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File Nos. 333-65965
811-9003
As filed with the Securities and Exchange Commission on February 16, 1999
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [ ]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ ]
Amendment No. 1 [X]
(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)
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Title
of Securities
Being Registered
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Flexible Payment
Deferred Annuity
Contracts
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It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
---
on [ ] pursuant to paragraph (b) of Rule 485
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60 days after filing pursuant to paragraph (a) of Rule 485
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X on May 3, 1999 pursuant to paragraph (a) of Rule 485
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VARIABLE ANNUITY ACCOUNT SEVEN
Cross Reference Sheet
PART A - PROSPECTUS
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Item Number in Form N-4 Caption
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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 Class A
Variable Annuity;
Other Information
6. Deductions............................. Expenses
7. General Description of
Variable Annuity Contracts............. The Polaris Class A
Variable Annuity;
Purchasing a Polaris
Class A Variable
Annuity; Investment
Options
8. Annuity Period......................... Income Options
9. Death Benefit.......................... Death Benefit
10. Purchases and Contract Value........... Purchasing a Polaris
Class A
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
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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.
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Item Number in Form N-4 Caption
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15. Cover Page............................. Cover Page
16. Table of Contents...................... Table of Contents
17. General Information and History........ The Variable Polaris Class A
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 Class A
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
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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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PROFILE LOGO
VARIABLE ANNUITY
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD
KNOW AND CONSIDER BEFORE PURCHASING THE POLARIS CLASS A VARIABLE ANNUITY. THE
ANNUITY IS MORE FULLY DESCRIBED IN THE PROSPECTUS. PLEASE READ THE PROSPECTUS
CAREFULLY.
May 3, 1999
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1. THE POLARIS CLASS A VARIABLE ANNUITY
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The Polaris Class A Variable Annuity is a contract between you and Anchor
National Life Insurance Company. It is designed to help you invest on a
tax-deferred basis and meet long-term financial goals, such as retirement
funding. Tax deferral means all your money, including the amount you would
otherwise pay in current income taxes, remains in your contract to generate more
earnings. Your money could grow faster than it would in a comparable taxable
investment.
Polaris Class A offers a diverse selection of money managers and investment
options. You may divide your money among any or all 26 variable portfolios and 7
fixed account options. Your investment is not guaranteed. The value of your
Polaris Class A contract can fluctuate up and down, based on the performance of
the underlying investments you select, and you may experience a loss.
The variable portfolios offer professionally managed investment choices with
goals ranging from capital preservation to aggressive growth. Your choices for
the various investment options are found on the next page.
The contract also offers 7 fixed 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 portfolios to which your
money is allocated and/or the interest rate(s) earned on the fixed account
option(s) in which you invest. You may withdraw money from your contract during
the accumulation phase. However, as with other tax-deferred investments, you
will pay taxes on earnings and untaxed contributions when you withdraw them. An
IRS penalty tax may apply if you make withdrawals before age 59 1/2.
During the income phase, you may receive income payments from your annuity. Your
income payments may be fixed in dollar amount, vary with investment performance
or a combination of both, depending on where your money is allocated. Among
other factors, the amount of money you are able to accumulate in your contract
during the accumulation phase will 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 or 20 years;
(4) payments for your lifetime, but for not less than 10 or 20 years; and
(5) payments for a specified period of 5 to 30 years.
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.
If your contract is part of a non-qualified retirement plan (one that is
established with after-tax dollars), payments during the income phase are
considered partly a return of your original investment. The "original
investment" part of each payment is not taxable as income. For contracts which
are part of a qualified retirement plan using before-tax dollars, the entire
income payment is taxable as income.
In addition to the above income options, you may also elect to take income
payments under the Income Protection program, subject to the provisions thereof.
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3. PURCHASING A POLARIS CLASS A
VARIABLE ANNUITY CONTRACT
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You can buy a contract through your Edward Jones investment representative, who
can also help you complete the proper forms. For non-qualified contracts, the
minimum initial gross 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.
For qualified contracts, the minimum initial gross purchase payment is $2,000
and subsequent amounts of $250 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 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
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 MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Mid-Cap Growth Portfolio
- MFS Growth and Income Portfolio
- MFS Total Return 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-year fixed account option or the 3, 5, 7
and 10-year market value adjustment ("MVA") fixed account options and, under
certain circumstances, the 6-month and 1-year Dollar Cost Averaging ("DCA")
fixed account options.
The interest rates applicable for these fixed account options may differ from
time to time, however, we will never credit less than a 3% compounded effective
yield. Once established, the rate will not change during the selected period.
Your contract value will be adjusted up or down for withdrawals or transfers
from the 3, 5, 7 and 10-year fixed account options prior to the end of the
guarantee period.
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5. EXPENSES
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We deduct insurance charges, to cover our mortality and expense risks, which
equal 0.85% annually of the average daily value of your contract allocated to
the variable portfolios.
We apply an up-front sales charge against each gross purchase payment you make.
The sales charge equals a percentage of each gross purchase payment. The sales
charge ranges from 0.50% to 5.75%, depending upon your investment amount. You
may be entitled to a reduced sales charge if you agree to contribute additional
money to your contract within a 13-month period or if you have related contracts
with us.
For investment amounts of $1,000,000 or more, we deduct, from your contract
value, a withdrawal charge of 0.50% for amounts withdrawn from any Purchase
Payment invested less than 12 months prior to such withdrawal.
As with other professionally managed investments, there are investment charges
imposed on contracts with money allocated to the variable portfolios. We
estimate these fees to range from .58% to 1.90%.
Each year, you are allowed to make 15 transfers without charge. After your first
15 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 chart is designed to help you understand the charges in your
contract. The column "Total Annual Charges" shows the total of the 0.85%
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. We assume an up-front sales charge of 5.75% and a premium
tax of 0% in both examples.
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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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Capital Appreciation 0.85% 0.68% 1.53% $ 73 $230
Growth 0.85% 0.75% 1.60% $ 73 $237
Government and Quality Bond 0.85% 0.67% 1.52% $ 73 $229
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SUNAMERICA SERIES TRUST PORTFOLIO
Emerging Markets* 0.85% 1.90% 2.75% $ 85 $349
International Diversified Equities 0.85% 1.26% 2.11% $ 78 $289
Global Equities 0.85% 0.88% 1.73% $ 75 $251
International Growth and Income* 0.85% 1.46% 2.31% $ 80 $310
Aggressive Growth* 0.85% 0.83% 1.68% $ 74 $246
MFS Mid-Cap Growth 0.85% 1.00% 1.85% $ 76 $263
Real Estate* 0.85% 0.95% 1.80% $ 75 $258
Putnam Growth 0.85% 0.86% 1.71% $ 74 $249
MFS Growth and Income 0.85% 0.73% 1.58% $ 73 $235
Alliance Growth 0.85% 0.64% 1.49% $ 72 $226
"Dogs" of Wall Street* 0.85% 0.85% 1.70% $ 74 $248
Venture Value 0.85% 0.75% 1.60% $ 73 $237
Federated Value* 0.85% 0.83% 1.68% $ 74 $246
Growth-Income 0.85% 0.60% 1.45% $ 72 $222
Utility* 0.85% 1.01% 1.86% $ 76 $261
Asset Allocation 0.85% 0.64% 1.49% $ 72 $226
MFS Total Return 0.85% 0.77% 1.62% $ 74 $239
SunAmerica Balanced* 0.85% 0.78% 1.63% $ 74 $240
Worldwide High Income 0.85% 1.08% 1.93% $ 77 $271
High-Yield Bond 0.85% 0.69% 1.54% $ 73 $231
Corporate Bond 0.85% 0.77% 1.62% $ 74 $239
Global Bond 0.85% 0.85% 1.70% $ 74 $248
Cash Management 0.85% 0.58% 1.43% $ 72 $220
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* 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.
** Includes sales charge applicable to a $1,000 purchase payment, or 5.75%, but
does not include the fees associated with the optional income protector plus
and max features.
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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 earned in a non-qualified contract are deferred until they are
withdrawn. In a qualified contract, all amounts are taxable when they are
withdrawn.
When you begin taking distributions or withdrawals from your contract, earnings
are considered to be taken out first and will be taxed at your ordinary income
rate. You may be subject to a 10% IRS penalty tax for distributions or
withdrawals before age 59 1/2.
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7. ACCESS TO YOUR MONEY
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Withdrawals may be made from your contract in the amount of $1,000 or more. You
may request a withdrawal in writing or by establishing systematic withdrawals.
Under systematic withdrawals, the minimum withdrawal amount is $250.
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8. PERFORMANCE
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The value of your contract will fluctuate depending upon the investment
performance of the variable portfolio(s) you choose.
When you invest in the Polaris Class A 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 information 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. You must select from the two death benefit options described
below at the time you purchase your contract. Once selected, your death benefit
may not be changed. You should discuss with your Edward Jones investment
representative the options available to you and which option is best for you.
OPTION 1 - PURCHASE PAYMENT ACCUMULATION OPTION:
The death benefit is the greater of:
(1) the value of your contract at the time we receive satisfactory proof of
death; or
(2) total purchase payments less withdrawals (and any fees or charges applicable
to such withdrawals), compounded at a 4% annual growth rate until the date
of death (3% growth rate if 70 or older at the time of contract issue) plus
any purchase payments less withdrawals recorded after the date of death (and
any fees or charges applicable to such withdrawals; or
(3) the value of your contract on the seventh contract anniversary, plus any
purchase payments since the seventh anniversary and less any withdrawals
(and any fees or charges applicable to such withdrawals), all compounded at
a 4% annual growth rate until the date of death (3% if 70 or older at the
time of contract issue) plus any purchase payments less withdrawals recorded
after the date of death (and any fees or charges applicable to such
withdrawals).
OPTION 2 - MAXIMUM ANNIVERSARY OPTION:
The death benefit is the greater of:
(1) the value of your contract at the time we receive satisfactory proof of
death; or
(2) total purchase payments less any withdrawals (and any fees or charges
applicable to such withdrawals); or
(3) the maximum anniversary value on any contract anniversary prior to your 81st
birthday. The anniversary value equals the value of your contract on a
contract anniversary plus any purchase payments since that anniversary and
less any withdrawals (and any fees or charges applicable to such
withdrawals).
If you are age 90 or older at the time of death and selected the option 2 death
benefit, the death benefit will be equal to the value of your contract 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 sum of the value of your contract (unless otherwise required by state
law) and the sales charge. Its value may be more or less than the money you
initially invested.
ASSET ALLOCATION REBALANCING: If selected by you, this program seeks to keep
your investment in line with your goals. We will maintain your specified
allocation mix in the variable portfolios and the 1-year fixed account option by
readjusting your money on a calendar quarter, semiannual or annual basis.
SYSTEMATIC WITHDRAWAL PROGRAM: If selected by you, this program allows you to
receive either monthly, quarterly, semiannual or annual checks during the
accumulation phase. Systematic withdrawals may also be electronically
transferred to your bank account. Of course, withdrawals may be taxable and a
10% IRS penalty tax may apply if you are under age 59 1/2.
PRINCIPAL ADVANTAGE PROGRAM: If selected by you, this program allows you to
obtain growth potential without any market risk to your principal. We will
guarantee that the portion of your money allocated to the 1, 3, 5, 7 or 10-year
fixed account option will grow to equal your principal investment when it is
allocated in accordance with the program.
DOLLAR COST AVERAGING: If selected by you, this program allows you to invest
gradually in the variable portfolios from any of the variable portfolios, the
1-year fixed account option, the 6-month DCA fixed account option or the 1-year
DCA fixed account option.
AUTOMATIC PAYMENT PLAN: You can add to your contract directly from your bank
account with as little as $20 per month.
CONFIRMATIONS AND QUARTERLY STATEMENTS: You will receive a confirmation of each
transaction within your contract. On a quarterly basis, you will receive a
complete statement of your transactions over the past quarter and a summary of
your account values.
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11. INQUIRIES
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If you have questions about your contract or need to make changes, call your
Edward Jones investment representative or contact us at:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Telephone Number: (800) 445-SUN2
If money accompanies your correspondence, you should direct it to:
Anchor National Life Insurance Company
P.O. Box 100330
Pasadena, California 91189-0001
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PROFILE LOGO
VARIABLE ANNUITY
PROSPECTUS
MAY 3, 1999
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Please read this prospectus carefully FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACTS
before investing and keep it for issued by
future reference. It contains ANCHOR NATIONAL LIFE INSURANCE COMPANY
important information about the in connection with
Polaris Class A Variable Annuity. VARIABLE ANNUITY ACCOUNT SEVEN
The annuity has 33 investment choices -- 7 fixed account
To learn more about the annuity options and 26 Variable Portfolios listed below. The 7 fixed
offered by this prospectus, you can account options include specified periods of 1, 3, 5, 7 and
obtain a copy of the Statement of 10 years and DCA accounts for 6-month and 1-year periods.
Additional Information ("SAI") dated The 26 Variable Portfolios are part of the Anchor Series
May 3, 1999. The SAI is on file with Trust or the SunAmerica Series Trust.
the Securities and Exchange
Commission ("SEC") and is ANCHOR SERIES TRUST:
incorporated by reference into this MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
prospectus. The Table of Contents of - Capital Appreciation Portfolio
the SAI appears on page 23 of this - Growth Portfolio
prospectus. For a free copy of the - Government and Quality Bond Portfolio
SAI, call us at (800) 445-SUN2 or
write to us at our Annuity Service SUNAMERICA SERIES TRUST:
Center, P.O. Box 54299, Los Angeles, MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
California 90054-0299. - Global Equities Portfolio
- Alliance Growth Portfolio
In addition, the SEC maintains a - Growth-Income Portfolio
website (http://www.sec.gov) that MANAGED BY DAVIS SELECTED ADVISERS, L.P.
contains the SAI, materials - Venture Value Portfolio
incorporated by reference and other - Real Estate Portfolio
information filed electronically with MANAGED BY FEDERATED INVESTORS
the SEC by Anchor National. - Federated Value Portfolio
- Utility Portfolio
Annuities involve risks, including - Corporate Bond Portfolio
possible loss of principal. Annuities MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT/
are not a deposit or obligation of, GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
or guaranteed or endorsed by, any - Asset Allocation Portfolio
bank. They are not Federally insured - Global Bond Portfolio
by the Federal Deposit Insurance MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
Corporation, the Federal Reserve - MFS Mid-Cap Growth Portfolio
Board or any other agency. - MFS Growth and Income Portfolio
- MFS Total Return Portfolio
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT
- 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
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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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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
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Anchor National's Annual Report on Form 10-K for the year ended September 30,
1998, and its quarterly report on Form 10-Q for the quarter ended December 31,
1998 are incorporated herein by reference. In addition, Anchor National filed
two reports on Form 8-K on January 14 and 15, 1999. These reports are also
incorporated herein by reference.
All documents or reports filed by Anchor National pursuant to Section 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") after the date hereof and prior to the termination of the
offering of the securities offered hereby shall be deemed to be incorporated by
reference in this prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
and superseded, to constitute a part of this prospectus.
Anchor National files its Exchange Act documents and reports, including its
annual and quarterly reports on Form 10-K and Form 10-Q, electronically pursuant
to EDGAR under CIK No. 0000006342. The SEC maintains a web site that contains
reports, proxy and information statements, and other information regarding
registrants that file electronically with the SEC. The address of the site is
http://www.sec.gov.
Anchor National will provide without charge to each person to whom this
prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated herein by reference.
Requests for such documents should be directed to Anchor National's Annuity
Service Center, as follows:
Anchor National Life
Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Telephone Number: (800) 445-SUN2
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SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION
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Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
2
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TABLE OF CONTENTS
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 2
SECURITIES AND EXCHANGE COMMISSION POSITION ON
INDEMNIFICATION........................................... 2
GLOSSARY.................................................... 3
FEE TABLES.................................................. 4
Sales Charge.......................................... 4
Withdrawal Charge..................................... 4
Owner Transaction Expenses............................ 4
The Income Protector Expense.......................... 4
Annual Separate Account Expenses...................... 4
Portfolio Expenses.................................... 4
EXAMPLES.................................................... 5
THE POLARIS CLASS A VARIABLE ANNUITY........................ 6
PURCHASING A POLARIS CLASS A VARIABLE ANNUITY............... 6
Allocation of Purchase Payments....................... 7
Accumulation Units.................................... 7
Free Look............................................. 7
INVESTMENT OPTIONS.......................................... 7
Variable Portfolios................................... 7
Anchor Series Trust................................... 8
SunAmerica Series Trust............................... 8
Fixed Account Options................................. 8
Market Value Adjustment ("MVA")....................... 9
Transfers During the Accumulation Phase............... 9
Dollar Cost Averaging................................. 10
Asset Allocation Rebalancing.......................... 11
Principal Advantage Program........................... 11
Voting Rights......................................... 11
Substitution.......................................... 11
ACCESS TO YOUR MONEY........................................ 11
Systematic Withdrawal Program......................... 12
Minimum Contract Value................................ 12
DEATH BENEFIT............................................... 12
EXPENSES.................................................... 13
Insurance Charges..................................... 13
Sales Charge.......................................... 13
Reduction of Sales Charge............................. 13
Letter of Intent...................................... 13
Rights of Accumulation................................ 14
Purchase Payments Subject to a Withdrawal Charge...... 14
Investment Charges.................................... 15
Transfer Fee.......................................... 15
Premium Tax........................................... 15
Income Taxes.......................................... 15
Reduction or Elimination of Certain 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 -
Non-Qualified Contracts............................. 19
Tax Treatment of Distributions -
Qualified Contracts................................. 19
Minimum Distributions................................. 20
Diversification....................................... 20
PERFORMANCE................................................. 20
OTHER INFORMATION........................................... 20
Anchor National....................................... 20
The Separate Account.................................. 21
The General Account................................... 21
Distribution of the Contract.......................... 21
Administration........................................ 21
Year 2000............................................. 21
Legal Proceedings..................................... 22
Ownership............................................. 22
Custodian............................................. 22
Additional Information................................ 22
Independent Accountants............................... 22
Legal Matters......................................... 22
Registration Statement................................ 23
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION....
23
APPENDIX A -- MARKET VALUE ADJUSTMENT....................... A-1
APPENDIX B -- PREMIUM TAXES................................. B-1
------------------------------------------------------------------
------------------------------------------------------------------
GLOSSARY
------------------------------------------------------------------
------------------------------------------------------------------
We have capitalized some of the technical terms used in this
prospectus. To help you understand these terms, we have defined
them in this glossary.
ACCUMULATION PHASE - The period during which you invest money in
your contract.
ACCUMULATION UNITS - A measurement we use to calculate the value
of the variable portion of your contract during the Accumulation
Phase.
ANNUITANT(S) - The person(s) on whose life (lives) we base income
payments.
ANNUITY DATE - The date on which income payments are to begin, as
selected by you.
ANNUITY UNITS - A measurement we use to calculate the amount of
income payments you receive from the variable portion of your
contract during the Income Phase.
BENEFICIARY - The person designated to receive any benefits under
the contract if you or the Annuitant dies.
GROSS 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. Gross Purchase Payments do not
reflect the reduction of the sales charge.
INCOME PHASE - The period during which we make income payments to
you.
IRS - The Internal Revenue Service.
NON-QUALIFIED (CONTRACT) - A contract purchased with after-tax
dollars. In general, these contracts are not under any pension
plan, specially sponsored program or individual retirement account
("IRA").
PURCHASE PAYMENTS - The portion of your Gross Purchase Payments
which we invest in your contract. We calculate this amount by
deducting the applicable sales charge from your Gross Purchase
Payments.
QUALIFIED (CONTRACT) - A contract purchased with pre-tax dollars.
These contracts are generally purchased under a pension plan,
specially sponsored program or IRA.
TRUSTS - Refers to the Anchor Series Trust and the SunAmerica
Series Trust collectively.
VARIABLE PORTFOLIO(S) - The variable investment options
available under the contract. Each Variable Portfolio has its own
investment objective and is invested in the underlying investments
of the Anchor Series Trust or the SunAmerica Series Trust.
</TABLE>
ALL INVESTMENT REPRESENTATIVES THAT SELL THE CONTRACTS OFFERED BY THIS
PROSPECTUS ARE REQUIRED TO DELIVER A PROSPECTUS.
3
<PAGE> 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FEE TABLES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OWNER TRANSACTION EXPENSES
SALES CHARGE
<TABLE>
<CAPTION>
SALES CHARGE AS A
PERCENTAGE OF GROSS
INVESTMENT AMOUNT PURCHASE PAYMENT INVESTED*
-------------------------------- --------------------------
<S> <C>
Less than $50,000.................... 5.75%
$50,000 but less than $100,000....... 4.75%
$100,000 but less than $250,000...... 3.50%
$250,000 but less than $500,000...... 2.50%
$500,000 but less than $1,000,000.... 2.00%
$1,000,000 or more................... 0.50%
</TABLE>
* Your gross purchase payment may qualify for a reduced sales charge. SEE
EXPENSES SECTION ON PAGE 11.
WITHDRAWAL CHARGE
<TABLE>
<CAPTION>
WITHDRAWAL CHARGE AS A
PERCENTAGE
OF GROSS PURCHASE PAYMENT
WITHDRAWN WITHIN 12 MONTHS OF
INVESTMENT AMOUNT PURCHASE PAYMENT
------------------------- ----------------------------
<S> <C>
$1,000,000 or more............... 0.50%
TRANSFER FEE..................... No charge for first 15 transfers
each year; thereafter, fee is $25
($10 in Pennsylvania and Texas)
per transfer
</TABLE>
CONTRACT MAINTENANCE FEE . . . . . . . . . . . Non.
ANNUAL SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge....................... 0.85%
-----
TOTAL SEPARATE ACCOUNT EXPENSES..................... 0.85%
=====
</TABLE>
THE INCOME PROTECTOR EXPENSE
(THE INCOME PROTECTOR PLUS AND MAX FEATURES ARE OPTIONAL AND, IF ELECTED, THE
FEE IS DEDUCTED ANNUALLY FROM YOUR CONTRACT VALUE. THE INCOME PROTECTOR PROGRAM
MAY NOT BE AVAILABLE IN YOUR STATE. SEE THE INCOME PROTECTOR SECTION ON PAGE
16.)
<TABLE>
<CAPTION>
FEE AS A PERCENTAGE OF
YOUR INCOME BENEFIT BASE
THE INCOME PROTECTOR ALTERNATIVES ------------------------
------------------------------
<S> <C>
Base Income Protector................. 0%
Income Protector Plus................. .15%
Income Protector Max.................. .30%
</TABLE>
PORTFOLIO EXPENSES
ANCHOR SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S TWELVE-MONTH PERIOD ENDED
DECEMBER 31, 1998)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Capital Appreciation .64% .04% .68%
- -----------------------------------------------------------------------------------------------------------
Growth .70% .05% .75%
- -----------------------------------------------------------------------------------------------------------
Government and Quality Bond .61% .06% .67%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
SUNAMERICA SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER REIMBURSEMENT OR WAIVER OF EXPENSES
FOR THE TRUST'S FISCAL YEAR ENDED DECEMBER 31, 1998)
<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% .26% 1.26%
- -----------------------------------------------------------------------------------------------------------
Global Equities .74% .14% .88%
- -----------------------------------------------------------------------------------------------------------
International Growth and Income*** 1.00% .46% 1.46%
- -----------------------------------------------------------------------------------------------------------
Aggressive Growth .74% .09% .83%
- -----------------------------------------------------------------------------------------------------------
MFS Mid-Cap Growth+ .75% .25% 1.00%
- -----------------------------------------------------------------------------------------------------------
Real Estate*** .80% .15% .95%
- -----------------------------------------------------------------------------------------------------------
Putnam Growth .81% .05% .86%
- -----------------------------------------------------------------------------------------------------------
MFS Growth and Income .70% .03% .73%
- -----------------------------------------------------------------------------------------------------------
Alliance Growth+ .61% .03% .64%
- -----------------------------------------------------------------------------------------------------------
"Dogs" of Wall Street* .60% .25% .85%**
- -----------------------------------------------------------------------------------------------------------
Venture Value .72% .03% .75%
- -----------------------------------------------------------------------------------------------------------
Federated Value .75% .08% .83%
- -----------------------------------------------------------------------------------------------------------
Growth-Income .56% .04% .60%
- -----------------------------------------------------------------------------------------------------------
Utility*** .75% .26% 1.01%
- -----------------------------------------------------------------------------------------------------------
Asset Allocation .59% .05% .64%
- -----------------------------------------------------------------------------------------------------------
MFS Total Return+ .67% .10% .77%
- -----------------------------------------------------------------------------------------------------------
SunAmerica Balanced .68% .10% .78%
- -----------------------------------------------------------------------------------------------------------
Worldwide High Income 1.00% .08% 1.08%
- -----------------------------------------------------------------------------------------------------------
High-Yield Bond .63% .06% .69%
- -----------------------------------------------------------------------------------------------------------
Corporate Bond .65% .12% .77%
- -----------------------------------------------------------------------------------------------------------
Global Bond .70% .15% .85%
- -----------------------------------------------------------------------------------------------------------
Cash Management .53% .05% .58%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Absent fee waivers or reimbursement of expenses by the adviser, you would
have incurred the following expenses during the last fiscal year: Emerging
Markets (2.01%) and "Dogs" of Wall Street (.92%).
** Annualized
*** Absent recoupment of expenses by the adviser, you would have incurred the
following expenses during the last fiscal year: International Growth and
Income (1.40%); Real Estate (.93%); and Utility (.92%).
+ The expenses noted here are restated to reflect an estimate of fees for
each portfolio for the current fiscal year.
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 Variable
Portfolio, assuming a 5% annual return on assets and a sales charge of 5.75%. We
do not deduct any additional fees or charges when you surrender your contract.*
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS
<S> <C> <C>
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Capital Appreciation $73 $104
- ---------------------------------------------------------------------------------
Growth $73 $106
- ---------------------------------------------------------------------------------
Government and Quality Bond $73 $103
- ---------------------------------------------------------------------------------
Emerging Markets $85 $139
- ---------------------------------------------------------------------------------
International Diversified Equities $78 $120
- ---------------------------------------------------------------------------------
Global Equities $75 $109
- ---------------------------------------------------------------------------------
International Growth and Income $80 $126
- ---------------------------------------------------------------------------------
Aggressive Growth $74 $108
- ---------------------------------------------------------------------------------
MFS Mid-Cap Growth $76 $113
- ---------------------------------------------------------------------------------
Real Estate $75 $111
- ---------------------------------------------------------------------------------
Putnam Growth $74 $109
- ---------------------------------------------------------------------------------
MFS Growth and Income $73 $105
- ---------------------------------------------------------------------------------
Alliance Growth $72 $102
- ---------------------------------------------------------------------------------
"Dogs" of Wall Street $74 $109
- ---------------------------------------------------------------------------------
Venture Value $73 $106
- ---------------------------------------------------------------------------------
Federated Value $74 $108
- ---------------------------------------------------------------------------------
Growth-Income $72 $101
- ---------------------------------------------------------------------------------
Utility $76 $113
- ---------------------------------------------------------------------------------
Asset Allocation $72 $102
- ---------------------------------------------------------------------------------
MFS Total Return $74 $106
- ---------------------------------------------------------------------------------
SunAmerica Balanced $74 $107
- ---------------------------------------------------------------------------------
Worldwide High Income $77 $116
- ---------------------------------------------------------------------------------
High-Yield Bond $73 $104
- ---------------------------------------------------------------------------------
Corporate Bond $74 $106
- ---------------------------------------------------------------------------------
Global Bond $74 $109
- ---------------------------------------------------------------------------------
Cash Management $72 $101
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
* We do not currently charge a withdrawal charge upon annuitization, unless the
contract is annuitized under the Income Protector program. We will assess any
applicable withdrawal charge upon annuitizations effected using the Income
Protector program as if you had fully surrendered your contract.
5
<PAGE> 13
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 Variable 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 Variable Portfolio's average net assets:
SunAmerica Balanced (1.00%); "Dogs" of Wall Street (.85%); Aggressive Growth
(.90%); Federated Value (1.03%); Utility (1.05%); Emerging Markets (1.90%);
International Growth and Income (1.60%); and Real Estate (1.25%). The
adviser also may voluntarily waive or reimburse additional amounts to
increase a Variable 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 Variable 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 OPTION 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 CLASS A VARIABLE ANNUITY
- ----------------------------------------------------------------
- ----------------------------------------------------------------
An annuity is a contract between you and an insurance company. You are the owner
of the contract. The contract provides three main benefits:
- Tax Deferral: This means that you do not pay taxes on your earnings from
the annuity until you withdraw them.
- Death Benefit: If you die during the Accumulation Phase, the insurance
company pays a death benefit to your Beneficiary.
- Guaranteed Income: If elected, you receive a stream of income for your
lifetime, or another available period you select.
This annuity was developed to help you contribute to your retirement savings.
This annuity works in two stages, the Accumulation Phase and the Income Phase.
Your contract is in the Accumulation Phase during the period when you make
payments into the contract. The Income Phase begins when you request us to start
making 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
portfolios which, like mutual funds, vary 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 Variable
Portfolios in which you invest. This contract currently offers 26 Variable
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 invest.
For more information on investment options available under this contract SEE
INVESTMENT OPTIONS ON PAGE 7.
Anchor National Life Insurance Company (Anchor National, The Company, Us, We)
issues the Polaris Class A Variable Annuity. When you purchase a Polaris Class A
Variable Annuity, a contract exists between you and Anchor National. The Company
is a stock life insurance company organized under the laws of the state of
Arizona. Its principal place of business is 1 SunAmerica Center, Los Angeles,
California 90067. The Company conducts life insurance and annuity business in
the District of Columbia and all states except New York. Anchor National is an
indirect, wholly owned subsidiary of American International Group, Inc. ("AIG"),
a Delaware corporation.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
PURCHASING A POLARIS CLASS A
VARIABLE ANNUITY
- ----------------------------------------------------------------
- ----------------------------------------------------------------
An initial Gross Purchase Payment is the money you give us to buy a contract.
Any additional money you give us to invest in the contract after purchase is a
subsequent Gross Purchase Payment.
This chart shows the minimum initial and subsequent Gross Purchase Payments
permitted under your contract. These amounts depend upon whether a contract is
Qualified or Non-qualified for tax purposes. FOR FURTHER EXPLANATION, SEE TAXES
ON PAGE 19.
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------
Minimum Initial Minimum Subsequent
Gross Purchase Gross Purchase
Payment Payment
- -----------------------------------------------------------
Qualified $2,000 $250
- -----------------------------------------------------------
Non-Qualified $5,000 $500
- -----------------------------------------------------------
</TABLE>
Prior Company approval is required to accept Gross Purchase Payments greater
than $1,000,000. Also, the optional automatic payment plan allows you to make
subsequent Gross Purchase Payments of as little as $20.00.
6
<PAGE> 14
We may refuse any Gross Purchase Payment. In general, we will not issue a
Qualified contract to anyone who is age 70 1/2 or older, unless it is shown that
the minimum distribution required by the IRS is being made. In addition we may
not issue a contract to anyone over age 90.
ALLOCATION OF PURCHASE PAYMENTS
A Purchase Payment is the portion of your Gross Purchase Payment which we invest
in your contract after we deduct the sales charge.
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 invest the money according to your last allocation
instructions. SEE INVESTMENT OPTIONS BELOW.
In order to issue your contract, we must receive your completed application,
Purchase Payment allocation instructions and any other required paperwork at our
principal place of business. We allocate your initial purchase payment within
two days of receiving it. If we do not have complete information necessary to
issue your contract, we will contact you. If we do not have the information
necessary to issue your contract within 5 business days we will:
- Send your money back to you, or;
- Ask your permission to keep your money until we get the information
necessary to issue the contract.
ACCUMULATION UNITS
When you allocate a Purchase Payment to the Variable Portfolios, we credit your
contract with Accumulation Units of the separate account, based on the AUV next
determined after receipt. The value of an Accumulation Unit goes up and down
based on the performance of the Variable Portfolios.
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 Variable
Portfolio;
2. We subtract from that amount all applicable contract charges; and
3. We divide this amount by the number of outstanding Accumulation Units.
We determine the number of Accumulation Units credited to your contract by
dividing the Purchase Payment by the Accumulation Unit value for the specific
Variable Portfolio.
EXAMPLE:
We receive a $50,000 Gross Purchase Payment from you on Wednesday which you
allocate to the Global Bond Portfolio. After we deduct the sales charge,
the net amount to be invested of your Gross Purchase Payment is $47,625. 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
$47,625 by $11.10 and credit your contract on Wednesday night with 4290.54
Accumulation Units for the Global Bond Portfolio.
Performance of the Variable Portfolios and the charges and expenses under your
contract affect Accumulation Unit values. These factors cause the value of your
contract to go up and 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 the value of your
contract on the day we receive your request plus the sales charge we deducted.
The amount refunded may be more or less than the amount you originally invested.
Certain states require us to return your Gross Purchase Payments upon a free
look request. Additionally, all contracts issued as an IRA require the full
return of Gross Purchase Payments upon a free look. With respect to those
contracts, we reserve the right to put your money in the Cash Management
Portfolio during the free look period. If you cancel your contract during the
free look period, we return your Gross Purchase Payment or the value of your
contract plus the sales charge we deducted, whichever is larger. At the end of
the free look period, we allocate your money according to your instructions.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
INVESTMENT OPTIONS
- ----------------------------------------------------------------
- ----------------------------------------------------------------
VARIABLE PORTFOLIOS
The contract currently offers 26 Variable Portfolios. These Variable Portfolios
invest in shares of the Anchor Series Trust and the SunAmerica Series Trust (the
"Trusts"). Additional Variable Portfolios may be available in the future. The
Variable 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 AIG,
is the investment adviser to the Trusts. The Trusts serve as the underlying
investment vehicles for other variable annuity contracts issued by Anchor
National, and other affiliated/unaffiliated insurance companies. Neither Anchor
National nor the Trusts believe that offering shares of the Trusts in this
manner disadvantages you. The adviser monitors the Trusts for potential
conflicts.
7
<PAGE> 15
The Variable 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 investment Portfolios in addition to
those listed below which are not available for investment under the contract.
The 3 available investment 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. SunAmerica Series Trust has investment Portfolios in addition to
those listed below which are not available for investment under the contract.
The 23 available investment 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 GOLDMAN SACHS ASSET MANAGEMENT/GOLDMAN
SACHS ASSET MANAGEMENT INTERNATIONAL
- Asset Allocation Portfolio
- Global Bond Portfolio
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Mid-Cap Growth Portfolio
- MFS Growth and Income Portfolio
- MFS Total Return 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 attached prospectuses for the Trusts carefully. These
prospectuses contain detailed information about the Variable Portfolios,
including each Variable Portfolio's investment objective and risk factors.
FIXED ACCOUNT OPTIONS
The contract also offers seven fixed account options. Anchor National will
guarantee the interest rate earned on money you allocate to any of these fixed
account options. We currently offer fixed account options for periods of one,
three, five, seven and ten years, which we call guarantee periods. Additionally,
we guarantee the interest rate for money allocated to the six-month DCA fixed
account and/or the one year DCA fixed account (the "DCA fixed accounts") which
are available only in conjunction with the Dollar Cost Averaging Program. Please
see the section on DOLLAR COST AVERAGING ON PAGE 10 for additional information
about, including limitations on, the availability and operation of the DCA fixed
accounts. The DCA fixed accounts are only available for new Purchase Payments.
Each guarantee period may offer a different interest rate but will never be less
than an annual effective rate of 3%. 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, five, seven or ten
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
or one of the Variable Portfolios to another fixed account.
Each of these rates may differ from one another. Although once declared the
applicable rate is guaranteed until the guarantee period expires.
When a guarantee period ends, you may leave your money in the same fixed
investment option. You may also reallocate your money to another fixed
investment option (other than the DCA fixed accounts) or to the Variable
Portfolios. If you want to reallocate your money to a different fixed account
option or Variable Portfolio, you must contact us within 30 days after the end
of the current interest guarantee period and instruct us how to reallocate the
money. We do not
8
<PAGE> 16
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 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 ON PAGE 10 for more information.
MARKET VALUE ADJUSTMENT ("MVA")
NOTE: THE FOLLOWING DISCUSSION APPLIES TO THE 3, 5, 7 and 10-YEAR FIXED ACCOUNT
OPTIONS, ONLY. THESE OPTIONS ARE NOT AVAILABLE IN ALL STATES. PLEASE CONTACT
YOUR EDWARD JONES INVESTMENT REPRESENTATIVE FOR MORE INFORMATION.
If you take money out of the 3, 5, 7 or 10-year fixed account options before the
end of the guarantee period, we make an adjustment to your contract (the "MVA").
The MVA reflects any difference in the interest rate environment between the
time you place your money in the fixed account option and the time when you
withdraw that money. This adjustment can increase or decrease your contract
value. You have 30 days after the end of each guarantee period to reallocate
your funds without incurring any MVA.
We calculate the MVA by doing a comparison between current rates and the rate
being credited to you in the fixed account option. For the current rate we use a
rate being offered by us for a guarantee period that is equal to the time
remaining in the guarantee period from which you seek withdrawal. If we are not
currently offering a guarantee period for that period of time, we determine an
applicable rate by using a formula to arrive at a number between the interest
rates currently offered for the two closest periods available.
Generally, if interest rates drop between the time you put your money into the
fixed account 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 MVA is negative, we first deduct the adjustment from any money
remaining in the fixed account option. If there is not enough money in the fixed
account option to meet the negative deduction, we deduct the remainder from your
withdrawal. Where the MVA is positive, we add the adjustment to your withdrawal
amount.
Anchor National does not assess a MVA against withdrawals under the following
circumstances:
- If annuitization occurs on the latest annuity date;
- To pay a death benefit;
- If made within 30 days after the end of a guarantee period; or
- If made to pay contract charges.
The 1-year fixed account option and the DCA fixed accounts do not impose a MVA.
These fixed accounts are not registered under the Securities Act of 1933 and are
not subject to the provisions of the Investment Company Act of 1940.
APPENDIX A shows how we calculate the MVA.
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. If less than $100 will remain in any Variable Portfolio after a transfer,
that amount must be transferred as well.
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 per 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 application. 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 may limit the number of transfers in any contract year or refuse any transfer
request for you or others invested in the contract if we believe that excessive
trading or a specific transfer request or group transfer requests may have a
detrimental effect on unit values or the share prices of the underlying Variable
Portfolios.
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Where permitted by law, we may accept your authorization for a third party to
make transfers for you subject to our rules. We reserve the right to suspend or
cancel such acceptance at any time and will notify you accordingly.
Additionally, we may restrict the investment options available for transfers
during any period in which such third party acts for you. We notify such third
party beforehand regarding any restrictions. However, we will not enforce these
restrictions if we are satisfied that:
- such third party has been appointed by a court of competent jurisdiction
to act on your behalf; or
- such third party is a trustee/fiduciary 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 DCA program allows you to invest gradually in the Variable Portfolios. Under
the program you systematically transfer a set dollar amount or percentage of
portfolio value from one Variable Portfolio or the 1-year fixed account option
(source accounts) to any other Variable Portfolio. Transfers may be monthly or
quarterly. You may change the frequency at any time by notifying us in writing.
The minimum transfer amount under the DCA program is $100, regardless of the
source account.
We also offer the 6-month and 1-year DCA fixed accounts exclusively to
facilitate this program. The DCA fixed accounts only accept new Purchase
Payments. You cannot transfer money already in your contract into these options.
If you allocate a Purchase Payment into a DCA fixed account, we transfer all
your money allocated to that account into the Variable Portfolios over the
selected 6-month or 1-year period. You cannot change the option or the frequency
of transfers once selected.
If allocated to the 6-month DCA fixed account, we transfer your money over a
maximum of 6 monthly transfers. We base the actual number of transfers on the
total amount allocated to the account. For example, if you allocate $500 to the
6-month DCA fixed account, we transfer your money over a period of five months,
so that each payment complies with the $100 per transfer minimum.
We determine the amount of the transfers from the 1-year DCA fixed account based
on:
- the total amount of money allocated to the account; and
- the frequency of transfers selected.
For example, let's say you allocate $1,000 to the 1-year DCA account. You select
monthly transfers. We completely transfer all of your money to the selected
investment options over a period of ten months.
You may terminate your DCA program at any time. If money remains in the DCA
fixed 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
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<PAGE> 18
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 to return your allocations to their original
percentages. Asset rebalancing typically involves shifting a portion of your
money out of an investment option with a higher return into an investment option
with a lower return.
You request quarterly, semiannual or annual rebalancing. Transfers made as a
result of rebalancing do not count against your 15 free transfers for the
contract year.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want your initial Purchase Payment split between two
Variable 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%.
PRINCIPAL ADVANTAGE PROGRAM
The principal advantage program allows you to invest in one or more Variable
Portfolios without putting your principal at direct risk. The program
accomplishes this by allocating your investment strategically between the fixed
account options and Variable Portfolios. You decide how much you want to invest
and approximately when you want a return of principal. We calculate how much of
your Purchase Payment to allocate to the particular fixed account option to
ensure that it grows to an amount equal to your total principal invested under
this program. We invest the rest of your principal in the Variable Portfolio(s)
of your choice.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to allocate a portion of your initial Purchase Payment
of $100,000 to the fixed account option after we deduct sales charges. You
want the amount allocated to the fixed account option to grow to $100,000
in 7 years. If the 7-year fixed account option is offering a 5% interest
rate, we will allocate $71,069 to the 7-year fixed account option to ensure
that this amount will grow to $100,000 at the end of the 7-year period. The
remaining $28,931 may be allocated among the Variable Portfolios, as
determined by you, to provide opportunity for greater growth.
VOTING RIGHTS
Anchor National is the legal owner of the Trusts' shares. However, when a
Variable 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 Variable Portfolios become unavailable for investment, we may be required to
substitute shares of another Variable Portfolio. We will seek prior approval of
the SEC and give you notice before substituting shares.
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ACCESS TO YOUR MONEY
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You can access money in your contract in two ways:
- by making a partial or total withdrawal, and/or;
- by receiving income payments during the Income Phase. (SEE INCOME OPTIONS
ON PAGE 15.)
We deduct a MVA if a partial withdrawal comes from the 3, 5, 7 or 10-year fixed
account prior to the end of the guarantee period. Additionally, a withdrawal
charge may apply in limited circumstances. If you withdraw your entire contract
value, we also deduct premium taxes if applicable. SEE EXPENSES ON PAGE 13.
Under certain Qualified plans, access to the money in your contract may be
restricted. Additionally, withdrawals made prior to age 59 1/2 may result in a
10% IRS penalty tax. SEE TAXES ON PAGE 19.
Under most circumstances, the partial withdrawal minimum is $1,000. We require
that the value left in any investment option be at least $500, after the
withdrawal. You must send a written withdrawal request. Unless you provide us
with different instructions, partial withdrawals will be made pro rata from each
Variable Portfolio and the fixed account option(s) in which your contract is
invested.
We may be required to suspend or postpone the payment of a withdrawal for any
period of time when: (1) the NYSE is
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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 Variable 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.
SYSTEMATIC WITHDRAWAL PROGRAM
During the Accumulation Phase, you may elect to receive periodic income payments
under the systematic withdrawal program. Under the program you may choose to
take monthly, quarterly, semiannual or annual payments from your contract.
Electronic transfer of these funds to your bank account is available. The
minimum amount of each withdrawal is $250. There must be at least $500 remaining
in your contract at all times. Withdrawals may be taxable and a 10% IRS penalty
tax may apply if you are under age 59 1/2. There is no additional charge for
participating in this program, although a withdrawal charge and a MVA may apply.
SEE EXPENSES ON PAGE 13. We reserve the right to modify, suspend or terminate
this program at any time.
MINIMUM CONTRACT VALUE
Where permitted by state law, we may terminate your contract if both of the
following occur: (1) your contract is less than $500 as a result of withdrawals;
and (2) you have not made any Purchase Payments during the past three years. We
will provide you with sixty days written notice. At the end of the notice
period, we will distribute the contract value to you.
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DEATH BENEFIT
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If you die during the Accumulation Phase of your contract, we pay a death
benefit to your Beneficiary. At the time you purchase your contract, you must
select one of the two death benefits described below. Once selected, you can not
change your death benefit option. You should discuss the available options with
your Edward Jones investment representative to determine which option is best
for you.
OPTION 1 - PURCHASE PAYMENT ACCUMULATION OPTION
The death benefit is the greater of:
1. the value of your contract at the time we receive satisfactory proof of
death; or
2. total Purchase Payments less withdrawals (and any fees or charges
applicable to such withdrawals), compounded at a 4% annual growth rate
until the date of death (3% growth rate if 70 or older at the time of
contract issue) plus any Purchase Payments less withdrawals since date
of death (and any fees or charges applicable to such withdrawals); or
3. the value of your contract on the seventh contract anniversary, plus any
Purchase Payments and less any withdrawals (and any fees or charges
applicable to such withdrawals) since the seventh contract anniversary,
all compounded at a 4% annual growth rate until the date of death (3%
growth rate if age 70 or older at the time of contract issue) plus any
Purchase Payments less withdrawals since date of death (and any fees or
charges applicable to such withdrawals).
OPTION 2 - MAXIMUM ANNIVERSARY OPTION
The death benefit is the greater of:
1. the value of your contract at the time we receive satisfactory proof of
death; or
2. total Purchase Payments less any withdrawals (and any fees or charges
applicable to such withdrawals); or
3. the maximum anniversary value on any contract anniversary prior to your
81st birthday. The anniversary value equals the value of your contract
on a contract anniversary plus any Purchase Payments and less any
withdrawals (and any fees or charges applicable to such withdrawals)
since that contract anniversary.
If you are age 90 or older at the time of death and selected the option 2 death
benefit, the death benefit will be equal to the value of your contract at the
time we receive satisfactory proof of death. Accordingly, you do not get the
advantage of option 2 if:
- you are over age 80 at the time of contract issue, or
- you are 90 or older at the time of your 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.
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
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<PAGE> 20
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 within 5 years 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 within one year of your
death.
If the Beneficiary is the spouse of a deceased owner, he or she can elect to
continue the contract at the then current value. If the Beneficiary/spouse
continues the contract, we do not pay a death benefit to him or her.
If a Beneficiary does not elect a specific form of pay out within 60 days of our
receipt of proof of death, we pay a lump sum death benefit to the Beneficiary.
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EXPENSES
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There are charges and expenses associated with your contract. These charges and
expenses reduce your investment return. We will not increase the sales,
insurance and withdrawal charges under your contract. However, the investment
charges under your contract may increase or decrease. Some states may require
that we charge less than the amounts described below.
INSURANCE CHARGES
The amount of this charge is 0.85% annually, of the value of your contract
invested in the Variable Portfolios. We deduct the charge daily.
The insurance charge compensates us for the mortality and expense risks 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.
SALES CHARGE
We apply an up-front sales charge against each Gross Purchase Payment you put
into your contract. The sales charge equals a percentage of each Gross Purchase
Payment and varies with your investment amount according to the chart below.
Your investment amount at the time your Gross Purchase Payment is received is
determined by the sum of:
1. Your current contract value for this contract;
2. Your current Gross Purchase Payment amount;
3. Any additional investment commitments secured by a Letter of Intent, as
described below; and
4. Your investment under Rights of Accumulation, as defined on the next
page.
<TABLE>
<CAPTION>
- -------------------------------------------------------
SALES CHARGE
AS A PERCENTAGE OF
GROSS PURCHASE
INVESTMENT AMOUNT PAYMENT INVESTED
- -------------------------------------------------------
<S> <C>
Less than $50,000 5.75%
$50,000 but less than $100,000 4.75%
$100,000 but less than $250,000 3.50%
$250,000 but less than $500,000 2.50%
$500,000 but less than $1,000,000 2.00%
$1,000,000 or more 0.50%*
- -------------------------------------------------------
</TABLE>
* For investment amounts of $1,000,000 or more, we deduct from your contract
value, a withdrawal charge of 0.50% for amounts withdrawn from a Purchase
Payment invested less than 12 months prior to such withdrawal. SEE PURCHASE
PAYMENTS SUBJECT TO A WITHDRAWAL CHARGE ON PAGE 14.
We call each investment amount a "breakpoint." You can reduce your sales charge
by increasing the amount of your investment amount to reach the next breakpoint.
For example, an investment amount of $50,000 brings you to the first breakpoint
and entitles you to a reduced sales charge of 4.75%.
REDUCTION OF SALES CHARGE
You may also be entitled to a reduced sales charge if you: (1) sign a Letter of
Intent to invest a combined amount of $50,000 or more within a 13-month period;
and/or (2) have related contracts with us which qualify for Rights of
Accumulation privileges.
LETTER OF INTENT
A Letter of Intent allows you to set your own investment goal of $50,000 or more
over a 13-month period. We base the sales charge on any Gross Purchase Payment
you make during the 13-month period on your investment goal. In essence, we
reduce your sales charge on Gross Purchase Payments made during the 13-month
period as though the total amount of Gross Purchase Payments (your investment
goal) is invested as one lump-sum.
EXAMPLE:
Assume as part of your contract application you sign a Letter of Intent
indicating an investment goal of $50,000 over a 13-month period. The sales
charge corresponding to your investment goal is 4.75%. You make an initial
Gross Purchase Payment of $20,000. We deduct a reduced sales charge of
4.75% from your initial Gross Purchase Payment. Two months later you make a
subsequent Gross Purchase Payment of $10,000. We again deduct a reduced
sales charge of 4.75% from your Gross Purchase Payment. Without a Letter of
Intent the sales charge for each Gross Purchase Payment would have been
5.75%.
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<PAGE> 21
You may elect to participate in the Letter of Intent program at any time.
However, we do not retroactively reduce sales charges on Gross Purchase Payments
made before we receive your Letter of Intent. If you choose to participate in
this program at the time you apply for the contract, you must check the
corresponding box on the application and complete the appropriate form. If you
elect to participate in the program after your contract is issued, you must
complete the Letter of Intent form, which is available from our Annuity Service
Center.
You are not obligated to reach your investment goal. If you do not achieve your
investment goal by the end of the 13-month period, we will deduct from your
contract the difference between (1) the sales charge applicable to the actual
amount of Gross Purchase Payments you invested during the period and (2) the
sales charge you actually paid. These charges will be deducted from your
contract at the end of the 13-month period.
If you exceed your investment goal and reach the next breakpoint, the sales
charge deducted is based on the next breakpoint level. However, we do not
retroactively reduce sales charges on previous Purchase Payments.
At any time during the 13-month period, you may increase your investment goal by
sending us a written request. Gross Purchase Payments made from the date of
notice through the end of the original 13-month period will receive any
applicable reduced sales charge. Sales charges on Gross Purchase Payments
received prior to the notice to increase your investment goal will not be
retroactively reduced.
We reserve the right to modify, suspend or terminate this program at any time.
RIGHTS OF ACCUMULATION
You may qualify for a reduced sales charge through Rights of Accumulation.
Rights of Accumulation involves combining your current Gross Purchase Payment
with your current contract value on this contract and/or the current contract
values of qualifying related contracts. If through accumulation you reach the
next breakpoint level, we reduce your sales charge accordingly.
Related contracts include other Anchor National contracts owned by you, your
spouse and your children under age 21. There may be other requirements for
qualification. For information on which related contracts qualify for Rights of
Accumulation privileges, please contact your Edward Jones investment
representative.
In order to use Rights of Accumulation to reduce your sales charge, you or your
Edward Jones investment representative must inform us in writing of the related
contracts. We will assign a Rights of Accumulation number to your contract.
Purchase Payments received after we assign a Rights of Accumulation number to
your contract will automatically qualify for a reduced sales charge, if
applicable.
If you choose to participate in this program at the time you apply for the
contract, you must check the corresponding box on the application and complete
the appropriate form. If you elect to participate in this program after your
contract is issued, you must complete the Rights of Accumulation form, which is
available from our Annuity Service Center.
The sales charge for Gross Purchase Payments submitted with a Rights of
Accumulation number will be based on the breakpoint corresponding to the sum of
(1) your Gross Purchase Payment; (2) your current contract value; and (3) the
current contract values of your related contracts.
EXAMPLE:
Assume your contract has a current value of $20,000. You have a second
contract with us which qualifies for Rights of Accumulation that has a
current value of $25,000. You make a $5,000 Gross Purchase Payment and
include your Rights of Accumulation number with your payment. To determine
the sales charge applicable to your Gross Purchase Payment we first
calculate the sum of (1) your current contract value ($20,000); (2) the
current contract value of your related contract ($25,000); and (3) your
current Gross Purchase Payment ($5,000). The sum of these values is
$50,000. We deduct the sales charge corresponding to a $50,000 Gross
Purchase Payment, or 4.75%, from your $5,000 Gross Purchase Payment.
We reserve the right to modify, suspend or terminate this program at any time.
PURCHASE PAYMENTS SUBJECT TO A WITHDRAWAL CHARGE
For investment amounts of $1,000,000 or more, we deduct from your contract
value, a withdrawal charge of 0.50% for amounts withdrawn from a Purchase
Payment invested less than 12 months prior to such withdrawal.
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 fully surrender your contract value during the 12 months
following our receipt of a Purchase Payment on which we assessed a 0.50% sales
charge, we deduct the withdrawal charge from the amount withdrawn.
We will not assess a withdrawal charge for money withdrawn to pay a death
benefit or to pay contract fees or charges. We will not assess a withdrawal
charge when you switch to the
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<PAGE> 22
Income Phase, except when you elect to receive income payments using the Income
Protector program. If you elect to receive income payments using the Income
Protector program, we assess any applicable withdrawal charge applicable to
Purchase Payments remaining in your contract when calculating your Income
Benefit Base. SEE INCOME OPTIONS ON PAGE 15.
Withdrawals made prior to age 59 1/2 may result in a 10% IRS penalty tax. SEE
TAXES ON PAGE 19.
INVESTMENT CHARGES
Charges are deducted from your Variable Portfolios for the advisory and other
expenses of the Variable Portfolios. THE FEE TABLES LOCATED AT 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 each contract
year. We charge you $25 for each additional transfer that contract year ($10 in
Pennsylvania and Texas). SEE INVESTMENT OPTIONS ON PAGE 7.
PREMIUM TAX
Certain states charge the Company a tax on the premiums you pay into the
contract. We deduct from your contract these premium tax charges. Currently we
deduct the charge for premium taxes when you take a full withdrawal or begin the
Income Phase of the contract. In the future, we may assess this deduction at the
time you put Purchase Payment(s) into the contract or upon payment of a death
benefit.
APPENDIX B provides more information about premium taxes.
INCOME TAXES
We do not currently deduct income taxes from your contract. We reserve the right
to do so in the future.
REDUCTION OR ELIMINATION OF CHARGES AND EXPENSES, AND ADDITIONAL AMOUNTS
CREDITED
Sometimes sales of the contracts to groups of similarly situated individuals may
lower our administrative and/or sales expenses. We reserve the right to reduce
or waive certain charges and expenses when this type of sale occurs. In
addition, we may also credit additional interest to policies sold to such
groups. We determine which groups are eligible for such treatment. Some of the
criteria we evaluate to make a determination are: size of the group; amount of
expected Purchase Payments; relationship existing between us and prospective
purchaser; nature of the purchase; length of time a group of contracts is
expected to remain active; purpose of the purchase and whether that purpose
increases the likelihood that our expenses will be reduced; and/or any other
factors that we believe indicate that administrative and/or sales expenses may
be reduced.
Anchor National may make such a determination regarding sales to its employees,
it affiliates' employees and employees of currently contracted broker-dealers;
its registered representatives and immediate family members of all of those
described.
We reserve the right to change or modify any such determination or the treatment
applied to a particular group, at any time.
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INCOME OPTIONS
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ANNUITY DATE
During the Income Phase, we use the money accumulated in your contract to make
regular income payments to you. You may switch to the Income Phase any time
after your 2nd contract anniversary. You select the month and year in which you
want income payments to begin. The first day of that month is the Annuity Date.
You may change your Annuity Date, so long as you do so at least seven days
before the income payments are scheduled to begin. Once you begin receiving
income payments, you cannot change your income option. Except as indicated under
Option 5 below, once you begin receiving income payments, you cannot access your
money through a withdrawal or surrender.
Income payments must begin on or before your 90th birthday or on your tenth
contract anniversary, whichever occurs later. If you do not choose an Annuity
Date, your income payments will automatically begin on this date. Certain states
may require your income payments to start earlier.
If the Annuity Date is past your 85th birthday, your contract could lose its
status as an annuity under Federal tax laws. This may cause you to incur adverse
tax consequences.
In addition, most qualified contracts require you to take minimum distributions
after you reach age 70 1/2. SEE TAXES ON PAGE 19.
INCOME OPTIONS
Currently, this contract offers five income options. If you elect to receive
income payments but do not select an option, your income payments will be made
in accordance with option 4 for a period of 10 years. For income payments based
on joint lives, we pay according to option 3, for a period of 10 years.
We base our calculation of income payments on the life of the Annuitant and the
annuity rates set forth in your contract. As the contract owner, you may change
the Annuitant at any time prior to the Annuity Date. You must notify us if the
Annuitant dies before the Annuity Date and designate a new Annuitant.
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<PAGE> 23
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 when the survivor dies.
OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED
This option is similar to option 2 above, with an additional guarantee of
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 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 or 20 years. You
select the number of years. If the Annuitant dies before all guaranteed income
payments are made, the remaining income payments go to the Beneficiary under
your contract.
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
This option provides income payments for a guaranteed period, ranging from 5 to
30 years. If the Annuitant dies before all of the guaranteed income payments are
made, the remaining income payments are made to the Beneficiary under your
contract. Additionally, if variable income payments are elected under this
option, you (or the Beneficiary under the contract if the Annuitant dies prior
to all guaranteed payments being made) may redeem the contract value after the
Annuity Date. The amount available upon such redemption would be the discounted
present value of any remaining guaranteed payments.
The value of an Annuity Unit, regardless of the option chosen, takes into
account the Mortality and Expense Risk Charge. Since Option 5 does not contain
an element of mortality risk, no benefit is derived from this charge.
Please read the Statement of Additional Information ("SAI") for a more detailed
discussion of the income options.
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
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.
If you are invested in the Variable Portfolios after the Annuity Date your
income payments vary 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 Variable 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 income payments.
TRANSFERS DURING THE INCOME PHASE
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.
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 when you switch
to the Income Phase. 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 receive income payments 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 your contract, if
available for sale in your state. There is no additional charge associated with
the base
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<PAGE> 24
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.
We reserve the right to modify, suspend or terminate the income protector
program at any time.
HOW WE DETERMINE THE AMOUNT OF YOUR MINIMUM GUARANTEED INCOME
We base the amount of minimum income available to you if you elect to receive
income payments using the income protector upon a calculation we call the income
benefit base. At the time your participation in the income protector program
becomes effective, your income benefit base is equal to your contract value. For
the base, participation is effective on the date of issue of your contract. For
the plus or max alternatives, participation is effective on either the date of
issue of the contract (if elected) or at the contract anniversary following your
election of the plus or max alternative.
The income benefit base is only a calculation. It does not represent a contract
value, nor does it guarantee performance of the Variable Portfolios in which you
invest.
Your income benefit base increases if you make subsequent Purchase Payments and
decreases if you withdraw money from your contract. The exact income benefit
base calculation is equal to (a) plus (b) minus (c) where:
(a) is,
- for the first year of calculation, your contract value on the date
your participation in the program became effective, or;
- for each subsequent year of calculation, the income benefit base on
the prior contract anniversary, and;
(b) is the sum of all subsequent Purchase Payments made into the contract
since the last contract anniversary, and;
(c) is all withdrawals and applicable fees and charges since the last
contract anniversary, 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 election to begin receiving income under the
program:
<TABLE>
<S> <C>
- -------------------------------------------------------
Alternative Growth Rate*
- -------------------------------------------------------
The Income Protector Plus 3.25%
- -------------------------------------------------------
The Income Protector Max 6.50%
- -------------------------------------------------------
</TABLE>
* If you elect the plus or max feature on a subsequent anniversary, the Growth
Rates may be different.
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 income
payments through the income protector is restarted if you step-up your income
benefit base. Thus, your last opportunity to step up is the later of:
- your 83rd birthday, or
- your 3rd contract anniversary.
You must complete the income protector election form to effect a step-up. The
form is available from our Annuity Service Center.
Qualified contract holders should refer to the Note at the end of the income
protector discussion.
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.
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<PAGE> 25
The contract anniversary prior to your election to begin receiving income
payments is your income benefit date. This is the date as of which we calculate
your income benefit base to use in determining your guaranteed minimum fixed
retirement income. Your final income benefit base is equal to (a) minus (b)
where:
(a) is your income benefit base as your income benefit date, and;
(b) is any partial withdrawals of contract value and any charges applicable
to those withdrawals and any withdrawal charges otherwise applicable,
calculated as if you fully surrender your contract as the income
benefit date, and any applicable premium taxes.
To arrive at the minimum guaranteed retirement income available to you we apply
the annuity rates stated in your income protector endorsement for the income
option you select to your final income benefit base. You then choose if you
would like to receive that income annually, semi-annually quarterly or monthly
for the time guaranteed under your selected income option. The income options
available when using the income protector program to receive your retirement
income are:
- Life Annuity with 10 Years Guaranteed, or
- Joint and Survivor Life Annuity with 20 Years Guaranteed
At the time you elect to begin receiving income payments, we will calculate your
annual income using both your income benefit base and your contract value. We
will use the same income option for each calculation, however, the annuity
factors used to calculate your income under the income protector will be
different. You will receive whichever provides a greater stream of income. If
you elect to receive income payments 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 elect to receive income payments under the general
provisions of your contract. YOU MAY NEVER NEED TO RELY UPON THE INCOME
PROTECTOR, IF YOUR CONTRACT PERFORMS WITHIN A HISTORICALLY ANTICIPATED RANGE.
HOWEVER, PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
FEES ASSOCIATED WITH THE INCOME PROTECTOR
The base income protector is a standard feature of your contract at no extra
charge. If you elect the income protector plus or max, we charge a fee, as
follows:
<TABLE>
<S> <C>
- -----------------------------------------------------
Fee As A % of Your Income
Alternative Benefit Base
- -----------------------------------------------------
The Income Protector Plus .15%
- -----------------------------------------------------
The 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 at 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 this charge from your contract value on
every contract anniversary up to and including your income benefit date.
Additionally, we deduct the entire annual fee from any full surrender of your
contract requested prior to your contract anniversary.
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 elect to receive income payments
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 Years Guaranteed, you must elect to receive
income payments before age 79, and
- for the Joint and Survivor Life Annuity with 20 Years Guaranteed, both
Annuitants must be 70 or younger or one of the Annuitants must be 65 or
younger when you switch to the Income Phase. Other age combinations may
be available.
You may wish to consult your tax advisor for information concerning your
particular circumstances.
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<PAGE> 26
HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR
This table assumes $100,000 initial investment, net of sales charges, in a
Non-qualified contract with no withdrawals, additional payments or premium
taxes, no step-up, current growth rates and the election of optional income
protector benefits at contract issue.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Minimum annual income if you elect to receive income payments
If at issue on contract anniversary . . . Income Protector
you are . . . 7 10 15 20 Benefit Level
<S> <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>
* Life annuity with 10 years guaranteed
** Joint and survivor life annuity with 20 years guaranteed
- ----------------------------------------------------------------
- ----------------------------------------------------------------
TAXES
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Note: We prepared the following information on taxes as a general discussion of
the subject. It is not tax advice. We caution you to seek competent tax advice
about your own circumstances. We do not guarantee the tax status of your
annuity. Tax laws constantly change, therefore we cannot guarantee that the
information contained herein is complete and/or accurate.
ANNUITY CONTRACTS IN GENERAL
The Internal Revenue Code ("IRC") provides for special rules regarding the tax
treatment of annuity contracts. Generally, taxes on the earnings in your annuity
contract are deferred until you take the money out. Qualified retirement
investments automatically provide tax deferral regardless of whether the
underlying contract is an annuity. Different rules apply depending on how you
take the money out and whether your contract is Qualified or Non-qualified.
If you do not purchase your contract under a pension plan, a specially sponsored
employer program or an individual retirement account, your contract is referred
to as a Non-qualified contract. A Non-qualified contract receives different tax
treatment than a Qualified contract. In general, your cost basis in a
Non-qualified contract is equal to the Purchase Payments you put into the
contract. You have already been taxed on the cost basis in your contract.
If you purchase your contract under a pension plan, a specially sponsored
employer program or as an individual retirement account, your contract is
referred to as a Qualified contract. Examples of Qualified plans are: Individual
Retirement Accounts ("IRAs"), Roth IRAs, Tax-Sheltered Annuities (referred to as
403(b) contracts), H.R. 10 Plans (referred to as Keogh Plans) and pension and
profit sharing plans, including 401(k) plans. Typically you have not paid any
tax on the Purchase Payments used to buy your contract and therefore, you have
no cost basis in your contract.
TAX TREATMENT OF DISTRIBUTIONS -
NON-QUALIFIED CONTRACTS
If you make a withdrawal from a Non-qualified contract, the IRC treats such a
withdrawal as first coming from the earnings and then as coming from your
Purchase Payments. For income payments, any portion of each payment that is
considered a return of your Purchase Payment will not be taxed. Withdrawn
earnings are treated as income to you and are taxable. The IRC provides for a
10% penalty tax on any earnings that are withdrawn other than in conjunction
with the following circumstances: (1) after reaching age 59 1/2; (2) when paid
to your Beneficiary after you die; (3) after you become disabled (as defined in
the IRC); (4) when paid in a series of substantially equal installments made for
your life or for the joint lives of you and you Beneficiary; (5) under an
immediate annuity; or (6) which come from Purchase Payments made prior to August
14, 1982.
TAX TREATMENT OF DISTRIBUTIONS - QUALIFIED CONTRACTS
Generally, you have not paid any taxes on the Purchase Payments used to buy a
Qualified contract. Any amount of money you take out as a withdrawal or as
income payments is taxable income. The IRC further provides for a 10% penalty
tax on any withdrawal or income payment paid to you other than in conjunction
with the following circumstances: (1) after reaching age 59 1/2; (2) when paid
to your Beneficiary after you die; (3) after you become disabled (as defined in
the IRC); (4) in a series of substantially equal
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<PAGE> 27
installments made for your life or for the joint lives of you and your
Beneficiary; (5) to the extent such withdrawals do not exceed limitations set by
the IRC for amounts paid during the taxable year for medical care; (6) to fund
higher education expenses (as defined in IRC); (7) to fund certain first-time
home purchase expenses; and, except in the case of an IRA, (8) when you separate
from service after attaining age 55; and (9) when paid to an alternate payee
pursuant to a qualified domestic relations order.
The IRC limits the withdrawal of Purchase Payments from certain Tax-Sheltered
Annuities. Withdrawals can only be made when an owner: (1) reaches age 59 1/2;
(2) leaves his or her job; (3) dies; (4) becomes disabled (as defined in the
IRC); or (5) experiences a hardship (as defined in the IRC). In the case of
hardship, the owner can only withdraw Purchase Payments.
MINIMUM DISTRIBUTIONS
If you have a Qualified contract, distributions must begin by April 1 of the
calendar year following the later of (1) the calendar year in which you attain
age 70 1/2 or (2) the calendar year in which you retire.
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity. We believe that each underlying Variable
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 Variable Portfolios. It is unknown to what extent owners
are permitted to select investments, to make transfers among Variable Portfolios
or the number and type of Variable Portfolios owners may select from. If any
guidance is provided which is considered a new position, then the guidance would
generally be applied prospectively. However, if such guidance is considered not
to be a new position, it may be applied retroactively. This would mean you, as
the owner of the contract, could be treated as the owner of the underlying
Variable 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 Variable
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 Variable Portfolio.
Consult the SAI for more detailed information regarding the calculation of
performance data. The performance of each Variable 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 Variable 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
Anchor National is a stock life insurance company originally organized under the
laws of the state of California in April 1965. On January 1, 1996, Anchor
National redomesticated under the laws of the state of Arizona.
Anchor National and its affiliates, SunAmerica Life Insurance Company, First
SunAmerica Life Insurance Company, CalAmerica Life Insurance Company, SunAmerica
National Life Insurance Company, SunAmerica Asset Management, Resources Trust
Company, and six broker-dealers, specialize in retirement savings and investment
products and services.
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<PAGE> 28
Business focuses include fixed and variable annuities, mutual funds,
broker-dealer services and trust administration services.
THE SEPARATE ACCOUNT
Anchor National originally established a separate account, Variable Annuity
Account 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
This contract is sold exclusively by investment representatives affiliated with
Edward Jones & Company. We pay commissions to these investment representatives
for the sale of the contracts. We do not expect the total commissions to exceed
5.00% of your Purchase Payments. We may also pay a bonus to investment
representatives for contracts which stay active for a particular period of time,
in addition to standard commissions. The sales charges on your contract cover
the cost of commissions we pay to the investment representative.
From time to time, we may pay or allow additional promotional incentives in the
form of cash or other compensation. 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 , a registered as a broker-dealer under the Exchange Act of 1934
and a member of the National Association of Securities Dealers, Inc. No
underwriting fees are paid in connection with the distribution of the contracts.
ADMINISTRATION
We are responsible for the administrative servicing of your contract. Please
contact our Annuity Service Center
at 1-800-445-SUN2, if you have any comment, question or service request.
We send out transaction confirmations and quarterly statements. It is your
responsibility to review these documents carefully and notify us of any
inaccuracies immediately. We investigate all inquiries. To the extent that we
believe we made an error, we retroactively adjust your contract, provided you
notify us within 30 days of receiving the transaction confirmation or quarterly
statement. Any other adjustments we deem warranted are made as of the time we
receive notice of the error.
YEAR 2000
We rely significantly on computer systems and applications in our daily
operations. Many of our systems are not presently year 2000 compliant, which
means that because they have historically used only two digits to identify the
year in a date, they will fail to distinguish dates in the "2000s" from dates in
the "1900s." Anchor National's business, financial condition and results of
operations could be materially and adversely affected by the failure of our
systems and applications (and those operated by third parties interfacing with
our systems and applications) to properly operate or manage these dates.
Anchor National has a coordinated plan to repair or replace these noncompliant
systems and to obtain similar assurances from third parties interfacing with our
systems and applications. In fiscal 1997, the Company recorded a $6.2 million
provision for estimated programming costs to repair noncompliant systems. We are
making expenditures which we expect will ultimately total $5.0 million to
replace certain other noncompliant systems. Total expenditures relating to the
replacement of noncompliant systems will be capitalized by the Company as
software costs and will be amortized over future periods. Both phases of the
project are progressing according to plan and we expect to substantially
complete them by the end of calendar 1998. We will test both the repaired and
replacement systems during calendar 1999.
In addition, we distributed a year 2000 questionnaire to our significant
suppliers, distributors, financial institutions, lessors and others we do
business with to evaluate their year 2000 compliance plans and state of
readiness and to determine how our systems and applications may be affected by
their failure to solve their own year 2000 issues. To date, however, we have
only received preliminary feedback from such parties and have not independently
confirmed any information received from other parties with respect to the year
2000 issues. Therefore, we cannot assure that such other parties will complete
their year 2000 conversions in a timely fashion or will not suffer a year 2000
business disruption that may
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<PAGE> 29
adversely affect our financial condition and results of operations.
Because we expect to complete our year 2000 conversion prior to any potential
disruption to our business, we have not developed a comprehensive year 2000
contingency plan. Anchor National closely monitors the progression of its plan
for compliance, and if necessary, would devote additional resources to assure
the timely completion of our year 2000 plan. If we determine that our business
is at material risk of disruption due to the year 2000 issue or anticipate that
we will not complete our year 2000 conversion in a timely fashion, we will work
to enhance our contingency plans.
The above statements are forward-looking. The costs of our year 2000 conversion,
the date which we have set to complete such conversion and the possible risks
associated with the year 2000 issue are based on our current estimates and are
subject to various uncertainties that could cause the actual results to differ
materially from our expectations. Such uncertainties include, among others, our
success in identifying systems and applications that are not year 2000
compliant, the nature and amount of programming required to upgrade or replace
each of the affected systems and applications, the availability of qualified
personnel, consultants and other resources, and the success of the year 2000
conversion efforts of others.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the separate account. Anchor
National and its subsidiaries engage in various kinds of routine litigation. In
management's opinion, these matters are not of material importance to their
respective total assets nor are they material with respect to the separate
account.
OWNERSHIP
The Polaris Class A Variable Annuity is a Flexible Payment Group Deferred
Annuity contract. We issue a group contract to a contract holder for the benefit
of the participants in the group. As a participant in the group, you will
receive a certificate which evidences your ownership. As used in this
prospectus, the term contract refers to your certificate. In some states, a
Flexible Payment Individual Modified Guaranteed and Variable Deferred Annuity
contract is available instead. Such a contract is identical to the contract
described in this prospectus, with the exception that we issue it directly to
the owner.
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 required
documents are mailed.
Registration statements under the Securities Act of 1933, as amended, related to
the contracts offered by this prospectus are on file with the SEC. This
prospectus does not contain all of the information contained in the
registrations statement and its exhibits. For further information regarding the
separate account, Anchor National and its general account, the Variable
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.
INDEPENDENT ACCOUNTANTS
The financial statements of Anchor National as of September 30, 1998 and 1997
and for each of the three years in the period ended September 30, 1998
incorporated by reference in this prospectus 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.
LEGAL MATTERS
The organization of Anchor National, its authority to issue the contracts and
the validity of the form of the contracts have been passed upon by Susan L.
Harris, Senior Vice President and General Counsel of SunAmerica Inc., of which
Anchor National is an indirect-wholly owned subsidiary.
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<PAGE> 30
REGISTRATION STATEMENT
A registration statement has been filed with the SEC under the Securities Act of
1933 relating to the contract. This prospectus does not contain all the
information in the registration statement as permitted by SEC regulations. The
omitted information can be obtained from the SEC's principal office in
Washington, D.C., upon payment of a prescribed fee.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
- ----------------------------------------------------------------
- ----------------------------------------------------------------
<TABLE>
<S> <C>
Separate Account.............................. 3
General Account............................... 3
Performance Data.............................. 4
Income Payments............................... 7
Annuity Unit Values........................... 8
Taxes......................................... 11
Distribution of Contracts..................... 14
Financial Statements.......................... 15
</TABLE>
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX A - MARKET VALUE ADJUSTMENT ("MVA")
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The MVA 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 account
option, the greater the impact of changing interest rates. The impact of the MVA
can be either positive or negative, and is computed by multiplying the amount
withdrawn, transferred or switched to the Income Phase by the following factor:
(N/12)
[(1+I/(1+J+0.005)] - 1
The MVA formula may differ in certain states
where:
I is the interest rate you are earning on the money invested in the
fixed account 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 account option; and
N is the number of full months remaining in the term you initially
agreed to leave your money in the fixed account option.
EXAMPLES OF THE MVA
The examples below assume the following:
(1) You made an initial Purchase Payment of $10,000 (net of the sales
charge) and allocated it to the 10-year fixed account option at a rate
of 5%;
(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 account option (N=18); and
(3) You have not made any other transfers, additional Purchase Payments, or
withdrawals.
We assume no withdrawal charge applies. If a withdrawal charge applies, it is
deducted before the MVA. The MVA is assessed on the amount withdrawn less any
withdrawal charges.
POSITIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for a new
Purchase Payments in the 1-year fixed account option is 3.5% and the 3-year
fixed account option is 4.5%. 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 4%.
(N/12)
The MVA factor is = [(1+I/(1+J+0.005)] - 1
(18/12)
= [(1.05)/(1.04+0.005)] - 1
(1.5)
= (1.004785) - 1
= 1.007186 - 1
= + 0.007186
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 x (+0.007186) = +$28.74
$28.74 represents the MVA that would be added to your withdrawal.
NEGATIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 1-year fixed account option is 5.5% and the 3-year
fixed account 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 MVA factor is = [(1+I)/(1+J+0.005)] - 1
(18/12)
= [(1.05)/(1.06+0.005)] - 1
(1.5)
= (0.985915) - 1
= 0.978948 - 1
= - 0.021052
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 X (- 0.021052) = -$84.21
$84.21 represents the MVA that will be deducted from the money remaining in the
10-year fixed account option.
A-1
<PAGE> 32
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX B - PREMIUM TAXES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Premium taxes vary according to the state and are subject to change without
notice. In many states, there is no tax at all. Listed below are the current
premium tax rates in those states that assess a premium tax. For current
information, you should consult your tax adviser.
<TABLE>
<CAPTION>
QUALIFIED NON-QUALIFIED
STATE CONTRACT CONTRACT
<S> <C> <C>
========================================================================================
California .50% 2.35%
- ----------------------------------------------------------------------------------------
District of Columbia 2.25% 2.25%
- ----------------------------------------------------------------------------------------
Kentucky 2% 2%
- ----------------------------------------------------------------------------------------
Maine 0% 2%
- ----------------------------------------------------------------------------------------
Nevada 0% 3.5%
- ----------------------------------------------------------------------------------------
South Dakota 0% 1.25%
- ----------------------------------------------------------------------------------------
West Virginia 1% 1%
- ----------------------------------------------------------------------------------------
Wyoming 0% 1%
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
B-1
<PAGE> 33
- --------------------------------------------------------------------------------
Please forward a copy (without charge) of the Polaris Class A 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> 34
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
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 dated May 3, 1999, relating to the annuity contracts
described above. A copy of the prospectus may be obtained without charge by
calling (800) 445-SUN2 or writing us at:
ANCHOR NATIONAL LIFE INSURANCE COMPANY
ANNUITY SERVICE CENTER
P.O. BOX 54299
LOS ANGELES, CALIFORNIA 90054-0299
May 3, 1999
<PAGE> 35
TABLE OF CONTENTS
PAGE
----
Separate Account........................................................ 3
General Account......................................................... 3
Performance Data ....................................................... 4
Income Payments......................................................... 7
Annuity Unit Values..................................................... 8
Taxes................................................................... 11
Distribution of Contracts............................................... 14
Financial Statements.................................................... 15
<PAGE> 36
SEPARATE ACCOUNT
Variable Annuity Account Seven 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 income 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 income 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 income 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 income 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 income
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 income payments).
GENERAL ACCOUNT
The general account is made up of all of the general assets of the
Company other than those allocated to the separate account or any other
-3-
<PAGE> 37
segregated asset account of the Company. A Purchase Payment may be allocated to
the 1, 3, 5, 7 or 10 year fixed account options and the DCA fixed accounts for
6-month and 1-year periods 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
account options become part of the Company's general account assets and are
available to fund the claims of all classes of customers of the Company, as well
as of its creditors. Accordingly, all of the Company's assets held in the
general account will be available to fund the Company's obligations under the
contracts as well as such other claims.
The Company will invest the assets of the general account in the manner
chosen by the Company and allowed by applicable state laws regarding the nature
and quality of investments that may be made by life insurance companies and the
percentage of their assets that may be committed to any particular type of
investment. In general, these laws permit investments, within specified limits
and subject to certain qualifications, in federal, state and municipal
obligations, corporate bonds, preferred and common stocks, real estate
mortgages, real estate and certain other investments.
PERFORMANCE DATA
From time to time the separate account may advertise the Cash
Management Portfolio's "yield" and "effective yield." Both yield figures are
based on historical earnings and are not intended to indicate future
performance. The "yield" of the Cash Management Portfolio refers to the net
income generated for a contract funded by an investment in the Portfolio (which
invests in shares of the Cash Management Portfolio of SunAmerica Series Trust)
over a seven-day period (which period will be stated in the advertisement). This
income is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment in
the Portfolio is assumed to be reinvested at the end of each seven day period.
The "effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. Neither the yield nor the
effective yield takes into consideration the effect of any capital changes that
might have occurred during the seven day period, nor do they reflect the impact
of premium taxes or any withdrawal charges. The impact of other recurring
charges (including the mortality and expense risk charge) 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 perfromance 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.
-4-
<PAGE> 38
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 those shown in the chart below.
The chart 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 a 5.75% sales charge. (see:
"EXPENSES" in the prospectus).
HISTORICAL PERFORMANCE FOR PERIODS ENDING MARCH 31, 1999
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- ------------------------------------------------ -------------- ----------------- ---------------- -----------------
INCEPTION 10 YEARS OR
VARIABLE PORTFOLIO DATE 1 YEAR 5 YEARS SINCE INCEPTION
------------------ ---- ------ ------- ----------------
<S> <C> <C> <C> <C>
Capital Appreciation 3/13/87 [TO BE PROVIDED BY AMENDMENT]
Growth 8/13/84
Government & Quality Bond 8/13/84
Emerging Markets 6/2/97
International Diversified Equities 10/31/94
Global Equities 2/9/93
International Growth and Income 6/2/97
Aggressive Growth 6/3/96
MFS Mid-Cap Growth N/A
Real Estate 6/2/97
Putnam Growth 2/9/93
MFS Growth and Income 2/9/93
Alliance Growth 2/9/93
"Dogs" of Wall Street 4/1/98
Venture Value 10/31/94
Federated Value 6/3/96
Growth-Income 2/9/93
Utility 6/3/96
Asset Allocation 7/1/93
MFS Total Return 10/31/94
SunAmerica Balanced 6/3/96
Worldwide High Income 10/31/94
High-Yield Bond 2/9/93
Corporate Bond 7/1/93
Global Bond 7/1/93
- ------------------------------------------------ -------------- ----------------- ---------------- -----------------
</TABLE>
The performance figures also reflect the actual fees and expenses paid
by each portfolio. For periods starting prior to the date the contracts were
first offered to the public, the total return data for the Portfolios of the
separate account will be derived from the performance of the corresponding
Portfolios of Anchor Series Trust and SunAmerica Series Trust, modified to
reflect the charges and expenses as if the separate account Portfolio had been
in existence since the inception date of each respective Anchor Series Trust and
-5-
<PAGE> 39
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 March 31, 1999, were [to be
provided by amendment]% and [to be provided by amendment]%, 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)/(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
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 current yield is then obtained by annualizing the Base Period
Return:
Current Yield = (Base Period Return) x (365/7)
The Cash Management Portfolio also quotes an "effective yield" that
differs from the current yield given above in that it takes into account the
effect of dividend reinvestment in the underlying fund. The effective yield,
like the current yield, is derived from the Base Period Return over a 7 day
period. However, the effective yield accounts for dividend reinvestment by
compounding the current yield according to the formula:
365/7
Effective Yield = [(Base Period Return + 1) - 1]
The yield quoted should not be considered a representation of the yield
of the Cash Management Portfolio in the future since the yield is not fixed.
Actual yields will depend on the type, quality and maturities of the investments
held by the underlying fund and changes in interest rates on such investments.
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.
-6-
<PAGE> 40
OTHER PORTFOLIOS
The Portfolios of the separate account other than the Cash Management
Portfolio compute their performance data as "total return."
Total return for a Portfolio represents a single computed annual rate
of return that, when compounded annually over a specified time period (one,
five, and ten years, or since inception) and applied to a hypothetical initial
investment in a contract funded by that Portfolio made at the beginning of the
period, will produce the same contract value at the end of the period that the
hypothetical investment would have produced over the same period. The total rate
of return (T) is computed so that it satisfies the formula:
[(1-SC)P](1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
SC = sales charge
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).
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 INCOME 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 income 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 income 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 income payment.
The number of Annuity Units determined for the first variable income payment
remains constant for the second and subsequent monthly variable income 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.
-7-
<PAGE> 41
For variable income payments, the amount of the second and each
subsequent monthly income 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.
INCOME PAYMENTS UNDER THE INCOME PROTECTOR PROGRAM
If contract holders elect to begin Income Payments using the Income
Protector Program, the income benefit base is determined as described in the
prospectus. The initial Income Payment is determined by applying the income
benefit base to the annuity table specifically designated for use in
conjunction with the Income Protector Program, either in the contract or in the
endorsement to the contract. Those tables are based on a set amount per $1,000
of income benefit base 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 income benefit base is applied 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 Income Payment. The amount of the
second and each subsequent income payment is the same as that determined above
for the first monthly payment.
ANNUITY UNIT VALUES
The value of an Annuity Unit is determined independently for each
Portfolio.
The annuity tables contained in the contract are based on a 3.5% per
annum assumed investment rate. If the actual net investment rate experienced by
a Portfolio exceeds 3.5%, variable 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 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 Portfolios elected, and the amount of each income payment
will vary accordingly.
For each Portfolio, the value of an Annuity Unit is determined by
multiplying the Annuity Unit value for the preceding month by the Net Investment
Factor for the month for which the Annuity Unit value is being calculated. The
result is then multiplied by a second factor which offsets the effect of the
assumed net investment rate of 3.5% per annum which is assumed in the annuity
tables contained in the contract.
NET INVESTMENT FACTOR
The Net Investment Factor ("NIF") is an index applied to measure the
net investment performance of a Portfolio from one day to the next. The NIF may
be greater or less than or equal to one; therefore, the value of an Annuity Unit
may increase, decrease or remain the same.
The NIF for any Portfolio for a certain month is determined by dividing
(a) by (b) where:
(a) is the Accumulation Unit value of the Portfolio determined as of
the end of that month, and
(b) is the Accumulation Unit value of the Portfolio determined as of
the end of the preceding month.
The NIF for a Portfolio for a given month is a measure of the net
investment performance of the Portfolio from the end of the prior month to the
end of the given month. A NIF of 1.000 results in no change; a NIF greater than
1.000 results in an increase; and a NIF less than 1.000 results in a decrease.
The 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.
-8-
<PAGE> 42
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 income 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 income payments should remain constant
(i.e., the Annuity Unit value should not change). The monthly factor that
neutralizes the assumed investment rate of 3.5 percent per annum is:
(1/12)
1/[(1.035) ] = 0.99713732
In the example given above, if the Annuity Unit value for the Portfolio
was $10.103523 on the last business day in August, the Annuity Unit value on the
last business day in September would have been:
$10.103523 x 1.00174825 x 0.99713732 = $10.092213
To determine the initial payment, the initial income payment for
variable annuitization is calculated based on our mortality expectations and an
assumed interest rate (AIR) of 3.5%. Thus the initial variable income payment
is the same as the initial payment for a fixed interest payout annuity
calculated at an effective rate of 3.5%.
The NIF measures the performance of the funds that are the basis for
the amount of future annuity payments. This performance is compared to the AIR,
and if the growth in the NIF is the same as the AIR rate, the payment remains
the same as the prior month. If the rate of the NIF is different than the AIR,
then this proportion is greater than one and payments are increased. If the NIF
is less than the AIR, then this proportion is less than one and payments are
decreased.
VARIABLE 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 income 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:
-9-
<PAGE> 43
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 income 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 income 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 Income Phase (assuming
no transfers from the Portfolio). The net investment performance of the
Portfolio during the Income Phase is reflected in continuing changes during this
phase in the Annuity Unit value, which determines the amounts of the second and
subsequent variable income 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 income payments under the income 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 income 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 income 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.
-10-
<PAGE> 44
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) income payments for the life (or life
expectancy) of the employee, or joint lives (or joint life expectancies) of the
employee and his or her designated Beneficiary, or for a specified period of ten
years or more; and (2) distributions required to be made under the Code).
Failure to "roll over" the entire amount of an eligible rollover distribution
(including an amount equal to the 20% portion of the distribution that was
withheld) could have adverse tax consequences, including the imposition of a
penalty tax on premature withdrawals, described later in this section.
Withdrawals or distributions from a contract other than eligible
rollover distributions are also subject to withholding on the estimated taxable
portion of the distribution, but the owner may elect in such cases to waive the
withholding requirement. If not waived, withholding is imposed (1) for periodic
payments, at the rate that would be imposed if the payments were wages, or (2)
for other distributions, at the rate of 10%. If no withholding exemption
certificate is in effect for the payee, the rate under (1) above is computed by
treating the payee as a married individual claiming 3 withholding exemptions.
DIVERSIFICATION - SEPARATE ACCOUNT INVESTMENTS
Section 817(h) of the Code imposes certain diversification standards on
the underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not adequately
diversified, in accordance with regulations prescribed by the United States
Treasury Department ("Treasury Department"). Disqualification of the contract as
an annuity contract would result in imposition of federal income tax to the
owner with respect to earnings allocable to the contract prior to the receipt of
any payments under the contract. The Code contains a safe harbor provision which
provides that annuity contracts, such as your contract, meet the diversification
requirements if, as of the close of each calendar quarter, the underlying assets
meet the diversification standards for a regulated investment company, and no
more than 55% of the total assets consist of cash, cash items, U.S. government
securities and securities of other regulated investment companies.
The Treasury Department has issued regulations which establish
diversification requirements for the investment portfolios underlying variable
contracts such as the contracts. The regulations amplify the diversification
requirements for variable contracts set forth in the Code and provide an
alternative to the safe harbor provision described above. Under the regulations
an investment portfolio will be deemed adequately diversified if (1) no more
than 55% of the value of the total assets of the portfolio is represented by any
one investment; (2) no more than 70% of the value of the total assets of the
portfolio is represented by any two investments; (3) no more than 80% of the
value of the total assets of the portfolio is represented by any three
investments; and (4) no more than 90% of the value of the total assets of the
portfolio is represented by any four investments. For purposes of determining
-11-
<PAGE> 45
whether or not the diversification standards imposed on the underlying assets of
variable contracts by Section 817(h) of the Code have been met, "each United
States government agency or instrumentality shall be treated as a separate
issuer."
MULTIPLE CONTRACTS
Multiple annuity contracts which are issued within a calendar year to
the same contract owner by one company or its affiliates are treated as one
annuity contract for purposes of determining the tax consequences of any
distribution. Such treatment may result in adverse tax consequences including
more rapid taxation of the distributed amounts from such multiple contracts. The
Company believes that Congress intended to affect the purchase of multiple
deferred annuity contracts which may have been purchased to avoid withdrawal
income tax treatment. Owners should consult a tax adviser prior to purchasing
more than one annuity contract in any calendar year.
TAX TREATMENT OF ASSIGNMENTS
An assignment of a contract may have tax consequences, and may also be
prohibited by ERISA in some circumstances. Owners should therefore consult
competent legal advisers should they wish to assign their contracts.
QUALIFIED PLANS
The contracts offered by this prospectus are designed to be suitable
for use under various types of Qualified plans. Taxation of owners in each
Qualified plan varies with the type of plan and terms and conditions of each
specific plan. Owners, Annuitants and Beneficiaries are cautioned that benefits
under a Qualified plan may be subject to the terms and conditions of the plan,
regardless of the terms and conditions of the contracts issued pursuant to the
plan.
Following are general descriptions of the types of Qualified plans with
which the contracts may be used. Such descriptions are not exhaustive and are
for general information purposes only. The tax rules regarding Qualified plans
are very complex and will have differing applications depending on individual
facts and circumstances. Each purchaser should obtain competent tax advice prior
to purchasing a contract issued under a Qualified plan.
Contracts issued pursuant to Qualified plans include special provisions
restricting contract provisions that may otherwise be available and described in
this prospectus. Generally, contracts issued pursuant to Qualified plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified contracts.
(a) H.R. 10 PLANS
Section 401 of the Code permits self-employed individuals to
establish Qualified plans for themselves and their employees, commonly
referred to as "H.R. 10" or "Keogh" Plans. Contributions made to the
plan for the benefit of the employees will not be included in the gross
income of the employees until distributed from the plan. The tax
consequences to owners may vary depending upon the particular plan
design. However, the Code places limitations and restrictions on all
plans on such items as: amounts of allowable contributions; form,
manner and timing of distributions; vesting and nonforfeitability of
interests; nondiscrimination in eligibility and participation; and the
tax treatment of distributions, withdrawals and surrenders. Purchasers
-12-
<PAGE> 46
of contracts for use with an H.R. 10 Plan should obtain competent tax
advice as to the tax treatment and suitability of such an investment.
(b) TAX-SHELTERED ANNUITIES
Section 403(b) of the Code permits the purchase of
"tax-sheltered annuities" by public schools and certain charitable,
education and scientific organizations described in Section 501(c)(3)
of the Code. These qualifying employers may make contributions to the
contracts for the benefit of their employees. Such contributions are
not includible in the gross income of the employee until the employee
receives distributions from the contract. The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by
the Code. Furthermore, the Code sets forth additional restrictions
governing such items as transferability, distributions,
nondiscrimination and withdrawals. Any employee should obtain competent
tax advice as to the tax treatment and suitability of such an
investment.
(c) INDIVIDUAL RETIREMENT ANNUITIES
Section 408(b) of the Code permits eligible individuals to
contribute to an individual retirement program known as an "Individual
Retirement Annuity" ("IRA"). Under applicable limitations, certain
amounts may be contributed to an IRA which will be deductible from the
individual's gross income. These IRAs are subject to limitations on
eligibility, contributions, transferability and distributions. Sales of
contracts for use with IRAs are subject to special requirements imposed
by the Code, including the requirement that certain informational
disclosure be given to persons desiring to establish an IRA. Purchasers
of contracts to be qualified as IRAs should obtain competent tax advice
as to the tax treatment and suitability of such an investment.
(d) ROTH IRAS
Section 408(a) of the Code permits an individual to contribute
to an individual retirement program called a Roth IRA. Unlike
contributions to a regular IRA under Section 408(b) of the Code,
contributions to a Roth IRA are not made on a tax-deferred basis, but
distributions are tax-free if certain requirements are satisfied. Like
regular IRAs, Roth IRAs are subject to limitations on the amount that
may be contributed, those who may be eligible and the time when
distributions may commence without tax penalty. Certain persons may be
eligible to convert a regular IRA into a Roth IRA, and the taxes on the
resulting income may be spread over four years if the conversion occurs
before January 1, 1999. If and when the contracts are made available
for use with Roth IRAs, they may be subject to special requirements
imposed by the Internal Revenue Service ("IRS"). Purchasers of the
contracts for this purpose will be provided with such supplementary
information as may be required by the IRS or other appropriate agency.
(e) CORPORATE PENSION AND PROFIT-SHARING PLANS
Sections 401(a) and 401(k) of the Code permit corporate
employers to establish various types of retirement plans for employees.
These retirement plans may permit the purchase of the contracts to
provide benefits under the plan. Contributions to the plan for the
benefit of employees will not be includible in the gross income of the
employee until distributed from the plan. The tax consequences to
owners may vary depending upon the particular plan design. However, the
Code places limitations on all plans on such items as amount of
allowable contributions; form, manner and timing of distributions;
vesting and nonforfeitability of interests; nondiscrimination in
eligibility and participation; and the tax treatment of distributions,
withdrawals and surrenders. Purchasers of contracts for use with
corporate pension or profit sharing plans should obtain competent tax
advice as to the tax treatment and suitability of such an investment.
-13-
<PAGE> 47
(f) DEFERRED COMPENSATION PLANS - SECTION 457
Under Section 457 of the Code, governmental and certain other
tax-exempt employers may establish, for the benefit of their employees,
deferred compensation plans which may invest in annuity contracts. The
Code, as in the case of Qualified plans, establishes limitations and
restrictions on eligibility, contributions and distributions. Under
these plans, contributions made for the benefit of the employees will
not be includible in the employees' gross income until distributed from
the plan. However, under a 457 plan all the plan assets shall remain
solely the property of the employer, subject only to the claims of the
employer's general creditors until such time as made available to an
owner or a Beneficiary.
DISTRIBUTION OF CONTRACTS
The contracts are offered through SunAmerica Capital Services, Inc.,
located at 733 Third Avenue, 4th Floor, New York, New York 10017. SunAmerica
Capital Services, Inc. is registered as a broker-dealer under the Securities
Exchange Act of 1934, as amended, and is a member of the National Association of
Securities Dealers, Inc. The Company and SunAmerica Capital Services, Inc. are
each an indirect wholly owned subsidiary of SunAmerica Inc.
Contracts are offered on a continuous basis.
FINANCIAL STATEMENTS
The audited consolidated financial statements of the Company as of
September 30, 1998 and 1997 and for each of the three years in the period ended
September 30, 1998 are presented in this Statement of Additional Information.
The consolidated financial statements of the Company should be considered only
as bearing on the ability of the Company to meet its obligation under the
contracts for amounts allocated to the 1, 3, 5, 7 or 10 year fixed account
options and the DCA fixed accounts for 6-month and 1-year periods. As of the
date of this Statement of Additional Information sale of these contracts had not
yet begun. Therefore, financial statements for Variable Annuity Account Seven
are not contained herein.
PricewaterhouseCoopers LLP, 400 South Hope Street, Los Angeles,
California 90071, serves as the independent accountants for the separate account
and the Company. The Company financial statements referred to above have been so
included in reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
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<PAGE> 48
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 (the "Company")at September 30, 1998 and 1997, and
the results of their operations and their cash flows for each of the three years
in the period ended September 30, 1998, 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 9, 1998
33
<PAGE> 49
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
----------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
ASSETS
Investments:
Cash and short-term investments........................... $ 333,735,000 $ 113,580,000
Bonds, notes and redeemable preferred stocks available for
sale, at fair value (amortized cost: 1998,
$1,934,863,000; 1997, $1,942,485,000).................. 1,954,754,000 1,986,194,000
Mortgage loans............................................ 391,448,000 339,530,000
Common stocks available for sale, at fair value (cost:
1998, $115,000; 1997, $271,000)........................ 169,000 1,275,000
Real estate............................................... 24,000,000 24,000,000
Other invested assets..................................... 30,636,000 143,722,000
--------------- ---------------
Total investments................................. 2,734,742,000 2,608,301,000
Variable annuity assets held in separate accounts........... 11,133,569,000 9,343,200,000
Accrued investment income................................... 26,408,000 21,759,000
Deferred acquisition costs.................................. 539,850,000 536,155,000
Income taxes currently receivable........................... 5,869,000 --
Other assets................................................ 85,926,000 61,524,000
--------------- ---------------
TOTAL ASSETS...................................... $14,526,364,000 $12,570,939,000
=============== ===============
LIABILITIES AND SHAREHOLDER'S EQUITY
Reserves, payables and accrued liabilities:
Reserves for fixed annuity contracts...................... $ 2,189,272,000 $ 2,098,803,000
Reserves for guaranteed investment contracts.............. 282,267,000 295,175,000
Payable to brokers for purchases of securities............ 27,053,000 263,000
Income taxes currently payable............................ -- 32,265,000
Other liabilities......................................... 106,594,000 122,728,000
--------------- ---------------
Total reserves, payables and accrued
liabilities...................................... 2,605,186,000 2,549,234,000
--------------- ---------------
Variable annuity liabilities related to separate accounts... 11,133,569,000 9,343,200,000
--------------- ---------------
Subordinated notes payable to Parent........................ 39,182,000 36,240,000
--------------- ---------------
Deferred income taxes....................................... 95,758,000 67,047,000
--------------- ---------------
Shareholder's equity:
Common Stock.............................................. 3,511,000 3,511,000
Additional paid-in capital................................ 308,674,000 308,674,000
Retained earnings......................................... 332,069,000 244,628,000
Net unrealized gains on debt and equity securities
available for sale..................................... 8,415,000 18,405,000
--------------- ---------------
Total shareholder's equity........................ 652,669,000 575,218,000
--------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY........ $14,526,364,000 $12,570,939,000
=============== ===============
</TABLE>
See accompanying notes.
34
<PAGE> 50
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED INCOME STATEMENT
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------------
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Investment income........................................... $ 221,966,000 $ 210,759,000 $ 164,631,000
------------- ------------- -------------
Interest expense on:
Fixed annuity contracts................................... (112,695,000) (109,217,000) (82,690,000)
Guaranteed investment contracts........................... (17,787,000) (22,650,000) (19,974,000)
Senior indebtedness....................................... (1,498,000) (2,549,000) (2,568,000)
Subordinated notes payable to Parent...................... (3,114,000) (3,142,000) (2,556,000)
------------- ------------- -------------
Total interest expense............................ (135,094,000) (137,558,000) (107,788,000)
------------- ------------- -------------
NET INVESTMENT INCOME....................................... 86,872,000 73,201,000 56,843,000
------------- ------------- -------------
NET REALIZED INVESTMENT GAINS
(LOSSES).................................................. 19,482,000 (17,394,000) (13,355,000)
------------- ------------- -------------
Fee income:
Variable annuity fees..................................... 200,867,000 139,492,000 103,970,000
Net retained commissions.................................. 48,561,000 39,143,000 31,548,000
Asset management fees..................................... 29,592,000 25,764,000 25,413,000
Surrender charges......................................... 7,404,000 5,529,000 5,184,000
Other fees................................................ 3,938,000 3,218,000 3,390,000
------------- ------------- -------------
TOTAL FEE INCOME.................................. 290,362,000 213,146,000 169,505,000
------------- ------------- -------------
GENERAL AND ADMINISTRATIVE
EXPENSES.................................................. (96,102,000) (98,802,000) (81,552,000)
------------- ------------- -------------
AMORTIZATION OF DEFERRED
ACQUISITION COSTS......................................... (72,713,000) (66,879,000) (57,520,000)
------------- ------------- -------------
ANNUAL COMMISSIONS.......................................... (18,209,000) (8,977,000) (4,613,000)
------------- ------------- -------------
PRETAX INCOME............................................... 209,692,000 94,295,000 69,308,000
Income tax expense.......................................... (71,051,000) (31,169,000) (24,252,000)
------------- ------------- -------------
NET INCOME.................................................. $ 138,641,000 $ 63,126,000 $ 45,056,000
============= ============= =============
</TABLE>
See accompanying notes.
35
<PAGE> 51
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 138,641,000 $ 63,126,000 $ 45,056,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Interest credited to:
Fixed annuity contracts............................... 112,695,000 109,217,000 82,690,000
Guaranteed investment contracts....................... 17,787,000 22,650,000 19,974,000
Net realized investment (gains) losses.................. (19,482,000) 17,394,000 13,355,000
Amortization (accretion) of net premiums (discounts) on
investments............................................ 447,000 (18,576,000) (8,976,000)
Amortization of goodwill................................ 1,422,000 1,187,000 1,169,000
Provision for deferred income taxes..................... 34,087,000 (16,024,000) (3,351,000)
Change in:
Accrued investment income............................... (4,649,000) (2,084,000) (5,483,000)
Deferred acquisition costs.............................. (160,926,000) (113,145,000) (60,941,000)
Other assets............................................ (19,374,000) (14,598,000) (8,000,000)
Income taxes currently payable.......................... (38,134,000) 10,779,000 5,766,000
Other liabilities....................................... (2,248,000) 14,187,000 5,474,000
Other, net................................................ (5,599,000) 418,000 (129,000)
--------------- --------------- ---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 54,667,000 74,531,000 86,604,000
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Premium receipts on:
Fixed annuity contracts................................. 1,512,994,000 1,097,937,000 741,774,000
Guaranteed investment contracts......................... 5,619,000 55,000,000 134,967,000
Net exchanges from the fixed accounts of variable annuity
contracts............................................... (1,303,790,000) (620,367,000) (236,705,000)
Withdrawal payments on:
Fixed annuity contracts................................. (191,690,000) (242,589,000) (263,614,000)
Guaranteed investment contracts......................... (36,313,000) (198,062,000) (16,492,000)
Claims and annuity payments on fixed annuity contracts.... (40,589,000) (35,731,000) (31,107,000)
Net receipts from (repayments of) other short-term
financings.............................................. (10,944,000) 34,239,000 (119,712,000)
Net receipts from a modified coinsurance transaction...... 166,631,000 -- --
Capital contributions received............................ -- 28,411,000 27,387,000
Dividends paid............................................ (51,200,000) (25,500,000) (29,400,000)
--------------- --------------- ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES................... 50,718,000 93,338,000 207,098,000
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of:
Bonds, notes and redeemable preferred stocks............ $(1,970,502,000) $(2,566,211,000) $(1,937,890,000)
Mortgage loans.......................................... (131,386,000) (266,771,000) (15,000,000)
Other investments, excluding short-term investments..... -- (75,556,000) (36,770,000)
Sales of:
Bonds, notes and redeemable preferred stocks............ 1,602,079,000 2,299,063,000 1,241,928,000
Real estate............................................. -- -- 900,000
Other investments, excluding short-term investments..... 42,458,000 6,421,000 4,937,000
Redemptions and maturities of:
Bonds, notes and redeemable preferred stocks............ 424,393,000 376,847,000 288,969,000
Mortgage loans.......................................... 80,515,000 25,920,000 11,324,000
Other investments, excluding short-term investments..... 67,213,000 23,940,000 20,749,000
--------------- --------------- ---------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES............ 114,770,000 (176,347,000) (420,853,000)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM
INVESTMENTS............................................... 220,155,000 (8,478,000) (127,151,000)
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD...... 113,580,000 122,058,000 249,209,000
--------------- --------------- ---------------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD............ $ 333,735,000 $ 113,580,000 $ 122,058,000
=============== =============== ===============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid on indebtedness............................. $ 3,912,000 $ 7,032,000 $ 5,982,000
=============== =============== ===============
Net income taxes paid..................................... $ 74,932,000 $ 36,420,000 $ 22,031,000
=============== =============== ===============
</TABLE>
See accompanying notes.
36
<PAGE> 52
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 operations and broker-dealer
operations. Annuity operations include the sale and administration of fixed and
variable annuities and guaranteed investment contracts. Asset management
operations, 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 1998 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.
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 by using the specific cost
identification method. Premiums and discounts on investments are amortized to
investment income by using the interest method over the contractual lives of the
investments.
INTEREST RATE SWAP AGREEMENTS: The net differential to be paid or received on
interest rate swap agreements ("Swap Agreements") entered into to reduce the
impact of changes in interest rates is recognized over the lives of the
agreements, and such differential is classified as Investment Income or Interest
Expense in the income statement. Initially, Swap Agreements are designated as
hedges and, therefore, are not marked to market. However, when a hedged
asset/liability is sold or repaid before the related Swap Agreement matures, the
Swap Agreement is marked to market and any gain/loss is classified with any
gain/loss realized on the disposition of the hedged asset/liability.
Subsequently, the Swap Agreement is marked to market and
37
<PAGE> 53
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
the resulting change in fair value is included in Investment Income in the
income statement. When a Swap Agreement that is designated as a hedge is
terminated before its contractual maturity, any resulting gain/loss is
credited/charged to the carrying value of the asset/liability that it hedged and
is treated as a premium/discount for the remaining life of the asset/liability.
DEFERRED ACQUISITION COSTS: Policy acquisition costs are deferred and amortized,
with interest, in relation to the incidence of estimated gross profits to be
realized over the estimated lives of the annuity contracts. Estimated gross
profits are composed of net interest income, net realized investment gains and
losses, variable annuity fees, surrender charges and direct administrative
expenses. Costs incurred to sell mutual funds are also deferred and amortized
over the estimated lives of the funds obtained. Deferred acquisition costs
("DAC") consist of commissions and other costs that vary with, and are primarily
related to, the production or acquisition of new business.
As debt and equity securities available for sale are carried at aggregate fair
value, an adjustment is made to DAC equal to the change in amortization that
would have been recorded if such securities had been sold at their stated
aggregate fair value and the proceeds reinvested at current yields. The change
in this adjustment, net of tax, is included with the change in net unrealized
gains/losses on debt and equity securities available for sale that is credited
or charged directly to shareholder's equity. DAC have been decreased by
$7,000,000 at September 30, 1998 and $16,400,000 at September 30, 1997 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 $23,339,000 at September 30, 1998, 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 income tax assets
and liabilities are recognized based on the difference between financial
statement carrying amounts and income tax bases of assets and liabilities using
enacted income tax rates and laws.
RECENTLY ISSUED ACCOUNTING STANDARDS: In June 1997, the Financial Accounting
Standards Board (the "FASB") issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130") and Statement of
Financial Accounting Standards No. 131, "Disclosure about Segments of an
Enterprise and Related Information" ("SFAS 131").
SFAS 130 establishes standards for reporting comprehensive income and its
components in a full set of general purpose financial statements. SFAS 130 is
effective for the Company as of October 1, 1998 and is not included in these
financial statements.
SFAS 131 establishes standards for the disclosure of information about the
Company's operating segments. SFAS 131 is effective for the year ending
September 30, 1999 and is not included in these financial statements.
Implementation of SFAS 130 and SFAS 131 will not have an impact on the Company's
results of operations, financial condition or liquidity.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 addresses the accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and hedging
activities. SFAS 133 is effective for the Company as of October 1, 1999 and is
not included in these financial statements. The Company has not completed its
analysis of the effect of
38
<PAGE> 54
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
SFAS 133, but management believes that it will not have a material impact on the
Company's results of operations, financial condition or liquidity.
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>
AMORTIZED COST ESTIMATED FAIR VALUE
-------------- --------------------
<S> <C> <C>
AT SEPTEMBER 30, 1998:
Securities of the United States Government................ $ 84,377,000 $ 88,239,000
Mortgage-backed securities................................ 569,613,000 584,007,000
Securities of public utilities............................ 108,431,000 106,065,000
Corporate bonds and notes................................. 883,890,000 884,209,000
Redeemable preferred stocks............................... 6,125,000 6,888,000
Other debt securities..................................... 282,427,000 285,346,000
-------------- --------------
Total..................................................... $1,934,863,000 $1,954,754,000
============== ==============
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..................................................... $1,942,485,000 $1,986,194,000
============== ==============
</TABLE>
The amortized cost and estimated fair value of bonds, notes and redeemable
preferred stocks available for sale by contractual maturity, as of September 30,
1998, follow:
<TABLE>
<CAPTION>
AMORTIZED COST ESTIMATED FAIR VALUE
-------------- --------------------
<S> <C> <C>
Due in one year or less..................................... $ 19,124,000 $ 19,319,000
Due after one year through five years....................... 313,396,000 318,943,000
Due after five years through ten years...................... 744,740,000 750,286,000
Due after ten years......................................... 287,990,000 282,199,000
Mortgage-backed securities.................................. 569,613,000 584,007,000
-------------- --------------
Total....................................................... $1,934,863,000 $1,954,754,000
============== ==============
</TABLE>
Actual maturities of bonds, notes and redeemable preferred stocks will differ
from those shown above due to prepayments and redemptions.
39
<PAGE> 55
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 1998:
Securities of the United States Government................ $ 3,862,000 $ --
Mortgage-backed securities................................ 15,103,000 (709,000)
Securities of public utilities............................ 2,420,000 (4,786,000)
Corporate bonds and notes................................. 31,795,000 (31,476,000)
Redeemable preferred stocks............................... 763,000 --
Other debt securities..................................... 5,235,000 (2,316,000)
----------- ------------
Total..................................................... $59,178,000 $(39,287,000)
=========== ============
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..................................................... $46,453,000 $ (2,744,000)
=========== ============
</TABLE>
Gross unrealized gains on equity securities available for sale aggregated
$54,000 and $1,004,000 at September 30, 1998 and 1997, respectively. There were
no unrealized losses at September 30, 1998 and 1997.
Gross realized investment gains and losses on sales of investments are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
BONDS, NOTES AND REDEEMABLE PREFERRED STOCKS:
Realized gains........................................ $ 28,086,000 $ 22,179,000 $ 14,532,000
Realized losses....................................... (4,627,000) (25,310,000) (10,432,000)
COMMON STOCKS:
Realized gains........................................ 337,000 4,002,000 511,000
Realized losses....................................... -- (312,000) (3,151,000)
OTHER INVESTMENTS:
Realized gains........................................ 8,824,000 2,450,000 1,135,000
IMPAIRMENT WRITEDOWNS................................... (13,138,000) (20,403,000) (15,950,000)
------------ ------------ ------------
Total net realized investment gains and
losses...................................... $ 19,482,000 $(17,394,000) $(13,355,000)
============ ============ ============
</TABLE>
40
<PAGE> 56
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INVESTMENTS -- (CONTINUED)
The sources and related amounts of investment income are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Short-term investments.................................. $ 12,524,000 $ 11,780,000 $ 10,647,000
Bonds, notes and redeemable preferred stocks............ 156,140,000 163,038,000 140,387,000
Mortgage loans.......................................... 29,996,000 17,632,000 8,701,000
Common stocks........................................... 34,000 16,000 8,000
Real estate............................................. (467,000) (296,000) (196,000)
Cost-method partnerships................................ 24,311,000 6,725,000 4,073,000
Other invested assets................................... (572,000) 11,864,000 1,011,000
------------ ------------ ------------
Total investment income....................... $221,966,000 $210,759,000 $164,631,000
============ ============ ============
</TABLE>
Expenses incurred to manage the investment portfolio amounted to $1,910,000 for
the year ended September 30, 1998, $2,050,000 for the year ended September 30,
1997, and $1,737,000 for the year ended September 30, 1996, and are included in
General and Administrative Expenses in the income statement.
At September 30, 1998, no investment exceeded 10% of the Company's consolidated
shareholder's equity.
At September 30, 1998, mortgage loans were collateralized by properties located
in 29 states, with loans totaling approximately 21% of the aggregate carrying
value of the portfolio secured by properties located in California and
approximately 14% by properties located in New York. No more than 8% of the
portfolio was secured by properties in any other single state.
At September 30, 1998, bonds, notes and redeemable preferred stocks included
$167,564,000 of bonds and notes not rated investment grade. The Company had no
material concentrations of non-investment-grade assets at September 30, 1998.
At September 30, 1998, the carrying value of investments in default as to the
payment of principal or interest was $917,000, all of which were mortgage loans.
Such nonperforming investments had an estimated fair value equal to their
carrying value.
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,
1998, the Company had one outstanding Swap Agreement with a notional principal
amount of $21,538,000, which matures in December 2024. The net interest paid
amounted to $278,000 and $125,000 for the years ended September 30, 1998 and
1997, respectively, and is included in Interest Expense on Guaranteed Investment
Contracts in the income statement.
At September 30, 1998, $5,154,000 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.
41
<PAGE> 57
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
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.
COST-METHOD PARTNERSHIPS: Fair value of limited partnerships accounted for by
using the cost method is based upon the fair value of the net assets of the
partnerships as determined by the general partners.
VARIABLE ANNUITY ASSETS HELD IN SEPARATE ACCOUNTS: Variable annuity assets are
carried at the market value of the underlying securities.
RESERVES FOR FIXED ANNUITY CONTRACTS: Deferred annuity contracts 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 a hedging Swap Agreement, determined from independent broker
quotes.
PAYABLE TO BROKERS FOR 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.
VARIABLE ANNUITY LIABILITIES RELATED TO SEPARATE ACCOUNTS: Fair values of
contracts in the accumulation phase are based on net surrender values. Fair
values of contracts in the payout phase are based on the present value of future
cash flows at assumed investment rates.
SUBORDINATED NOTES PAYABLE TO PARENT: Fair value is estimated based on the
quoted market prices for similar issues.
42
<PAGE> 58
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
The estimated fair values of the Company's financial instruments at September
30, 1998 and 1997, compared with their respective carrying values, are as
follows:
<TABLE>
<CAPTION>
CARRYING VALUE FAIR VALUE
--------------- ---------------
<S> <C> <C>
1998:
ASSETS:
Cash and short-term investments........................... $ 333,735,000 $ 333,735,000
Bonds, notes and redeemable preferred stocks.............. 1,954,754,000 1,954,754,000
Mortgage loans............................................ 391,448,000 415,981,000
Common stocks............................................. 169,000 169,000
Cost-method partnerships.................................. 4,403,000 12,744,000
Variable annuity assets held in separate accounts......... 11,133,569,000 11,133,569,000
LIABILITIES:
Reserves for fixed annuity contracts...................... 2,189,272,000 2,116,874,000
Reserves for guaranteed investment contracts.............. 282,267,000 282,267,000
Payable to brokers for purchases of securities............ 27,053,000 27,053,000
Variable annuity liabilities related to separate
accounts............................................... 11,133,569,000 10,696,607,000
Subordinated notes payable to Parent...................... 39,182,000 40,550,000
=============== ===============
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 held in separate accounts......... 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 related to separate
accounts............................................... 9,343,200,000 9,077,200,000
Subordinated notes payable to Parent...................... 36,240,000 37,393,000
=============== ===============
</TABLE>
5. SUBORDINATED NOTES PAYABLE TO PARENT
Subordinated notes and accrued interest payable to Parent totaled $39,182,000 at
interest rates ranging from 8.5% to 9% at September 30, 1998, and require
principal payments of $23,060,000 in 1999, $5,400,000 in 2000 and $10,000,000 in
2001.
6. REINSURANCE
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, effective December 31,
1997. As a part of this transaction, the Company received cash amounting to
approximately $188,700,000, and recorded a corresponding reduction of DAC
related to the coinsured annuities.
As payments are made to the reinsurer, the reduction of DAC is relieved. The net
reduction in DAC at September 30, 1998 was $166,631,000. Certain expenses
related to this transaction are being charged directly to DAC amortization in
the income statement. The net effect of this transaction in the income statement
is not material.
43
<PAGE> 59
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. CONTINGENT LIABILITIES
The Company has entered into three agreements in which it has provided liquidity
support for certain short-term securities of two 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. An additional
$51,000,000 has been committed to investments in the process of being funded or
to be available in the case of certain natural disasters, for which the Company
receives a fee.
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.
8. SHAREHOLDER'S EQUITY
The Company is authorized to issue 4,000 shares of its $1,000 par value Common
Stock. At September 30, 1998 and 1997, 3,511 shares were outstanding.
Changes in shareholder's equity are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
ADDITIONAL PAID-IN CAPITAL:
Beginning balances.................................... $308,674,000 $280,263,000 $252,876,000
Capital contributions received........................ -- 28,411,000 27,387,000
------------ ------------ ------------
Ending balances....................................... $308,674,000 $308,674,000 $280,263,000
============ ============ ============
RETAINED EARNINGS:
Beginning balances.................................... $244,628,000 $207,002,000 $191,346,000
Net income............................................ 138,641,000 63,126,000 45,056,000
Dividend paid......................................... (51,200,000) (25,500,000) (29,400,000)
------------ ------------ ------------
Ending balances....................................... $332,069,000 $244,628,000 $207,002,000
============ ============ ============
NET UNREALIZED GAINS (LOSSES) ON
DEBT AND EQUITY SECURITIES
AVAILABLE FOR SALE:
Beginning balances.................................... $ 18,405,000 $ (5,521,000) $ (5,673,000)
Change in net unrealized gains (losses) on debt
securities available for sale...................... (23,818,000) 57,463,000 (2,904,000)
Change in net unrealized gains (losses) on equity
securities available for sale...................... (950,000) (55,000) 3,538,000
Change in adjustment to deferred acquisition costs.... 9,400,000 (20,600,000) (400,000)
Tax effects of net changes............................ 5,378,000 (12,882,000) (82,000)
------------ ------------ ------------
Ending balances....................................... $ 8,415,000 $ 18,405,000 $ (5,521,000)
============ ============ ============
</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 $51,200,000, $25,500,000 and
$29,400,000 were paid on June 4, 1998, April 1, 1997 and March 18, 1996,
respectively.
Under statutory accounting principles utilized in filings with insurance
regulatory authorities, the Company's net income for the nine months ended
September 30, 1998 was $64,125,000. The statutory net income for the year ended
December 31, 1997 was $74,407,000, and the statutory net income for the year
ended December 31, 1996 was $27,928,000. The Company's statutory
44
<PAGE> 60
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. SHAREHOLDER'S EQUITY -- (CONTINUED)
capital and surplus was $537,542,000 at September 30, 1998, $567,979,000 at
December 31, 1997 and $311,176,000 at December 31, 1996.
9. 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>
1998:
Currently payable..................................... $ 4,221,000 $ 32,743,000 $ 36,964,000
Deferred.............................................. (550,000) 34,637,000 34,087,000
------------ ------------ ------------
Total income tax expense...................... $ 3,671,000 $ 67,380,000 $ 71,051,000
============ ============ ============
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
============ ============ ============
</TABLE>
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,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Amount computed at statutory rate.......................... $73,392,000 $33,003,000 $24,258,000
Increases (decreases) resulting from:
Amortization of differences between book and tax bases of
net assets acquired................................... 460,000 666,000 464,000
State income taxes, net of federal tax benefit........... 5,530,000 1,950,000 2,070,000
Dividends-received deduction............................. (7,254,000) (4,270,000) (2,357,000)
Tax credits.............................................. (1,296,000) (318,000) (257,000)
Other, net............................................... 219,000 138,000 74,000
----------- ----------- -----------
Total income tax expense......................... $71,051,000 $31,169,000 $24,252,000
=========== =========== ===========
</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, 1998. The Company does not anticipate any
transactions which would cause any part of this surplus to be taxable.
45
<PAGE> 61
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. 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,
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Investments................................................. $ 17,643,000 $ 13,160,000
Deferred acquisition costs.................................. 223,392,000 154,949,000
State income taxes.......................................... 2,873,000 1,777,000
Other liabilities........................................... 144,000 --
Net unrealized gains on debt and equity securities available
for sale.................................................. 4,531,000 9,910,000
------------- -------------
Total deferred tax liabilities.............................. 248,583,000 179,796,000
------------- -------------
DEFERRED TAX ASSETS:
Contractholder reserves..................................... (149,915,000) (108,090,000)
Guaranty fund assessments................................... (2,910,000) (2,707,000)
Other assets................................................ -- (1,952,000)
------------- -------------
Total deferred tax assets................................... (152,825,000) (112,749,000)
------------- -------------
Deferred income taxes....................................... $ 95,758,000 $ 67,047,000
============= =============
</TABLE>
10. RELATED-PARTY MATTERS
The Company pays commissions to five affiliated companies, SunAmerica
Securities, Inc., Advantage Capital Corp., Financial Services Corp., Sentra
Securities Corp. and Spelman & Co. Inc. Commissions paid to these broker-dealers
totaled $32,946,000 in 1998, $25,492,000 in 1997, and $16,906,000 in 1996. 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 33.6%, 36.1%, and 38.3% of premiums in 1998, 1997, and 1996,
respectively. The Company also sells its products through unaffiliated
broker-dealers, the largest two of which represented approximately 17.3% and
8.4% of premiums in 1998, 19.2% and 10.1% in 1997, and 19.7% and 10.2% in 1996,
respectively.
The Company purchases administrative, investment management, accounting,
marketing and data processing services from SunAmerica Financial, whose purpose
is to provide services to the Company and its affiliates. Amounts paid for such
services totaled $84,975,000 for the year ended September 30, 1998, $86,116,000
for the year ended September 30, 1997 and $65,351,000 for the year ended
September 30, 1996. The marketing component of such costs during these periods
amounted to $39,482,000, $31,968,000 and $17,442,000, respectively, and are
deferred and amortized as part of Deferred Acquisition Costs. The other
components of such costs are included in General and Administrative Expenses in
the income statement.
The Parent made a capital contribution of $28,411,000 in December 1996 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, 1998, the Company sold various invested
assets to the Parent for cash equal to their current market value of
$64,431,000. The Company recorded a net gain aggregating $16,388,000 on such
transactions.
During the year ended September 30, 1998, the Company purchased certain invested
assets from the Parent, SunAmerica Life Insurance Company and CalAmerica Life
Insurance Company for cash equal to their current market value, which aggregated
$20,666,000, $10,468,000 and $61,000, respectively.
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 value of $15,776,000 and $15,000,
respectively. The Company recorded a net gain aggregating $276,000 on such
transactions.
46
<PAGE> 62
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. RELATED-PARTY MATTERS (CONTINUED)
During the year ended September 30, 1997, the Company purchased certain invested
assets from SunAmerica Life Insurance Company and CalAmerica Life Insurance
Company for cash equal to their current market value 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 value of $274,000 and $47,321,000, respectively. The
Company recorded a net loss aggregating $3,000 on such transactions.
During the year ended September 30, 1996, the Company purchased certain invested
assets from SunAmerica Life Insurance Company for cash equal to their current
market value, which aggregated $28,379,000.
11. 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>
1998:
Annuity operations........................... $443,407,000 $60,731,000 $178,120,000 $14,366,018,000
Broker-dealer operations..................... 47,363,000 1,770,000 22,401,000 55,870,000
Asset management operations.................. 41,040,000 14,780,000 9,171,000 104,476,000
------------ ----------- ------------ ---------------
Total................................ $531,810,000 $77,281,000 $209,692,000 $14,526,364,000
============ =========== ============ ===============
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 operations.................. 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 operations.................. 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
============ =========== ============ ===============
</TABLE>
12. SUBSEQUENT EVENTS
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 contract owners 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 life
insurance reserves.
47
<PAGE> 63
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. SUBSEQUENT EVENTS (CONTINUED)
On August 20, 1998, the Parent announced that it has entered into a definite
agreement to merge with and into American International Group, Inc. ("AIG").
Under the terms of the agreement, each share of the Parent's common stock
(including Nontransferable Class B) will be exchanged for 0.855 shares of AIG's
common stock. The transaction will be treated as a pooling of interests for
accounting purposes and will be a tax-free reorganization. The transaction was
approved by both the Parent's and AIG's shareholders on November 18, 1998, and,
subject to various regulatory approvals, will be completed in late 1998 or early
1999.
48
<PAGE> 64
PART C -- OTHER INFORMATION
Item 24. Financial Statements And Exhibits
(a) Financial Statements
The following financial statements are included in Part B of the
Registration Statement:
Consolidated financial statements of Anchor National
Life Insurance Company for the fiscal year ended
September 30, 1998.
The following financial statements are included in Part B of the
Registration Statement:
None
(b) Exhibits
(1) Resolutions Establishing Separate Account..... Filed October 21, 1998,
Initial Registration
Statement to this
Registration Statement
(2) Custody Agreements............................ Not Applicable
(3) (a) Form of Distribution Contract............. Filed Herewith
(b) Form of Selling Agreement................. Filed Herewith
(4) (a) Group Annuity Certificate................. Filed Herewith
(b) Individual Annuity Contract............... Filed Herewith
(5) Application for Contract...................... Filed Herewith
(a) Participant Enrollment Form............... Filed Herewith
(b) Deferred Annuity Application.............. Filed Herewith
(6) Depositor -- Corporate Documents
(a) Articles of Incorporation................. Filed October 21, 1998,
Initial Registration
Statement to this
Registration Statement
(b) By-Laws................................... Filed October 21, 1998,
Initial Registration
Statement to this
Registration Statement
(7) Reinsurance Contract.......................... Not Applicable
(8) Form of Fund Participation Agreement.......... Filed Herewith
(a) Anchor Series Trust Fund Participation
Agreement................................. Filed Herewith
(b) SunAmerica Series Trust Fund
Participation Agreement................... Filed Herewith
(9) Opinion of Counsel............................ To Be Filed by
Amendment
Consent of Counsel............................ To Be Filed By
Amendment
(10) Consent of Independent Accountants............ Filed Herewith
(11) Financial Statements Omitted from Item 23..... Not Applicable
(12) Initial Capitalization Agreement.............. Not Applicable
(13) Performance Computations...................... To Be Filed By
Amendment
(15) Powers of Attorney............................ Filed October 21, 1998,
Initial Registration
Statement to this
Registration Statement
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> 65
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 Senior 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). TO BE UPDATED BY AMENDMENT.
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, Presidential Variable Account One, Variable Separate Account, FS
Variable Separate Account, Variable Annuity Account One, FS Variable Annuity
Account One, Variable Annuity Account Four and Variable Annuity Account Five.
SunAmerica Capital Services, Inc. also serves as the underwriter to the
SunAmerica Income Funds, SunAmerica Equity Funds, SunAmerica Money Market Funds,
Inc., Style Select Series, Inc. and the SunAmerica Strategic Investment Series,
Inc. (currently in Registration), all issued by SunAmerica Asset Management
Corp.
Its principal business address is 733 Third Avenue, 4th Floor, New York,
New York 10017. The following are the directors and officers of SunAmerica
Capital Services, Inc.
<TABLE>
<CAPTION>
Name Position with Distributor
---- -------------------------
<S> <C> <C>
J. Steven Neamtz Director and President
Robert M. Zakem Director, Executive Vice
President, General Counsel
and Assistant Secretary
Peter Harbeck Director
Susan L. Harris Secretary
Debbie Potash-Turner Controller
Per Furmark Vice President
James Nichols Vice President
</TABLE>
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> 66
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> 67
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant certifies it meets the requirements of Securities
Act Rule 485 for effectiveness of this Registration Statement and 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 16th
day of February, 1999.
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
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
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Eli Broad* President, Chief
- -------------------- Executive Officer and
Eli Broad Chairman of the Board
(Principal Executive
Officer)
/s/ Scott L. Robinson* Senior Vice President
- --------------------- and Director
Scott L. Robinson (Principal Financial
Officer)
/s/ N. Scott Gillis* Senior Vice President
- -------------------- and Controller
N. Scott Gillis (Principal Accounting
Officer)
/s/ James R. Belardi* Director
- --------------------
James R. Belardi
/s/ Jana W. Greer* Director
- --------------------
Jana W. Greer
/s/ Susan L. Harris Director February 16, 1999
- --------------------
Susan L. Harris
/s/ Peter McMillan* Director
- --------------------
Peter McMillan
/s/ James W. Rowan* Director
- --------------------
James W. Rowan
/s/ Jay S. Wintrob* Director
- --------------------
Jay S. Wintrob
*By: /s/ Susan L. Harris Attorney-in-Fact
---------------------
Susan L. Harris
Date: February 16, 1999
II-4
<PAGE> 68
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
Exhibit 3(a) Form of Distribution Contract
Exhibit 3(b) Form of Selling Agreement
Exhibit 4(a) Group Annuity Certificate
Exhibit 4(b) Individual Annuity Contract
Exhibit 5(a) Participant Enrollment Form
Exhibit (5)(b) Deferred Annuity Application
Exhibit (8)(a) Anchor Series Trust Fund Participation Agreement
Exhibit (8)(b) SunAmerica Series Trust Fund Participation Agreement
Exhibit (10) Consent of Independent Accountants
<PAGE> 1
DISTRIBUTION AGREEMENT
THIS AGREEMENT, entered into as of this 10thth day of February, 1999,
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. 333-65965) 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 Conduct Rules of the NASD
Regulation, 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;
-2-
<PAGE> 3
(vi) The performance of this Agreement and the
consummation of the transactions
contemplated by this Agreement will not
result in a breach or violation of any
of the terms and provisions of, or
constitute a default under any statute, any
indenture, mortgage, deed of trust, note
agreement or other agreement or instrument
to which Anchor is a party or by which
Anchor is bound, Anchor's Charter as a
stock life insurance company or By-laws,
or any order, rule or regulation of any
court or governmental agency or body having
jurisdiction over Anchor or any of its
properties; and no consent, approval,
authorization or order of any court or
governmental agency or body is required for
the consummation by Anchor of the
transactions contemplated by this Agreement,
except such as may be required under the
Securities Exchange Act of 1934 or state
insurance or securities laws in connection
with the distribution of the Contracts by
the Distributor; and
(vii) There are no material legal or governmental
proceedings pending to which Anchor or the
Separate Account is a party or of which any
property of Anchor or the Separate Account
is the subject, other than as set forth in
the Prospectus relating to the Contracts,
and other than litigation incident to the
kind of business conducted by Anchor, if
determined adversely to Anchor, would
individually or in the aggregate have a
material adverse effect on the financial
position, surplus or operations of Anchor.
(b) The Distributor represents and warrants to Anchor that;
(i) It is a broker-dealer duly registered with
the Commission pursuant to the Securities
Exchange Act of 1934 and a member in good
standing of the National Association of
Securities Dealers, Inc., and is in
compliance with the securities laws in those
states in which it conducts business as a
broker-dealer;
(ii) 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
-3-
<PAGE> 4
the requirements of the Securities Act of
1933 and the rules and regulations of the
Commission thereunder and will not contain
any untrue statement of a material fact or
omit to state any material fact required to
be stated therein or necessary to make the
statements therein not misleading.
5. The Distributor, or an affiliate thereof, shall keep, or
cause to be kept, in a manner and form prescribed or
approved by Anchor and in accordance with Rules 17a-3 and
17a-4 under the Securities Exchange Act of 1934, correct
records and books of account as required to be maintained by
a registered broker-dealer, acting as distributor, of all
transactions entered into on behalf of Anchor and with
respect to its activities under this Agreement for Anchor.
The 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: /s/ Susan L. Harris
-----------------------------------
Susan L. Harris
Senior Vice President
VARIABLE ANNUITY ACCOUNT SEVEN
By: ANCHOR NATIONAL LIFE
INSURANCE COMPANY
By: /s/ Susan L. Harris
----------------------------------
Susan L. Harris
Senior Vice President
SUNAMERICA CAPITAL SERVICES, INC.
By: /s/ Robert M. Zakem
---------------------------------
Robert M Zakem
Executive Vice 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 February 10, 1999 regarding the sale of the following
contracts funded in Variable Annuity Account Seven:
1. Polaris Class A
-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 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.
(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.
2
<PAGE> 3
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, other than the Contracts, unless a selling agreement with respect
thereto has been executed by the parties. 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; and (3)
all background investigations required by state and federal laws have been made
with respect to such Subagent.
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 currently
effective prospectuses for the Contract and the underlying funds; and if
required by state law, the Statement of Additional Information for the Contract;
that the prospectuses 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 prospectuses.
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 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
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<PAGE> 4
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 bank 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.
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. Applications shall be taken only on preprinted application forms
supplied by the Insurer. 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 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. 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.
H. 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, 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 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.
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
4
<PAGE> 5
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 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 with respect to that product when
the Contract application was accepted. 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
commission 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. 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 $1,000,000,
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
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
5
<PAGE> 6
(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 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, 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.
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<PAGE> 7
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, as determined in the
sole discretion of the Insurer.
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 or any of its
Affiliates, 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.
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 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.
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<PAGE> 8
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:
-----------------------------------
Name:
Title:
"DISTRIBUTOR":
SUNAMERICA CAPITAL SERVICES, INC.
By:
-----------------------------------
Peter Harbeck, President
"BROKER/DEALER":
- --------------------------------------
By:
-----------------------------------
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>
<CAPTION>
COMPANY STATE(S) TAX I.D. NO.
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<S> <C> <C> <C>
Signature:
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Signature:
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Signature:
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</TABLE>
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<TABLE>
<CAPTION>
COMPANY STATE(S) TAX I.D. NO.
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Signature:
- ----------------------------------------------------------------------------------------------
Signature:
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Signature:
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Signature:
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Signature:
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Signature:
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</TABLE>
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<PAGE> 11
BANK RIDER
This rider is appended to that certain Selling Agreement date
____________________________between Anchor National Life Insurance Company
("Insurer"), SunAmerica Capital Services, Inc. ("Distributor") and
_____________________________, together with its duly licensed insurance
affiliates indicated on Annex I of the Selling Agreement ("Broker/Dealer"). This
Rider is to be executed by any Broker/Dealer which is selling, or intends to
sell, Contracts on the premises of any federal or state chartered bank, thrift
or savings and loan institution (collectively, "Bank"). Pursuant hereto,
Broker/Dealer represents and warrants that it will comply with the requirements
of applicable laws, regulations and guidelines of any regulatory authority
having jurisdiction over the activities of Bank or occurring on Bank premises,
including without limitation, the Interagency Statement on Retail Sales of
Nondeposit Investment Products (Board of Governors of the Federal Reserve
System, Federal Deposit Insurance Corporation, Office of the Comptroller of the
Currency, and Office of Thrift Supervision, February 14, 1994) and any
subsequent release designed to provide governance to banks in connection with
the sale of nondeposit investment products ("applicable banking laws").
Broker/Dealer agrees that it shall be responsible for ensuring that applicable
banking laws are complied with in connection with the activities undertaken
pursuant to the Selling Agreement, including without limitation, ensuring that
all advertisements and sales literature used by Broker/Dealer comply with
applicable banking laws. Broker/Dealer further agrees that it shall inform the
Insurer in writing of any legends and other disclosures that are required by
applicable banking laws to be contained in advertisements or sales literature
for policies issued by the Insurer.
"Broker/Dealer"
By:
-----------------------------------
-----------------------------------
Printed Name & Title
11
<PAGE> 1
Exhibit (4.a)
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., STE 250 1 SUNAMERICA CENTER P. O. 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 Purchase Payments We receive.
THIS CERTIFICATE IS EVIDENCE OF COVERAGE UNDER THE GROUP CONTRACT. 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
INCREASES OR DECREASES BASED ON THE APPLICATION OF THE MARKET VALUE ADJUSTMENT
EXCEPT DURING THE 30 DAYS AFTER THE END OF THE GUARANTEE PERIOD. THERE IS NO
MARKET VALUE ADJUSTMENT TO AMOUNTS ALLOCATED TO NON-MVA 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 AND THE SALES CHARGE ON THE BUSINESS DAY DURING WHICH THE
CERTIFICATE IS RECEIVED. UPON SUCH REFUND, THE CERTIFICATE SHALL BE VOID.
For Individual Retirement Annuities, a refund of the Gross Purchase Payment(s)
may be required. Therefore, We reserve the right to allocate your Purchase
Payment(s) to the Cash Management Subaccount until the end of the Right To
Examine period. Thereafter, allocations will be made as shown on the Certificate
Data Page.
THIS IS A LEGAL DOCUMENT. READ IT CAREFULLY.
/s/ SUSAN L. HARRIS /s/ ELI BROAD
- ------------------------------- -------------------------------
Susan L. Harris Eli Broad
Secretary President
ALLOCATED FIXED AND
VARIABLE GROUP ANNUITY CERTIFICATE
Nonparticipating
1
<PAGE> 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
CHARGES AND DEDUCTIONS................................................................. PAGE 11
Sales Charge; Rights of Accumulation; Letter of Intent; Withdrawal Charge;
Mortality Risk Charge; Expense Risk Charge; Distribution Expense Charge;
Guaranteed Death Benefit Risk Charge
TRANSFER PROVISIONS.................................................................... PAGE 12
Transfers of Accumulation and Annuity Units Between Subaccounts; Transfers of
Accumulation and Annuity Units To and From the Fixed Account
WITHDRAWAL PROVISIONS.................................................................. PAGE 13
Systematic Withdrawal Program
GENERAL PROVISIONS..................................................................... PAGE 13
Entire Contract; Change of Annuitant; Death of Annuitant; Misstatement of Age or
Sex; Proof of Age, Sex or Survival; Conformity With State Laws; Changes in Law;
Assignment; Claims of Creditors; Premium Taxes and Other Taxes; Written Notice;
Periodic Reports; Incontestability; Nonparticipating
DEATH PROVISIONS....................................................................... PAGE 15
Death of Participant Before the Annuity Date; Due Proof of Death; Amount of
Death Benefit; Death of Participant or Annuitant on or After the Annuity Date;
Beneficiary
ANNUITY PROVISIONS..................................................................... PAGE 18
Annuity Date; Payments to Participant; Fixed Annuity Payments; Amount of Fixed
Annuity Payments; Amount of Variable Annuity Payments
ANNUITY PAYMENT OPTIONS ............................................................... PAGE 20
FIXED ANNUITY PAYMENT OPTIONS TABLE.................................................... PAGE 21
VARIABLE ANNUITY PAYMENT OPTIONS TABLE................................................. PAGE 24
</TABLE>
2
<PAGE> 3
CERTIFICATE DATA PAGE
<TABLE>
<S> <C>
CERTIFICATE NUMBER: ANNUITY SERVICE CENTER:
P9999999999 P. O. BOX 54299
LOS ANGELES, CA 90054-0299
PARTICIPANT: AGE AT ISSUE:
JOHN DOE 35
ANNUITANT: GROSS PURCHASE PAYMENT:
JOHN DOE $10,000.00
ANNUITY DATE: PURCHASE PAYMENT:
October 1, 2028 $9425.00
LATEST ANNUITY DATE: CERTIFICATE DATE:
October 1, 2053 October 1, 1998
MORTALITY RISK CHARGE: FIXED ACCOUNT OPTIONS -
[0.23%] Minimum Guarantee Rate: 3.0%
DISTRIBUTION EXPENSE RISK CHARGE: EXPENSE RISK CHARGE:
[0.15%] [0.35%]
GUARANTEED DEATH BENEFIT RISK CHARGE BENEFICIARY:
[0.12%] As named by You.
DEATH BENEFIT OPTION: SEPARATE ACCOUNT:
Option I: Purchase Payment Accumulation Variable Annuity Account Seven
</TABLE>
SALES CHARGE AND WITHDRAWAL CHARGE SCHEDULE
<TABLE>
<CAPTION>
AMOUNT OF PARTICIPANT'S MAXIMUM SALES CHARGE AS A WITHDRAWAL CHARGE AS A
INVESTMENT (AS DISCUSSED IN PERCENTAGE OF GROSS PERCENTAGE OF GROSS
THE SALES CHARGE PROVISION) PURCHASE PAYMENT PURCHASE PAYMENT
--------------------------- ------------------------- ----------------------
<S> <C> <C>
[Less than $50,000] [5.75%] [0.00%]
[$50,000-$99,999] [4.75%] [0.00%]
[$100,000-$249,999] [3.50%] [0.00%]
[$250,000-$499,999] [2.50%] [0.00%]
[$500,000-$999,999] [2.00%] [0.00%]
[$1,000,000+] [0.50%] [0.50%]
</TABLE>
FOR INQUIRIES
CALL 1-800-445-SUN2
3
<PAGE> 4
PURCHASE PAYMENT ALLOCATION
Subaccounts
<TABLE>
<CAPTION>
SUNAMERICA ANCHOR
SERIES TRUST SERIES TRUST
------------ ------------
<S> <C>
0.00% Cash Management 0.00% Government & Quality Bond
0.00% Corporate Bond 25.00% Growth
0.00% Global Bond 0.00% Capital Appreciation
0.00% High-Yield Bond
0.00% Worldwide High Income
0.00% SunAmerica Balanced
25.00% MFS Total Return
0.00% Asset Allocation
0.00% Utility
0.00% Growth-Income
0.00% MFS Growth and Income
0.00% Federated Value
0.00% Venture Value
0.00% "Dogs" of Wall St.
0.00% Alliance Growth
25.00% Putnam Growth
0.00% Real Estate
0.00% MFS Mid-Cap Growth
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>
25.00% 1-Year Fixed Non-MVA 3.00%
0.00% 3-Year Fixed MVA
0.00% 5-Year Fixed MVA
0.00% 7-Year Fixed MVA
0.00% 10-Year Fixed MVA
DCA Fixed Account Options
0.00% 6 Month DCA Fixed Non-MVA
0.00% 1 Year DCA Fixed Non-MVA
</TABLE>
4
<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 or persons (collectively, Joint Annuitants) whose life or
lives is/are used to determine the annuity benefits under the Certificate. If
the Certificate is in force and the Annuitant(s) is/are alive on the Annuity
Date, We will begin payments to the Payee. This Certificate cannot have Joint
Annuitants if it is issued on a tax-qualified basis.
ANNUITY DATE
The date on which annuity payments to the Payee are to start. The Participant
must specify the Annuity Date, which must be at least two years after the
Certificate Date.
ANNUITY SERVICE CENTER As specified on the Certificate Data Page.
ANNUITY UNIT
A unit of measurement used to compute annuity payments from the Subaccounts.
BENEFICIARY
The Beneficiary is as named by You unless later changed by You in a written
request to Us at Our Annuity Service Center.
CERTIFICATE
This Certificate, which 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.
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.
5
<PAGE> 6
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 succeeding
calendar years.
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 specified amounts or percentages, at
the interval selected by You, from the DCA Fixed Account Option(s), the 1-Year
Fixed Account Option or any Subaccount(s) into any Subaccount, other than the
source account. All amounts allocated to a DCA Fixed Account Option will be
transferred out within the specified DCA Fixed Account Option period. The unit
values credited and applied to Your Certificate are determined on each date of
transfer. You may terminate the DCA program at any time. However, upon
termination or annuitization, any amounts remaining in the DCA Fixed Account
Options will be transferred to the 1-Year Fixed Account Option. We reserve the
right to change the terms and conditions of the DCA program at any time.
FIXED ACCOUNT OPTIONS
The investment options under this Certificate that are credited with a fixed
rate of interest declared by the Company. All Purchase Payments allocated to the
Fixed Account Options become part of the Company's general asset account. The
general asset account contains all the assets of the Company except for the
Separate Account and other segregated asset accounts. The Fixed Account Options
for this Certificate are shown on page 4.
FIXED ANNUITY
A series of periodic annuity payments in predetermined amounts that do not vary
with investment experience. Such payments are made from the Company's general
asset account.
GROSS PURCHASE PAYMENTS
Payments in U.S. currency made by or on behalf of the Participant to the Company
for the Certificate. Gross Purchase Payments do not reflect the reduction of the
Sales Charge. The amount of Your initial Gross Purchase Payment is shown on the
Certificate Data Page.
GUARANTEE PERIOD
The period for which either the Initial Interest Rate, the Current Interest Rate
or the Renewal Interest Rate is credited to amounts allocated to the Fixed
Account Options.
INITIAL INTEREST RATE
The rate(s) of interest credited to any portion of the initial 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.
6
<PAGE> 7
JOINT PARTICIPANT
If Joint Participants are named, they must be spouses. Each Joint Participant
has an equal ownership interest in the Certificate unless we are advised
otherwise in writing.
NYSE
New York Stock Exchange. Generally, the close of any NYSE business day is
4:00PM, Eastern Time. Financial transactions and/or Purchase Payments 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 of ownership under the Certificate. Participant means both
Joint Participants, if applicable.
PAYEE
The person receiving payment of annuity benefits under this Certificate.
PORTFOLIO
The variable investment options in which the corresponding Subaccount(s) invest.
PURCHASE PAYMENTS
The amount of a Purchase Payment is equal to the Gross Purchase Payment amount
less any applicable Sales Charge and premium taxes. Purchase Payments are
credited to your Certificate Value. The amount of Your initial Purchase Payment
is shown on the Certificate Data Page.
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 a Fixed Account Option wherein the Guarantee Period has expired. The Renewal
Interest Rate may not be less than the Minimum Guarantee Rate as shown on the
Certificate Data Page.
SEPARATE ACCOUNT
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 variable Portfolio. The assets of the Separate Account are not
comingled with the general assets and liabilities of the Company. The value of
amounts allocated to the Subaccounts of the Separate Account is not guaranteed.
SUBACCOUNT
One or more divisions of the Separate Account which invests in shares of the
corresponding variable Portfolios. Each Subaccount is not chargeable with
liabilities arising out of any other Subaccount. The available Subaccounts are
shown on page 4.
VARIABLE ANNUITY
A series of periodic annuity payments which vary in amount according to the
investment experience of one or more Subaccounts, as selected by You.
7
<PAGE> 8
WE, OUR, US, THE COMPANY
Anchor National Life Insurance Company.
YOU, YOUR
The Participant.
PURCHASE PAYMENT PROVISIONS
PURCHASE PAYMENTS
Purchase Payments are flexible. This means that, subject to Company declared
minimums and maximums, You may change the amounts, frequency or timing of
Purchase Payments. Purchase Payments will be allocated to the Fixed Account
Option(s) and Subaccount(s) in accordance with instructions from You. We reserve
the right to specify the minimum Purchase Payment that may be allocated to a
Subaccount under the Certificate.
DEFERMENT OF PAYMENTS
We may defer making payments from the Fixed Account Options for up to six (6)
months. Interest, subject to state requirements, will be credited during the
deferral period.
SUSPENSION OF PAYMENTS
We may suspend or postpone any payments from the Subaccounts if any of the
following occur:
(a) the NYSE is closed;
(b) trading on the NYSE is restricted;
(c) an emergency exists such that it is not reasonably practical to dispose
of securities in the Portfolios or to determine the value of its 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.
SUBSTITUTION OF PORTFOLIO
If: (a) the shares of the variable Portfolios should no longer be available for
investment by the Separate Account; or (b) in the judgment of the Board of
Trustees for the SunAmerica Series Trust and the Anchor Series Trust, further
investment in the shares of a variable 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 subsequent Purchase Payments under the
Certificate. No substitution of securities may take place without prior approval
of the Securities and Exchange Commission and under such requirements as it may
impose.
8
<PAGE> 9
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/or transfer amount allocated to the Subaccount:
Divided by
The Accumulation Unit value for that Subaccount for the NYSE business day on
which the Purchase Payment or transfer amount is allocated.
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 on 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,
Mortality Risk and Guaranteed Death Benefit Risk charges (See CHARGES
AND DEDUCTIONS); and
(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 then invested in the Fixed Account Option(s) plus all interest
credited thereto. This amount shall be adjusted for withdrawals, annuitizations,
transfers and applicable charges. The Fixed Account Accumulation Value shall not
be less than the minimum values required by law in the state where this
Certificate is issued.
FIXED ACCOUNT GUARANTEE PERIOD OPTIONS AND INTEREST CREDITING
Any amounts allocated to the Fixed Account Options from the initial Purchase
Payment will earn interest at the Initial Interest Rate for the Fixed Account
Option(s) selected for the duration of the Guarantee Period.
Subsequent Purchase Payments allocated to the Fixed Account Options will earn
interest at the Current Interest Rate for the Fixed Account Option(s) selected
for the duration of the Guarantee Period.
9
<PAGE> 10
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
during that 30-day period You do not specify a different Guarantee Period or
otherwise transfer to a Subaccount, 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 the guarantee
period extends beyond the Annuity Date, We will credit interest up to the
Annuity Date at the Renewal Interest Rate for the 1-Year Fixed Account Option.
If You are participating in the DCA program and allocated Purchase Payments to a
DCA Fixed Account Option, upon termination of the DCA program and unless you
otherwise specify, any amounts remaining in the DCA Fixed Account Options will
be automatically transferred to the 1-Year Fixed Account Option. Such amounts
will earn interest at the Renewal Interest Rate for the 1-Year Fixed Account
Option.
MARKET VALUE ADJUSTMENT (MVA)
Any payments and values based on the 3, 5, 7 or 10-year Fixed Account Options
may be subject to a MVA, the operation of which may result in upward or downward
adjustments in the Certificate Value, if withdrawn, transferred or annuitized
prior to the end of the respective Guarantee Period. The MVA will be calculated
by multiplying the amount withdrawn, transferred or annuitized by the following
formula:
{(1 + I)/(1+J+0.0050)(N/12)-1
I = The interest rate currently in effect for that Guarantee Period.
J = The Initial Interest Rate available for the Guarantee Period equal to the
number of years (rounded up to an integer) remaining in the current Guarantee
Period at the time of withdrawal, transfer or annuitization. In the
determination of J, if the Company currently does not offer the applicable
Guarantee Period, then the rate will be determined by linear interpolation of
the Initial Interest Rate for the nearest two Guarantee Periods that are
available.
N = The number of full months remaining in the current Guarantee Period at the
time the withdrawal or annuitization request is processed.
There will be no MVA on withdrawals from the Fixed Account Options in the
following situations: (1) to pay a Death Benefit paid upon death of the
Participant; (2) on amounts withdrawn to pay fees or charges; (3) on amounts
withdrawn or transferred from the Fixed Account Options within thirty (30) days
after the end of the Guarantee Period; and (4) on annuitizations on the Latest
Annuity Date.
10
<PAGE> 11
CHARGES AND DEDUCTIONS
We will deduct the following charges from the Certificate:
SALES CHARGE
A Sales Charge is deducted from each Gross Purchase Payment. The Sales Charge
equals a percentage of each Gross Purchase Payment and varies based upon the
Participant's investment, as described below, at the time each Gross Purchase
Payment is made. We will not retroactively reduce Sales Charges. The Sales
Charge Schedule is shown on the Certificate Data Page.
The Participant's investment at the time a Gross Purchase Payment is deposited
into the Certificate is determined as the sum of: (a) Your investment as defined
under the Rights of Accumulation provision; and (b) any additional investment
commitments secured by a Letter of Intent as defined in the Letter of Intent
provision.
RIGHTS OF ACCUMULATION
At the time a Gross Purchase Payment is made into this Certificate, the
Participant's investment under this Rights of Accumulation provision is the sum
of: (1) that Gross Purchase Payment; and (2) the Certificate Value of this
Certificate; and (3) the value of other qualifying certificates or contracts
issued by Us which You, Your spouse, or any of Your children under the age of 21
own. You must notify Us of any qualifying contracts, as discussed in (3) above,
by the time that Gross Purchase Payment is made in order to receive any
applicable reduction in Sales Charge. We reserve the right to modify, suspend or
terminate the Rights of Accumulation provision at any time.
LETTER OF INTENT
Your commitment to invest a certain amount over a 13-month period through a
Letter of Intent subject to Company restrictions. If you do not satisfy the
conditions of Your Letter of Intent by the end of the 13-month period, We will
deduct from your Certificate Value the difference between: (1) the Sales Charge
applicable to the actual amount of Gross Purchase Payments made during the
13-month period, and (2) the Sales Charge that was actually deducted. We will
not retroactively reduce Sales Charges if You exceed Your investment commitment.
We reserve the right to modify, suspend or terminate the Letter of Intent
provision at any time.
WITHDRAWAL CHARGE
If applicable, a Withdrawal Charge will be deducted from Your Certificate Value
upon the withdrawal of any portion of a Gross Purchase Payment that is subject
to a Withdrawal Charge. That Withdrawal Charge applies only during the 1-year
period following the receipt and application of that Gross Purchase Payment. The
Withdrawal Charge Schedule is shown on the Certificate Data Page. Also, see
WITHDRAWAL PROVISIONS.
MORTALITY RISK CHARGE
11
<PAGE> 12
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.
GUARANTEED DEATH BENEFIT 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
the risk assumed as a result of contractual obligations to provide a minimum
guaranteed Death Benefit prior to the Annuity Date.
TRANSFER PROVISIONS
Prior to the Annuity Date, You may transfer all or part of Your Certificate
Value to any of the Subaccounts or Fixed Account Options, other than the DCA
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 Fixed Account Option are subject to Company
limits.
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 redemption of
Accumulation Units in a Subaccount and the purchase 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
redemption of Annuity Units in a Subaccount and the purchase 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 AND ANNUITY UNITS TO AND FROM THE FIXED ACCOUNT
12
<PAGE> 13
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 Contract.
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 You are living, You may withdraw all or
part of Your Certificate Value under this Certificate by informing Us in writing
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 a withdrawal are subject to Company limits.
Without written notice to the contrary, withdrawals will be deducted from the
Certificate Value in proportion to their allocation among the Fixed Account
Options and the Subaccounts. Withdrawals will be based on values at the end of
the NYSE business day in which the request for withdrawal and the Certificate
(in the case of a full withdrawal), are received at 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.
For the purposes of determining the amount of any applicable Withdrawal Charge,
withdrawals are assumed to be taken from earnings first then Purchase Payments.
Purchase Payments are assumed to be withdrawn on a first-in-first-out (FIFO)
basis. The Withdrawal Charge Schedule is shown on the Certificate Data Page.
Also, see the WITHDRAWAL CHARGE provision.
For the purposes of determining tax liability under the IRC, withdrawals of the
Certificate Value are treated on a last-in first-out (LIFO) basis.
SYSTEMATIC WITHDRAWAL PROGRAM
Prior to the Annuity Date, You may elect to participate in the Systematic
Withdrawal Program by informing Us at Our Annuity Service Center. The Systematic
Withdrawal Program allows You to make automatic withdrawals from your account
monthly, quarterly, semiannually or annually. The minimum systematic withdrawal
amount is $250 per withdrawal. Any amount withdrawn through the Systematic
Withdrawal Program may be subject to a Market Value Adjustment as discussed in
the MARKET VALUE ADJUSTMENT provisions. You may terminate Your participation in
the Systematic Withdrawal Program at any time by sending Us a written request.
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). No one can change
the terms or conditions of this contract other than Us. Any change must be in
writing and approved by Us. Only Our President, Secretary, or one of Our
Vice-Presidents can give Our approval.
13
<PAGE> 14
CHANGE OF ANNUITANT
If the Participant is an individual, the Participant may change the Annuitant(s)
at any time prior to the Annuity Date. To make a change, the Participant must
send a written notice to Us at least 30 days before the Annuity Date. If the
Participant is a non-natural person, the Participant may not change the
Annuitant.
DEATH OF ANNUITANT
If the Participant and Annuitant are different, and the Annuitant dies before
the Annuity Date, the Participant becomes the Annuitant until the Participant
elects a new Annuitant. If there are Joint Annuitants, upon the death of any
Annuitant prior to the Annuity Date, the Participant may elect a new Joint
Annuitant. However, if the Participant is a non-natural person, We will treat
the death of any Annuitant as the death of the "Primary Annuitant" and as the
death of the Participant, see DEATH PROVISIONS.
MISSTATEMENT OF AGE OR SEX
If the Age or sex of any Annuitant has been misstated, future annuity payments
will be adjusted using the correct Age and sex, according to Our rates in effect
on the date that annuity payments were determined. Any overpayment from the
Fixed Account Options, plus interest at the rate of 4% per year, will be
deducted from the next payment(s) due. Any underpayment from the Fixed Account
Options, plus interest at the rate of 4% per year, will be paid in full with the
next payment due. Any overpayment from the Subaccounts will be deducted from the
next payment(s) due. Any underpayment from the Subaccounts will be paid in full
with the next payment due.
PROOF OF AGE, SEX, OR SURVIVAL
The Company may require satisfactory proof of correct Age or sex at any time. If
any payment under this Certificate depends on the Annuitant being alive, the
Company may require satisfactory proof of survival.
CONFORMITY WITH STATE LAWS
The provisions of this Certificate will be interpreted by the laws of the state
in which the enrollment form was signed or such 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
14
<PAGE> 15
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 quarterly statements will include all transactions
which have occurred during the accounting period shown on the statement.
INCONTESTABILITY
This Certificate will be incontestable from the Certificate Date.
NONPARTICIPATING
This Certificate does not share in Our surplus.
DEATH PROVISIONS
Notwithstanding any provision of this Certificate to the contrary, all payments
of benefits under this Certificate will be made in a manner that satisfies the
requirements of IRC Section 72(s), as amended from time to time. If the
Certificate is owned by a trust or other non-natural person, We will treat the
death of any Annuitant as the death of the "Primary Annuitant" and as the death
of any Participant.
DEATH OF PARTICIPANT BEFORE THE ANNUITY DATE
We will pay a death benefit to the Beneficiary upon Our receiving 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
15
<PAGE> 16
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.
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 will be determined based upon your death benefit
option selection. Once selected, the death benefit option cannot be changed. The
death benefit options are as described below.
OPTION I: PURCHASE PAYMENT ACCUMULATION DEATH BENEFIT OPTION
Prior to the Annuity Date and upon death of the Participant, the
Beneficiary will receive the greatest of:
1. the Certificate Value for the NYSE business day during which We
receive all required documentation including due proof of death
of the Participant and an election of the type of payment to be
made at Our Annuity Service Center; or
2. Purchase Payments less any withdrawals (and any fees or charges
applicable to such withdrawals), compounded until the date of
death at 4% interest, plus any Purchase Payments and less any
withdrawals (and any fees or charges applicable to such
withdrawals) recorded after the date of death; or
3. the Certificate Value at the seventh Certificate anniversary,
plus any subsequent Purchase Payments and less any subsequent
withdrawals (and any fees or charges applicable to such
withdrawals) compounded until the date of death at 4% interest,
plus any Purchase Payments and less any withdrawals (and any
fees or charges applicable to such withdrawals) recorded after
the date of death.
If the Participant was age 70 or older on the Certificate Date, both (2) and (3)
above will be compounded at 3%, rather than 4%. If the death benefit is paid on
the death of a Participant who was not originally named in the application and
was age 70 or older on the Certificate Date, both (2) and (3) above will be
compounded at 3%, rather than 4%.
16
<PAGE> 17
OPTION II: MAXIMUM ANNIVERSARY VALUE DEATH BENEFIT OPTION
If, upon the death of the Participant and prior to the Annuity Date, the
Participant has not attained his or her 90th birthday, the Beneficiary
will receive the greatest of:
1. the Certificate Value for the NYSE business day during which We
receive all required documentation including due proof of death
the Participant and an election of the type of payment to be
made at Our Annuity Service Center; or
2. Purchase Payments less any withdrawals (and any fees or charges
applicable to such withdrawals); or
3. the maximum anniversary value preceding the date of death. The
maximum anniversary value is equal to the greatest anniversary
value attained from the following:
As of the date of receipt of due proof of death and an election
of the type of payment to be made, at our Annuity Service
Center, We will calculate an anniversary value for each
Certificate anniversary prior to the Participant's 81st
birthday. The anniversary value is equal to the Certificate
Value on a Certificate anniversary, increased by the dollar
amount of any Purchase Payments made since that anniversary and
reduced by the dollar amount of any withdrawals (and any fees or
charges applicable to such withdrawals) since that anniversary.
If the deceased Participant has attained age 90, then the death benefit will be
the Certificate Value as defined in (1) above.
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 selected 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
17
<PAGE> 18
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.
Joint Participants, if applicable, shall be each other's primary Beneficiary.
Joint Annuitants, if any, when the Participant is a non-natural person, shall be
each other's primary Beneficiary. Any other Beneficiary designation will be
treated as a contingent Beneficiary.
If the Participant is also the Annuitant and there are no surviving
Beneficiaries at the death of the Participant, the death benefit will be paid to
the estate of the Participant in accordance with option 1, under DEATH OF
PARTICIPANT BEFORE THE ANNUITY DATE.
ANNUITY PROVISIONS
ANNUITY DATE
The Participant selects an Annuity Date (the date on which annuity payments are
to begin) at the time of application. The Participant may change the Annuity
Date at any time, at least seven days prior to the Annuity Date, by written
notice to the Company at its Annuity Service Center. The Annuity Date must
always be the first day of the calendar month and must be at least two years
after the Certificate Date, but not beyond the later of the Participant's 90th
birthday or ten years after the Certificate Date. If the Participant is a
non-natural person, the latest Annuity Date is the later of the Annuitant's 90th
birthday or ten years after the Certificate Date. If no Annuity Date is
selected, the Annuity Date will be the latest Annuity Date, as set by the
Company.
PAYMENTS TO PARTICIPANT
Unless You request otherwise, We will make annuity payments to You. If You want
the annuity payments to be made to some other Payee, We will make such payments
subject to receipt of a written request filed at the Annuity Service Center no
later than thirty (30) days before the due date of the first annuity payment.
Any such request is subject to the rights of any assignee. No payments available
to or being paid to the Payee while the Annuitant is alive can be transferred,
commuted, anticipated or encumbered.
FIXED ANNUITY PAYMENTS
If a Fixed Annuity payment option has been elected, the proceeds payable under
this Certificate less any applicable premium taxes, shall be applied to the
payment of the Fixed Annuity payment option elected at rates which are at least
equal to the annuity rates based upon the applicable tables. In no event will
the Fixed Annuity payments be changed once they begin.
AMOUNT OF FIXED ANNUITY PAYMENTS
The amount of each Fixed Annuity payment will be determined by applying the
portion of the 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
18
<PAGE> 19
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, subsequent Variable Annuity payments will vary in amount
according to the investment performance of the applicable Subaccount(s)
to which a portion of Your Certificate Value is allocated. The amount
may change from month to month. The amount of each subsequent payment
for each Subaccount is:
The number of Annuity Units for each Subaccount as determined for the first
annuity payment
Multiplied by
The value of an Annuity Unit for that Subaccount at the end of the month
immediately preceding the month in which payment is due.
We guarantee that the amount of each Variable Annuity payment will not be
affected by variations in expenses or mortality experience.
19
<PAGE> 20
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 a Payee during the lifetime of the Annuitant. No further
payments are payable after the death of the Annuitant.
OPTIONS 2 & 2v - JOINT AND 100% 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 100% SURVIVOR LIFE ANNUITY WITH PAYMENTS GUARANTEED
FOR 10 OR 20 YEARS 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 the 10 or 20 years,
as selected at the time of annuitization, the remaining guaranteed annuity
payments will be continued to the Beneficiary.
OPTIONS 4 & 4v - LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20 YEARS
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 10 or 20
years, 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
20
<PAGE> 21
for full twelve month periods. In the event of death of the Annuitant, any
remaining annuity payments will be continued to the Beneficiary.
21
<PAGE> 22
FIXED ANNUITY PAYMENT OPTIONS TABLE
BASIS OF COMPUTATION
The actuarial basis for the Table of Annuity Rates is the 1983a Annuity
Mortality Table with projection and a guaranteed interest rate of 3%. The
mortality table is projected using Projection Scale G factors, assuming
annuitization in the year 2000. The Fixed Annuity Payment Options Table does not
included any applicable premium tax.
OPTIONS 1 & 4 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
<TABLE>
<CAPTION>
OPTION 1 OPTION 4 OPTION 4
LIFE ANNUITY LIFE ANNUITY
AGE OF (W/120 PAYMENTS (W/240 PAYMENTS
ANNUITANT LIFE ANNUITY GUARANTEED) GUARANTEED)
--------- ------------- --------------------- --------------------
MALE FEMALE MALE FEMALE MALE FEMALE
---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
55 4.23 3.84 4.19 3.82 4.05 3.76
56 4.32 3.91 4.27 3.88 4.11 3.81
57 4.41 3.98 4.35 3.95 4.17 3.87
58 4.51 4.05 4.44 4.02 4.24 3.93
59 4.61 4.13 4.54 4.10 4.31 4.00
60 4.72 4.22 4.64 4.18 4.37 4.06
61 4.84 4.31 4.74 4.27 4.44 4.13
62 4.96 4.40 4.85 4.36 4.51 4.20
63 5.10 4.51 4.97 4.45 4.58 4.27
64 5.24 4.62 5.10 4.55 4.65 4.35
65 5.40 4.73 5.22 4.66 4.72 4.42
66 5.56 4.86 5.36 4.78 4.79 4.50
67 5.74 4.99 5.50 4.90 4.86 4.57
68 5.93 5.14 5.65 5.02 4.92 4.65
69 6.13 5.29 5.80 5.16 4.99 4.73
70 6.35 5.46 5.96 5.30 5.05 4.80
71 6.58 5.64 6.13 5.46 5.10 4.88
72 6.82 5.84 6.29 5.62 5.16 4.95
73 7.08 6.05 6.47 5.78 5.20 5.02
74 7.36 6.28 6.64 5.96 5.25 5.08
75 7.66 6.53 6.82 6.14 5.29 5.14
76 7.98 6.80 7.00 6.33 5.33 5.19
77 8.33 7.09 7.19 6.53 5.36 5.24
78 8.69 7.41 7.37 6.73 5.39 5.29
79 9.09 7.75 7.55 6.94 5.41 5.33
80 9.51 8.11 7.73 7.14 5.43 5.36
81 9.97 8.51 7.91 7.35 5.45 5.39
82 10.45 8.94 8.08 7.55 5.47 5.42
83 10.97 9.41 8.24 7.76 5.48 5.44
84 11.52 9.92 8.40 7.95 5.49 5.46
85 12.10 10.47 8.54 8.13 5.50 5.48
</TABLE>
22
<PAGE> 23
OPTION 2 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
JOINT & 100% SURVIVOR LIFE ANNUITY
<TABLE>
<CAPTION>
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
--------- -----------------------
55 60 65 70 75 80 85
-- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.54 3.69 3.84 3.96 4.06 4.13 4.17
60 3.63 3.83 4.04 4.23 4.39 4.52 4.60
65 3.70 3.95 4.23 4.51 4.78 5.00 5.16
70 3.75 4.04 4.39 4.78 5.18 5.56 5.85
75 3.78 4.11 4.51 5.01 5.57 6.14 6.65
80 3.81 4.15 4.60 5.18 5.89 6.70 7.52
85 3.82 4.18 4.66 5.30 6.14 7.18 8.35
</TABLE>
OPTION 3 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT & 100% SURVIVOR LIFE ANNUITY (W/120 PAYMENTS GUARANTEED)
<TABLE>
<CAPTION>
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
--------- -----------------------
55 60 65 70 75 80 85
-- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.54 3.69 3.83 3.96 4.05 4.12 4.16
60 3.63 3.83 4.03 4.22 4.38 4.50 4.57
65 3.70 3.95 4.22 4.50 4.76 4.97 5.10
70 3.75 4.04 4.38 4.76 5.15 5.48 5.72
75 3.78 4.10 4.50 4.98 5.50 6.00 6.40
80 3.80 4.14 4.58 5.13 5.78 6.46 7.04
85 3.81 4.16 4.62 5.22 5.97 6.80 7.55
</TABLE>
OPTION 3 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT & 100% SURVIVOR LIFE ANNUITY (W/240 PAYMENTS GUARANTEED)
<TABLE>
<CAPTION>
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
--------- -----------------------
55 60 65 70 75 80 85
-- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.53 3.68 3.81 3.92 3.99 4.03 4.04
60 3.62 3.81 4.00 4.16 4.27 4.34 4.37
65 3.68 3.92 4.16 4.39 4.56 4.66 4.71
70 3.72 3.99 4.29 4.58 4.81 4.96 5.03
75 3.74 4.03 4.36 4.70 4.99 5.17 5.26
80 3.75 4.05 4.40 4.77 5.09 5.30 5.40
85 3.76 4.06 4.42 4.80 5.13 5.35 5.46
</TABLE>
23
<PAGE> 24
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>
24
<PAGE> 25
VARIABLE ANNUITY PAYMENT OPTIONS TABLE
BASIS OF COMPUTATION
The actuarial basis for the Table of Annuity Rates is the 1983a Annuity
Mortality Table with projection and an effective annual Assumed Investment Rate
of 3.5%. The mortality table is projected using Projection Scale G factors,
assuming annuitization in the year 2000. The Variable Annuity Payment Options
Table does not include any applicable premium tax.
OPTIONS 1v & 4v - TABLE OF MONTHLY INSTALLMENTS PER $1,000
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
<TABLE>
<CAPTION>
OPTION 1v OPTION 4v OPTION 4v
LIFE ANNUITY LIFE ANNUITY
AGE OF (W/120 PAYMENTS (W/240 PAYMENTS
ANNUITANT LIFE ANNUITY GUARANTEED) GUARANTEED)
--------- -------------- --------------------- --------------------
MALE FEMALE MALE FEMALE MALE FEMALE
---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
55 4.53 4.13 4.48 4.11 4.33 4.05
56 4.62 4.20 4.56 4.18 4.39 4.10
57 4.71 4.27 4.64 4.24 4.45 4.16
58 4.80 4.34 4.73 4.31 4.52 4.22
59 4.90 4.42 4.82 4.39 4.58 4.28
60 5.01 4.51 4.92 4.47 4.65 4.34
61 5.13 4.60 5.03 4.55 4.71 4.41
62 5.26 4.69 5.14 4.64 4.78 4.48
63 5.39 4.80 5.25 4.74 4.85 4.55
64 5.54 4.91 5.38 4.84 4.92 4.62
65 5.69 5.02 5.51 4.94 4.99 4.69
66 5.86 5.15 5.64 5.06 5.05 4.77
67 6.03 5.28 5.78 5.18 5.12 4.84
68 6.22 5.43 5.93 5.30 5.18 4.92
69 6.43 5.58 6.08 5.44 5.24 4.99
70 6.64 5.75 6.23 5.58 5.30 5.06
71 6.87 5.93 6.40 5.73 5.36 5.14
72 7.12 6.13 6.56 5.89 5.41 5.21
73 7.38 6.34 6.73 6.06 5.46 5.27
74 7.66 6.57 6.91 6.23 5.50 5.33
75 7.96 6.82 7.09 6.41 5.54 5.39
76 8.28 7.09 7.27 6.60 5.57 5.44
77 8.63 7.38 7.45 6.79 5.61 5.49
78 9.00 7.70 7.63 6.99 5.63 5.54
79 9.40 8.04 7.81 7.19 5.66 5.58
80 9.82 8.41 7.98 7.40 5.68 5.61
81 10.28 8.81 8.16 7.60 5.70 5.64
82 10.76 9.24 8.32 7.81 5.71 5.66
83 11.28 9.71 8.48 8.00 5.72 5.69
84 11.83 10.23 8.64 8.19 5.73 5.70
85 12.42 10.78 8.78 8.38 5.74 5.72
</TABLE>
25
<PAGE> 26
OPTION 2v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
JOINT & 100% SURVIVOR LIFE ANNUITY
<TABLE>
<CAPTION>
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
--------- -----------------------
55 60 65 70 75 80 85
-- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.83 3.98 4.12 4.24 4.34 4.42 4.46
60 3.92 4.11 4.32 4.51 4.67 4.80 4.89
65 3.99 4.23 4.50 4.79 5.05 5.28 5.44
70 4.04 4.33 4.67 5.05 5.46 5.83 6.13
75 4.07 4.39 4.79 5.28 5.84 6.41 6.93
80 4.10 4.44 4.88 5.45 6.16 6.97 7.79
85 4.11 4.47 4.94 5.57 6.41 7.45 8.61
</TABLE>
OPTION 3v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT AND 100% SURVIVOR LIFE ANNUITY (W/120 PAYMENTS GUARANTEED)
<TABLE>
<CAPTION>
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
--------- -----------------------
55 60 65 70 75 80 85
-- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.83 3.98 4.12 4.24 4.34 4.40 4.45
60 3.92 4.11 4.31 4.50 4.66 4.78 4.86
65 3.99 4.23 4.50 4.78 5.03 5.24 5.38
70 4.04 4.32 4.66 5.03 5.41 5.75 5.99
75 4.07 4.38 4.78 5.25 5.77 6.26 6.66
80 4.09 4.43 4.86 5.40 6.05 6.72 7.29
85 4.10 4.45 4.90 5.50 6.24 7.05 7.80
</TABLE>
OPTION 3v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT & 100% SURVIVOR LIFE ANNUITY (W/240 PAYMENTS GUARANTEED)
<TABLE>
<CAPTION>
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
--------- -----------------------
55 60 65 70 75 80 85
-- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.82 3.97 4.10 4.20 4.27 4.31 4.33
60 3.91 4.09 4.28 4.44 4.55 4.61 4.64
65 3.97 4.20 4.44 4.66 4.83 4.93 4.97
70 4.01 4.27 4.56 4.84 5.07 5.21 5.28
75 4.03 4.31 4.64 4.97 5.25 5.42 5.51
80 4.04 4.33 4.67 5.03 5.34 5.55 5.65
85 4.05 4.34 4.69 5.06 5.38 5.60 5.70
</TABLE>
26
<PAGE> 27
OPTION 5v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
PAYMENTS FOR A SPECIFIED PERIOD
<TABLE>
<CAPTION>
NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY
OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
10 9.83 17 6.47 24 5.09
11 9.09 18 6.20 25 4.96
5 18.12 12 8.46 19 5.97 26 4.84
6 15.35 13 7.94 20 5.75 27 4.73
7 13.38 14 7.49 21 5.56 28 4.63
8 11.90 15 7.10 22 5.39 29 4.53
9 10.75 16 6.76 23 5.24 30 4.45
</TABLE>
27
<PAGE> 1
Exhibit 4.b
ANCHOR NATIONAL LIFE INSURANCE COMPANY
A STOCK COMPANY LOS ANGELES, CALIFORNIA
CONTRACT NUMBER P9999999999
OWNER JOHN DOE
<TABLE>
<S> <C> <C>
STATUTORY HOME OFFICE EXECUTIVE OFFICE ANNUITY SERVICE CENTER
2999 NORTH 44TH ST., STE 250 1 SUNAMERICA CENTER P. O. BOX 54299
PHOENIX, AZ 85018 LOS ANGELES, CA 90067-6022 LOS ANGELES, CA 90054-0299
</TABLE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY ("We", "Us", the "Company", or "Anchor
National") agrees to provide benefits to the Owner in accordance with the
provisions set forth in this Contract and in consideration of Purchase Payments
We receive.
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
INCREASES OR DECREASES BASED ON THE APPLICATION OF THE MARKET VALUE ADJUSTMENT
EXCEPT DURING THE 30 DAYS AFTER THE END OF THE GUARANTEE PERIOD. THERE IS NO
MARKET VALUE ADJUSTMENT TO AMOUNTS ALLOCATED TO NON-MVA FIXED ACCOUNT OPTIONS.
RIGHT TO EXAMINE - YOU MAY RETURN THIS CONTRACT TO OUR ANNUITY SERVICE CENTER OR
TO THE AGENT THROUGH WHOM THE CONTRACT WAS PURCHASED WITHIN 10 DAYS AFTER YOU
RECEIVE IT, IF YOU ARE NOT SATISFIED WITH IT. THE COMPANY WILL REFUND THE
CONTRACT VALUE AND THE SALES CHARGE ON THE BUSINESS DAY DURING WHICH THE
CONTRACT IS RECEIVED. UPON SUCH REFUND, THE CONTRACT SHALL BE VOID.
For Individual Retirement Annuities, a refund of the Gross Purchase Payment(s)
may be required. Therefore, We reserve the right to allocate your Purchase
Payment(s) to the Cash Management Subaccount until the end of the Right To
Examine period. Thereafter, allocations will be made as shown on the Contract
Data Page.
THIS IS A LEGAL DOCUMENT. READ IT CAREFULLY.
/s/ SUSAN L. HARRIS /s/ ELI BROAD
- ------------------------------- -------------------------------
Susan L. Harris Eli Broad
Secretary President
INDIVIDUAL FIXED AND VARIABLE
ANNUITY CONTRACT
Nonparticipating
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TABLE OF CONTENTS
<TABLE>
<S> <C>
CONTRACT DATA PAGE...................................................................... PAGE 3
PURCHASE PAYMENT ALLOCATION............................................................. PAGE 4
DEFINITIONS............................................................................. PAGE 5
PURCHASE PAYMENT PROVISIONS............................................................. PAGE 8
Purchase Payments; Deferment of Payments; Suspension of Payments; Substitution
of 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
CHARGES AND DEDUCTIONS.................................................................. PAGE 11
Sales Charge; Rights of Accumulation; Letter of Intent; Withdrawal Charge;
Mortality Risk Charge; Expense Risk Charge; Distribution Expense Charge;
Guaranteed Death Benefit Risk Charge
TRANSFER PROVISIONS..................................................................... PAGE 12
Transfers of Accumulation and Annuity Units Between Subaccounts; Transfers of
Accumulation and Annuity Units To and From the Fixed Account
WITHDRAWAL PROVISIONS................................................................... PAGE 13
Systematic Withdrawal Program
GENERAL PROVISIONS...................................................................... PAGE 13
Entire Contract; Change of Annuitant; Death of Annuitant; Misstatement of Age or
Sex; Proof of Age, Sex or Survival; Conformity With State Laws; Changes in Law;
Assignment; Claims of Creditors; Premium Taxes and Other Taxes; Written Notice;
Periodic Reports; Incontestability; Nonparticipating
DEATH PROVISIONS.......................................................................PAGE 15
Death of Owner Before the Annuity Date; Due Proof of Death; Amount of Death
Benefit; Death of Owner or Annuitant on or After the Annuity Date; Beneficiary
ANNUITY PROVISIONS.....................................................................PAGE 18
Annuity Date; Payments to Owner; Fixed Annuity Payments; Amount of Fixed Annuity
Payments; Amount of Variable Annuity Payments
ANNUITY PAYMENT OPTIONS ...............................................................PAGE 20
FIXED ANNUITY PAYMENT OPTIONS TABLE....................................................PAGE 21
VARIABLE ANNUITY PAYMENT OPTIONS TABLE.................................................PAGE 24
</TABLE>
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CONTRACT DATA PAGE
<TABLE>
<S> <C>
CONTRACT NUMBER: ANNUITY SERVICE CENTER:
P9999999999 P. O. BOX 54299
LOS ANGELES, CA 90054-0299
OWNER: AGE AT ISSUE:
JOHN DOE 35
ANNUITANT: GROSS PURCHASE PAYMENT:
JOHN DOE $10,000.00
ANNUITY DATE: PURCHASE PAYMENT:
October 1, 2028 $9425.00
LATEST ANNUITY DATE: CONTRACT DATE:
October 1, 2053 October 1, 1998
MORTALITY RISK CHARGE: FIXED ACCOUNT OPTIONS -
[0.23%] Minimum Guarantee Rate:
3.0%
DISTRIBUTION EXPENSE RISK CHARGE: EXPENSE RISK CHARGE:
[0.15%] [0.35%]
GUARANTEED DEATH BENEFIT RISK CHARGE BENEFICIARY:
[0.12%] As named by You.
DEATH BENEFIT OPTION: SEPARATE ACCOUNT:
Option I: Purchase Payment Accumulation Variable Annuity Account Seven
</TABLE>
SALES CHARGE AND WITHDRAWAL CHARGE SCHEDULE
<TABLE>
<CAPTION>
AMOUNT OF OWNER'S MAXIMUM SALES CHARGE AS A WITHDRAWAL CHARGE AS A
INVESTMENT (AS DISCUSSED IN PERCENTAGE OF GROSS PERCENTAGE OF GROSS
THE SALES CHARGE PROVISION) PURCHASE PAYMENT PURCHASE PAYMENT
--------------------------- ------------------------- ----------------------
<S> <C> <C>
[Less than $50,000] [5.75%] [0.00%]
[$50,000-$99,999] [4.75%] [0.00%]
[$100,000-$249,999] [3.50%] [0.00%]
[$250,000-$499,999] [2.50%] [0.00%]
[$500,000-$999,999] [2.00%] [0.00%]
[$1,000,000+] [0.50%] [0.50%]
</TABLE>
FOR INQUIRIES
CALL 1-800-445-SUN2
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PURCHASE PAYMENT ALLOCATION
Subaccounts
<TABLE>
<CAPTION>
SUNAMERICA ANCHOR
SERIES TRUST SERIES TRUST
------------ ------------
<S> <C>
0.00% Cash Management 0.00% Government & Quality Bond
0.00% Corporate Bond 25.00% Growth
0.00% Global Bond 0.00% Capital Appreciation
0.00% High-Yield Bond
0.00% Worldwide High Income
0.00% SunAmerica Balanced
25.00% MFS Total Return
0.00% Asset Allocation
0.00% Utility
0.00% Growth-Income
0.00% MFS Growth and Income
0.00% Federated Value
0.00% Venture Value
0.00% "Dogs" of Wall St.
0.00% Alliance Growth
25.00% Putnam Growth
0.00% Real Estate
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>
25.00% 1-Year Fixed Non-MVA 3.00%
0.00% 3-Year Fixed MVA
0.00% 5-Year Fixed MVA
0.00% 7-Year Fixed MVA
0.00% 10-Year Fixed MVA
DCA Fixed Account Options
0.00% 6 Month DCA Fixed Non-MVA
0.00% 1 Year DCA Fixed Non-MVA
</TABLE>
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DEFINITIONS
Defined in this section are some of the words and phrases used in this Contract.
These terms are capitalized when used in the Contract. Other capitalized terms
in the Contract refer to the captioned paragraph explaining that particular
concept in the Contract.
ACCUMULATION UNIT
A unit of measurement used to compute the Contract Value in a Subaccount prior
to the Annuity Date.
AGE
Age as of last birthday.
ANNUITANT
The natural person or persons (collectively, Joint Annuitants) whose life or
lives is/are used to determine the annuity benefits under the Contract. If the
Contract is in force and the Annuitant(s) is/are alive on the Annuity Date, We
will begin payments to the Payee. This Contract cannot have Joint Annuitants if
it is issued on a tax-qualified basis.
ANNUITY DATE
The date on which annuity payments to the Payee are to start. The Owner must
specify the Annuity Date, which must be at least two years after the Contract
Date.
ANNUITY SERVICE CENTER As specified on the Contract Data Page.
ANNUITY UNIT
A unit of measurement used to compute annuity payments from the Subaccounts.
BENEFICIARY
The Beneficiary is as named by You unless later changed by You in a written
request to Us at Our Annuity Service Center.
CONTRACT DATE
The date Your Contract is issued, as shown on the Contract Data Page. It is the
date from which Contract Years and anniversaries are measured.
CONTRACT VALUE
The sum of: (1) Your share of the Subaccounts' Accumulation Unit values and (2)
the value of amounts allocated to the Fixed Account Options.
CONTRACT YEAR
A year starting from the Contract Date in one calendar year and ending on the
day preceding the anniversary of such date in the succeeding calendar year.
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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 succeeding
calendar years.
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 Contract Data Page.
DOLLAR COST AVERAGING (DCA)
You may authorize the automatic transfer of specified amounts or percentages, at
the interval selected by You, from the DCA Fixed Account Option(s), the 1-Year
Fixed Account Option or any Subaccount(s) into any Subaccount, other than the
source account. All amounts allocated to a DCA Fixed Account Option will be
transferred out within the specified DCA Fixed Account Option period. The unit
values credited and applied to Your Contract are determined on each date of
transfer. You may terminate the DCA program at any time. However, upon
termination or annuitization, any amounts remaining in the DCA Fixed Account
Options will be transferred to the 1-Year Fixed Account Option. We reserve the
right to change the terms and conditions of the DCA program at any time.
FIXED ACCOUNT OPTIONS
The investment options under this Contract that are credited with a fixed rate
of interest declared by the Company. All Purchase Payments allocated to the
Fixed Account Options become part of the Company's general asset account. The
general asset account contains all the assets of the Company except for the
Separate Account and other segregated asset accounts. The Fixed Account Options
for this Contract are shown on page 4.
FIXED ANNUITY
A series of periodic annuity payments in predetermined amounts that do not vary
with investment experience. Such payments are made from the Company's general
asset account.
GROSS PURCHASE PAYMENTS
Payments in U.S. currency made by or on behalf of the Owner to the Company for
the Contract. Gross Purchase Payments do not reflect the reduction of the Sales
Charge. The amount of Your initial Gross Purchase Payment is shown on the
Contract Data Page.
GUARANTEE PERIOD
The period for which either the Initial Interest Rate, the Current Interest Rate
or the Renewal Interest Rate is credited to amounts allocated to the Fixed
Account Options.
INITIAL INTEREST RATE
The rate(s) of interest credited to any portion of the initial Purchase Payment
allocated to the Fixed Account Option(s), as described in the Accumulation
Provisions section. The Initial Interest Rate(s) for this Contract is/are listed
on page 4. The Initial Interest Rate may not be less than the Minimum Guarantee
Rate as shown on the Contract Data Page.
IRC
The Internal Revenue Code of 1986, as amended, or as it may be amended or
superseded.
JOINT OWNER
If Joint Owners are named, they must be spouses. Each Joint Owner has an equal
ownership interest in the Contract unless we are advised otherwise in writing.
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NYSE
New York Stock Exchange. Generally, the close of any NYSE business day is
4:00PM, Eastern Time. Financial transactions and/or Purchase Payments 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.
OWNER
The person or entity named in the Contract who is entitled to exercise all
rights and privileges of ownership under the Contract. Owner means both Joint
Owners, if applicable.
PAYEE
The person receiving payment of annuity benefits under this Contract.
PORTFOLIO
The variable investment options in which the corresponding Subaccount(s) invest.
PURCHASE PAYMENTS
The amount of a Purchase Payment is equal to the Gross Purchase Payment amount
less any applicable Sales Charge and premium taxes. Purchase Payments are
credited to your Contract Value. The amount of Your initial Purchase Payment is
shown on the Contract Data Page.
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 a Fixed Account Option wherein the Guarantee Period has expired. The Renewal
Interest Rate may not be less than the Minimum Guarantee Rate as shown on the
Contract Data Page.
SEPARATE ACCOUNT
A segregated asset account named on the Contract Data Page. The Separate Account
consists of the Subaccounts, each investing in the shares of the corresponding
variable Portfolio. The assets of the Separate Account are not comingled with
the general assets and liabilities of the Company. The value of amounts
allocated to the Subaccounts of the Separate Account is not guaranteed.
SUBACCOUNT
One or more divisions of the Separate Account which invests in shares of the
corresponding variable Portfolios. Each Subaccount is not chargeable with
liabilities arising out of any other Subaccount. The available Subaccounts are
shown on page 4.
VARIABLE ANNUITY
A series of periodic annuity payments which vary in amount according to the
investment experience of one or more Subaccounts, as selected by You.
WE, OUR, US, THE COMPANY
Anchor National Life Insurance Company.
YOU, YOUR
The Owner.
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PURCHASE PAYMENT PROVISIONS
PURCHASE PAYMENTS
Purchase Payments are flexible. This means that, subject to Company declared
minimums and maximums, You may change the amounts, frequency or timing of
Purchase Payments. Purchase Payments will be allocated to the Fixed Account
Option(s) and Subaccount(s) in accordance with instructions from You. We reserve
the right to specify the minimum Purchase Payment that may be allocated to a
Subaccount under the Contract.
DEFERMENT OF PAYMENTS
We may defer making payments from the Fixed Account Options for up to six (6)
months. Interest, subject to state requirements, will be credited during the
deferral period.
SUSPENSION OF PAYMENTS
We may suspend or postpone any payments from the Subaccounts if any of the
following occur:
(a) the NYSE is closed;
(b) trading on the NYSE is restricted;
(c) an emergency exists such that it is not reasonably practical to dispose
of securities in the Portfolios or to determine the value of its assets;
or
(d) the Securities and Exchange Commission, by order, so permits for the
protection of Owners.
Conditions in (b) and (c) will be decided by or in accordance with rules of the
Securities and Exchange Commission.
SUBSTITUTION OF PORTFOLIO
If: (a) the shares of the variable Portfolios should no longer be available for
investment by the Separate Account; or (b) in the judgment of the Board of
Trustees for the SunAmerica Series Trust and the Anchor Series Trust, further
investment in the shares of a variable Portfolio is no longer appropriate in
view of the purpose of the Contract, then We may substitute shares of another
underlying investment series or portfolio, for shares already purchased, or to
be purchased in the future by subsequent Purchase Payments under the Contract.
No substitution of securities may take place without prior approval of the
Securities and Exchange Commission and under such requirements as it may impose.
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ACCUMULATION PROVISIONS
SEPARATE ACCOUNT ACCUMULATION VALUE
The Separate Account Accumulation Value under the Contract shall be the sum of
the values of the Accumulation Units held in the Subaccounts for the Owner.
NUMBER OF ACCUMULATION UNITS
For each Subaccount, the number of Accumulation Units is the sum of each
Purchase Payment and/or transfer amount allocated to the Subaccount:
Divided by
The Accumulation Unit value for that Subaccount for the NYSE business day on
which the Purchase Payment or transfer amount is allocated.
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 on 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,
Mortality Risk and Guaranteed Death Benefit Risk charges (See CHARGES
AND DEDUCTIONS); and
(3) is the number of Accumulation Units outstanding at the end of the given
NYSE business day.
FIXED ACCOUNT ACCUMULATION VALUE
Under the Contract, the Fixed Account Accumulation Value shall be the sum of all
monies then invested in the Fixed Account Option(s) plus all interest credited
thereto. This amount shall be adjusted for withdrawals, annuitizations,
transfers and applicable charges. The Fixed Account Accumulation Value shall not
be less than the minimum values required by law in the state where this Contract
is issued.
FIXED ACCOUNT GUARANTEE PERIOD OPTIONS AND INTEREST CREDITING
Any amounts allocated to the Fixed Account Options from the initial 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.
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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
during that 30-day period You do not specify a different Guarantee Period or
otherwise transfer to a Subaccount, We will select the same Guarantee Period as
has just expired, crediting Your Contract with the Renewal Interest Rate in
effect on the date of expiration of the Guarantee Period, so long as such
Guarantee Period does not extend beyond the Annuity Date. If the guarantee
period extends beyond the Annuity Date, We will credit interest up to the
Annuity Date at the Renewal Interest Rate for the 1-Year Fixed Account Option.
If You are participating in the DCA program and allocated Purchase Payments to a
DCA Fixed Account Option, upon termination of the DCA program and unless you
otherwise specify, any amounts remaining in the DCA Fixed Account Options will
be automatically transferred to the 1-Year Fixed Account Option. Such amounts
will earn interest at the Renewal Interest Rate for the 1-Year Fixed Account
Option.
MARKET VALUE ADJUSTMENT (MVA)
Any payments and values based on the 3, 5, 7 or 10-year Fixed Account Options
may be subject to a MVA, the operation of which may result in upward or downward
adjustments in the Contract Value, if withdrawn, transferred or annuitized prior
to the end of the respective Guarantee Period. The MVA will be calculated by
multiplying the amount withdrawn, transferred or annuitized by the following
formula:
{(1 + I)/(1+J+0.0050)}(N/12) -1
I = The interest rate currently in effect for that Guarantee Period.
J = The Initial Interest Rate available for the Guarantee Period equal to the
number of years (rounded up to an integer) remaining in the current Guarantee
Period at the time of withdrawal, transfer or annuitization. In the
determination of J, if the Company currently does not offer the applicable
Guarantee Period, then the rate will be determined by linear interpolation of
the Initial Interest Rate for the nearest two Guarantee Periods that are
available.
N = The number of full months remaining in the current Guarantee Period at the
time the withdrawal or annuitization request is processed.
There will be no MVA on withdrawals from the Fixed Account Options in the
following situations: (1) to pay a Death Benefit paid upon death of the Owner;
(2) on amounts withdrawn to pay fees or charges; (3) on amounts withdrawn or
transferred from the Fixed Account Options within thirty (30) days after the end
of the Guarantee Period; and (4) on annuitizations on the Latest Annuity Date.
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CHARGES AND DEDUCTIONS
We will deduct the following charges from the Contract:
SALES CHARGE
A Sales Charge is deducted from each Gross Purchase Payment. The Sales Charge
equals a percentage of each Gross Purchase Payment and varies based upon the
Owner's investment, as described below, at the time each Gross Purchase Payment
is made. We will not retroactively reduce Sales Charges. The Sales Charge
Schedule is shown on the Contract Data Page.
The Owner's investment at the time a Gross Purchase Payment is deposited into
the Contract is determined as the sum of: (a) Your investment as defined under
the Rights of Accumulation provision; and (b) any additional investment
commitments secured by a Letter of Intent as defined in the Letter of Intent
provision.
RIGHTS OF ACCUMULATION
At the time a Gross Purchase Payment is made into this Contract, the Owner's
investment under this Rights of Accumulation provision is the sum of: (1) that
Gross Purchase Payment; and (2) the Contract Value of this Contract; and (3) the
value of other qualifying Contracts or contracts issued by Us which You, Your
spouse, or any of Your children under the age of 21 own. You must notify Us of
any qualifying contracts, as discussed in (3) above, by the time that Gross
Purchase Payment is made in order to receive any applicable reduction in Sales
Charge. We reserve the right to modify, suspend or terminate the Rights of
Accumulation provision at any time.
LETTER OF INTENT
Your commitment to invest a certain amount over a 13-month period through a
Letter of Intent subject to Company restrictions. If you do not satisfy the
conditions of Your Letter of Intent by the end of the 13-month period, We will
deduct from your Contract Value the difference between: (1) the Sales Charge
applicable to the actual amount of Gross Purchase Payments made during the
13-month period, and (2) the Sales Charge that was actually deducted. We will
not retroactively reduce Sales Charges if You exceed Your investment commitment.
We reserve the right to modify, suspend or terminate the Letter of Intent
provision at any time.
WITHDRAWAL CHARGE
If applicable, a Withdrawal Charge will be deducted from Your Contract Value
upon the withdrawal of any portion of a Gross Purchase Payment that is subject
to a Withdrawal Charge. That Withdrawal Charge applies only during the 1-year
period following the receipt and application of that Gross Purchase Payment. The
Withdrawal Charge Schedule is shown on the Contract Data Page. Also, see
WITHDRAWAL PROVISIONS.
MORTALITY RISK CHARGE
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On an annual basis this charge, as shown on the Contract Data Page, equals a
percentage of the average daily total net asset value of the Subaccounts to
which Your Purchase Payments are allocated. This charge is to compensate Us for
assuming the mortality risks under the Contract.
EXPENSE RISK CHARGE
On an annual basis this charge, as shown on the Contract Data Page, equals a
percentage of the average daily total net asset value of the Subaccounts to
which Your Purchase Payments are allocated. This charge is to compensate Us for
assuming the expense risks under the Contract.
DISTRIBUTION EXPENSE CHARGE
On an annual basis this charge, as shown on the Contract Data Page, equals a
percentage of the average daily total net asset value of the Subaccounts to
which Your Purchase Payments are allocated. This charge is to compensate Us for
all distribution expenses associated with the Contract.
GUARANTEED DEATH BENEFIT RISK CHARGE
On an annual basis this charge, as shown on the Contract Data Page, equals a
percentage of the average daily total net asset value of the Subaccounts to
which Your Purchase Payments are allocated. This charge is to compensate Us for
the risk assumed as a result of contractual obligations to provide a minimum
guaranteed Death Benefit prior to the Annuity Date.
TRANSFER PROVISIONS
Prior to the Annuity Date, You may transfer all or part of Your Contract Value
to any of the Subaccounts or Fixed Account Options, other than the DCA 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 Fixed Account Option are subject to Company limits.
TRANSFERS OF ACCUMULATION AND ANNUITY UNITS BETWEEN SUBACCOUNTS
Prior to the Annuity Date, You may transfer all or a portion of Your Contract
Value between Subaccounts. A transfer will result in the redemption of
Accumulation Units in a Subaccount and the purchase 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 Contract Value
from one Subaccount to another Subaccount. A transfer will result in the
redemption of Annuity Units in a Subaccount and the purchase 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 AND ANNUITY UNITS TO AND FROM THE FIXED ACCOUNT
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Prior to the Annuity Date, You may transfer all or any part of Your Contract
Value from the Subaccount(s) to any Fixed Account Option(s) other than the DCA
Fixed Account Options or from the Fixed Account Option(s) to the Subaccount(s)
of the Contract.
After the Annuity Date, transfers into or out of the Fixed Account Option(s) are
not allowed.
WITHDRAWAL PROVISIONS
On or before the Annuity Date and while You are living, You may withdraw all or
part of Your Contract Value under this Contract by informing Us in writing at
Our Annuity Service Center. For a full withdrawal, this Contract must be
returned to Our Annuity Service Center. The minimum amount that can be withdrawn
and the amount remaining after a withdrawal are subject to Company limits.
Without written notice to the contrary, withdrawals will be deducted from the
Contract Value in proportion to their allocation among the Fixed Account Options
and the Subaccounts. Withdrawals will be based on values at the end of the NYSE
business day in which the request for withdrawal and the Contract (in the case
of a full withdrawal), are received at 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.
For the purposes of determining the amount of any applicable Withdrawal Charge,
withdrawals are assumed to be taken from earnings first, then Purchase Payments.
Purchase Payments are assumed to be withdrawn on a first-in-first-out (FIFO)
basis. The Withdrawal Charge Schedule is shown on the Contract Data Page. Also,
see the WITHDRAWAL CHARGE provision.
For the purposes of determining tax liability under the IRC, withdrawals of the
Contract Value are treated on a last-in first-out (LIFO) basis.
SYSTEMATIC WITHDRAWAL PROGRAM
Prior to the Annuity Date, You may elect to participate in the Systematic
Withdrawal Program by informing Us at Our Annuity Service Center. The Systematic
Withdrawal Program allows You to make automatic withdrawals from your account
monthly, quarterly, semiannually or annually. The minimum systematic withdrawal
amount is $250 per withdrawal. Any amount withdrawn through the Systematic
Withdrawal Program may be subject to a Market Value Adjustment as discussed in
the MARKET VALUE ADJUSTMENT provisions. You may terminate Your participation in
the Systematic Withdrawal Program at any time by sending Us a written request.
GENERAL PROVISIONS
ENTIRE CONTRACT
The entire contract between You and Us consists of the application as completed
by You at the time of purchase, this Contract and any attached endorsement(s).
No one can change the terms or conditions of this contract other than Us. Any
change must be in writing and approved by Us. Only Our President, Secretary, or
one of Our Vice-Presidents can give Our approval.
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CHANGE OF ANNUITANT
If the Owner is an individual, the Owner may change the Annuitant(s) at any time
prior to the Annuity Date. To make a change, the Owner must send a written
notice to Us at least 30 days before the Annuity Date. If the Owner is a
non-natural person, the Owner may not change the Annuitant.
DEATH OF ANNUITANT
If the Owner and Annuitant are different, and the Annuitant dies before the
Annuity Date, the Owner becomes the Annuitant until the Owner elects a new
Annuitant. If there are Joint Annuitants, upon the death of any Annuitant prior
to the Annuity Date, the Owner may elect a new Joint Annuitant. However, if the
Owner is a non-natural person, We will treat the death of any Annuitant as the
death of the "Primary Annuitant" and as the death of the Owner, see DEATH
PROVISIONS.
MISSTATEMENT OF AGE OR SEX
If the Age or sex of any Annuitant has been misstated, future annuity payments
will be adjusted using the correct Age and sex, according to Our rates in effect
on the date that annuity payments were determined. Any overpayment from the
Fixed Account Options, plus interest at the rate of 4% per year, will be
deducted from the next payment(s) due. Any underpayment from the Fixed Account
Options, plus interest at the rate of 4% per year, will be paid in full with the
next payment due. Any overpayment from the Subaccounts will be deducted from the
next payment(s) due. Any underpayment from the Subaccounts will be paid in full
with the next payment due.
PROOF OF AGE, SEX, OR SURVIVAL
The Company may require satisfactory proof of correct Age or sex at any time. If
any payment under this Contract depends on the Annuitant being alive, the
Company may require satisfactory proof of survival.
CONFORMITY WITH STATE LAWS
The provisions of this Contract will be interpreted by the laws of the state in
which the application 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.
ASSIGNMENT
You may assign this Contract before the Annuity Date, but We will not be bound
by an assignment unless it is received by Us in writing. Your rights and those
of any other person referred to in this Contract will be subject to the
assignment. Certain assignments may be taxable. We do not assume any
responsibility for the validity or tax consequences of any assignment.
CLAIMS OF CREDITORS
14
<PAGE> 15
To the extent permitted by law, no right or proceeds payable under this Contract
will be subject to claims of creditors or legal process.
PREMIUM TAXES OR OTHER TAXES
The Company may deduct from Your Contract Value any premium tax or other taxes
payable to a state or other government entity, if applicable. Should We advance
any amount so due, We are not waiving any right to collect such amount at a
later date. The Company will deduct any withholding taxes required by applicable
law.
WRITTEN NOTICE
Any notice We send to You will be sent to Your address shown in the Application
unless You request otherwise. Any written request or notice to Us must be sent
to Our Annuity Service Center, as specified on the Contract Data Page.
PERIODIC REPORTS
During each Contract Year, We will send You quarterly statements of the account
activity of the Contract as well as confirmation reports after each financial
transaction. The quarterly statements will include all transactions which have
occurred during the accounting period shown on the statement.
INCONTESTABILITY
This Contract will be incontestable from the Contract Date.
NONPARTICIPATING
This Contract does not share in Our surplus.
DEATH PROVISIONS
Notwithstanding any provision of this Contract to the contrary, all payments of
benefits under this Contract will be made in a manner that satisfies the
requirements of IRC Section 72(s), as amended from time to time. If the Contract
is owned by a trust or other non-natural person, We will treat the death of any
Annuitant as the death of the "Primary Annuitant" and as the death of any Owner.
DEATH OF OWNER BEFORE THE ANNUITY DATE
We will pay a death benefit to the Beneficiary upon Our receiving all required
documentation including: (a) due proof that any Owner 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
15
<PAGE> 16
Owner's death, otherwise, the death benefit will be paid in
accordance with option 1 above; or
3. If the Beneficiary is the Owner's spouse, the Beneficiary may
elect to become the Owner and continue the Contract in force. If
this option is elected, no death benefit is paid. Upon the new
Owner's subsequent death, the entire interest must be
distributed immediately under option 1 or 2 above.
DUE PROOF OF DEATH
Due Proof of Death means:
1. a certified copy of a death certificate; or
2. a certified copy of a decree of a court of competent
jurisdiction as to the finding of death; or
3. a written statement by a medical doctor who attended the
deceased Owner at the time of death; or
4. any other proof satisfactory to Us.
AMOUNT OF DEATH BENEFIT
The amount of the death benefit will be determined based upon your death benefit
option selection. Once selected, the death benefit option cannot be changed. The
death benefit options are as described below.
OPTION I: PURCHASE PAYMENT ACCUMULATION DEATH BENEFIT OPTION
Prior to the Annuity Date and upon death of the Owner, the Beneficiary will
receive the greatest of:
1. the Contract Value for the NYSE business day during which We receive all
required documentation including due proof of death of the Owner and an
election of the type of payment to be made at Our Annuity Service
Center; or
2. Purchase Payments less any withdrawals (and any fees or charges
applicable to such withdrawals), compounded until the date of death at
4% interest, plus any Purchase Payments and less any withdrawals (and
any fees or charges applicable to such withdrawals) recorded after the
date of death; or
3. the Contract Value at the seventh Contract anniversary, plus any
subsequent Purchase Payments and less any subsequent withdrawals (and
any fees or charges applicable to such withdrawals) compounded until the
date of death at 4% interest, plus any Purchase Payments and less any
withdrawals (and any fees or charges applicable to such withdrawals)
recorded after the date of death.
If the Owner was age 70 or older on the Contract Date, both (2) and (3) above
will be compounded at 3%, rather than 4%. If the death benefit is paid on the
death of a Owner who was not originally named in the application and was age 70
or older on the Contract Date, both (2) and (3) above will be compounded at 3%,
rather than 4%.
16
<PAGE> 17
OPTION II: MAXIMUM ANNIVERSARY VALUE DEATH BENEFIT OPTION
If, upon the death of the Owner and prior to the Annuity Date, the Owner
has not attained his or her 90th birthday, the Beneficiary will receive
the greatest of:
1. the Contract Value for the NYSE business day during which We
receive all required documentation including due proof of death
the Owner and an election of the type of payment to be made at
Our Annuity Service Center; or
2. Purchase Payments less any withdrawals (and any fees or charges
applicable to such withdrawals); or
3. the maximum anniversary value preceding the date of death. The
maximum anniversary value is equal to the greatest anniversary
value attained from the following:
As of the date of receipt of due proof of death and an election
of the type of payment to be made, at our Annuity Service
Center, We will calculate an anniversary value for each Contract
anniversary prior to the Owner's 81st birthday. The anniversary
value is equal to the Contract Value on a Contract anniversary,
increased by the dollar amount of any Purchase Payments made
since that anniversary and reduced by the dollar amount of any
withdrawals (and any fees or charges applicable to such
withdrawals) since that anniversary.
If the deceased Owner has attained age 90, then the death benefit will be the
Contract Value as defined in (1) above.
DEATH OF OWNER OR ANNUITANT ON OR AFTER THE ANNUITY DATE. If any Owner or
Annuitant dies on or after the Annuity Date and before the entire interest in
the Contract has been distributed, We will pay the remaining portion of the
interest of the Contract 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 selected by the Owner. While (a) the Owner is living; and (b)
before the Annuity Date, the Owner may change the Beneficiary by written notice
in a form satisfactory to Us. The change will take effect on the date We record
the proper notice subject to any payments We have made. If two or more persons
are named, (a) those surviving the Owner will share equally unless otherwise
stated; and (b) the Beneficiaries must elect to receive their respective
17
<PAGE> 18
portions of the death benefit according to the options listed under DEATH OF
OWNER BEFORE THE ANNUITY DATE. If the Annuitant survives the Owner, and there
are no surviving Beneficiaries, the Annuitant will be deemed the Beneficiary.
Joint Owners, if applicable, shall be each other's primary Beneficiary. Joint
Annuitants, if any, when the Owner is a non-natural person, shall be each
other's primary Beneficiary. Any other Beneficiary designation will be treated
as a contingent Beneficiary.
If the Owner is also the Annuitant and there are no surviving Beneficiaries at
the death of the Owner, the death benefit will be paid to the estate of the
Owner in accordance with option 1, under DEATH OF OWNER BEFORE THE ANNUITY DATE.
ANNUITY PROVISIONS
ANNUITY DATE
The Owner selects an Annuity Date (the date on which annuity payments are to
begin) at the time of application. The Owner may change the Annuity Date at any
time, at least seven days prior to the Annuity Date, by written notice to the
Company at its Annuity Service Center. The Annuity Date must always be the first
day of the calendar month and must be at least two years after the Contract
Date, but not beyond the later of the Owner's 90th birthday or ten years after
the Contract Date. If the Owner is a non-natural person, the latest Annuity Date
is the later of the Annuitant's 90th birthday or ten years after the Contract
Date. If no Annuity Date is selected, the Annuity Date will be the latest
Annuity Date, as set by the Company.
PAYMENTS TO OWNER
Unless You request otherwise, We will make annuity payments to You. If You want
the annuity payments to be made to some other Payee, We will make such payments
subject to receipt of a written request filed at the Annuity Service Center no
later than thirty (30) days before the due date of the first annuity payment.
Any such request is subject to the rights of any assignee. No payments available
to or being paid to the Payee while the Annuitant is alive can be transferred,
commuted, anticipated or encumbered.
FIXED ANNUITY PAYMENTS
If a Fixed Annuity payment option has been elected, the proceeds payable under
this Contract less any applicable premium taxes, shall be applied to the payment
of the Fixed Annuity payment option elected at rates which are at least equal to
the annuity rates based upon the applicable tables. In no event will the Fixed
Annuity payments be changed once they begin.
AMOUNT OF FIXED ANNUITY PAYMENTS
The amount of each Fixed Annuity payment will be determined by applying the
portion of the Contract Value allocated to Fixed Annuity payments less any
applicable premium taxes to the annuity table applicable to the Fixed Annuity
payment option chosen.
AMOUNT OF VARIABLE ANNUITY PAYMENTS
(a) FIRST VARIABLE ANNUITY PAYMENT: The dollar amount of the first Variable
Annuity payment will be determined by applying the portion of the
Contract Value allocated to the Subaccount, less any applicable premium
taxes, to rates which are at least
18
<PAGE> 19
equal to the annuity rates based upon the annuity table applicable to
the Variable Annuity payment option chosen. If the Contract Value is
allocated to more than one Subaccount, the value of Your interest in
each Subaccount is applied separately to the Variable Annuity payment
option table to determine the amount of the first annuity payment
attributable to each Subaccount.
(b) NUMBER OF VARIABLE ANNUITY UNITS: The number of Annuity Units for each
applicable Subaccount is the amount of the first annuity payment
attributable to that 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, subsequent Variable Annuity payments will vary in amount
according to the investment performance of the applicable Subaccount(s)
to which a portion of Your Contract Value is allocated. The amount may
change from month to month. The amount of each subsequent payment for
each Subaccount is:
The number of Annuity Units for each Subaccount as determined for the first
annuity payment
Multiplied by
The value of an Annuity Unit for that Subaccount at the end of the month
immediately preceding the month in which payment is due.
We guarantee that the amount of each Variable Annuity payment will not be
affected by variations in expenses or mortality experience.
19
<PAGE> 20
ANNUITY PAYMENT OPTIONS
During the Annuitant's life, upon written election and the return of this
Contract to the Company at its Annuity Service Center, the Contract Value may be
applied to provide one of the following options or any annuity payment option
that is mutually agreeable. After two years from the Contract Date, and prior to
the Annuity Date, You can choose one of the options described below. If no
option has been 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 a Payee during the lifetime of the Annuitant. No further
payments are payable after the death of the Annuitant.
OPTIONS 2 & 2v - JOINT AND 100% 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 100% SURVIVOR LIFE ANNUITY WITH PAYMENTS GUARANTEED
FOR 10 OR 20 YEARS 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 the 10 or 20 years,
as selected at the time of annuitization, the remaining guaranteed annuity
payments will be continued to the Beneficiary.
OPTIONS 4 & 4v - LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20 YEARS
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 10 or 20
years, 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
20
<PAGE> 21
for full twelve month periods. In the event of death of the Annuitant, any
remaining annuity payments will be continued to the Beneficiary.
21
<PAGE> 22
FIXED ANNUITY PAYMENT OPTIONS TABLE
BASIS OF COMPUTATION
The actuarial basis for the Table of Annuity Rates is the 1983a Annuity
Mortality Table with projection and a guaranteed interest rate of 3%. The
mortality table is projected using Projection Scale G factors, assuming
annuitization in the year 2000. The Fixed Annuity Payment Options Table does not
included any applicable premium tax.
OPTIONS 1 & 4 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
<TABLE>
<CAPTION>
OPTION 1 OPTION 4 OPTION 4
AGE OF LIFE ANNUITY LIFE ANNUITY
ANNUITANT LIFE ANNUITY (W/120 PAYMENTS GUARANTEED) (W/240 PAYMENTS GUARANTEED)
--------- ------------ --------------------------- ---------------------------
MALE FEMALE MALE FEMALE MALE FEMALE
---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
55 4.23 3.84 4.19 3.82 4.05 3.76
56 4.32 3.91 4.27 3.88 4.11 3.81
57 4.41 3.98 4.35 3.95 4.17 3.87
58 4.51 4.05 4.44 4.02 4.24 3.93
59 4.61 4.13 4.54 4.10 4.31 4.00
60 4.72 4.22 4.64 4.18 4.37 4.06
61 4.84 4.31 4.74 4.27 4.44 4.13
62 4.96 4.40 4.85 4.36 4.51 4.20
63 5.10 4.51 4.97 4.45 4.58 4.27
64 5.24 4.62 5.10 4.55 4.65 4.35
65 5.40 4.73 5.22 4.66 4.72 4.42
66 5.56 4.86 5.36 4.78 4.79 4.50
67 5.74 4.99 5.50 4.90 4.86 4.57
68 5.93 5.14 5.65 5.02 4.92 4.65
69 6.13 5.29 5.80 5.16 4.99 4.73
70 6.35 5.46 5.96 5.30 5.05 4.80
71 6.58 5.64 6.13 5.46 5.10 4.88
72 6.82 5.84 6.29 5.62 5.16 4.95
73 7.08 6.05 6.47 5.78 5.20 5.02
74 7.36 6.28 6.64 5.96 5.25 5.08
75 7.66 6.53 6.82 6.14 5.29 5.14
76 7.98 6.80 7.00 6.33 5.33 5.19
77 8.33 7.09 7.19 6.53 5.36 5.24
78 8.69 7.41 7.37 6.73 5.39 5.29
79 9.09 7.75 7.55 6.94 5.41 5.33
80 9.51 8.11 7.73 7.14 5.43 5.36
81 9.97 8.51 7.91 7.35 5.45 5.39
82 10.45 8.94 8.08 7.55 5.47 5.42
83 10.97 9.41 8.24 7.76 5.48 5.44
84 11.52 9.92 8.40 7.95 5.49 5.46
85 12.10 10.47 8.54 8.13 5.50 5.48
</TABLE>
22
<PAGE> 23
OPTION 2 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
JOINT & 100% SURVIVOR LIFE ANNUITY
<TABLE>
<CAPTION>
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
--------- -----------------------
55 60 65 70 75 80 85
-- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.54 3.69 3.84 3.96 4.06 4.13 4.17
60 3.63 3.83 4.04 4.23 4.39 4.52 4.60
65 3.70 3.95 4.23 4.51 4.78 5.00 5.16
70 3.75 4.04 4.39 4.78 5.18 5.56 5.85
75 3.78 4.11 4.51 5.01 5.57 6.14 6.65
80 3.81 4.15 4.60 5.18 5.89 6.70 7.52
85 3.82 4.18 4.66 5.30 6.14 7.18 8.35
</TABLE>
OPTION 3 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT & 100% SURVIVOR LIFE ANNUITY (W/120 PAYMENTS GUARANTEED)
<TABLE>
<CAPTION>
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
--------- -----------------------
55 60 65 70 75 80 85
-- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.54 3.69 3.83 3.96 4.05 4.12 4.16
60 3.63 3.83 4.03 4.22 4.38 4.50 4.57
65 3.70 3.95 4.22 4.50 4.76 4.97 5.10
70 3.75 4.04 4.38 4.76 5.15 5.48 5.72
75 3.78 4.10 4.50 4.98 5.50 6.00 6.40
80 3.80 4.14 4.58 5.13 5.78 6.46 7.04
85 3.81 4.16 4.62 5.22 5.97 6.80 7.55
</TABLE>
OPTION 3 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT & 100% SURVIVOR LIFE ANNUITY (W/240 PAYMENTS GUARANTEED)
<TABLE>
<CAPTION>
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
--------- -----------------------
55 60 65 70 75 80 85
-- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.53 3.68 3.81 3.92 3.99 4.03 4.04
60 3.62 3.81 4.00 4.16 4.27 4.34 4.37
65 3.68 3.92 4.16 4.39 4.56 4.66 4.71
70 3.72 3.99 4.29 4.58 4.81 4.96 5.03
75 3.74 4.03 4.36 4.70 4.99 5.17 5.26
80 3.75 4.05 4.40 4.77 5.09 5.30 5.40
85 3.76 4.06 4.42 4.80 5.13 5.35 5.46
</TABLE>
23
<PAGE> 24
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>
24
<PAGE> 25
VARIABLE ANNUITY PAYMENT OPTIONS TABLE
BASIS OF COMPUTATION
The actuarial basis for the Table of Annuity Rates is the 1983a Annuity
Mortality Table with projection and an effective annual Assumed Investment Rate
of 3.5%. The mortality table is projected using Projection Scale G factors,
assuming annuitization in the year 2000. The Variable Annuity Payment Options
Table does not include any applicable premium tax.
OPTIONS 1v & 4v - TABLE OF MONTHLY INSTALLMENTS PER $1,000
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
<TABLE>
<CAPTION>
OPTION 1v OPTION 4v OPTION 4v
LIFE ANNUITY LIFE ANNUITY
AGE OF (W/120 PAYMENTS (W/240 PAYMENTS
ANNUITANT LIFE ANNUITY GUARANTEED) GUARANTEED)
--------- ------------ ---------------------- --------------------
MALE FEMALE MALE FEMALE MALE FEMALE
---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
55 4.53 4.13 4.48 4.11 4.33 4.05
56 4.62 4.20 4.56 4.18 4.39 4.10
57 4.71 4.27 4.64 4.24 4.45 4.16
58 4.80 4.34 4.73 4.31 4.52 4.22
59 4.90 4.42 4.82 4.39 4.58 4.28
60 5.01 4.51 4.92 4.47 4.65 4.34
61 5.13 4.60 5.03 4.55 4.71 4.41
62 5.26 4.69 5.14 4.64 4.78 4.48
63 5.39 4.80 5.25 4.74 4.85 4.55
64 5.54 4.91 5.38 4.84 4.92 4.62
65 5.69 5.02 5.51 4.94 4.99 4.69
66 5.86 5.15 5.64 5.06 5.05 4.77
67 6.03 5.28 5.78 5.18 5.12 4.84
68 6.22 5.43 5.93 5.30 5.18 4.92
69 6.43 5.58 6.08 5.44 5.24 4.99
70 6.64 5.75 6.23 5.58 5.30 5.06
71 6.87 5.93 6.40 5.73 5.36 5.14
72 7.12 6.13 6.56 5.89 5.41 5.21
73 7.38 6.34 6.73 6.06 5.46 5.27
74 7.66 6.57 6.91 6.23 5.50 5.33
75 7.96 6.82 7.09 6.41 5.54 5.39
76 8.28 7.09 7.27 6.60 5.57 5.44
77 8.63 7.38 7.45 6.79 5.61 5.49
78 9.00 7.70 7.63 6.99 5.63 5.54
79 9.40 8.04 7.81 7.19 5.66 5.58
80 9.82 8.41 7.98 7.40 5.68 5.61
81 10.28 8.81 8.16 7.60 5.70 5.64
82 10.76 9.24 8.32 7.81 5.71 5.66
83 11.28 9.71 8.48 8.00 5.72 5.69
84 11.83 10.23 8.64 8.19 5.73 5.70
85 12.42 10.78 8.78 8.38 5.74 5.72
</TABLE>
25
<PAGE> 26
OPTION 2v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
JOINT & 100% SURVIVOR LIFE ANNUITY
<TABLE>
<CAPTION>
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
--------- -----------------------
55 60 65 70 75 80 85
-- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.83 3.98 4.12 4.24 4.34 4.42 4.46
60 3.92 4.11 4.32 4.51 4.67 4.80 4.89
65 3.99 4.23 4.50 4.79 5.05 5.28 5.44
70 4.04 4.33 4.67 5.05 5.46 5.83 6.13
75 4.07 4.39 4.79 5.28 5.84 6.41 6.93
80 4.10 4.44 4.88 5.45 6.16 6.97 7.79
85 4.11 4.47 4.94 5.57 6.41 7.45 8.61
</TABLE>
OPTION 3v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT AND 100% SURVIVOR LIFE ANNUITY (W/120 PAYMENTS GUARANTEED)
<TABLE>
<CAPTION>
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
--------- -----------------------
55 60 65 70 75 80 85
-- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.83 3.98 4.12 4.24 4.34 4.40 4.45
60 3.92 4.11 4.31 4.50 4.66 4.78 4.86
65 3.99 4.23 4.50 4.78 5.03 5.24 5.38
70 4.04 4.32 4.66 5.03 5.41 5.75 5.99
75 4.07 4.38 4.78 5.25 5.77 6.26 6.66
80 4.09 4.43 4.86 5.40 6.05 6.72 7.29
85 4.10 4.45 4.90 5.50 6.24 7.05 7.80
</TABLE>
OPTION 3v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT & 100% SURVIVOR LIFE ANNUITY (W/240 PAYMENTS GUARANTEED)
<TABLE>
<CAPTION>
AGE OF
MALE
ANNUITANT AGE OF FEMALE ANNUITANT
--------- -----------------------
55 60 65 70 75 80 85
-- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.82 3.97 4.10 4.20 4.27 4.31 4.33
60 3.91 4.09 4.28 4.44 4.55 4.61 4.64
65 3.97 4.20 4.44 4.66 4.83 4.93 4.97
70 4.01 4.27 4.56 4.84 5.07 5.21 5.28
75 4.03 4.31 4.64 4.97 5.25 5.42 5.51
80 4.04 4.33 4.67 5.03 5.34 5.55 5.65
85 4.05 4.34 4.69 5.06 5.38 5.60 5.70
</TABLE>
26
<PAGE> 27
OPTION 5v - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
PAYMENTS FOR A SPECIFIED PERIOD
<TABLE>
<CAPTION>
NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY
OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
10 9.83 17 6.47 24 5.09
11 9.09 18 6.20 25 4.96
5 18.12 12 8.46 19 5.97 26 4.84
6 15.35 13 7.94 20 5.75 27 4.73
7 13.38 14 7.49 21 5.56 28 4.63
8 11.90 15 7.10 22 5.39 29 4.53
9 10.75 16 6.76 23 5.24 30 4.45
</TABLE>
27
<PAGE> 28
ANCHOR NATIONAL LIFE INSURANCE COMPANY
A STOCK COMPANY LOS ANGELES, CALIFORNIA
28
<PAGE> 29
INDIVIDUAL FIXED AND VARIABLE
ANNUITY CONTRACT
Nonparticipating
29
<PAGE> 1
Exhibit 5(a)
<TABLE>
<S> <C> <C>
Anchor National Life New Business Documents New Business Documents [ANCHOR NATIONAL LOGO]
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
- -------------------------------------------------------------------------------------------------------------------
PARTICIPANT ENROLLMENT FORM ANG-531 (11/98)
DO NOT USE HIGHLIGHTER. Please Print or type.
</TABLE>
<TABLE>
<S> <C>
A. PARTICIPANT [ ]Mr. [ ]Mrs.[ ]Ms. [ ]Miss [ ]Dr. [ ]Sr. [ ]Jr.
------------------------------------------------------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL
------------------------------------------------------------------------------------------
STREET ADDRESS
------------------------------------------------------------------------------------------
CITY STATE ZIP CODE
MO. DAY YR. [ ]M [ ]F ( )
-------------------- ------------ -------------------------- -------------------------
DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER
JOINT PARTICIPANT (IF ANY, MUST BE SPOUSE)
------------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL
MO. DAY YR. [ ]M [ ]F ( )
-------------------- ------------ -------------------------- -------------------------
DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER
B. ANNUITANT ------------------------------------------------------------------------------------------
(Complete only LAST NAME FIRST NAME MIDDLE INITIAL
if different
from ------------------------------------------------------------------------------------------
participant) STREET ADDRESS
------------------------------------------------------------------------------------------
CITY STATE ZIP CODE
MO. DAY YR. [ ]M [ ]F ( )
-------------------- ------------ -------------------------- -------------------------
DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER
JOINT PARTICIPANT (IF ANY, MUST BE SPOUSE)
------------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL
MO. DAY YR. [ ]M [ ]F ( )
-------------------- ------------ -------------------------- -------------------------
DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER
C. DEATH BENEFIT [ ] Purchase Payment Accumulation [ ] Maximum Anniversary Value
(Participant must Death Benefit Option Death Benefit Option
choose one) (See your investment representative or the prospectus for information about these options.)
D. BENEFICIARY PRIMARY[ ]CONTINGENT [ ]
--------------------------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL RELATIONSHIP
PRIMARY[ ]CONTINGENT [ ]
--------------------------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL RELATIONSHIP
E. TYPE OF [ ] Nonqualified. If nonqualified, is this a 1035 Exchange? [ ] YES [ ] NO
CONTRACT If yes, please complete a "Request for Transfer or 1035 Exchange" form (SA-2500RL).
[ ] Qualified, as indicated below. Is this a direct transfer? [ ] YES [ ] NO
If yes, please complete a "Request for Transfer or 1035 Exchange" form (SA-2500RL).
Please note: Please select an appropriate plan for qualified monies.
[ ]SEP [ ] 403(b) [ ] Terminal funding [ ] 457 [ ] 401 retirement plan
[ ] IRA Tax Year______ [ ] IRA rollover [ ] IRA transfer
[ ] Roth IRA Roth IRA origination date__________ [ ]Other_______
PLEASE SPECIFY
F. ANNUITY DATE MO. DAY YR. Date annuity payments begin. (Must be at least 2 years after the
ANNUITY DATE Certificate Date. Maximum age is the later of the Participant's Age
90 or 10 years after Certificate Date. Note: If left blank, the Annuity
Date will default to maximum for nonqualified and to 70 1/2 for
qualified contracts.)
G. GROSS
PURCHASE [ ] INITIAL PAYMENT: $_____________________
PAYMENT(S) Minimum initial payment is [$5,000] for nonqualified contracts; [$2,000] for qualified
contracts. Payments may be wired or mailed. Make check payable to: Anchor National
Life Insurance Company.
[ ] AUTOMATIC PAYMENTS: $_____________________
To establish automatic bank drafts for future payments, include a completed "Automatic
Payment Authorization" form (G-2233POS), and a voided check.
ANG-531 (11/98) OVER 2.99
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PARTICIPANT ENROLLMENT FORM ANG-531 (11/98) SIDE 2
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
H. SPECIAL [ ] RIGHTS OF ACCUMULATION: Check the box at left if You have other qualifying contracts or
FEATURES certificates to be included under the Rights of Accumulation and include a completed
"Rights of Accumulation" form (TBD).
[ ] LETTER OF INTENT: Check the box at left and include a completed "Letter of Intent" form
(TBD).
[ ] SYSTEMATIC WITHDRAWAL: Check the box at left and include a "Systematic Withdrawal
Application" form (V-5550SW).
[ ] AUTOMATIC DOLLAR COST AVERAGING: Check the box at left and include a completed "Dollar
Cost Averaging Application" form (V-5551DCA).
[ ] PRINCIPAL ADVANTAGE: Check the box at left. Under Investment Instructions, indicate the
fixed account desired and specify other allocations as percentages.
I. TELEPHONE / Do you wish to authorize telephone TRANSFERS, subject to the conditions
INTERNET set forth below? [ ] YES [ ] NO
TRANSFERS Do you wish to authorize Internet TRANSFERS, subject to the conditions
set forth below? [ ] YES [ ] NO
(If no election is indicated the Company will default to yes for transfers via the
telephone or Internet.) I authorize the
AUTHORIZATION Company to accept telephone and/or Internet instructions for transfers in any amount among
subaccounts from anyone providing proper identification subject to restrictions and
limitations contained in the certificate and related prospectus, if any. I understand that
I bear the risk of loss in the event of a telephone or Internet instruction not authorized
by me. The Company will not be responsible for any losses resulting from unauthorized
transactions if it follows reasonable procedures designed to verify the identity of the
requestor and therefore, the Company will record telephone conversations containing
transaction instructions, request personal identification information before acting upon
telephone instructions and send written confirmation statements of transactions to the
address of record. For Internet transfers the Company will require proper password or
Internet authentication, keep records of all such transactions and send confirmations to
the address of record.
Do you authorize the delivery of the prospectus and other required documentation to your
personal Internet Address in lieu of receipt by mail? [ ] YES [ ] NO
If YES, You MUST indicate Your Internet Address in the space provided.
-------------------
Internet Address
J. SPECIAL
INSTRUCTIONS -------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
K. STATEMENT OF This Certificate [ ] WILL [ ] WILL NOT replace an existing life insurance or annuity
PARTICIPANT contract. (If this will replace an existing policy, please indicate name of issuing company
and contract number below.)
COMPANY NAME CONTRACT NUMBER
------------------------------- ---------------------------
I hereby represent my answers to the above questions to be correct and true to the best of
my knowledge and belief and agree that this Enrollment Form shall be a part of any
Certificate issued by the Company. I VERIFY MY UNDERSTANDING THAT 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 ARE 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 (A-SHARE) INCLUDING THE SUNAMERICA SERIES TRUST AND ANCHOR
SERIES TRUST PROSPECTUSES. I HAVE READ THEM CAREFULLY AND UNDERSTAND THEIR CONTENTS.
Signed at
---------------------------------------------- ----------------------
CITY STATE DATE
---------------------------------------------- -----------------------------------------
PARTICIPANT'S SIGNATURE REGISTERED REPRESENTATIVE'S SIGNATURE
----------------------------------------------
JOINT PARTICIPANT'S SIGNATURE (IF APPLICABLE)
L. REGISTERED/ Will this Certificate replace in whole or in part any existing life insurance or annuity
LICENSED contract? [ ] YES [ ] NO
REPRESENTATIVE
INFORMATION
--------------------------------------------------------- --------------------------
REPRESENTATIVE'S LAST NAME FIRST NAME MIDDLE INITIAL SOC. SEC. NUMBER
--------------------------------------------------------- --------------------------
REPRESENTATIVE'S STREET ADDRESS CITY STATE ZIP CODE
( )
----------------------- ----------------------------- --------------------------
BROKER/DEALER FIRM NAME REPRESENTATIVE'S TELEPHONE NO. LICENSED AGENT ID NUMBER
FRAUD WARNING: ANY PERSON WHO WITH INTENT TO DEFRAUD OR KNOWING THAT HE IS FACILITATING A
FRAUD AGAINST AN INSURER, SUBMITS AN APPLICATION OR FILES A CLAIM CONTAINING A FALSE OR
DECEPTIVE STATEMENT MAY BE GUILTY OF INSURANCE FRAUD.
ANG-531 (11/98) 2.99
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT INSTRUCTIONS FOR FIXED ACCOUNT OPTIONS AND VARIABLE SUBACCOUNTS ANG-531 (11/98)
SIDE 3
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT INSTRUCTIONS: Choose from Fixed Account Options and Variable Subaccounts below. If Dollar Cost
Averaging Fixed Account Options are selected, Form [TBD-5551DCA] must accompany this Participant Enrollment Form.
ALLOCATIONS MUST BE EXPRESSED IN WHOLE PERCENTAGES AND TOTAL ALLOCATION MUST EQUAL 100%.
</TABLE>
<TABLE>
<CAPTION>
_____ Portfolio_____ ______ Manager_____ ______ Portfolio_____ ______ Manager_____
<S> <C> <C> <C>
__% Cash Management SunAmerica Asset Mgmt. Corp. __% Venture Value Davis Selected Advisers, L.P.
__% Government & Quality Bond Wellington Mgmt. Co., LLP __% "Dogs" of Wall Street SunAmerica Asset Mgmt. Corp.
__% Corporate Bond Federated Investors __% Alliance Growth Alliance Capital Mgmt. L.P.
__% Global Bond Goldman Sachs Asset Mgmt. __% Growth Wellington Mgmt. Co., LLP
__% High-Yield Bond SunAmerica Asset Mgmt. Corp. __% Putnam Growth Putnam Investment Mgmt., Inc.
__% Worldwide High Income Morgan Stanley Asset Mgmt., Inc. __% Real Estate Davis Selected Advisers, L.P.
__% SunAmerica Balanced SunAmerica Asset Mgmt. Corp. __% MFS Mid-Cap Growth Massachusetts Financial Services
__% MFS Total Return Massachusetts Financial Services __% Capital Appreciation Wellington Mgmt. Co., LLP
__% Asset Allocation Goldman Sachs Asset Mgmt. __% Aggressive Growth SunAmerica Asset Mgmt. Corp.
__% Utility Federated Investors __% Int'l. Growth and Income Putnam Investment Mgmt., Inc.
__% Growth-Income Alliance Capital Mgmt. L.P. __% Global Equities Alliance Capital Mgmt. L.P.
__% MFS Growth and Income Massachusetts Financial Services __% Int'l. Diversified Equities Morgan Stanley Asset Mgmt., Inc.
__% Federated Value Federated Investors __% Emerging Markets Putnam Investment Mgmt., Inc.
</TABLE>
<TABLE>
<S> <C> <C> <C>
I understand that my initial Purchase Payment may be allocated to the Money Market Subaccount until the
end of my Right to Examine period, at which point it will be allocated as shown above.
FIXED ACCOUNT OPTION GUARANTEE PERIODS
DCA ALLOCATIONS: ______% 6 Month DCA ______% 1 Year DCA
____% 1 yr. ____% 3 yr. ____% 5 yr. ____% 7 yr. ____% 10 yr.
- ------------------------------------------ ------------------------------------- --------------------
PARTICIPANT'S SIGNATURE REGISTERED REPRESENTATIVE'S SIGNATURE DATE
- ---------------------------------------------
JOINT PARTICIPANT'S SIGNATURE (if applicable)
REGISTERED/LICENSED REPRESENTATIVE INFORMATION
( )
- -------------------------------------- ------------------------------- -----------------------
REPRESENTATIVE'S TELEPHONE NO. LICENSED AGENT ID NUMBER BROKER/DEALER FIRM NAME
- -----------------------------------------------------------------------------------------------------------------
FOR OFFICE USE ONLY
- -----------------------------------------------------------------------------------------------------------------
ANG-531 (11/98) 2.99
</TABLE>
<PAGE> 1
<TABLE>
<S> <C> <C>
Anchor National Life New Business Documents New Business Documents [ANCHOR NATIONAL LOGO]
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
- -----------------------------------------------------------------------------------------------------------------
DEFERRED ANNUITY APPLICATION ANA-532 (11/98)
DO NOT USE HIGHLIGHTER. Please Print or type.
</TABLE>
<TABLE>
<S> <C>
A. OWNER [ ]Mr. [ ]Mrs.[ ]Ms. [ ]Miss [ ]Dr. [ ]Sr. [ ]Jr.
----------------------------------------------------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL
----------------------------------------------------------------------------------------
STREET ADDRESS
----------------------------------------------------------------------------------------
CITY STATE ZIP CODE
MO. DAY YR. [ ]M [ ]F ( )
-------------------- ------------ -------------------------- ----------------------
DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER
JOINT PARTICIPANT (IF ANY, MUST BE SPOUSE)
----------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL
MO. DAY YR. [ ]M [ ]F ( )
-------------------- ------------ -------------------------- ----------------------
DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER
B. ANNUITANT ----------------------------------------------------------------------------------------
(Complete only LAST NAME FIRST NAME MIDDLE INITIAL
if different
from owner) ----------------------------------------------------------------------------------------
STREET ADDRESS
----------------------------------------------------------------------------------------
CITY STATE ZIP CODE
MO. DAY YR. [ ]M [ ]F ( )
-------------------- ------------ -------------------------- ----------------------
DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER
JOINT PARTICIPANT (IF ANY, MUST BE SPOUSE)
----------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL
MO. DAY YR. [ ]M [ ]F ( )
-------------------- ------------ -------------------------- ----------------------
DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER
C. DEATH BENEFIT [ ] Purchase Payment Accumulation [ ] Maximum Anniversary Value
(Owner must Death Benefit Option Death Benefit Option
choose one) (See your investment representative or the prospectus for information about these options.)
D. BENEFICIARY PRIMARY[ ]CONTINGENT [ ]
--------------------------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL RELATIONSHIP
PRIMARY[ ]CONTINGENT [ ]
--------------------------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL RELATIONSHIP
E. TYPE OF [ ] Nonqualified. If nonqualified, is this a 1035 Exchange? [ ] YES [ ] NO
CONTRACT If yes, please complete a "Request for Transfer or 1035 Exchange" form (SA-2500RL).
[ ] Qualified, as indicated below. Is this a direct transfer? [ ] YES [ ] NO
If yes, please complete a "Request for Transfer or 1035 Exchange" form (SA-2500RL).
Please note: Please select an appropriate plan for qualified monies.
[ ]SEP [ ] 403(b) [ ] Terminal funding [ ] 457 [ ] 401 retirement plan
[ ] IRA Tax Year______ [ ] IRA rollover [ ] IRA transfer
[ ] Roth IRA Roth IRA origination date__________ [ ]Other_______
PLEASE SPECIFY
F. ANNUITY DATE MO. DAY YR. Date annuity payments begin. (Must be at least 2 years after the
-------------- Certificate Date. Maximum age is the later of the Owner's Age
ANNUITY DATE 90 or 10 years after Certificate Date. Note: If left blank, the Annuity
Date will default to maximum for nonqualified and to 70 1/2 for
qualified contracts.)
G. GROSS
PURCHASE [ ] INITIAL PAYMENT: $_____________________
PAYMENT(S) Minimum initial payment is [$5,000] for nonqualified contracts; [$2,000] for qualified
contracts. Payments may be wired or mailed. Make check payable to: Anchor National
Life Insurance Company.
[ ] AUTOMATIC PAYMENTS: $_____________________
To establish automatic bank drafts for future payments, include a completed "Automatic
Payment Authorization" form (G-2233POS), and a voided check.
ANG-531 (11/98) OVER 2.99
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
DEFERRED ANNUITY APPLICATION ANA-532 (11/98) SIDE 2
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
H. SPECIAL [ ] RIGHTS OF ACCUMULATION: Check the box at left if You have other qualifying contracts or
FEATURES certificates to be included under the Rights of Accumulation and include a completed
"Rights of Accumulation" form (TBD).
[ ] LETTER OF INTENT: Check the box at left and include a completed "Letter of Intent" form
(TBD).
[ ] SYSTEMATIC WITHDRAWAL: Check the box at left and include a "Systematic Withdrawal
Application" form (V-5550SW).
[ ] AUTOMATIC DOLLAR COST AVERAGING: Check the box at left and include a completed "Dollar
Cost Averaging Application" form (V-5551DCA).
[ ] PRINCIPAL ADVANTAGE: Check the box at left. Under Investment Instructions, indicate the
fixed account desired and specify other allocations as percentages.
I. TELEPHONE / Do you wish to authorize telephone TRANSFERS, subject to the conditions
INTERNET set forth below? [ ] YES [ ] NO
TRANSFERS Do you wish to authorize Internet TRANSFERS, subject to the conditions
set forth below? [ ] YES [ ] NO
(If no election is indicated the Company will default to yes for transfers via the
telephone or Internet.) I authorize the
AUTHORIZATION Company to accept telephone and/or Internet instructions for transfers in any amount among
subaccounts from anyone providing proper identification subject to restrictions and
limitations contained in the certificate and related prospectus, if any. I understand that
I bear the risk of loss in the event of a telephone or Internet instruction not authorized
by me. The Company will not be responsible for any losses resulting from unauthorized
transactions if it follows reasonable procedures designed to verify the identity of the
requestor and therefore, the Company will record telephone conversations containing
transaction instructions, request personal identification information before acting upon
telephone instructions and send written confirmation statements of transactions to the
address of record. For Internet transfers the Company will require proper password or
Internet authentication, keep records of all such transactions and send confirmations to
the address of record.
Do you authorize the delivery of the prospectus and other required documentation to your
personal Internet Address in lieu of receipt by mail? [ ] YES [ ] NO
If YES, You MUST indicate Your Internet Address in the space provided.
-------------------
Internet Address
J. SPECIAL
INSTRUCTIONS -------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
K. STATEMENT OF This Contract [ ] WILL [ ] WILL NOT replace an existing life insurance or annuity
OWNER contract. (If this will replace an existing policy, please indicate name of issuing company
and contract number below.)
COMPANY NAME CONTRACT NUMBER
------------------------------- ---------------------------
I hereby represent my answers to the above questions to be correct and true to the best of
my knowledge and belief and agree that this Deferred Annuity Application shall be a part of
any Contract issued by the Company. I VERIFY MY UNDERSTANDING THAT ALL PAYMENTS AND VALUES
PROVIDED BY THE CONTRACT, 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 ARE 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 (A-SHARE) INCLUDING THE SUNAMERICA SERIES TRUST AND ANCHOR SERIES
TRUST PROSPECTUSES. I HAVE READ THEM CAREFULLY AND UNDERSTAND THEIR CONTENTS.
Signed at
---------------------------------------------- ----------------------
CITY STATE DATE
---------------------------------------------- -----------------------------------------
OWNER'S SIGNATURE REGISTERED REPRESENTATIVE'S SIGNATURE
----------------------------------------------
JOINT PARTICIPANT'S SIGNATURE (IF APPLICABLE)
L. REGISTERED/ Will this Contract replace in whole or in part any existing life insurance or annuity
LICENSED contract? [ ] YES [ ] NO
REPRESENTATIVE
INFORMATION
--------------------------------------------------------- --------------------------
REPRESENTATIVE'S LAST NAME FIRST NAME MIDDLE INITIAL SOC. SEC. NUMBER
--------------------------------------------------------- --------------------------
REPRESENTATIVE'S STREET ADDRESS CITY STATE ZIP CODE
( )
----------------------- ----------------------------- --------------------------
BROKER/DEALER FIRM NAME REPRESENTATIVE'S TELEPHONE NO. LICENSED AGENT ID NUMBER
FRAUD WARNING: ANY PERSON WHO WITH INTENT TO DEFRAUD OR KNOWING THAT HE IS FACILITATING A
FRAUD AGAINST AN INSURER, SUBMITS AN APPLICATION OR FILES A CLAIM CONTAINING A FALSE OR
DECEPTIVE STATEMENT MAY BE GUILTY OF INSURANCE FRAUD.
ANG-531 (11/98) 2.99
</TABLE>
<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
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<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.
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<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.
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<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
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<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.;
<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
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
-6-
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-4 (the "Registration Statement") for Variable Annuity
Account Seven of Anchor National Life Insurance Company of our report dated
November 9, 1998, relating to the consolidated financial statements of Anchor
National Life Insurance Company, which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Financial Statements" in such
Statement of Additional Information and to the reference to us under the
heading "Independent Accountants" in such Prospectus.
PricewaterhouseCoopers LLP
Los Angeles, California
February 11, 1999
