payment
into the subaccounts, which misallocation was the result of Insurer relying on
Broker/Dealer's or their Subagents' application information. In the absence of a
demand for payment, such amounts shall be charged back to Broker/Dealer.
E. Broker/Dealer agrees that its Subagents who are resident and licensed
in those jurisdictions approved by the Insurer may submit applications to the
Insurer pursuant to the RapidApp Program and agree to the provisions of this
Section 11. Broker/Dealer acknowledges that agreeing to the provisions of this
Section 11 does not require its Subagents to submit all applications to the
Insurer pursuant to the RapidApp Program.
12. Termination.
A. Normal Termination. This Agreement shall continue for an indefinite
term, subject to the termination by either party upon written notice to the
other parties hereto, which shall be effective upon receipt thereof. In
addition, Insurer may terminate this Agreement without notice if Broker/Dealer
fails to satisfy the Insurer's production requirements.
B. Automatic Termination for Cause. This Agreement shall automatically
terminate upon: (1) a material breach of this Agreement, including without
limitation the failure to comply with the laws or regulations of any state or
other governmental agency or body having jurisdiction over the sale of
insurance; and (2) the suspension, revocation or non-renewal of any then
required insurance or securities license of Broker/Dealer, any of its Affiliates
or any Subagent, or the deregistration of the Broker/Dealer or its termination
of membership with the NASD.
C. Rights and Obligations. Upon termination of this Agreement, except as
otherwise provided herein, all authorizations, rights and obligations shall
cease. If this Agreement is terminated for cause as described above,
Broker/Dealer's right to receive compensation shall immediately terminate. IN
ADDITION, UPON TERMINATION ALL SERVICE FEES AND ANY OTHER ASSET BASED FEES WILL
TERMINATE, UNLESS OTHERWISE SET FORTH IN A WRITTEN ADDENDUM TO THIS AGREEMENT.
13. General Provisions.
A. Waiver. Waiver by any of the parties to promptly insist upon strict
compliance with any of the obligations of any other party under this Agreement
will not be deemed to constitute a waiver of the right to enforce strict
compliance.
B. Independent Contractor. Broker/Dealer is an independent contractor and
its Subagents who are appointed as insurance agents of Insurer are agents of
Broker/Dealer and not employees, agents or representatives of Insurer or
Distributor.
C. Independent Assignment. No assignment of this Agreement or of
commissions or other payments under this Agreement shall be valid without the
prior written consent of the Insurer.
D. Notice. Any notice pursuant to this Agreement shall be mailed, postage
paid, to the last address communicated by the receiving party to the other
parties to this Agreement.
E. Severability. To the extent this Agreement may be in conflict with any
applicable law or
7
<PAGE> 8
regulation, this Agreement shall be construed in a manner not inconsistent with
such law or regulation. The invalidity or illegality of any provision of this
Agreement shall not be deemed to affect the validity or legality of any other
provision of this Agreement.
F. Amendment. No Amendment to this Agreement shall be effective unless in
writing and signed by all the parties hereto.
G. California Law. This Agreement shall be construed in accordance with
the laws of the State of California.
H. Effectiveness. This Agreement shall be effective as of the date set
forth above.
IN WITNESS WHEREOF, this Agreement has been executed by duly authorized
representatives of the parties to this Agreement as of the date set forth above.
"INSURER":
ANCHOR NATIONAL LIFE INSURANCE COMPANY
By:
--------------------------------------
--------------------------------------
Printed Name and Title
"DISTRIBUTOR":
SUNAMERICA CAPITAL SERVICES, INC.
By:
--------------------------------------
Peter Harbeck, President
"BROKER/DEALER":
- -----------------------------------------
By:
--------------------------------------
--------------------------------------
Printed Name and Title
8
<PAGE> 9
ANNEX I
This Annex I appends that certain Selling Agreement dated
_______________________ (the "Agreement") between Anchor National Life Insurance
Company, SunAmerica Capital Services, Inc. and _______________________________
("Broker/Dealer"). Each of the undersigned is affiliated with Broker/Dealer and
represents that it holds the necessary corporate insurance license to act as
general agent in connection with the sale of Contracts, as defined in the
Agreement, in those states so identified next to its name. By executing this
Annex I each of the undersigned agrees to be bound by the terms and conditions
of the Agreement as if it were a party thereto.
<TABLE>
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COMPANY STATE(S) TAX I.D. NO.
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</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
COMPANY STATE(S) TAX I.D. NO.
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Signature:
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</TABLE>
10
<PAGE> 1
Exhibit 4.(a)
ANCHOR NATIONAL LIFE INSURANCE COMPANY
A STOCK COMPANY LOS ANGELES, CALIFORNIA
CONTRACTHOLDER JOHN DOE COMPANY
GROUP CONTRACT NUMBER A00009050 CONTRACT DATE: July 1, 1998
<TABLE>
<S> <C> <C>
STATUTORY HOME OFFICE EXECUTIVE OFFICE ANNUITY SERVICE CENTER
2999 NORTH 44TH ST., SUITE 250 1 SUNAMERICA CENTER PO BOX 54299
PHOENIX, AZ 85018 LOS ANGELES, CA 90067-6022 LOS ANGELES, CA 90054-0299
</TABLE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY ("We", "Us", the "Company", or "Anchor
National") agrees to provide annuity benefits bought under this Contract in
accordance with and subject to its terms. The Contract takes effect as of the
Contract Date.
THE VALUE OF AMOUNTS ALLOCATED TO THE SEPARATE ACCOUNT DURING THE ACCUMULATION
AND ANNUITY PERIODS IS NOT GUARANTEED, AND WILL INCREASE OR DECREASE BASED UPON
THE INVESTMENT EXPERIENCE OF THE SUBACCOUNTS AS SET OUT IN THE CERTIFICATE.
THE CASH SURRENDER BENEFIT OF AMOUNTS ALLOCATED TO ANY FIXED-MVA ACCOUNT OPTION
INCREASES OR DECREASES BASED ON THE APPLICATION OF A MARKET VALUE ADJUSTMENT.
THE UNADJUSTED CASH SURRENDER BENEFIT IS AVAILABLE FOR 30 DAYS AFTER THE END OF
THE GUARANTEE PERIOD. THERE IS NO MARKET VALUE ADJUSTMENT FOR ANY CASH SURRENDER
BENEFIT OF AMOUNTS ALLOCATED TO THE DCA FIXED ACCOUNT OPTIONS.
/s/ SUSAN L. HARRIS /s/ ELI BROAD
- ------------------------------- ------------------------------
Susan L. Harris Eli Broad
Secretary President
ALLOCATED FIXED AND
VARIABLE GROUP ANNUITY CONTRACT
Nonparticipating
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
DEFINITIONS.............................................................................PAGE 3
PURCHASE PAYMENT PROVISIONS.............................................................PAGE 4
ANNUITY PROVISIONS......................................................................PAGE 5
Annuity Date; Annuity Payments; Deferment of Payments
GENERAL PROVISIONS..................................................................PAGE 5 - 6
Entire Contract; Misstatement of Age or Sex; Proof of Age or Survival; Conformity
With State Laws; Changes in Law; Written Notice; Non-Participating
DEATH PROVISIONS........................................................................PAGE 6
Death of Participant Before the Annuity Date; Death of Participant or Annuitant
on or After the Annuity Date
</TABLE>
FOR INQUIRIES
CALL 1-800-445-SUN2
<PAGE> 3
DEFINITIONS
Defined in this section are some of the words and phrases used in this Contract.
These terms are capitalized when used in the Contract. Other capitalized terms
in the Contract refer to the captioned paragraph explaining that particular
concept in the Contract.
ANNUITANT
The natural person whose life is used to determine the annuity benefits under a
Certificate that is issued under this Contract.
ANNUITY
A series of periodic annuity payments payable under this Contract for which a
Certificate has been issued.
ANNUITY DATE
The date on which annuity payments to the Payee are to start.
ANNUITY SERVICE CENTER
As specified on page 1 of the Contract.
CERTIFICATE
The Certificate describes the Participant's interest under the Contract.
CONTRACT DATE
The date this Contract is issued.
CONTRACTHOLDER
The individual or entity shown on Page 1 which has established and maintains the
Plan for the benefit of its Participants.
DISCONTINUANCE DATE
The Date on and after which no further Purchase Payments will be made to Us.
FIXED ANNUITY
A series of periodic annuity payments of predetermined amounts that do not vary
with investment experience. Such payments are made from the Company's general
asset account.
IRC
The Internal Revenue Code of 1986, as amended, or as it may be amended or
superseded.
NYSE
New York Stock Exchange. Generally, the close of any NYSE business day is 4:00
P.M., Eastern Time. Financial Transactions received after the close of any NYSE
business day will be credited with the next NYSE business day.
<PAGE> 4
PARTICIPANT
The person disclosed to Us as the Participant at the date of issuance of the
Certificate who is entitled to exercise all rights and privileges of ownership
under the Certificate while living.
PAYEE
The person receiving payment of annuity benefits under the Certificate.
PURCHASE PAYMENTS
Payments in U. S. currency made by or on behalf of the Annuitant to the Company
for the Certificate.
SUBSEQUENT PURCHASE PAYMENTS
Purchase Payments made after the first Purchase Payment.
WE, OUR, US, THE COMPANY
Anchor National Life Insurance Company.
YOU, YOUR
The Contractholder.
PURCHASE PAYMENT PROVISIONS
PURCHASE PAYMENTS
Purchase Payments are flexible and must be in U. S. currency. This means that,
subject to Company declared minimums and maximums, The Contractholder may change
the amounts, frequency or timing of Purchase Payments. Purchase Payments will be
allocated in accordance with instructions from the Contractholder. We reserve
the right to specify the minimum Purchase Payment that may be allocated to a
subaccount, if applicable, under the Certificate. Purchase Payments may be made
under this Contract prior to the Discontinuance Date.
For each Annuity Certificate purchased under this Contract, the Contractholder
will provide Us with Our Participant Enrollment Form completed by the
Participant.
DISCONTINUANCE OF PURCHASES
We have the right at any time to notify the Contractholder that no further
purchases may be made under this Contract on or after the date specified in the
notice. That date will be at least 90 days after the date the notice is given.
Payments which have been previously made under the Contract remain in the
Contract subject to the terms of the Contract.
TERMINATION OF CONTRACT
This Contract will terminate when: (a) no further contributions may be paid
under this Contract; and (b) no Participant's account remains uncancelled; and
(c) no further annuity or transfer payments are payable from this Contract; or
(d) as otherwise agreed upon by the Contractholder and Us.
<PAGE> 5
ANNUITY PROVISIONS
ANNUITY DATE
Annuity Date is the date on which annuity payments are to begin. Prior to the
Annuity Date, there is no cash surrender value except as may be provided by the
form of Annuity purchased or as may be agreed by Us when the Annuity is
purchased. The Participant selects an Annuity Date at the time of application.
The Participant may change the Annuity Date at any time, at least seven days
prior to the Annuity Date, by written notice to the Company at its Annuity
Service Center. If no Annuity Date is selected, the Annuity Date will be the
latest Annuity Date, as set by the Company
DEFERMENT OF PAYMENTS
We may defer making payments from the Fixed Account Options for up to six (6)
months. Interest, subject to state requirements, will be credited during the
deferral period.
ANNUITY PAYMENT OPTIONS
During the Annuitant's life, upon written election and the return of the
Certificate to the Company at its Annuity Service Center, the Participant may
choose any annuity payment option from the Annuity Payment Options Table in the
Participant's Certificate or any .Annuity Payment Option that is mutually
agreeable. If We do not receive any selected payment option by the Annuity Date,
the Participant will automatically receive Annuity Payment Option 4 in the
Certificate which is 120 monthly payments guaranteed.
GENERAL PROVISIONS
ENTIRE CONTRACT
This Contract with the attached Application, the form of Certificate issued
under the Contract and any endorsement form the Entire Contract between You and
Us. We shall issue Certificates to Participants under this group contract. An
agent cannot change the terms or conditions of this contract. Any change must be
in writing and approved by Us. Only Our President, Secretary, or one of Our
Vice-Presidents can give Our approval.
MISSTATEMENT
If the age or sex (if pertinent) or any pertinent information of any Annuitant
has been misstated, future annuity payments will be adjusted using the correct
information. Upon receipt of the correct information, any overpayment of annuity
will, together with interest, be deducted from future annuity payments. Any
underpayment of an annuity will be paid with interest.
PROOF OF AGE OR SURVIVAL
The Company may require satisfactory proof of correct age at any time. If any
payment under this Contract depends on the Annuitant being alive, the Company
may require satisfactory proof of survival.
WRITTEN NOTICE
Any notice or communication from the Contractholder to Us will be given in
writing. Any written request or notice to Us must be sent to Our Annuity Service
Center, as specified on the Contract Data
<PAGE> 6
Page. Any notice We send to the Participant will be sent to the Participant's
address shown in the Participant Enrollment Form unless requested otherwise.
CONFORMITY WITH STATE LAWS
The provisions of this Contract will be interpreted by the laws of the state in
which the Application Form was signed or such other state as is required by law.
Any provision which, on the Contract Date, is in conflict with the law of such
state is amended to conform to the minimum requirements of such law.
CHANGES IN LAW
If the laws governing this Contract or the taxation of benefits under the
Contract change, We reserve the right to amend this Contract to comply with
these changes.
NONPARTICIPATING
This Contract does not share in Our surplus.
DEATH PROVISIONS
Notwithstanding any provision of this Contract to the contrary, all payments of
benefits under the Certificate will be made in a manner that satisfies the
requirements of IRC Section 72(s), or IRC Section 401(a)(9), as amended from
time to time whichever is applicable. If the Certificate is owned by a trust or
other non-natural person, We will treat the death of any Annuitant as the death
of the "Primary Annuitant" and as the death of any Participant.
DEATH OF PARTICIPANT BEFORE THE ANNUITY DATE
If the Participant dies before the Annuity Date, We will have no further
liability except as may be provided by the form of the Certificate issued under
this Contract or as may be agreed by Us when the Certificate is purchased. We
will treat the death of any Annuitant as the death of the "Primary Annuitant"
and as the death of the Participant.
DEATH OF PARTICIPANT ON OR AFTER THE ANNUITY DATE. If any Participant or
Annuitant dies on or after the Annuity Date and before the entire interest in
the Certificate has been distributed, We will pay the remaining portion of the
interest of the Certificate under the annuity payment option being used on the
date of death.
ANNUITY PAYMENT OPTIONS
During the Annuitant's life, upon written election and the return of the
Annuitant's Certificate to the Company at its Annuity Service Center, the
Certificate Value may be applied to provide any annuity payment option that is
mutually agreeable. The Annuity Payment Options are as set out in the
Certificate.
<PAGE> 7
ANCHOR NATIONAL LIFE INSURANCE COMPANY
A STOCK COMPANY LOS ANGELES, CALIFORNIA
ALLOCATED FIXED AND
VARIABLE GROUP ANNUITY CONTRACT
Nonparticipating
<PAGE> 1
Exhibit 4.(b)
ANCHOR NATIONAL LIFE INSURANCE COMPANY
A STOCK COMPANY LOS ANGELES, CALIFORNIA
CERTIFICATE NUMBER P9999999999
PARTICIPANT JOHN DOE
<TABLE>
<S> <C> <C>
STATUTORY HOME OFFICE EXECUTIVE OFFICE ANNUITY SERVICE CENTER
2999 NORTH 44TH ST., SUITE 250 1 SUNAMERICA CENTER PO BOX 54299
PHOENIX, AZ 85018 LOS ANGELES, CA 90067-6022 LOS ANGELES, CA 90054-0299
</TABLE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY ("We", "Us", the "Company", or "Anchor
National") agrees to provide benefits to the Participant under the Group
Contract, in accordance with the provisions set forth in this Certificate and in
consideration of the Participant Enrollment Form and Purchase Payments We
receive.
THIS CERTIFICATE IS EVIDENCE OF COVERAGE UNDER THE GROUP CONTRACT IF A
PARTICIPANT ENROLLMENT FORM IS ATTACHED. THE COVERAGE WILL BEGIN AS OF THE
CERTIFICATE DATE, SHOWN ON THE CERTIFICATE DATA PAGE.
THE VALUE OF AMOUNTS ALLOCATED TO THE SEPARATE ACCOUNT DURING THE ACCUMULATION
AND ANNUITY PERIODS IS NOT GUARANTEED, AND WILL INCREASE OR DECREASE BASED UPON
THE INVESTMENT EXPERIENCE OF THE SUBACCOUNTS YOU CHOOSE.
THE CASH SURRENDER BENEFIT OF AMOUNTS ALLOCATED TO ANY FIXED MVA ACCOUNT OPTION
MAY INCREASE OR DECREASE BASED ON THE APPLICATION OF THE MARKET VALUE
ADJUSTMENT. THE UNADJUSTED CASH SURRENDER BENEFIT IS AVAILABLE FOR 30 DAYS AFTER
THE END OF THE GUARANTEE PERIOD. THERE IS NO MARKET VALUE ADJUSTMENT FOR ANY
CASH SURRENDER BENEFIT OF AMOUNTS ALLOCATED TO THE DCA FIXED ACCOUNT OPTIONS.
RIGHT TO EXAMINE - YOU MAY RETURN THIS CERTIFICATE TO OUR ANNUITY SERVICE CENTER
OR TO THE AGENT THROUGH WHOM THE CERTIFICATE WAS PURCHASED WITHIN 10 DAYS AFTER
YOU RECEIVE IT, IF YOU ARE NOT SATISFIED WITH IT. THE COMPANY WILL REFUND THE
CERTIFICATE VALUE ON THE BUSINESS DAY DURING WHICH THE CERTIFICATE IS RECEIVED.
UPON SUCH REFUND, THE CERTIFICATE SHALL BE VOID.
THIS IS A LEGAL DOCUMENT. READ IT CAREFULLY.
/s/ SUSAN L. HARRIS /s/ ELI BROAD
- ------------------------------- ------------------------------
Susan L. Harris Eli Broad
Secretary President
ALLOCATED FIXED AND
VARIABLE GROUP ANNUITY CERTIFICATE
Nonparticipating
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
CERTIFICATE DATA PAGE...................................................................PAGE 3
PURCHASE PAYMENT ALLOCATION.............................................................PAGE 4
DEFINITIONS.............................................................................PAGE 5
PURCHASE PAYMENT PROVISIONS.............................................................PAGE 8
Purchase Payments; Deferment of Payments; Suspension of Payments; Substitution of Portfolio
ACCUMULATION PROVISIONS.................................................................PAGE 9
Separate Account Accumulation Value; Number of Accumulation Units; Accumulation Unit Value (AUV);
Fixed Account Accumulation Value; Fixed Account Guarantee Period Options and Interest Crediting ;
Market Value Adjustment(MVA)
CHARGES AND DEDUCTIONS.................................................................PAGE 11
Withdrawal Charge; Mortality Risk Charge; Expense Risk Charge; Distribution Expense Charge
TRANSFER PROVISION.....................................................................PAGE 12
Transfers of Accumulation Units and Annuity Units Between Subaccounts; Transfers of Accumulation
Units To and From the Fixed Account
WITHDRAWAL PROVISIONS..................................................................PAGE 12
Withdrawal Charge; Withdrawal Charge Exemption
GENERAL PROVISIONS.....................................................................PAGE 14
Entire Contract; Change of Annuitant; Death of Annuitant; Misstatement of Age; Proof of Age or
Survival; Conformity With State Laws; Changes in Law; Assignment; Claims of Creditors; Premium
Taxes or Other Taxes; Written Notice; Periodic Reports; Incontestability; Non-Participating
DEATH PROVISIONS.......................................................................PAGE 16
Death of Participant Before the Annuity Date; Due Proof of Death; Amount of Death Benefit; Death
of Participant or Annuitant on or After the Annuity Date; Beneficiary
ANNUITY PROVISIONS.....................................................................PAGE 17
Annuity Date; Payments to Participant; Fixed Annuity Payments; Amount of Fixed Annuity Payments;
Amount of Variable Annuity Payments
ANNUITY PAYMENT OPTIONS ...............................................................PAGE 19
FIXED ANNUITY PAYMENT OPTIONS TABLE....................................................PAGE 20
VARIABLE ANNUITY PAYMENT OPTIONS TABLE.................................................PAGE 22
</TABLE>
<PAGE> 3
CERTIFICATE DATA PAGE
<TABLE>
<S> <C>
CERTIFICATE NUMBER: ANNUITY SERVICE CENTER:
P9999999999 P. O. BOX 54299
LOS ANGELES, CA 90054-0299
PLAN PLAN ADMINISTRATOR:
[403(b)] John Doe Distributors
CONTRACTHOLDER: None
PARTICIPANT: AGE AT ISSUE:
JOHN DOE 35
ANNUITANT: FIRST PURCHASE PAYMENT:
JOHN DOE $10,000.00
ANNUITY DATE: CERTIFICATE DATE:
December 1, 2028 July 1, 1998
LATEST ANNUITY DATE: BENEFICIARY:
December 1, 2038 As stated on the Participant Enrollment
Form or beneficiary designated form
MORTALITY RISK CHARGE: EXPENSE RISK CHARGE:
[0.80%] [0.30%]
DISTRIBUTION EXPENSE CHARGE: FIXED ACCOUNT OPTIONS -
[0.15%] Minimum Guarantee Rate:
3.0%
SEPARATE ACCOUNT:
[Variable Annuity Account Seven]
</TABLE>
FOR INQUIRIES
[CALL 1-877-999-9205]
<PAGE> 4
PURCHASE PAYMENT ALLOCATION
Subaccounts
<TABLE>
<CAPTION>
SUNAMERICA ANCHOR
SERIES TRUST SERIES TRUST
<S> <C>
25.00% Cash Management 0.00% Government & Quality Bond
0.00% Corporate Bond 0.00% Growth
0.00% Global Bond 0.00% Capital Appreciation
0.00% High-Yield Bond
0.00% Worldwide High Income
25.00% SunAmerica Balanced
0.00% Asset Allocation
0.00% Equity Income
0.00% Utility
0.00% Equity Index
0.00% Growth-Income
0.00% Federated Value
0.00% Venture Value
0.00% "Dogs" of Wall Street
0.00% Alliance Growth
25.00% Putnam Growth
0.00% Real Estate
0.00% Small Company Value
0.00% Aggressive Growth
0.00% International Growth
and Income
0.00% Global Equities
0.00% International Diversified
Equities
0.00% Emerging Markets
</TABLE>
FIXED ACCOUNT OPTIONS
<TABLE>
<CAPTION>
Guarantee Initial
Period Interest Rate
<S> <C> <C>
25.00% 1-Year Fixed MVA 3.00%
0.00% 3-Year Fixed MVA
0.00% 5-Year Fixed MVA
DCA Fixed Account Options
0.00% 6 Month DCA Fixed Non-MVA
0.00% 1 Year DCA Fixed Non-MVA
</TABLE>
<PAGE> 5
DEFINITIONS
Defined in this section are some of the words and phrases used in this
Certificate. These terms are capitalized when used in the Certificate. Other
capitalized terms in the Certificate refer to the captioned paragraph explaining
that particular concept in the Certificate.
ACCUMULATION UNIT
A unit of measurement used to compute the Certificate Value in a Subaccount
prior to the Annuity Date.
AGE
Age as of last birthday.
ANNUITANT
The natural person whose life is used to determine the annuity benefits under
the Certificate. If the Certificate is in force and the Annuitant is alive on
the Annuity Date, We will begin payments to the Payee.
ANNUITY DATE
The date on which annuity payments to the Payee are to start.
ANNUITY SERVICE CENTER
As specified on the Certificate Data Page.
ANNUITY UNIT
A unit of measurement used to compute annuity payments from the Subaccounts.
BENEFICIARY
The Beneficiary is as designated on the Participant Enrollment Form unless later
changed by the Participant in writing to Us. See Death Provisions, page 16.
CALENDAR YEAR
Calendar Year begins on January 1 and ends on December 31.
CERTIFICATE
This Certificate describes Your interest as a Participant under the group
annuity contract.
CERTIFICATE DATE
The date Your Certificate is issued, as shown on the Certificate Data Page. It
is the date from which Certificate Years and anniversaries are measured.
CERTIFICATE VALUE
The sum of: (1) Your share of the Subaccounts' Accumulation Unit values and (2)
the value of amounts allocated to the Fixed Account Options.
<PAGE> 6
CERTIFICATE YEAR
A year starting from the Certificate Date in one Calendar Year and ending on the
day preceding the anniversary of such date in the succeeding Calendar Year.
CONTRIBUTION YEAR
A year starting from the date a Purchase Payment is made in one Calendar Year
and ending on the day preceding the anniversary of such date in the succeeding
Calendar Year.
CURRENT INTEREST RATE
The rate(s) of interest declared by Us applicable to allocations of Subsequent
Purchase Payments to the Fixed Account Options. The Current Interest Rate will
not be less than the Minimum Guarantee Rate as shown on the Certificate Data
Page.
DOLLAR COST AVERAGING (DCA)
You may authorize the automatic transfer of amounts, at the interval selected by
You, from the DCA Fixed Account Option(s) to any Subaccount(s). All amounts
allocated to a DCA Fixed Account Option will be transferred out within the
specified DCA Fixed Account period. You may also authorize the automatic
transfer of amounts at regular intervals and specified amounts or percentages
from the 1-Year MVA Fixed Account Option or any of the Subaccounts to any other
Subaccount(s) (other than the source account). The unit values credited and
applied to Your Certificate are determined on the dates of transfer(s). You may
terminate the DCA program at any time. However, upon termination or
annuitization, any amounts remaining in the DCA Fixed Account Options will be
transferred to the 1-Year MVA Fixed Account Option. We reserve the right to
change the terms and conditions of the DCA program at any time.
ERISA PLAN
A Plan subject to the Employee Retirement Income Security Act of 1974, as
amended.
FIXED ACCOUNT OPTIONS
The investment options under this Certificate that are credited with a fixed
rate of interest declared by the Company. All Purchase Payments allocated to the
Fixed Account Options become part of the Company's general asset account. The
term of each Fixed Account Option determines the length of the Guarantee Period.
FIXED ANNUITY
A series of periodic annuity payments of predetermined amounts that do not vary
with investment experience. Such payments are made from the Company's general
asset account.
GUARANTEE PERIOD
The period for which any of the Initial Interest Rate, the Current Interest Rate
or the Renewal Interest Rate is credited to amounts allocated to any Fixed
Account Option. The Guarantee Period for each Initial Interest Rate and Current
Interest Rate of the Fixed Account Options will begin on the date Purchase
Payments are invested in the Fixed Account Option and extend to the end of the
Calendar Year following the end of the term of the Fixed Account Option. The
Guarantee Period for each Renewal Interest Rate will begin at the beginning of a
Calendar Year and extend for the term of the Fixed Account Option.
<PAGE> 7
INITIAL INTEREST RATE
The rate(s) of interest credited to any portion of the first Purchase Payment
allocated to the Fixed Account Option(s) as described in the Accumulation
Provisions section. The Initial Interest Rate(s) for this Certificate is/are
listed on page 4. The Initial Interest Rate may not be less than the Minimum
Guarantee Rate as shown on the Certificate Data Page.
IRC
The Internal Revenue Code of 1986, as amended, or as it may be amended or
superseded, together with all regulations thereunder.
NYSE
New York Stock Exchange. Generally, the close of any NYSE business day is 4:00
PM, Eastern Time. Financial transactions received after the close of any NYSE
business day will be credited with the next NYSE business day's Accumulation
Unit Value for the selected Subaccount.
PARTICIPANT
The person or entity named in the Certificate who is entitled to exercise all
rights and privileges set forth in the Certificate while living.
PAYEE
The person receiving payment of annuity benefits under this Certificate.
PLAN ADMINISTRATOR
The Plan Administrator is the person or entity as set forth on the Certificate
Data Page.
PORTFOLIOS
The variable investment options available under the Certificate in which the
corresponding Subaccount(s) invest.
PURCHASE PAYMENTS
Payments in U.S. currency made by or on behalf of the Participant to the Company
for the Certificate.
RENEWAL INTEREST RATE
The rate(s) of interest declared by Us applicable to transfers from the
Subaccounts into the Fixed Account Options and to amounts previously allocated
to one of the Fixed Account Options wherein the Guarantee Period has expired.
The Renewal Interest Rate may not be less than the Minimum Guarantee Rate as
shown on the Certificate Data Page.
SEPARATE ACCOUNT
A segregated asset account named on the Certificate Data Page. The Separate
Account consists of the Subaccounts, each investing in the shares of the
corresponding Portfolio. The assets of the Separate Account are not comingled
with the general assets and liabilities of the Company. Each Subaccount is not
chargeable with liabilities arising out of any other Subaccount. The value of
amounts allocated to the Subaccounts of the Separate Account is not guaranteed.
<PAGE> 8
SUBACCOUNT
One or more divisions of the Separate Account which invests in shares of the
corresponding Portfolios. The available Subaccounts are shown on page 4.
SUBSEQUENT PURCHASE PAYMENTS
Purchase Payments made after the first Purchase Payment.
VARIABLE ANNUITY
A series of periodic annuity payments which vary in amount according to the
investment experience of one or more Subaccounts, as selected by You.
WE, OUR, US, THE COMPANY
Anchor National Life Insurance Company.
YOU, YOUR
The Participant.
PURCHASE PAYMENT PROVISIONS
PURCHASE PAYMENTS
Purchase Payments are flexible. This means that, subject to Company declared
minimums and maximums and the terms of any applicable Plan, as certified by the
Plan Administrator to Us, You or the Plan Administrator may change the amounts,
frequency or timing of Purchase Payments. Purchase Payments will be allocated to
the Fixed Account Option(s) and Subaccount(s) in accordance with instructions
from You. Purchase Payments resulting from salary reductions and/or employer
contributions are not allowed to be allocated to the DCA Fixed Account Options.
We reserve the right to specify the minimum Purchase Payment that may be
allocated to a Subaccount under the Certificate.
DEFERMENT OF PAYMENTS
We may defer making payments from the Fixed Account Options for up to six (6)
months. Interest, subject to state requirements, will be credited during the
deferral period.
SUSPENSION OF PAYMENTS
We may suspend or postpone any payments from the Subaccounts if any of the
following occur:
(a) the NYSE is closed;
(b) trading on the NYSE is restricted;
(c) an emergency exists such that it is not reasonably practical to dispose
of securities in the Portfolios or to determine the value of their
assets; or
(d) the Securities and Exchange Commission, by order, so permits for the
protection of Participants.
Conditions in (b) and (c) will be decided by or in accordance with rules of the
Securities and Exchange Commission.
<PAGE> 9
SUBSTITUTION OF PORTFOLIO
If: (a) the shares of a Portfolio should no longer be available for investment
by the Separate Account; or (b) in the judgment of the Board of Trustees for the
Trusts, [SunAmerica Series Trust and the Anchor Series Trust], further
investment in the shares of a Portfolio is no longer appropriate in view of the
purpose of the Certificate, then We may substitute shares of another underlying
investment series or Portfolio, for shares already purchased, or to be purchased
in the future by Purchase Payments under the Certificate. No substitution of
securities may take place without prior approval of the Securities and Exchange
Commission and under such requirements as it may impose.
ACCUMULATION PROVISIONS
SEPARATE ACCOUNT ACCUMULATION VALUE
The Separate Account Accumulation Value under the Certificate shall be the sum
of the values of the Accumulation Units held in the Subaccounts for the
Participant.
NUMBER OF ACCUMULATION UNITS
For each Subaccount, the number of Accumulation Units is the sum of each
Purchase Payment and transfer amount allocated to the Subaccount, reduced by
premium taxes, if any:
Divided by
The Accumulation Unit value for that Subaccount for the NYSE business day in
which the Purchase Payment or transfer amount is received.
The number of Accumulation Units will be similarly adjusted for withdrawals,
annuitizations, transfers and charges. Adjustments will be made as of the NYSE
business day in which We receive all requirements for the transaction, as
appropriate.
ACCUMULATION UNIT VALUE (AUV)
The AUV of a Subaccount for any NYSE business day is calculated by subtracting
(2) from (1) and dividing the result by (3) where:
(1) is the total value for the given NYSE business day of the assets
attributable to the Accumulation Units of the Subaccount minus the total
liabilities;
(2) is the cumulative unpaid charge for assumption of Expense Risk,
Distribution Expense and Mortality Risk charges (See CHARGES AND
DEDUCTIONS);
(3) is the number of Accumulation Units outstanding at the end of the given
NYSE business day.
FIXED ACCOUNT ACCUMULATION VALUE
Under the Certificate, the Fixed Account Accumulation Value shall be the sum of
all monies allocated or transferred to the Fixed Account Option(s), reduced by
any applicable premium taxes, plus all interest credited on the Fixed Account
Option(s) during the period that the Certificate has been in effect. This amount
shall be adjusted for withdrawals, annuitizations, transfers and any applicable
Withdrawal Charge. The Fixed Account Accumulation Value shall not be less than
the minimum value required by law in the state where this Certificate is issued.
<PAGE> 10
FIXED ACCOUNT GUARANTEE PERIOD OPTIONS AND INTEREST CREDITING
Any amounts allocated to the Fixed Account Options from the first Purchase
Payment will earn interest at the Initial Interest Rate for the Fixed Account
Option(s) selected for the duration of the Guarantee Period.
Subsequent Purchase Payments allocated to the Fixed Account Options will earn
interest at the Current Interest Rate for the Fixed Account Option(s) selected
for the duration of the Guarantee Period.
Transfers to the Fixed Account Options from the Subaccounts and amounts renewed
into the Fixed Account Options will earn interest at the Renewal Interest Rate
for the Fixed Account Option(s) selected for the duration of the Guarantee
Period.
For thirty (30) days following the date of expiration of a Guarantee Period, You
may renew for the same or any other Guarantee Period at the Renewal Interest
Rate or You may transfer all or a portion of the amount to the Subaccounts. If
You do not specify a Guarantee Period at the time of renewal, We will select the
same Guarantee Period as has just expired, crediting Your Certificate with the
Renewal Interest Rate in effect on the date of expiration of the Guarantee
Period, so long as such Guarantee Period does not extend beyond the Annuity
Date. If a renewal occurs within one year of the latest Annuity Date, We will
credit interest up to the Annuity Date at the Renewal Interest Rate for the
1-Year MVA Fixed Account Option.
If You are participating in the DCA program, interest will be credited from the
date a Purchase Payment is deposited in the selected DCA Fixed Account Option or
the 1-Year MVA Fixed Account Option until the end of the selected DCA Fixed
Account period or the 1-Year MVA Fixed Account Option period. Upon termination
of the DCA program, any amounts remaining in the DCA Fixed Account Option(s)
will be automatically transferred to the 1-Year MVA Fixed Account Option. Such
amounts will earn interest at the Renewal Interest Rate for the 1-Year MVA Fixed
Account Option.
MARKET VALUE ADJUSTMENT (MVA)
Any payments and values based on the 1, 3 or 5 year MVA Fixed Account Options
may be subject to an MVA, the operation of which may result in upward or
downward adjustments in the Certificate Value, if withdrawn, transferred or
annuitized prior to the end of the respective Guarantee Period.
The MVA is applied only if the absolute difference between the Guarantee Period
Interest Rate in effect for the Guarantee Period and the Current Interest Rate
for a new Purchase Payment is greater than 50 basis points. If the MVA is
negative, it may not reduce the Certificate Value below the sum of Purchase
Payments made less withdrawals, accumulated at an effective annual rate of 3%
from the date of receipt or withdrawal to the date of surrender. If the MVA is
positive, the amount added to the Certificate Value may not exceed the amount
that if negative, could be deducted. The MVA will be calculated by multiplying
the amount withdrawn or transferred by the following formula:
<PAGE> 11
(n-t)
(---)
( (1+I) )( 12)
(------------) - 1
((1+J+0.0050))
I = The Guarantee Period interest rate in effect for the Guarantee Period on the
Certificate
J = The Current Interest Rate available for the same Guarantee Period
n = The original term in number of months rounded up to the nearest integer for
the Guarantee Period to the end of the Calendar Year.
t = Time expired in months rounded up to the nearest integer for the Guarantee
Period to the end of the Calendar Year.
(n-t) = The number of months remaining in the Guarantee Period to the end of the
Calendar Year.
There will be no MVA on withdrawals or transfers from the Fixed Account Options
in the following situations: (1) withdrawals under a Withdrawal Charge
Exemption; (2) if the absolute difference between the Guarantee Period Interest
Rate in effect for the Guarantee Period and the Current Interest Rate for a new
Purchase Payment is less than 0.50%; (3) on amounts withdrawn to pay fees or
charges; (4) on amounts withdrawn or transferred from the Fixed Account Options
within thirty (30) days after the end of the Guarantee Period; (5) on
annuitizations; (6) on amounts transferred from a DCA Fixed Account Option; (7)
on amounts transferred under the DCA program from the 1-Year MVA Fixed Account
Option.
CHARGES AND DEDUCTIONS
We will deduct the following charges from the Certificate:
WITHDRAWAL CHARGE
This charge may be deducted upon withdrawal of any portion of the Certificate
Value. See WITHDRAWAL PROVISIONS.
MORTALITY RISK CHARGE
On an annual basis this charge, as shown on the Certificate Data Page, equals a
percentage of the average daily total net asset value of the Subaccounts to
which Your Purchase Payments are allocated. This charge is to compensate Us for
assuming the mortality risks under the Certificate.
EXPENSE RISK CHARGE
On an annual basis this charge, as shown on the Certificate Data Page, equals a
percentage of the average daily total net asset value of the Subaccounts to
which Your Purchase Payments are allocated. This charge is to compensate Us for
assuming the expense risks under the Certificate.
DISTRIBUTION EXPENSE CHARGE
On an annual basis this charge, as shown on the Certificate Data Page, equals a
percentage of the average daily total net asset value of the Subaccounts to
which Your Purchase Payments are allocated. This charge is to compensate Us for
all distribution expenses associated with the Certificate.
<PAGE> 12
TRANSFER PROVISIONS
Prior to the Annuity Date, You may transfer all or part of Your Certificate
Value to any of the Subaccounts or the Fixed Account Options subject to certain
restrictions. We reserve the right to charge a fee for transfers if the number
of transfers exceeds the limit specified by Us. The minimum amount that can be
transferred and the amount that can remain in a Subaccount or a Fixed Account
Option are subject to Company limits. If this Certificate is issued in
connection with an ERISA Plan, the availability of certain Subaccounts or Fixed
Account Options may be limited by the provisions of the ERISA Plan as certified
by the Plan Administrator to Us.
TRANSFERS OF ACCUMULATION AND ANNUITY UNITS BETWEEN SUBACCOUNTS
Prior to the Annuity Date, You may transfer all or a portion of Your Certificate
Value between Subaccounts. A transfer will result in the purchase of
Accumulation Units in a Subaccount and the redemption of Accumulation Units in
the other Subaccount. Transfers will be effected at the next computed
Accumulation Unit Value following Our receipt of Your request for transfer.
Accumulation Unit Values are calculated at the close of each NYSE business day.
After the Annuity Date, You may transfer all or a portion of Your Certificate
Value from one Subaccount to another Subaccount. A transfer will result in the
purchase of Annuity Units in a Subaccount and the redemption of Annuity Units in
the other Subaccount. Transfers will be effected for the last NYSE business day
of the month in which We receive Your request for the transfer.
TRANSFERS OF ACCUMULATION UNITS TO AND FROM THE FIXED ACCOUNT OPTION(S)
Prior to the Annuity Date, You may transfer all or any part of Your Certificate
Value from the Subaccount(s) to any Fixed Account Option(s) other than the DCA
Fixed Account Options or from the Fixed Account Option(s) to the Subaccount(s)
of the Certificate.
After the Annuity Date, transfers into or out of the Fixed Account Option(s) are
not allowed.
WITHDRAWAL PROVISIONS
On or before the Annuity Date and while the Participant is living, You may
withdraw all or part of Your Certificate Value under this Certificate by
informing Us at Our Annuity Service Center. For a full withdrawal, this
Certificate must be returned to Our Annuity Service Center. The minimum amount
that can be withdrawn and the amount remaining after withdrawal are subject to
Company limits.
Without a written notice to the contrary, withdrawals will be deducted from the
Certificate Value in proportion to their allocation among the Fixed Account
Options and the Subaccounts. Withdrawals will be based on values for the NYSE
business day in which the request for withdrawal and the Certificate (in the
case of a full withdrawal), are received at Our Annuity Service Center. Unless
the SUSPENSION OF PAYMENTS or DEFERMENT OF PAYMENTS sections are in effect,
payment of withdrawals will be made within seven calendar days.
<PAGE> 13
WITHDRAWAL CHARGE
Withdrawals of all or a portion of the Certificate Value may be subject to a
Withdrawal Charge as shown in the chart below. The Withdrawal Charge applied to
any withdrawal will depend on how long each Purchase Payment to which the
withdrawal is attributed has been in the Certificate. No Withdrawal Charge is
made on an amount withdrawn which is certified to be a Withdrawal Charge
Exemption.
For the purpose of determining the Withdrawal Charge, a withdrawal will be
attributed to amounts in the following order: (1) Purchase Payments which are
both no longer subject to the Withdrawal Charge and are not yet withdrawn; and
(2) Purchase Payments subject to a Withdrawal Charge. Purchase Payments, when
withdrawn, are assumed to be withdrawn on a first-in-first-out (FIFO) basis.
The Withdrawal Charge will be assessed against the Subaccounts and the Fixed
Account Options in the same proportion as the remaining Certificate Value is
allocated unless You request that the withdrawal come from a particular Fixed
Account Option or Subaccount. If the remaining Certificate Value is insufficient
to cover the Withdrawal Charge, any remaining balance will be deducted from the
withdrawal amount requested.
On the Certificate Date, if You are not retired or separated from service as
explained under the Withdrawal Charge Exemption provision, the following
Withdrawal Charge table applies for the first ten Certificate Years. Withdrawal
Charges do not apply after the tenth Certificate Year.
<TABLE>
<CAPTION>
- ------------------------------------- -----------------------
Number of Years Elapsed Withdrawal Charge as a
Between Purchase Payment Contribution Percentage of Withdrawn
and Date of Withdrawal Purchase Payment
- ------------------------------------- -----------------------
<S> <C>
0 6%
- ------------------------------------- -----------------------
1 6%
- ------------------------------------- -----------------------
2 5%
- ------------------------------------- -----------------------
3 5%
- ------------------------------------- -----------------------
4 4%
- ------------------------------------- -----------------------
5 4%
- ------------------------------------- -----------------------
6+ 0%
- ------------------------------------- -----------------------
</TABLE>
On the Certificate Date, if You are retired or separated from service as
explained under the Withdrawal Charge Exemption provision, the following
Withdrawal Charge table applies for the first ten Certificate Years. In
addition, You may withdraw up to an amount equal to 15% of Your Purchase
Payments without Withdrawal Charges each Certificate Year. You will not receive
the benefit of this free withdrawal in a full surrender and free withdrawals do
not reduce future Withdrawal Charge amounts. Withdrawal Charges do not apply
after the tenth Certificate Year.
<TABLE>
<CAPTION>
- ------------------------------------- -----------------------
Number of Years Elapsed Withdrawal Charge as a
Between Purchase Payment Contribution Percentage of Withdrawn
and Date of Withdrawal Purchase Payment
- ------------------------------------- -----------------------
<S> <C>
0 6%
- ----------------------------------- -----------------------
1 6%
- ----------------------------------- -----------------------
2 5%
- ----------------------------------- -----------------------
3 5%
- ----------------------------------- -----------------------
4 4%
- ----------------------------------- -----------------------
5+ 0%
- ----------------------------------- -----------------------
</TABLE>
<PAGE> 14
WITHDRAWAL CHARGE EXEMPTION
A withdrawal will not be subject to Withdrawal Charges, if the Plan
Administrator (or the Participant if there is no Plan Administrator) certifies
such withdrawal is made to provide Plan benefits to You or Your Beneficiary due
to any of the following events occurring subsequent to the issuance of this
Certificate: (1) death; (2) disability as defined by the Plan but in no event
unless the Participant satisfies the requirements of IRC 72(m)(7); (3) hardship,
as defined by the Plan; (4) normal retirement at or after age 65; or (5)
separation from service for reasons other than retirement.
Separation from service for purposes of the Withdrawal Charge Exemption does not
include (without limiting other events as being or not being a Separation from
Service): (a) any termination of employment in connection with a sale or other
transfer of the assets or business of the employee's then employer while the
employee is thereafter employed by such acquirer or an entity controlling,
controlled by or under common control with such acquirer, (b) any transfer or
other action resulting in employee being employed by any other entity which is
controlling, controlled by or under common control with the same "employer" as
his then employer, (c) any temporary absence or (d) any termination of the
employment relationship resulting from a merger, reorganization, sale,
disposition, or liquidation of all or any part of his then employer's business.
GENERAL PROVISIONS
ENTIRE CONTRACT
The entire contract between You and Us consists of the group annuity contract,
the application, the Participant Enrollment Form as completed by You at the time
of purchase, this Certificate and any attached endorsement(s). An agent cannot
change the terms or conditions of this contract. Any change must be in writing
and approved by Us. Only Our President, Secretary, or one of Our Vice-Presidents
can give Our approval.
MISSTATEMENT OF AGE
If the Age of any Annuitant has been misstated, future annuity payments will be
adjusted using the correct Age, according to Our rates in effect on the date
that annuity payments were determined. Any overpayment from the Fixed Account
Options, plus interest at the rate of 4% per year, will be deducted from the
next payment(s) due. Any underpayment from the Fixed Account Options, plus
interest at the rate of 4% per year, will be paid in full with the next payment
due. Any overpayment from the Subaccounts will be deducted from the next
payment(s) due. Any underpayment from the Subaccounts will be paid in full with
the next payment due.
PROOF OF AGE OR SURVIVAL
The Company may require satisfactory proof of correct Age at any time. If any
payment under this Certificate depends on the Annuitant being alive, the Company
may require satisfactory proof of survival.
<PAGE> 15
CONFORMITY WITH STATE LAWS
The provisions of this Certificate will be interpreted by the laws of the state
in which the Participant Enrollment form was signed or such other state as is
required by law. Any provision which, on the Certificate Date, is in conflict
with the law of such state is amended to conform to the minimum requirements of
such law.
CHANGES IN LAW
If the laws governing this Certificate or the taxation of benefits under the
Certificate change, We reserve the right to amend this Certificate to comply
with these changes.
ASSIGNMENT
You may assign this Certificate before the Annuity Date, but We will not be
bound by an assignment unless it is received by Us in writing. Your rights and
those of any other person referred to in this Certificate will be subject to the
assignment. Certain assignments may be taxable. We do not assume any
responsibility for the validity or tax consequences of any assignment.
CLAIMS OF CREDITORS
To the extent permitted by law, no right or proceeds payable under this
Certificate will be subject to claims of creditors or legal process.
PREMIUM TAXES OR OTHER TAXES
The Company may deduct from Your Certificate Value any premium tax or other
taxes payable to a state or other government entity, if applicable. Should We
advance any amount so due, We are not waiving any right to collect such amount
at a later date. The Company will deduct any withholding taxes required by
applicable law.
WRITTEN NOTICE
Any notice We send to You will be sent to Your address shown in the Participant
Enrollment Form unless You request otherwise. Any written request or notice to
Us must be sent to Our Annuity Service Center, as specified on the Certificate
Data Page.
PERIODIC REPORTS
During each Certificate Year, We will send You quarterly statements of the
account activity of the Certificate as well as confirmation reports after each
financial transaction. The statement will include all transactions which have
occurred during the quarterly accounting period shown on the statement.
NONPARTICIPATING
This Certificate does not share in Our surplus.
<PAGE> 16
DEATH PROVISIONS
DEATH OF PARTICIPANT BEFORE THE ANNUITY DATE. We will pay a death benefit to the
Beneficiary upon Our receiving all required documentation including: (a) due
proof that any Participant died before the Annuity Date; and (b) an election
form selecting the payment option from the options listed below. If no election
is received within 60 days of our receipt of due proof of death, the death
benefit will be paid in accordance with option 1 below. The Beneficiary must
select one of the following options:
1. Immediately collect the death benefit in a lump sum
payment. If a lump sum payment is elected, payment will be
in accordance with any applicable laws and regulations
governing payments and death; or
2. Collect the death benefit in the form of one of the
Annuity Payment Options. The payments must be over the
life of the Beneficiary or over a period not extending
beyond the life expectancy of the Beneficiary. Payments
under this option must commence within one year after the
Participant's death, otherwise, the death benefit will be
paid in accordance with option 1 above; or
3. If the Beneficiary is the Participant's spouse, the
Beneficiary may elect to become the Participant and
continue the Certificate in force. If this option is
elected, no death benefit is paid. Upon the new
Participant's subsequent death, the entire interest must
be distributed immediately under option 1 or 2 above.
In any event, the entire interest in the Certificate will be distributed within
five years from the date of death of the Participant.
DUE PROOF OF DEATH
Due Proof of Death means:
1. a certified copy of a death certificate; or
2. a certified copy of a decree of a court of competent
jurisdiction as to the finding of death; or
3. a written statement by a medical doctor who attended the
deceased Participant at the time of death; or
4. any other proof satisfactory to Us.
AMOUNT OF DEATH BENEFIT
The amount of the death benefit is the greater of:
1. the Certificate Value at the end of the NYSE business day during which
We receive, at Our Annuity Service Center, due proof of the
Participant's death and an election of the type of payment to be made;
Or
2. Purchase Payments less any previous withdrawals including all fees and
charges applicable to such withdrawals of the Certificate Value.
<PAGE> 17
DEATH OF PARTICIPANT OR ANNUITANT ON OR AFTER THE ANNUITY DATE. If any
Participant or Annuitant dies on or after the Annuity Date and before the entire
interest in the Certificate has been distributed, We will pay the remaining
portion of the interest of the Certificate under the annuity payment option
being used on the date of death. For further information pertaining to death of
the Annuitant, see ANNUITY PAYMENT OPTIONS.
BENEFICIARY
The Beneficiary is as designated on the Participant Enrollment Form unless later
changed by the Participant. While: (a) the Participant is living; and (b) before
the Annuity Date, the Participant may change the Beneficiary by written notice
in a form satisfactory to Us. The change will take effect on the date We record
the proper notice subject to any payments We have made. If two or more persons
are named: (a) those surviving the Participant will share equally unless
otherwise stated; and (b) the Beneficiaries must elect to receive their
respective portions of the death benefit according to the options listed under
DEATH OF PARTICIPANT BEFORE THE ANNUITY DATE. If the Annuitant survives the
Participant, and there are no surviving Beneficiaries, the Annuitant will be
deemed the Beneficiary.
If the Participant is also the Annuitant and there are no surviving
Beneficiaries at the death of the Participant, the death benefit will be paid to
the estate of the Participant in accordance with option 1, under DEATH OF
PARTICIPANT BEFORE THE ANNUITY DATE.
ANNUITY PROVISIONS
ANNUITY DATE
The Participant selects an Annuity Date (the date on which annuity payments are
to begin) at the time of application. The Participant may change the Annuity
Date at any time, at least seven days prior to the Annuity Date, by written
notice to the Company at its Annuity Service Center. The Annuity Date must
always be the first day of the calendar month and must be at least two years
after the Certificate Date, but not beyond the Participant's 75th birthday,
except as otherwise permitted by law. We reserve the right to waive the two year
waiting period. If no Annuity Date is selected, the Annuity Date will be the
latest Annuity Date, as set by the Company.
PAYMENTS TO PARTICIPANT
Unless You request otherwise, We will make annuity payments to You. If You want
the annuity payments to be made to some other Payee, We will make such payments
subject to receipt of a written request filed at the Annuity Service Center no
later than thirty (30) days before the due date of the first annuity payment.
FIXED ANNUITY PAYMENTS
If a Fixed Annuity payment option has been elected, the proceeds payable under
this Certificate less any applicable premium taxes, shall be applied to the
payment of the Fixed Annuity payment option elected at rates which are at least
equal to the annuity rates based upon the applicable tables in the Certificate.
In no event will the Fixed Annuity payments be changed once they begin.
<PAGE> 18
AMOUNT OF FIXED ANNUITY PAYMENTS
The amount of each Fixed Annuity payment will be determined by applying the
portion of the Certificate Value allocated to Fixed Annuity payments less any
applicable premium taxes to the annuity table applicable to the Fixed Annuity
payment option chosen.
AMOUNT OF VARIABLE ANNUITY PAYMENTS
(a) FIRST VARIABLE ANNUITY PAYMENT: The dollar amount of the first Variable
Annuity payment will be determined by applying the portion of the
Certificate Value allocated to the Subaccount, less any applicable
premium taxes, to rates which are at least equal to the annuity rates
based upon the annuity table applicable to the Variable Annuity payment
option chosen. If the Certificate Value is allocated to more than one
Subaccount, the value of Your interest in each Subaccount is applied
separately to the Variable Annuity payment option table to determine the
amount of the first annuity payment attributable to each Subaccount.
(b) NUMBER OF VARIABLE ANNUITY UNITS: The number of Annuity Units for each
applicable Subaccount is the amount of the first annuity payment
attributable to that Subaccount divided by the value of the applicable
Annuity Unit for that Subaccount as of the Annuity Date. The number will
not change as a result of investment experience.
(c) VALUE OF EACH VARIABLE ANNUITY UNIT: The value of an Annuity Unit may
increase or decrease from one month to the next. For any month, the
value of an Annuity Unit of a particular Subaccount is the value of that
Annuity Unit as of the last NYSE business day of the preceding month,
multiplied by the Net Investment Factor for that Subaccount for the last
NYSE business day of the current month.
The Net Investment Factor for any Subaccount for a certain month is
determined by dividing (1) by (2) where:
(1) is the Accumulation Unit Value of the Subaccount
determined as of the last business day at the end of that
month, and
(2) is the Accumulation Unit Value of the Subaccount
determined as of the last business day at the end of the
preceding month.
The result is then multiplied by a factor that neutralizes the assumed
investment rate of 3.5%.
(d) SUBSEQUENT VARIABLE ANNUITY PAYMENTS: After the first Variable
Annuity payment, payments will vary in amount according to the
investment performance of the applicable Subaccount(s) to which Your
Purchase Payments are allocated. The amount may change from month to
month. The amount of each subsequent payment for each Subaccount is :
The number of Annuity Units for each Subaccount as determined for the first
annuity payment
Multiplied by
The value of an Annuity Unit for that Subaccount at the end of the month
immediately preceding the month in which payment is due.
<PAGE> 19
We guarantee that the amount of each Variable Annuity payment will not be
affected by variations in expenses or mortality experience.
ANNUITY PAYMENT OPTIONS
During the Annuitant's life, upon written election and the return of this
Certificate to the Company at its Annuity Service Center, the Certificate Value
may be applied to provide one of the following options or any annuity payment
option that is mutually agreeable. After two years from the Certificate Date,
and prior to the Annuity Date, You can choose one of the options described
below. If no option has been selected by the Annuity Date, You will
automatically receive option 4, below, with 120 monthly payments guaranteed.
OPTIONS 1 & 1v - LIFE ANNUITY, LIFETIME PAYMENTS GUARANTEED
Payments payable to the Payee during the lifetime of the Annuitant. No further
payments are payable after the death of the Annuitant.
OPTIONS 2 & 2v - JOINT AND SURVIVOR LIFE ANNUITY
Payments payable to the Payee during the lifetime of the Annuitant and during
the lifetime of a designated second person. No further payments are payable
after the deaths of both the Annuitant and the designated second person.
OPTIONS 3 & 3v - JOINT AND SURVIVOR LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR
120 MONTHS
Payments are payable to the Payee during the lifetime of the
Annuitant and during the lifetime of a designated second person. If, at the
death of the survivor, payments have been made for less than 120 months, the
remaining guaranteed annuity payments will be continued to the Beneficiary.
OPTIONS 4 & 4v - LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 120, 180 OR 240
MONTHS
Payments payable to the Payee during the lifetime of the Annuitant. If,
at the death of the Annuitant, payments have been made for less than the 120,
180 or 240 months, as selected at the time of annuitization, the remaining
guaranteed annuity payments will be continued to the Beneficiary.
OPTIONS 5 & 5v - FIXED PAYMENTS FOR A SPECIFIED PERIOD CERTAIN
Payments payable to the Payee for any specified period of time for five (5)
years or more, but not exceeding thirty (30) years, as selected at the time of
annuitization. The selection must be made for full twelve month periods. In the
event of death of the Annuitant, any remaining annuity payments will be
continued to the Beneficiary.
<PAGE> 20
FIXED ANNUITY PAYMENT OPTIONS TABLE
BASIS OF COMPUTATION
The actuarial basis for the Table of Annuity Rates is the 1983a Annuity
Mortality Table, with equal mortality distribution between male and female, with
projection and a guaranteed interest rate of 3%. The mortality table is
projected using Projection Scale G factors, assuming annuitization in the year
2000. The Fixed Annuity Payment Options Table does not reflect any applicable
premium tax.
OPTIONS 1 & 4 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(Monthly installments for ages not shown will be furnished upon request.)
<TABLE>
<CAPTION>
OPTION 1 OPTION 4 OPTION 4 OPTION 4
LIFE ANNUITY LIFE ANNUITY LIFE ANNUITY
AGE OF (W/120 PAYMENTS (W/180 PAYMENTS (W/240 PAYMENTS
ANNUITANT LIFE ANNUITY GUARANTEED) GUARANTEED GUARANTEED)
<S> <C> <C> <C> <C>
55 4.04 4.00 3.96 3.90
56 4.11 4.08 4.03 3.96
57 4.19 4.15 4.10 4.02
58 4.28 4.23 4.17 4.09
59 4.37 4.32 4.25 4.15
60 4.47 4.41 4.33 4.22
61 4.57 4.50 4.42 4.29
62 4.68 4.61 4.50 4.36
63 4.80 4.71 4.59 4.43
64 4.93 4.82 4.69 4.50
65 5.07 4.94 4.79 4.57
66 5.21 5.07 4.89 4.64
67 5.37 5.20 4.99 4.72
68 5.53 5.34 5.10 4.79
69 5.71 5.48 5.20 4.86
70 5.90 5.63 5.31 4.92
71 6.11 5.79 5.43 4.99
72 6.33 5.95 5.54 5.05
73 6.57 6.13 5.65 5.11
74 6.82 6.30 5.76 5.16
75 7.10 6.48 5.87 5.21
76 7.39 6.67 5.97 5.26
77 7.71 6.86 6.07 5.30
78 8.05 7.05 6.17 5.34
79 8.42 7.24 6.26 5.37
80 8.81 7.44 6.34 5.40
81 9.24 7.63 6.42 5.42
82 9.70 7.82 6.48 5.44
83 10.19 8.00 6.55 5.46
84 10.72 8.17 6.60 5.47
85 11.29 8.34 6.65 5.49
</TABLE>
<PAGE> 21
OPTION 2 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
JOINT & 100% SURVIVOR LIFE ANNUITY
<TABLE>
<CAPTION>
AGE OF
ANNUITANT AGE OF ANNUITANT
--------- ----------------
55 60 65 70 75 80 85
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.54 3.66 3.77 3.85 3.92 3.97 4.00
60 3.66 3.83 3.99 4.14 4.25 4.34 4.39
65 3.77 3.99 4.23 4.45 4.65 4.80 4.91
70 3.85 4.14 4.45 4.78 5.10 5.37 5.57
75 3.92 4.25 4.65 5.10 5.57 6.02 6.40
80 3.97 4.34 4.80 5.37 6.02 6.70 7.35
85 4.00 4.39 4.91 5.57 6.40 7.35 8.35
</TABLE>
OPTION 3 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
JOINT & 100% SURVIVOR LIFE ANNUITY (W/120 PAYMENTS GUARANTEED)
<TABLE>
<CAPTION>
AGE OF
ANNUITANT AGE OF ANNUITANT
--------- ----------------
55 60 65 70 75 80 85
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.54 3.66 3.76 3.85 3.91 3.96 3.98
60 3.66 3.83 3.99 4.13 4.24 4.32 4.37
65 3.76 3.99 4.22 4.44 4.63 4.77 4.86
70 3.85 4.13 4.44 4.76 5.06 5.31 5.47
75 3.91 4.24 4.63 5.06 5.50 5.89 6.18
80 3.96 4.32 4.77 5.31 5.89 6.46 6.92
85 3.98 4.37 4.86 5.47 6.18 6.92 7.55
</TABLE>
OPTION 5 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
FIXED PAYMENT FOR SPECIFIED PERIOD
<TABLE>
<CAPTION>
NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY
OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
10 9.61 17 6.23 24 4.84
11 8.86 18 5.96 25 4.71
5 17.91 12 8.24 19 5.73 26 4.59
6 15.14 13 7.71 20 5.51 27 4.47
7 13.16 14 7.26 21 5.32 28 4.37
8 11.68 15 6.87 22 5.15 29 4.27
9 10.53 16 6.53 23 4.99 30 4.18
</TABLE>
<PAGE> 22
VARIABLE ANNUITY PAYMENT OPTIONS TABLE
BASIS OF COMPUTATION
The actuarial basis for the Table of Annuity Rates is the 1983a Annuity
Mortality Table, with equal mortality distribution between male and female, with
projection and a guaranteed interest rate of 3.5%. The mortality table is
projected using Projection Scale G factors, assuming annuitization in the year
2000. The Variable Annuity Payment Options Table does not reflect any applicable
premium tax.
OPTIONS 1v & 4v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(Monthly installments for ages not shown will be furnished upon request.)
<TABLE>
<CAPTION>
OPTION 1v OPTION 4v OPTION 4v OPTION 4v
LIFE ANNUITY LIFE ANNUITY LIFE ANNUITY
AGE OF (W/120 PAYMENTS (W/180 PAYMENTS (W/240 PAYMENTS
ANNUITANT LIFE ANNUITY GUARANTEED) GUARANTEED) GUARANTEED)
<S> <C> <C> <C> <C>
55 4.33 4.30 4.25 4.19
56 4.41 4.37 4.32 4.25
57 4.49 4.44 4.39 4.31
58 4.57 4.52 4.46 4.37
59 4.66 4.61 4.53 4.43
60 4.76 4.70 4.61 4.50
61 4.86 4.79 4.70 4.56
62 4.98 4.89 4.78 4.63
63 5.09 5.00 4.87 4.70
64 5.22 5.11 4.96 4.77
65 5.36 5.22 5.06 4.84
66 5.50 5.35 5.16 4.91
67 5.66 5.48 5.26 4.98
68 5.83 5.61 5.36 5.05
69 6.00 5.76 5.47 5.12
70 6.20 5.91 5.58 5.18
71 6.40 6.06 5.69 5.25
72 6.62 6.23 5.80 5.31
73 6.86 6.39 5.90 5.36
74 7.12 6.57 6.01 5.42
75 7.39 6.75 6.12 5.46
76 7.69 6.93 6.22 5.51
77 8.01 7.12 6.32 5.55
78 8.35 7.31 6.41 5.58
79 8.72 7.50 6.50 5.62
80 9.11 7.69 6.58 5.64
81 9.54 7.88 6.66 5.67
82 10.00 8.07 6.72 5.69
83 10.50 8.24 6.79 5.70
84 11.03 8.42 6.84 5.72
85 11.60 8.58 6.89 5.73
</TABLE>
<PAGE> 23
OPTION 2v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
JOINT & 100% SURVIVOR LIFE ANNUITY
<TABLE>
<CAPTION>
AGE OF
ANNUITANT AGE OF ANNUITANT
--------- ----------------
55 60 65 70 75 80 85
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.83 3.95 4.05 4.14 4.21 4.26 4.29
60 3.95 4.11 4.27 4.42 4.53 4.62 4.68
65 4.05 4.27 4.50 4.73 4.92 5.08 5.19
70 4.14 4.42 4.73 5.05 5.37 5.64 5.85
75 4.21 4.53 4.92 5.37 5.84 6.29 6.67
80 4.26 4.62 5.08 5.64 6.29 6.97 7.62
85 4.29 4.68 5.19 5.85 6.67 7.62 8.61
</TABLE>
OPTION 3v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
JOINT & 100% SURVIVOR LIFE ANNUITY (W/120 PAYMENTS GUARANTEED)
<TABLE>
<CAPTION>
AGE OF
ANNUITANT AGE OF ANNUITANT
--------- ----------------
55 60 65 70 75 80 85
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.83 3.95 4.05 4.14 4.20 4.25 4.27
60 3.95 4.11 4.27 4.41 4.52 4.60 4.65
65 4.05 4.27 4.50 4.72 4.91 5.05 5.14
70 4.14 4.41 4.72 5.03 5.33 5.58 5.75
75 4.20 4.52 4.91 5.33 5.77 6.16 6.45
80 4.25 4.60 5.05 5.58 6.16 6.72 7.17
85 4.27 4.65 5.14 5.75 6.45 7.17 7.80
</TABLE>
OPTION 5v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
PAYMENT FOR SPECIFIED PERIOD
<TABLE>
<CAPTION>
NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY
OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
10 9.83 17 6.47 24 5.09
11 9.09 18 6.20 25 4.96
5 18.12 12 8.46 19 5.97 26 4.84
6 15.35 13 7.94 20 5.75 27 4.73
7 13.38 14 7.49 21 5.56 28 4.63
8 11.90 15 7.10 22 5.39 29 4.53
9 10.75 16 6.76 23 5.24 30 4.45
</TABLE>
<PAGE> 24
ANCHOR NATIONAL LIFE INSURANCE COMPANY
A STOCK COMPANY LOS ANGELES, CALIFORNIA
ALLOCATED FIXED AND
VARIABLE GROUP ANNUITY CERTIFICATE
Nonparticipating
<PAGE> 1
Exhibit 4.(c)
ANCHOR NATIONAL LIFE INSURANCE COMPANY
TAX-SHELTERED ANNUITY ENDORSEMENT
This Endorsement is part of the Certificate to which it is attached and, through
such attachment, part of The Group Annuity Contract (the "Contract") of which
the Certificate is part. The Certificate, with this Endorsement, is issued as a
tax sheltered annuity under Section 403(b) of the Internal Revenue Code of 1986,
as amended (together with applicable regulations, the IRC). The Certificate may
be used with an arrangement not subject to the Employee Retirement Income
Security Act of 1974, as amended (together with applicable regulations, "ERISA")
or an arrangement that is subject to ERISA (an "ERISA Plan").
The Certificate and Contract may be used with an arrangement that is not an
ERISA Plan because the arrangement satisfies the requirements of ERISA
Regulation 2510.3-2(f) as not being established or maintained by an employer (a
"Regulatory Non-ERISA Arrangement"). If the Contract and Certificate have been
issued in connection with a Regulatory Non-ERISA Arrangement, it is so indicated
on the Certificate Data Page and Payments will be treated as not being subject
to ERISA. In such event, the Contractholder shall merely hold this Contract in
its name and all rights under the Contract shall be enforceable solely by the
Participant, a Beneficiary of the Participant or by an authorized representative
of such Participant or Beneficiary.
This Certificate and Contract may also be used with an arrangement that is not
an ERISA Plan because it is exempt under Section 4 (b) of ERISA as a
governmental or non-electing church plan (a "Statutory Non-ERISA Plan"). If the
Contract and Certificate have been issued in connection with a Statutory
Non-ERISA Plan, it is indicated on the Certificate Data Page and Payments will
be treated as not being subject to ERISA. The Certificate Data Page will also
indicate whether the Statutory Non-ERISA Plan has employer non-salary reduction
contributions, a plan document and a Plan Administrator. If it has such
contributions, a plan document and a Plan Administrator, it, along with any
ERISA Plan, will be referred to as a "Plan" in this Endorsement. If it does not,
it will not be included within the meaning of a Plan.
Notwithstanding any provision contained therein to the contrary, the Certificate
to which this Endorsement is attached is amended as follows:
CONTRACTHOLDER, PARTICIPANT AND ANNUITANT
1. The Contractholder must be an organization described in IRC Section
403(b)(1)(A) or a Trustee serving as the nominal holder of the Contract.
The term "Employee" or "Participant", as used in this Endorsement, shall
mean the individual Employee (including a former employee, beneficiaries of
a deceased employee and any alternate Payee under qualified Domestic
Relations Orders as and to the extent applicable) for whose benefit an
organization described in IRC Section 403(b)(1)(A) has established an
annuity arrangement under IRC Section 403(b). Such Employee shall be the
Annuitant and the Participant.
<PAGE> 2
If the Certificate is issued to an organization described in IRC Section
403(b)(1)(A) in connection with a Plan and We are notified in writing,
employees of entities within the Contractholder's control group, with the
meaning of IRC Section 414(b) or (c), covered by the Plan and which are
organizations described in Section 403(b)(1)(A) may also be covered under
this Certificate(a "Related Entity").
The Annuitant cannot be changed, except as otherwise permitted under the
IRC. A joint Participant cannot be named. All distributions made while the
Employee is alive must be made to the Employee. The entire interest of the
Employee in the Certificate is for the exclusive benefit of the Employee
and his or her beneficiaries as such and each Employee shall have a
separate account which is separately record kept and represented by the
Certificate.
The Plan Administrator for a Plan shall be the Contractholder unless We are
notified otherwise in writing by the Contractholder. The Plan Year for a
Plan shall be the calendar year unless We are notified otherwise in writing
by the Plan Administrator.
NONTRANSFERABLE
2. The interest of the Employee in the Certificate is non-transferable within
the meaning of IRC Section 401(g). In particular, such interest may not be
sold, assigned, discounted, or pledged as collateral for a loan or as
security for the performance of any obligation or for any other purpose to
any person other than Us. To the extent permitted by law no amount payable
under this Certificate shall be subject to legal process or attachment for
payment of any claims against any Participant. The interest of the Employee
in the Certificate except as either (a) provided by law, or (b) if issued
in connection with a Plan, with regard to non-salary reduction
contributions, is non-forfeitable.
PAYMENTS
3. Purchase payments ("Payments"), must be made by an organization described
in IRC Section 403(b)(1)(A), except in the case of rollover contributions
under IRC Sections 403(b)(8) and 408(d)(3), or a nontaxable transfer
pursuant to Revenue Ruling 90-24 from another contract qualifying under IRC
Section 403(b) or a custodial account qualifying under IRC Section
403(b)(7) (the "Exception Payments"). Payments may be either Employer
contributions or salary reduction contributions. No after tax contributions
are permitted to be made under this Certificate.
If this Certificate is used in connection with a Plan, Exception Payments
may be made only to the extent permitted by the Plan. Unless, and until We
are notified in writing otherwise by the Plan Administrator, We shall be
entitled to assume that all Exception Payments are permitted by the Plan.
<PAGE> 3
The Employee must be an employee of the Contractholder or a Related Entity
with regard to salary reduction or Employee contributions except that, if
the Contractholder is a Trustee, salary reduction and Employer
contributions may be for any employee of an organization described in IRC
Section 403(b)(1)(A). Exception payments may be made with regard to any
amounts originating from an IRC Section 403(b) arrangement to the extent
permitted by law. Payments made pursuant to a salary reduction agreement
shall be limited to the extent provided in IRC Section 402(g). Payments
shall not exceed the limitations on contributions under IRC Section
403(b)(2) and IRC Section 415. All payments must be in cash.
To the extent Payments are in excess of the amounts permitted under IRC
Sections 402(g), 415, or 403(b), We may distribute amounts equal to such
excess as permitted by applicable law, including but not limited to
Treasury Regulation Section 1.415-6(b)(6)(iv), provided that, if the
Certificate is used in connection with a Plan, such amounts shall be
distributed only upon the written direction of the Plan Administrator.
If this Certificate is not used in connection with a Plan, pursuant to
Treasury Regulation Section 1.415-6(b)(6)(iv), if as a result of the
allocation of forfeitures, reasonable error in estimating an Employee's
annual compensation, a reasonable error in determining the amount of
elective deferrals (within the meaning of IRC Section 402(g)(3)) that may
be made with respect to any individual under the limits of IRC Section 415,
or under other limited facts and circumstances that the Commissioner of the
Internal Revenue Service finds justify the availability of the rules of the
Section, the annual additions for an Employee would exceed the limitation
of Section 415 applicable to the Employee, the excess payments (together
with earnings thereon) shall upon the written request of the Employee be
distributed to the Employee.
If the Employee notifies Us in writing prior to March 1 following the close
of the Employee's tax year of any excess deferrals available under IRC
Section 402(g) made by him or her to the Certificate, We will use
reasonable efforts to distribute such amounts (and income allocable to that
amount) to the Employee by April 15, provided that, if this Certificate is
used in connection with a Plan, any notice must be given to Us in writing
by the Plan Administrator and not the Employee.
In addition, Payments are further limited as otherwise provided in this
Endorsement. Any minimum required Payment set forth in the Certificate or
Group Annuity Contract shall not apply.
Any Exception Payment made pursuant to Revenue Ruling 90-24 shall be
treated as (a) salary reduction contributions made after December 31, 1988
for purposes of the limitations on withdrawals under Sections 9 and 10 of
the Endorsement unless such amounts were not prior to transfer subject to
the limitations of IRC Sections 403(b) (11) or
<PAGE> 4
403(b)(7) and We are provided in a form satisfactory to Us prior to such
Exception Payment being made to Us both evidence of such amounts not being
subject to such limitation and a record of the amount and type of
contribution, and any income thereon, which was not subject to such
limitations and (b) made after December 1, 1986, unless such amounts were
accrued as of December 31, 1986 and We are provided in a form satisfactory
to Us prior to such Exception Payment being made to Us both evidence of
such amounts being accrued as of December 31, 1986 and a record of the
information required by Proposed Treasury Regulation 1.403(b)-2 Q&A-2.
With regard to any Exceptions Payments, We may require proof that such
amounts meet the requirements of the IRC and the applicable rules and
regulations thereunder.
REQUIRED BEGINNING DATE
4. The Employee's entire interest in the Certificate shall be distributed as
required under IRC Section 403(b)(l0), including the requirement that
payments to persons other than the Employee are incidental.
Except as otherwise provided by law, the term "required beginning date" as
used in this Endorsement means April 1 of the calendar year following the
later of (1) the calendar year in which the Employee attains age 70-1/2, or
(2) the calendar year in which the Employee retires. However, the required
beginning date means April 1 of the calendar year following the calendar
year in which the Employee attains age 70-1/2 for an Employee who:
(a) is a 5% owner (as defined in IRC Section 416) of the organization
described in section 1 of this Endorsement with respect to the plan
year ending in the calendar year in which the Employee attains age
70-1/2; and
(b) is not in a governmental plan or a church plan (as defined in IRC
Section 401(a)(9)(C)).
Notwithstanding the foregoing, for amounts accrued as of December 31, 1986,
"required beginning date" means, except as otherwise provided by law, the
later of the foregoing or the Employee's attainment of age 75.
DISTRIBUTIONS DURING EMPLOYEE'S LIFE
5. Unless otherwise permitted under applicable law, and subject to the other
provisions of this Endorsement, the Employee's entire interest shall be
distributed no later than the required beginning date, or shall be
distributed, beginning no later than the required beginning date, over (a)
the life of the Employee, or the joint lives of the Employee and an
individual who is his or her designated beneficiary (within the meaning of
IRC Section 401(a)(9)), or (b) a period not extending beyond the life
expectancy of the Employee or the joint life and last survivor expectancy
of the Employee and the designated beneficiary, as required by law.
<PAGE> 5
If the Employee's interest is to be distributed over a period greater than
one year, then the amount to be distributed by December 31 of each year
(including the year in which the required beginning date occurs) shall be
made in accordance with the requirements of IRC Section 401(a)(9),
including the incidental death benefit requirements of IRC Section
401(a)(9)(G) and the minimum distribution incidental benefit requirement of
Proposed Treasury Regulation Section 1.401 (a)(9)-2.
DISTRIBUTIONS AFTER EMPLOYEE'S DEATH
6. Unless otherwise permitted under applicable law, and subject to the other
provisions of this Endorsement, if the Employee dies on or after the
required beginning date (or if distributions have begun before the required
beginning date as irrevocable annuity payments), the remaining portion of
the Employee's interest (if any) shall be distributed at least as rapidly
as under the method of distribution in effect as of the Employee's death.
Unless otherwise permitted under applicable law, if the Employee dies
before the required beginning date and an irrevocable annuity distribution
has not begun, the Employee's entire interest will be distributed by
December 31 of the calendar year containing the fifth anniversary of the
Employee's death, except that:
(a) if the interest is payable to an individual who is the Employee's
designated beneficiary, the designated beneficiary may elect to
receive the entire interest over the life of the designated
beneficiary or over a period not extending beyond the life
expectancy of the designated beneficiary, commencing on or before
December 31 of the calendar year immediately following the calendar
year in which the Employee died; or
(b) if the designated beneficiary is the Employee's surviving spouse,
the surviving spouse may elect to receive the entire interest in
equal or substantially equal payments over the life of the surviving
spouse or over a period not extending beyond the life expectancy of
the surviving spouse, commencing at any date prior to the later of:
(i) December 31 of the calendar year immediately following the
calendar year in which the Employee died, and
(ii) December 31 of the calendar year in which the Employee would
have attained age 70-1/2.
If the surviving spouse dies before distributions begin, the limitations of
this section 6 (without regard to this provision (b)) shall be applied as
if the surviving spouse were the Employee.
<PAGE> 6
An irrevocable election of the method of distribution by a designated
beneficiary who is the surviving spouse must be made no later than the
earlier of December 31 of the calendar year containing the fifth
anniversary of the Employee's death or the date distributions are required
to begin pursuant to provision (b) above. If no election is made, the
entire interest will be distributed in accordance with the method of
distribution in provision (b) above.
An irrevocable election of the method of distribution by a designated
beneficiary who is not the surviving spouse must be made no later than
December 31 of the calendar year immediately following the calendar year in
which the Employee died. If no such election is made, the entire interest
will be distributed by December 31 of the calendar year containing the
fifth anniversary of the Employee's death.
Subject to Section 15 of this Endorsement, if the Employee has not
designated a Beneficiary, his or her Beneficiary shall be his or her
estate.
LIFE EXPECTANCY CALCULATIONS
7. Life expectancies will be calculated in accordance with the applicable
requirements of the IRC and will be computed by use of the expected return
multiples in Tables V and VI of Section 1.72-9 of the Income Tax
Regulations.
If benefits under the Certificate are payable in accordance with an Annuity
Payment Option provided under the Certificate, life expectancy shall not be
recalculated. If benefits are payable under an alternate form acceptable to
Us, life expectancies shall not be recalculated unless annual
recalculations are elected at the time distributions are required to begin
(a) by the Employee, or (b) for purposes of distributions beginning after
the Employee's death, by the surviving spouse; in either case in a manner
acceptable to Us. Such an election shall be irrevocable as to the Employee
or the surviving spouse, and shall apply to all subsequent years.
The life expectancy of a non-spouse designated beneficiary (a) may not be
recalculated, and (b) shall be calculated using the attained age of such
designated beneficiary during the calendar year in which distributions are
required to begin pursuant to this Endorsement. Payments for any subsequent
calendar year shall be calculated based on such life expectancy reduced by
one for each calendar year which has elapsed since the calendar year in
which life expectancy was first calculated.
ANNUITY PAYMENT OPTIONS
8. All Annuity Payment Options under the Certificate must meet the
requirements of IRC Section 403(b)(10), including the requirement that
payments to persons other than the Employee are incidental. The provisions
of this Endorsement reflecting the requirements of IRC Sections 401(a)(9)
and 403(b)(10) override any Annuity Payment Option, systematic withdrawal
plan or other settlement options which is inconsistent with such
requirements.
<PAGE> 7
If a guaranteed period of payments is chosen under an Annuity Payment
Option, the length of the period over which the guaranteed payments are to
be made must not exceed the shorter of (1) the Employee's life expectancy,
or if a Joint Annuitant is named, the joint and last survivor expectancy of
the Employee and the Joint Annuitant, and (2) the applicable maximum period
under Section 1.401(a)(9)-2 of the Proposed Income Tax Regulations.
All payments made under a joint and survivor Annuity Payment Option after
the Employee's death while the Joint Annuitant is alive must be made to the
Joint Annuitant. Payments must be made in periodic payments at intervals of
no longer than one year. In addition, payments must either be
non-increasing or may increase only as provided in Q&A F-3 of Section
1.401(a)(9)-l of the Proposed Income Tax Regulations.
WITHDRAWAL OF CONTRIBUTIONS
9. Withdrawals and other distributions attributable to contributions made
pursuant to a salary reduction agreement after December 31, 1988, and the
earnings on such contributions and earnings on the salary reduction
contributions and earnings thereon held on December 31, 1988, shall not be
paid unless the Employee has reached age 59-1/2, separated from service,
died, become disabled (within the meaning of IRC Section 72(m)(7)) or
incurred a hardship; provided that amounts permitted to be distributed in
the event of hardship shall be limited to actual salary deferral
contributions (excluding earnings thereon); and provided further that
amounts may be distributed pursuant to a qualified domestic relations order
to the extent permitted by IRC Section 414(p). Code Section 72(m)(7)
provides that an individual shall be considered disabled if he is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result
in death or to be of long-continued and indefinite duration. In addition to
the foregoing, if the Certificate is used in connection with a Plan,
withdrawals and other distributions are not permitted except in accordance
with the Plan terms as certified in writing to Us by the Plan Administrator
and a certification of the Plan Administrator that such terms and the above
requirement have been satisfied.
WITHDRAWAL OF CUSTODIAL ACCOUNT CONTRIBUTIONS
10. Payments made by a nontaxable transfer from a custodial account qualifying
under IRC Section 403(b)(7) (or amounts attributable to such an account),
will not, except to the extent otherwise permitted by the IRC, be paid or
made available before the Employee dies, attains age 59-1/2, separates from
service, becomes disabled (within the meaning of IRC Section 72(m)(7), as
defined in Section 9 above), or in the case of such amounts attributable to
contributions made pursuant to a salary reduction agreement, encounters
financial hardship; provided, that such amounts permitted to be paid or
made available in the event of financial hardship shall be limited to
amounts attributable to actual salary deferral contributions (excluding
earnings thereon); and provided further, that amounts may be distributed
pursuant to a qualified domestic relations order to the extent permitted
<PAGE> 8
by IRC Section 414(p). Section 9 of this Endorsement shall not apply to
payments or earnings subject to this Section 10, which shall instead
govern. Notwithstanding the foregoing, if this Certificate is used in
connection with a Plan, withdrawals and other distributions are not
permitted except in accord with the terms of the Plan as certified in
writing to Us by the Plan Administrator and a certificate of the Plan
Administrator that such terms and the above requirement have been
satisfied.
HARDSHIP WITHDRAWALS
11. A. Hardship withdrawals are permitted in accordance with Section 9 and
Section 10 above in the event of an Immediate and Heavy Financial Need
of the Employee where such withdrawal is Necessary to Satisfy such
Financial Need, within the meaning of the IRC, provided that, if this
Certificate is used in connection with a Plan, hardship withdrawals
shall be permitted only to the extent permitted in the Plan as certified
in writing to Us by the Plan Administrator.
B. If this Certificate is not used in connection with a Plan:
An Immediate and Heavy Financial Need is limited to:
(a) Payment of costs for unreimbursed medical care (as defined in the
IRC) previously incurred by the Employee or his or her spouse or
dependent (or necessary for those persons to obtain such medical
care); or
(b) Payment of tuition, related educational fees and room and board
expenses for the next twelve (12) months of post-secondary education
of the Employee or his or her spouse, children or other dependents
(so claimed on the Participant's Federal Income Tax return); or
(c) Payment of costs directly related to the purchase (exclusive of
mortgage payments) of a principal residence for the Employee; or
(d) Payment of amounts needed to prevent the eviction of the Employee
from his or her principal residence or foreclosure on the mortgage
of the Employee's principal residence; or
(e) Such other financial needs as may be specifically promulgated by the
Internal Revenue Service as part of its "safe harbor" definition of
an Immediate and Heavy Financial Need.
In order to evidence that the withdrawal is necessary to satisfy such
financial need the following conditions must be satisfied:
<PAGE> 9
(f) the amount cannot be more than the amount needed to satisfy the
need, together with any amounts necessary to pay any Federal, state
or local income taxes or penalties reasonably anticipated to result
from the distribution;
(g) the Employee has obtained all distributions, except for hardship
distributions, and all nontaxable loans then available under all
plans and arrangements maintained by the Employee's employer;
(h) salary reduction elective deferral contributions ("elective
deferrals") made and interest credited to such amounts prior to
January 1, 1989 will be used to satisfy Employee's withdrawal
request before elective deferrals made after December 31, 1988;
(i) the Employee shall have represented to us
(1) As to need under (a)-(e) above and as to (f), (g) and (h) above;
(2) That Employee will not make elective deferrals or employee
contributions into this Certificate or, to the extent required
by the Federal tax rules, any other plan or arrangement
maintained by Employee's employer during the twelve (12) months
following Employee's hardship withdrawal;
(3) That Employee's elective deferrals into this Certificate, or to
the extent required by Federal tax rules, any other plan or
arrangement maintained by Employee's employer will be limited
for the next taxable year to the annual limit under IRC Section
402(g) for that year minus Employee's elective deferrals for the
year of the hardship withdrawal;
(4) That Employee recognizes that the withdrawal will be subject to
any applicable income taxes, penalty taxes, contract charges and
other applicable costs on this withdrawal and that, prior to
January 1, 1999, the amount of Employee's hardship withdrawal is
an eligible rollover distribution and will be subject to 20%
Federal tax withholding to the extent it is not directly rolled
over to an eligible retirement plan;
(5) That Employee recognizes that We do not make any representation
or warranty regarding the tax consequences resulting from
Employee's hardship withdrawal, that any payment made to
Employee as a result of his or representation does not
constitute a
<PAGE> 10
determination by Us that the withdrawal meets the standards for
hardship withdrawal under the IRC and that the hardship
withdrawal is being made to Employee based solely on Employee's
representations; and
(6) As We otherwise require.
C. If the Certificate is used in connection with a Plan, a hardship
withdrawal will be permitted only as directed by the Plan Administrator
in writing with a certification to Us that such withdrawal is in
accordance with terms of the Plan and applicable law.
POLICY LOANS
12. Loans will be made by Us pursuant to the Certificate to a Participant, or
after the Participant's death and prior to the commencement of payments to
the Beneficiary, provided that, if the Certificate is used in connection
with a Plan, loans will only be permitted to the extent permitted by the
Plan as certified in writing to Us by the Plan Administrator. All such
loans shall be subject to the requirements of IRC Section 72(p). In
addition, the following rules shall apply:
(a) All loans shall be evidenced by a loan agreement.
(b) A non-refundable loan application fee may be charged for each loan
application. The amount of this fee will be shown in the loan
agreement.
(c) No actual distributions to repay loans shall be made which would be in
violation of IRC Section 403(b)(7) or IRC Section 403(b)(11).
(d) We reserve the right to specify the minimum loan amount, which shall
in no event be in excess of $1,000.
(e) The maximum amount of the loan (when combined with other then
outstanding loans) shall not exceed the least of (i) if applicable,
the maximum amount permitted by the Plan (ii) fifty percent (50%) if
not made under an ERISA Plan or forty percent (40%) if made under an
ERISA Plan, of the Employee's vested account balance from which loans
may be taken or (iii) $50,000 reduced by the excess (if any) of (x)
the highest outstanding balance of loans from, or secured by, the
Certificate during the one year period ending on the day before the
date on which such loan was made, over (y) the outstanding balance of
loans from, or secured by, the Certificate on the date on which such
loan was made.
(f) We may delay granting a loan for up to six (6) months after We receive
Your request.
<PAGE> 11
(g) If the Certificate is annuitized, the loan shall become immediately
due and payable in full and, if not repaid, the loan amount (including
accrued interest) will be treated as a partial surrender.
(h) A loan may be prepaid in whole or in part at any time. Any prepayments
shall be applied to the last principal due.
All loans are made by Us and secured from a collateral Fixed Account and
certain other amounts in your Certificate; provided that, if the loan is
pursuant to an ERISA Plan, the amount transferred plus the additional
security shall not exceed fifty percent (50%) of the Employee's vested
account balance from which loans may be taken at the time of the loan
including earnings on such amounts thereafter as adjusted for the security
in outstanding loans. An amount equal to [one hundred percent (100%)] of
the principal amount of the loan value will be transferred to the
collateral Fixed Account unless instructed to the contrary by the
Participant in the case of a Certificate not issued in connection with a
Plan, or, in the case of a Certificate issued in connection with a Plan by
the Plan Administrator, We will first transfer to the collateral Fixed
Account the Subaccount units from the Participant's investment options in
proportion to the assets in each option until the required balance is
reached or all such variable units are exhausted. The remaining required
collateral, if any, will next be transferred from the Fixed Account
Options. A collateral Fixed Account shall be maintained with regard to
securitization maintained in connection with a loan. No Withdrawal Charges
are deducted at the time of the loan and amounts in the collateral Fixed
Account may not be withdrawn except to the extent they are in excess of the
outstanding loan balance.
Until the loan has been repaid in full, that portion of the collateral
Fixed Account equal to the outstanding loan balance shall be credited with
interest at a rate of 2.00% less than the loan interest rate fixed by Us
for the term of the loan. The remaining portion of the collateral Fixed
Account will be credited with interest at the rate being earned by the
Fixed Account. However, the interest rate credited to the collateral Fixed
Account will never be less than 3.0%. Specific loan terms are disclosed at
the time of loan application or loan issuance. With regard to loans under
an ERISA Plan, if we cannot establish a reasonable rate of interest of at
least 5% we may decline to make loans under such Plan.
Loans must be repaid in substantially level payments, not less frequently
than quarterly. Loans used to purchase the principal residence of the
Participant must be repaid within 20 years; all other loans must be repaid
within 5 years. Loan repayments will consist of principal and interest in
amounts set forth in the loan agreement. Loan repayments will be allocated
between the Fixed Accounts and Subaccounts in the same manner as a Payment.
Loan repayments will be allocated to the Certificate in accordance with the
most current allocation, unless We agree otherwise. If a Plan or
arrangement has multiple contribution type of accounts, we may establish a
procedure to order or limit the loan as well as a procedure for allocation
of payment and interest on the loan among contribution type of accounts.
<PAGE> 12
If the Certificate is surrendered while the loan is outstanding the
surrender value will be reduced by the amount of the loan outstanding plus
accrued interest. If the Participant dies while the loan is outstanding,
the Death Benefit will be reduced by the amount of the loan outstanding
plus accrued interest. If Annuity Payments start while the loan is
outstanding, the Certificate Value will be reduced by the amount of the
outstanding loan plus accrued interest. Until the loan is repaid, We
reserve the right to restrict any transfer pursuant to Revenue Ruling 90-24
which would otherwise qualify as a transfer as permitted in the Code and
hereunder.
If a loan payment is not made when due, interest will continue to accrue. A
grace period of at least thirty (30) days will be available under the terms
of the loan agreement. If a loan payment is not made when due, or by the
end of applicable grace period, then the entire loan will be treated as a
deemed distribution, will be taxable to the borrower, and may be subject to
the early withdrawal tax penalty. Any defaulted amounts, plus accrued
interest, will be deducted from the Certificate when the loan goes into
default if then permitted under IRC Sections 403(b)(11) and 403(b)(7) or,
if not, as soon as so permitted. Additional loans may not be available
while a previous loan remains in default.
Loans may also be subject to additional limitations or restrictions under
the terms of the Plan if this Certificate is used in connection with a
Plan. Loans permitted under this Certificate may still be taxable in whole
or part if the Participant has additional loans from other plans or
contracts. We will calculate the maximum nontaxable loan based solely on
the information provided to Us by the Participant or the Plan
Administrator, in writing.
Loan repayments must be identified as such or else they will be treated as
Payments, and will not be used to reduce the outstanding loan principle or
interest due. We reserve the right to modify the term or procedures
associated with the loan in the event of a change in the laws or
regulations relating to the treatment of loans.
TAX-FREE DIRECT TRANSFERS
13. Direct transfers to another contract qualifying under IRC Section 403(b) or
to a custodial account qualifying under IRC Section 403(b)(7) may be made
only as permitted by applicable law and, if the Certificate is used in
connection with a Plan, the terms of the Plan as certified to Us in writing
by the Plan Administrator. Amounts subject to withdrawal restrictions under
the IRC may only be transferred to such a contract or account with the same
or more stringent restrictions. We may limit the transfer of an account
with a loan outstanding unless the loan is included as part of the
transferred assets.
DIRECT ROLLOVERS
14. A distributee may elect, at the time and in the manner prescribed by Us, to
have any portion of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a direct rollover.
<PAGE> 13
An eligible rollover distribution is any distribution of all or any portion
of the balance to the credit of the distributee, except that an eligible
rollover distribution does not include (1) any distribution that is one of
a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the distributee or the
joint lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period or ten
years or more; (2) any distribution to the extent such distribution is
required under IRC Sections 403(b)(10) and 401(a)(9); (3) the portion of
any distribution that is not includible in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to
employer securities) (4) on and after January 1, 1998, any salary reduction
hardship withdrawal pursuant to Section 11; and (5) any other distribution
which in the future, is determined not to be an eligible rollover
distribution under applicable law.
An eligible retirement plan is an annuity described in IRC Section 403(b),
an individual retirement account described in IRC Section 408(a), or an
individual retirement annuity described in Section IRC 408(b), that accepts
the distributee's eligible rollover distributions. However, in the case of
an eligible rollover distribution to the surviving spouse, an eligible
rollover plan is an individual retirement account or an individual
retirement annuity.
A distributee includes an Employee or former Employee. In addition, the
Employee or former Employee's surviving spouse and the Employee or former
Employee's spouse or former spouse who is the alternative payee under a
qualified domestic relations order, as defined in IRC Section 414(p), are
distributees, within the meaning of this section 14 with regard to the
interest of the spouse or former spouse.
A direct rollover is a plan payment by the plan administrator or Us to the
eligible retirement plan specified by the distributee. All distributions
shall be made in accordance with IRC Sections 403(b)(10) and 401(a)(31).
ERISA PLANS
15. If the Certificate is used in connection with an ERISA Plan, the following
provisions shall also apply:
(a) In the event of the Employee's death prior to the commencement of
Annuity Payments, 50 percent of the vested Certificate Value shall be
paid to (1) subject to (2) the surviving spouse of the Employee in the
form required by Section 205 or ERISA, unless the spouse elects
otherwise in accordance with the requirements of such Section 205; or
(2) if there is no surviving spouse, or if the surviving spouse has
consented in the manner required by Section 205 of ERISA or if
applicable regulations otherwise permit, to the Beneficiary under the
Certificate. The remaining 50 percent of the Certificate Value shall
be paid to the Beneficiary under the Certificate.
<PAGE> 14
(b) Except as otherwise provided herein, only a joint and 50% survivor
Annuity Payment Option with no guaranteed period is available to a
married Employee, and the Joint Annuitant must be the Employee's
spouse. A married Employee may elect another Annuity Payment Option or
designate another Joint Annuitant, provided his or her spouse consents
in accordance with the requirements of Section 205 of ERISA, or
provided such election is otherwise permitted under such applicable
regulations. An unmarried Employee will be deemed to have elected a
straight life Annuity Payment Option with no guaranteed period unless
the Employee makes a different election in the manner required under
Section 205 of ERISA.
(c) Elections and consents required by ERISA may be revoked in the form,
time and manner prescribed in Section 205 of ERISA. All elections and
consents required by ERISA shall adhere to the requirements of the
applicable regulations interpreting Section 205 of ERISA (or any other
applicable law), including the requirements as to the timing of any
elections or consents.
(d) If a withdrawal is permitted by the ERISA Plan, no withdrawal, partial
or total, may be made without consent of the Employee and the
Employee's spouse in the manner required by Section 205 of ERISA,
except to the extent that such consent is not required under such
applicable regulations. Any withdrawal must be made in the form
required under Section 205 of ERISA unless the Employee (and spouse,
if applicable) makes an election in the form and manner permitted
under such regulations, to receive the benefit in another form. Any
loan must conform to the requirements of ERISA, including the
requirement of spousal consent.
(e) If the Employee's Contract Value, Accumulation Value, Certificate
Value, or Annuity Value, whichever term is applicable, is $5,000 or
less at the time of termination of employment and at all times
thereafter, in accordance with Section 205 of ERISA, if permitted by
the ERISA Plan and the Plan Administrator certifies to Us in writing
that such ERISA Plan requires such distribution and that such amount,
when combined with other account balances of the Employee under the
ERISA Plan is below the above limit, We will pay such value to the
Employee as soon as administratively possible after the termination
and receipt of such certification in one lump sum in lieu of annuity
benefits.
(f) Compliance with the requirements of ERISA, including but not limited
to those as to elections, beneficiary designations, spousal consents
and required notices, is the responsibility of the Plan Administrator
and We shall not be responsible for such compliance. We may require
prior to taking any action a certification of the Plan Administrator
that such action is in accordance with the provisions of the Plan and
ERISA and that all necessary notices have been timely given and all
elections, designations and consents have been timely and properly
made. We may fully rely on such certifications. We may agree in
writing with the Plan Administrator that an alternative standard form
of benefits or payments to a spouse or other beneficiary in
<PAGE> 15
accordance with the terms of the ERISA Plan shall apply in lieu of
those under (a) or (b) above so long as such alternative forms satisfy
the requirements of ERISA.
(g) The Contractholder represents and warrants to Us that the ERISA Plan
satisfies the requirements of IRC Section 403(b) and of ERISA, that it
contains all provisions required to be included in a plan under such
Section or ERISA and that all rights exercised by it or the Plan
Administrator and all certifications given by it or the Plan
Administrator under the Contract will be exercised and given in
accordance with the ERISA Plan, such Section and ERISA. We have no
responsibility for assuring such compliance and may fully rely on the
foregoing representations and warranties.
IRC AND ERISA REQUIREMENTS
16. The provisions of this Endorsement are intended to comply with the
requirements of the IRC and, if applicable, ERISA, for IRC Section 403(b)
annuity contracts. We reserve the right to amend the Certificate and this
Endorsement from time to time, without the Participant's or the
Contractholder's consent, when necessary to comply with the provisions of
the IRC, related regulations and, if applicable, ERISA, in order to
maintain this as an IRC Section 403(b) annuity contract, meeting, if
applicable, the requirements of ERISA subject to the extent required of
applicable state insurance department approval, to the extent permitted by
law. We also reserve the right to return contributions to the extent
necessary to assure compliance with the requirements of IRC Section 403(b).
No Withdrawal Charge shall apply to any such returned contribution.
The ability of a Participant to exercise rights under this Certificate and
this Endorsement may be further restricted under the Employer's Plan under
which this Certificate and Endorsement are issued. Therefore, You might
wish to check with the employer sponsor of this 403(b) arrangement before
You exercise any rights or make any elections under this Certificate and
Endorsement.
At the date of issue of the Contract, Contractholder has provided to Us
certifications by the Plan Administrator as to certain provisions of the Plan as
required by the Certificate and Endorsement. We shall be entitled to fully rely
on such certifications as to the Plan provisions and shall not be required to
follow alternative or additional provisions unless they have been certified to
us by the Plan Administrator at least thirty (30) days before they become
effective and either We agree in writing to follow them, or such alternative or
additional provisions are required by applicable law. We may waive in writing
the foregoing requirement. In no event will We be responsible for actions or
inactions taken by Us prior to thirty (30) days after receipt of any
certification as to alternative or additional provisions based on prior
certifications or no certification having been provided to Us.
<PAGE> 16
All other terms and conditions of the Certificate remain unchanged.
ANCHOR NATIONAL LIFE INSURANCE COMPANY
/s/ SUSAN L. HARRIS /s/ ELI BROAD
- ------------------------------- ------------------------------
Susan L. Harris Eli Broad
Secretary President
<PAGE> 1
Exhibit 5
<TABLE>
<S> <C> <C>
Anchor National Life New Business Documents New Business Documents [ANCHOR NATIONAL
Insurance Company with checks: without checks: LOGO]
1 SunAmerica Center P. O. Box 100064 P. O. Box 54299
Los Angeles, CA 90067-6022 Pasadena, CA 91189-0064 Los Angeles, CA 90054-0299
- ------------------------------------------------------------------------------------------------------------
PARTICIPANT ENROLLMENT FORM ANG-530 (6/98)
DO NOT USE HIGHLIGHTER. Please print or type.
============================================================================================================
A. PARTICIPANT [ ]Mr. [ ]Mrs. [ ]Ms. [ ]Miss [ ]Dr. [ ]Sr. [ ]Jr.
INDICATE MARITAL STATUS: SINGLE [ ] MARRIED [ ]
- ------------------------------------------------------------- ----------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL SOCIAL SECURITY NUMBER
- ------------------------------------------------------------------------------------------------------------
STREET ADDRESS CITY STATE ZIP CODE
MO. DAY YR. SEX: [ ]M [ ]F ( ) [ ] Home [ ] Work
- ------------------------- --------------------------------
DATE OF BIRTH TELEPHONE NUMBER
============================================================================================================
B. BENEFICIARY (IF ERISA, COMPLETE BENEFICIARY DESIGNATION FORM [TBD])
- -------------------------------------------------------------- PRIMARY [ ]______%CONTINGENT [ ]______%
LAST NAME FIRST NAME MIDDLE INITIAL RELATIONSHIP
- -------------------------------------------------------------- PRIMARY [ ]______%CONTINGENT [ ]______%
LAST NAME FIRST NAME MIDDLE INITIAL RELATIONSHIP
============================================================================================================
C. CONTRACT APPLIED FOR
[ ] 403(b) [ ] 401(k) [ ] 457 [ ]Other (PLEASE SPECIFY) ________________________
============================================================================================================
D. EMPLOYER(ER)/ PLAN NAME (If 457, Employer is the owner)
Please check one: [ ] Existing Group [ ] New Group Employer Group No. (if applicable) __________________
Employer Plan Name (if different)
---------------------------------------- -----------------------------
Address
----------------------------------------------------------------------------------------------------
Employee(EE) I.D. No. (if other than Soc. Sec. No.)
-------------------------
Campus No. (if applicable)
-------------------------------------------------
ERISA Participant's Date of Employment (as applicable)
----------------------
Plan Participation Date (as applicable)
-------------------------------------
Employer I.D. No. Is Employee retired? [ ] Yes [ ] No
------------------
Is Employee separated from service? [ ] Yes [ ] No
================================================================================
E. CONTRIBUTIONS Employee Annual Salary $
---------------------
Estimated date first contribution will be received
-----------
EE ANTICIPATED CONTRIBUTION: $_______________or _____% per contribution __times per certificate year.
Total $ _________ Total % ____
EE ANTICIPATED CONTRIBUTION: $_______________or _____% per contribution __times per certificate year.
Total $ _________ Total % ____
============================================================================================================
F. LUMP SUM/ TAX FREE DIRECT TRANSFERS INSTRUCTIONS
Amount $_______________
PLEASE COMPLETE A "REQUEST FOR TRANSFER" FORM [TBD] AND INDICATE THE TYPE OF
LUMP SUM TRANSFER BELOW.
Check one: [ ] Direct Transfer (Rev. Rul. 90-24)
[ ] Direct Rollover (select one if applicable):
[ ] 403(b) [ ] 401(k) [ ] 401(a) [ ] IRA
============================================================================================================
G. ANNUITY DATE Date annuity payments begin. (Must be at least 2 years after the Certificate
MO. DAY YR. Date except as required to comply with applicable laws and prior to the later of
- ------------------- the Participant's attainment of Age 75 or the date of termination of
ANNUITY DATE employment.)
============================================================================================================
</TABLE>
ANG-530 (6/98) OVER
<PAGE> 2
- --------------------------------------------------------------------------------
PARTICIPANT ENROLLMENT FORM ANG-530 (6/98) SIDE 2
- --------------------------------------------------------------------------------
================================================================================
H. AUTHORIZATION
Do you wish to authorize telephone TRANSFERS, subject to the conditions set
forth below? [ ] YES [ ] NO (If no election is indicated the Company will
default to yes.) If indicated above, I authorize the Company to accept telephone
instructions for transfers in any amount among subaccounts from anyone providing
proper identification subject to Restrictions and limitations contained in the
contract and related prospectus, if any. I understand that I bear the risk of
loss in the event of a telephone instruction not authorized by me. The Company
will not be responsible for any losses resulting from unauthorized transactions
if it follows reasonable procedures designed to verify the identity of the
caller and therefore, the Company will record telephone conversations containing
transaction instructions, request personal identification information before
acting upon telephone instructions and send written confirmation statements of
transactions to the address of record.
Do you wish to have the prospectus delivered through the Internet instead of a
mailed document? [ ] YES [ ] NO
If YES, You MUST indicate Your Internet Address in the space provided. (Internet
Address)
------------------------------------------------------------------------
================================================================================
I. SPECIAL INSTRUCTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
================================================================================
J. STATEMENT OF PARTICIPANT
This Certificate [ ] WILL [ ] WILL NOT replace an existing life insurance or
annuity contract.
(If this will replace an existing policy, please indicate name of issuing
company and contract number below.)
COMPANY NAME CONTRACT NUMBER
------------------------ -------------------------
I hereby represent my answers to the above questions to be correct and true to
the best of my knowledge and belief and agree that this Participant Enrollment
Form shall be a part of any Certificate issued by the COMPANY. I VERIFY MY
UNDERSTANDING THAT ALL PAYMENTS AND VALUES PROVIDED BY THE CERTIFICATE, WHEN
BASED ON INVESTMENT EXPERIENCE OF VARIABLE ACCOUNT(S), ARE VARIABLE AND NOT
GUARANTEED AS TO DOLLAR AMOUNT. I UNDERSTAND THAT ALL PAYMENTS AND VALUES BASED
ON THE GENERAL ACCOUNT MAY BE SUBJECT TO A MARKET VALUE ADJUSTMENT FORMULA,
WHICH MAY RESULT IN UPWARD AND DOWNWARD ADJUSTMENTS IN AMOUNTS PAYABLE. I
ACKNOWLEDGE RECEIPT OF THE CURRENT PROSPECTUSES FOR [INSERT PRODUCT NAME],
INCLUDING THE SUNAMERICA SERIES TRUST AND ANCHOR SERIES TRUST PROSPECTUSES. I
HAVE READ THEM CAREFULLY AND UNDERSTAND THEIR CONTENTS.
I further acknowledge the following: (1) that Section 403(b) (11) of the
Internal Revenue Code of 1986 requires that a distribution from a contract may
only be made after I attain age 59 1/2 , terminate employment, die, become
disabled within the meaning of the Internal Revenue Code Section 72(m)(7), or in
the event of hardship, and that, in the event of hardship, a contract may not
provide for the distribution of any income attributable to contributions; and
(2) that, if there are other investment alternatives available under my
employer's Section 403(b) arrangement, I may elect to transfer the value of my
account to such other investment alternatives subject to any applicable
withdrawal charge.
I certify that I have entered into a separate salary reduction agreement with my
employer for salary reduction contributions and have submitted form [SA-2383POS]
(403(b) Salary Reduction Agreement) with this Participant Enrollment Form.
Signed at
-----------------------------------------------------------------------
CITY STATE DATE
- ------------------------------------- --------------------------------------
PARTICIPANT'S SIGNATURE REGISTERED REPRESENTATIVE'S SIGNATURE
- ------------------------------------- --------------------------------------
OWNER SIGNATURE FOR 457 PLANS ONLY PLAN ADMINISTRATOR SIGNATURE FOR
ERISA PLANS ONLY
================================================================================
================================================================================
K. LICENSED/ REPRESENTATIVE INFORMATION
Will this Certificate replace in whole or in part any existing life insurance or
annuity contract? [ ] YES [ ] NO
- --------------------------------------------------------------------------------
REPRESENTATIVE'S LAST NAME FIRST NAME MIDDLE INITIAL
- -------------------------------
SOC. SEC. NUMBER
- --------------------------------------------------------------------------------
REPRESENTATIVE'S STREET ADDRESS CITY STATE ZIP CODE
- ------------------------------------- --------------------------------------
BROKER/DEALER FIRM NAME REPRESENTATIVE'S TELEPHONE NO.
- -------------------------------
LICENSED AGENT ID NUMBER
================================================================================
FRAUD WARNING: ANY PERSON WHO WITH INTENT TO DEFRAUD OR KNOWING THAT HE IS
FACILITATING A FRAUD AGAINST AN INSURER, SUBMITS AN APPLICATION OR FILES A CLAIM
CONTAINING A FALSE OR DECEPTIVE STATEMENT MAY BE GUILTY OF INSURANCE FRAUD.
================================================================================
FOR OFFICE USE ONLY
================================================================================
ANG-530 (6/98)
<PAGE> 3
<TABLE>
<S> <C> <C>
Anchor National Life New Business Documents New Business Documents [ANCHOR NATIONAL
Insurance Company with checks: without checks: LOGO]
1 SunAmerica Center P. O. Box 100330 P. O. Box 54299
Los Angeles, CA 90067-6022 Pasadena, CA 91189-0001 Los Angeles, CA 90054-0299
- ----------------------------------------------------------------------------------------------------------
INVESTMENT INSTRUCTIONS FOR FIXED ACCOUNT OPTIONS AND VARIABLE SUBACCOUNTS ANG-530 (6/98)
- ----------------------------------------------------------------------------------------------------------
INVESTMENT INSTRUCTIONS: Choose from Fixed Account Options and Variable
SubAccounts below. If Dollar Cost Averaging Fixed Account Options are selected,
Form [TBD-5551DCA] must accompany this Participant Enrollment Form. (DOLLAR COST
AVERAGING FIXED ACCOUNT OPTIONS DO NOT APPLY TO SCHEDULED CONTRIBUTIONS)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
[ ] SCHEDULED CONTRIBUTIONS (SALARY REDUCTIONS)
____% 1 Yr. MVA Fixed ____% 3 Yr. MVA Fixed
_____% 5 Yr. MVA Fixed
% TOTAL FIXED ACCOUNT ALLOCATIONS
_____ Portfolio _____ _____ Manager _____
_____% Cash Management SunAmerica Asset Management. Corp.
_____% Government & Quality Bond Wellington Management Co., LLP
_____% Corporate Bond Goldman Sachs Asset Management
_____% Global Bond Federated Investors
_____% High-Yield Bond SunAmerica Asset Management Corp.
_____% Worldwide High Income Morgan Stanley Asset Management, Inc.
_____% SunAmerica Balanced SunAmerica Asset Management Corp.
_____% Asset Allocation Goldman Sachs Asset Management
_____% Equity Income First American Asset Management
_____% Utility Federated Investors
_____% Equity Index First American Asset Management
_____% Growth-Income Alliance Capital Management L.P.
_____% Federated Value Federated Investors
_____% Venture Value Davis Selected Advisers, L.P.
_____% "Dogs" of Wall Street SunAmerica Asset Management Corp.
_____% Alliance Growth Alliance Capital Management L.P.
_____% Growth Wellington Company, LLP
_____% Putnam Growth Putnam Investment Management Inc.
_____% Real Estate Davis Selected Advisers, L.P.
_____% Capital Appreciation Wellington Management Company, LLP
_____% Small Company Value First American Asset Management
_____% Aggressive Growth SunAmerica Asset Management Corp.
_____% Int'l. Growth and Income Putnam Investment Management, Inc.
_____% Global Equities Alliance Capital Management L.P
_____% Int'l. Diversified Equities Morgan Stanley Asset Management, Inc.
_____% Emerging Markets Putnam Investment Management, Inc.
____% TOTAL VARIABLE SUBACCOUNT ALLOCATIONS
[ ] DIRECT TRANSFER/LUMP SUM CONTRIBUTION
____% 6 Month DCA ____% 1 Yr. DCA
____% 1 Yr. MVA Fixed ____% 3 Yr. MVA Fixed
____% 5 Yr. MVA Fixed
% TOTAL FIXED ACCOUNT ALLOCATIONS
_____ Portfolio _____ _____ Manager _____
_____% Cash Management SunAmerica Asset Management. Corp.
_____% Government & Quality Bond Wellington Management Co., LLP
_____% Corporate Bond Goldman Sachs Asset Management
_____% Global Bond Federated Investors
_____% High-Yield Bond SunAmerica Asset Management Corp.
_____% Worldwide High Income Morgan Stanley Asset Management, Inc.
_____% SunAmerica Balanced SunAmerica Asset Management Corp.
_____% Asset Allocation Goldman Sachs Asset Management
_____% Equity Income First American Asset Management
_____% Utility Federated Investors
_____% Equity Index First American Asset Management
_____% Growth-Income Alliance Capital Management L.P.
_____% Federated Value Federated Investors
_____% Venture Value Davis Selected Advisers, L.P.
_____% "Dogs" of Wall Street SunAmerica Asset Management Corp.
_____% Alliance Growth Alliance Capital Management L.P.
_____% Growth Wellington Company, LLP
_____% Putnam Growth Putnam Investment Management Inc.
_____% Real Estate Davis Selected Advisers, L.P.
_____% Capital Appreciation Wellington Management Company, LLP
_____% Small Company Value First American Asset Management
_____% Aggressive Growth SunAmerica Asset Management Corp.
_____% Int'l. Growth and Income Putnam Investment Management, Inc.
_____% Global Equities Alliance Capital Management L.P
_____% Int'l. Diversified Equities Morgan Stanley Asset Management, Inc.
_____% Emerging Markets Putnam Investment Management, Inc.
____% TOTAL VARIABLE SUBACCOUNT ALLOCATIONS
</TABLE>
NOTE: THE SUM OF SCHEDULED FIXED AND VARIABLE CONTRIBUTION ALLOCATIONS AND THE
SUM OF DIRECT TRANSFER/LUMP SUM FIXED AND VARIABLE ALLOCATIONS MUST EACH TOTAL
100%
<TABLE>
<S> <C> <C>
- ----------------------------------- ------------------------------------ -------------------------
PARTICIPANT'S SIGNATURE REGISTERED REPRESENTATIVE'S SIGNATURE DATE
==========================================================================================================
LICENSED/ REPRESENTATIVE INFORMATION
- ----------------------------------- ------------------------------ -------------------------
REPRESENTATIVE'S TELEPHONE NO. LICENSED AGENT ID NUMBER BROKER/DEALER FIRM NAME
==========================================================================================================
FOR OFFICE USE ONLY
==========================================================================================================
</TABLE>
ANG-530 (6/98)
<PAGE> 4
[LOGO]
Anchor National Life New Business Documents New Business Documents
Insurance Company with checks: without checks:
1 SunAmerica Center P.O. Box 100330 P.O. Box 54299
Los Angeles, CA 90067-6022 Pasadena, CA 91189-0001 Los Angeles, CA 90054-0299
- --------------------------------------------------------------------------------
APPLICATION FOR GROUP ANNUITY ANA-512(11/96)
Please print or type
A. GROUP
INFORMATION
--------------------------- ------------------ ---------------
GROUP CONTRACTHOLDER'S NAME TAXPAYER ID NUMBER PHONE NUMBER
------------------------------------------------------------------
GROUP CONTRACTHOLDER'S ADDRESS CITY STATE ZIP CODE
B. ANNUITANT In the event it is necessary for Anchor National Life Insurance
CONTRACT Company to obtain additional information or instructions, the
following individual is authorized to provide such information
or instructions:
(Complete
only if ------------------------------------------------------------------
different CONTACT'S LAST NAME FIRST NAME MIDDLE INITIAL
than Group
Contactholder)
------------------------------------------------------------------
CONTACT'S STREET ADDRESS CITY STATE ZIP CODE
------------------------------------------------------------------
Signature of Contactholder Title
Signed at ___________________ this ______ day of ____________ 1997
ANA-512(11/96)
<PAGE> 5
[LOGO]
Anchor National Life New Business Documents New Business Documents
Insurance Company with checks: without checks:
1 SunAmerica Center P.O. Box 100330 P.O. Box 54299
Los Angeles, CA 90067-6022 Pasadena, CA 91189-0001 Los Angeles, CA 90054-0299
- --------------------------------------------------------------------------------
APPLICATION FOR GROUP ANNUITY ANA-512(11/96)
Please print or type
A. GROUP
INFORMATION
--------------------------- ------------------ ---------------
GROUP CONTRACTHOLDER'S NAME TAXPAYER ID NUMBER PHONE NUMBER
------------------------------------------------------------------
GROUP CONTRACTHOLDER'S ADDRESS CITY STATE ZIP CODE
B. ANNUITANT In the event it is necessary for Anchor National Life Insurance
CONTRACT Company to obtain additional information or instructions, the
following individual is authorized to provide such information
or instructions:
(Complete
only if ------------------------------------------------------------------
different CONTACT'S LAST NAME FIRST NAME MIDDLE INITIAL
than Group
Contactholder)
------------------------------------------------------------------
CONTACT'S STREET ADDRESS CITY STATE ZIP CODE
------------------------------------------------------------------
Signature of Contactholder Title
Signed at ___________________ this ______ day of ____________ 1997
ANA-512(11/96)
<PAGE> 6
<TABLE>
<S> <C> <C>
Anchor National Life New Business Documents New Business Documents [ANCHOR NATIONAL
Insurance Company with checks: without checks: LOGO]
1 Sun America Center P. O. Box 100064 P. O. Box 54299
Los Angeles, CA 90067-6022 Pasadena, CA 91189-0064 Los Angeles, CA 90054-0299
- ----------------------------------------------------------------------------------------------------
APPLICATION FOR GROUP ANNUITY ANA-530 (7/98)
DO NOT USE HIGHLIGHTER. Please print or type.
A. GROUP
INFORMATION ( )
--------------------------------------- ------------------ ---- --------------
GROUP CONTRACTHOLDER'S NAME TAXPAYER ID NUMBER PHONE NUMBER
-------------------------------------------------------------------------------------
GROUP CONTRACTHOLDER'S ADDRESS CITY STATE ZIP CODE
B. CONTACT Please provide the name of the individual who is authorized to provide information and
authorize instructions related to this Plan:
--------------------------------------------------------------------------------------
CONTACT'S LAST NAME FIRST NAME MIDDLE INITIAL
--------------------------------------------------------------------------------------
CONTACT'S STREET ADDRESS CITY STATE ZIP CODE
( )
------------------------------
CONTACT'S PHONE NUMBER
</TABLE>
In consideration of the Contractholder's Purchase Payments under this Contract,
Anchor National Life Insurance Company agrees to make benefit payments, and to
pay annuities bought, under this Contract , in accordance with and subject to
its terms.
The Contractholder represents and warrants as follows:
(1) It is an entity that satisfies the requirement to maintain a tax
sheltered annuity arrangement under IRC Section 403(b) in that it is
within the meaning of the IRC Section 403(b)(1)(A):
[ ] an IRC Section 501(c)(3) organization. Date of IRS
letter:___________________________________________________
[ ] an educational organization described in IRC Section
170(b)(1)(A)(ii) and is a state, a political subdivision of a
state, or an agency or instrumentality of any one or more of the
foregoing.
[ ] a minister described in IRC Section 494(e)(5)(A)
[ ] an employer employing a minister described in IRC Section
494(e)(5)(A)
(2) That all other entities participating in its tax sheltered annuity
arrangement are a member of its control group within the meaning of IRC
Section 414(b) and (c) and are in the same category as listed in (1)
for the Contractholder. These entities are listed in (7) below.
(3) The tax sheltered annuity arrangement will [ ] will not [ ] include
nonsalary reduction employer contributions.
(4) The tax sheltered annuity arrangement will [ ] will not [ ] have
funding vehicles other than this group annuity contract.
ANA-530 (7/98) over
<PAGE> 7
(5) The tax sheltered annuity arrangement will [ ] will not [ ] be subject
to ERISA.
(a) If not subject to ERISA, it is because the arrangement is (1)
[ ] a governmental plan, (2) [ ] a nonelecting church plan, or
(3) [ ] an arrangement satisfying ERISA Regulation Section
2510.3-2(f) as to employer involvement.
(b) If (a)(1) or (a)(2) there are [ ] there are not [ ] employer
contributions, documents describing the arrangement and a Plan
Administrator.
(6) The Contractholder is one of the following within the meaning of IRC
Sections 402(b)(8)(B) and 415(c)(4):
[ ] an education organization (A)
[ ] a hospital (B)
[ ] a home health service agency (C)
[ ] a health and welfare agency (D)
[ ] a church or connection or association of churches (E)
[ ] none of the above (F)
(7) If applicable, the Plan Administrator is the Contractholder [ ] or
Other [ ] . If other, it is ____________________________.
A Plan Administrator is applicable for arrangements subject to ERISA
and those arrangements indicating under (5)(b) that there is a Plan
Administrator.
(8) Set forth below is the classification under (6) of each other
participating entity, as provided in (2) above:
Name Classification
Therefore, the Contractholder and Anchor National Life Insurance Company execute
this Application form in [duplicate] to take effect as of the Contract Date.
- ----------------------------------------------------
Company
- ----------------------------------------------------
Signature
- ----------------------------------------------------
Title
- ----------------------------------------------------
Witness
- ----------------------------------------------------
Date
- ----------------------------------------------------
City and State
Anchor National Life Insurance Company
- ----------------------------------------------------
/s/ SUSAN L. HARRIS /s/ ELI BROAD
- ------------------------------- ------------------------------
Susan L. Harris Eli Broad
Secretary President
- ----------------------------------------------------
Date
- ----------------------------------------------------
City and State
FRAUD WARNING: ANY PERSON WHO WITH INTENT TO DEFRAUD OR KNOWING THAT HE IS
FACILITATING A FRAUD AGAINST AN INSURER, SUBMITS AN APPLICATION OR FILES A CLAIM
CONTAINING A FALSE OR DECEPTIVE STATEMENT MAY BE GUILTY OF INSURANCE FRAUD.
ANA-530 (7/98)
<PAGE> 1
Exhibit 8(a)
FUND PARTICIPATION AGREEMENT
AGREEMENT, made on this 15th day of November, 1998, between ANCHOR
NATIONAL LIFE INSURANCE COMPANY ("Anchor National"), a life insurance company
organized under the laws of the State of Arizona, on behalf of itself and on
behalf of VARIABLE ANNUITY ACCOUNT SEVEN ("Variable Account"), a separate
account of Anchor National existing pursuant to the laws of the State of
Arizona, and ANCHOR SERIES TRUST ("Fund"), an open-end management investment
company established pursuant to the laws of the Commonwealth of Massachusetts
under a Declaration of Fund dated August 26, 1983 which is composed of multiple
investment series ("Portfolios").
WITNESSETH:
WHEREAS, Anchor National, by resolution, has established the Variable
Account on its books of account for the purpose of funding certain variable
annuity contracts issued by it; and
WHEREAS, the Variable Account is divided into various portfolios
("Divisions") under which the income, gains and losses, whether or not realized,
from assets allocated to each such Division are, in accordance with the
applicable variable annuity contracts, credited to or charged against such
Division without regard to any income, gains or losses of other Divisions or
separate accounts of Anchor National; and
WHEREAS, the Variable Account is registered with the Securities and
Exchange Commission as a unit investment trust under the Investment Company Act
of 1940 ("Act"); and
WHEREAS, the Fund, a registered, open-end, diversified management
investment company, is divided into various Portfolios, each Portfolio being
subject to separate investment objectives and restrictions which may not be
changed without a majority vote of the shareholders of each such Portfolio; and
WHEREAS, the Variable Account desires to purchase shares of the Fund in
connection with the issuance of certain variable annuity contracts to be
marketed under the name Polaris Plus Variable Annuity (collectively with other
contracts and policies that may be funded through the Fund, "Contracts"); and
WHEREAS, the Fund agrees to make shares of certain of its Portfolios
available to serve as underlying investment media for the corresponding
Divisions of the Variable Account; and
WHEREAS, SUNAMERICA CAPITAL SERVICES, INC. ("Distributor"), which serves
as the distributor for the Contracts funded in the Variable Account pursuant to
an agreement with Anchor National on behalf of itself and the Variable Account
is a broker-dealer registered as such under the Securities Exchange Act of 1934
and a member of the National Association of Securities Dealers, Inc.;
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing and of mutual
covenants and conditions set forth herein and for other good and valuable
consideration, Anchor National (on behalf of itself and the Variable Account)
and the Fund hereby agree as follows:
1. The Contracts funded by the Variable Account will provide for the
allocation of net amounts among certain Divisions of the Variable Account for
investment in the shares of the portfolios of the Fund underlying each such
Division. The selection of a particular Division is to be made (and such
selection may be changed) in accordance with the terms of the applicable
Contract.
2. No representation is made as to the number or amount of such Contracts
to be sold. Anchor National, pursuant to its agreement with Distributor, will
make reasonable efforts to market those Contracts it determines from time to
time to offer for sale and, although it is not required to offer for sale new
Contracts, Anchor National will accept payments and otherwise service existing
Contracts funded in the Variable Account.
3. Fund shares to be made available to the respective Divisions of the
Variable Account shall be sold by each of the respective Portfolios of the Fund
and purchased by Anchor National for that Division at the net asset value next
computed after receipt of each order, as established in accordance with the
provisions of the then current prospectus of the Fund. Shares of a particular
Portfolio of the Fund shall be ordered in such quantities and at such times as
determined by Anchor National to be necessary to meet the requirements of those
Contracts having amounts allocated to the Division for which the Fund Portfolio
shares serve as the underlying investment medium. Orders and payments for shares
purchased will be sent promptly to the Fund and will be made payable in the
manner established from time to time by the Fund for the receipt of such
payments. The Fund reserves the right to delay transfer of its shares until the
payment check has cleared. The Fund has the obligation to insure that its shares
to be made available to the appropriate Division(s) under the Contracts are
registered at all times under the Securities Act of 1933 ("1933 Act").
4. The Fund will redeem the shares of the various Portfolios when
requested by Anchor National on behalf of the corresponding Division of the
Variable Account at the net asset value next computed after receipt of each
request for redemption, as established in accordance with the provisions of the
then current prospectus of the Fund. The Fund will make payment in the manner
established from time to time by the Fund for the receipt of such redemption
requests, but in no event shall payment be delayed for a greater period than is
permitted by the Act.
5. Transfer of the Fund's shares will be by book entry only. No stock
certificates will be issued to the Variable Account. Shares ordered from a
particular Portfolio to the Fund will be recorded in an appropriate title for
the corresponding Division of the Variable Account.
6. The Fund shall furnish notice promptly to Anchor National of any
dividend or distribution payable on its shares which are subject to this
Agreement. All of such dividends and distributions as are payable on each of the
Portfolio shares in the title for the corresponding Division of
-2-
<PAGE> 3
the Variable Account shall be automatically reinvested in additional shares of
that Portfolio of the Fund. The Fund shall notify Anchor National of the number
of shares so issued.
7. All expenses incident to the performance of the Fund under this
Agreement shall be paid by the Fund. The Fund shall ensure that all of its
shares which are subject to this Agreement are registered and authorized for
issue in accordance with applicable federal and state laws prior to their
purchase by the Variable Account. Anchor National shall bear none of the
expenses for the cost of registration of the Fund's shares, preparation of the
Fund's prospectuses, proxy materials and reports, the distribution of such items
to shareholders, the preparation of all statements and notices required by any
federal or state law or any taxes on the issue or transfer of the Fund's shares
subject to this Agreement.
8. Anchor National, either directly or through Distributor, shall make no
representations concerning the Fund's shares which are subject to this Agreement
other than those contained in the then current prospectus of the Fund and in
printed information subsequently issued by the Fund as supplemental to such
prospects.
9. Anchor National and the Fund acknowledge that in the future, the
Fund's shares may become available for investment by separate accounts of other
insurance companies, which may or may not be affiliated persons (as that term is
defined in the Act) of Anchor National (collectively with Anchor National,
"Participating Insurers"). In such event, (a) the Fund shall undertake that its
Board of Trustees ("Board") will monitor the Fund for the existence of material
irreconcilable conflicts that may arise between the Contract owners of
Participating Insurers, for the purpose of identifying and remedying any such
conflict and (b) paragraphs 10, 11 and 12 shall apply. In discharging its
responsibilities under paragraphs 10, 11 and 12 hereinafter, Anchor National
will cooperate and coordinate, to the extent necessary, with the Board and with
other Participating Insurers. The Fund agrees that it will require, as a
condition to participation, that all Participating Insurers shall have
obligations and responsibilities regarding conflicts of interest corresponding
to those that are agreed to herein by Anchor National pursuant to such
paragraphs 10, 11 and 12 and pursuant to this paragraph 9.
10. Anchor National shall provide pass-through voting privileges to all
variable Contract owners so long as the U.S. Securities and Exchange Commission
continues to interpret the Act to require pass-through voting privileges for
variable Contract owners. Anchor National shall be responsible for assuring that
the Variable Account calculates voting privilege in a manner consistent with
separate accounts of other Participating Insurers, as determined by the Board.
Anchor National will vote shares for which it has not received voting
instructions in the same proportion as it votes shares for which it has received
instructions.
11. Anchor National will report to the Board any potential or existing
conflicts of which it is or becomes aware between any of its Contract owners or
between any of its Contract owners and Contract owners of other Participating
Insurers. Anchor National will be responsible for assisting the Board in
carrying out its responsibilities to identify material conflicts by providing
the Board with all
-3-
<PAGE> 4
information available to it that is reasonably necessary for the Board to
consider any issues raised, including information as to a decision by Anchor
National to disregard voting instructions of its Contract owners.
12. The Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly by it to
Anchor National and other Participating Insurers. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance tax, or securities laws or regulations, or a public ruling,
private letter ruling, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by variable
annuity Contract owners and variable life insurance Contract owners or by
Contract owners of different Participating Insurers; or (f) a decision by a
Participating Insurer to disregard the voting instructions of variable Contract
owners.
13. If it is determined by a majority of the Board or a majority of its
disinterested Trustees that a material irreconcilable conflict exists that
affects the interests of Anchor National Contract owners, Anchor National shall,
in cooperation with other Participating Insurers whose Contract owners'
interests are also affected by the conflict, take whatever steps are necessary
to remedy or eliminate the irreconcilable material conflict, which steps could
include: (a) withdrawing the assets allocable to the Variable Account from the
Fund or any portfolio and reinvesting such assets in a different investment
medium, including another Portfolio of the Fund, or submitting the question of
whether such segregation should be implemented to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any particular
group (e.g., annuity Contract owners or life insurance Contract owners) that
votes in favor of such segregation, or offering to the affected Contract owners
of the option of making such a change; and (b) establishing a new registered
management investment company or managed separate account. Anchor National shall
take such steps at its expense if the conflict affects solely the interests of
the owners of Anchor National Contracts, but shall bear only its equitable
portion of any such expense if the conflict also affects the interest of the
Contract owners of one or more Participating Insurers other than Anchor
National, provided: that this sentence shall not be construed to require the
Fund to bear any portion of such expense. If a material irreconcilable conflict
arises because of Anchor National's decision to disregard Contract owner voting
instructions and that decision represents a minority position or would preclude
a majority vote, Anchor National may be required, at Fund's election, to
withdraw the Variable Account's investment in the Fund, and no charge or penalty
will be imposed against the Variable Account as a result of such a withdrawal.
Anchor National agrees to take such remedial action as may be required under
this paragraph 13 with a view only to the interests of its Contract owners. For
purposes of this paragraph 13, a majority of the disinterested members of the
Board shall determine whether or not any proposed action adequately remedies any
irreconcilable conflict, but in no event will Fund be required to establish a
new funding medium for any variable Contracts. Anchor National shall not be
required by this paragraph 13 to establish a new funding medium for any variable
Contract if an offer to do so has been declined by vote of a majority of
affected Contract owners.
-4-
<PAGE> 5
14. This Agreement shall terminate:
(a) at the option of Anchor National or the Fund upon 60 days'
advance written notice to all other parties to this Agreement; or
(b) at the option of Anchor National if any of the Fund's shares are
not reasonably available to meet the requirements of the
Contracts funded in the Variable Account as determined by Anchor
National. Prompt notice of election to terminate shall be
furnished by Anchor National; or
(c) at the option of Anchor National upon institution of formal
proceedings against the Fund by the Securities and Exchange
Commission; or
(d) upon the vote of Contract owners having an interest in a
particular Division of the Variable Account to substitute the
shares of another investment company for the corresponding Fund
Portfolio shares in accordance with the terms of the Contracts
for which those Fund shares had been selected to serve as the
underlying investment medium. Anchor National will give 30 days'
prior written notice to the Fund of the date of any proposed
action to replace the Fund's shares; or
(e) in the event the Fund's shares are not registered, issued or sold
in accordance with applicable state and/or federal law or such
law precludes the use of such shares as the underlying investment
medium of the Contracts funded in the Variable Account. Prompt
notice shall be given by each party to all other parties in the
event that the conditions stated in subsections (b), (c) or (d)
of this paragraph 14 should occur.
15. Notwithstanding any other provisions of this Agreement, the
obligations of the Fund hereunder are not personally binding upon any of the
trustees, shareholders, officers, employees or agents of the Fund; resort in
satisfaction of such obligations shall be had only to the assets and property of
the Fund and not to the private property of any of such Fund's trustees,
shareholders, officers, employees or agents.
16. This Agreement shall be construed in accordance with the laws of the
State of California.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ANCHOR NATIONAL LIFE INSURANCE COMPANY
By:
-----------------------------------------
Jana Waring Greer
Senior Vice President
VARIABLE ANNUITY ACCOUNT SEVEN
BY: ANCHOR NATIONAL LIFE INSURANCE
COMPANY
By:
-----------------------------------------
Susan L. Harris
Senior Vice President
ANCHOR SERIES TRUST
By:
-----------------------------------------
Robert M. Zakem
Assistant Secretary
Acknowledged and Agreed:
SUNAMERICA CAPITAL SERVICES, INC.
By: Dated: November 15, 1998
-------------------------------------
J. Steven Neamtz
President
-6-
<PAGE> 1
Exhibit 8(b)
FUND PARTICIPATION AGREEMENT
AGREEMENT, made on this 15th day of November, 1998, between ANCHOR
NATIONAL LIFE INSURANCE COMPANY ("Anchor National"), a life insurance company
organized under the laws of the State of Arizona, on behalf of itself and on
behalf of VARIABLE ANNUITY ACCOUNT SEVEN ("Variable Account"), a separate
account of Anchor National existing pursuant to the laws of the State of
Arizona, and SUNAMERICA SERIES TRUST ("Fund"), an open-end management investment
company established pursuant to the laws of the Commonwealth of Massachusetts
under a Declaration of Fund dated September 11, 1992 which is composed of
multiple investment series ("Portfolios").
WITNESSETH:
WHEREAS, Anchor National, by resolution, has established the Variable
Account on its books of account for the purpose of funding certain variable
annuity contracts issued by it; and
WHEREAS, the Variable Account is divided into various portfolios
("Divisions") under which the income, gains and losses, whether or not realized,
from assets allocated to each such Division are, in accordance with the
applicable variable annuity contracts, credited to or charged against such
Division without regard to any income, gains or losses of other Divisions or
separate accounts of Anchor National; and
WHEREAS, the Variable Account is registered with the Securities and
Exchange Commission as a unit investment trust under the Investment Company Act
of 1940 ("Act"); and
WHEREAS, the Fund, a registered, open-end, diversified management
investment company, is divided into various Portfolios, each Portfolio being
subject to separate investment objectives and restrictions which may not be
changed without a majority vote of the shareholders of each such Portfolio; and
WHEREAS, the Variable Account desires to purchase shares of the Fund in
connection with the issuance of certain variable annuity contracts to be
marketed under the name Polaris Plus Variable Annuity (collectively with other
contracts and policies that may be funded through the Fund, "Contracts"); and
WHEREAS, the Fund agrees to make shares of certain of its Portfolios
available to serve as underlying investment media for the corresponding
Divisions of the Variable Account; and
WHEREAS, SUNAMERICA CAPITAL SERVICES, INC. ("Distributor"), which serves
as the distributor for the Contracts funded in the Variable Account pursuant to
an agreement with Anchor National on behalf of itself and the Variable Account
is a broker-dealer registered as such under the Securities Exchange Act of 1934
and a member of the National Association of Securities Dealers, Inc.;
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NOW, THEREFORE, in consideration of the foregoing and of mutual covenants
and conditions set forth herein and for other good and valuable consideration,
Anchor National (on behalf of itself and the Variable Account) and the Fund
hereby agree as follows:
1. The Contracts funded by the Variable Account will provide for the
allocation of net amounts among certain Divisions of the Variable Account for
investment in the shares of the portfolios of the Fund underlying each such
Division. The selection of a particular Division is to be made (and such
selection may be changed) in accordance with the terms of the applicable
Contract.
2. No representation is made as to the number or amount of such Contracts
to be sold. Anchor National, pursuant to its agreement with Distributor, will
make reasonable efforts to market those Contracts it determines from time to
time to offer for sale and, although it is not required to offer for sale new
Contracts, Anchor National will accept payments and otherwise service existing
Contracts funded in the Variable Account.
3. Fund shares to be made available to the respective Divisions of the
Variable Account shall be sold by each of the respective Portfolios of the Fund
and purchased by Anchor National for that Division at the net asset value next
computed after receipt of each order, as established in accordance with the
provisions of the then current prospectus of the Fund. Shares of a particular
Portfolio of the Fund shall be ordered in such quantities and at such times as
determined by Anchor National to be necessary to meet the requirements of those
Contracts having amounts allocated to the Division for which the Fund Portfolio
shares serve as the underlying investment medium. Orders and payments for shares
purchased will be sent promptly to the Fund and will be made payable in the
manner established from time to time by the Fund for the receipt of such
payments. The Fund reserves the right to delay transfer of its shares until the
payment check has cleared. The Fund has the obligation to insure that its shares
to be made available to the appropriate Division(s) under the Contracts are
registered at all times under the Securities Act of 1933 ("1933 Act").
4. The Fund will redeem the shares of the various Portfolios when
requested by Anchor National on behalf of the corresponding Division of the
Variable Account at the net asset value next computed after receipt of each
request for redemption, as established in accordance with the provisions of the
then current prospectus of the Fund. The Fund will make payment in the manner
established from time to time by the Fund for the receipt of such redemption
requests, but in no event shall payment be delayed for a greater period than is
permitted by the Act.
5. Transfer of the Fund's shares will be by book entry only. No stock
certificates will be issued to the Variable Account. Shares ordered from a
particular Portfolio to the Fund will be recorded in an appropriate title for
the corresponding Division of the Variable Account.
6. The Fund shall furnish notice promptly to Anchor National of any
dividend or distribution payable on its shares which are subject to this
Agreement. All of such dividends and distributions as are payable on each of the
Portfolio shares in the title for the corresponding Division of
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the Variable Account shall be automatically reinvested in additional shares of
that Portfolio of the Fund. The Fund shall notify Anchor National of the number
of shares so issued.
7. All expenses incident to the performance of the Fund under this
Agreement shall be paid by the Fund. The Fund shall ensure that all of its
shares which are subject to this Agreement are registered and authorized for
issue in accordance with applicable federal and state laws prior to their
purchase by the Variable Account. Anchor National shall bear none of the
expenses for the cost of registration of the Fund's shares, preparation of the
Fund's prospectuses, proxy materials and reports, the distribution of such items
to shareholders, the preparation of all statements and notices required by any
federal or state law or any taxes on the issue or transfer of the Fund's shares
subject to this Agreement.
8. Anchor National, either directly or through Distributor, shall make no
representations concerning the Fund's shares which are subject to this Agreement
other than those contained in the then current prospectus of the Fund and in
printed information subsequently issued by the Fund as supplemental to such
prospects.
9. Anchor National and the Fund acknowledge that in the future, the
Fund's shares may become available for investment by separate accounts of other
insurance companies, which may or may not be affiliated persons (as that term is
defined in the Act) of Anchor National (collectively with Anchor National,
"Participating Insurers"). In such event, (a) the Fund shall undertake that its
Board of Trustees ("Board") will monitor the Fund for the existence of material
irreconcilable conflicts that may arise between the Contract owners of
Participating Insurers, for the purpose of identifying and remedying any such
conflict and (b) paragraphs 10, 11 and 12 shall apply. In discharging its
responsibilities under paragraphs 10, 11 and 12 hereinafter, Anchor National
will cooperate and coordinate, to the extent necessary, with the Board and with
other Participating Insurers. The Fund agrees that it will require, as a
condition to participation, that all Participating Insurers shall have
obligations and responsibilities regarding conflicts of interest corresponding
to those that are agreed to herein by Anchor National pursuant to such
paragraphs 10, 11 and 12 and pursuant to this paragraph 9.
10. Anchor National shall provide pass-through voting privileges to all
variable Contract owners so long as the U.S. Securities and Exchange Commission
continues to interpret the Act to require pass-through voting privileges for
variable Contract owners. Anchor National shall be responsible for assuring that
the Variable Account calculates voting privilege in a manner consistent with
separate accounts of other Participating Insurers, as determined by the Board.
Anchor National will vote shares for which it has not received voting
instructions in the same proportion as it votes shares for which it has received
instructions.
11. Anchor National will report to the Board any potential or existing
conflicts of which it is or becomes aware between any of its Contract owners or
between any of its Contract owners and Contract owners of other Participating
Insurers. Anchor National will be responsible for assisting the Board in
carrying out its responsibilities to identify material conflicts by providing
the Board with all
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information available to it that is reasonably necessary for the Board to
consider any issues raised, including information as to a decision by Anchor
National to disregard voting instructions of its Contract owners.
12. The Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly by it to
Anchor National and other Participating Insurers. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance tax, or securities laws or regulations, or a public ruling,
private letter ruling, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by variable
annuity Contract owners and variable life insurance Contract owners or by
Contract owners of different Participating Insurers; or (f) a decision by a
Participating Insurer to disregard the voting instructions of variable Contract
owners.
13. If it is determined by a majority of the Board or a majority of its
disinterested Trustees that a material irreconcilable conflict exists that
affects the interests of Anchor National Contract owners, Anchor National shall,
in cooperation with other Participating Insurers whose Contract owners'
interests are also affected by the conflict, take whatever steps are necessary
to remedy or eliminate the irreconcilable material conflict, which steps could
include: (a) withdrawing the assets allocable to the Variable Account from the
Fund or any portfolio and reinvesting such assets in a different investment
medium, including another Portfolio of the Fund, or submitting the question of
whether such segregation should be implemented to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any particular
group (e.g., annuity Contract owners or life insurance Contract owners) that
votes in favor of such segregation, or offering to the affected Contract owners
of the option of making such a change; and (b) establishing a new registered
management investment company or managed separate account. Anchor National shall
take such steps at its expense if the conflict affects solely the interests of
the owners of Anchor National Contracts, but shall bear only its equitable
portion of any such expense if the conflict also affects the interest of the
Contract owners of one or more Participating Insurers other than Anchor
National, provided: that this sentence shall not be construed to require the
Fund to bear any portion of such expense. If a material irreconcilable conflict
arises because of Anchor National's decision to disregard Contract owner voting
instructions and that decision represents a minority position or would preclude
a majority vote, Anchor National may be required, at Fund's election, to
withdraw the Variable Account's investment in the Fund, and no charge or penalty
will be imposed against the Variable Account as a result of such a withdrawal.
Anchor National agrees to take such remedial action as may be required under
this paragraph 13 with a view only to the interests of its Contract owners. For
purposes of this paragraph 13, a majority of the disinterested members of the
Board shall determine whether or not any proposed action adequately remedies any
irreconcilable conflict, but in no event will Fund be required to establish a
new funding medium for any variable Contracts. Anchor National shall not be
required by this paragraph 13 to establish a new funding medium for any variable
Contract if an offer to do so has been declined by vote of a majority of
affected Contract owners.
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14. This Agreement shall terminate:
(a) at the option of Anchor National or the Fund upon 60 days'
advance written notice to all other parties to this Agreement; or
(b) at the option of Anchor National if any of the Fund's shares are
not reasonably available to meet the requirements of the
Contracts funded in the Variable Account as determined by Anchor
National. Prompt notice of election to terminate shall be
furnished by Anchor National; or
(c) at the option of Anchor National upon institution of formal
proceedings against the Fund by the Securities and Exchange
Commission; or
(d) upon the vote of Contract owners having an interest in a
particular Division of the Variable Account to substitute the
shares of another investment company for the corresponding Fund
Portfolio shares in accordance with the terms of the Contracts
for which those Fund shares had been selected to serve as the
underlying investment medium. Anchor National will give 30 days'
prior written notice to the Fund of the date of any proposed
action to replace the Fund's shares; or
(e) in the event the Fund's shares are not registered, issued or sold
in accordance with applicable state and/or federal law or such
law precludes the use of such shares as the underlying investment
medium of the Contracts funded in the Variable Account. Prompt
notice shall be given by each party to all other parties in the
event that the conditions stated in subsections (b), (c) or (d)
of this paragraph 14 should occur.
15. Notwithstanding any other provisions of this Agreement, the
obligations of the Fund hereunder are not personally binding upon any of the
trustees, shareholders, officers, employees or agents of the Fund; resort in
satisfaction of such obligations shall be had only to the assets and property of
the Fund and not to the private property of any of such Fund's trustees,
shareholders, officers, employees or agents.
16. This Agreement shall be construed in accordance with the laws of the
State of California.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ANCHOR NATIONAL LIFE INSURANCE COMPANY
By:
-----------------------------------------
Jana Waring Greer
Senior Vice President
VARIABLE ANNUITY ACCOUNT SEVEN
BY: ANCHOR NATIONAL LIFE INSURANCE
COMPANY
By:
-----------------------------------------
Susan L. Harris
Senior Vice President
SUNAMERICA SERIES TRUST
By:
-----------------------------------------
Robert M. Zakem
Assistant Secretary
Acknowledged and Agreed:
SUNAMERICA CAPITAL SERVICES, INC.
By: Dated: November 15, 1998
-------------------------------------
J. Steven Neamtz
President
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Exhibit 9
November 15, 1998
Division of Investment Management
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Madam/Sir:
Referring to this Registration Statement on behalf of Variable Annuity Account
Seven (the "Account") and the Registration Statement on Form N-4 filed September
16, 1998 (the "Registration Statements") on behalf of Variable Annuity Account
Seven and having examined and being familiar with the articles of incorporation
and by-laws of Anchor National, the applicable resolutions relating to the
Account and other pertinent records and documents, I am of the opinion that:
1) Anchor National is a duly organized and existing stock life
insurance company under the laws of the State of Arizona;
2) the Account is a duly organized and existing separate account of
Anchor National;
3) the annuity contracts being registered by the Registration
Statements will, upon sale thereof, be legally issued, fully paid
and nonassessable, and, to the extent that they are construed to
constitute debt securities, will be binding obligations of Anchor
National, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the rights of
creditors generally.
I am licensed to practice only in the State of California, and the foregoing
opinions are limited to the laws of the State of California, the general
opinions are limited to the laws of the State of California, the general
corporate law of the State of Arizona and federal law. I hereby consent to the
filing of this opinion with the Securities and Exchange Commission in connection
with the Registration Statements on Form N-4 of the Account.
Very truly yours,
/s/ SUSAN L. HARRIS
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Susan L. Harris
