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As filed with the Securities and Exchange Commission on February 16, 1999
Registration No. 333-65953
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1 ON
FORM S-3 TO FORM S-1
ON FORM S-3 UNDER
THE SECURITIES ACT OF 1933
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ANCHOR NATIONAL LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
California 6311 86-0198983
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Number) organization)
1 SunAmerica Center
Los Angeles, California 90067-6022
(310) 772-6000
(Address, including zip code, and telephone number,
including area code, or registrant's
principal executive offices)
Susan L. Harris, Esquire
Anchor National Life Insurance Company
1 SunAmerica Center
Los Angeles, California 90067-6022
(310) 772-6000
(Name, address, including zip code, and telephone number, including area code
of agent for service)
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Approximate date of commencement of proposed sale to the public: As soon
after the effective date of this Registration Statement as is practicable.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _______________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
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PROFILE LOGO
VARIABLE ANNUITY
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD
KNOW AND CONSIDER BEFORE PURCHASING THE POLARIS CLASS A VARIABLE ANNUITY. THE
ANNUITY IS MORE FULLY DESCRIBED IN THE PROSPECTUS. PLEASE READ THE PROSPECTUS
CAREFULLY.
May 3, 1999
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1. THE POLARIS CLASS A VARIABLE ANNUITY
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The Polaris Class A Variable Annuity is a contract between you and Anchor
National Life Insurance Company. It is designed to help you invest on a
tax-deferred basis and meet long-term financial goals, such as retirement
funding. Tax deferral means all your money, including the amount you would
otherwise pay in current income taxes, remains in your contract to generate more
earnings. Your money could grow faster than it would in a comparable taxable
investment.
Polaris Class A offers a diverse selection of money managers and investment
options. You may divide your money among any or all 26 variable portfolios and 7
fixed account options. Your investment is not guaranteed. The value of your
Polaris Class A contract can fluctuate up and down, based on the performance of
the underlying investments you select, and you may experience a loss.
The variable portfolios offer professionally managed investment choices with
goals ranging from capital preservation to aggressive growth. Your choices for
the various investment options are found on the next page.
The contract also offers 7 fixed account options, for different time periods.
Each may have a different interest rate. Interest rates are guaranteed by Anchor
National.
Like most annuities, the contract has an accumulation phase and an income phase.
During the accumulation phase, you invest money in your contract. Your earnings
are based on the investment performance of the variable portfolios to which your
money is allocated and/or the interest rate(s) earned on the fixed account
option(s) in which you invest. You may withdraw money from your contract during
the accumulation phase. However, as with other tax-deferred investments, you
will pay taxes on earnings and untaxed contributions when you withdraw them. An
IRS penalty tax may apply if you make withdrawals before age 59 1/2.
During the income phase, you may receive income payments from your annuity. Your
income payments may be fixed in dollar amount, vary with investment performance
or a combination of both, depending on where your money is allocated. Among
other factors, the amount of money you are able to accumulate in your contract
during the accumulation phase will affect the amount of your income payments
during the income phase.
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2. INCOME OPTIONS
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You can select from one of five income options:
(1) payments for your lifetime;
(2) payments for your lifetime and your survivor's lifetime;
(3) payments for your lifetime and your survivor's lifetime, but for not less
than 10 or 20 years;
(4) payments for your lifetime, but for not less than 10 or 20 years; and
(5) payments for a specified period of 5 to 30 years.
You will also need to decide when your income payments begin and if you want
your income payments to fluctuate with investment performance or remain
constant. Once you begin receiving income payments, you cannot change your
income option.
If your contract is part of a non-qualified retirement plan (one that is
established with after-tax dollars), payments during the income phase are
considered partly a return of your original investment. The "original
investment" part of each payment is not taxable as income. For contracts which
are part of a qualified retirement plan using before-tax dollars, the entire
income payment is taxable as income.
In addition to the above income options, you may also elect to take income
payments under the Income Protection program, subject to the provisions thereof.
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3. PURCHASING A POLARIS CLASS A
VARIABLE ANNUITY CONTRACT
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You can buy a contract through your Edward Jones investment representative, who
can also help you complete the proper forms. For non-qualified contracts, the
minimum initial gross purchase payment is $5,000 and subsequent amounts of $500
or more may be added to your contract at any time during the accumulation phase.
For qualified contracts, the minimum initial gross purchase payment is $2,000
and subsequent amounts of $250 or more may be added to your contract at any time
during the accumulation phase.
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4. INVESTMENT OPTIONS
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You may allocate money to the following variable portfolios of the Anchor Series
Trust and/or the SunAmerica Series Trust:
ANCHOR SERIES TRUST
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Capital Appreciation Portfolio
- Growth Portfolio
- Government and Quality Bond Portfolio
SUNAMERICA SERIES TRUST
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Global Equities Portfolio
- Alliance Growth Portfolio
- Growth-Income Portfolio
MANAGED BY DAVIS SELECTED ADVISERS, L.P.
- Venture Value Portfolio
- Real Estate Portfolio
MANAGED BY FEDERATED INVESTORS
- Federated Value Portfolio
- Utility Portfolio
- Corporate Bond Portfolio
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT/ GOLDMAN SACHS ASSET MANAGEMENT
INTERNATIONAL
- Asset Allocation Portfolio
- Global Bond Portfolio
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Mid-Cap Growth Portfolio
- MFS Growth and Income Portfolio
- MFS Total Return Portfolio
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT INC.
- International Diversified Equities Portfolio
- Worldwide High Income Portfolio
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
- Putnam Growth Portfolio
- International Growth and Income Portfolio
- Emerging Markets Portfolio
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio
- "Dogs" of Wall Street Portfolio
- SunAmerica Balanced Portfolio
- High-Yield Bond Portfolio
- Cash Management Portfolio
You may also allocate money to the 1-year fixed account option or the 3, 5, 7
and 10-year market value adjustment ("MVA") fixed account options and, under
certain circumstances, the 6-month and 1-year Dollar Cost Averaging ("DCA")
fixed account options.
The interest rates applicable for these fixed account options may differ from
time to time, however, we will never credit less than a 3% compounded effective
yield. Once established, the rate will not change during the selected period.
Your contract value will be adjusted up or down for withdrawals or transfers
from the 3, 5, 7 and 10-year fixed account options prior to the end of the
guarantee period.
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5. EXPENSES
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We deduct insurance charges, to cover our mortality and expense risks, which
equal 0.85% annually of the average daily value of your contract allocated to
the variable portfolios.
We apply an up-front sales charge against each gross purchase payment you make.
The sales charge equals a percentage of each gross purchase payment. The sales
charge ranges from 0.50% to 5.75%, depending upon your investment amount. You
may be entitled to a reduced sales charge if you agree to contribute additional
money to your contract within a 13-month period or if you have related contracts
with us.
For investment amounts of $1,000,000 or more, we deduct, from your contract
value, a withdrawal charge of 0.50% for amounts withdrawn from any Purchase
Payment invested less than 12 months prior to such withdrawal.
As with other professionally managed investments, there are investment charges
imposed on contracts with money allocated to the variable portfolios. We
estimate these fees to range from .58% to 1.90%.
Each year, you are allowed to make 15 transfers without charge. After your first
15 transfers, a $25 transfer fee ($10 in Pennsylvania and Texas) applies to each
subsequent transfer.
In a limited number of states, you may also be assessed a state premium tax of
up to 3.5% depending upon the state.
The following chart is designed to help you understand the charges in your
contract. The column "Total Annual Charges" shows the total of the 0.85%
insurance charges and the investment charges for each variable portfolio.
The next two columns show two examples of the charges you would pay under the
contract. The examples assume that you invested $1,000 in a contract which earns
5% annually and that you withdraw your money: (1) at the end of year 1, and (2)
at the end of year 10. We assume an up-front sales charge of 5.75% and a premium
tax of 0% in both examples.
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EXAMPLES:
TOTAL ANNUAL TOTAL ANNUAL TOTAL EXPENSES TOTAL EXPENSES
INSURANCE INVESTMENT TOTAL ANNUAL AT END OF AT END OF
ANCHOR SERIES TRUST PORTFOLIO CHARGES CHARGES CHARGES 1 YEAR** 10 YEARS**
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Capital Appreciation 0.85% 0.68% 1.53% $ 73 $230
Growth 0.85% 0.75% 1.60% $ 73 $237
Government and Quality Bond 0.85% 0.67% 1.52% $ 73 $229
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SUNAMERICA SERIES TRUST PORTFOLIO
Emerging Markets* 0.85% 1.90% 2.75% $ 85 $349
International Diversified Equities 0.85% 1.26% 2.11% $ 78 $289
Global Equities 0.85% 0.88% 1.73% $ 75 $251
International Growth and Income* 0.85% 1.46% 2.31% $ 80 $310
Aggressive Growth* 0.85% 0.83% 1.68% $ 74 $246
MFS Mid-Cap Growth 0.85% 1.00% 1.85% $ 76 $263
Real Estate* 0.85% 0.95% 1.80% $ 75 $258
Putnam Growth 0.85% 0.86% 1.71% $ 74 $249
MFS Growth and Income 0.85% 0.73% 1.58% $ 73 $235
Alliance Growth 0.85% 0.64% 1.49% $ 72 $226
"Dogs" of Wall Street* 0.85% 0.85% 1.70% $ 74 $248
Venture Value 0.85% 0.75% 1.60% $ 73 $237
Federated Value* 0.85% 0.83% 1.68% $ 74 $246
Growth-Income 0.85% 0.60% 1.45% $ 72 $222
Utility* 0.85% 1.01% 1.86% $ 76 $261
Asset Allocation 0.85% 0.64% 1.49% $ 72 $226
MFS Total Return 0.85% 0.77% 1.62% $ 74 $239
SunAmerica Balanced* 0.85% 0.78% 1.63% $ 74 $240
Worldwide High Income 0.85% 1.08% 1.93% $ 77 $271
High-Yield Bond 0.85% 0.69% 1.54% $ 73 $231
Corporate Bond 0.85% 0.77% 1.62% $ 74 $239
Global Bond 0.85% 0.85% 1.70% $ 74 $248
Cash Management 0.85% 0.58% 1.43% $ 72 $220
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* For these portfolios, the adviser, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or reimburse expenses, if necessary, to keep
operating expenses at or below an established maximum amount. All waivers or
reimbursements may be terminated at any time. For more detailed information,
see Fee Tables and Examples in the prospectus.
** Includes sales charge applicable to a $1,000 purchase payment, or 5.75%, but
does not include the fees associated with the optional income protector plus
and max features.
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6. TAXES
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Unlike taxable investments where earnings are taxed in the year they are earned,
taxes on amounts earned in a non-qualified contract are deferred until they are
withdrawn. In a qualified contract, all amounts are taxable when they are
withdrawn.
When you begin taking distributions or withdrawals from your contract, earnings
are considered to be taken out first and will be taxed at your ordinary income
rate. You may be subject to a 10% IRS penalty tax for distributions or
withdrawals before age 59 1/2.
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7. ACCESS TO YOUR MONEY
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Withdrawals may be made from your contract in the amount of $1,000 or more. You
may request a withdrawal in writing or by establishing systematic withdrawals.
Under systematic withdrawals, the minimum withdrawal amount is $250.
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8. PERFORMANCE
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The value of your contract will fluctuate depending upon the investment
performance of the variable portfolio(s) you choose.
When you invest in the Polaris Class A Variable Annuity, your money is actually
invested in the underlying portfolios of the Anchor Series Trust and/or the
SunAmerica Series Trust. These trusts are older than the annuity itself and have
served as underlying investments for other variable annuity contracts. Some of
the advertised historical performance for this annuity will be derived from the
performance of the corresponding portfolios of the trusts modified to reflect
the charges and expenses associated with this contract, as if this contract had
been in existence during the time period advertised. Of course, past performance
does not guarantee future results.
As of the date of this prospectus, the sale of this contract has not yet begun.
Therefore, no performance information is presented here.
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9. DEATH BENEFIT
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If you should die during the accumulation phase, your beneficiary will receive a
death benefit. You must select from the two death benefit options described
below at the time you purchase your contract. Once selected, your death benefit
may not be changed. You should discuss with your Edward Jones investment
representative the options available to you and which option is best for you.
OPTION 1 - PURCHASE PAYMENT ACCUMULATION OPTION:
The death benefit is the greater of:
(1) the value of your contract at the time we receive satisfactory proof of
death; or
(2) total purchase payments less withdrawals (and any fees or charges applicable
to such withdrawals), compounded at a 4% annual growth rate until the date
of death (3% growth rate if 70 or older at the time of contract issue) plus
any purchase payments less withdrawals recorded after the date of death (and
any fees or charges applicable to such withdrawals; or
(3) the value of your contract on the seventh contract anniversary, plus any
purchase payments since the seventh anniversary and less any withdrawals
(and any fees or charges applicable to such withdrawals), all compounded at
a 4% annual growth rate until the date of death (3% if 70 or older at the
time of contract issue) plus any purchase payments less withdrawals recorded
after the date of death (and any fees or charges applicable to such
withdrawals).
OPTION 2 - MAXIMUM ANNIVERSARY OPTION:
The death benefit is the greater of:
(1) the value of your contract at the time we receive satisfactory proof of
death; or
(2) total purchase payments less any withdrawals (and any fees or charges
applicable to such withdrawals); or
(3) the maximum anniversary value on any contract anniversary prior to your 81st
birthday. The anniversary value equals the value of your contract on a
contract anniversary plus any purchase payments since that anniversary and
less any withdrawals (and any fees or charges applicable to such
withdrawals).
If you are age 90 or older at the time of death and selected the option 2 death
benefit, the death benefit will be equal to the value of your contract at the
time we receive satisfactory proof of death.
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10. OTHER INFORMATION
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FREE LOOK: You may cancel your contract within ten days (or longer if required
by your state) by mailing it to our Annuity Service Center. Your contract will
be treated as void on the date we receive it and we will pay you an amount equal
to the sum of the value of your contract (unless otherwise required by state
law) and the sales charge. Its value may be more or less than the money you
initially invested.
ASSET ALLOCATION REBALANCING: If selected by you, this program seeks to keep
your investment in line with your goals. We will maintain your specified
allocation mix in the variable portfolios and the 1-year fixed account option by
readjusting your money on a calendar quarter, semiannual or annual basis.
SYSTEMATIC WITHDRAWAL PROGRAM: If selected by you, this program allows you to
receive either monthly, quarterly, semiannual or annual checks during the
accumulation phase. Systematic withdrawals may also be electronically
transferred to your bank account. Of course, withdrawals may be taxable and a
10% IRS penalty tax may apply if you are under age 59 1/2.
PRINCIPAL ADVANTAGE PROGRAM: If selected by you, this program allows you to
obtain growth potential without any market risk to your principal. We will
guarantee that the portion of your money allocated to the 1, 3, 5, 7 or 10-year
fixed account option will grow to equal your principal investment when it is
allocated in accordance with the program.
DOLLAR COST AVERAGING: If selected by you, this program allows you to invest
gradually in the variable portfolios from any of the variable portfolios, the
1-year fixed account option, the 6-month DCA fixed account option or the 1-year
DCA fixed account option.
AUTOMATIC PAYMENT PLAN: You can add to your contract directly from your bank
account with as little as $20 per month.
CONFIRMATIONS AND QUARTERLY STATEMENTS: You will receive a confirmation of each
transaction within your contract. On a quarterly basis, you will receive a
complete statement of your transactions over the past quarter and a summary of
your account values.
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11. INQUIRIES
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If you have questions about your contract or need to make changes, call your
Edward Jones investment representative or contact us at:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Telephone Number: (800) 445-SUN2
If money accompanies your correspondence, you should direct it to:
Anchor National Life Insurance Company
P.O. Box 100330
Pasadena, California 91189-0001
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PROFILE LOGO
VARIABLE ANNUITY
PROSPECTUS
MAY 3, 1999
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Please read this prospectus carefully FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACTS
before investing and keep it for issued by
future reference. It contains ANCHOR NATIONAL LIFE INSURANCE COMPANY
important information about the in connection with
Polaris Class A Variable Annuity. VARIABLE ANNUITY ACCOUNT SEVEN
The annuity has 33 investment choices -- 7 fixed account
To learn more about the annuity options and 26 Variable Portfolios listed below. The 7 fixed
offered by this prospectus, you can account options include specified periods of 1, 3, 5, 7 and
obtain a copy of the Statement of 10 years and DCA accounts for 6-month and 1-year periods.
Additional Information ("SAI") dated The 26 Variable Portfolios are part of the Anchor Series
May 3, 1999. The SAI is on file with Trust or the SunAmerica Series Trust.
the Securities and Exchange
Commission ("SEC") and is ANCHOR SERIES TRUST:
incorporated by reference into this MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
prospectus. The Table of Contents of - Capital Appreciation Portfolio
the SAI appears on page 23 of this - Growth Portfolio
prospectus. For a free copy of the - Government and Quality Bond Portfolio
SAI, call us at (800) 445-SUN2 or
write to us at our Annuity Service SUNAMERICA SERIES TRUST:
Center, P.O. Box 54299, Los Angeles, MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
California 90054-0299. - Global Equities Portfolio
- Alliance Growth Portfolio
In addition, the SEC maintains a - Growth-Income Portfolio
website (http://www.sec.gov) that MANAGED BY DAVIS SELECTED ADVISERS, L.P.
contains the SAI, materials - Venture Value Portfolio
incorporated by reference and other - Real Estate Portfolio
information filed electronically with MANAGED BY FEDERATED INVESTORS
the SEC by Anchor National. - Federated Value Portfolio
- Utility Portfolio
Annuities involve risks, including - Corporate Bond Portfolio
possible loss of principal. Annuities MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT/
are not a deposit or obligation of, GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
or guaranteed or endorsed by, any - Asset Allocation Portfolio
bank. They are not Federally insured - Global Bond Portfolio
by the Federal Deposit Insurance MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
Corporation, the Federal Reserve - MFS Mid-Cap Growth Portfolio
Board or any other agency. - MFS Growth and Income Portfolio
- MFS Total Return Portfolio
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT
- International Diversified Equities Portfolio
- Worldwide High Income Portfolio
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
- Putnam Growth Portfolio
- International Growth and Income Portfolio
- Emerging Markets Portfolio
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio
- "Dogs" of Wall Street Portfolio
- SunAmerica Balanced Portfolio
- High-Yield Bond Portfolio
- Cash Management Portfolio
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
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Anchor National's Annual Report on Form 10-K for the year ended September 30,
1998, and its quarterly report on Form 10-Q for the quarter ended December 31,
1998 are incorporated herein by reference. In addition, Anchor National filed
two reports on Form 8-K on January 14 and 15, 1999. These reports are also
incorporated herein by reference.
All documents or reports filed by Anchor National pursuant to Section 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") after the date hereof and prior to the termination of the
offering of the securities offered hereby shall be deemed to be incorporated by
reference in this prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
and superseded, to constitute a part of this prospectus.
Anchor National files its Exchange Act documents and reports, including its
annual and quarterly reports on Form 10-K and Form 10-Q, electronically pursuant
to EDGAR under CIK No. 0000006342. The SEC maintains a web site that contains
reports, proxy and information statements, and other information regarding
registrants that file electronically with the SEC. The address of the site is
http://www.sec.gov.
Anchor National will provide without charge to each person to whom this
prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated herein by reference.
Requests for such documents should be directed to Anchor National's Annuity
Service Center, as follows:
Anchor National Life
Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Telephone Number: (800) 445-SUN2
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SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION
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Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
2
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TABLE OF CONTENTS
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 2
SECURITIES AND EXCHANGE COMMISSION POSITION ON
INDEMNIFICATION........................................... 2
GLOSSARY.................................................... 3
FEE TABLES.................................................. 4
Sales Charge.......................................... 4
Withdrawal Charge..................................... 4
Owner Transaction Expenses............................ 4
The Income Protector Expense.......................... 4
Annual Separate Account Expenses...................... 4
Portfolio Expenses.................................... 4
EXAMPLES.................................................... 5
THE POLARIS CLASS A VARIABLE ANNUITY........................ 6
PURCHASING A POLARIS CLASS A VARIABLE ANNUITY............... 6
Allocation of Purchase Payments....................... 7
Accumulation Units.................................... 7
Free Look............................................. 7
INVESTMENT OPTIONS.......................................... 7
Variable Portfolios................................... 7
Anchor Series Trust................................... 8
SunAmerica Series Trust............................... 8
Fixed Account Options................................. 8
Market Value Adjustment ("MVA")....................... 9
Transfers During the Accumulation Phase............... 9
Dollar Cost Averaging................................. 10
Asset Allocation Rebalancing.......................... 11
Principal Advantage Program........................... 11
Voting Rights......................................... 11
Substitution.......................................... 11
ACCESS TO YOUR MONEY........................................ 11
Systematic Withdrawal Program......................... 12
Minimum Contract Value................................ 12
DEATH BENEFIT............................................... 12
EXPENSES.................................................... 13
Insurance Charges..................................... 13
Sales Charge.......................................... 13
Reduction of Sales Charge............................. 13
Letter of Intent...................................... 13
Rights of Accumulation................................ 14
Purchase Payments Subject to a Withdrawal Charge...... 14
Investment Charges.................................... 15
Transfer Fee.......................................... 15
Premium Tax........................................... 15
Income Taxes.......................................... 15
Reduction or Elimination of Certain Charges and
Expenses, and Additional Amounts Credited........... 15
INCOME OPTIONS.............................................. 15
Annuity Date.......................................... 15
Income Options........................................ 15
Fixed or Variable Income Payments..................... 16
Income Payments....................................... 16
Transfers During the Income Phase..................... 16
Deferment of Payments................................. 16
The Income Protector.................................. 16
TAXES....................................................... 19
Annuity Contracts in General.......................... 19
Tax Treatment of Distributions -
Non-Qualified Contracts............................. 19
Tax Treatment of Distributions -
Qualified Contracts................................. 19
Minimum Distributions................................. 20
Diversification....................................... 20
PERFORMANCE................................................. 20
OTHER INFORMATION........................................... 20
Anchor National....................................... 20
The Separate Account.................................. 21
The General Account................................... 21
Distribution of the Contract.......................... 21
Administration........................................ 21
Year 2000............................................. 21
Legal Proceedings..................................... 22
Ownership............................................. 22
Custodian............................................. 22
Additional Information................................ 22
Independent Accountants............................... 22
Legal Matters......................................... 22
Registration Statement................................ 23
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION....
23
APPENDIX A -- MARKET VALUE ADJUSTMENT....................... A-1
APPENDIX B -- PREMIUM TAXES................................. B-1
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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 income
payments.
ANNUITY DATE - The date on which income payments are to begin, as
selected by you.
ANNUITY UNITS - A measurement we use to calculate the amount of
income payments you receive from the variable portion of your
contract during the Income Phase.
BENEFICIARY - The person designated to receive any benefits under
the contract if you or the Annuitant dies.
GROSS PURCHASE PAYMENTS - The money you give us to buy the
contract, as well as any additional money you give us to invest in
the contract after you own it. Gross Purchase Payments do not
reflect the reduction of the sales charge.
INCOME PHASE - The period during which we make income payments to
you.
IRS - The Internal Revenue Service.
NON-QUALIFIED (CONTRACT) - A contract purchased with after-tax
dollars. In general, these contracts are not under any pension
plan, specially sponsored program or individual retirement account
("IRA").
PURCHASE PAYMENTS - The portion of your Gross Purchase Payments
which we invest in your contract. We calculate this amount by
deducting the applicable sales charge from your Gross Purchase
Payments.
QUALIFIED (CONTRACT) - A contract purchased with pre-tax dollars.
These contracts are generally purchased under a pension plan,
specially sponsored program or IRA.
TRUSTS - Refers to the Anchor Series Trust and the SunAmerica
Series Trust collectively.
VARIABLE PORTFOLIO(S) - The variable investment options
available under the contract. Each Variable Portfolio has its own
investment objective and is invested in the underlying investments
of the Anchor Series Trust or the SunAmerica Series Trust.
</TABLE>
ALL INVESTMENT REPRESENTATIVES THAT SELL THE CONTRACTS OFFERED BY THIS
PROSPECTUS ARE REQUIRED TO DELIVER A PROSPECTUS.
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FEE TABLES
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OWNER TRANSACTION EXPENSES
SALES CHARGE
<TABLE>
<CAPTION>
SALES CHARGE AS A
PERCENTAGE OF GROSS
INVESTMENT AMOUNT PURCHASE PAYMENT INVESTED*
-------------------------------- --------------------------
<S> <C>
Less than $50,000.................... 5.75%
$50,000 but less than $100,000....... 4.75%
$100,000 but less than $250,000...... 3.50%
$250,000 but less than $500,000...... 2.50%
$500,000 but less than $1,000,000.... 2.00%
$1,000,000 or more................... 0.50%
</TABLE>
* Your gross purchase payment may qualify for a reduced sales charge. SEE
EXPENSES SECTION ON PAGE 11.
WITHDRAWAL CHARGE
<TABLE>
<CAPTION>
WITHDRAWAL CHARGE AS A
PERCENTAGE
OF GROSS PURCHASE PAYMENT
WITHDRAWN WITHIN 12 MONTHS OF
INVESTMENT AMOUNT PURCHASE PAYMENT
------------------------- ----------------------------
<S> <C>
$1,000,000 or more............... 0.50%
TRANSFER FEE..................... No charge for first 15 transfers
each year; thereafter, fee is $25
($10 in Pennsylvania and Texas)
per transfer
</TABLE>
CONTRACT MAINTENANCE FEE . . . . . . . . . . . Non.
ANNUAL SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge....................... 0.85%
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TOTAL SEPARATE ACCOUNT EXPENSES..................... 0.85%
=====
</TABLE>
THE INCOME PROTECTOR EXPENSE
(THE INCOME PROTECTOR PLUS AND MAX FEATURES ARE OPTIONAL AND, IF ELECTED, THE
FEE IS DEDUCTED ANNUALLY FROM YOUR CONTRACT VALUE. THE INCOME PROTECTOR PROGRAM
MAY NOT BE AVAILABLE IN YOUR STATE. SEE THE INCOME PROTECTOR SECTION ON PAGE
16.)
<TABLE>
<CAPTION>
FEE AS A PERCENTAGE OF
YOUR INCOME BENEFIT BASE
THE INCOME PROTECTOR ALTERNATIVES ------------------------
------------------------------
<S> <C>
Base Income Protector................. 0%
Income Protector Plus................. .15%
Income Protector Max.................. .30%
</TABLE>
PORTFOLIO EXPENSES
ANCHOR SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S TWELVE-MONTH PERIOD ENDED
DECEMBER 31, 1998)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
<S> <C> <C> <C>
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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 DECEMBER 31, 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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MFS Mid-Cap Growth+ .75% .25% 1.00%
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Real Estate*** .80% .15% .95%
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Putnam Growth .81% .05% .86%
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MFS Growth and Income .70% .03% .73%
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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%
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Utility*** .75% .26% 1.01%
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Asset Allocation .59% .05% .64%
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MFS Total Return+ .67% .10% .77%
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SunAmerica Balanced .68% .10% .78%
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Worldwide High Income 1.00% .08% 1.08%
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High-Yield Bond .63% .06% .69%
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Corporate Bond .65% .12% .77%
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Global Bond .70% .15% .85%
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Cash Management .53% .05% .58%
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</TABLE>
* Absent fee waivers or reimbursement of expenses by the adviser, you would
have incurred the following expenses during the last fiscal year: Emerging
Markets (2.01%) and "Dogs" of Wall Street (.92%).
** Annualized
*** Absent recoupment of expenses by the adviser, you would have incurred the
following expenses during the last fiscal year: International Growth and
Income (1.40%); Real Estate (.93%); and Utility (.92%).
+ The expenses noted here are restated to reflect an estimate of fees for
each portfolio for the current fiscal year.
THE ABOVE PORTFOLIO EXPENSES WERE PROVIDED BY THE TRUSTS. WE HAVE NOT
INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
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EXAMPLES
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You will pay the following expenses on a $1,000 investment in each Variable
Portfolio, assuming a 5% annual return on assets and a sales charge of 5.75%. We
do not deduct any additional fees or charges when you surrender your contract.*
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS
<S> <C> <C>
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Capital Appreciation $73 $104
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Growth $73 $106
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Government and Quality Bond $73 $103
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Emerging Markets $85 $139
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International Diversified Equities $78 $120
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Global Equities $75 $109
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International Growth and Income $80 $126
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Aggressive Growth $74 $108
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MFS Mid-Cap Growth $76 $113
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Real Estate $75 $111
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Putnam Growth $74 $109
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MFS Growth and Income $73 $105
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Alliance Growth $72 $102
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"Dogs" of Wall Street $74 $109
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Venture Value $73 $106
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Federated Value $74 $108
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Growth-Income $72 $101
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Utility $76 $113
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Asset Allocation $72 $102
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MFS Total Return $74 $106
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SunAmerica Balanced $74 $107
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Worldwide High Income $77 $116
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High-Yield Bond $73 $104
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Corporate Bond $74 $106
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Global Bond $74 $109
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Cash Management $72 $101
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</TABLE>
* We do not currently charge a withdrawal charge upon annuitization, unless the
contract is annuitized under the Income Protector program. We will assess any
applicable withdrawal charge upon annuitizations effected using the Income
Protector program as if you had fully surrendered your contract.
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EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you would
incur directly and indirectly by investing in the contract.
2. For certain Variable Portfolios, the adviser, SunAmerica Asset Management
Corp., has voluntarily agreed to waive fees or reimburse certain expenses,
if necessary, to keep annual operating expenses at or below the lesser of
the maximum allowed by any applicable state expense limitations or the
following percentages of each Variable Portfolio's average net assets:
SunAmerica Balanced (1.00%); "Dogs" of Wall Street (.85%); Aggressive Growth
(.90%); Federated Value (1.03%); Utility (1.05%); Emerging Markets (1.90%);
International Growth and Income (1.60%); and Real Estate (1.25%). The
adviser also may voluntarily waive or reimburse additional amounts to
increase a Variable Portfolio's investment return. All waivers and/or
reimbursements may be terminated at any time. Furthermore, the adviser may
recoup any waivers or reimbursements within two years after such waivers or
reimbursements are granted, provided that the Variable Portfolio is able to
make such payment and remain in compliance with the foregoing expense
limitations.
3. The Examples assume that no transfer fees were imposed. Although premium
taxes may apply in certain states, they are not reflected in the Examples.
In addition, the Examples do not reflect the fees associated with the
optional Income Protector Plus and Max features. SEE INCOME OPTION ON PAGE
15.
4. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
AS OF THE DATE OF THIS PROSPECTUS SALES OF THIS CONTRACT HAD NOT BEGUN.
THEREFORE, NO CONDENSED FINANCIAL INFORMATION APPEARS IN THIS PROSPECTUS.
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THE POLARIS CLASS A VARIABLE ANNUITY
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An annuity is a contract between you and an insurance company. You are the owner
of the contract. The contract provides three main benefits:
- Tax Deferral: This means that you do not pay taxes on your earnings from
the annuity until you withdraw them.
- Death Benefit: If you die during the Accumulation Phase, the insurance
company pays a death benefit to your Beneficiary.
- Guaranteed Income: If elected, you receive a stream of income for your
lifetime, or another available period you select.
This annuity was developed to help you contribute to your retirement savings.
This annuity works in two stages, the Accumulation Phase and the Income Phase.
Your contract is in the Accumulation Phase during the period when you make
payments into the contract. The Income Phase begins when you request us to start
making income payments to you out of the money accumulated in your contract.
The contract is called a "variable" annuity because it allows you to invest in
portfolios which, like mutual funds, vary with market conditions. You can gain
or lose money if you invest in these Variable Portfolios. The amount of money
you accumulate in your contract depends on the performance of the Variable
Portfolios in which you invest. This contract currently offers 26 Variable
Portfolios.
The contract also offers several fixed account options for varying time periods.
Fixed account options earn interest at a rate set and guaranteed by Anchor
National. If you allocate money to the fixed account options, the amount of
money that accumulates in the contract depends on the total interest credited to
the particular fixed account option(s) in which you invest.
For more information on investment options available under this contract SEE
INVESTMENT OPTIONS ON PAGE 7.
Anchor National Life Insurance Company (Anchor National, The Company, Us, We)
issues the Polaris Class A Variable Annuity. When you purchase a Polaris Class A
Variable Annuity, a contract exists between you and Anchor National. The Company
is a stock life insurance company organized under the laws of the state of
Arizona. Its principal place of business is 1 SunAmerica Center, Los Angeles,
California 90067. The Company conducts life insurance and annuity business in
the District of Columbia and all states except New York. Anchor National is an
indirect, wholly owned subsidiary of American International Group, Inc. ("AIG"),
a Delaware corporation.
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PURCHASING A POLARIS CLASS A
VARIABLE ANNUITY
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An initial Gross Purchase Payment is the money you give us to buy a contract.
Any additional money you give us to invest in the contract after purchase is a
subsequent Gross Purchase Payment.
This chart shows the minimum initial and subsequent Gross Purchase Payments
permitted under your contract. These amounts depend upon whether a contract is
Qualified or Non-qualified for tax purposes. FOR FURTHER EXPLANATION, SEE TAXES
ON PAGE 19.
<TABLE>
<S> <C> <C>
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Minimum Initial Minimum Subsequent
Gross Purchase Gross Purchase
Payment Payment
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Qualified $2,000 $250
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Non-Qualified $5,000 $500
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</TABLE>
Prior Company approval is required to accept Gross Purchase Payments greater
than $1,000,000. Also, the optional automatic payment plan allows you to make
subsequent Gross Purchase Payments of as little as $20.00.
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We may refuse any Gross Purchase Payment. In general, we will not issue a
Qualified contract to anyone who is age 70 1/2 or older, unless it is shown that
the minimum distribution required by the IRS is being made. In addition we may
not issue a contract to anyone over age 90.
ALLOCATION OF PURCHASE PAYMENTS
A Purchase Payment is the portion of your Gross Purchase Payment which we invest
in your contract after we deduct the sales charge.
We invest your Purchase Payments in the fixed and variable investment options
according to your instructions. If we receive a Purchase Payment without
allocation instructions, we invest the money according to your last allocation
instructions. SEE INVESTMENT OPTIONS BELOW.
In order to issue your contract, we must receive your completed application,
Purchase Payment allocation instructions and any other required paperwork at our
principal place of business. We allocate your initial purchase payment within
two days of receiving it. If we do not have complete information necessary to
issue your contract, we will contact you. If we do not have the information
necessary to issue your contract within 5 business days we will:
- Send your money back to you, or;
- Ask your permission to keep your money until we get the information
necessary to issue the contract.
ACCUMULATION UNITS
When you allocate a Purchase Payment to the Variable Portfolios, we credit your
contract with Accumulation Units of the separate account, based on the AUV next
determined after receipt. The value of an Accumulation Unit goes up and down
based on the performance of the Variable Portfolios.
We calculate the value of an Accumulation Unit each day that the New York Stock
Exchange ("NYSE") is open as follows:
1. We determine the total value of money invested in a particular Variable
Portfolio;
2. We subtract from that amount all applicable contract charges; and
3. We divide this amount by the number of outstanding Accumulation Units.
We determine the number of Accumulation Units credited to your contract by
dividing the Purchase Payment by the Accumulation Unit value for the specific
Variable Portfolio.
EXAMPLE:
We receive a $50,000 Gross Purchase Payment from you on Wednesday which you
allocate to the Global Bond Portfolio. After we deduct the sales charge,
the net amount to be invested of your Gross Purchase Payment is $47,625. We
determine that the value of an Accumulation Unit for the Global Bond
Portfolio is $11.10 when the NYSE closes on Wednesday. We then divide
$47,625 by $11.10 and credit your contract on Wednesday night with 4290.54
Accumulation Units for the Global Bond Portfolio.
Performance of the Variable Portfolios and the charges and expenses under your
contract affect Accumulation Unit values. These factors cause the value of your
contract to go up and down.
FREE LOOK
You may cancel your contract within ten days after receiving it (or longer if
required by state law). We call this a "free look." To cancel, you must mail the
contract along with your free look request to our Annuity Service Center at P.O.
Box 54299, Los Angeles, California 90054-0299. We will refund the value of your
contract on the day we receive your request plus the sales charge we deducted.
The amount refunded may be more or less than the amount you originally invested.
Certain states require us to return your Gross Purchase Payments upon a free
look request. Additionally, all contracts issued as an IRA require the full
return of Gross Purchase Payments upon a free look. With respect to those
contracts, we reserve the right to put your money in the Cash Management
Portfolio during the free look period. If you cancel your contract during the
free look period, we return your Gross Purchase Payment or the value of your
contract plus the sales charge we deducted, whichever is larger. At the end of
the free look period, we allocate your money according to your instructions.
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INVESTMENT OPTIONS
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VARIABLE PORTFOLIOS
The contract currently offers 26 Variable Portfolios. These Variable Portfolios
invest in shares of the Anchor Series Trust and the SunAmerica Series Trust (the
"Trusts"). Additional Variable Portfolios may be available in the future. The
Variable Portfolios operate similarly to a mutual fund but are only available
through the purchase of certain insurance contracts.
SunAmerica Asset Management Corp., an indirect wholly owned subsidiary of AIG,
is the investment adviser to the Trusts. The Trusts serve as the underlying
investment vehicles for other variable annuity contracts issued by Anchor
National, and other affiliated/unaffiliated insurance companies. Neither Anchor
National nor the Trusts believe that offering shares of the Trusts in this
manner disadvantages you. The adviser monitors the Trusts for potential
conflicts.
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The Variable Portfolios along with their respective subadvisers are listed
below:
ANCHOR SERIES TRUST
Wellington Management Company, LLP serves as subadviser to the Anchor Series
Trust Portfolios. Anchor Series Trust has investment Portfolios in addition to
those listed below which are not available for investment under the contract.
The 3 available investment Portfolios are:
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Capital Appreciation Portfolio
- Growth Portfolio
- Government and Quality Bond Portfolio
SUNAMERICA SERIES TRUST
Various subadvisers provide investment advice for the SunAmerica Series Trust
Portfolios. SunAmerica Series Trust has investment Portfolios in addition to
those listed below which are not available for investment under the contract.
The 23 available investment Portfolios and the subadvisers are:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Global Equities Portfolio
- Alliance Growth Portfolio
- Growth Income Portfolio
MANAGED BY DAVIS SELECTED ADVISERS, L.P.
- Venture Value Portfolio
- Real Estate Portfolio
MANAGED BY FEDERATED INVESTORS
- Federated Value Portfolio
- Utility Portfolio
- Corporate Bond Portfolio
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT/GOLDMAN
SACHS ASSET MANAGEMENT INTERNATIONAL
- Asset Allocation Portfolio
- Global Bond Portfolio
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
- MFS Mid-Cap Growth Portfolio
- MFS Growth and Income Portfolio
- MFS Total Return Portfolio
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT INC.
- International Diversified Equities Portfolio
- Worldwide High Income Portfolio
MANAGED BY PUTNAM INVESTMENT MANAGEMENT
- Putnam Growth Portfolio
- International Growth and Income Portfolio
- Emerging Markets Portfolio
MANAGED BY SUNAMERICA ASSET MANAGEMENT, INC.
- Aggressive Growth Portfolio
- "Dogs" of Wall Street Portfolio
- SunAmerica Balanced Portfolio
- High-Yield Bond Portfolio
- Cash Management Portfolio
You should read the attached prospectuses for the Trusts carefully. These
prospectuses contain detailed information about the Variable Portfolios,
including each Variable Portfolio's investment objective and risk factors.
FIXED ACCOUNT OPTIONS
The contract also offers seven fixed account options. Anchor National will
guarantee the interest rate earned on money you allocate to any of these fixed
account options. We currently offer fixed account options for periods of one,
three, five, seven and ten years, which we call guarantee periods. Additionally,
we guarantee the interest rate for money allocated to the six-month DCA fixed
account and/or the one year DCA fixed account (the "DCA fixed accounts") which
are available only in conjunction with the Dollar Cost Averaging Program. Please
see the section on DOLLAR COST AVERAGING ON PAGE 10 for additional information
about, including limitations on, the availability and operation of the DCA fixed
accounts. The DCA fixed accounts are only available for new Purchase Payments.
Each guarantee period may offer a different interest rate but will never be less
than an annual effective rate of 3%. Once established the rates for specified
payments do not change during the guarantee period. The guarantee period is that
period for which we credit the applicable rate (one, three, five, seven or ten
years).
There are three scenarios in which you may put money into the MVA fixed account
options. In each scenario your money may be credited a different rate of
interest as follows:
- Initial Rate: Rate credited to new Purchase Payments allocated to the
fixed account when you purchase your contract.
- Current Rate: Rate credited to subsequent Purchase Payments allocated to
the fixed account.
- Renewal Rate: Rate credited to money transferred from one fixed account
or one of the Variable Portfolios to another fixed account.
Each of these rates may differ from one another. Although once declared the
applicable rate is guaranteed until the guarantee period expires.
When a guarantee period ends, you may leave your money in the same fixed
investment option. You may also reallocate your money to another fixed
investment option (other than the DCA fixed accounts) or to the Variable
Portfolios. If you want to reallocate your money to a different fixed account
option or Variable Portfolio, you must contact us within 30 days after the end
of the current interest guarantee period and instruct us how to reallocate the
money. We do not
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contact you. If we do not hear from you, your money will remain in the same
fixed account option, where it will earn interest at the renewal rate then in
effect for the fixed account option.
The DCA fixed accounts also credit a fixed rate of interest for a predetermined
amount of time. The interest rate in the
1-year or 6-month DCA fixed account is credited while your investment is
systematically transferred to the Variable Portfolios. The rates applicable to
the DCA fixed accounts may differ from each other and/or the other fixed account
options. See DOLLAR COST AVERAGING ON PAGE 10 for more information.
MARKET VALUE ADJUSTMENT ("MVA")
NOTE: THE FOLLOWING DISCUSSION APPLIES TO THE 3, 5, 7 and 10-YEAR FIXED ACCOUNT
OPTIONS, ONLY. THESE OPTIONS ARE NOT AVAILABLE IN ALL STATES. PLEASE CONTACT
YOUR EDWARD JONES INVESTMENT REPRESENTATIVE FOR MORE INFORMATION.
If you take money out of the 3, 5, 7 or 10-year fixed account options before the
end of the guarantee period, we make an adjustment to your contract (the "MVA").
The MVA reflects any difference in the interest rate environment between the
time you place your money in the fixed account option and the time when you
withdraw that money. This adjustment can increase or decrease your contract
value. You have 30 days after the end of each guarantee period to reallocate
your funds without incurring any MVA.
We calculate the MVA by doing a comparison between current rates and the rate
being credited to you in the fixed account option. For the current rate we use a
rate being offered by us for a guarantee period that is equal to the time
remaining in the guarantee period from which you seek withdrawal. If we are not
currently offering a guarantee period for that period of time, we determine an
applicable rate by using a formula to arrive at a number between the interest
rates currently offered for the two closest periods available.
Generally, if interest rates drop between the time you put your money into the
fixed account options and the time you take it out, we credit a positive
adjustment to your contract. Conversely, if interest rates increase during the
same period, we post a negative adjustment to your contract.
Where the MVA is negative, we first deduct the adjustment from any money
remaining in the fixed account option. If there is not enough money in the fixed
account option to meet the negative deduction, we deduct the remainder from your
withdrawal. Where the MVA is positive, we add the adjustment to your withdrawal
amount.
Anchor National does not assess a MVA against withdrawals under the following
circumstances:
- If annuitization occurs on the latest annuity date;
- To pay a death benefit;
- If made within 30 days after the end of a guarantee period; or
- If made to pay contract charges.
The 1-year fixed account option and the DCA fixed accounts do not impose a MVA.
These fixed accounts are not registered under the Securities Act of 1933 and are
not subject to the provisions of the Investment Company Act of 1940.
APPENDIX A shows how we calculate the MVA.
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase you may transfer funds between the Variable
Portfolios and/or the fixed account options. Funds already in your contract
cannot be transferred into the DCA fixed accounts. You must transfer at least
$100. If less than $100 will remain in any Variable Portfolio after a transfer,
that amount must be transferred as well.
You may request transfers of your account value between the Variable Portfolios
and/or the fixed account options in writing or by telephone. We currently allow
15 free transfers per contract per year. We charge $25 ($10 in Pennsylvania and
Texas) for each additional transfer in any contract year. Transfers resulting
from your participation in the DCA program count against your 15 free transfers
per contract year. However, transfers resulting from your participation in the
automatic asset rebalancing program do not count against your 15 free transfers.
We accept transfer requests by telephone unless you tell us not to on your
contract application. Additionally, in the future you may be able to execute
transfers or other financial transactions over the internet. When receiving
instructions over the telephone, we follow appropriate procedures to provide
reasonable assurance that the transactions executed are genuine. Thus, we are
not responsible for any claim, loss or expense from any error resulting from
instructions received over the telephone.
Upon implementation of internet account transfers we will have appropriate
procedures in place to provide reasonable assurance that the transactions
executed are genuine. Thus, we would not be responsible for any claim, loss or
expense from any error resulting from instructions received over the internet.
If we fail to follow our procedures, we may be liable for any losses due to
unauthorized or fraudulent instructions.
We may limit the number of transfers in any contract year or refuse any transfer
request for you or others invested in the contract if we believe that excessive
trading or a specific transfer request or group transfer requests may have a
detrimental effect on unit values or the share prices of the underlying Variable
Portfolios.
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Where permitted by law, we may accept your authorization for a third party to
make transfers for you subject to our rules. We reserve the right to suspend or
cancel such acceptance at any time and will notify you accordingly.
Additionally, we may restrict the investment options available for transfers
during any period in which such third party acts for you. We notify such third
party beforehand regarding any restrictions. However, we will not enforce these
restrictions if we are satisfied that:
- such third party has been appointed by a court of competent jurisdiction
to act on your behalf; or
- such third party is a trustee/fiduciary for you or appointed by you to
act on your behalf for all your financial affairs.
We may provide administrative or other support services to independent third
parties you authorize to make transfers on your behalf. We do not currently
charge you extra for providing these support services. This includes, but is not
limited to, transfers between investment options in accordance with market
timing strategies. Such independent third parties may or may not be appointed
with us for the sale of annuities. However, WE DO NOT ENGAGE ANY THIRD PARTIES
TO OFFER INVESTMENT ALLOCATION SERVICES OF ANY TYPE. WE TAKE NO RESPONSIBILITY
FOR THE INVESTMENT ALLOCATION AND TRANSFERS TRANSACTED ON YOUR BEHALF BY SUCH
THIRD PARTIES OR FOR ANY INVESTMENT ALLOCATION RECOMMENDATIONS MADE BY SUCH
PARTIES.
For information regarding transfers during the Income Phase, SEE INCOME OPTIONS
ON PAGE 15.
We reserve the right to modify, suspend, waive or terminate these transfer
provisions at any time.
DOLLAR COST AVERAGING
The DCA program allows you to invest gradually in the Variable Portfolios. Under
the program you systematically transfer a set dollar amount or percentage of
portfolio value from one Variable Portfolio or the 1-year fixed account option
(source accounts) to any other Variable Portfolio. Transfers may be monthly or
quarterly. You may change the frequency at any time by notifying us in writing.
The minimum transfer amount under the DCA program is $100, regardless of the
source account.
We also offer the 6-month and 1-year DCA fixed accounts exclusively to
facilitate this program. The DCA fixed accounts only accept new Purchase
Payments. You cannot transfer money already in your contract into these options.
If you allocate a Purchase Payment into a DCA fixed account, we transfer all
your money allocated to that account into the Variable Portfolios over the
selected 6-month or 1-year period. You cannot change the option or the frequency
of transfers once selected.
If allocated to the 6-month DCA fixed account, we transfer your money over a
maximum of 6 monthly transfers. We base the actual number of transfers on the
total amount allocated to the account. For example, if you allocate $500 to the
6-month DCA fixed account, we transfer your money over a period of five months,
so that each payment complies with the $100 per transfer minimum.
We determine the amount of the transfers from the 1-year DCA fixed account based
on:
- the total amount of money allocated to the account; and
- the frequency of transfers selected.
For example, let's say you allocate $1,000 to the 1-year DCA account. You select
monthly transfers. We completely transfer all of your money to the selected
investment options over a period of ten months.
You may terminate your DCA program at any time. If money remains in the DCA
fixed accounts, we transfer the remaining money to the 1-year fixed account
option, unless we receive different instructions from you. Transfers resulting
from a termination of this program do not count towards your 15 free transfers.
The DCA program is designed to lessen the impact of market fluctuations on your
investment. However, we cannot ensure that you will make a profit. When you
elect the DCA program, you are continuously investing in securities regardless
of fluctuating price levels. You should consider your tolerance for investing
through periods of fluctuating price levels.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to gradually move $750 each quarter from the Cash
Management Portfolio to the Aggressive Growth Portfolio over six quarters.
You set up dollar cost averaging and purchase Accumulation Units at the
following values:
<TABLE>
<CAPTION>
- -------------------------------------------
ACCUMULATION UNITS
QUARTER UNIT PURCHASED
- -------------------------------------------
<S> <C> <C>
1 $ 7.50 100
2 $ 5.00 150
3 $10.00 75
4 $ 7.50 100
5 $ 5.00 150
6 $ 7.50 100
- -------------------------------------------
</TABLE>
You paid an average price of only $6.67 per Accumulation Unit over six
quarters, while the average market price actually was $7.08. By investing
an equal amount of money each month, you automatically buy more
Accumulation Units when the market price is low
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<PAGE> 16
and fewer Accumulation Units when the market price is
high. This example is for illustrative purposes only.
ASSET ALLOCATION REBALANCING
Earnings in your contract may cause the percentage of your investment in each
investment option to differ from your original allocations. The automatic asset
rebalancing program addresses this situation. At your election, we periodically
rebalance your investments to return your allocations to their original
percentages. Asset rebalancing typically involves shifting a portion of your
money out of an investment option with a higher return into an investment option
with a lower return.
You request quarterly, semiannual or annual rebalancing. Transfers made as a
result of rebalancing do not count against your 15 free transfers for the
contract year.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want your initial Purchase Payment split between two
Variable Portfolios. You want 50% in the Corporate Bond Portfolio and 50%
in the Growth Portfolio. Over the next calendar quarter, the bond market
does very well while the stock market performs poorly. At the end of the
calendar quarter, the Corporate Bond Portfolio now represents 60% of your
holdings because it has increased in value and the Growth Portfolio
represents 40% of your holdings. If you had chosen quarterly rebalancing,
on the last day of that quarter, we would sell some of your units in the
Corporate Bond Portfolio to bring its holdings back to 50% and use the
money to buy more units in the Growth Portfolio to increase those holdings
to 50%.
PRINCIPAL ADVANTAGE PROGRAM
The principal advantage program allows you to invest in one or more Variable
Portfolios without putting your principal at direct risk. The program
accomplishes this by allocating your investment strategically between the fixed
account options and Variable Portfolios. You decide how much you want to invest
and approximately when you want a return of principal. We calculate how much of
your Purchase Payment to allocate to the particular fixed account option to
ensure that it grows to an amount equal to your total principal invested under
this program. We invest the rest of your principal in the Variable Portfolio(s)
of your choice.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to allocate a portion of your initial Purchase Payment
of $100,000 to the fixed account option after we deduct sales charges. You
want the amount allocated to the fixed account option to grow to $100,000
in 7 years. If the 7-year fixed account option is offering a 5% interest
rate, we will allocate $71,069 to the 7-year fixed account option to ensure
that this amount will grow to $100,000 at the end of the 7-year period. The
remaining $28,931 may be allocated among the Variable Portfolios, as
determined by you, to provide opportunity for greater growth.
VOTING RIGHTS
Anchor National is the legal owner of the Trusts' shares. However, when a
Variable Portfolio solicits proxies in conjunction with a vote of shareholders,
we must obtain your instructions on how to vote those shares. We vote all of the
shares we own in proportion to your instructions. This includes any shares we
own on our own behalf. Should we determine that we are no longer required to
comply with these rules, we will vote the shares in our own right.
SUBSTITUTION
If Variable Portfolios become unavailable for investment, we may be required to
substitute shares of another Variable Portfolio. We will seek prior approval of
the SEC and give you notice before substituting shares.
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ACCESS TO YOUR MONEY
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You can access money in your contract in two ways:
- by making a partial or total withdrawal, and/or;
- by receiving income payments during the Income Phase. (SEE INCOME OPTIONS
ON PAGE 15.)
We deduct a MVA if a partial withdrawal comes from the 3, 5, 7 or 10-year fixed
account prior to the end of the guarantee period. Additionally, a withdrawal
charge may apply in limited circumstances. If you withdraw your entire contract
value, we also deduct premium taxes if applicable. SEE EXPENSES ON PAGE 13.
Under certain Qualified plans, access to the money in your contract may be
restricted. Additionally, withdrawals made prior to age 59 1/2 may result in a
10% IRS penalty tax. SEE TAXES ON PAGE 19.
Under most circumstances, the partial withdrawal minimum is $1,000. We require
that the value left in any investment option be at least $500, after the
withdrawal. You must send a written withdrawal request. Unless you provide us
with different instructions, partial withdrawals will be made pro rata from each
Variable Portfolio and the fixed account option(s) in which your contract is
invested.
We may be required to suspend or postpone the payment of a withdrawal for any
period of time when: (1) the NYSE is
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closed (other than a customary weekend and holiday closings); (2) trading with
the NYSE is restricted; (3) an emergency exists such that disposal of or
determination of the value of shares of the Variable Portfolios is not
reasonably practicable; (4) the SEC, by order, so permits for the protection of
contract owners.
Additionally, we reserve the right to defer payments for a withdrawal from a
fixed account option. Such deferrals are limited to no longer than six months.
SYSTEMATIC WITHDRAWAL PROGRAM
During the Accumulation Phase, you may elect to receive periodic income payments
under the systematic withdrawal program. Under the program you may choose to
take monthly, quarterly, semiannual or annual payments from your contract.
Electronic transfer of these funds to your bank account is available. The
minimum amount of each withdrawal is $250. There must be at least $500 remaining
in your contract at all times. Withdrawals may be taxable and a 10% IRS penalty
tax may apply if you are under age 59 1/2. There is no additional charge for
participating in this program, although a withdrawal charge and a MVA may apply.
SEE EXPENSES ON PAGE 13. We reserve the right to modify, suspend or terminate
this program at any time.
MINIMUM CONTRACT VALUE
Where permitted by state law, we may terminate your contract if both of the
following occur: (1) your contract is less than $500 as a result of withdrawals;
and (2) you have not made any Purchase Payments during the past three years. We
will provide you with sixty days written notice. At the end of the notice
period, we will distribute the contract value to you.
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DEATH BENEFIT
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If you die during the Accumulation Phase of your contract, we pay a death
benefit to your Beneficiary. At the time you purchase your contract, you must
select one of the two death benefits described below. Once selected, you can not
change your death benefit option. You should discuss the available options with
your Edward Jones investment representative to determine which option is best
for you.
OPTION 1 - PURCHASE PAYMENT ACCUMULATION OPTION
The death benefit is the greater of:
1. the value of your contract at the time we receive satisfactory proof of
death; or
2. total Purchase Payments less withdrawals (and any fees or charges
applicable to such withdrawals), compounded at a 4% annual growth rate
until the date of death (3% growth rate if 70 or older at the time of
contract issue) plus any Purchase Payments less withdrawals since date
of death (and any fees or charges applicable to such withdrawals); or
3. the value of your contract on the seventh contract anniversary, plus any
Purchase Payments and less any withdrawals (and any fees or charges
applicable to such withdrawals) since the seventh contract anniversary,
all compounded at a 4% annual growth rate until the date of death (3%
growth rate if age 70 or older at the time of contract issue) plus any
Purchase Payments less withdrawals since date of death (and any fees or
charges applicable to such withdrawals).
OPTION 2 - MAXIMUM ANNIVERSARY OPTION
The death benefit is the greater of:
1. the value of your contract at the time we receive satisfactory proof of
death; or
2. total Purchase Payments less any withdrawals (and any fees or charges
applicable to such withdrawals); or
3. the maximum anniversary value on any contract anniversary prior to your
81st birthday. The anniversary value equals the value of your contract
on a contract anniversary plus any Purchase Payments and less any
withdrawals (and any fees or charges applicable to such withdrawals)
since that contract anniversary.
If you are age 90 or older at the time of death and selected the option 2 death
benefit, the death benefit will be equal to the value of your contract at the
time we receive satisfactory proof of death. Accordingly, you do not get the
advantage of option 2 if:
- you are over age 80 at the time of contract issue, or
- you are 90 or older at the time of your death.
We do not pay the death benefit if you die after you switch to the Income Phase.
However, if you die during the Income Phase, your Beneficiary receives any
remaining guaranteed income payments in accordance with the income option you
selected. SEE INCOME OPTIONS ON PAGE 15.
You name your Beneficiary. You may change the Beneficiary at any time, unless
you previously made an irrevocable Beneficiary designation.
We pay the death benefit when we receive satisfactory proof of death. We
consider the following satisfactory proof of death:
1. a certified copy of the death certificate; or
2. a certified copy of a decree of a court of competent jurisdiction as to
the finding of death; or
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<PAGE> 18
3. a written statement by a medical doctor who attended the deceased at the
time of death; or
4. any other proof satisfactory to us.
We may require additional proof before we pay the death benefit.
The death benefit payment must begin immediately upon receipt of all necessary
documents. In any event, the death benefit must be paid within 5 years of the
date of death unless the Beneficiary elects to have it payable in the form of an
income option. If the Beneficiary elects an income option, it must be paid over
the Beneficiary's lifetime or for a period not extending beyond the
Beneficiary's life expectancy. Payments must begin within one year of your
death.
If the Beneficiary is the spouse of a deceased owner, he or she can elect to
continue the contract at the then current value. If the Beneficiary/spouse
continues the contract, we do not pay a death benefit to him or her.
If a Beneficiary does not elect a specific form of pay out within 60 days of our
receipt of proof of death, we pay a lump sum death benefit to the Beneficiary.
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EXPENSES
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There are charges and expenses associated with your contract. These charges and
expenses reduce your investment return. We will not increase the sales,
insurance and withdrawal charges under your contract. However, the investment
charges under your contract may increase or decrease. Some states may require
that we charge less than the amounts described below.
INSURANCE CHARGES
The amount of this charge is 0.85% annually, of the value of your contract
invested in the Variable Portfolios. We deduct the charge daily.
The insurance charge compensates us for the mortality and expense risks assumed
by Anchor National.
If these charges do not cover all of our expenses, we will pay the difference.
Likewise, if these charges exceed our expenses, we will keep the difference.
SALES CHARGE
We apply an up-front sales charge against each Gross Purchase Payment you put
into your contract. The sales charge equals a percentage of each Gross Purchase
Payment and varies with your investment amount according to the chart below.
Your investment amount at the time your Gross Purchase Payment is received is
determined by the sum of:
1. Your current contract value for this contract;
2. Your current Gross Purchase Payment amount;
3. Any additional investment commitments secured by a Letter of Intent, as
described below; and
4. Your investment under Rights of Accumulation, as defined on the next
page.
<TABLE>
<CAPTION>
- -------------------------------------------------------
SALES CHARGE
AS A PERCENTAGE OF
GROSS PURCHASE
INVESTMENT AMOUNT PAYMENT INVESTED
- -------------------------------------------------------
<S> <C>
Less than $50,000 5.75%
$50,000 but less than $100,000 4.75%
$100,000 but less than $250,000 3.50%
$250,000 but less than $500,000 2.50%
$500,000 but less than $1,000,000 2.00%
$1,000,000 or more 0.50%*
- -------------------------------------------------------
</TABLE>
* For investment amounts of $1,000,000 or more, we deduct from your contract
value, a withdrawal charge of 0.50% for amounts withdrawn from a Purchase
Payment invested less than 12 months prior to such withdrawal. SEE PURCHASE
PAYMENTS SUBJECT TO A WITHDRAWAL CHARGE ON PAGE 14.
We call each investment amount a "breakpoint." You can reduce your sales charge
by increasing the amount of your investment amount to reach the next breakpoint.
For example, an investment amount of $50,000 brings you to the first breakpoint
and entitles you to a reduced sales charge of 4.75%.
REDUCTION OF SALES CHARGE
You may also be entitled to a reduced sales charge if you: (1) sign a Letter of
Intent to invest a combined amount of $50,000 or more within a 13-month period;
and/or (2) have related contracts with us which qualify for Rights of
Accumulation privileges.
LETTER OF INTENT
A Letter of Intent allows you to set your own investment goal of $50,000 or more
over a 13-month period. We base the sales charge on any Gross Purchase Payment
you make during the 13-month period on your investment goal. In essence, we
reduce your sales charge on Gross Purchase Payments made during the 13-month
period as though the total amount of Gross Purchase Payments (your investment
goal) is invested as one lump-sum.
EXAMPLE:
Assume as part of your contract application you sign a Letter of Intent
indicating an investment goal of $50,000 over a 13-month period. The sales
charge corresponding to your investment goal is 4.75%. You make an initial
Gross Purchase Payment of $20,000. We deduct a reduced sales charge of
4.75% from your initial Gross Purchase Payment. Two months later you make a
subsequent Gross Purchase Payment of $10,000. We again deduct a reduced
sales charge of 4.75% from your Gross Purchase Payment. Without a Letter of
Intent the sales charge for each Gross Purchase Payment would have been
5.75%.
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<PAGE> 19
You may elect to participate in the Letter of Intent program at any time.
However, we do not retroactively reduce sales charges on Gross Purchase Payments
made before we receive your Letter of Intent. If you choose to participate in
this program at the time you apply for the contract, you must check the
corresponding box on the application and complete the appropriate form. If you
elect to participate in the program after your contract is issued, you must
complete the Letter of Intent form, which is available from our Annuity Service
Center.
You are not obligated to reach your investment goal. If you do not achieve your
investment goal by the end of the 13-month period, we will deduct from your
contract the difference between (1) the sales charge applicable to the actual
amount of Gross Purchase Payments you invested during the period and (2) the
sales charge you actually paid. These charges will be deducted from your
contract at the end of the 13-month period.
If you exceed your investment goal and reach the next breakpoint, the sales
charge deducted is based on the next breakpoint level. However, we do not
retroactively reduce sales charges on previous Purchase Payments.
At any time during the 13-month period, you may increase your investment goal by
sending us a written request. Gross Purchase Payments made from the date of
notice through the end of the original 13-month period will receive any
applicable reduced sales charge. Sales charges on Gross Purchase Payments
received prior to the notice to increase your investment goal will not be
retroactively reduced.
We reserve the right to modify, suspend or terminate this program at any time.
RIGHTS OF ACCUMULATION
You may qualify for a reduced sales charge through Rights of Accumulation.
Rights of Accumulation involves combining your current Gross Purchase Payment
with your current contract value on this contract and/or the current contract
values of qualifying related contracts. If through accumulation you reach the
next breakpoint level, we reduce your sales charge accordingly.
Related contracts include other Anchor National contracts owned by you, your
spouse and your children under age 21. There may be other requirements for
qualification. For information on which related contracts qualify for Rights of
Accumulation privileges, please contact your Edward Jones investment
representative.
In order to use Rights of Accumulation to reduce your sales charge, you or your
Edward Jones investment representative must inform us in writing of the related
contracts. We will assign a Rights of Accumulation number to your contract.
Purchase Payments received after we assign a Rights of Accumulation number to
your contract will automatically qualify for a reduced sales charge, if
applicable.
If you choose to participate in this program at the time you apply for the
contract, you must check the corresponding box on the application and complete
the appropriate form. If you elect to participate in this program after your
contract is issued, you must complete the Rights of Accumulation form, which is
available from our Annuity Service Center.
The sales charge for Gross Purchase Payments submitted with a Rights of
Accumulation number will be based on the breakpoint corresponding to the sum of
(1) your Gross Purchase Payment; (2) your current contract value; and (3) the
current contract values of your related contracts.
EXAMPLE:
Assume your contract has a current value of $20,000. You have a second
contract with us which qualifies for Rights of Accumulation that has a
current value of $25,000. You make a $5,000 Gross Purchase Payment and
include your Rights of Accumulation number with your payment. To determine
the sales charge applicable to your Gross Purchase Payment we first
calculate the sum of (1) your current contract value ($20,000); (2) the
current contract value of your related contract ($25,000); and (3) your
current Gross Purchase Payment ($5,000). The sum of these values is
$50,000. We deduct the sales charge corresponding to a $50,000 Gross
Purchase Payment, or 4.75%, from your $5,000 Gross Purchase Payment.
We reserve the right to modify, suspend or terminate this program at any time.
PURCHASE PAYMENTS SUBJECT TO A WITHDRAWAL CHARGE
For investment amounts of $1,000,000 or more, we deduct from your contract
value, a withdrawal charge of 0.50% for amounts withdrawn from a Purchase
Payment invested less than 12 months prior to such withdrawal.
When calculating the withdrawal charge, we treat withdrawals as coming first
from the Purchase Payments that have been in your contract the longest. However,
for tax purposes, your withdrawals are considered earnings first, then Purchase
Payments.
Whenever possible, we deduct the withdrawal charge from the money remaining in
your contract. If you fully surrender your contract value during the 12 months
following our receipt of a Purchase Payment on which we assessed a 0.50% sales
charge, we deduct the withdrawal charge from the amount withdrawn.
We will not assess a withdrawal charge for money withdrawn to pay a death
benefit or to pay contract fees or charges. We will not assess a withdrawal
charge when you switch to the
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<PAGE> 20
Income Phase, except when you elect to receive income payments using the Income
Protector program. If you elect to receive income payments using the Income
Protector program, we assess any applicable withdrawal charge applicable to
Purchase Payments remaining in your contract when calculating your Income
Benefit Base. SEE INCOME OPTIONS ON PAGE 15.
Withdrawals made prior to age 59 1/2 may result in a 10% IRS penalty tax. SEE
TAXES ON PAGE 19.
INVESTMENT CHARGES
Charges are deducted from your Variable Portfolios for the advisory and other
expenses of the Variable Portfolios. THE FEE TABLES LOCATED AT PAGE 4 illustrate
these charges and expenses. For more detailed information on these investment
charges, refer to the prospectuses for the Trusts, enclosed or attached.
TRANSFER FEE
We currently permit 15 free transfers between investment options each contract
year. We charge you $25 for each additional transfer that contract year ($10 in
Pennsylvania and Texas). SEE INVESTMENT OPTIONS ON PAGE 7.
PREMIUM TAX
Certain states charge the Company a tax on the premiums you pay into the
contract. We deduct from your contract these premium tax charges. Currently we
deduct the charge for premium taxes when you take a full withdrawal or begin the
Income Phase of the contract. In the future, we may assess this deduction at the
time you put Purchase Payment(s) into the contract or upon payment of a death
benefit.
APPENDIX B provides more information about premium taxes.
INCOME TAXES
We do not currently deduct income taxes from your contract. We reserve the right
to do so in the future.
REDUCTION OR ELIMINATION OF CHARGES AND EXPENSES, AND ADDITIONAL AMOUNTS
CREDITED
Sometimes sales of the contracts to groups of similarly situated individuals may
lower our administrative and/or sales expenses. We reserve the right to reduce
or waive certain charges and expenses when this type of sale occurs. In
addition, we may also credit additional interest to policies sold to such
groups. We determine which groups are eligible for such treatment. Some of the
criteria we evaluate to make a determination are: size of the group; amount of
expected Purchase Payments; relationship existing between us and prospective
purchaser; nature of the purchase; length of time a group of contracts is
expected to remain active; purpose of the purchase and whether that purpose
increases the likelihood that our expenses will be reduced; and/or any other
factors that we believe indicate that administrative and/or sales expenses may
be reduced.
Anchor National may make such a determination regarding sales to its employees,
it affiliates' employees and employees of currently contracted broker-dealers;
its registered representatives and immediate family members of all of those
described.
We reserve the right to change or modify any such determination or the treatment
applied to a particular group, at any time.
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INCOME OPTIONS
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ANNUITY DATE
During the Income Phase, we use the money accumulated in your contract to make
regular income payments to you. You may switch to the Income Phase any time
after your 2nd contract anniversary. You select the month and year in which you
want income payments to begin. The first day of that month is the Annuity Date.
You may change your Annuity Date, so long as you do so at least seven days
before the income payments are scheduled to begin. Once you begin receiving
income payments, you cannot change your income option. Except as indicated under
Option 5 below, once you begin receiving income payments, you cannot access your
money through a withdrawal or surrender.
Income payments must begin on or before your 90th birthday or on your tenth
contract anniversary, whichever occurs later. If you do not choose an Annuity
Date, your income payments will automatically begin on this date. Certain states
may require your income payments to start earlier.
If the Annuity Date is past your 85th birthday, your contract could lose its
status as an annuity under Federal tax laws. This may cause you to incur adverse
tax consequences.
In addition, most qualified contracts require you to take minimum distributions
after you reach age 70 1/2. SEE TAXES ON PAGE 19.
INCOME OPTIONS
Currently, this contract offers five income options. If you elect to receive
income payments but do not select an option, your income payments will be made
in accordance with option 4 for a period of 10 years. For income payments based
on joint lives, we pay according to option 3, for a period of 10 years.
We base our calculation of income payments on the life of the Annuitant and the
annuity rates set forth in your contract. As the contract owner, you may change
the Annuitant at any time prior to the Annuity Date. You must notify us if the
Annuitant dies before the Annuity Date and designate a new Annuitant.
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<PAGE> 21
OPTION 1 - LIFE INCOME ANNUITY
This option provides income payments for the life of the Annuitant. Income
payments stop when the Annuitant dies.
OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY
This option provides income payments for the life of the Annuitant and for the
life of another designated person. Upon the death of either person, we will
continue to make income payments during the lifetime of the survivor. Income
payments stop when the survivor dies.
OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED
This option is similar to option 2 above, with an additional guarantee of
payments for at least 10 years. If the Annuitant and the survivor die before all
of the guaranteed income payments have been made, the remaining payments are
made to the Beneficiary under your contract.
OPTION 4 - LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED
This option is similar to option 1 above. In addition, this option provides a
guarantee that income payments will be made for at least 10 or 20 years. You
select the number of years. If the Annuitant dies before all guaranteed income
payments are made, the remaining income payments go to the Beneficiary under
your contract.
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
This option provides income payments for a guaranteed period, ranging from 5 to
30 years. If the Annuitant dies before all of the guaranteed income payments are
made, the remaining income payments are made to the Beneficiary under your
contract. Additionally, if variable income payments are elected under this
option, you (or the Beneficiary under the contract if the Annuitant dies prior
to all guaranteed payments being made) may redeem the contract value after the
Annuity Date. The amount available upon such redemption would be the discounted
present value of any remaining guaranteed payments.
The value of an Annuity Unit, regardless of the option chosen, takes into
account the Mortality and Expense Risk Charge. Since Option 5 does not contain
an element of mortality risk, no benefit is derived from this charge.
Please read the Statement of Additional Information ("SAI") for a more detailed
discussion of the income options.
FIXED OR VARIABLE INCOME PAYMENTS
You can choose income payments that are fixed, variable or both. If at the date
when income payments begin you are invested in the Variable Portfolios only,
your income payments will be variable. If your money is only in fixed accounts
at that time, your income payments will be fixed in amount. Further, if you are
invested in both fixed and variable investment options when income payments
begin, your payments will be fixed and variable. If income payments are fixed,
Anchor National guarantees the amount of each payment. If the income payments
are variable the amount is not guaranteed.
INCOME PAYMENTS
We make income payments on a monthly, quarterly, semi-annual or annual basis.
You instruct us to send you a check or to have the payments directly deposited
into your bank account. If state law allows, we distribute annuities with a
contract value of $5,000 or less in a lump sum. Also, if the selected income
option results in income payments of less than $50 per payment, we may decrease
the frequency of the payments, state law allowing.
If you are invested in the Variable Portfolios after the Annuity Date your
income payments vary depending on four things:
- for life options, your age when payments begin, and;
- the value of your contract in the Variable Portfolios on the Annuity
Date, and;
- the 3.5% assumed investment rate used in the annuity table for the
contract, and;
- the performance of the Variable Portfolios in which you are invested
during the time you receive income payments.
If you are invested in both the fixed account options and the Variable
Portfolios after the Annuity Date, the allocation of funds between the fixed and
variable options also impacts the amount of your income payments.
TRANSFERS DURING THE INCOME PHASE
During the Income Phase, one transfer per month is permitted between the
Variable Portfolios. No other transfers are allowed during the Income Phase.
DEFERMENT OF PAYMENTS
We may defer making fixed payments for up to six months, or less if required by
law. Interest is credited to you during the deferral period.
THE INCOME PROTECTOR
This feature provides a future "safety net" in the event that, when you choose
to begin receiving income payments, your contract has not performed within a
historically anticipated range. The income protector feature offers you the
ability to receive a guaranteed fixed minimum retirement income when you switch
to the Income Phase. With the income protector you can know the level of minimum
income that will be available to you if, when you chose to retire, down markets
have negatively impacted your contract value. To receive income payments using
this feature you must follow the appropriate steps set forth below.
The income protector provides three alternative levels of minimum retirement
income. The base income protector is a standard feature of your contract, if
available for sale in your state. There is no additional charge associated with
the base
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feature. If elected, the income protector plus and income protector max
alternatives can provide increased levels of minimum guaranteed income. We
charge a fee for each of these alternatives. The amount of the fee and how to
select an alternative level of income protection, if that is appropriate for
you, is described below.
We reserve the right to modify, suspend or terminate the income protector
program at any time.
HOW WE DETERMINE THE AMOUNT OF YOUR MINIMUM GUARANTEED INCOME
We base the amount of minimum income available to you if you elect to receive
income payments using the income protector upon a calculation we call the income
benefit base. At the time your participation in the income protector program
becomes effective, your income benefit base is equal to your contract value. For
the base, participation is effective on the date of issue of your contract. For
the plus or max alternatives, participation is effective on either the date of
issue of the contract (if elected) or at the contract anniversary following your
election of the plus or max alternative.
The income benefit base is only a calculation. It does not represent a contract
value, nor does it guarantee performance of the Variable Portfolios in which you
invest.
Your income benefit base increases if you make subsequent Purchase Payments and
decreases if you withdraw money from your contract. The exact income benefit
base calculation is equal to (a) plus (b) minus (c) where:
(a) is,
- for the first year of calculation, your contract value on the date
your participation in the program became effective, or;
- for each subsequent year of calculation, the income benefit base on
the prior contract anniversary, and;
(b) is the sum of all subsequent Purchase Payments made into the contract
since the last contract anniversary, and;
(c) is all withdrawals and applicable fees and charges since the last
contract anniversary, in an amount proportionate to the amount by which
such withdrawals decreased your contract value.
For the plus or max alternatives, the income benefit base accumulates at one of
the following annual growth rates from the date your election in the alternative
becomes effective through your election to begin receiving income under the
program:
<TABLE>
<S> <C>
- -------------------------------------------------------
Alternative Growth Rate*
- -------------------------------------------------------
The Income Protector Plus 3.25%
- -------------------------------------------------------
The Income Protector Max 6.50%
- -------------------------------------------------------
</TABLE>
* If you elect the plus or max feature on a subsequent anniversary, the Growth
Rates may be different.
The growth rates for the plus or max features cease on the contract anniversary
following the Annuitant's 90th birthday.
CHOOSING THE APPROPRIATE LEVEL OF PROTECTION
FOR YOU
If you decide that you want the protection offered by the income protector plus
or max feature, you must elect the alternative by completing the income
protector election form available through our Annuity Service Center. You may
only elect one of the alternatives and you can never change your election once
made. Your income benefit base will begin accumulating at the applicable growth
rate on the contract anniversary following our receipt of your completed
election form. In order to obtain the benefit of the plus or max alternative you
may not begin the Income Phase for at least seven years following your election
of the plus or max feature. Thus, you must make your election prior to the later
of:
- your 83rd birthday, or
- your 3rd contract anniversary.
STEP-UP OF YOUR INCOME BENEFIT BASE
If you have elected to pay for the higher levels of protection available through
the income protector plus or max, you may also have the opportunity to "step-up"
your income benefit base. The step-up feature allows you to increase your income
benefit base to the amount of your contract value on your contract anniversary.
You can only elect to step-up within the 30 days before your next contract
anniversary. A seven year waiting period required prior to electing income
payments through the income protector is restarted if you step-up your income
benefit base. Thus, your last opportunity to step up is the later of:
- your 83rd birthday, or
- your 3rd contract anniversary.
You must complete the income protector election form to effect a step-up. The
form is available from our Annuity Service Center.
Qualified contract holders should refer to the Note at the end of the income
protector discussion.
ELECTING TO RECEIVE INCOME PAYMENTS
You may elect to begin the Income Phase of your contract using the income
protector program ONLY within the 30 days after the seventh or later contract
anniversary following the later of:
- the effective date of your income protector participation, or
- the contract anniversary of your most recent step-up.
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<PAGE> 23
The contract anniversary prior to your election to begin receiving income
payments is your income benefit date. This is the date as of which we calculate
your income benefit base to use in determining your guaranteed minimum fixed
retirement income. Your final income benefit base is equal to (a) minus (b)
where:
(a) is your income benefit base as your income benefit date, and;
(b) is any partial withdrawals of contract value and any charges applicable
to those withdrawals and any withdrawal charges otherwise applicable,
calculated as if you fully surrender your contract as the income
benefit date, and any applicable premium taxes.
To arrive at the minimum guaranteed retirement income available to you we apply
the annuity rates stated in your income protector endorsement for the income
option you select to your final income benefit base. You then choose if you
would like to receive that income annually, semi-annually quarterly or monthly
for the time guaranteed under your selected income option. The income options
available when using the income protector program to receive your retirement
income are:
- Life Annuity with 10 Years Guaranteed, or
- Joint and Survivor Life Annuity with 20 Years Guaranteed
At the time you elect to begin receiving income payments, we will calculate your
annual income using both your income benefit base and your contract value. We
will use the same income option for each calculation, however, the annuity
factors used to calculate your income under the income protector will be
different. You will receive whichever provides a greater stream of income. If
you elect to receive income payments using the income protector your income
payments will be fixed in amount. You are not required to use the income
protector to receive income payments. However, we will not refund fees paid for
the income protector if you elect to receive income payments under the general
provisions of your contract. YOU MAY NEVER NEED TO RELY UPON THE INCOME
PROTECTOR, IF YOUR CONTRACT PERFORMS WITHIN A HISTORICALLY ANTICIPATED RANGE.
HOWEVER, PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
FEES ASSOCIATED WITH THE INCOME PROTECTOR
The base income protector is a standard feature of your contract at no extra
charge. If you elect the income protector plus or max, we charge a fee, as
follows:
<TABLE>
<S> <C>
- -----------------------------------------------------
Fee As A % of Your Income
Alternative Benefit Base
- -----------------------------------------------------
The Income Protector Plus .15%
- -----------------------------------------------------
The Income Protector Max .30%
- -----------------------------------------------------
</TABLE>
Since the income benefit base is only a calculation and does not provide a
contract value, we deduct the fee from your actual contract value beginning on
the contract anniversary on which your participation in the program becomes
effective.
After a step-up, the fee for the income protector max or plus will be based on
your stepped-up income benefit base, and will be deducted from your contract
value beginning on the effective date of the step-up.
If your contract is issued with the income protector program, and you elect the
plus or max alternative at some later date we begin deducting the annual fee for
the plus or max alternative on the contract anniversary when your alternative
election becomes effective. If your contract is not issued with the income
protector program and you elect the plus or max alternative at some later date,
we begin deducting the annual fee on the contract anniversary following the date
on which your participation in the program becomes effective.
It is important to note that once you elect either alternative, you may not
cancel your election. We will deduct this charge from your contract value on
every contract anniversary up to and including your income benefit date.
Additionally, we deduct the entire annual fee from any full surrender of your
contract requested prior to your contract anniversary.
NOTE TO QUALIFIED CONTRACT HOLDERS
Qualified contracts generally require that you select an income option which
does not exceed your life expectancy. That restriction, if it applies to you,
may limit the benefit of the income protector program. As discussed above, in
order to utilize the income protector you must elect to receive income payments
under one of two income options. If those income options exceed your life
expectancy you may be prohibited from receiving your guaranteed fixed income
under the program. If you own a Qualified contract to which this restriction
applies and you elect the income protector max or plus, you may pay for this
guarantee and not be able to realize the benefit.
Generally,
- for the Life Annuity with 10 Years Guaranteed, you must elect to receive
income payments before age 79, and
- for the Joint and Survivor Life Annuity with 20 Years Guaranteed, both
Annuitants must be 70 or younger or one of the Annuitants must be 65 or
younger when you switch to the Income Phase. Other age combinations may
be available.
You may wish to consult your tax advisor for information concerning your
particular circumstances.
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<PAGE> 24
HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR
This table assumes $100,000 initial investment, net of sales charges, in a
Non-qualified contract with no withdrawals, additional payments or premium
taxes, no step-up, current growth rates and the election of optional income
protector benefits at contract issue.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Minimum annual income if you elect to receive income payments
If at issue on contract anniversary . . . Income Protector
you are . . . 7 10 15 20 Benefit Level
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Male 6,108 6,672 7,716 8,832 Base
age 60* 8,046 9,633 12,971 17,313 Plus
9,995 13,132 20,647 32,178 Max
- --------------------------------------------------------------------------------------------------------------------
Female 5,388 5,880 6,900 8,112 Base
age 60* 7,145 8,542 11,652 15,948 Plus
8,876 11,646 18,548 29,641 Max
- --------------------------------------------------------------------------------------------------------------------
Joint** 4,716 5,028 5,544 5,928 Base
Male-60 6,290 7,353 9,442 11,785 Plus
Female-60 7,813 10,024 15,030 21,903 Max
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Life annuity with 10 years guaranteed
** Joint and survivor life annuity with 20 years guaranteed
- ----------------------------------------------------------------
- ----------------------------------------------------------------
TAXES
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Note: We prepared the following information on taxes as a general discussion of
the subject. It is not tax advice. We caution you to seek competent tax advice
about your own circumstances. We do not guarantee the tax status of your
annuity. Tax laws constantly change, therefore we cannot guarantee that the
information contained herein is complete and/or accurate.
ANNUITY CONTRACTS IN GENERAL
The Internal Revenue Code ("IRC") provides for special rules regarding the tax
treatment of annuity contracts. Generally, taxes on the earnings in your annuity
contract are deferred until you take the money out. Qualified retirement
investments automatically provide tax deferral regardless of whether the
underlying contract is an annuity. Different rules apply depending on how you
take the money out and whether your contract is Qualified or Non-qualified.
If you do not purchase your contract under a pension plan, a specially sponsored
employer program or an individual retirement account, your contract is referred
to as a Non-qualified contract. A Non-qualified contract receives different tax
treatment than a Qualified contract. In general, your cost basis in a
Non-qualified contract is equal to the Purchase Payments you put into the
contract. You have already been taxed on the cost basis in your contract.
If you purchase your contract under a pension plan, a specially sponsored
employer program or as an individual retirement account, your contract is
referred to as a Qualified contract. Examples of Qualified plans are: Individual
Retirement Accounts ("IRAs"), Roth IRAs, Tax-Sheltered Annuities (referred to as
403(b) contracts), H.R. 10 Plans (referred to as Keogh Plans) and pension and
profit sharing plans, including 401(k) plans. Typically you have not paid any
tax on the Purchase Payments used to buy your contract and therefore, you have
no cost basis in your contract.
TAX TREATMENT OF DISTRIBUTIONS -
NON-QUALIFIED CONTRACTS
If you make a withdrawal from a Non-qualified contract, the IRC treats such a
withdrawal as first coming from the earnings and then as coming from your
Purchase Payments. For income payments, any portion of each payment that is
considered a return of your Purchase Payment will not be taxed. Withdrawn
earnings are treated as income to you and are taxable. The IRC provides for a
10% penalty tax on any earnings that are withdrawn other than in conjunction
with the following circumstances: (1) after reaching age 59 1/2; (2) when paid
to your Beneficiary after you die; (3) after you become disabled (as defined in
the IRC); (4) when paid in a series of substantially equal installments made for
your life or for the joint lives of you and you Beneficiary; (5) under an
immediate annuity; or (6) which come from Purchase Payments made prior to August
14, 1982.
TAX TREATMENT OF DISTRIBUTIONS - QUALIFIED CONTRACTS
Generally, you have not paid any taxes on the Purchase Payments used to buy a
Qualified contract. Any amount of money you take out as a withdrawal or as
income payments is taxable income. The IRC further provides for a 10% penalty
tax on any withdrawal or income payment paid to you other than in conjunction
with the following circumstances: (1) after reaching age 59 1/2; (2) when paid
to your Beneficiary after you die; (3) after you become disabled (as defined in
the IRC); (4) in a series of substantially equal
20
<PAGE> 25
installments made for your life or for the joint lives of you and your
Beneficiary; (5) to the extent such withdrawals do not exceed limitations set by
the IRC for amounts paid during the taxable year for medical care; (6) to fund
higher education expenses (as defined in IRC); (7) to fund certain first-time
home purchase expenses; and, except in the case of an IRA, (8) when you separate
from service after attaining age 55; and (9) when paid to an alternate payee
pursuant to a qualified domestic relations order.
The IRC limits the withdrawal of Purchase Payments from certain Tax-Sheltered
Annuities. Withdrawals can only be made when an owner: (1) reaches age 59 1/2;
(2) leaves his or her job; (3) dies; (4) becomes disabled (as defined in the
IRC); or (5) experiences a hardship (as defined in the IRC). In the case of
hardship, the owner can only withdraw Purchase Payments.
MINIMUM DISTRIBUTIONS
If you have a Qualified contract, distributions must begin by April 1 of the
calendar year following the later of (1) the calendar year in which you attain
age 70 1/2 or (2) the calendar year in which you retire.
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity. We believe that each underlying Variable
Portfolios' management monitors the Variable Portfolios so as to comply with
these requirements. To be treated as a variable annuity for tax purposes, the
underlying investments must meet these requirements.
The diversification regulations do not provide guidance as to the circumstances
under which you, because of the degree of control you exercise over the
underlying investments, and not Anchor National, would be considered the owner
of the shares of the Variable Portfolios. It is unknown to what extent owners
are permitted to select investments, to make transfers among Variable Portfolios
or the number and type of Variable Portfolios owners may select from. If any
guidance is provided which is considered a new position, then the guidance would
generally be applied prospectively. However, if such guidance is considered not
to be a new position, it may be applied retroactively. This would mean you, as
the owner of the contract, could be treated as the owner of the underlying
Variable Portfolios. Due to the uncertainty in this area, we reserve the right
to modify the contract in an attempt to maintain favorable tax treatment.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
PERFORMANCE
- ----------------------------------------------------------------
- ----------------------------------------------------------------
We advertise the Cash Management Portfolio's yield and effective yield. In
addition, the other Variable Portfolios advertise total return, gross yield and
yield-to-maturity. These figures represent past performance of the Variable
Portfolios. These performance numbers do not indicate future results.
When we advertise performance for periods prior to the date the contracts were
first issued, we derive the figures from the performance of the corresponding
portfolios for the Trusts, if available. We modify these numbers to reflect
charges and expenses as if the contract was in existence during the period
stated in the advertisement. Figures calculated in this manner do not represent
actual historic performance of the particular Variable Portfolio.
Consult the SAI for more detailed information regarding the calculation of
performance data. The performance of each Variable Portfolio may also be
measured against unmanaged market indices. The indices we use include but are
not limited to the Dow Jones Industrial Average, the Standard & Poor's 500, the
Russell 1000 Growth Index, the Morgan Stanley Capital International Europe,
Australia and Far East Index ("EAFE") and the Morgan Stanley Capital
International World Index. We may compare the Variable Portfolios' performance
to that of other variable annuities with similar objectives and policies as
reported by independent ranking agencies such as Morningstar, Inc., Lipper
Analytical Services, Inc. or Variable Annuity Research & Data Service ("VARDS").
Anchor National may also advertise the rating and other information assigned to
it by independent industry ratings organizations. Some of those organizations
are A.M. Best Company ("A.M. Best"), Moody's Investor's Service ("Moody's"),
Standard & Poor's Insurance Rating Services ("S&P"), and Duff & Phelps. A.M.
Best's and Moody's ratings reflect their current opinion of our financial
strength and performance in comparison to others in the life and health
insurance industry. S&P's and Duff & Phelps' ratings measure the ability of an
insurance company to meet its obligations under insurance policies it issues.
These two ratings do not measure the insurer's ability to meet non-policy
obligations. Ratings in general do not relate to the performance of the Variable
Portfolios.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
OTHER INFORMATION
- ----------------------------------------------------------------
- ----------------------------------------------------------------
ANCHOR NATIONAL
Anchor National is a stock life insurance company originally organized under the
laws of the state of California in April 1965. On January 1, 1996, Anchor
National redomesticated under the laws of the state of Arizona.
Anchor National and its affiliates, SunAmerica Life Insurance Company, First
SunAmerica Life Insurance Company, CalAmerica Life Insurance Company, SunAmerica
National Life Insurance Company, SunAmerica Asset Management, Resources Trust
Company, and six broker-dealers, specialize in retirement savings and investment
products and services.
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<PAGE> 26
Business focuses include fixed and variable annuities, mutual funds,
broker-dealer services and trust administration services.
THE SEPARATE ACCOUNT
Anchor National originally established a separate account, Variable Annuity
Account Seven ("separate account"), under Arizona law on August 28, 1998. The
separate account is registered with the SEC as a unit investment trust under the
Investment Company Act of 1940, as amended.
Anchor National owns the assets in the separate account. However, the assets in
the separate account are not chargeable with liabilities arising out of any
other business conducted by Anchor National. Income gains and losses (realized
and unrealized) resulting from assets in the separate account are credited to or
charged against the separate account without regard to other income gains or
losses of Anchor National.
THE GENERAL ACCOUNT
Money allocated to the fixed account options goes into Anchor National's general
account. The general account consists of all of Anchor National's assets other
than assets attributable to a separate account. All of the assets in the general
account are chargeable with the claims of any Anchor National contract holders
as well as all of its creditors. The general account funds are invested as
permitted under state insurance laws.
DISTRIBUTION OF THE CONTRACT
This contract is sold exclusively by investment representatives affiliated with
Edward Jones & Company. We pay commissions to these investment representatives
for the sale of the contracts. We do not expect the total commissions to exceed
5.00% of your Purchase Payments. We may also pay a bonus to investment
representatives for contracts which stay active for a particular period of time,
in addition to standard commissions. The sales charges on your contract cover
the cost of commissions we pay to the investment representative.
From time to time, we may pay or allow additional promotional incentives in the
form of cash or other compensation. Promotional incentives may change at any
time.
SunAmerica Capital Services, Inc., 733 Third Avenue, 4th Floor, New York, New
York 10017 distributes the contracts. SunAmerica Capital Services is an
affiliate of , a registered as a broker-dealer under the Exchange Act of 1934
and a member of the National Association of Securities Dealers, Inc. No
underwriting fees are paid in connection with the distribution of the contracts.
ADMINISTRATION
We are responsible for the administrative servicing of your contract. Please
contact our Annuity Service Center
at 1-800-445-SUN2, if you have any comment, question or service request.
We send out transaction confirmations and quarterly statements. It is your
responsibility to review these documents carefully and notify us of any
inaccuracies immediately. We investigate all inquiries. To the extent that we
believe we made an error, we retroactively adjust your contract, provided you
notify us within 30 days of receiving the transaction confirmation or quarterly
statement. Any other adjustments we deem warranted are made as of the time we
receive notice of the error.
YEAR 2000
We rely significantly on computer systems and applications in our daily
operations. Many of our systems are not presently year 2000 compliant, which
means that because they have historically used only two digits to identify the
year in a date, they will fail to distinguish dates in the "2000s" from dates in
the "1900s." Anchor National's business, financial condition and results of
operations could be materially and adversely affected by the failure of our
systems and applications (and those operated by third parties interfacing with
our systems and applications) to properly operate or manage these dates.
Anchor National has a coordinated plan to repair or replace these noncompliant
systems and to obtain similar assurances from third parties interfacing with our
systems and applications. In fiscal 1997, the Company recorded a $6.2 million
provision for estimated programming costs to repair noncompliant systems. We are
making expenditures which we expect will ultimately total $5.0 million to
replace certain other noncompliant systems. Total expenditures relating to the
replacement of noncompliant systems will be capitalized by the Company as
software costs and will be amortized over future periods. Both phases of the
project are progressing according to plan and we expect to substantially
complete them by the end of calendar 1998. We will test both the repaired and
replacement systems during calendar 1999.
In addition, we distributed a year 2000 questionnaire to our significant
suppliers, distributors, financial institutions, lessors and others we do
business with to evaluate their year 2000 compliance plans and state of
readiness and to determine how our systems and applications may be affected by
their failure to solve their own year 2000 issues. To date, however, we have
only received preliminary feedback from such parties and have not independently
confirmed any information received from other parties with respect to the year
2000 issues. Therefore, we cannot assure that such other parties will complete
their year 2000 conversions in a timely fashion or will not suffer a year 2000
business disruption that may
22
<PAGE> 27
adversely affect our financial condition and results of operations.
Because we expect to complete our year 2000 conversion prior to any potential
disruption to our business, we have not developed a comprehensive year 2000
contingency plan. Anchor National closely monitors the progression of its plan
for compliance, and if necessary, would devote additional resources to assure
the timely completion of our year 2000 plan. If we determine that our business
is at material risk of disruption due to the year 2000 issue or anticipate that
we will not complete our year 2000 conversion in a timely fashion, we will work
to enhance our contingency plans.
The above statements are forward-looking. The costs of our year 2000 conversion,
the date which we have set to complete such conversion and the possible risks
associated with the year 2000 issue are based on our current estimates and are
subject to various uncertainties that could cause the actual results to differ
materially from our expectations. Such uncertainties include, among others, our
success in identifying systems and applications that are not year 2000
compliant, the nature and amount of programming required to upgrade or replace
each of the affected systems and applications, the availability of qualified
personnel, consultants and other resources, and the success of the year 2000
conversion efforts of others.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the separate account. Anchor
National and its subsidiaries engage in various kinds of routine litigation. In
management's opinion, these matters are not of material importance to their
respective total assets nor are they material with respect to the separate
account.
OWNERSHIP
The Polaris Class A Variable Annuity is a Flexible Payment Group Deferred
Annuity contract. We issue a group contract to a contract holder for the benefit
of the participants in the group. As a participant in the group, you will
receive a certificate which evidences your ownership. As used in this
prospectus, the term contract refers to your certificate. In some states, a
Flexible Payment Individual Modified Guaranteed and Variable Deferred Annuity
contract is available instead. Such a contract is identical to the contract
described in this prospectus, with the exception that we issue it directly to
the owner.
CUSTODIAN
State Street Bank and Trust Company, 255 Franklin Street, Boston, Massachusetts
02110, serves as the custodian of the assets of the separate account. Anchor
National pays State Street Bank for services provided, based on a schedule of
fees.
ADDITIONAL INFORMATION
Anchor National is subject to the informational requirements of the Securities
and Exchange Act of 1934 (as amended). We file reports and other information
with the SEC to meet those requirements. You can inspect and copy this
information at SEC public facilities at the following locations:
WASHINGTON, DISTRICT OF COLUMBIA
450 Fifth Street, N.W., Room 1024
Washington, D.C. 20549
CHICAGO, ILLINOIS
500 West Madison Street
Chicago, IL 60661
NEW YORK, NEW YORK
7 World Trade Center, 13th Fl.
New York, NY 10048
To obtain copies by mail contact the Washington, D.C. location. After you pay
the fees as prescribed by the rules and regulations of the SEC, the required
documents are mailed.
Registration statements under the Securities Act of 1933, as amended, related to
the contracts offered by this prospectus are on file with the SEC. This
prospectus does not contain all of the information contained in the
registrations statement and its exhibits. For further information regarding the
separate account, Anchor National and its general account, the Variable
Portfolios and the contract, please refer to the registration statement and its
exhibits.
The SEC also maintains a website (http://www.sec.gov) that contains the SAI,
materials incorporated by reference and other information filed electronically
with the SEC by Anchor National.
INDEPENDENT ACCOUNTANTS
The financial statements of Anchor National as of September 30, 1998 and 1997
and for each of the three years in the period ended September 30, 1998
incorporated by reference in this prospectus have been so included in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
LEGAL MATTERS
The organization of Anchor National, its authority to issue the contracts and
the validity of the form of the contracts have been passed upon by Susan L.
Harris, Senior Vice President and General Counsel of SunAmerica Inc., of which
Anchor National is an indirect-wholly owned subsidiary.
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<PAGE> 28
REGISTRATION STATEMENT
A registration statement has been filed with the SEC under the Securities Act of
1933 relating to the contract. This prospectus does not contain all the
information in the registration statement as permitted by SEC regulations. The
omitted information can be obtained from the SEC's principal office in
Washington, D.C., upon payment of a prescribed fee.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
- ----------------------------------------------------------------
- ----------------------------------------------------------------
<TABLE>
<S> <C>
Separate Account.............................. 3
General Account............................... 3
Performance Data.............................. 4
Income Payments............................... 7
Annuity Unit Values........................... 8
Taxes......................................... 11
Distribution of Contracts..................... 14
Financial Statements.......................... 15
</TABLE>
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<PAGE> 29
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX A - MARKET VALUE ADJUSTMENT ("MVA")
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The MVA reflects the impact that changing interest rates have on the value of
money invested at a fixed interest rate. The longer the period of time remaining
in the term you initially agreed to leave your money in the fixed account
option, the greater the impact of changing interest rates. The impact of the MVA
can be either positive or negative, and is computed by multiplying the amount
withdrawn, transferred or switched to the Income Phase by the following factor:
(N/12)
[(1+I/(1+J+0.005)] - 1
The MVA formula may differ in certain states
where:
I is the interest rate you are earning on the money invested in the
fixed account option;
J is the interest rate then currently available for the period of time
equal to the number of years remaining in the term you initially agreed
to leave your money in the fixed account option; and
N is the number of full months remaining in the term you initially
agreed to leave your money in the fixed account option.
EXAMPLES OF THE MVA
The examples below assume the following:
(1) You made an initial Purchase Payment of $10,000 (net of the sales
charge) and allocated it to the 10-year fixed account option at a rate
of 5%;
(2) You make a partial withdrawal of $4,000 when 1 1/2 years (18 months)
remain in the 10-year term you initially agreed to leave your money in
the fixed account option (N=18); and
(3) You have not made any other transfers, additional Purchase Payments, or
withdrawals.
We assume no withdrawal charge applies. If a withdrawal charge applies, it is
deducted before the MVA. The MVA is assessed on the amount withdrawn less any
withdrawal charges.
POSITIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for a new
Purchase Payments in the 1-year fixed account option is 3.5% and the 3-year
fixed account option is 4.5%. By linear interpolation, the interest rate for the
remaining 2 years (1 1/2 years rounded up to the next full year) in the contract
is calculated to be 4%.
(N/12)
The MVA factor is = [(1+I/(1+J+0.005)] - 1
(18/12)
= [(1.05)/(1.04+0.005)] - 1
(1.5)
= (1.004785) - 1
= 1.007186 - 1
= + 0.007186
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 x (+0.007186) = +$28.74
$28.74 represents the MVA that would be added to your withdrawal.
NEGATIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 1-year fixed account option is 5.5% and the 3-year
fixed account option is 6.5%. By linear interpolation, the interest rate for the
remaining 2 years (1 1/2 years rounded up to the next full year) in the contract
is calculated to be 6%.
(N/12)
The MVA factor is = [(1+I)/(1+J+0.005)] - 1
(18/12)
= [(1.05)/(1.06+0.005)] - 1
(1.5)
= (0.985915) - 1
= 0.978948 - 1
= - 0.021052
The requested withdrawal amount is multiplied by the MVA factor to determine the
MVA:
$4,000 X (- 0.021052) = -$84.21
$84.21 represents the MVA that will be deducted from the money remaining in the
10-year fixed account option.
A-1
<PAGE> 30
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX B - PREMIUM TAXES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Premium taxes vary according to the state and are subject to change without
notice. In many states, there is no tax at all. Listed below are the current
premium tax rates in those states that assess a premium tax. For current
information, you should consult your tax adviser.
<TABLE>
<CAPTION>
QUALIFIED NON-QUALIFIED
STATE CONTRACT CONTRACT
<S> <C> <C>
========================================================================================
California .50% 2.35%
- ----------------------------------------------------------------------------------------
District of Columbia 2.25% 2.25%
- ----------------------------------------------------------------------------------------
Kentucky 2% 2%
- ----------------------------------------------------------------------------------------
Maine 0% 2%
- ----------------------------------------------------------------------------------------
Nevada 0% 3.5%
- ----------------------------------------------------------------------------------------
South Dakota 0% 1.25%
- ----------------------------------------------------------------------------------------
West Virginia 1% 1%
- ----------------------------------------------------------------------------------------
Wyoming 0% 1%
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
B-1
<PAGE> 31
- --------------------------------------------------------------------------------
Please forward a copy (without charge) of the Polaris Class A Variable
Annuity Statement of Additional Information to:
(Please print or type and fill in all information.)
------------------------------------------------------------------------
Name
------------------------------------------------------------------------
Address
------------------------------------------------------------------------
City/State/Zip
<TABLE>
<S> <C> <C> <C>
Date: ------------------------------------ Signed: ---------------------------------------
</TABLE>
Return to: Anchor National Life Insurance Company, Annuity Service Center,
P.O. Box 52499, Los Angeles, California 90054-0299
- --------------------------------------------------------------------------------
<PAGE> 32
PART II
-------
Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses in connection with the issuance
and distribution of the securities being registered, other than underwriting
discounts and commissions. All of the amounts shown are estimates, except the
SEC registration fee.
<TABLE>
<S> <C>
SEC registration fee .................... $ To Be Provided
By Amendment
Printing and engraving .................. 25,000
Legal fees and expenses ................. 10,000
Rating agency fees ...................... 7,500
Miscellaneous ........................... 10,000
---------------
Total ............................... $ To Be Provided
By Amendment
==============
</TABLE>
Item 15. Indemnification of Directors and Officers.
Section 10-851 of the Arizona Corporations and Associations law permits the
indemnification of directors, officers, employees and agents of Arizona
corporations. Article Eight of the Company's Restated Articles of Incorporation,
as amended and restated (the "Articles") and Article Five of the Company's
By-Laws ("By-Laws") authorize the indemnification of directors and officers to
the full extent required or permitted by the Laws of the State of Arizona, now
or hereafter in force, whether such persons are serving the Company, or, at its
request, any other entity, which indemnification shall include the advance of
expenses under the procedures and to the full extent permitted by law. In
addition, the Company's officers and directors are covered by certain directors'
and officers' liability insurance policies maintained by the Company's parent.
Reference is made to section 10-851 of the Arizona Corporations and Associations
Law, Article Eight of the Articles, and Article Five of the By-Laws, which are
incorporated herein by reference.
Item 16. Exhibits and Financial Statement Schedules.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
(1) Form of Underwriting Agreement*
(2) Plan of Acquisition, Reorganization,
Arrangement, Liquidation or Succession**
(3) (a) Articles of Incorporation****
(b) By-Laws****
(5) Opinion of Counsel re: Legality***
(6) Opinion re Discount on Capital Shares**
(7) Opinion re Liquidation Preference**
(8) Opinion re Tax Matters**
(9) Voting Trust Agreement**
(10) Material Contracts**
(11) Statement re Computation of Per Share
Earnings**
(12) Statement re Computation of Ratios**
(14) Material Foreign Patents**
(15) Letter re Unaudited Financial Information**
(16) Letter re Change in Certifying Accountant**
(21) Subsidiaries of Registrant***
(23) (a) Consent of Independent Accountants*
(b) Consent of Attorney***
(24) Powers of Attorney****
(25) Statement of Eligibility of Trustee**
(26) Invitation for Competitive Bids**
(27) Financial Data Schedule*
(28) Information Reports Furnished to State
Insurance Regulatory Authority**
(29) Other Exhibits**
</TABLE>
* Herewith
** Not Applicable
*** To be filed by amendment
**** Filed October 21, 1998, Initial
Registration Statement to this
Registration Statement
<PAGE> 33
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represents a
fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
<PAGE> 34
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Los Angeles, State of California on this 16th
day of February, 1999.
By: ANCHOR NATIONAL LIFE INSURANCE COMPANY
By: /s/ JAY S. WINTROB
---------------------------------------
Jay S. Wintrob
Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
ELI BROAD* President, Chief Executive
- ---------------- Officer, & Chairman of
Eli Broad Board
(Principal Executive Officer)
SCOTT L. ROBINSON* Senior Vice President &
- ---------------- Director
Scott L. Robinson (Principal Financial Officer)
N. SCOTT GILLIS* Senior Vice President &
- ---------------- Controller
N. Scott Gillis (Principal Accounting Officer)
JAMES R. BELARDI* Director
- ----------------
James R. Belardi
JANA W. GREER* Director
- ----------------
Jana W. Greer
JAY S. WINTROB* Director
- ----------------
Jay S. Wintrob
/s/ SUSAN L. HARRIS Director February 16, 1999
- -------------------
Susan L. Harris
PETER McMILLAN* Director
- ----------------
Peter McMillan
JAMES W. ROWAN* Director
- -----------------
James W. Rowan
*By: /s/ SUSAN L. HARRIS Attorney-in-Fact
-----------------------
Susan L. Harris
</TABLE>
Date: February 16, 1999
<PAGE> 35
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
Exhibit 1 Distribution Agreement
Exhibit 23(a) Consent of Independent Accountants
Exhibit 27 Financial Data Schedule
</TABLE>
<PAGE> 1
DISTRIBUTION AGREEMENT
THIS AGREEMENT, entered into as of this 10thth day of February, 1999,
is between ANCHOR NATIONAL LIFE INSURANCE COMPANY ("Anchor"), a life insurance
company organized under the laws of the State of Arizona, on behalf of itself
and VARIABLE ANNUITY ACCOUNT SEVEN ("Separate Account"), a Separate Account
established by Anchor pursuant to the insurance laws of the State of Arizona,
and SUNAMERICA CAPITAL SERVICES, INC. ("Distributor"), a corporation organized
under the laws of the State of Delaware.
WITNESSETH:
WHEREAS, Anchor issues to the public certain variable annuity contracts
identified on the contract specification sheet attached hereto as Attachment A
("Contracts"); and
WHEREAS, Anchor, by resolution adopted on August 28, 1998, established
the Separate Account on its books of account, for the purpose of issuing
variable annuity contracts; and
WHEREAS, the Separate Account is registered with the Securities and
Exchange Commission ("Commission") as a unit investment trust under the
Investment Company Act of 1940 (File No. 811-09003); and
WHEREAS, the Contracts to be issued by Anchor are registered with the
Commission under the Securities Act of 1933 (the "Act") (File No. 333-65965) for
offer and sale to the public, and otherwise are in compliance with all
applicable laws; and
WHEREAS, the Distributor, a broker-dealer registered under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc., proposes to act as distributor on an agency basis in
the marketing and distribution of the Contracts;
WHEREAS, Anchor desires to obtain the services of the Distributor as
distributor of said Contracts issued by Anchor through the Separate Account;
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and conditions set forth herein, and for other good and valuable
consideration, Anchor, the Separate Account and Distributor hereby agree as
follows:
1. The Distributor will serve as distributor on an agency
basis for the Contracts which will be issued by Anchor through
the Separate Account.
2. The Distributor will, either directly or through an
affiliate, provide information and marketing assistance to
licensed insurance agents and broker-dealers on a continuing
basis. The Distributor shall be responsible for compliance
with the requirements of state broker-dealer regulations and
the Securities Exchange Act of 1934 as each applies to
Distributor in connection with its duties as distributor of
said Contracts. Moreover, the Distributor shall conduct its
affairs in accordance with the Conduct Rules of the NASD
Regulation, Inc.
<PAGE> 2
3. Subject to agreement of Anchor, the Distributor may enter
into dealer agreements with broker-dealers registered under
the Securities Exchange Act of 1934 and authorized by
applicable law to sell variable annuity contracts issued by
Anchor through the Separate Account. Any such contractual
arrangement is expressly made subject to this Agreement, and
the Distributor will at all times be responsible to Anchor for
purposes of the federal securities laws for the distribution
of Contracts issued through the Separate Account.
4. WARRANTIES
(a) Anchor represents and warrants to Distributor that:
(i) Registration Statements on Form N-4 (and, if
applicable, Form S-1) for each of the
Contracts identified on Attachment A have
been filed with the Commission in the form
previously delivered to the Distributor and
that copies of any and all amendments
thereto will be forwarded to the Distributor
at the time that they are filed with the
Commission;
(ii) The Registration Statement and any further
amendments or supplements thereto will,
when they become effective, conform in
all material respects to the requirements
of the Securities Act of 1933 and the
Investment Company Act of 1940, and the
rules and regulations of the Commission
under such Acts, and will not contain an
untrue statement of a material fact or omit
to state a material fact required to be
stated therein or necessary to make the
statements therein not misleading; provided,
however, that this representation and
warranty shall not apply to any statement
or omission made in reliance upon and in
conformity with information furnished in
writing to Anchor by the Distributor
expressly for use therein;
(iii) Anchor is validly existing as a stock life
insurance company in good standing under the
laws of the state of Arizona, with power
(corporate or otherwise) to own its
properties and conduct its business as
described in the Prospectus, and has been
duly qualified for the transaction of
business and is in good standing under the
laws of each other jurisdiction, or conducts
any business, so as to require such
qualification;
(iv) The Contracts to be issued through the
Separate Account and offered for sale by the
Distributor on behalf of Anchor hereunder
have been duly and validly authorized and,
when issued and delivered against payment
therefor as provided herein, will be duly
and validly issued and will conform to the
description of such Contracts contained in
the Prospectuses relating thereto;
(v) Those persons who offer and sell the
Contracts are to be appropriately licensed
in a manner as to comply with the state
insurance laws;
-2-
<PAGE> 3
(vi) The performance of this Agreement and the
consummation of the transactions
contemplated by this Agreement will not
result in a breach or violation of any
of the terms and provisions of, or
constitute a default under any statute, any
indenture, mortgage, deed of trust, note
agreement or other agreement or instrument
to which Anchor is a party or by which
Anchor is bound, Anchor's Charter as a
stock life insurance company or By-laws,
or any order, rule or regulation of any
court or governmental agency or body having
jurisdiction over Anchor or any of its
properties; and no consent, approval,
authorization or order of any court or
governmental agency or body is required for
the consummation by Anchor of the
transactions contemplated by this Agreement,
except such as may be required under the
Securities Exchange Act of 1934 or state
insurance or securities laws in connection
with the distribution of the Contracts by
the Distributor; and
(vii) There are no material legal or governmental
proceedings pending to which Anchor or the
Separate Account is a party or of which any
property of Anchor or the Separate Account
is the subject, other than as set forth in
the Prospectus relating to the Contracts,
and other than litigation incident to the
kind of business conducted by Anchor, if
determined adversely to Anchor, would
individually or in the aggregate have a
material adverse effect on the financial
position, surplus or operations of Anchor.
(b) The Distributor represents and warrants to Anchor that;
(i) It is a broker-dealer duly registered with
the Commission pursuant to the Securities
Exchange Act of 1934 and a member in good
standing of the National Association of
Securities Dealers, Inc., and is in
compliance with the securities laws in those
states in which it conducts business as a
broker-dealer;
(ii) The performance of this Agreement and the
consummation of the transactions herein
contemplated will not result in a breach or
violation of any of the terms or provisions
of or constitute a default under any
statute, any indenture, mortgage, deed of
trust, note agreement or other agreement or
instrument to which the Distributor is a
party or by which the Distributor is bound,
the Certificate of Incorporation or By-laws
of the Distributor, or any order, rule or
regulation of any court or governmental
agency or body having jurisdiction over the
Distributor or its property; and
(iii) To the extent that any statements or
omissions made in the Registration
Statement, or any amendment or supplement
thereto are made in reliance upon and in
conformity with written information
furnished to Anchor by the Distributor
expressly for use therein, such Registration
Statement and any amendments or supplements
thereto will, when they become effective or
are filed with the Commission, as the case
may be, conform in all material respects to
-3-
<PAGE> 4
the requirements of the Securities Act of
1933 and the rules and regulations of the
Commission thereunder and will not contain
any untrue statement of a material fact or
omit to state any material fact required to
be stated therein or necessary to make the
statements therein not misleading.
5. The Distributor, or an affiliate thereof, shall keep, or
cause to be kept, in a manner and form prescribed or
approved by Anchor and in accordance with Rules 17a-3 and
17a-4 under the Securities Exchange Act of 1934, correct
records and books of account as required to be maintained by
a registered broker-dealer, acting as distributor, of all
transactions entered into on behalf of Anchor and with
respect to its activities under this Agreement for Anchor.
The party maintaining the books and records required
hereunder shall make such records and books of account
available for inspection by the Commission, and Anchor shall
have the right to inspect, make copies of or take possession
of such records and books of account at any time on demand.
6. Subsequent to having been authorized to commence the
activities contemplated herein, the Distributor, or an
affiliate thereof, will cause the currently effective
Prospectus relating to the subject Contracts in connection
with its marketing and distribution efforts to be utilized.
As to the other types of sales material, the Distributor, or
an affiliate thereof, agrees that it will cause to be used
only sales materials as have been authorized for use by
Anchor and which conform to the requirements of federal and
state laws and regulations, and which have been filed where
necessary with the appropriate regulatory authorities,
including the National Association of Securities Dealers,
Inc.
7. The Distributor, or such other person as referred to in
paragraph 6 above, will not distribute any Prospectus, sales
literature, or any other printed matter or material in the
marketing and distribution of any Contract if, to the
knowledge of the Distributor, or such other person, any of the
foregoing misstates the duties, obligation or liabilities of
Anchor or the Distributor.
8. Expenses of providing sales presentations, mailings,
advertising and any other marketing efforts conducted in
connection with the distribution or sale of the Contracts
shall be borne by Anchor.
9. The Distributor, as distributor of the Contracts, shall not be
entitled to remuneration for its services.
10. All premium payments collected on the sale of the Contracts by
the Distributor, if any, shall be transmitted to Anchor for
immediate allocation to the Separate Account in accordance
with the directions furnished by the purchasers of such
Contracts at the time of purchase.
11. The Distributor makes no representations or warranties
regarding the number of Contracts to be sold by licensed
broker-dealers and insurance agents or the amount to be paid
thereunder. The Distributor does, however, represent that it
will actively engage in its duties under this Agreement on a
continuous basis while there is an effective registration
statement with the Commission.
-4-
<PAGE> 5
12. It is understood and agreed that the Distributor may render
similar services or act as a distributor or dealer in the
distribution of other variable contracts.
13. Anchor will use its best efforts to assure that the Contracts
are continuously registered under the Securities Act of 1933
and, should it ever be required, under state Blue Sky Laws and
to file for approval under state insurance laws when
necessary.
14. Anchor reserves the right at any time to suspend or limit the
public offering of the subject Contracts.
15. Anchor agrees to advise the Distributor immediately of:
(a) any request by the Commission (i) for amendment of
the Registration Statement relating to the Contracts,
or (ii) for additional information;
(b) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration
Statement relating to the Contracts or the initiation
of any proceedings for that purpose; and
(c) the happening of any material event, if known, which
makes untrue any statement made in the Registration
Statement relating to the Contracts or which requires
the making of a change therein in order to make any
statement made therein not misleading.
16. Anchor will furnish to the Distributor such information with
respect to the Separate Account and the Contracts in such form
and signed by such of its officers as the Distributor may
reasonably request; and will warrant that the statements
therein contained when so signed will be true and correct.
17. Each of the undersigned parties agrees to notify the other in
writing upon being apprised of the institution of any
proceeding, investigation or hearing involving the offer or
sale of the subject Contracts.
18. This Agreement will terminate automatically upon its
assignment to any person other than a person which is a wholly
owned subsidiary of SunAmerica Inc. This Agreement shall
terminate, without the payment of any penalty by either party:
(a) at the option of Anchor, upon sixty days' advance
written notice to the Distributor; or
(b) at the option of the Distributor upon 90 days'
written notice to Anchor; or
(c) at the option of Anchor upon institution of formal
proceedings against the Distributors by the National
Association of Securities Dealers, Inc. or by the
Commission; or
-5-
<PAGE> 6
(d) at the option of either party, if the other party or
any representative thereof at any time (i) employs
any device, scheme, or artifice to defraud; makes any
untrue statement of a material fact or omits to state
a material fact necessary in order to make the
statements made, in light of the circumstances under
which they were made, not misleading; or engages in
any act, practice, or course of business which
operates or would operate as a fraud or deceit upon
any person; or (ii) violates the conditions of this
Agreement.
19. Each notice required by this Agreement may be given by
telephone or telefax and confirmed in writing.
20. (a) Anchor shall indemnify and hold harmless the
Distributor and each person, if any, who controls
the Distributor within the meaning of the Act
against any losses, claims, damages or
liabilities to which the Distributor or such
controlling person may become subject, under the
Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect
thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of
a material fact contained in the Registration
Statement, Prospectus or Statement of Additional
Information or any other written sales material
prepared by Anchor which is utilized by the
Distributor in connection with the sale of Contracts
or arise out of or are based upon the omission or
alleged omission to state therein a material fact
required to be stated therein (in the case of the
Registration Statement, Prospectus and Statement
of Additional Information), or in the case of such
other sales material, necessary to make the
statements therein not misleading in the light of the
circumstances under which they were made and will
reimburse the Distributor and each such controlling
person for any legal or other expenses reasonably
incurred by the Distributor or such controlling
person in connection with investigating or defending
any such loss, claim, damage, liability or action,
provided, however, that Anchor will not be
liable in any such case to the extent that any
such loss, claim, omission or alleged omission made
in such Registration Statement, Prospectus or
Statement of Additional Information is in conformity
with information furnished to Anchor specifically
for use therein; and provided, further, that
nothing herein shall be so construed as to
protect the Distributor against any liability to
Anchor or the Contract Owners to which the
Distributor would otherwise be subject by reason
of willful misfeasance, bad faith, or gross
negligence in the performance of his or her duties,
or by reason of his or her reckless disregard by the
Distributor of its obligations and duties under this
Agreement.
(b) The Distributor will likewise indemnify and hold
harmless Anchor, each of its directors and officers
and each person, if any, who controls the Trust
within the meaning of the Act to the extent, but only
to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was
made in conformity with written information furnished
to the Trust by the Distributor specifically for use
therein.
-6-
<PAGE> 7
21. This Agreement shall be subject to the laws of the State of
California and construed so as to interpret the Contracts and
insurance contracts written within the business operation of
Anchor.
22. This Agreement covers and includes all agreements, verbal and
written, between Anchor and the Distributor with regard to the
marketing and distribution of the Contracts, and supersedes
and annuls any and all agreements between the parties with
regard to the distribution of the Contracts; except that this
Agreement shall not affect the operation of previous or future
agreements entered into between Anchor and the Distributor
unrelated to the sale of the Contracts.
THIS AGREEMENT, along with any Attachment attached hereto and
incorporated herein by reference, may be amended from time to time by the mutual
agreement and consent of the undersigned parties; provided that such amended
shall not affect the rights of existing Contract Owners, and that such amended
be in writing and duly executed.
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement
to be duly executed and their respective corporate seals to be hereunto affixed
and attested on the date first stated above.
ANCHOR NATIONAL LIFE INSURANCE COMPANY
By: /s/ Susan L. Harris
-----------------------------------
Susan L. Harris
Senior Vice President
VARIABLE ANNUITY ACCOUNT SEVEN
By: ANCHOR NATIONAL LIFE
INSURANCE COMPANY
By: /s/ Susan L. Harris
----------------------------------
Susan L. Harris
Senior Vice President
SUNAMERICA CAPITAL SERVICES, INC.
By: /s/ Robert M. Zakem
---------------------------------
Robert M Zakem
Executive Vice President
-7-
<PAGE> 8
ATTACHMENT A
CONTRACT SPECIFICATION SHEET
The following variable annuity contracts are the subject of the Distribution
Agreement between Anchor National Life Insurance Company and SunAmerica Capital
Services, Inc. dated February 10, 1999 regarding the sale of the following
contracts funded in Variable Annuity Account Seven:
1. Polaris Class A
-8-
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated November 9, 1998 appearing on page F-2 of Anchor National Life Insurance
Company's Annual Report on Form 10-K for the year ended September 30, 1998. We
also consent to the reference to us under the heading "Independent Accountants"
in such Prospectus.
PricewaterhouseCoopers LLP
Los Angeles, California
February 11, 1999
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEET AND INCOME STATEMENT OF ANCHOR NATIONAL LIFE
INSURANCE COMPANY'S FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<DEBT-HELD-FOR-SALE> 1,954,754,000
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 169,000
<MORTGAGE> 391,448,000
<REAL-ESTATE> 24,000,000
<TOTAL-INVEST> 2,734,742,000
<CASH> 333,735,000
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 539,850,000
<TOTAL-ASSETS> 14,526,364,000
<POLICY-LOSSES> 2,471,539,000
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 39,182,000
<COMMON> 3,511,000
0
0
<OTHER-SE> 649,158,000
<TOTAL-LIABILITY-AND-EQUITY> 14,526,364,000
0
<INVESTMENT-INCOME> 217,354,000
<INVESTMENT-GAINS> 19,482,000
<OTHER-INCOME> 290,362,000
<BENEFITS> 130,482,000
<UNDERWRITING-AMORTIZATION> 72,713,000
<UNDERWRITING-OTHER> 18,209,000
<INCOME-PRETAX> 209,692,000
<INCOME-TAX> 71,051,000
<INCOME-CONTINUING> 138,641,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 138,641,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
