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POLARIS PLUS 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 PLUS VARIABLE ANNUITY. THE
ANNUITY IS MORE FULLY DESCRIBED IN THE PROSPECTUS. PLEASE READ THE PROSPECTUS
CAREFULLY.
January 29, 1999
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1. THE POLARIS PLUS VARIABLE ANNUITY
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The Polaris Plus Variable Annuity is issued by Anchor National Life Insurance
Company ("Anchor National") to Participants in certain employer sponsored
retirement plans qualified subject to Section 403(b) of the Internal Revenue
Code (the "IRC"). An annuity qualified under Section 403(b) of the IRC is also
known as a tax sheltered annuity ("TSA"). It is designed to help you invest to
meet long-term financial goals, such as retirement funding. A TSA allows you to
invest money on which you have not already paid taxes and your earnings grow tax
deferred. In addition to a wide range of underlying investment options, a
variable annuity provides a guaranteed death benefit and an option to receive
income for your lifetime.
Polaris Plus offers a diverse selection of money managers and investment
options. You may divide your money among any or all of our 26 variable
investment portfolios and 5 fixed account options. Your investment is not
guaranteed. The value of your Polaris Plus contract can fluctuate up or down,
based on the performance of the underlying investments you select. You may
experience a loss.
The variable investment portfolios offer professionally managed investment
choices with goals ranging from capital preservation to aggressive growth. Your
choices for the various investment options are found on the next page.
The contract also offers 5 fixed account options, for different time periods.
Each may have a different interest rate. Interest rates are guaranteed by Anchor
National.
Like most annuities, the contract has an accumulation phase and an income phase.
During the accumulation phase, you invest money in your contract. Your earnings
are based on the investment performance of the variable investment Portfolios to
which your money is allocated and/or the interest rate(s) earned on the fixed
account option(s) in which you invest. Subject to certain IRC restrictions you
may withdraw money from your contract during the accumulation phase. However, as
with other tax-deferred investments, your ability to withdraw money is
restricted and you will pay taxes on earnings and untaxed contributions when you
withdraw them. A federal tax penalty may apply if you make withdrawals before
age 59 1/2.
During the income phase, you receive income payments from your annuity. Among
other factors, the amount of money you are able to accumulate in your contract
during the accumulation phase will affect the amount of your income payments
during the income phase.
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2. INCOME OPTIONS
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You can select from one of five income options:
(1) payments for your lifetime;
(2) payments for your lifetime and your survivor's lifetime;
(3) payments for your lifetime and your survivor's lifetime, but for not less
than 10 or 20 years;
(4) payments for your lifetime, but for not less than 10, 15 or 20 years; and
(5) payments for a specified period of 5 to 30 years.
You will also need to decide when your income payments begin and if you want
your income payments to fluctuate with investment performance or remain
constant. Once you begin receiving income payments, you cannot change your
income option.
For contracts which are part of a qualified retirement Plan (including those
issued under IRC Section 403(b)) funded with money on which you had not paid
taxes, the entire income payment is generally taxable as income. In addition,
under certain qualified contracts your income option may not exceed your life
expectancy.
If your contract is part of a non-qualified retirement plan (one that is
established with after tax dollars), payments during the Income Phase are
considered partly a return of your original investment. The "original
investment" part of each payment is not taxable as income.
In addition to the above income options, you may also enroll in the Income
Protector program which provides a minimum retirement income guarantee, subject
to the provisions thereof.
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3. PURCHASING A POLARIS PLUS VARIABLE
ANNUITY CONTRACT
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You can buy a contract with money from a direct transfer or a direct rollover
from an existing retirement plan or by establishing a salary reduction agreement
with your employer.
For qualified contracts issued under IRC Section 403(b) there is no minimum
initial purchase payment if you establish a salary reduction agreement with your
employer. If you fund a contract through a direct transfer or direct rollover
only, the minimum initial purchase payment is $2,000.
For Non-qualified contracts, the minimum initial purchase payment is $5,000 and
subsequent amounts of $500 or more may be added to your contract at any time
during the Accumulation Phase.
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4. INVESTMENT OPTIONS
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You may allocate money to the following variable investment Portfolios of the
Anchor Series Trust and/or the SunAmerica Series Trust:
ANCHOR SERIES TRUST
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Capital Appreciation Portfolio
- Growth Portfolio
- Government and Quality Bond Portfolio
SUNAMERICA SERIES TRUST
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Global Equities Portfolio
- Alliance Growth Portfolio
- Growth-Income Portfolio
MANAGED BY DAVIS SELECTED ADVISERS, L.P.
- Venture Value Portfolio
- Real Estate Portfolio
FIRST AMERICAN ASSET MANAGEMENT
- Equity Income Portfolio
- Equity Index Portfolio
- Small Company Value Portfolio
MANAGED BY FEDERATED INVESTORS
- Federated Value Portfolio
- Utility Portfolio
- Corporate Bond Portfolio
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT/
GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
- Asset Allocation Portfolio
- Global Bond Portfolio
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT INC.
- International Diversified Equities Portfolio
- Worldwide High Income Portfolio
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
- Putnam Growth Portfolio
- International Growth and Income Portfolio
- Emerging Markets Portfolio
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio
- "Dogs" of Wall Street Portfolio
- SunAmerica Balanced Portfolio
- High-Yield Bond Portfolio
- Cash Management Portfolio
You may also allocate money to the 1, 3 and 5 year market value adjustment
("MVA") fixed account options and, under certain circumstances, the 6-month and
1-year Dollar Cost Averaging ("DCA") fixed account options. (The 6-month DCA
fixed account may not yet be available in your state. Please contact your
financial representative for more information.)
Your contract value will be adjusted up or down for withdrawals or transfers
from the 1, 3 and 5 year MVA fixed account options prior to the end of the
guarantee period. The interest rates applicable for these fixed account options
may differ from time to time, however, we will never credit less than a 3%
annual effective rate. Once established, the rate will not change during the
selected period.
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5. EXPENSES
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We deduct insurance charges which equal 1.25% annually of the average daily
value of your contract allocated to the variable portfolios.
As with other professionally managed investments, there are also investment
charges imposed on contracts with money allocated to the variable portfolios. We
estimate these fees to range from .55 to 1.90.
If you take money out of your contract, you may be assessed a withdrawal charge
which is a percentage of purchase payments based on the number of years the
withdrawn purchase payments have been invested in the contract. The percentage
declines over the time the money is in the contract. The applicable withdrawal
charge schedule also varies dependent upon your employment status at the time of
contract issue.
SEPARATED FROM SERVICE AT TIME OF ISSUE
(SCHEDULE A)
<TABLE>
<CAPTION>
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Year 1 2 3 4 5 6
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<S> <C> <C> <C> <C> <C> <C>
WITHDRAWAL CHARGE 6% 6% 5% 5% 4% 0%
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</TABLE>
EMPLOYED AT TIME OF ISSUE (SCHEDULE B)
<TABLE>
<CAPTION>
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Year 1 2 3 4 5 6 7
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<S> <C> <C> <C> <C> <C> <C> <C>
WITHDRAWAL
CHARGE 6% 6% 5% 5% 4% 4% 0%
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</TABLE>
Each year, you are allowed to make 15 transfers without charge. After your first
15 free transfers, a $25 transfer fee ($10 in Pennsylvania and Texas) applies to
each subsequent transfer.
In a limited number of states, you may also be assessed a state premium tax of
up to 3.5%, depending upon the state.
The following charts are designed to help you understand the charges in your
contract. The column "Total Annual Charges" shows the total of the 1.25%
insurance charges and the investment charges for each variable portfolio.
The next two columns show two examples of the charges you would pay under the
contract. The examples assume that you invested $1,000 in a contract which earns
5% annually and that you withdraw your money: (1) at the end of year 1, and (2)
at the end of year 10. The premium tax is assumed to be 0% in both examples.
<PAGE> 3
<TABLE>
<CAPTION>
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EXAMPLES:
TOTAL ANNUAL TOTAL ANNUAL TOTAL EXPENSES TOTAL EXPENSES
INSURANCE INVESTMENT TOTAL ANNUAL AT END OF AT END OF
ANCHOR SERIES TRUST PORTFOLIO CHARGES CHARGES CHARGES 1 YEAR 10 YEARS
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<S> <C> <C> <C> <C> <C>
Capital Appreciation 1.25% .68% 1.93% $ 80 $225
Growth 1.25% .75% 2.00% $ 80 $233
Government and Quality Bond 1.25% .67% 1.92% $ 79 $224
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SUNAMERICA SERIES TRUST PORTFOLIO
Emerging Markets* 1.25% 1.90% 3.15% $ 92 $346
International Diversified Equities 1.25% 1.26% 2.51% $ 85 $285
Global Equities 1.25% .88% 2.13% $ 82 $246
International Growth and Income* 1.25% 1.46% 2.71% $ 87 $304
Aggressive Growth* 1.25% .83% 2.08% $ 81 $241
Small Company Value* 1.25% 1.40% 2.65% $ 87 $298
Real Estate* 1.25% .95% 2.20% $ 82 $253
Putnam Growth 1.25% .86% 2.11% $ 81 $244
Alliance Growth 1.25% .64% 1.89% $ 79 $221
"Dogs" of Wall Street* 1.25% .85% 2.10% $ 81 $243
Venture Value 1.25% .75% 2.00% $ 80 $233
Federated Value* 1.25% .83% 2.08% $ 81 $241
Growth-Income 1.25% .60% 1.85% $ 79 $217
Equity Index* 1.25% .55% 1.80% $ 78 $212
Utility* 1.25% 1.01% 2.26% $ 83 $260
Equity Income* 1.25% .95% 2.20% $ 82 $253
Asset Allocation 1.25% .64% 1.89% $ 79 $221
SunAmerica Balanced* 1.25% .78% 2.03% $ 81 $236
Worldwide High Income 1.25% 1.08% 2.33% $ 84 $267
High-Yield Bond 1.25% .69% 1.94% $ 80 $226
Corporate Bond 1.25% .77% 2.02% $ 81 $235
Global Bond 1.25% .85% 2.10% $ 81 $243
Cash Management 1.25% .58% 1.83% $ 79 $215
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</TABLE>
* For these Portfolios, the adviser, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or reimburse expenses, if necessary, to keep
operating expenses at or below an established maximum amount. All waivers or
reimbursements may be terminated at any time. For more detailed information,
see Fee Tables and Examples in the prospectus.
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6. TAXES
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Unlike taxable investments where earnings are taxed in the year they are earned,
taxes on amounts contributed to and earned in a qualified contract (one
purchased with before-tax dollars, like a TSA), are taxable when withdrawn. In a
non-qualified contract (one that is purchased with after-tax dollars) taxes on
amounts earned are taxed upon withdrawal.
You may be subject to a 10% federal tax penalty for distributions or withdrawals
before age 59 1/2.
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7. ACCESS TO YOUR MONEY
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During the accumulation phase withdrawals from your contract may be limited by
the IRC, any applicable employer plan and this contract. Contracts issued
pursuant to Section 403(b) of the IRC are subject to specific withdrawal
restrictions. SEE ACCESS TO YOUR MONEY ON PAGE 12 for details regarding
restrictions applicable to withdrawals.
Under this contract, certain types of withdrawals are subject to a withdrawal
charge if taken within the first five or six years a purchase payment has been
in the contract. We determine the exact schedule of withdrawal charges based on
your employment status as of the date of the contract issue. Some types of
withdrawals may be exempt from these Company imposed withdrawal charges. SEE
EXPENSES ON PAGE 13 for details regarding possible withdrawal charge exceptions.
In all cases after your tenth Contract anniversary, Company imposed withdrawal
charges no longer apply. However, the IRC or any applicable Plan may still
impose restrictions on withdrawals at that point in time.
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8. PERFORMANCE
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The value of your contract will fluctuate depending upon the investment
performance of the portfolio(s) you choose.
When you invest in the Polaris Plus Variable Annuity, your money is actually
invested in the underlying portfolios of the Anchor Series Trust and/or the
SunAmerica Series Trust. These trusts are older than the annuity itself and have
served as underlying investments for other variable annuity contracts. Some of
the advertised historical performance for this annuity will be derived from the
performance of the corresponding portfolios of the trusts modified to reflect
the charges and expenses associated with this contract, as if this contract had
been in existence during the time period advertised. Of course, past performance
does not guarantee future results.
As of the date of this prospectus, the sale of this contract has not yet begun.
Therefore, no performance is presented here.
<PAGE> 4
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9. DEATH BENEFIT
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If you should die during the accumulation phase, your beneficiary will receive a
death benefit. The death benefit will be the greater of:
1. Total purchase payments minus total withdrawals at the time we receive
satisfactory proof of death, or;
2. The contract value at the time we receive satisfactory proof of death.
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10. OTHER INFORMATION
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FREE LOOK: You may cancel your contract within ten days (or longer if required
by your state) by mailing it to our Annuity Service Center. Your contract will
be treated as void on the date we receive it and we will pay you an amount equal
to the value of your contract on the date (unless otherwise required by state
law). Its value may be more or less than the money you initially invested.
ASSET ALLOCATION REBALANCING: If selected by you, this program maintains your
specified allocation mix in the variable investment portfolio by readjusting
your money on a calendar quarterly, semiannual or annual basis.
SYSTEMATIC WITHDRAWAL PROGRAM: If selected by you, this program allows you to
receive either monthly, quarterly, semiannual or annual checks during the
accumulation phase. Systematic withdrawals may also be electronically
transferred to your bank account. Of course, withdrawals may be subject to a
withdrawal charge and a 10% federal tax penalty may apply if you are under age
59 1/2. This program is not available if you are not eligible to make
withdrawals under the IRC or an applicable employer plan.
DOLLAR COST AVERAGING: If selected by you, this program allows you to invest
gradually in the variable portfolios from any of the variable investment
portfolios, the 1-year MVA fixed account option, and under certain circumstances
the 6-month or the 1-year DCA fixed account options.
CONFIRMATIONS AND QUARTERLY STATEMENTS: You will receive a confirmation of each
transaction within your contract. On a quarterly basis, you will receive a
complete statement of your transactions over the past quarter and a summary of
your account values.
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11. INQUIRIES
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If you have questions about your contract or need to make changes, call your
financial representative or contact us at:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Toll Free Telephone Number: 877-999-9205
If money accompanies your correspondence, you should direct it to:
Anchor National Life Insurance Company
P.O. Box 100330
Pasadena, California 91189-0001
<PAGE> 5
POLARIS PLUS LOGO
VARIABLE ANNUITY
PROSPECTUS
JANUARY 29, 1999
<TABLE>
<S> <C> <C>
Please read this prospectus carefully FLEXIBLE PAYMENT GROUP AND INDIVIDUAL DEFERRED ANNUITY
before investing and keep it for CONTRACTS
future reference. It contains issued by
important information about the ANCHOR NATIONAL LIFE INSURANCE COMPANY
Polaris Plus Variable Annuity. in connection with
VARIABLE ANNUITY ACCOUNT SEVEN
To learn more about the annuity The annuity has 31 investment choices - 5 fixed account
offered by this prospectus, obtain a options and 26 variable investment Portfolios listed below.
copy of the Statement of Additional The 5 fixed account options include market value adjustment
Information ("SAI") dated January 29, fixed accounts for specified periods of 1, 3, and 5 years.
1999. The SAI is on file with the In addition there are 2 Dollar Cost Averaging Accounts for
Securities and Exchange Commission 6-month and 1-year periods. The 26 variable investment
("SEC") and is incorporated by portfolios are part of the Anchor Series Trust or the
reference into this prospectus. The SunAmerica Series Trust.
Table of Contents of the SAI appears
on page 22 of this prospectus. For a ANCHOR SERIES TRUST:
free copy of the SAI, call us at MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
(877) 999-9205 or write to us at our - Capital Appreciation Portfolio
Annuity Service Center, P.O. Box - Growth Portfolio
54299, Los Angeles, California - Government and Quality Bond Portfolio
90054-0299.
SUNAMERICA SERIES TRUST:
In addition, the SEC maintains a MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
website (http://www.sec.gov) that - Global Equities Portfolio
contains the SAI, materials - Alliance Growth Portfolio
incorporated by reference and other - Growth-Income Portfolio
information filed electronically with MANAGED BY DAVIS SELECTED ADVISERS, L.P.
the SEC by Anchor National. - Venture Value Portfolio
- Real Estate Portfolio
ANNUITIES INVOLVE RISKS, INCLUDING MANAGED BY FEDERATED INVESTORS
POSSIBLE LOSS OF PRINCIPAL. ANNUITIES - Federated Value Portfolio
ARE NOT A DEPOSIT OR OBLIGATION OF, - Utility Portfolio
OR GUARANTEED OR ENDORSED BY, ANY - Corporate Bond Portfolio
BANK. THEY ARE NOT FEDERALLY INSURED MANAGED BY FIRST AMERICAN ASSET MANAGEMENT
BY THE FEDERAL DEPOSIT INSURANCE - Equity Income Portfolio
CORPORATION, THE FEDERAL RESERVE - Equity Index Portfolio
BOARD OR ANY OTHER AGENCY. - Small Company Value Portfolio
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT/
GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
- Asset Allocation Portfolio
- Global Bond Portfolio
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT
- International Diversified Equities Portfolio
- Worldwide High Income Portfolio
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
- Putnam Growth Portfolio
- International Growth and Income Portfolio
- Emerging Markets Portfolio
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio
- "Dogs" of Wall Street Portfolio
- SunAmerica Balanced Portfolio
- High-Yield Bond Portfolio
- Cash Management Portfolio
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
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<TABLE>
<S> <C> <C>
GLOSSARY............................................. 3
FEE TABLES........................................... 4
Owner Transaction Expenses........................... 4
The Income Protector Expense......................... 4
Annual Separate Account Expenses..................... 4
Portfolio Expenses................................... 4
EXAMPLES............................................. 5
THE POLARIS PLUS VARIABLE ANNUITY.................... 7
PURCHASING A POLARIS PLUS VARIABLE ANNUITY........... 7
Allocation of Purchase Payments...................... 7
Accumulation Units................................... 8
Free Look............................................ 8
INVESTMENT OPTIONS................................... 8
Variable Portfolios.................................. 8
Anchor Series Trust.............................. 8
SunAmerica Series Trust.......................... 8
Fixed Account Options................................ 9
Market Value Adjustment ("MVA")...................... 9
Transfers During the Accumulation Phase.............. 10
Dollar Cost Averaging ("DCA")........................ 10
Asset Allocation Rebalancing......................... 11
Voting Rights........................................ 11
Substitution......................................... 12
ACCESS TO YOUR MONEY................................. 12
Withdrawal Restrictions.............................. 12
Systematic Withdrawal Program........................ 12
Loans................................................ 13
Minimum Contract Value............................... 13
DEATH BENEFIT........................................ 13
EXPENSES............................................. 13
Insurance Charges.................................... 13
Withdrawal Charges................................... 14
Exceptions to Withdrawal Charge...................... 14
Investment Charges................................... 14
Transfer Fee......................................... 14
Premium Tax.......................................... 14
Income Taxes......................................... 14
Reduction or Elimination of Charges and Expenses, and
Additional Amounts Credited........................ 14
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................................................ 18
Annuity Contracts in General......................... 18
Tax Treatment of Distributions -
Qualified Contracts................................ 19
Section 403(b) Plans................................. 19
Tax Treatment of Distributions -
Non-Qualified Contracts............................ 19
Minimum Distributions................................ 19
Diversification...................................... 19
PERFORMANCE.......................................... 20
OTHER INFORMATION.................................... 20
The Separate Account................................. 20
The General Account.................................. 20
Distribution of the Contract......................... 20
Administration....................................... 21
Year 2000............................................ 21
Legal Proceedings.................................... 21
Custodian............................................ 22
Additional Information............................... 22
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL
INFORMATION.......................................... 22
APPENDIX A -- PREMIUM TAXES.......................... A-1
APPENDIX B -- MARKET VALUE ADJUSTMENT................ B-1
</TABLE>
2
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GLOSSARY
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We have capitalized some of the technical terms used in this prospectus. To help
you understand these terms, we have defined them in this glossary.
ACCUMULATION PHASE - The period during which you invest money in your contract.
ACCUMULATION UNITS - A measurement we use to calculate the value of the variable
portion of your contract during the Accumulation Phase.
ANNUITANT(S) - The person(s) on whose life (lives) we base annuity payments. For
a contract issued pursuant to IRC Section 403(b), the Participant must be the
Annuitant.
ANNUITY DATE - The date on which annuity payments are to begin, as selected by
you.
ANNUITY UNITS - A measurement we use to calculate the mount of annuity payments
you receive from the variable portion of your contract during the Income Phase.
BENEFICIARY (IES) - The person(s) designated to receive any benefits under the
contract if you or the Annuitant dies.
COMPANY - Anchor National Life Insurance Company, Anchor National, We, Us, the
insurer that issues this contract.
CONTRACT - The variable annuity contract issued by Anchor National Life
Insurance Company ("Anchor National"). This includes any applicable group master
contract, certificate and endorsement.
CONTRACTHOLDER - The party named as the Contractholder on the annuity Contract
issued by Anchor National. The Contractholder may be an Employer, a retirement
plan trust, an association or any other entity allowed under the law.
EMPLOYER - The organization specified in the Contract which offers the Plan to
its employees.
INCOME PHASE - The period during which we make annuity payments to you.
IRC - The Internal Revenue Code of 1986, as amended, and all regulations
thereto.
IRS - The Internal Revenue Service.
NON-QUALIFIED (CONTRACT) - A contract purchased with after-tax dollars. In
general, these contracts are not under any pension plan, specially sponsored
program or individual retirement account ("IRA").
PARTICIPANT - An employee or other person affiliated with the Contractholder on
whose behalf an account is maintained under the terms of the Contract.
PLAN - A retirement program offered by an Employer to its employees for which a
Contract is used to accumulate funds.
PURCHASE PAYMENTS - The money you give us to buy the contract, as well as any
additional money you give us to invest in the contract after you own it.
QUALIFIED (CONTRACT) - A contract purchased with pretax dollars. These contracts
are generally purchased under a pension plan, specially sponsored program or
IRA.
TRUSTS - Refers to the Anchor Series Trust and the SunAmerica Series Trust
collectively.
TSA - A tax sheltered annuity, one issued in accordance with the provisions of
Section 403(b) of the IRC.
VARIABLE PORTFOLIO(S) - The variable investment options available under the
contract. Each Portfolio has its own investment objective and is invested in the
underlying investments of the Anchor Series Trust or the SunAmerica Series
Trust.
3
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FEE TABLES
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OWNER TRANSACTION EXPENSES
WITHDRAWAL CHARGE (AS A PERCENTAGE OF PURCHASE PAYMENTS)
<TABLE>
<CAPTION>
YEARS: 1 2 3 4 5 6 7
<S> <C> <C> <C> <C> <C> <C> <C>
Schedule A* 6% 6 % 5 % 5 % 4 % 0 % 0%
Schedule B** 6% 6 % 5 % 5 % 4 % 4 % 0%
</TABLE>
* This Withdrawal Charge schedule applies to participants who are separated
from service at the time of contract issue.
** This Withdrawal Charge schedule applies to all other participants.
THE INCOME PROTECTOR EXPENSE
(THE INCOME PROTECTOR PROGRAM IS OPTIONAL AND IF ELECTED THE APPROPRIATE FEE IS
DEDUCTED ANNUALLY FROM CONTRACT VALUE)
<TABLE>
<CAPTION>
THE INCOME PROTECTOR FEE AS A PERCENTAGE OF YOUR
ALTERNATIVES INCOME BENEFIT BASE
-------------------- ---------------------------
<S> <C>
Income Protector Plus.................. .15%
Income Protector Max................... .30%
</TABLE>
ANNUAL SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge Insurance Charge...... 1.25%
-----
TOTAL SEPARATE ACCOUNT EXPENSES 1.25%
=====
</TABLE>
PORTFOLIO EXPENSES
ANCHOR SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S TWELVE-MONTH PERIOD ENDED
NOVEMBER 30, 1998)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
<S> <C> <C> <C>
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Capital Appreciation .64% .04% .68%
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Growth .70% .05% .75%
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Government and Quality Bond .61% .06% .67%
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</TABLE>
SUNAMERICA SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER REIMBURSEMENT OR WAIVER OF EXPENSES
FOR THE TRUST'S FISCAL YEAR ENDED
NOVEMBER 30, 1998)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
<S> <C> <C> <C>
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Emerging Markets*** 1.25% .65% 1.90%
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International Diversified Equities 1.00% .26% 1.26%
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Global Equities .74% .14% .88%
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International Growth and Income**** 1.00% .46% 1.46%
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Aggressive Growth .74% .09% .83%
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Small Company Value** 1.00% .40% 1.40%
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Real Estate**** .80% .15% .95%
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Putnam Growth .81% .05% .86%
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Alliance Growth+ .61% .03% .64%
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"Dogs" of Wall Street*** .60% .25% .85%*
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Venture Value .72% .03% .75%
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Federated Value .75% .08% .83%
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Growth-Income .56% .04% .60%
- -----------------------------------------------------------------------------------------------------------
Equity Index** .40% .15% .55%
- -----------------------------------------------------------------------------------------------------------
Utility**** .75% .26% 1.01%
- -----------------------------------------------------------------------------------------------------------
Equity Income** .65% .30% .95%
- -----------------------------------------------------------------------------------------------------------
Asset Allocation .59% .05% .64%
- -----------------------------------------------------------------------------------------------------------
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>
* Annualized.
** As of the date of this prospectus, the sale of contracts offering the Small
Company Value, Equity Index and Equity Income Portfolios has not begun. The
percentages are based on estimated amounts for the current fiscal year.
*** 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%); "Dogs" of Wall Street (.92%).
**** 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%); and Real Estate (.93%); Utility (.92%).
+ The fees noted here are restated to reflect an estimate of fees for this
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> 9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXAMPLES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You will pay the following expenses on a $1,000 investment in each Portfolio,
assuming a 5% annual return on assets and:
(a) Surrender of the contract at the end of the stated time period under
either schedule A* or B**;
(b) If the contract is not Surrendered or is annuitized.+
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS
<S> <C> <C>
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Capital Appreciation (a) $80 (a) $111
(b) $20 (b) $ 61
- ----------------------------------------------------------------------------------
Growth (a) $80 (a) $113
(b) $20 (b) $ 63
- ----------------------------------------------------------------------------------
Government and Quality Bond (a) $79 (a) $110
(b) $19 (b) $ 60
- ----------------------------------------------------------------------------------
Emerging Markets (a) $92 (a) $147
(b) $32 (b) $ 97
- ----------------------------------------------------------------------------------
International Diversified Equities (a) $85 (a) $128
(b) $25 (b) $ 78
- ----------------------------------------------------------------------------------
Global Equities (a) $82 (a) $117
(b) $22 (b) $ 67
- ----------------------------------------------------------------------------------
International Growth and Income (a) $87 (a) $134
(b) $27 (b) $ 84
- ----------------------------------------------------------------------------------
Aggressive Growth (a) $81 (a) $115
(b) $21 (b) $ 65
- ----------------------------------------------------------------------------------
Small Company Value (a) $87 (a) $132
(b) $27 (b) $ 82
- ----------------------------------------------------------------------------------
Real Estate (a) $82 (a) $119
(b) $22 (b) $ 69
- ----------------------------------------------------------------------------------
Putnam Growth (a) $81 (a) $116
(b) $21 (b) $ 66
- ----------------------------------------------------------------------------------
Alliance Growth (a) $79 (a) $109
(b) $19 (b) $ 59
- ----------------------------------------------------------------------------------
"Dogs" of Wall Street (a) $81 (a) $116
(b) $21 (b) $ 66
- ----------------------------------------------------------------------------------
Venture Value (a) $80 (a) $113
(b) $20 (b) $ 63
- ----------------------------------------------------------------------------------
Federated Value (a) $81 (a) $115
(b) $21 (b) $ 65
- ----------------------------------------------------------------------------------
Growth-Income (a) $79 (a) $108
(b) $19 (b) $ 58
- ----------------------------------------------------------------------------------
Equity Index (a) $78 (a) $107
(b) $18 (b) $ 57
- ----------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 10
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS
<S> <C> <C>
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Utility (a) $83 (a) $121
(b) $23 (b) $ 71
- ----------------------------------------------------------------------------------
Equity Income (a) $82 (a) $119
(b) $22 (b) $ 69
- ----------------------------------------------------------------------------------
Asset Allocation (a) $79 (a) $109
(b) $19 (b) $ 59
- ----------------------------------------------------------------------------------
SunAmerica Balanced (a) $81 (a) $114
(b) $21 (b) $ 64
- ----------------------------------------------------------------------------------
Worldwide High Income (a) $84 (a) $123
(b) $24 (b) $ 73
- ----------------------------------------------------------------------------------
High-Yield Bond (a) $80 (a) $111
(b) $20 (b) $ 61
- ----------------------------------------------------------------------------------
Corporate Bond (a) $81 (a) $113
(b) $21 (b) $ 63
- ----------------------------------------------------------------------------------
Global Bond (a) $81 (a) $116
(b) $21 (b) $ 66
- ----------------------------------------------------------------------------------
Cash Management (a) $79 (a) $108
(b) $19 (b) $ 58
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
* See Page 4 above for an explanation of Schedule A.
** See Page 4 above for an explanation of Schedule B.
+ We do not currently charge a surrender charge upon annuitization, unless the
contract is annuitized under the Income Protector program. We will assess
any applicable surrender charges upon annuitizations effected using the
Income Protector program as if you had fully surrendered your contract.
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you would
incur directly and indirectly by investing in the contract.
2. For certain Portfolios, the adviser, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or reimburse certain expenses, if
necessary, to keep annual operating expenses at or below the lesser of the
maximum allowed by any applicable state expense limitations or the following
percentages of each Portfolio's average net assets: Emerging Markets
(1.90%); International Growth and Income (1.60%); Aggressive Growth (.90%);
Small Company Value (1.40%); Real Estate (1.25%); "Dogs" of Wall Street
(.85%); Federated Value (1.03%); Equity Index (.55%); Utility (1.05%);
Equity Income (.95%); SunAmerica Balanced (1.00%). The adviser also may
voluntarily waive or reimburse additional amounts to increase a Portfolio's
investment return. All waivers and/or reimbursements may be terminated at
any time. Furthermore, the adviser may recoup any waivers or reimbursements
within two years after such waivers or reimbursements are granted, provided
that the Portfolio is able to make such payment and remain in compliance
with the foregoing expense limitations.
3. The Examples assume that no transfer fees were imposed. Although premium
taxes may apply in certain states, they are not reflected in the Examples.
In addition, the examples do not reflect the fees associated with the
optional Income Protector Program. SEE INCOME OPTIONS ON PAGE 15.
4. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
AS OF THE DATE OF THIS PROSPECTUS SALES OF THIS CONTRACT HAD NOT BEGUN,
THEREFORE NO CONDENSED FINANCIAL INFORMATION APPEARS IN THIS PROSPECTUS.
6
<PAGE> 11
- ----------------------------------------------------------------
- ----------------------------------------------------------------
THE POLARIS PLUS VARIABLE ANNUITY
- ----------------------------------------------------------------
- ----------------------------------------------------------------
We issue Polaris Plus, a group Contract, to a Contractholder (usually your
employer) for the benefit of the Participants in the group (you and other
employees in the group), under Section 403(b) of the IRC. As a Participant in
the group, you will receive a certificate that evidences your ownership. When
you see the term Contract in this prospectus we are referring to your
certificate. In some states we issue a Contract directly to you instead of a
certificate. Such contracts are identical to the contracts described in this
prospectus, except we issue it to you directly.
An annuity is a contract between you and an insurance company. You are the owner
of the contract. The contract provides certain benefits. You should decide
whether the benefits are right for you. Among other features the contract
offers:
- Investment Options: Various investment options available in one contract,
including both variable and fixed-rate investing.
- Death Benefit: If you die during the Accumulation Phase, the insurance
company pays a death benefit to your Beneficiary.
- Guaranteed Income: If elected, you receive a stream of income for your
lifetime or another available period you select.
We developed this variable annuity to help you contribute to your retirement
savings. Your contributions may come from payroll deductions arranged through
your employer and/or from direct transfers or direct rollovers from other
retirement savings plans.
This Contract has two stages, the Accumulation Phase and the Income Phase. Your
Contract is in the Accumulation Phase when you make payments into the Contract.
During the Accumulation Phase, as a TSA participant you have the advantage of
making purchase payments before paying taxes on the contributions. In addition,
taxes on your earnings are deferred until withdrawal. The Income Phase begins
when you request that we start making income payments to you out of the money
accumulated in your Contract.
The Contract is called a "variable" annuity because it allows you to invest in
Variable Portfolios which, like mutual funds, have different investment
objectives and performance which varies with market conditions. You can gain or
lose money if you invest in these Variable Portfolios. The amount of money you
accumulate in your Contract depends on the performance of the Portfolios in
which you invest. This Contract currently offers 26 variable investment
Portfolios.
The Contract also offers several fixed account options for varying time periods.
Fixed account options earn interest at a rate set and guaranteed by Anchor
National. If you allocate money to the fixed account options, the amount of
money that accumulates in the Contract depends on the total interest credited to
the particular fixed account option(s) in which you are invested.
For more information on investment options available under this contract SEE
INVESTMENT OPTIONS ON PAGE 8.
Anchor National is a stock life insurance company organized under the laws of
the state of Arizona. Its principal place of business is 1 SunAmerica Center,
Los Angeles, California 90067. The Company conducts life insurance and annuity
business in the District of Columbia and all states except New York. Anchor
National is an indirect, wholly owned subsidiary of American International
Group, Inc., a Delaware Corporation.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
PURCHASING A POLARIS PLUS VARIABLE ANNUITY
- ----------------------------------------------------------------
- ----------------------------------------------------------------
A Purchase Payment is the money you give us to buy a contract. Any additional
money you give us to invest in your contract after purchase is a subsequent
Purchase Payment. You make payments into your Contract in two ways:
- - salary reduction contributions, arranged through your employer; and/or
- - direct transfer or direct rollover from an existing retirement plans.
If you enter into a salary reduction agreement with your employer to make
Purchase Payments, there is no minimum initial payment. If you do not establish
such a salary reduction agreement, and only contribute through direct transfer
or direct rollover, the minimum initial Purchase Payment is $2,000.
You must have prior Company approval before we can accept Purchase Payments
greater than $1,000,000. The Company reserves the right to refuse any Purchase
Payment or subsequent Purchase Payments, including but not limited to any
Purchase Payments which would cause the contract value to exceed $1,000,000 at
the time of the Purchase Payment.
In general, for Qualified contracts we will not issue you a contract if you are
age 70 1/2 or older, unless you certify that the minimum distributions required
by the IRS are being made. Upon proof satisfactory to us that minimum
distribution requirements are being satisfied or are not yet required, we may
issue you a contract prior to your reaching age 80.
ALLOCATION OF PURCHASE PAYMENTS
We invest your Purchase Payments in the fixed and variable investment options
according to your instructions. If we receive a Purchase Payment without
allocation instructions, we will invest the money according to your last
allocation instructions. SEE INVESTMENTS OPTIONS ON PAGE 8.
In order to issue your Contract, we must receive your completed enrollment form,
Purchase Payment, allocation instructions and any other required paper work at
our principal place of business. We allocate your initial purchase payment
within two days of receiving it. If we do not have the complete information
necessary to issue your contract, we will
7
<PAGE> 12
contact you. If we do not have the information necessary to issue your Contract
within 5 business days we will:
- Send your money back to you, or;
- Ask your permission to keep your money until we get the information
necessary to issue the Contract.
ACCUMULATION UNITS
The value of the variable portion of your Contract will go up and down dependent
on the investment performance of the Portfolios you choose. To calculate the
value of your Contract, we use a measure called an Accumulation Unit.
We calculate the value of an Accumulation Unit each day that the New York Stock
Exchange ("NYSE") is open, as follows:
1. We determine the total value of money invested in a particular
Portfolio;
2. We subtract from that amount all applicable contract charges; and
3. We divide this amount by the number of outstanding Accumulation Units.
When you make a Purchase Payment, we credit your Contract with Accumulation
Units. We determine the number of Accumulation Units credited by dividing the
Purchase Payment by the Accumulation Unit value for the specific Portfolio.
EXAMPLE:
We receive a $25,000 Purchase Payment from you on Wednesday. You allocate
the money to the Global Bond Portfolio. We determine that the value of an
Accumulation Unit for the Global Bond Portfolio is $11.10 when the NYSE
closes on Wednesday. We then divide $25,000 by $11.10 and credit your
Contract on Wednesday night with 2252.25 Accumulation Units for the Global
Bond Portfolio.
Performance of the Portfolios in which you are invested and the charges and
expenses under your contract affect your Accumulation Unit values. These factors
may cause the value of your Contract to go up or down.
FREE LOOK
You may cancel your Contract within ten days after receiving it (or longer if
required by state law). We call this a "free look." To cancel, you must mail the
Contract along with your free look request to our Annuity Service Center at P.O.
Box 54299, Los Angeles, California 90054-0299. We will refund to you the value
of your Contract on the day we receive your request. The amount refunded to you
may be more or less than the amount you originally invested.
Certain states (and all contracts issued as IRAs) require us to return your
Purchase Payments upon a free look request. With respect to those contracts, we
reserve the right to put your money in the Cash Management Portfolio or the
1-year fixed account option during the free look period. If you cancel your
Contract during the free look period, we return your Purchase Payments or the
value of your Contract, whichever is larger. At the end of the free look period,
we reallocate your money according to your instructions.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
INVESTMENT OPTIONS
- ----------------------------------------------------------------
- ----------------------------------------------------------------
VARIABLE PORTFOLIOS
The Contract currently offers 26 variable investment Portfolios. These
Portfolios invest in shares of the Anchor Series Trust and the SunAmerica Series
Trust (the "Trusts"). Additional Portfolios may be available in the future.
These Portfolios operate similarly to a mutual fund but are only available
through the purchase of certain insurance contracts.
SunAmerica Asset Management Corp., an indirect wholly owned subsidiary of
SunAmerica Inc., is the investment adviser to the Trusts. The Trusts serve as
the underlying investment vehicles for other variable annuity contracts issued
by Anchor National Life Insurance Company, and other affiliated and unaffiliated
insurance companies. Neither Anchor National nor the Trusts believe that
offering shares of the Trusts in this manner is disadvantageous to you. The
fund's management monitors the Trusts for any conflicts between contract owners.
The Portfolios along with their respective subadvisers are listed below:
ANCHOR SERIES TRUST
Wellington Management Company, LLP serves as subadviser to the Anchor Series
Trust Portfolios. Anchor Series Trust has Portfolios in addition to those listed
below which are not available for investment under the contract. The 3 available
Portfolios are:
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Capital Appreciation Portfolio
- Growth Portfolio
- Government and Quality Bond Portfolio
SUNAMERICA SERIES TRUST
Various subadvisers provide investment advice for the SunAmerica Series Trust
Portfolios. The 23 Portfolios and the subadvisers are:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Global Equities Portfolio
- Alliance Growth Portfolio
- Growth-Income Portfolio
MANAGED BY DAVIS SELECTED ADVISERS, L.P.
- Venture Value Portfolio
- Real Estate Portfolio
8
<PAGE> 13
MANAGED BY FEDERATED INVESTORS
- Federated Value Portfolio
- Utility Portfolio
- Corporate Bond Portfolio
MANAGED BY FIRST AMERICAN ASSET MANAGEMENT
- Equity Income Portfolio
- Equity Index Portfolio
- Small Company Value Portfolio
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT/GOLDMAN
SACHS ASSET MANAGEMENT INTERNATIONAL
- Asset Allocation Portfolio
- Global Bond Portfolio
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT
- International Diversified Equities Portfolio
- Worldwide High Income Portfolio
MANAGED BY PUTNAM INVESTMENT MANAGEMENT
- Putnam Growth Portfolio
- International Growth and Income Portfolio
- Emerging Markets Portfolio
MANAGED BY SUNAMERICA ASSET MANAGEMENT, INC.
- Aggressive Growth Portfolio
- "Dogs" of Wall Street Portfolio
- SunAmerica Balanced Portfolio
- High-Yield Bond Portfolio
- Cash Management Portfolio
YOU SHOULD READ THE PROSPECTUSES FOR THE TRUSTS CAREFULLY. THESE PROSPECTUSES
CONTAIN DETAILED INFORMATION ABOUT THE PORTFOLIOS, INCLUDING EACH PORTFOLIO'S
INVESTMENT OBJECTIVE AND RISK FACTORS.
FIXED ACCOUNT OPTIONS
The Contract offers fixed account options; the 1, 3 and 5 year fixed market
value adjustment ("MVA") accounts. In addition we have two Dollar Cost Averaging
("DCA") fixed accounts available under the contract.
The 1, 3 and 5 year MVA fixed account options and the 6 month and 1-year DCA
fixed accounts are not registered under the Securities Act of 1933 and are not
subject to other provisions of the Investment Company Act of 1940.
The 1, 3 and 5 year MVA fixed accounts pay interest at rates set and guaranteed
by Anchor National. Interest rates may differ from time to time and are set at
Anchor National's sole discretion. We will never credit less than a 3% annual
effective rate to any of the fixed investment options.
Each guarantee period may offer a different interest rate. Once established the
rates for specified payments do not change during the guarantee period. The
guarantee period is that period for which we credit the applicable rate (one,
three or five years).
There are three scenarios in which you may put money into the MVA fixed account
options. In each scenario your money may be credited a different rate of
interest as follows:
- Initial Rate: Rate credited to new purchase payments allocated to the
fixed account when you purchase your contract.
- Current Rate: Rate credited to subsequent purchase payments allocated
to the fixed account.
- Renewal Rate: Rate credited to money transferred to a fixed account
from another fixed account or from one of the Variable Portfolios.
Each of these rates may differ from one another. Once declared, the applicable
rate is guaranteed until the end of the calendar year in which the guarantee
period expires.
At the end of the calendar year during which a guarantee period ends, you may
leave your money in the same fixed account option. You may also reallocate your
money to another fixed account option or to the Variable Portfolios. If you want
to reallocate your money to a different fixed or variable investment option, you
must contact us within 30 days after the end of the current interest guarantee
period and instruct us how to reallocate the money. We do not contact you. If we
do not hear from you, your money will remain in the same fixed account option,
where it will earn interest at the renewal rate then in effect for the fixed
account option.
The DCA fixed accounts also credit a fixed rate of interest for a predetermined
amount of time. The interest rate in the 1-year or 6-month DCA fixed account is
credited for one year or 6 months while your investment is systematically
transferred to the Variable Portfolios. The rates applicable to the DCA fixed
accounts may differ from each other and/or the other fixed account options. See
DOLLAR COST AVERAGING (below) for more information.
MARKET VALUE ADJUSTMENT ("MVA")
If you take money out of the 1, 3, or 5 year MVA fixed investment options before
the end of the interest crediting period, we may make an adjustment to your
Contract. We call this a market value adjustment or "MVA". This market value
adjustment reflects any difference in the interest rates between the time you
originally place your money in the fixed investment option and the time when you
withdraw or transfer that money. This adjustment can increase or decrease your
Contract value. However, the market value adjustment will never result in your
earning less than 3% in any particular guarantee period.
We calculate the market value adjustment by comparing the current interest rates
being offered by us for subsequent Purchase Payments made to the same fixed
account option and the interest rate earned in your current fixed investment
option.
9
<PAGE> 14
Generally, if interest rates drop more than one half of a percent between the
time you put your money into the fixed investment options and the time you take
it out, we credit a positive adjustment to your contract. Conversely, if
interest rates increase during the same period, we post a negative adjustment to
your contract.
Where the market value adjustment is negative, we first deduct the adjustment
from any money remaining in the fixed investment option. If there is not enough
money in the fixed investment option to meet the negative deduction, we deduct
the remainder from your withdrawal. Where the market value adjustment is
positive, we add the adjustment to your withdrawal from the fixed investment
option.
Please see Appendix B for more information on how we calculate the Market Value
Adjustment.
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase you may transfer funds between the Variable
Portfolios and/or the fixed account options. Funds already in your Contract
cannot be transferred into the DCA fixed accounts. You must transfer at least
$100 and at least $100 must remain in any Portfolio after a transfer.
You may request transfers of your account value between the Variable Portfolios
and/or the fixed account options in writing or by telephone. We currently allow
15 free transfers per contract year. We charge $25 ($10 in Pennsylvania and
Texas) for each additional transfer in any contract year. Transfers resulting
from your participation in the DCA program count against your 15 free transfers
per contract year. However, transfers resulting from your participation in the
Automatic Asset Rebalancing program do not count against your 15 free transfers.
We accept transfer requests by telephone unless you tell us not to on your
contract enrollment form. Additionally, in the future you may be able to execute
transfers or other financial transactions over the internet.
When receiving instructions over the telephone, we follow appropriate procedures
to provide reasonable assurance that the transactions executed are genuine.
Thus, we are not responsible for any claim, loss or expense from any error
resulting from instructions received over the telephone.
Upon implementation of internet account transfers we will have appropriate
procedures in place to provide reasonable assurance that the transactions
executed are genuine. Thus, we would not be responsible for any claim, loss or
expense from any error resulting from instructions received over the internet.
If we fail to follow our procedures, we may be liable for any losses due to
unauthorized or fraudulent instructions.
We can limit the number of transfers in any contract year for all existing and
new owners. We can also limit the number of transfers in any contract year or
refuse any transfer request for you or others invested in the contract if:
- We believe that excessive trading or a specific transfer request or a
group of transfer requests may have a detrimental effect on unit values
or the share prices of the underlying Portfolios; or
- The underlying Portfolios inform us that they need to restrict the
purchase or redemption of the shares because of excessive trading or
because a specific transfer or group of transfers is deemed to have a
detrimental effect on share prices of affected underlying Portfolios.
Where permitted by law, we may accept your authorization for a third party to
make transfers for you subject to our rules. We reserve the right to suspend or
cancel such acceptance at any time and will notify you accordingly.
Additionally, we may restrict the investment options available for transfers
during any period in which such third party acts for you. We notify such third
party beforehand regarding any 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 ("DCA")
The Dollar Cost Averaging program allows you to invest gradually in the Variable
Portfolios. Under the program you systematically transfer a set dollar amount or
percentage of investment option value from one Variable Portfolio or the 1-year
fixed account option (source accounts) to any other Variable Portfolio(s).
Transfers may be monthly or quarterly and count against your 15 free transfers
per contract year.
10
<PAGE> 15
You may change the frequency at any time by notifying us in writing. The minimum
transfer amount under the DCA program is $100, regardless of the source account.
We also offer a 6-month and a 1-year DCA fixed account exclusively to facilitate
DCA of your direct transfer and/or direct rollover purchase payments. If you
allocate a Purchase Payment into a DCA fixed account, we transfer all your money
allocated to that account into the Variable Portfolios over the selected 6-month
or 1-year period. You cannot change the option or the frequency of transfers
once selected.
Any single allocation of funds placed into the 6-month DCA fixed account must be
$600.00 or larger. We transfer all of your money out of the 6-month DCA fixed
account to the Variable Portfolio(s) you select by the end of the six month
period.
Transfers out of the 1-year DCA fixed account must be made quarterly or monthly.
If you select monthly transfers the minimum amount you must place in the account
is $1,200. If you select quarterly transfers the minimum amount you must place
in the account is $400. The amount of each transfer from the 1-year DCA fixed
account equals the total amount of money allocated to the account divided by the
frequency of transfers selected.
You may terminate your DCA program at any time. If money remains in the DCA
fixed accounts, we transfer the remaining money to the 1-year fixed account
option, unless we receive different instructions from you. Transfers resulting
from a termination of this program do not count towards your 15 free transfers.
The DCA program is designed to lessen the impact of market fluctuations on your
investment. However, we cannot ensure that you will make a profit. When you
elect the DCA Program, you are continuously investing in securities regardless
of fluctuating price levels. You should consider your tolerance for investing
through periods of fluctuating price levels.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to gradually move $750 each quarter from the Cash
Management Portfolio to the Aggressive Growth Portfolio over six quarters.
You set up dollar cost averaging and purchase Accumulation Units at the
following values:
<TABLE>
<CAPTION>
- -------------------------------------------
ACCUMULATION UNITS
QUARTER UNIT PURCHASED
- -------------------------------------------
<S> <C> <C>
1 $ 7.50 100
2 $ 5.00 150
3 $10.00 75
4 $ 7.50 100
5 $ 5.00 150
6 $ 7.50 100
- -------------------------------------------
</TABLE>
You paid an average price of only $6.67 per Accumulation Unit over six
quarters, while the average market price actually was $7.08. By investing
an equal amount of money each month, you automatically buy more
Accumulation Units when the market price is low and fewer Accumulation
Units when the market price is high. This example is for illustrative
purposes only.
ASSET ALLOCATION REBALANCING
Earnings in your Contract may cause the percentage of your investment in each
investment option to differ from your original allocations. The Automatic Asset
Rebalancing program addresses this situation. At your election, we periodically
rebalance your investments in the Variable Portfolios to return your allocations
to their original percentages. You request quarterly, semi annual or annual
rebalancing. Transfers resulting from your participation in this program do not
count against your 15 free transfers per year.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want your initial Purchase Payment split between two
Portfolios. You want 50% in the Corporate Bond Portfolio and 50% in the
Growth Portfolio. Over the next calendar quarter, the bond market does very
well while the stock market performs poorly. At the end of the calendar
quarter, the Corporate Bond Portfolio now represents 60% of your holdings
because it has increased in value and the Growth Portfolio represents 40%
of your holdings. If you had chosen quarterly rebalancing, on the last day
of that quarter, we would sell some of your units in the Corporate Bond
Portfolio to bring its holdings back to 50% and use the money to buy more
units in the Growth Portfolio to increase those holdings to 50%.
VOTING RIGHTS
Anchor National is the legal owner of the Trusts' shares. However, when a
Portfolio solicits proxies in conjunction with a vote of shareholders, we must
obtain your instructions on how to vote those shares. We vote all of the shares
we own in
11
<PAGE> 16
proportion to your instructions. This includes any shares we own on our own
behalf. Should we determine that we are no longer required to comply with these
rules, we will vote the shares in our own right.
SUBSTITUTION
If Portfolios become unavailable for investment, we may be required to
substitute shares of another Portfolio. We will seek prior approval of the SEC
and give you notice before substituting shares.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
ACCESS TO YOUR MONEY
- ----------------------------------------------------------------
- ----------------------------------------------------------------
You can access money in your Contract in three ways:
- by receiving income payments during the Income Phase, SEE INCOME OPTIONS
ON PAGE 15; or
- by taking a loan in accordance with the provisions of your Plan and/or
this Contract; or
- subject to the restrictions described below, by making a partial or total
withdrawal.
We may be required to suspend or postpone the payment of a withdrawal for any
period of time when: (1) the NYSE is closed (other than a customary weekend and
holiday closings); (2) trading with the NYSE is restricted; (3) an emergency
exists such that disposal of or determination of the value of shares of the
Portfolios is not reasonably practicable; (4) the SEC, by order, so permits for
the protection of contract owners.
Additionally, we reserve the right to defer payments for a withdrawal from a
fixed account option. Such deferrals are limited to no longer than six months.
We may deduct a withdrawal charge applicable to any total or partial withdrawal,
and a market value adjustment if a total or partial withdrawal comes from the 1,
3 or 5 year MVA fixed accounts unless the withdrawal qualifies for withdrawal
charge exception. SEE INVESTMENT OPTIONS ON PAGE 8 AND EXPENSES ON PAGE 13.
We may establish certain minimum withdrawal amounts or require that a minimum
amount remain in a Portfolio upon withdrawal. Please consult the Annuity Service
Center for additional information. You must send a written withdrawal request.
Unless you provide us with different instructions, partial withdrawals will be
made pro rata from each Variable Portfolio and each fixed account option in
which you are invested.
WITHDRAWAL RESTRICTIONS
Withdrawals under Section 403(b) Contracts are subject to the limitations under
Section 403(b)(11) of the IRC and any applicable Plan document. Section 403(b)
provides that salary reduction contributions deposited and earnings credited on
any salary reduction contributions after December 31, 1988 may only be withdrawn
upon (1) death; (2) disability; (3) reaching age 59 1/2; (4) separation from
service; or (5) occurrence of a hardship. Amounts accumulated in one Section
403(b)(1) Contract may be transferred to another Section 403(b)(1) Contract or
Section 403(b)(7) custodial account without a penalty under the IRC. Amounts
accumulated in a Section 403(b)(7) custodial account and deposited in a contract
will be subject to the same withdrawal restrictions as are applicable to
post-1988 salary reduction contributions. For more information on these
provisions. SEE TAXES ON PAGE 18.
If your Plan is subject to Title I of ERISA, your withdrawal request must be
authorized by the Contractholder on your behalf. All withdrawal requests will
require the Contractholder's written authorization and written documentation
specifying the portion of your Contract value which is available for
distribution to you.
If your Plan is not subject to Title I of ERISA, you must certify to Anchor
National that, one of the events listed in the IRC has occurred (and provide
supporting information, if requested) and that Anchor National may rely on such
representation in granting such a withdrawal request. The above does not apply
to transfers to other Qualified investment alternatives. SEE TAXES ON PAGE 18.
You should consult your tax adviser as well as review the provisions of any
applicable Plan before requesting a withdrawal.
In addition to the restrictions noted above, a Plan may contain additional
withdrawal or transfer restrictions.
Early withdrawals, as defined under Section 72(q) and 72(t) of the IRC, may be
subject to 10% penalty tax.
SYSTEMATIC WITHDRAWAL PROGRAM
If you elect and the terms of your TSA and the IRC allow, then we use money in
your contract to pay you monthly, quarterly, semiannual or annual payments
during the Accumulation Phase. Electronic transfer of these funds to your bank
account is also available. However, any such payments you elect to receive are
subject to all applicable withdrawal charges, market value adjustments, income
taxes, tax penalties and other withdrawal restrictions affecting your contract.
The minimum amount of each withdrawal is $50. There must be a least $500
remaining in your contract at all times. Withdrawals may be taxable and a 10%
IRS tax penalty may apply if you are under age 59 1/2. There is no additional
charge for participating in this program.
The program is not available to everyone. Please check with our Annuity Service
Center, which can provide the necessary enrollment forms. We reserve the right
to modify, suspend or terminate this program at any time.
WITHDRAWAL CHARGES, MARKET VALUE ADJUSTMENTS, INCOME TAXES, TAX PENALTIES AND
12
<PAGE> 17
CERTAIN WITHDRAWAL RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL YOU MAKE, INCLUDING
SYSTEMATIC WITHDRAWALS.
LOANS
If your Plan permits, you may take a loan from your Contract during the
Accumulation Period. You may apply for a loan under the contract by completing a
loan application available from Anchor National. Loans are secured by a portion
of your Contract value. Under certain Contracts, we may charge a one-time fee of
up to $75 to set up a loan. More information about loans, including interest
rates, restrictions, terms of repayment and applicable fees and charges is
available in the Certificate, Endorsement and the Loan Agreement as well as from
Anchor National's Annuity Service Center.
MINIMUM CONTRACT VALUE
Where permitted by state law, we may terminate your contract if both of the
following occur: (1) your contract is less than $500 as a result of withdrawals;
and (2) you have not made any Purchase Payments during the past three years. We
will provide you with sixty days written notice. At the end of the notice
period, we will distribute the contract's remaining value to you.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
DEATH BENEFIT
- ----------------------------------------------------------------
- ----------------------------------------------------------------
If you die during the Accumulation Phase of your contract, we pay a death
benefit to your Beneficiary. The death benefit equals the greater of:
1. Total Purchase Payments minus total withdrawals (and any fees and
charges applicable to those withdrawals) at the time we receive
satisfactory proof of death, or;
2. Contract Value at the time we receive satisfactory proof of death.
We do not pay the death benefit if you die after you switch to the Income Phase.
However, if you die during the Income Phase, your Beneficiary receives any
remaining guaranteed income payments in accordance with the income option you
selected. SEE INCOME OPTIONS ON PAGE 15.
You name your Beneficiary. You may change the Beneficiary at any time, unless
you previously made an irrevocable Beneficiary designation. Plans subject to
Title 1 of ERISA may impose additional restrictions on beneficiary designation
which are discussed in the Beneficiary Designation Form.
We pay the death benefit when we receive satisfactory proof of death. We
consider the following satisfactory proof of death:
1. a certified copy of the death certificate; or
2. a certified copy of a decree of a court of competent jurisdiction as to
the finding of death; or
3. a written statement by a medical doctor who attended the deceased at the
time of death; or
4. any other proof satisfactory to us.
We may require additional proof before we pay the death benefit.
The death benefit payment must begin immediately upon receipt of all necessary
documents. In any event, the death benefit must be paid by December 31 of the
calendar year containing the fifth anniversary of the date of death unless the
Beneficiary elects to have it payable in the form of an income option. If the
Beneficiary elects an income option, it must be paid over the Beneficiary's
lifetime or for a period not extending beyond the Beneficiary's life expectancy.
Payments must begin on or before December 31 of the calendar year immediately
following the year of your death.
If the Beneficiary is the Participant's surviving spouse, the surviving spouse
may elect to receive the entire death benefit in equal or substantially equal
payments over their life or over a period not longer than their life expectancy,
commencing at any date prior to the later of:
(i) December 31 of the calendar year immediately following the calendar
year in which the Participant died, and
(ii) December 31 of the calendar year in which the Participant would have
attained age 70 1/2.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
EXPENSES
- ----------------------------------------------------------------
- ----------------------------------------------------------------
There are charges and expenses associated with your contract. These charges and
expenses reduce your investment return. We will not increase the insurance and
withdrawal fees and charges under your contract. However, investment charges may
increase or decrease. Some states may require that we charge less than the
amounts described below.
INSURANCE CHARGES
The amount of the insurance charge is 1.25% annually of the value of your
contract invested in the Variable Portfolios. We deduct this charge daily.
The insurance charge compensates us for the mortality and expense risks and the
costs of contract distribution assumed by Anchor National.
If these charges do not cover all of our expenses, we will pay the difference.
Likewise, if these charges exceed our expenses, we will keep the difference.
13
<PAGE> 18
WITHDRAWAL CHARGES
A withdrawal charge applies against each Purchase Payment you put into the
contract if you seek withdrawal of that payment prior to the end of the fifth or
sixth year it has been in the contract. The withdrawal charge equals a
percentage of the Purchase Payment you take out of the contract. The withdrawal
charge percentage declines over time for each Purchase Payment in the contract.
The applicable withdrawal charge schedule depends on your employment status at
the time your contract is issued.
SEPARATED FROM SERVICE AT CONTRACT ISSUE
(SCHEDULE A)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Year 1 2 3 4 5 6
- ----------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
WITHDRAWAL CHARGE 6% 6% 5% 5% 4% 0%
- ----------------------------------------------------------------
</TABLE>
EMPLOYED AT CONTRACT ISSUE
(SCHEDULE B)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Year 1 2 3 4 5 6 7
- ----------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
WITHDRAWAL CHARGE 6% 6% 5% 5% 4% 4% 0%
- ----------------------------------------------------------------
</TABLE>
When calculating the withdrawal charge, we treat withdrawals as coming first
from the Purchase Payments that have been in your contract the longest. However,
for tax purposes, your withdrawals are considered earnings first, then Purchase
Payments.
Whenever possible, we deduct the withdrawal charge from the money remaining in
your contract. If you withdraw all of your contract value, we deduct any
applicable withdrawal charge from the amount withdrawn.
We calculate charges due on a total withdrawal on the day after we receive your
request and your contract. We return your contract value less any applicable
fees and charges. However, you will not receive the benefit of any available
free withdrawal amounts if you make a complete withdrawal of your contract.
EXCEPTIONS TO WITHDRAWAL CHARGE
A withdrawal charge is not applicable to withdrawals requested in the following
situations:
- Annuitization (except if under the Income Protector Program) SEE INCOME
OPTIONS ON PAGE 15;
- Death Benefits, SEE DEATH BENEFIT ON PAGE 13;
- After your 10th contract anniversary;
- If you are subject to withdrawal charge Schedule A, 15% of your Purchase
Payments each contract year;
- Disability occurring after contract issue;
- Hardship occurring after contract issue;
- After separation from service occurring after contract issue.
Withdrawals made prior to age 59 1/2 may result in tax penalties. SEE TAXES ON
PAGE 18.
INVESTMENT CHARGES
Charges are deducted from your Variable Portfolios for the advisory and other
expenses of the Portfolios. THE FEE TABLES LOCATED ON PAGE 4 illustrate these
charges and expenses. For more detailed information on these investment charges,
refer to the prospectuses for the Trusts, enclosed or attached.
TRANSFER FEE
We currently permit 15 free transfers between investment options, every year. We
may charge you $25 for each transfer over 15 in any one year ($10 in
Pennsylvania and Texas). SEE INVESTMENT OPTIONS ON PAGE 8.
PREMIUM TAX
Certain states charge the Company a tax on the premiums you pay into the
contract. Currently we deduct the charge for premium taxes when you make a full
withdrawal or annuitize the contract. In the future, we may assess this
deduction at the time you put Purchase Payment(s) into the contract or upon
payment of a death benefit.
APPENDIX A provides more information about premium taxes.
INCOME TAXES
We do not currently deduct income taxes from your contract. We reserve the right
to do so in the future.
REDUCTION OR ELIMINATION OF CHARGES AND EXPENSES, AND ADDITIONAL AMOUNTS
CREDITED
Sometimes sales of the contracts to groups of similarly situated individuals may
lower our administrative and/or sales expenses. We reserve the right to reduce
or waive certain charges and expenses when this type of sale occurs. In
addition, we may also credit additional interest to policies sold to such
groups. We determine which groups are eligible for such treatment. Some of the
criteria we evaluate to make a determination are: size of the group; amount of
expected Purchase Payments; relationship existing between us and prospective
purchaser; nature of the purchase; length of time a group of contracts is
expected to remain active; purpose of the purchase and whether that purpose
increases the likelihood that our expenses will be reduced; and/or any other
factors that we believe indicate that administrative and/or sales expenses may
be reduced.
Anchor National may make a similar determination regarding sales to its
employees, its affiliates' employees and employees of currently contracted
broker-dealers; its registered representatives and immediate family members of
all of those described.
We reserve the right to change or modify any such determination or the treatment
applied to a particular group, at any time.
14
<PAGE> 19
- ----------------------------------------------------------------
- ----------------------------------------------------------------
INCOME OPTIONS
- ----------------------------------------------------------------
- ----------------------------------------------------------------
ANNUITY DATE
During the Income Phase, the money in your contract is used to make regular
income payments to you. You may switch to the Income Phase any time after your
second contract anniversary, or sooner if the Company waives this two year
requirement. You select the month and year in which you want income payments to
begin. The first day of that month is the Annuity Date. You may change your
Annuity Date, so long as you do so at least seven days before the income
payments are scheduled to begin. Once you begin receiving income payments, you
cannot change your income option. Except as indicated under option 5, once you
begin receiving income payments, you cannot otherwise access your money through
withdrawal or surrender.
Generally, for Qualified contracts, the Annuity Date may be any day after you
reach age 59 1/2 but not later than age 75. However, you may be required to
begin taking minimum distributions by April 1 following the later of, the year
in which you turn age 70 1/2 or the calendar year in which you retire. SEE TAXES
ON PAGE 18.
For Non-qualified contracts, income payments must begin on or before your 90th
birthday or on your tenth contract anniversary, whichever occurs later. If you
do not choose an Annuity Date, your income payments will automatically begin on
the latest allowable date. Certain states may require your income payments to
start earlier.
Under Section 403(b) of the IRC, an income payment is considered a withdrawal.
Therefore, IRC withdrawal restrictions limit the time at which income payments
may begin. SEE ACCESS TO YOUR MONEY ON PAGE 12.
If the Annuity Date is past your 85th birthday, your contract could lose its
status as an annuity under Federal tax laws. This may cause you to incur adverse
tax consequences.
INCOME OPTIONS
Currently, this contract offers 5 income options. If you elect to receive income
payments but do not select an option, your income payments will be made in
accordance with option 4 for a period of 10 years. For income payments selected
for joint lives, we pay according to option 3.
We base our calculation of income payments on the life of the Annuitant and the
annuity rates set forth in your contract. Under a TSA you, as the Participant,
are always the Annuitant. UNDER CERTAIN QUALIFIED CONTRACTS THE INCOME OPTION
YOU SELECT MAY NOT EXCEED YOUR LIFE EXPECTANCY.
OPTION 1 - LIFE INCOME ANNUITY
This option provides income payments for the life of the Annuitant. Income
payments stop when the Annuitant dies.
OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY
This option provides income payments for the life of the Annuitant and for the
life of another designated person. Upon the death of either person, we will
continue to make income payments during the lifetime of the survivor. Income
payments stop whenever the survivor dies.
OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY WITH
10 OR 20 YEARS GUARANTEED
This option is similar to option 2 above, with an additional guarantee of income
payments for at least 10 or 20 years. If the Annuitant and the Survivor die
before all of the guaranteed income payments have been made, the remaining
payments are made to the Beneficiary under your contract.
OPTION 4 - LIFE ANNUITY WITH 10, 15 OR 20 YEARS GUARANTEED
This option is similar to option 1 above. In addition, this option provides a
guarantee that income payments will be made for at least 10, 15 or 20 years. You
select the number of years. If the Annuitant dies before all guaranteed income
payments are made, the remaining income payments go to the Beneficiary under
your contract.
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
This option provides income payments for a guaranteed period ranging from 5 to
30 years. If the Annuitant dies before all the guaranteed income payments are
made, the remaining income payments are made to the Beneficiary under your
contract. Additionally, if variable income payments are elected under this
option, you (or the Beneficiary under the contract if the Annuitant dies prior
to all guaranteed payments being made) may redeem the contract value after the
Annuity Date. The amount available upon such redemption would be the discounted
present value of any remaining guaranteed payments.
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.
Under this option contract values are redeemable even after the Annuity Date at
any time while payments are being made.
The value of an Annuity Unit, regardless of the option chosen, takes into
account the Mortality and Expense Risk Charge. Since annuity option 5, Income
for a Specified Period, does not contain an element of mortality risk, the payee
is not getting the benefit of this Charge. There shall be no right to terminate
the Contract during the Annuity Period if the option elected contains an element
of mortality risk.
15
<PAGE> 20
FIXED OR VARIABLE INCOME PAYMENTS
You can choose income payments that are fixed, variable or both. If at the date
when income payments begin you are invested in the Variable Portfolios only,
your income payments will be variable. If your money is only in fixed accounts
at that time, your income payments will be fixed in amount. Further, if you are
invested in both fixed and variable investment options when income payments
begin, your payments will be fixed and variable. If income payments are fixed,
Anchor National guarantees the amount of each payment. If the income payments
are variable the amount is not guaranteed.
INCOME PAYMENTS
Your income payments will vary if you are invested in the Variable Portfolios
after the Annuity Date depending on four things:
- for life options, your age when payments begin, and;
- the value of your contract in the Variable Portfolios on the Annuity
Date, and;
- the 3.5% assumed investment rate used in the annuity table for the
contract, and;
- the performance of the Portfolios in which you are invested during the
time you receive income payments.
If you are invested in both the fixed account options and the Variable
Portfolios after the Annuity Date, the allocation of funds between the fixed and
variable options also impacts the amount of your annuity payments.
We make income payments on a monthly, quarterly, semi-annual or annual basis.
You instruct us to send you a check or to have the payments directly deposited
into your bank account. If state law allows, we distribute annuities with a
contract value of $5,000 or less in a lump sum. Also, if the selected income
option results in income payments of less than $50 per payment, we may decrease
the frequency of the payments, state law allowing.
TRANSFERS DURING THE INCOME PHASE
If you are invested in the Variable Portfolios during the Income Phase, one
transfer per month is permitted between the Variable Portfolios. No other
transfers are allowed during the Income Phase.
DEFERMENT OF PAYMENTS
We may defer making fixed payments for up to six months, or less if required by
law. Interest is credited to you during the deferral period.
Please read the Statement of Additional Information ("SAI") for a more detailed
discussion of the income options.
THE INCOME PROTECTOR
If elected, 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 program offers you
the ability to receive a guaranteed fixed minimum retirement income upon
annuitization. With the Income Protector you can know the level of minimum
income that will be available to you if, when you chose to begin the income
phase of your contract, down markets have negatively impacted your contract
value. We reserve the right to modify, suspend or terminate the Income Protector
program at any time.
The Income Protector provides two levels of minimum retirement income. The two
available options are the Income Protector Plus and Max. If you enroll in the
Income Protector program, we charge a fee based on the level of protection you
select. The amount of the fee and how to enroll are described below. In order to
utilize the benefit of the program you must follow the provisions discussed
below.
Certain IRC restrictions on income options available to Qualified retirement
investors may have an impact on your ability to benefit from this feature.
Qualified investors should read NOTE TO QUALIFIED CONTRACT HOLDERS, below.
HOW WE DETERMINE THE AMOUNT OF YOUR MINIMUM
GUARANTEED INCOME
We base the amount of minimum income available to you if you take income
payments using the Income Protector upon a calculation we call the Income
Benefit Base. At the time your enrollment in the Income Protector program
becomes effective, your Income Benefit Base is equal to your contract value.
Your participation becomes effective on either the date of issue of the contract
(if elected at the time of application) or on the contract anniversary following
your enrollment in the program.
The Income Benefit Base is only a calculation. It does not represent a contract
value, nor does it guarantee performance of the Variable Portfolios in which you
invest.
Your Income Benefit Base increases if you make subsequent Purchase Payments and
decreases if you withdraw money from your contract. The exact Income Benefit
Base calculation is equal to (a) plus (b) minus (c) where:
(a) is,
- for the first year of calculation, your contract value on the date
your participation in the program became effective, or;
- for each subsequent year of calculation, the Income Benefit Base on
the prior contract anniversary, and;
(b) is the sum of all Purchase Payments made into the contract since the
last contract anniversary, and;
(c) is all withdrawals and applicable fees and charges since the last
contract anniversary (excluding any MVA), in an amount proportionate to
the amount by which such withdrawals decreased your contract value.
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<PAGE> 21
The Income Benefit Base accumulates at one of the following annual growth rates
from the date your enrollment becomes effective through your election to begin
receiving income under the program:
<TABLE>
<CAPTION>
- ----------------------------------------------------
Options Growth Rate*
- ----------------------------------------------------
<S> <C>
The Income Protector Plus 3.25%
- ----------------------------------------------------
The Income Protector Max 5.25%
- ----------------------------------------------------
</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.
ENROLLING IN THE PROGRAM
If you decide that you want the protection offered by the Income Protector
program, you must elect the option of your choice by completing the Income
Protector Election Form available through our Annuity Service Center. You may
only elect one of the options, you can not change your election once made, and
you can not terminate your enrollment. In order to obtain the benefit of the
Income Protector program you may not begin the income phase for at least seven
years following your enrollment.
STEP-UP OF YOUR INCOME BENEFIT BASE
You may also have the opportunity to "Step-Up" your Income Benefit Base. The
Step-Up feature allows you to increase your Income Benefit Base to the amount of
your contract value on your contract anniversary. You can only elect to Step-Up
within the 30 days before the next contract anniversary. The seven year waiting
period required prior to electing income payments through the Income Protector
is restarted if you step-up your Income Benefit Base.
You must complete the appropriate portion of the Income Protector Election Form
to effect a Step-Up.
ELECTING TO RECEIVE INCOME PAYMENTS
You may elect to begin the Income Phase of your contract using the Income
Protector Program ONLY within the 30 days after the seventh or later contract
anniversary following the later of,
- the effective date of your enrollment in the Income Protector program, or
- the contract anniversary of your most recent Step-Up.
The contract anniversary prior to your election to begin receiving income
payments is your Income Benefit Date. This is the date as of which we calculate
your Income Benefit Base to use in determining your guaranteed minimum fixed
retirement income. To arrive at the minimum guaranteed fixed retirement income
available to you, we apply the annuity rates stated in your Income Protector
Endorsement for the income option you select to your final Income Benefit Base.
You then choose if you would like to receive that income annually, quarterly or
monthly for the time guaranteed under your selected annuity option. Your final
Income Benefit Base is equal to (a) minus (b) where:
(a) is your Income Benefit Base as your Income Benefit Date, and;
(b) is any partial withdrawals of contract value and any charges applicable
to those withdrawals (excluding any MVA) and any withdrawal charges
otherwise applicable, calculated as if you fully surrender your
contract as the Income Benefit Date, and any applicable premium taxes.
The income options available when using the Income Protector program to receive
your retirement income are:
- Life Annuity with 10 Year Period Certain, or
- Joint and 100% Survivor Annuity with 20 Year Period Certain
At the time you elect to begin the income phase, we will calculate your annual
income using both your final Income Benefit Base and your contract value. We
will use the same income option for each calculation, however, the annuity
factors used to calculate your income under the Income Protector will be
different. You will receive whichever provides a greater stream of income. If
you take Income Payments using the Income Protector your payments will be fixed
in amount. You are not required to use the Income Protector to receive your
Income Payments. The general provisions of your contract provide other income
options. However, we will not refund fees paid for the Income Protector if you
begin taking Income Payments under the general provisions of your contract. YOU
MAY NEVER NEED TO RELY UPON THE INCOME PROTECTOR, IF YOUR CONTRACT PERFORMS
WITHIN A HISTORICALLY ANTICIPATED RANGE. HOWEVER, PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS.
NOTE TO QUALIFIED CONTRACT HOLDERS
Qualified contracts generally require that you select an 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. To utilize the Income
Protector you must take 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
program, you may pay for this minimum guarantee and not be able to realize the
benefit.
Generally, for qualified contracts:
- for the Life Annuity with 10 Year Period Certain, you must annuitize
before age 79, and
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<PAGE> 22
- for the Joint and 100% Survivor Annuity with 20 Year Period Certain, both
Annuitants must be 70 or younger or one of the annuitants must be 65 or
younger upon annuitization. Other age combinations may be available.
You should consult your tax advisor for information concerning your particular
circumstances.
FEES ASSOCIATED WITH THE INCOME PROTECTOR
We charge a fee for the Income Protector program, as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------
Fee As a % of
Your Income
Options Benefit Base
- -------------------------------------------------------
<S> <C>
Income Protector Plus .15%
- -------------------------------------------------------
Income Protector Max .30%
- -------------------------------------------------------
</TABLE>
Since the Income Benefit Base is only a calculation and does not provide a
contract value, we deduct the fee from your actual contract value beginning on
the contract anniversary on which your enrollment in the program becomes
effective.
If you elect to participate in the Income Protector program at contract issue,
we begin deducting the annual fee for the Plus or Max option when your
participation becomes effective. If you elect to participate in the Income
Protector program at some time after contract issue, we begin deducting the
annual fee on the contract anniversary of or following 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.
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.
HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR
This table assumes a $100,000 initial investment in a qualified contract with no
further premiums, no withdrawals, no step-ups, no premium taxes, current growth
rates; and the election of optional Income Protector alternatives at contract
issue.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
INCOME
IF AT ISSUE ANNUAL INCOME IF YOU ANNUITIZE ON THE FOLLOWING CONTRACT ANNIVERSARIES: PROTECTOR
YOU ARE 1 - 6 7 10 15 20 LEVEL
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Unisex N/A 7,596 9,088 12,311 N/A Plus
Age 60* N/A 8,687 11,009 16,417 N/A Max
- ---------------------------------------------------------------------------------------------------------------
Male, Age 60** N/A 6,290 7,353 N/A N/A Plus
Female Age 60* N/A 7,194 8,908 N/A N/A Max
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* 10 year and life
** Joint and 100% survivor with 20 year certain
The Income Protector may not be available in your state. Please consult your
financial adviser for information regarding availability of this program in your
state.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
TAXES
- ----------------------------------------------------------------
- ----------------------------------------------------------------
NOTE: WE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL DISCUSSION OF
THE SUBJECT. IT IS NOT TAX ADVICE. WE CAUTION YOU TO SEEK COMPETENT TAX ADVICE
ABOUT YOUR OWN CIRCUMSTANCES. WE DO NOT GUARANTEE THE TAX STATUS OF YOUR
ANNUITY. TAX LAWS CONSTANTLY CHANGE, THEREFORE WE CAN NOT GUARANTEE THAT THE
INFORMATION CONTAINED HEREIN IS COMPLETE AND/OR ACCURATE.
ANNUITY CONTRACTS IN GENERAL
If you purchase your Contract under a pension plan, a specially sponsored
employer program or as an individual retirement account, your contract is
referred to as a Qualified contract. Examples of Qualified plans are: IRAs,
TSAs, H.R. 10 Plans (referred to as Keogh Plans) as well as pension and profit
sharing plans, including 401(k) plans. Typically you have not paid any tax on
the Purchase Payments used to buy your contract and therefore, you have no cost
basis in your Contract.
The IRC provides for special rules regarding the tax treatment of annuity
contracts. Generally, taxes on the earnings in your annuity contract are
deferred until you take the money out. Different rules apply depending on how
you take the money out and whether your contract is Qualified or Non-qualified.
If you do not purchase your contract under a pension plan, a specially sponsored
employer program or an individual retirement account, your contract is referred
to as a Non-qualified contract. A Non-qualified contract receives different tax
treatment than a Qualified contract. In general, your cost basis in a
Non-qualified contract is equal to the Purchase Payments you put into the
contract. You have already been taxed on the cost basis in your contract.
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<PAGE> 23
TAX TREATMENT OF DISTRIBUTIONS -
QUALIFIED CONTRACTS
Generally, you have not paid any taxes on the Purchase Payments used to buy a
Qualified contract. Any amount of money you take out as a withdrawal or as
income payments is taxable income. The IRC further provides for a 10% penalty
tax on any withdrawal or income payment paid to you other than in conjunction
with the following circumstances: (1) after reaching age 59 1/2; (2) when paid
to your Beneficiary after you die; (3) after you become disabled (as defined in
the IRC); (4) in a series of substantially equal installments made for your life
or for the joint lives of you and your Beneficiary; (5) to the extent such
withdrawals do not exceed limitations set by the IRC for amounts paid during the
taxable year for medical care; (6) to fund higher education expenses (as defined
in IRC); (7) to fund certain first-time home purchase expenses; and, except in
the case of an IRA; (8) when you separate from service after attaining age 55;
and (9) when paid to an alternate payee pursuant to a qualified domestic
relations order.
SECTION 403(b) PLANS
Section 403(b) of the IRC permits the purchase of TSA by public schools and
certain charitable, educational and scientific organizations described in
Section 501(c)(3) of the IRC. A qualifying Employer may make contributions to
the Contract for the benefit of an employee who is a Participant, and/or the
Participant may enter into a salary reduction agreement with the Participant's
Employer authorizing the Employer to contribute a percentage of the
Participant's salary to the Section 403(b) contract. All contributions made to a
Section 403(b) contract are subject to the limitations described in IRC Sections
402(g) regarding elective deferral amounts, 403(b)(2) regarding the maximum
exclusion allowance, and 415(a)(2) and 415(c) regarding the limitations on
annual additions. Most contributions to a 403(b) contract are not includible in
the Participant's gross income until the Participant receives distributions from
the Contract.
A Participant who makes a withdrawal from a Section 403(b) contract must declare
that amount in current income, therefore it is taxed at ordinary income tax
rates. In addition, Section 403(b)(11) of the IRC requires that salary reduction
contributions made, and/or earnings credited on any salary reduction
contributions after December 31, 1988, may not be withdrawn from the
Participant's Section 403(b) contract prior to an "eligible event", such as the
Participant having (1) attained age 59 1/2, (2) separated from service, (3)
become disabled (as defined by the IRC), (4) died or (5) incurred a hardship (as
defined by the IRC). Hardship withdrawals may not include any earnings credited
after December 31, 1988 attributable to salary reduction contributions. The
Internal Revenue Service has decided in Revenue Ruling 90-24 that amounts may be
transferred between Section 403(b) investment vehicles as long as the
transferred funds retain withdrawal restrictions at least as restrictive as that
of the transferring investment vehicle. Such transferred amounts are considered
withdrawals under the Contract and will be subject to withdrawal charges, if
applicable. (SEE EXPENSES ON PAGE 14 for more complete information).
Section 403(b)(8) of the IRC permits tax-free rollovers from Section 403(b)
contracts to IRAs or other Section 403(b) contracts under certain circumstances.
Qualified distributions eligible for rollover treatment may be subject to a 20%
federal tax withholding depending on whether or not the distribution is paid
directly to an eligible retirement plan.
The IRC sets forth additional restrictions governing Section 403(b) contracts on
such items as transferability, distributions, nondiscrimination and withdrawals.
Competent tax advice should be obtained as to the tax treatment and suitability
of purchasing a Contract.
TAX TREATMENT OF DISTRIBUTIONS - NON-QUALIFIED CONTRACTS
If you make a withdrawal from a Non-qualified contract, the IRC treats such a
withdrawal as first coming from the earnings and then as coming from your
Purchase Payments. For annuity payments, any portion of each payment that is
considered a return of your Purchase Payment will not be taxed. Withdrawn
earnings are treated as income to you and are taxable. The IRC provides for a
10% tax penalty on any earnings that are withdrawn other than in conjunction
with the following circumstances: (1) after reaching age 59 1/2; (2) when paid
to your Beneficiary after you die; (3) after you become disabled (as defined in
the IRC); (4) in a series of substantially equal installments made for your life
or for the joint lives of you and you Beneficiary; (5) under an immediate
annuity; or (6) which come from Purchase Payments made prior to August 14, 1982.
MINIMUM DISTRIBUTIONS
If your Contract is issued under a Section 403(b) or other Qualified Plan,
generally the IRS requires that you begin taking annual minimum distributions
from qualified annuity contracts by April 1 of the calendar year following the
later of (1) the calendar year in which the Participant attains age 70 1/2 or
(2) the calendar year in which the Participant retires. Failure to satisfy the
minimum distribution requirements may result in a federal tax penalty. You
should consult your tax adviser for more information.
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity. We believe that each underlying Portfolios'
management monitors the Variable Portfolios so as to comply with these
requirements. To be treated as a variable annuity for tax purposes, the
underlying investments must meet these requirements.
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The diversification regulations do not provide guidance as to the circumstances
under which you, because of the degree of control you exercise over the
underlying investments, and not Anchor National, would be considered the owner
of the shares of the Portfolios. It is unknown to what extent owners are
permitted to select investments, to make transfers among Portfolios or the
number and type of Portfolios owners may select from. If any guidance is
provided which is considered a new position, then the guidance would generally
be applied prospectively. However, if such guidance is considered not to be a
new position, it may be applied retroactively. This would mean you, as the owner
of the contract, could be treated as an owner of the underlying variable
investment Portfolios. Due to the uncertainty in this area, we reserve the right
to modify the contract in an attempt to maintain favorable tax treatment.
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PERFORMANCE
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We advertise the Cash Management Portfolio's yield and effective yield. In
addition, the other Variable Portfolios advertise total return, gross yield and
yield-to-maturity. These figures represent past performance of the Portfolios.
These performance numbers do not indicate future results.
The accumulation units of the separate account are new and therefore have no
performance history. 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. These trusts have
been in existence for some time. We do this to demonstrate how the historical
investment experience of the funds affects accumulation unit values. We modify
these numbers to reflect charges and expenses as if the contract was in
existence during the period stated in the advertisement. Figures calculated in
this manner do not represent actual historic performance of the particular
Portfolio. Consult the SAI for more detailed information regarding the
calculation of performance data.
The performance of each Portfolio may also be measured against unmanaged market
indices. The indices we use include but are not limited to the Dow Jones
Industrial Average, the Standard & Poor's 500, the Russell 1000 Growth Index,
the Morgan Stanley Capital International Europe, Australia and Far East Index
("EAFE") and the Morgan Stanley Capital International World Index. We may
compare the Portfolios' performance to that of other variable annuities with
similar objectives and policies as reported by independent ranking agencies such
as Morningstar, Inc., Lipper Analytical Services, Inc. or Variable Annuity
Research & Data Service ("VARDS").
Anchor National may also advertise the rating and other information assigned to
it by independent industry ratings organizations. Some of those organizations
are A.M. Best Company ("A.M. Best"), Moody's Investor's Service ("Moody's"),
Standard & Poor's Insurance Rating Services ("S&P"), and Duff & Phelps. A.M.
Best's and Moody's ratings reflect their current opinion of our financial
strength and performance in comparison to others in the life and health
insurance industry. S&P's and Duff & Phelps' ratings measure the ability of an
insurance company to meet its obligations under insurance policies it issues.
These two ratings do not measure the insurer's ability to meet non-policy
obligations. Ratings in general do not relate to the performance of the Variable
Portfolios.
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OTHER INFORMATION
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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 Company, Imperial
Premium Finance, Inc., Resources Trust Company, and six broker-dealers,
specialize in retirement savings and investment products and services. Business
focuses include; fixed and variable annuities, mutual funds, premium finance,
broker-dealer services and trust administration services.
THE SEPARATE ACCOUNT
Anchor National established a separate account, Variable Annuity Account Seven
("Separate Account"), under Arizona law on August 28, 1998. The Separate Account
is registered with the SEC as a unit investment trust under the Investment
Company Act of 1940, as amended.
Anchor National owns the assets in the Separate Account. However, the assets in
the Separate Account are not chargeable with liabilities arising out of any
other business conducted by Anchor National. Income gains and losses (realized
and unrealized) resulting from assets in the Separate Account are credited to or
charged against the Separate Account without regard to other income, gains or
losses of Anchor National.
THE GENERAL ACCOUNT
Money allocated to the fixed account options goes into Anchor National's general
account. The general account consists of all of Anchor National's assets other
than assets attributable to a separate account. All of the assets in the general
account are chargeable with the claims of any Anchor National contract holders
as well as all of its creditors. The general account funds are invested as
permitted under state insurance laws.
DISTRIBUTION OF THE CONTRACT
Registered representatives of broker-dealers sell the contract. We pay
commissions to these representatives for the sale of the contracts. We do not
expect the total commissions to
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exceed 5% of your Purchase Payments. We may also pay a bonus to representatives
for contracts which stay active for a particular period of time, in addition to
standard commissions. We do not deduct commissions paid to registered
representatives directly from your Purchase Payments.
From time to time, we may pay or allow additional promotional incentives in the
form of cash or other compensation. We reserve the right to offer these
additional incentives only to certain broker-dealers that sell, or are expected
to sell, certain minimum amounts of the contract, or other contracts offered by
us. Promotional incentives may change at any time.
SunAmerica Capital Services, Inc., 733 Third Avenue, 4th Floor, New York, New
York 10017 distributes the contracts. SunAmerica Capital Services is an
affiliate of Anchor National, is registered as a broker-dealer under the
Exchange Act of 1934 and is a member of the National Association of Securities
Dealers, Inc. No underwriting fees are paid in connection with the distribution
of this contract.
ADMINISTRATION
We are responsible for the administrative servicing of your contract. Please
contact our Annuity Service Center at 1-877-999-9205, if you have any comment,
question or service request.
We send out transaction confirmations and quarterly statements. It is your
responsibility to review these documents carefully and notify us of any
inaccuracies immediately. We investigate all inquiries. To the extent that we
believe we made an error, we retroactively adjust your contract, provided you
notify us within 30 days of receiving the transaction confirmation or quarterly
statement. Any other adjustments we deem warranted are made as of the time we
receive notice of the error.
YEAR 2000
We rely significantly on computer systems and applications in our daily
operations. Many of our systems are not presently year 2000 compliant, which
means that because they have historically used only two digits to identify the
year in a date, they will fail to distinguish dates in the "2000s" from dates in
the "1900s." Anchor National's business, financial condition and results of
operations could be materially and adversely affected by the failure of our
systems and applications (and those operated by third parties interfacing with
our systems and applications) to properly operate or manage these dates.
Anchor National has a coordinated plan to repair or replace these noncompliant
systems and to obtain similar assurances from third parties interfacing with our
systems and applications. In fiscal 1997, the Company's recorded a $6.2 million
provision for estimated programming costs to repair noncompliant systems. Anchor
National's management is 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 paid for over future
periods. Both phases of the project are progressing according to plan and we
expect to substantially complete them by the end of calendar 1998. We will test
both the repaired and replacement systems during calendar 1999.
In addition, we distributed a year 2000 questionnaire to our significant
suppliers, distributors, financial institutions, lessors and others we do
business with to evaluate their year 2000 compliance plans and state of
readiness and to determine how our systems and applications may be affected by
their failure to solve their own year 2000 issues. To date, however, we have
only received preliminary feedback from such parties and have not independently
confirmed any information received from other parties with respect to the year
2000 issues. Therefore, we cannot assure that such other parties will complete
their year 2000 conversions in a timely fashion or will not suffer a year 2000
business disruption that may adversely affect our financial condition and
results of operations.
Because we expect to complete our year 2000 conversion prior to any potential
disruption to our business, we have not developed a comprehensive year 2000
contingency plan. Anchor National closely monitors the progression of its plan
for compliance, and if necessary, would devote additional resources to assure
the timely completion of our year 2000 plan. If we determine that our business
is at material risk of disruption due to the year 2000 issue or anticipate that
we will not complete our year 2000 conversion in a timely fashion, we will work
to enhance our contingency plans.
The above statements are forward-looking. The costs of our year 2000 conversion,
the date which we have set to complete such conversion and the possible risks
associated with the year 2000 issue are based on our current estimates and are
subject to various uncertainties that could cause the actual results to differ
materially from our expectations. Such uncertainties include, among others, our
success in identifying systems and applications that are not year 2000
compliant, the nature and amount of programming required to upgrade or replace
each of the affected systems and applications, the availability of qualified
personnel, consultants and other resources, and the success of the year 2000
conversion efforts of others.
LEGAL PROCEEDINGS
There are no pending legal proceeding affecting the Separate Account. Anchor
National and its subsidiaries engage in various kinds of routine litigation. In
management's opinion, these matters are not of material importance to their
respective total assets nor are they material with respect to the Separate
Account.
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CUSTODIAN
State Street Bank and Trust Company, 255 Franklin Street, Boston, Massachusetts
02110, serves as the custodian of the assets of the Separate Account. Anchor
National pays State Street Bank for services provided, based on a schedule of
fees.
ADDITIONAL INFORMATION
Anchor National is subject to the informational requirements of the Securities
and Exchange Act of 1934 (as amended). We file reports and other information
with the SEC to meet those requirements. You can inspect and copy this
information at SEC public facilities at the following locations:
WASHINGTON, DISTRICT OF COLUMBIA
450 Fifth Street, N.W., Room 1024
Washington, D.C. 20549
CHICAGO, ILLINOIS
500 West Madison Street
Chicago, IL 60661
NEW YORK, NEW YORK
7 World Trade Center, 13th Fl.
New York, NY 10048
To obtain copies by mail, contact the Washington, D.C. location. After you pay
the fees as prescribed by the rules and regulations of the SEC, the requested
documents are mailed.
Registration Statements under the Securities Act of 1933, as amended, related to
the contracts offered by this prospectus are on file with the SEC. This
prospectus does not contain all of the information contained in the registration
statement and its exhibits. For further information regarding the Separate
Account, Anchor National and its general account, the Portfolios and the
contract, please refer to the registration statement and its exhibits.
The SEC also maintains a website (http://www.sec.gov) that contains the SAI,
materials incorporated by reference and other information filed electronically
with the SEC by Anchor National.
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TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
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<TABLE>
<S> <C>
Separate Account.............................. 3
General Account............................... 3
Performance Data.............................. 4
Income Payments............................... 8
Annuity Unit Values........................... 8
Taxes......................................... 11
Distribution of Contracts..................... 13
Financial Statements.......................... 13
</TABLE>
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APPENDIX A - PREMIUM TAXES
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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%
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District of Columbia 2.25% 2.25%
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Kentucky 2% 2%
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Maine 0% 2%
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Nevada 0% 3.5%
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South Dakota 0% 1.25%
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West Virginia 1% 1%
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Wyoming 0% 1%
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</TABLE>
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<PAGE> 28
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APPENDIX B - MARKET VALUE ADJUSTMENT
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The market value adjustment reflects the impact that changing interest rates
have on the value of money invested at a fixed interest rate. The longer the
period of time remaining in the term you initially agreed to leave your money in
the fixed investment option, the greater the impact of changing interest rates.
The impact of the market value adjustment can be either positive or negative,
and is computed by multiplying the amount withdrawn, transferred or annuitized
by the following factor:
(N/12)
[(1+I/(1+J+0.005)] - 1
The market value adjustment formula may differ in certain states
where:
I is the interest rate you are earning on the money invested in the
fixed investment option;
J is the interest rate then currently available for the period of time
equal to the number of years remaining in the term you initially agreed
to leave your money in the fixed investment option; and
N is the number of full months remaining in the term you initially
agreed to leave your money in the fixed investment option.
EXAMPLES OF THE MARKET VALUE ADJUSTMENT
The examples below assume the following:
(1) You made an initial Purchase Payment of $10,000 and allocated it to the
10-year fixed investment option at a rate of 7%;
(2) You make a partial withdrawal of $4,000 when 1 1/2 years (18 months)
remain in the 10-year term you initially agreed to leave your money in
the fixed investment option (N=18); and
(3) You have not made any other transfers, additional Purchase Payments, or
withdrawals.
No withdrawal charges are reflected because your Purchase Payment has been in
the contract for seven full years. If a withdrawal charge applies, it is
deducted before the market value adjustment. The market value adjustment is
assessed on the amount withdrawn less any withdrawal charges.
NEGATIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 1-year fixed investment option is 7.5% and the 3-year
fixed investment option is 8.5%. By linear interpolation, the interest rate for
the remaining 2 years (1 1/2 years rounded up to the next full year) in the
contract is calculated to be 8%.
(N/12)
The market value adjustment factor is = [(1+I)/(1+J+0.005)] - 1
(18/12)
= [(1.07)/(1.08+0.005)] - 1
(1.5)
= (0.986175) - 1
= 0.979335 - 1
= - 0.020665
The requested withdrawal amount is multiplied by the market value adjustment
factor to determine the market value adjustment:
$4,000 X (- 0.020665) = -$82.66
$82.66 represents the market value adjustment that will be deducted from the
money remaining in the 10-year fixed investment option.
POSITIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for a new
Purchase Payments in the 1-year fixed investment option is 5.5% and the 3-year
fixed investment option is 6.5%. By linear interpolation, the interest rate for
the remaining 2 years (1 1/2 years rounded up to the next full year) in the
contract is calculated to be 6%.
(N/12)
The market value adjustment factor is = [(1+I/(1+J+0.005)] - 1
(18/12)
= [(1.07)/(1.06+0.005)] - 1
(1.5)
= (1.004695) - 1
= 1.007051 - 1
= + 0.007051
The requested withdrawal amount is multiplied by the market value adjustment
factor to determine the market value adjustment:
$4,000 x (+0.007051) = +$28.20
$28.20 represents the market value adjustment that would be added to your
withdrawal.
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Please forward a copy (without charge) of the Polaris Plus Variable Annuity
Statement of Additional Information to:
(Please print or type and fill in all information.)
------------------------------------------------------------------------
Name
------------------------------------------------------------------------
Address
------------------------------------------------------------------------
City/State/Zip
<TABLE>
<S> <C> <C> <C>
Date: ------------------------------------ Signed: ---------------------------------------
</TABLE>
Return to: Anchor National Life Insurance Company, Annuity Service Center,
P.O. Box 52499, Los Angeles, California 90054-0299
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