<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT FIVE
(PORTION RELATING TO THE SEASON SELECT VARIABLE ANNUITY)
- --------------------------------------------------------------------------------
SUPPLEMENT TO THE SEASONS SELECT PROSPECTUS
DATED DECEMBER 29, 1999
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The date of the prospectus has been changed to May 1, 2000.
All references in the Prospectus to the date of the Statement of
Additional Information is hereby changed to May 1, 2000.
Date: May 1, 2000
PLEASE KEEP THIS SUPPLEMENT WITH YOUR PROSPECTUS.
<PAGE>
[LOGO]
PROFILE
July 15, 1999
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS YOU SHOULD KNOW
AND CONSIDER BEFORE PURCHASING THE SEASONS SELECT VARIABLE ANNUITY. THE ANNUITY
IS MORE FULLY DESCRIBED IN THE PROSPECTUS. PLEASE READ THE PROSPECTUS CAREFULLY.
1. THE SEASONS SELECT VARIABLE ANNUITY
The Seasons Select Variable Annuity contract is a contract between you and
Anchor National Life Insurance Company. We designed Seasons Select to help you
save on a tax-deferred basis. Season Select provides a means to diversify your
investments among asset classes and managers as well as a variety of investment
styles to meet long-term financial goals, such as retirement funding. Tax
deferral means all your money, including the amount you would otherwise pay in
current income taxes, remains in your contract to generate more earnings. Your
money could grow faster than it would in a comparable taxable investment. Of
course, certain qualified contracts automatically provide tax deferral
regardless of whether they are funded with an annuity.
The Seasons Select Variable Annuity is designed as a long term retirement
investment and helps you meet these goals by offering variable investment
options. There are nine multimanaged portfolios called SELECT PORTFOLIOS
representing a spectrum of investment styles. In addition, there are four
STRATEGIES which are managed by five different professional investment managers.
The value of any portion of your contract allocated to the SELECT PORTFOLIOS or
STRATEGIES will fluctuate up or down based on the performance of the SELECT
PORTFOLIOS and STRATEGIES you select. You may experience a loss of both
principal and earnings. Five fixed investment options, each for a different
length of time and offering different interest rates guaranteed by Anchor
National, are also available. In addition, the DCA fixed accounts offer fixed
interest rates guaranteed by Anchor National and are available under the
contract strictly as source accounts for the Dollar Cost Averaging program.
The SELECT PORTFOLIOS, STRATEGIES and fixed investment options are designed to
be used in concert in order to achieve your desired investment goals. You may
put money into any of the SELECT PORTFOLIOS, STRATEGIES and/or fixed investment
options. You may transfer between the SELECT PORTFOLIOS, STRATEGIES and/or the
fixed investment options four times per year without charge.
Like most annuities, the contract has an Accumulation Phase and an Income Phase.
During the Accumulation Phase, you invest money in your contract. Your earnings
are based on the investment performance of the SELECT PORTFOLIO(S) or
STRATEGY(IES) to which your money is allocated and/or the interest rate earned
on the fixed investment options. You may withdraw money from your contract
during the Accumulation Phase. However, as with other tax-deferred investments,
you will pay taxes on earnings and untaxed contributions when you withdraw them.
An IRS tax penalty may apply if you make withdrawals before age 59 1/2. During
the Income Phase, you will receive payments from your annuity. Your payments may
be fixed in dollar amount, vary with investment performance or be a combination
of both, depending on where your money is allocated. Among other factors, the
amount of money you are able to accumulate in your contract during the
Accumulation Phase will determine the amount of your payments during the Income
Phase.
The Seasons Select Variable Annuity may not be available in all states.
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2. INCOME OPTIONS
You can select from one of five income options:
(1) payments for your lifetime;
(2) payments for your lifetime and your survivor's lifetime;
(3) payments for your lifetime and your survivor's lifetime, but for not
less than 10 or 20 years;
(4) payments for your lifetime, but for not less than 10 or 20 years; and
(5) payments for a specified period of 5 to 30 years.
Other options may be available.
You will also need to decide if you want your payments to fluctuate with
investment performance or remain constant, and the date on which your payments
will begin. Once you begin receiving payments, you cannot change your income
option. If your contract is non-qualified, payments during the Income Phase are
considered partly a return of your original investment. The "original
investment" part of each payment is not taxable but any gain to your original
investment is currently taxable as ordinary income upon distribution. For
qualified contracts, the entire payment is currently taxable as ordinary income.
In addition to the above income options, you may also elect to take income
payments under the Income Protector program subject to the provisions thereof.
3. PURCHASING A SEASONS SELECT VARIABLE ANNUITY
You can buy a contract through your financial representative, who can also help
you complete the proper forms. For Non-Qualified contracts the minimum initial
investment is $5000. For Qualified contracts the minimum initial investment is
$2000. You can add $500 or more to your contract at any time during the
Accumulation Phase.
4. INVESTMENT OPTIONS
You can put your money into any one or more of the nine distinct SELECT
PORTFOLIOS, four multi-manager variable investment STRATEGIES and/or the seven
fixed investment options. The fixed investment options offer fixed rates of
interest for specified lengths of time.
Each SELECT PORTFOLIO has a distinct investment objective utilizing a
disciplined investing style to achieve its objective. Each SELECT PORTFOLIO
invests in an underlying investment portfolio. Except for the Cash Management
portfolio[s], each underlying portfolio is multi-managed by a team of three
money managers specializing in the distinct investment style. The nine SELECT
PORTFOLIOS and the respective managers are:
<TABLE>
<S> <C>
LARGE CAP GROWTH LARGE CAP COMPOSITE
BANKERS TRUST COMPANY BANKERS TRUST
("BANKERS TRUST") SUNAMERICA ASSET
GOLDMAN SACHS ASSET MANAGEMENT COMPANY
MANAGEMENT ("GOLDMAN ("SAAMCO")
SACHS") T. ROWE PRICE ASSOCIATES,
INC.
JANUS CAPITAL ("T. ROWE PRICE")
CORPORATION("JANUS")
LARGE CAP VALUE MID CAP GROWTH
BANKERS TRUST BANKERS TRUST
T. ROWE PRICE T. ROWE PRICE
WELLINGTON MANAGEMENT WELLINGTON
COMPANY LLP
("WELLINGTON")
MID CAP VALUE SMALL-CAP
BANKERS TRUST BANKERS TRUST
GOLDMAN SACHS LORD ABBETT
LORD ABBETT & CO. ("LORD SAAMCO
ABBETT")
INTERNATIONAL EQUITY DIVERSIFIED FIXED INCOME
BANKERS TRUST BANKERS TRUST
GOLDMAN SACHS MANAGEMENT SAAMCO
INTERNATIONAL ("GOLDMAN WELLINGTON
SACHS INT'L")
LORD ABBETT
CASH MANAGEMENT
SAAMCO
</TABLE>
Each STRATEGY has a different investment objective. The STRATEGY(IES) use an
asset allocation investment approach. Each STRATEGY invests in a combination of
underlying investment portfolios which in turn invest in a
<PAGE>
combination of stocks, bonds and cash, to achieve its investment objective. The
four investment STRATEGIES and their underlying investment portfolios are:
GROWTH STRATEGY
MODERATE GROWTH STRATEGY
- - ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO
PUTNAM INVESTMENT MANAGEMENT, INC.
- - STOCK PORTFOLIO
T. ROWE PRICE ASSOCIATES, INC.
- - MULTI-MANAGED MODERATE GROWTH PORTFOLIO
JANUS CAPITAL CORPORATION
SUNAMERICA ASSET MANAGEMENT CORP.
WELLINGTON MANAGEMENT COMPANY LLP
BALANCED GROWTH STRATEGY
- - ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO
PUTNAM INVESTMENT MANAGEMENT, INC.
- - STOCK PORTFOLIO
T. ROWE PRICE ASSOCIATES, INC.
- - MULTI-MANAGED INCOME/EQUITY PORTFOLIO
JANUS CAPITAL CORPORATION
SUNAMERICA ASSET MANAGEMENT CORP.
WELLINGTON MANAGEMENT COMPANY LLP
CONSERVATIVE GROWTH STRATEGY
- - ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO
PUTNAM INVESTMENT MANAGEMENT, INC.
- - STOCK PORTFOLIO
T. ROWE PRICE ASSOCIATES, INC.
- - MULTI-MANAGED INCOME PORTFOLIO
JANUS CAPITAL CORPORATION
SUNAMERICA ASSET MANAGEMENT CORP.
WELLINGTON MANAGEMENT COMPANY LLP
The percentage allocation which each STRATEGY invests in each underlying
portfolio is depicted on page 11 of the prospectus.
5. EXPENSES
Each year we deduct a $35 ($30 in North Dakota) contract administration fee on
your contract anniversary. We currently waive this fee if your contract value is
at least $50,000 on your contract anniversary.
We also deduct insurance charges. If you are age 80 or younger at the issue
date, the insurance charge amounts to 1.40% annually of the average daily value
of your contract allocated to the SELECT PORTFOLIO(S) and/or STRATEGY(IES). If
you are 81 years of age or older at the issue date, the amount of the insurance
charge is 1.52% annually of the average daily value of your contract allocated
to the SELECT PORTFOLIO(S) and/or STRATEGY(IES). There are also investment
charges and other expenses if you put money into the SELECT PORTFOLIO(S) or
STRATEGY(IES), which are estimated to range from .85% to 1.30%. Investment
charges may be more or less than the percentages reflected here.
If you take your money out in excess of the "free withdrawal" amount allowed for
in your contract, we may assess a withdrawal charge that is a percentage of the
money you withdraw. The percentage declines with each year the purchase payment
is in the contract as follows:
<TABLE>
<S> <C> <C> <C>
Year 1........ 9% Year 6........ 5%
Year 2........ 8% Year 7........ 4%
Year 3........ 7% Year 8........ 3%
Year 4........ 6% Year 9........ 2%
Year 5........ 6% Year 10........ 0%
</TABLE>
Additionally, if you take money out of a multi-year fixed investment option
before the end of the selected period, we may assess an adjustment which could
increase or decrease the value of your money.
In some states you may also be assessed a state premium tax of up to 3.5%,
depending upon the state in which you reside.
If you transfer among the SELECT PORTFOLIO(S), STRATEGY(IES) and/or fixed
investment options more than four times per year, we charge a $25 dollar
transfer fee for each subsequent transfer ($10 in Pennsylvania and Texas). If
you enroll in the Income Protector program, we charge .15% or .30% of your
Income Benefit Base (as described in the prospectus) from your contract value on
each contract anniversary depending on the option you select.
The following charts are designed to help you understand the charges in your
contract. THE COLUMN "TOTAL ANNUAL CHARGES" SHOWS THE TOTAL OF THE $35 CONTRACT
ADMINISTRATION CHARGE, THE 1.40% OR 1.52% INSURANCE CHARGES, WHICHEVER IS
APPLICABLE, AND THE INVESTMENT CHARGES FOR EACH SELECT PORTFOLIO AND STRATEGY.
WE CONVERTED THE CONTRACT ADMINISTRATION CHARGE TO A PERCENTAGE (.09%) USING AN
ASSUMED CONTRACT SIZE OF $40,000. The actual impact of this charge on your
contract may differ from this percentage.
<PAGE>
If you are age 80 or younger at contract issue:
<TABLE>
<CAPTION>
Total Annual
Insurance
Related Total Annual EXAMPLES
Charges Investment Total Total Total
SELECT PORTFOLIOS Related Annual Expenses Expenses
Charges Charges at end of at end of
1 YEAR 10 YEARS
<S> <C> <C> <C> <C> <C> <C>
Large-Cap Growth 1.49% (1.40% + .09%) 1.10% 2.59% $116 $293
Large-Cap Composite 1.49% (1.40% + .09%) 1.10 2.59 $116 $293
Large-Cap Value 1.49% (1.40% + .09%) 1.10 2.59 $116 $293
Mid-Cap Growth 1.49% (1.40% + .09%) 1.15 2.64 $117 $297
Mid-Cap Value 1.49% (1.40% + .09%) 1.15 2.64 $117 $297
Small-Cap 1.49% (1.40% + .09%) 1.15 2.64 $117 $297
International Equity 1.49% (1.40% + .09%) 1.30 2.79 $118 $312
Diversified Fixed Income 1.49% (1.40% + .09%) 1.00 2.49 $115 $283
Cash Management 1.49% (1.40% + .09%) .85 2.34 $114 $268
<CAPTION>
Total Annual
Insurance
Related Total Annual EXAMPLES
Charges Investment Total Total Total
STRATEGIES Related Annual Expenses Expenses
Charges(1) Charges at end of at end of
1 YEAR 10 YEARS
<S> <C> <C> <C> <C> <C> <C>
Growth 1.49% (1.40% + .09%) 1.17% 2.66% $97 $299
Moderate Growth 1.49% (1.40% + .09%) 1.16% 2.65% $97 $298
Balanced Growth 1.49% (1.40% + .09%) 1.15% 2.64% $97 $297
Conservative Growth 1.49% (1.40% + .09%) 1.10% 2.59% $96 $292
</TABLE>
(1) Investment related charges for each STRATEGY are based upon the allocation
to the underlying investment portfolio after the quarterly rebalancing
described in the prospectus.
<PAGE>
If you are age 81 or older at contract issue:
<TABLE>
<CAPTION>
Total Annual
Insurance
Related Total Annual EXAMPLES
Charges Investment Total Total Total
SELECT PORTFOLIO(S) Related Annual Expenses Expenses
Charges Charges at end of at end of
1 YEAR 10 YEARS
<S> <C> <C> <C> <C> <C> <C>
Large-Cap Growth 1.61% (1.52% + .09%) 1.10% 2.71% $117 $304
Large-Cap Composite 1.61% (1.52% + .09%) 1.10 2.71 $117 $304
Large-Cap Value 1.61% (1.52% + .09%) 1.10 2.71 $117 $304
Mid-Cap Growth 1.61% (1.52% + .09%) 1.15 2.76 $118 $309
Mid-Cap Value 1.61% (1.52% + .09%) 1.15 2.76 $118 $309
Small-Cap Portfolio 1.61% (1.52% + .09%) 1.15 2.76 $118 $309
International Equity 1.61% (1.52% + .09%) 1.30 2.91 $119 $323
Diversified Fixed Income 1.61% (1.52% + .09%) 1.00 2.61 $116 $295
Cash Management 1.61% (1.52% + .09%) .85 2.46 $115 $280
<CAPTION>
Total Annual
Insurance
Related Total Annual EXAMPLES
Charges Investment Total Total Total
STRATEGY(IES) Related Annual Expenses Expenses
Charges(1) Charges at end of at end of
1 YEAR 10 YEARS
<S> <C> <C> <C> <C> <C> <C>
Growth 1.61% (1.52% + .09%) 1.17% 2.78% $98 $311
Moderate Growth 1.61% (1.52% + .09%) 1.16% 2.77% $98 $310
Balanced Growth 1.61% (1.52% + .09%) 1.15% 2.76% $98 $309
Conservative Growth 1.61% (1.52% + .09%) 1.10% 2.71% $97 $304
</TABLE>
(1) Investment related charges for each STRATEGY are based upon the allocation
to the underlying investment portfolio after the quarterly rebalancing
described in the prospectus.
The examples assume that you invested $1,000 in a SELECT PORTFOLIO or STRATEGY
which earns 5% annually and that you withdrew your money at the end of a 1 year
period and at the end of a 10 year period. For year 1, the total annual charges
are assessed as well as the withdrawal charge. For year 10, the example reflects
the total annual charges but there is no withdrawal charge applicable. The
annual investment-related expenses may vary. The amounts shown here are
estimates and reflect the waiver or reimbursement of expenses by the investment
adviser. No premium taxes are reflected. Please see the Fee Tables in the
prospectus for more detailed information regarding the fees and expenses
incurred under the contract.
6. TAXES
Unlike taxable investments where earnings are taxed in the year they are earned,
taxes on amounts earned in a non-qualified contract (one that is established
with after tax dollars) are deferred until they are withdrawn. In a qualified
contract (one that is established with before tax dollars) all amounts are
taxable when they are withdrawn.
When you begin taking distributions or withdrawals from your contract, earnings
are considered to be taken out first and will be taxed at your ordinary income
tax rate. You may be subject to a 10% IRS tax penalty for distributions or
withdrawals before age 59 1/2.
7. ACCESS TO YOUR MONEY
Withdrawals may be made from your contract in the amount of $1,000 or more.
Your contract provides for a free withdrawal amount each year. A free withdrawal
amount is the portion of your account that we allow you to take out each year
without being charged a surrender penalty. However, upon a future full surrender
of your contract we will recoup any surrender charges which would have been due
if your free withdrawal had not been free.
To determine your free withdrawal amount and your surrender charge, we refer to
two special terms. These are penalty free earnings and the total invested
amount.
<PAGE>
The penalty-free earnings portion of your contract is simply your account value
less your total invested amount. The total invested amount is the total of all
Purchase Payments you have made into the contract less portions of some prior
withdrawals you made.
During the first year after we issue your contract your free withdrawal amount
is the greater of:
1. Your penalty-free earnings; and
2. If you are participating in the Systematic Withdrawal program, a total of
10% of your total invested amount, less any withdrawals taken during the
contract year.
After the first contract year, you can take out the greater of the following
amounts each year:
1. Your penalty free earnings and any portion of your total invested amount no
longer subject to surrender charges; or
2. 10% of the portion of your total invested amount that has been in your
contract for at least one year, less any withdrawals taken during the
contract year.
If you withdraw your entire contract value you will not receive the benefit of
any free withdrawal amount. A separate withdrawal charge schedule applies to
each purchase payment. After a purchase payment has been in the contract for
nine full years, withdrawal charges no longer apply to that portion of the
money. Of course, upon withdrawal you may also have to pay income taxes and a
10% IRS tax penalty may apply. Neither withdrawal charges nor the 10% IRS tax
penalty are assessed when a death benefit is paid.
8. PERFORMANCE
The value of your annuity will fluctuate depending upon the investment
performance of the SELECT PORTFOLIO(S) and/or STRATEGY(IES) you select. From
time to time we may advertise a SELECT PORTFOLIO'S or STRATEGY'S total return.
The total return figures are based on historical data and are not intended to
indicate future performance.
Prior to the date of this prospectus Seasons Select was not available for sales.
Therefore, no performance information is presented here.
9. DEATH BENEFIT
If you, or, if there is a joint owner, either of the two, should die during the
Accumulation Phase, your Beneficiary will receive a death benefit.
If at the time we issued your contract, you were 80 years old or younger, the
death benefit is the greatest of:
(1) the value of your contract at the time we receive satisfactory proof of
death; or (2) total Purchase Payments less withdrawals (and any fees or charges
applicable to such withdrawals) in an amount proportionate to the amount by
which such withdrawals decreased contract values, compounded at a 4% annual
growth rate until the date of death (3% growth rate if 70 or older at the time
of contract issue); or (3) the value of your contract on the seventh contract
anniversary, plus any Purchase Payments and less withdrawals (and any fees or
charges applicable to such withdrawals) in an amount proportionate to the amount
by which such withdrawals decreased contract values, since the seventh contract
anniversary, all compounded at a 4% annual growth rate until the date of death
(3% growth rate if age 70 or older at the time of contract issue). (4) the
maximum anniversary value on any contract anniversary prior to your 81st
birthday. The anniversary value equals the value of your contract on a contract
anniversary plus any Purchase Payments and less any withdrawals (and any fees or
charges applicable to such withdrawals) in an amount proportionate to the amount
by which such withdrawals decreased contract values, since that contract
anniversary.
If at the time we issued your contract, you were 81 years old or older, the
death benefit is the greatest of: (1) the value of your contract at the time we
receive satisfactory proof of death, or (2) total Purchase Payments less
withdrawals (and any fees or charges applicable to such withdrawals) in an
amount proportionate to the amount by which such withdrawals decreased contract
values, compounded at 3% to date of death.
10. OTHER INFORMATION
OWNERSHIP: The contract is an allocated fixed and variable group annuity
contract. A group contract is issued to a contractholder, for the benefit of the
participants in the group. You, as an owner of a Seasons Select Variable
Annuity, are a participant in the group and will receive a certificate
evidencing your ownership. You, as the owner of a certificate, are entitled to
all the rights and privileges of ownership. As used in this Profile and the
prospectus, the term contract refers to your certificate. In some states an
individual fixed and variable annuity contract may be available instead, which
is identical to the group contract described in this Profile and the prospectus
except that it is issued directly to the individual owner.
FREE LOOK: You may cancel your contract within 10 days of receiving it (or
whatever period is required by your state) by mailing it to our Annuity Service
Center. Your contract will be treated as void on the date we receive it and we
will pay you an amount equal to the value of the money in the SELECT
PORTFOLIO(S) and/or STRATEGY(IES) plus any money you put into the fixed
investment options. Its value may be more or less than the money you initially
invested. Thus, the investment risk is borne by you during the free look period.
SYSTEMATIC WITHDRAWAL PROGRAM: If selected by you, this program allows you to
receive either monthly, quarterly, semi-annual
<PAGE>
or annual checks during the Accumulation Phase. Systematic withdrawals may also
be electronically transferred to your bank account. Of course, withdrawals
during the Accumulation Phase may be taxable and a 10% IRS tax penalty may apply
if you are under age 59 1/2.
DOLLAR COST AVERAGING: If selected by you, this program allows you to invest
gradually into one or more of the SELECT PORTFOLIO(S) or STRATEGY(IES).
PRINCIPAL ADVANTAGE PROGRAM: If selected by you, this program allows you to put
money in a fixed investment option and one or more SELECT PORTFOLIO(S) or
STRATEGY(IES) and we will guarantee that the portion allocated to the fixed
investment option assuming that it remains invested in that option, will grow to
equal your principal investment.
AUTOMATIC PAYMENT PLAN: You can add to your contract directly from your bank
account with as little as $50 per month.
CONFIRMATIONS AND QUARTERLY STATEMENTS: During the accumulation phase, you will
receive confirmation of transactions within your contract. Transactions made
pursuant to contractual or systematic agreements, such as deduction of the
annual maintenance fee and dollar cost averaging, may be confirmed quarterly.
Purchase payments received through the automatic payment plan or a salary
reduction arrangement, may also be confirmed quarterly. For all other
transactions, we send confirmations immediately.
During the accumulation and income phases, you will receive a statement of your
transactions over the past quarter and a summary of your account values.
11. INQUIRIES:
If you have questions about your contract or need to make changes, call your
financial representative or contact us at:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
800/445-SUN2
If money accompanies your correspondence, you should direct it to:
Anchor National Life Insurance Company
P.O. Box 100330
Pasadena, California 91189-0001
<PAGE>
[LOGO]
PROSPECTUS
July 15, 1999
ALLOCATED FIXED AND VARIABLE GROUP ANNUITY
issued by
VARIABLE ANNUITY ACCOUNT FIVE
and
ANCHOR NATIONAL LIFE INSURANCE COMPANY
The annuity contract has 20 investment choices - 7 fixed investment options
which offer interest rates guaranteed by Anchor National for different periods
of time, 9 variable investment SELECT PORTFOLIOS and 4 variable investment
STRATEGIES:
SELECT PORTFOLIOS
LARGE CAP GROWTH
LARGE CAP COMPOSITE
LARGE CAP VALUE
MID CAP GROWTH
MID CAP VALUE
SMALL CAP
INTERNATIONAL EQUITY
DIVERSIFIED FIXED INCOME
CASH MANAGEMENT
STRATEGIES
GROWTH
MODERATE GROWTH
BALANCED GROWTH
CONSERVATIVE GROWTH
all of which invest in the underlying portfolios of
SEASONS SERIES TRUST
which is managed by:
SELECT PORTFOLIOS
BANKERS TRUST COMPANY
GOLDMAN SACHS ASSET MANAGEMENT
JANUS CAPITAL CORPORATION
LORD, ABBETT & COMPANY
SUNAMERICA ASSET MANAGEMENT COMPANY
T. ROWE PRICE ASSOCIATES, INC.
WELLINGTON MANAGEMENT COMPANY, LLP
STRATEGIES
PUTNAM INVESTMENT MANAGEMENT, INC.
T. ROWE PRICE ASSOCIATES, INC.
JANUS CAPITAL CORPORATION
SUNAMERICA ASSET MANAGEMENT COMPANY
WELLINGTON MANAGEMENT COMPANY, LLP
You can put your money into any one or all of the SELECT PORTFOLIO(S),
STRATEGY(IES) and/or fixed investment options.
Please read this prospectus carefully before investing and keep it for your
future reference. It contains important information you should know about the
Seasons Select Variable Annuity.
To learn more about the annuity offered by this prospectus, you can obtain a
copy of the Statement of Additional Information ("SAI") dated July 15,
1999. The SAI has been filed with the Securities and Exchange Commission
("SEC") and can be considered part of this prospectus.
The table of contents of the SAI appears on page 36 of this prospectus. For a
free copy of the SAI, call us at 800/445-SUN2 or write our Annuity Service
Center at, P.O. Box 54299, Los Angeles, California 90054-0299.
A registration statement has been filed with the SEC under the Securities Act of
1933 relating to the contract. This prospectus does not contain all the
information in the registration statement as permitted by SEC regulations. The
omitted information can be obtained from the SEC's principal office in
Washington, D.C., upon payment of a prescribed fee.
In addition, the SEC maintains a website (http://www.sec.gov) that contains the
SAI, materials incorporated by reference and other information filed
electronically with the SEC.
ANNUITIES INVOLVE RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL, AND ARE NOT A
DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. THEY ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE
Anchor National's Annual Report on Form 10-K for the year ended September 30,
1998, and its quarterly report on Form 10-Q for the quarters ended December 31,
1998 and March 31, 1999 are incorporated herein by reference. In addition,
Anchor National filed three reports on Form 8-K on January 14 and 15 and March
12, 1999. These reports are also incorporated herein by reference.
All documents or reports filed by Anchor National under Section 13(a), 13(c),
14, or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") after the effective date of this prospectus are also incorporated by
reference. Statements contained in this prospectus and subsequently filed
documents which are incorporated by reference or deemed to be incorporated by
reference are deemed to modify or supersede documents incorporated herein by
reference.
Anchor National files its Exchange Act documents and reports, including its
annual and quarterly reports on Form 10-K and Form 10-Q, electronically pursuant
to EDGAR under CIK No. 0000006342.
Anchor National is subject to the informational requirements of the Securities
and Exchange Act of 1934 (as amended). We file reports and other information
with the SEC to meet those requirements. You can inspect and copy this
information at SEC public facilities at the following locations:
WASHINGTON, DISTRICT OF COLUMBIA
450 Fifth Street, N.W., Room 1024
Washington, D.C. 20549
CHICAGO, ILLINOIS
500 West Madison Street
Chicago, IL 60661
NEW YORK, NEW YORK
7 World Trade Center, 13th Fl.
New York, NY 10048
To obtain copies by mail contract the Washington, D.C. location. After you pay
the fees as prescribed by the rules and regulations of the SEC, the required
documents are mailed.
Registration statements under the Securities Act of 1933, as amended, related to
the contracts offered by this prospectus are on file with the SEC. This
prospectus does not contain all of the information contained in the registration
statements and exhibits. For further information regarding the separate account,
Anchor National and its general account, the Variable Portfolios and the
contract, please refer to the registration statements and exhibits.
The SEC also maintains a website (http://www.sec.gov) that contains the SAI,
materials incorporated by reference and other information filed electronically
with the SEC by Anchor National.
Anchor National will provide without charge to each person to whom this
prospectus is delivered, upon written or oral request, a copy of the documents
incorporated by reference. Requests for these documents should be directed to
Anchor National's Annuity Service Center, as follows:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Telephone Number: (800) 445-SUN2
SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION
Indemnification for liabilities arising under the Securities Act of 1933 (the
"Act") is provided to Anchor National's officers, directors and controlling
persons. The SEC has advised that it believes such indemnification is against
public policy under the Act and unenforceable. If a claim for indemnification
against such liabilities (other than for Anchor National's payment of expenses
incurred or paid by its directors, officers or controlling persons in the
successful defense of any legal action) is asserted by a director, officer or
controlling person of Anchor National in connection with the securities
registered under this prospectus, Anchor National will submit to a court with
jurisdiction to determine whether the indemnification is against public policy
under the Act. Anchor National will be governed by final judgment of the issue.
However, if in the opinion of Anchor National's counsel this issue has been
determined by controlling precedent, Anchor National will not submit the issue
to a court for determination.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY............................................................................................................ 3
FEE TABLES.......................................................................................................... 4
Owner Transaction Expenses...................................................................................... 4
Annual Separate Account Expenses................................................................................ 4
Income Protector Expense........................................................................................ 4
Investment Portfolio Expenses................................................................................... 5
Investment Portfolio Expenses by Strategy....................................................................... 5
Investment Portfolio Expenses for Strategy Underlying Portfolios................................................ 5
EXAMPLES............................................................................................................ 6
THE SEASONS SELECT VARIABLE ANNUITY................................................................................. 8
PURCHASING A SEASONS SELECT VARIABLE ANNUITY........................................................................ 9
Allocation of Purchase Payments................................................................................. 9
Accumulation Units.............................................................................................. 9
Free Look....................................................................................................... 10
INVESTMENT OPTIONS.................................................................................................. 10
Variable Investment Options..................................................................................... 10
THE SELECT PORTFOLIO(S)....................................................................................... 10
THE STRATEGIES................................................................................................ 11
Market Value Adjustment......................................................................................... 15
Transfers During the Accumulation Phase......................................................................... 16
Dollar Cost Averaging........................................................................................... 17
Principal Advantage Program..................................................................................... 18
Voting Rights................................................................................................... 19
Substitution.................................................................................................... 19
ACCESS TO YOUR MONEY................................................................................................ 19
Free Withdrawal Provision....................................................................................... 19
Systematic Withdrawal Program................................................................................... 21
Minimum Contract Value.......................................................................................... 21
Qualified Contract Owners....................................................................................... 21
DEATH BENEFIT....................................................................................................... 21
Death of the Annuitant.......................................................................................... 22
EXPENSES............................................................................................................ 22
Insurance Charges............................................................................................... 22
Withdrawal Charges.............................................................................................. 23
Investment Charges.............................................................................................. 23
Contract Maintenance Fee........................................................................................ 23
Transfer Fee.................................................................................................... 24
Premium Tax..................................................................................................... 24
Income Taxes.................................................................................................... 24
Reduction or Elimination of Charges and Expenses, and Additional Amounts Credited............................... 24
INCOME OPTIONS...................................................................................................... 24
Annuity Date.................................................................................................... 24
Income Options.................................................................................................. 25
Allocation of Annuity Payments.................................................................................. 26
Transfers During the Income Phase............................................................................... 26
Deferment of Payments........................................................................................... 27
The Income Protector............................................................................................ 27
TAXES............................................................................................................... 30
Annuity Contracts in General.................................................................................... 30
Tax Treatment of Distributions--Non-qualified Contracts......................................................... 31
Tax Treatment of Distributions--Qualified Contracts............................................................. 31
Minimum Distributions........................................................................................... 32
Diversification................................................................................................. 32
PERFORMANCE......................................................................................................... 32
OTHER INFORMATION................................................................................................... 33
The Separate Account............................................................................................ 33
Custodian....................................................................................................... 33
The General Account............................................................................................. 33
Distribution of the Contract.................................................................................... 33
Administration.................................................................................................. 34
Year 2000....................................................................................................... 34
Legal Proceedings............................................................................................... 35
INDEPENDENT ACCOUNTANTS............................................................................................. 35
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION............................................................ 36
APPENDIX A--CONDENSED FINANCIAL INFORMATION......................................................................... A-1
APPENDIX B--MARKET VALUE ADJUSTMENT................................................................................. B-1
APPENDIX C--PREMIUM TAXES........................................................................................... C-1
</TABLE>
2
<PAGE>
GLOSSARY
We have capitalized some of the technical terms used in this prospectus. To help
you understand these terms, we define them in this glossary.
ACCUMULATION PHASE--The period during which you invest money in your contract.
ACCUMULATION UNITS--A measurement we use to calculate the value of the variable
portion of your contract during the Accumulation Phase.
ANNUITANT(S)--The person(s) on whose life (lives) we base annuity payments.
ANNUITY DATE--The date on which annuity payments are to begin, as selected by
you.
ANNUITY UNITS--A measurement we use to calculate the amount of annuity payments
you receive from the variable portion of your contract during the Income Phase.
BENEFICIARY(IES)--The person(s) designated to receive any benefits under the
contract if you or the Annuitant dies.
COMPANY--Anchor National Life Insurance Company ("Anchor National"), We, Us, the
issuer of this annuity contract.
INCOME PHASE--The period during which we make annuity payments to you.
IRS--The Internal Revenue Service.
NON-QUALIFIED (CONTRACT)--A contract purchased with after-tax dollars. In
general, these contracts are not under any pension plan, specially sponsored
program or individual retirement account ("IRA").
PURCHASE PAYMENTS--The money you give us to buy the contract, as well as any
additional money you give us to invest in the contract after you own it.
QUALIFIED (CONTRACT)--A contract purchased with pretax dollars. These contracts
are generally purchased under a pension plan, specially sponsored program or
individual retirement account ("IRA").
STRATEGY(IES)--A sub-account of Variable Annuity Account Five which provides for
the variable investment options available under the contract. Each STRATEGY has
its own investment objective and is invested in the underlying investment
porfolios of the Seasons Series Trust. This investment option allocates assets
to three out of six available portfolios, each of which is managed by a
different investment advisor.
SELECT PORTFOLIO(S)--A sub-account of Variable Annuity Account Five which
provides for the variable investment options available under the contract. Each
SELECT PORTFOLIO has a distinct investment objective and is invested in the
underlying investment portfolios of the Seasons Series Trust. This investment
option allocates assets to an underlying fund in which a portion of the assets
is managed by three out of seven advisors.
3
<PAGE>
SEASONS SELECT VARIABLE ANNUITY FEE TABLES
------------------------------------------------------------
OWNER TRANSACTION EXPENSES
Withdrawal Charge as a percentage of Purchase Payments:
<TABLE>
<S> <C> <C> <C>
Year 1.............. 9% Year 6.............. 5%
Year 2.............. 8% Year 7.............. 4%
Year 3.............. 7% Year 8.............. 3%
Year 4.............. 6% Year 9.............. 2%
Year 5.............. 6% Year 10............. 0%
</TABLE>
<TABLE>
<S> <C>
Contract Maintenance Charge........ $35 each year ($30 in North Dakota)
Transfer Fee....................... No charge for first 4 transfers each
year; thereafter, the fee is $25 per
transfer ($10 in
Pennsylvania and Texas)
</TABLE>
ANNUAL SEPARATE ACCOUNT EXPENSES
(as a percentage of daily net asset value)
If age 80 or younger at contract issue:
<TABLE>
<S> <C>
Mortality Risk Charge........................ 0.90%
Expense Risk Charge.......................... 0.35%
Distribution Expense Charge.................. 0.15%
---
Total Separate Account Expenses........ 1.40%
</TABLE>
If age 81 or older at contract issue:
<TABLE>
<S> <C>
Mortality Risk Charge........................ 1.02%
Expense Risk Charge.......................... 0.35%
Distribution Expense Charge.................. 0.15%
---
Total Separate Account Expenses........ 1.52%
</TABLE>
THE INCOME PROTECTOR EXPENSE
(The Income Protector Program is optional and
if elected the fee is deducted annually from your contract value.)
<TABLE>
<CAPTION>
Fee as a percentage of
The Income Protector your
Alternatives Income Benefit Base
- ---------------------------------------------- -------------------------
<S> <C>
Income Protector PLUS......................... 0.15%
Income Protector MAX.......................... 0.30%
</TABLE>
4
<PAGE>
INVESTMENT PORTFOLIO EXPENSES
OF SELECT PORTFOLIOS
(Estimated for the current fiscal year as a percentage of daily net asset value
of each investment portfolio)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
FEE EXPENSES EXPENSES
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
SELECT PORTFOLIOS*
- --------------------------------------------
Large Cap Growth .80% .30% 1.10%
Large Cap Composite .80% .30% 1.10%
Large Cap Value .80% .30% 1.10%
Mid Cap Growth .85% .30% 1.15%
Mid Cap Value .85% .30% 1.15%
Small Company .85% .30% 1.15%
International Equity 1.00% .30% 1.30%
Diversified Fixed Income .70% .30% 1.00%
Cash Management 55% .30% .85%
- -------------------------------------------------------------------------------------------------------
</TABLE>
INVESTMENT PORTFOLIO EXPENSES BY STRATEGY
(based on the total annual expenses of the underlying investment portfolios
reflected below as of the fiscal year end of the
Trust ending March 31, 1999)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
FEE EXPENSES EXPENSES
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
Growth .87% .30% 1.17%
Moderate Growth .85% .31% 1.16%
Balanced Growth .83% .32% 1.15%
Conservative Growth .80% .30% 1.10%
- -------------------------------------------------------------------------------------------------------
</TABLE>
IMPORTANT INFORMATION ABOUT PORTFOLIO EXPENSES IF INVESTED IN STRATEGY(IES):
The Investment Portfolio Expenses table set forth below identify the total
investment expenses charged by the underlying investment portfolios of Seasons
Series Trust. Each contractholder invested in a STRATEGY will incur only a
portion of the investment expense of those portfolios in which the STRATEGY
invests. The table above entitled "Investment Portfolio Expenses by STRATEGY"
shows an approximation of the total investment expenses a contractholder may
incur if invested in each respective STRATEGY, after the automatic quarterly
rebalancing of such STRATEGY as described on page 15. The actual investment
expenses incurred by contractholders within a STRATEGY will vary depending upon
the daily net asset value of each investment portfolio in which such STRATEGY is
invested.
INVESTMENT PORTFOLIO EXPENSES
FOR STRATEGY UNDERLYING PORTFOLIOS
(as a percentage of daily net asset value of each investment portfolio as of the
fiscal year end of the
Trust (March 31, 1999))
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
FEE EXPENSES EXPENSES
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
Stock .85% .25% 1.10%
Asset Allocation: Diversified Growth .85% .36% 1.21%
Multi-Managed Growth .89% .30% 1.19%
Multi-Managed Moderate Growth .85% .31% 1.16%
Multi-Managed Income/Equity .81% .33% 1.14%
Multi-Managed Income .77% .29% 1.06%
- -------------------------------------------------------------------------------------------------------
</TABLE>
THE ABOVE INVESTMENT PORTFOLIO EXPENSES WERE PROVIDED BY SEASONS SERIES TRUST.
WE HAVE NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
5
<PAGE>
EXAMPLES
You will pay the following expenses on a $1,000 investment, assuming a 5% annual
return on assets and:
(a) surrender of the contract at the end of the stated time period if you were
80 or younger at time of issue;
(b) surrender of the contract at the end of the stated time period if you were
age 81 or older at time of issue.
(c) If the contract is not surrendered or is annuitized and you were 80 or
younger at time of issue.*
(d) If the contract is not surrendered or is annuitized and you were 81 or
older at time of issue.*
<TABLE>
<CAPTION>
TIME PERIODS
SELECT PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Large Cap Growth (a) $ 116 (a) $ 151 (a) $ 198 (a) $ 293
(b) $ 117 (b) $ 154 (b) $ 204 (b) $ 304
(c) $ 26 (c) $ 81 (c) $ 138 (c) $ 293
(d) $ 27 (d) $ 84 (d) $ 144 (d) $ 304
Large Cap Composite (a) $ 116 (a) $ 151 (a) $ 198 (a) $ 293
(b) $ 117 (b) $ 154 (b) $ 204 (b) $ 304
(c) $ 26 (c) $ 81 (c) $ 138 (c) $ 293
(d) $ 27 (d) $ 84 (d) $ 144 (d) $ 304
Large Cap Value (a) $ 116 (a) $ 151 (a) $ 198 (a) $ 293
(b) $ 117 (b) $ 154 (b) $ 204 (b) $ 304
(c) $ 26 (c) $ 81 (c) $ 138 (c) $ 293
(d) $ 27 (d) $ 84 (d) $ 144 (d) $ 304
Mid Cap Growth (a) $ 117 (a) $ 152 (a) $ 200 (a) $ 297
(b) $ 118 (b) $ 156 (b) $ 206 (b) $ 309
(c) $ 27 (c) $ 82 (c) $ 140 (c) $ 297
(d) $ 28 (d) $ 86 (d) $ 146 (d) $ 309
Mid Cap Value (a) $ 117 (a) $ 152 (a) $ 200 (a) $ 297
(b) $ 118 (b) $ 156 (b) $ 206 (b) $ 309
(c) $ 27 (c) $ 82 (c) $ 140 (c) $ 297
(d) $ 28 (d) $ 86 (d) $ 146 (d) $ 309
Small Company (a) $ 117 (a) $ 152 (a) $ 200 (a) $ 297
(b) $ 118 (b) $ 156 (b) $ 206 (b) $ 309
(c) $ 27 (c) $ 82 (c) $ 140 (c) $ 297
(d) $ 28 (d) $ 86 (d) $ 146 (d) $ 309
International Equity (a) $ 118 (a) $ 157 (a) $ 207 (a) $ 312
(b) $ 119 (b) $ 160 (b) $ 213 (b) $ 323
(c) $ 28 (c) $ 87 (c) $ 147 (c) $ 312
(d) $ 29 (d) $ 90 (d) $ 153 (d) $ 323
Diversified Fixed
Income (a) $ 115 (a) $ 148 (a) $ 193 (a) $ 283
(b) $ 116 (b) $ 151 (b) $ 199 (b) $ 295
(c) $ 25 (c) $ 78 (c) $ 133 (c) $ 283
(d) $ 26 (d) $ 81 (d) $ 139 (d) $ 295
Cash Management (a) $ 114 (a) $ 125 (a) $ 185 (a) $ 268
(b) $ 115 (b) $ 147 (b) $ 191 (b) $ 280
(c) $ 24 (c) $ 85 (c) $ 125 (c) $ 268
(d) $ 25 (d) $ 77 (d) $ 131 (d) $ 280
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
TIME PERIODS
STRATEGY 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Growth (a) $ 97 (a) $ 143 (a) $ 181 (a) $ 299
(b) $ 98 (b) $ 146 (b) $ 187 (b) $ 311
(c) $ 27 (c) $ 83 (c) $ 141 (c) $ 299
(d) $ 28 (d) $ 86 (d) $ 147 (d) $ 311
Moderate Growth (a) $ 97 (a) $ 142 (a) $ 180 (a) $ 298
(b) $ 98 (b) $ 146 (b) $ 186 (b) $ 310
(c) $ 27 (c) $ 82 (c) $ 140 (c) $ 298
(d) $ 28 (d) $ 86 (d) $ 146 (d) $ 310
Balanced Growth (a) $ 97 (a) $ 142 (a) $ 180 (a) $ 297
(b) $ 98 (b) $ 146 (b) $ 186 (b) $ 309
(c) $ 27 (c) $ 82 (c) $ 140 (c) $ 297
(d) $ 28 (d) $ 86 (d) $ 146 (d) $ 309
Conservative Growth (a) $ 96 (a) $ 140 (a) $ 177 (a) $ 292
(b) $ 97 (b) $ 144 (b) $ 183 (b) $ 304
(c) $ 26 (c) $ 80 (c) $ 137 (c) $ 292
(d) $ 27 (d) $ 84 (d) $ 143 (d) $ 304
</TABLE>
* We do not currently charge a surrender charge upon annuitization, unless the
contract is annuitized under the Income Protector Program. We will assess any
applicable surrender charges upon annuitizations effected using the Income
Protector Program as if you had fully surrendered your contract.
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you will
incur directly and indirectly by investing in the contract. The example
reflects owner transaction expenses, separate account expenses and
investment portfolio expenses by SELECT PORTFOLIO and STRATEGY.
2. The Examples assume that no transfer fees were imposed. Premium taxes are
not reflected but may be applicable. Although premium taxes may apply in
certain states, they are not reflected in the Examples. In addition, these
examples do not reflect the fees associated with the Income Protector
Program.
3. For certain investment portfolios in which the SELECT PORTFOLIOS and
STRATEGIES invest SunAmerica Asset Management has voluntarily agreed to
waive fees or reimburse expenses, if necessary, to keep annual operating
expenses at or below the following percentages of each of the following
Portfolios' average net assets: Multi-Managed Growth Portfolio 1.29%,
Multi-Managed Moderate Growth Portfolio 1.21%, Multi-Managed Income/Equity
Portfolio 1.14%, Multi-Managed Income Portfolio 1.06%, Asset Allocation:
Diversified Growth Portfolio 1.21%, Stock Portfolio 1.21%, Large Cap
Growth Portfolio 1.10%, Large Cap Composite Portfolio 1.10%, Large Cap
Value Portfolio 1.10%, Mid Cap Growth Portfolio 1.15%, Mid Cap Value
Portfolio 1.15%, Small Cap Portfolio 1.15%, International Equity Portfolio
1.30%, Diversified Fixed Income Portfolio 1.00% and Cash Management
Portfolio 0.85%. SunAmerica Asset Management also may voluntarily waive or
reimburse additional amounts to increase the investment return to a
Portfolio's investors. SunAmerica may terminate all such waivers and/or
reimbursements at any time. Further, any waivers or reimbursements made by
SunAmerica Asset Management with respect to a Portfolio are subject to
recoupment from that Portfolio within the following two years, provided
that the Portfolio is able to effect such payment to SunAmerica Asset
Management and remain in compliance with the foregoing expense
limitations. During the time period reflected in this Fee Table, the
adviser did not rely on any of these waiver and/or reimbursement
agreements.
4. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The historical accumulation unit values for the STRATEGY(IES) and SELECT
PORTFOLIOS are contained in Appendix A--Condensed Financial Information.
7
<PAGE>
THE SEASONS SELECT VARIABLE ANNUITY
- --------------------------------------------------------------------------------
An annuity is a contract between you and an insurance company. You are the owner
of the contract. The contract provides three main benefits:
- Tax Deferral: This means that you do not pay taxes on your earnings from
the annuity until you withdraw them.
- Death Benefit: If you die during the Accumulation Phase, the insurance
company pays a death benefit to your Beneficiary.
- Guaranteed Income: If elected, you receive a stream of income for your
lifetime, or another available period you select.
Tax-qualified retirement plans (e.g., IRAs, 401(k) or 403(b) plans) defer
payment of taxes on earnings until withdrawal. If you are considering funding a
tax-qualified retirement plan with an annuity, you should know that an annuity
does not provide any additional tax deferral treatment of earnings beyond the
treatment provided by the tax-qualified retirement plan itself. However,
annuities do provide other features and benefits which may be valuable to you.
You should fully discuss this decision with your financial advisor.
This annuity was developed to help you contribute to your retirement savings.
This annuity works in two stages, the Accumulation Phase and the Income Phase.
Your contract is in the Accumulation Phase during the period when you make
payments into the contract. The Income Phase begins when you request us to start
making payments to you out of the money accumulated in your contract.
The Contract is called a "variable" annuity because it allows you to invest in
variable investment portfolios which we call SELECT PORTFOLIOS and/or
STRATEGIES. The SELECT PORTFOLIOS and STRATEGIES, are similar to mutual funds,
in that they have specific investment objectives and their performance varies.
You can gain or lose money if you invest in these SELECT PORTFOLIOS or
STRATEGIES. The amount of money you accumulate in your contract depends on the
performance of the SELECT PORTFOLIO(S) or STRATEG(IES) in which you invest.
The Contract also offers several fixed account options for varying time periods.
Fixed account options earn interest at a rate set and guaranteed by Anchor
National. If you allocate money to the fixed account options, the amount of
money that accumulates in your Contract depends on the total interest credited
to the particular fixed account option(s) in which you are invested.
For more information on SELECT PORTFOLIO(S), STRATEGY(IES) and fixed account
options available under this contract, SEE INVESTMENT OPTIONS PAGE 10.
Anchor National Life Insurance Company (Anchor National, The Company, Us, We)
issues the Seasons Select Variable Annuity. When you purchase a Seasons Select
Variable Annuity, a contract exists between you and Anchor National. The Company
is a stock life insurance company organized under the laws of the state of
Arizona. Its principal place of business is 1 SunAmerica Center, Los Angeles,
California 90067. The Company conducts life insurance and annuity business in
the District of Columbia and all states except New York. Anchor National is an
indirect, wholly owned subsidiary of American International Group, Inc., a
Delaware corporation. Seasons Select may not currently be available in all
states.
This annuity is designed for investors whose personal circumstances allow for a
long-term investment time horizon, to assist in contributing to retirement
savings. As a function of the IRC you may be assessed a 10% federal tax penalty
on any withdrawal made prior to your reaching age 59 1/2. Additionally, this
contract provides that you will
8
<PAGE>
be charged a withdrawal charge on each purchase payment withdrawn if that
purchase payment has not been invested in this contract for at least 9 years.
Because of these potential penalties, you should fully discuss all of the
benefits and risks of this contract with your financial adviser prior to
purchase.
PURCHASING A SEASONS SELECT VARIABLE ANNUITY
- --------------------------------------------------------------------------------
An initial Purchase Payment is the money you give us to buy a contract. Any
additional money you give us to invest in the contract after purchase is a
subsequent Purchase Payment.
This chart shows the minimum initial and subsequent Purchase Payments permitted
under your contract. These amounts depend upon whether a contract is Qualified
or Non-Qualified for tax purposes.
<TABLE>
<CAPTION>
MINIMUM
MINIMUM INITIAL SUBSEQUENT
PURCHASE PAYMENT PURCHASE PAYMENT
----------------- -------------------
<S> <C> <C>
Qualified $ 2,000 $ 500
Non-Qualified $ 5,000 $ 500
</TABLE>
Prior Company approval is required to accept Purchase Payments greater than
$1,000,000. The Company reserves the right to refuse any Purchase Payment
including one which would cause the contact value or Purchase Payments to exceed
$1,000,000 at the time of the Purchase Payment. Also, the optional Automatic
Payment Plan allows you to make subsequent payments as small as $50.00. We may
refuse any Purchase Payment.
In general, we will not issue a Qualified contract to anyone who is age 70 1/2
or older, unless they certify to us that the minimum distribution required by
the IRS is being made. In addition we may not issue a contract to anyone over
age 90.
ALLOCATION OF PURCHASE PAYMENTS
We invest your Purchase Payments in the fixed accounts, SELECT PORTFOLIO(S)
and/or STRATEGY(IES) according to your instructions. If we receive a Purchase
Payment without allocation instructions, we will invest the money according to
your last allocation instructions. Purchase Payments are applied to your
contract based upon the value of the variable investment option next determined
after receipt of your money. SEE INVESTMENT OPTIONS PAGE 10.
In order to issue your contract, we must receive your completed application,
Purchase Payment allocation instructions and any other required paper work at
our Annuity Service Center. We allocate your initial purchase payment within two
days of receiving it. If we do not have complete information necessary to issue
your contract, we will contact you. If we do not have the information necessary
to issue your contract within 5 business days we will:
- Send your money back to you, or;
- Ask your permission to keep your money until we get the information
necessary to issue the contract.
ACCUMULATION UNITS
The value of the variable portion of your contract will go up or down depending
upon the investment performance of the SELECT PORTFOLIO(S) or STRATEGY(IES) you
select. In order to keep track of the value of your contract, we use a unit of
measure called an Accumulation Unit which works like a share of a mutual fund.
During the Income Phase, we call them Annuity Units.
9
<PAGE>
An Accumulation Unit value is determined each day that the New York Stock
Exchange ("NYSE") is open. We calculate an Accumulation Unit for each STRATEGY
or SELECT PORTFOLIO after the NYSE closes each day. We do this by:
1. determining the total value of money invested in a particular STRATEGY
or SELECT PORTFOLIO;
2. subtracting from that amount any asset-based charges and any other
charges such as taxes we have deducted; and
3. dividing this amount by the number of outstanding Accumulation Units.
FREE LOOK
You may cancel your contract within ten days after receiving it (or longer if
required by state law). We call this a "free look." To cancel, you must mail the
contract along with your free look request to our Annuity Service Center at P.O.
Box 54299, Los Angeles, California 90054-0299. Unless otherwise required by
state law, you will receive back the value of the money allocated to the SELECT
PORTFOLIO(S) or STRATEGY(IES) on the day we receive your request plus any
Purchase Payment in the fixed investment options. This value may be more or less
than the money you initially invested. Thus, the investment risk is borne by you
during the free look period.
Certain states require us to return your Purchase Payments upon a free look
request. Additionally, all contracts issued as an IRA require the full return of
Purchase Payments upon a free look. With respect to those contracts, we reserve
the right to put your money in the 1-year fixed investment option during the
free look period. If you cancel your contract during the free look period, we
return the greater of (1) your Purchase Payments, or (2) the value of your
contract. At the end of the free look period, we reallocate your money according
to your instructions.
INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
The contract offers variable investment options which we call SELECT
PORTFOLIO(S) and STRATEGY(IES), and fixed investment options. We designed the
contract to meet your varying investment needs over time. You can achieve this
by using the SELECT PORTFOLIO(S) and/or STRATEGY(IES) alone or in concert with
the fixed investment options. The SELECT PORTFOLIO(S) and STRATEGY(IES) operate
similar to a mutual fund but are only available through the purchase of certain
variable annuities. A mixture of your investment in the SELECT PORTFOLIO(S)
and/or STRATEGY(IES) and fixed account options may lower the risk associated
with investing only in a variable investment option.
VARIABLE INVESTMENT OPTIONS
Each of the variable investment options of the contract invests in underlying
portfolios of Seasons Series Trust. SunAmerica Asset Management Company
("SAAMCo"), an affiliate of Anchor National, manages Seasons Series Trust.
SAAMCo has engaged sub-advisers to provide investment advice for certain of the
underlying investment portfolios.
YOU SHOULD READ THE PROSPECTUS FOR THE SEASONS SERIES TRUST CAREFULLY BEFORE
INVESTING. THE PROSPECTUS WHICH IS ATTACHED HERETO CONTAINS DETAILED INFORMATION
ABOUT THE UNDERLYING INVESTMENT PORTFOLIOS INCLUDING INVESTMENT OBJECTIVE AND
RISK FACTORS.
THE SELECT PORTFOLIOS
The contract offers nine SELECT PORTFOLIO(S), each with a distinct investment
objective, utilizing a disciplined investing style to achieve its objective.
Each SELECT PORTFOLIO invests in an underlying investment portfolio of the
Seasons Series Trust. Except for the Cash Management portfolio, each underlying
portfolio is multi-managed by a team of three money managers, one component of
the underlying portfolios is an unmanaged
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component that tracks a particular target index or subset of an index. The other
two components are actively managed. The unmanaged component of each underlying
portfolio is intended to balance some of the risks associated with an actively
traded portfolio.
Each underlying portfolio and the respective managers are:
<TABLE>
<S> <C>
LARGE-CAP GROWTH LARGE-CAP COMPOSITE
Bankers Trust Company ("Bankers Trust") Bankers Trust
Goldman Sachs Assets Management ("Goldman Sachs) SAAMCo
Janus Capital Corporation ("Janus") T. Rowe Price Associates, Inc. ("T. Rowe
Price")
LARGE-CAP VALUE MID-CAP GROWTH
Bankers Trust Bankers Trust
T. Rowe Price T. Rowe Price
Wellington Management Company, LLP ("Wellington") Wellington
MID-CAP VALUE SMALL-CAP
Bankers Trust Bankers Trust
Goldman Sachs Lord Abbett
Lord Abbett & Co. ("Lord Abbett") SAAMCo
INTERNATIONAL EQUITY DIVERSIFIED FIXED INCOME
Bankers Trust Bankers Trust
Goldman Sachs Asset Management International SAAMCo
Lord Abbett Wellington
CASH MANAGEMENT
SAAMCo
</TABLE>
SELECT PORTFOLIO OPERATION
Each SELECT PORTFOLIO is designed to meet a distinct investment objective
facilitated by the management philosophy of three different money managers.
Generally, an equal portion of the Purchase Payments received for allocation to
each SELECT PORTFOLIO will be allocated among the three managers for that SELECT
PORTFOLIO. Each quarter SAAMCo will evaluate the asset allocation between the
three managers of each SELECT PORTFOLIO. If SAAMCo determines that the assets
have become significantly unequal in allocation among the managers, then the
in-coming cash flows may be redirected in an attempt to stabilize the
allocations. Generally, existing SELECT PORTFOLIO assets will not be rebalanced.
However, we reserve the right to do so in the event that it is deemed necessary
and not adverse to the interests of contract owners invested in the SELECT
PORTFOLIO. Transfers made as a result of rebalancing a SELECT PORTFOLIO are not
considered a transfer under your contract.
THE STRATEGIES
The contract offers four multi-manager variable investment STRATEGY(IES), each
with a different investment objective. We designed the STRATEGY(IES) utilizing
an asset allocation approach to meet your investment needs over time,
considering factors such as your age, goals and risk tolerance. However, each
STRATEGY is designed to achieve different levels of growth over time.
Each STRATEGY invests in three underlying investment portfolios of the Seasons
Series Trust. The allocation of money among these investment portfolios varies
depending on the objective of the STRATEGY.
The underlying investment portfolios of Seasons Series Trust in which the
STRATEGY(IES) invest include the Asset Allocation--Diversified Growth Portfolio,
the Stock Portfolio and the Multi-Managed Growth, Multi-Managed Moderate Growth,
Multi-Managed Income/Equity and Multi-Managed Income Portfolios (the "Multi-
Managed Portfolios").
The Asset Allocation: Diversified Growth Portfolio is managed by Putnam
Investment Management, Inc. The Stock Portfolio is managed by T. Rowe Price
Associates, Inc. All of the Multi-Managed Portfolios include the same three
basic investment components: a growth component managed by Janus Capital
Corporation, a balanced
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<PAGE>
component managed by SAAMCo and a fixed income component managed by Wellington
Management Company, LLP. The Growth STRATEGY and the Moderate Growth STRATEGY
also have an aggressive growth component which SAAMCo manages. The percentage
that any one of these components represents in each Multi-Managed Portfolio
varies in accordance with the investment objective.
Each STRATEGY uses an investment approach based on asset allocation. This
approach is achieved by each STRATEGY investing in distinct percentages in three
specific underlying funds of the Seasons Series Trust. In turn, the underlying
funds invest in a combination of domestic and international stocks, bonds and
cash. Based on the percentage allocation to each specific underlying fund and
each underlying fund's investment approach, each STRATEGY initially has a
neutral asset allocation mix of stocks, bonds and cash. At the beginning of each
quarter a rebalancing occurs among the underlying funds to realign each STRATEGY
with its distinct percentage investment in the three underlying funds. This
rebalancing is designed to help maintain the neutral asset allocation mix for
each STRATEGY. The pie charts on the following pages demonstrate:
- the neutral asset allocation mix for each STRATEGY; and
- the percentage allocation in which each STRATEGY invests.
STRATEGY REBALANCING
Each STRATEGY is designed to meet its investment objective by allocating a
portion of your money to three different investment portfolios. In order to
maintain the mix of investment portfolios consistent with each STRATEGY's
objective, each STRATEGY within your contract is rebalanced each quarter. On the
first business day of each quarter (or as close to such date as is
administratively practicable) your money will be allocated among the various
investment portfolios according to the percentages set forth on the prior pages.
Additionally, within each Multi-Managed Portfolio, your money will be rebalanced
among the various components. We also reserve the right to rebalance any
STRATEGY more frequently if rebalancing is, deemed necessary and not adverse to
the interests of contract owners invested in such STRATEGY. Rebalancing a
STRATEGY may involve shifting a portion of assets out of underlying investment
portfolios with higher returns into underlying investment portfolios with
relatively lower returns. Transfers made as a result of rebalancing a STRATEGY
are not counted against your four free transfers per year.
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<PAGE>
GROWTH
GOAL: Long-term growth of capital, allocating its assets primarily to
stocks. This STRATEGY may be best suited for those with longer periods to
invest.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Stocks 80%
Bonds 15%
Cash 5%
</TABLE>
UNDERLYING INVESTMENT
PORTFOLIOS & MANAGERS
ASSET ALLOCATION: DIVERSIFIED
GROWTH PORTFOLIO 25%
Managed by Putnam Investment
Management, Inc.
STOCK PORTFOLIO 25%
Managed by T. Rowe Price
Associates, Inc.
MULTI-MANAGED GROWTH PORTFOLIO 50%
Managed by:
Janus Capital Corporation
SunAmerica Asset Management Corp.
Wellington Management Company, LLP
MODERATE GROWTH
GOAL: Growth of capital through investments in equities, with a secondary
objective of conservation of principal by allocating more of its assets to bonds
than the Growth STRATEGY. This STRATEGY may be best suited for those nearing
retirement years but still earning income.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Stocks 70%
Bonds 25%
Cash 5%
</TABLE>
UNDERLYING INVESTMENT
PORTFOLIOS & MANAGERS
ASSET ALLOCATION: DIVERSIFIED
GROWTH PORTFOLIO 25%
Managed by Putnam Investment
Management, Inc.
STOCK PORTFOLIO 20%
Managed by T. Rowe Price
Associates, Inc.
MULTI-MANAGED MODERATE GROWTH
PORTFOLIO 55%
Managed by:
Janus Capital Corporation
SunAmerica Asset Management Corp.
Wellington Management Company, LLP
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<PAGE>
BALANCED GROWTH
GOAL: Focuses on conservation of principal by investing in a more balanced
weighting of stocks and bonds, with a secondary objective of seeking a high
total return. This STRATEGY may be best suited for those approaching retirement
and with less tolerance for investment risk.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Stocks 55%
Bonds 40%
Cash 5%
</TABLE>
UNDERLYING INVESTMENT
PORTFOLIOS & MANAGERS
ASSET ALLOCATION: DIVERSIFIED
GROWTH PORTFOLIO 25%
Managed by Putnam Investment
Management, Inc.
STOCK PORTFOLIO 20%
Managed by T. Rowe Price
Associates, Inc.
MULTI-MANAGED INCOME/EQUITY
PORTFOLIO 55%
Managed by:
Janus Capital Corporation
SunAmerica Asset Management Corp.
Wellington Management Company, LLP
CONSERVATIVE GROWTH
GOAL: Capital preservation while maintaining some potential for growth over
the long term. This STRATEGY may be best suited for those with lower investment
risk tolerance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Stocks 42%
Bonds 53%
Cash 5%
</TABLE>
UNDERLYING INVESTMENT
PORTFOLIOS & MANAGERS
ASSET ALLOCATION: DIVERSIFIED
GROWTH PORTFOLIO 25%
Managed by Putnam Investment
Management, Inc.
STOCK PORTFOLIO 15%
Managed by T. Rowe Price
Associates, Inc.
MULTI-MANAGED INCOME PORTFOLIO 60%
Managed by:
Janus Capital Corporation
SunAmerica Asset Management Corp.
Wellington Management Company, LLP
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<PAGE>
FIXED INVESTMENT OPTIONS
The contract also offers seven fixed investment options. Anchor National will
guarantee the interest rate earned on money you allocate to any of these fixed
investment options. We currently offer fixed investment options for periods of
one, three, five, seven and ten years, which we call guarantee periods. In
Maryland and Washington only the one year fixed account option is available. The
seven and ten year guarantee periods are not available in Oregon. Additionally,
we guarantee the interest rate for money allocated to the six-month DCA fixed
account and/ or the one year DCA fixed account (the "DCA fixed accounts") which
are available only in conjunction with the Dollar Cost Averaging Program. Please
see the section on the Dollar Cost Averaging Program on page 17 for additional
information about, including limitations on, the availability and operation of
the DCA fixed accounts. The DCA fixed accounts are only available for new
Purchase Payments.
All of these fixed account options pay interest at rates set and guaranteed by
Anchor National. Interest rates may differ from time to time and are set at our
sole discretion. We will never credit less than a 3% annual effective rate to
any of the fixed account options. The interest rate offered for new Purchase
Payments may differ from that offered for subsequent Purchase Payments and money
already in the fixed account options. In addition, different guarantee periods
offer different interest rates. Rates for specified payments are declared at the
beginning of the guarantee period and do not change during the specified period.
There are three scenarios in which you may put money into the fixed account
options. In each scenario your money may be credited a different rate of
interest as follows:
- INITIAL RATE: Rate credited to new Purchase Payments allocated to the
fixed account when you purchase your contract.
- CURRENT RATE: Rate credited to subsequent Purchase Payments allocated to
the fixed account.
- RENEWAL RATE: Rate credited to money transferred from a fixed account or
one of the STRATEGIES into a fixed account and to money remaining in a
fixed account after expiration of a guarantee period.
Each of these rates may differ from one and other. Although once declared the
applicable rate is guaranteed until the guarantee period expires.
The DCA fixed accounts also credit a fixed rate of interest. Interest is
credited to amounts allocated to the 1-year or 6-month DCA fixed account while
your investment is systematically transferred to the variable Portfolios. The
rates applicable to the DCA fixed accounts may differ from each other and/or the
other fixed account options but will never be less than an effective rate of 3%.
SEE DOLLAR COST AVERAGING ON PAGE 17 for more information.
When a guarantee period ends, you may leave your money in the same guarantee
period. You may also reallocate money to another fixed investment option (other
than the DCA fixed accounts) or to any of the SELECT PORTFOLIO(S) or
STRATEGY(IES). If you want to reallocate your money, you must contact us within
30 days after the end of the current guarantee period and instruct us how to
reallocate your money. If we do not hear from you, we will keep your money in
the same guarantee period where it will earn the renewal interest rate
applicable at that time.
MARKET VALUE ADJUSTMENT
NOTE: THE FOLLOWING DISCUSSION APPLIES TO THE 3, 5, 7 OR 10 YEAR FIXED
INVESTMENT OPTIONS ONLY. THESE OPTIONS ARE NOT AVAILABLE IN ALL STATES. PLEASE
CONTACT YOUR FINANCIAL REPRESENTATIVE FOR MORE INFORMATION. THIS DISCUSSION DOES
NOT APPLY TO WITHDRAWALS TO PAY A DEATH BENEFIT OR CONTRACT FEES AND CHARGES.
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<PAGE>
If you take money out of the 3, 5, 7 or 10 year fixed investment options before
the end of the guarantee period, we make an adjustment to your contract (the
"market value adjustment" or "MVA"). This market value adjustment reflects any
difference in the interest rate environment between the time you place your
money in the fixed investment option and the time when you withdraw that money.
This adjustment can increase or decrease your contract value. You have 30 days
after the end of each guarantee period to reallocate your funds without
incurring a market value adjustment.
We will not assess a market value adjustment against withdrawals made (1) to pay
a death benefit; (2) to pay contract fees and charges; or (3) to begin the
income phase of your contract on the latest annuity date.
We calculate the market value adjustment by doing a comparison between current
rates and the rate being credited to you in the fixed investment option. For the
current rate we use a rate being offered by us for a guarantee period that is
equal to the time remaining in the guarantee period from which you seek
withdrawal. If we are not currently offering a guarantee period for that period
of time, we determine an applicable rate by using a formula to arrive at a
number between the interest rates currently offered for the two closest periods
available.
Generally, if interest rates drop between the time you put your money into the
fixed investment options and the time you take it out, we credit a positive
adjustment to your contract. On the other hand, if interest rates increase
during the same period, we post a negative adjustment to your contract.
Where the market value adjustment is negative, we first deduct the adjustment
from any money remaining in the fixed investment option. If there is not enough
money in the fixed investment option to meet the negative deduction, we deduct
the remainder from your withdrawal. Where the market value adjustments is
positive, we add the adjustment to your withdrawal amount.
The one year fixed investment option and the DCA fixed accounts do not impose a
market value adjustment. These fixed investment options are not registered under
the Securities Act of 1933 and are not subject to the provisions of the
Investment Company Act of 1940.
Please see Appendix B for more information on how we calculate the market value
adjustment.
TRANSFERS DURING THE ACCUMULATION PHASE
Except as provided in the next sentence with respect to the DCA fixed accounts,
you can transfer money among the SELECT PORTFOLIO(S), STRATEGY(IES) and the
fixed investment options by written request or by telephone. Although you may
transfer money out of the DCA fixed accounts, you may not transfer money into
the DCA fixed account from any SELECT PORTFOLIO, STRATEGY or fixed investment
option. You can make four transfers every year without incurring a transfer
charge. We measure a year from the anniversary of the date we issued your
contract. If you make more than four transfers in a year, there is a $25 fee per
transfer ($10 in Pennsylvania and Texas). Additionally, transfers out of a 3, 5,
7 or 10 year fixed investment option may be subject to a market value
adjustment.
The minimum amount you can transfer is $500, or a lesser amount if you transfer
the entire balance from a SELECT PORTFOLIO, STRATEGY or a fixed investment
option. Any money remaining in a SELECT PORTFOLIO, STRATEGY or fixed investment
option after making a transfer must equal at least $500. Your request for
transfer must clearly state which investment option(s) are involved and the
amount you want to transfer. Please see the section below on Dollar Cost
Averaging for specific rules regarding the DCA fixed accounts.
We will accept transfers by telephone unless you specify otherwise on your
contract application. Additionally, in the future you may be able to execute
transfers or other financial transactions over the internet. When receiving
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<PAGE>
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 transactions.
For information regarding transfers during the Income Phase, SEE INCOME OPTIONS,
PAGE 24.
We may limit the number of transfers in any contract year or refuse any transfer
request for you or others invested in the contract if we believe that excessive
trading or a specific transfer request or group transfer requests may have a
detrimental effect on unit values or the share prices of the underlying
portfolios.
Where permitted by law, we may accept your authorization for a third party to
make transfers for you subject to our rules. We reserve the right to suspend or
cancel such acceptance at any time and will notify you accordingly.
Additionally, we may restrict the investment options available for transfers
during any period in which such third party acts for you. We notify such third
party beforehand regarding any restrictions. However, we will not enforce these
restrictions if we are satisfied that:
- such third party has been appointed by a court of competent jurisdiction
to act on your behalf; or
- such third party is a trustee/fiduciary appointed, by you or for you, to
act on your behalf for all your financial affairs.
We may provide administrative or other support services to independent third
parties you authorize to make transfers on your behalf. We do not currently
charge you extra for providing these support services. This includes, but is not
limited to, transfers between investment options in accordance with market
timing strategies. Such independent third parties may or may not be appointed
with us for the sale of annuities. However, WE DO NOT ENGAGE ANY THIRD PARTIES
TO OFFER INVESTMENT ALLOCATION SERVICES OF ANY TYPE. WE TAKE NO RESPONSIBILITY
FOR THE INVESTMENT ALLOCATION AND TRANSFERS TRANSACTED ON YOUR BEHALF BY SUCH
THIRD PARTIES OR FOR ANY INVESTMENT ALLOCATION RECOMMENDATIONS MADE BY SUCH
PARTIES.
We reserve the right to modify, suspend or terminate the transfer privileges at
any time.
DOLLAR COST AVERAGING
The Dollar Cost Averaging ("DCA") program allows you to invest gradually in the
variable investment options. Under the program you systematically transfer a set
dollar amount or percentage of any SELECT PORTFOLIO and/or STRATEGY or from the
1-year fixed account option (source accounts) to any other SELECT PORTFOLIO or
STRATEGY. Transfers may be monthly or quarterly. You may change the frequency at
any time by notifying us in writing.
We also offer the 6-month and a 1-year DCA fixed accounts exclusively to
facilitate this program. The DCA fixed accounts only accept new Purchase
Payments. You can not transfer money already in your contract into these
options. If you allocate a Purchase Payment into a DCA fixed account, we
transfer all your money allocated to that account into the SELECT PORTFOLIO(S)
or STRATEGY(IES) you select over the selected 6-month or 1-year period. You
cannot change the option or the frequency of transfers once selected. The
minimum transfer amount if you use the 1-year or 6-month DCA fixed accounts to
provide dollar cost averaging is $100.
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<PAGE>
If allocated to the 6-month DCA fixed account, we transfer your money over a
maximum of 6 monthly transfers. We base the actual number of transfers on the
total amount allocated to the account. For example, if you allocate $500 to the
6-month DCA fixed account, we transfer your money over a period of five months,
so that each payment complies with the $100 per transfer minimum.
We determine the amount of the transfers from the 1-year DCA fixed account based
on
- the total amount of money allocated to the account, and
- the frequency of transfers selected.
For example, let's say you allocate $1,000 to the 1-year DCA account. You select
monthly transfers. We completely transfer all of your money to the selected
investment options over a period of ten months.
You may terminate your DCA program at any time. If money remains in the DCA
fixed account, we transfer the remaining money to the 1-year fixed investment
option, unless we receive different instructions from you.
Transfers under the DCA program do not count against your four free transfers
per year. In addition, transfers resulting from a termination of this program do
not count towards your 4 free transfers.
The DCA program is designed to lessen the impact of market fluctuations on your
investment. However, we cannot ensure that you will make a profit. When you
elect the DCA Program, you are continuously investing in securities regardless
of fluctuating price levels. You should consider your tolerance for investing
through periods of fluctuating price levels.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to gradually move $750 each quarter from the Cash
Management Portfolio to the Mid-Cap Value SELECT PORTFOLIO over six
quarters. You set up dollar cost averaging and purchase Accumulation Units
at the following values:
<TABLE>
<CAPTION>
QUARTER ACCUMULATION UNIT UNITS PURCHASED
- --------- ----------------- -------------------
<S> <C> <C>
1 $ 7.50 100
2 $ 5.00 150
3 $ 10.00 75
4 $ 7.50 100
5 $ 5.00 150
6 $ 7.50 100
</TABLE>
You paid an average price of only $6.67 per Accumulation Unit over six
quarters, while the average market price actually was $7.08. By investing an
equal amount of money each month, you automatically buy more Accumulation
Units when the market price is low and fewer Accumulation Units when the
market price is high. This example is for illustrative purposes only.
PRINCIPAL ADVANTAGE PROGRAM
The Principal Advantage Program allows you to invest in one or more of the
SELECT PORTFOLIO(S) or STRATEGY(IES) without putting your principal at direct
risk. The program accomplishes this by allocating your investment strategically
between the fixed investment options (other than the DCA fixed accounts) and the
SELECT PORTFOLIO or STRATEGY you select. You decide how much you want to invest
and approximately
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<PAGE>
when you want a return of principal. We calculate how much of your Purchase
Payment needs to be allocated to the particular fixed investment option to
ensure that it grows to an amount equal to your total principal invested under
this program.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to allocate a portion of your initial Purchase Payment
of $100,000 to the fixed investment option. You want the amount allocated to
the fixed investment option to grow to $100,000 in 7 years. If the 7-year
fixed investment option is offering a 5% interest rate, we will allocate
$71,069 to the 7-year fixed investment option to ensure that this amount
will grow to $100,000 at the end of the 7-year period. The remaining $28,931
may be allocated among the SELECT PORTFOLIO(S) or STRATEGY(IES), as
determined by you, to provide opportunity for greater growth.
VOTING RIGHTS
Anchor National is the legal owner of the Seasons Series Trust shares. However,
when an underlying portfolio solicits proxies in conjunction with a vote of
shareholders, we must obtain your instructions on how to vote those shares. We
vote all of the shares we own in proportion to your instructions. This includes
any shares we own on our own behalf. Should we determine that we are no longer
required to comply with these rules, we will vote the shares in our own right.
SUBSTITUTION
If any of the underlying portfolios become unavailable for investment, we may be
required to substitute shares of another investment portfolio. We will seek
prior approval of the SEC and give you notice before substituting shares.
ACCESS TO YOUR MONEY
- --------------------------------------------------------------------------------
You can access money in your contract in two ways:
- by making a partial or total withdrawal, and/or;
- by receiving income payments during the Income Phase. SEE INCOME OPTIONS,
PAGE 24.
Generally, we deduct a withdrawal charge applicable to any total or partial
withdrawal and a market value adjustment if a withdrawal comes from the 3, 5, 7
or 10 year fixed investment options prior to the end of a guarantee period. If
you withdraw your entire contract value, we also deduct any applicable premium
taxes and a contract maintenance fee. SEE EXPENSES, PAGE 22. We calculate
charges due on a total withdrawal on the day after we receive your request and
other required paper work. We return your contract value less any applicable
fees and charges.
FREE WITHDRAWAL PROVISION
Your contract provides for a free withdrawal amount each year. A free withdrawal
amount is the portion of your account that we allow you to take out each year
without being charged a surrender penalty. However, upon a future full surrender
of your contract we will recoup any surrender charges which would have been due
if your prior free withdrawal(s) had not been free.
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<PAGE>
To determine your free withdrawal amount and your surrender charge, we refer to
two special terms. These are penalty free earnings and the total invested
amount.
The penalty-free earnings portion of your contract is simply your account value
less your total invested amount. The total invested amount is the total of all
Purchase Payments you have made into the contract less portions of some prior
withdrawals you made. The portions of prior withdrawals that reduce your total
invested amount are as follows:
1. Any free withdrawals in any year that were in excess of your penalty
free earnings and were based on the part of the Total Investment Amount
that was no longer subject to surrender charges at the time of the
withdrawal.
2. Any prior withdrawals of the Total Investment Amount on which you
already paid a surrender penalty, plus any surrender charge paid on such
a withdrawal.
When you make a withdrawal, we assume that it is taken from penalty-free
earnings first, then from the total invested amount on a first-in, first-out
basis. This means that you can also access your Purchase Payments which are no
longer subject to a surrender charge before those Purchase Payments which are
still subject to the surrender charge.
During the first year after we issue your contract your free withdrawal amount
is the greater of:
1. Your penalty-free earnings, or;
2. If you are participating in the Systematic Withdrawal program, a total
of 10% of your total invested amount less any withdrawals taken during
the contract year.
After the first contract year, you can take out the greater of the following
amounts each year:
1. Your penalty free earnings and any portion of your total invested amount
no longer subject to surrender charges, or;
2. 10% of the portion of your total invested amount that has been in your
contract for at least one year less any withdrawals taken during the
contract year.
Purchase payments, above and beyond the amount of your free withdrawal amount,
that are invested for less than 9 years and withdrawn will result in your paying
a penalty in the form of a surrender charge. The amount of the charge and how it
applies are discussed more fully below. You should consider, before purchasing
this contract, the effect this charge will have on your investment if you need
to withdraw more money than the free withdrawal amount. You should fully discuss
this decision with your financial advisor.
The minimum partial withdrawal amount is $1,000. We require that the value left
in any SELECT PORTFOLIO, STRATEGY or fixed account be at least $500 after the
withdrawal. You must send a written withdrawal request. Unless you provide us
with different instructions, partial withdrawals will be made in equal amounts
from each SELECT PORTFOLIO, STRATEGY and the fixed investment option in which
your contract is invested. Withdrawals from fixed investment options prior to
the end of the guarantee period may result in a market value adjustment.
We may be required to suspend or postpone the payment of a withdrawal for any
period of time when: (1) the NYSE is closed (other than a customary weekend and
holiday closings); (2) trading with the NYSE is restricted; (3) an emergency
exists such that disposal of or determination of the value of shares of the
Portfolios is not reasonably practicable; (4) the SEC, by order, so permits for
the protection of contract owners.
Additionally, we reserve the right to defer payments for a withdrawal from a
fixed investment option. Such deferrals are limited to no longer than six
months.
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<PAGE>
SYSTEMATIC WITHDRAWAL PROGRAM
If you elect, we use money in your contract to pay you monthly, quarterly,
semi-annual or annual payments during the Accumulation Phase. Electronic
transfer of these funds to your bank account is also available. The minimum
amount of each withdrawal is $250. There must be at least $500 remaining in your
contract at all times. Withdrawals may be taxable and a 10% IRS tax penalty may
apply if you are under age 59 1/2. Any withdrawals you make using this program
count against your free withdrawal amount as described above. Withdrawals in
excess of that amount may incur a withdrawal charge. There is no additional
charge for participating in this program.
The program is not available to everyone. Please check with our Annuity Service
Center, which can provide the necessary enrollment forms. We reserve the right
to modify, suspend or terminate this program at any time.
MINIMUM CONTRACT VALUE
Where permitted by state law, we may terminate your contract if both of the
following occur: (1) your contract is less than $500 as a result of withdrawals;
and (2) you have not made any Purchase Payments during the past three years. We
will provide you with sixty days written notice. At the end of the notice
period, we will distribute the contract's remaining value to you.
QUALIFIED CONTRACT OWNERS
Certain qualified plans restrict and/or prohibit your ability to withdraw money
from your contract. SEE TAXES, PAGE 30 for a more detailed explanation.
DEATH BENEFIT
- --------------------------------------------------------------------------------
If you die during the Accumulation Phase of your contract, we pay a death
benefit to your Beneficiary.
If at the time we issued your contract, you were 80 years old or younger, the
death benefit is the greatest of:
1. the value of your contract at the time we receive satisfactory proof of
death; or
2. total Purchase Payments less withdrawals (and any fees or charges
applicable to such withdrawals) in an amount proportionate to the amount
by which such withdrawals decreased contract values, compounded at a 4%
annual growth rate until the date of death (3% growth rate if 70 or older
at the time of contract issue); or
3. the value of your contract on the seventh contract anniversary, plus any
Purchase Payments and less withdrawals (and any fees or charges
applicable to such withdrawals) in an amount proportionate to the amount
by which such withdrawals decreased contract values, since the seventh
contract anniversary, all compounded at a 4% annual growth rate until the
date of death (3% growth rate if age 70 or older at the time of contract
issue); or
4. the maximum anniversary value on any contract anniversary prior to your
81st birthday. The anniversary value equals the value of your contract on
a contract anniversary plus any Purchase Payments and less any
withdrawals (and any fees or charges applicable to such withdrawals) in
an amount proportionate to the amount by which such withdrawals decreased
contract values, since that contract anniversary.
If at the time we issue your contract, you were 81 years old or older, the death
benefit is the greater of:
1. the value of your contract at the time we receive satisfactory proof of
death; or
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<PAGE>
2. total Purchase Payments less withdrawals (and any fees or charges
applicable to such withdrawals) in an amount proportionate to the amount
by which such withdrawals decreased contract values, compounded at a 3%
annual growth rate until the date of death.
The death benefit is not paid after you switch to the Income Phase. If you die
during the Income Phase, your Beneficiary will receive any remaining guaranteed
income payments in accordance with the income option you choose. SEE INCOME
OPTIONS, PAGE 24.
You select the Beneficiary to receive any amounts payable on death. You may
change the Beneficiary at any time, unless you previously made an irrevocable
Beneficiary designation. A new Beneficiary designation is not effective until we
record the change.
The death benefit will be paid out when we receive adequate proof of death: (1)
a certified copy of a death certificate; (2) a certified copy of a decree of
court of competent jurisdiction as to the finding of death; (3) a written
statement by a medical doctor who attended the deceased at the time of death; or
(4) any other proof satisfactory to us. We may also require additional
documentation or proof in order for the death benefit to be paid.
The death benefit must begin payment immediately upon receipt of all necessary
documents and, in any event, must be paid within 5 years of the date of death.
The Beneficiary may, in the alternative, elect to have the death benefit payable
in the form of an annuity. If the Beneficiary elects an income option, it must
be paid over the Beneficiary's lifetime or for a period not extending beyond the
Beneficiary's life expectancy. Income payments must begin within one year of
your death. If the Beneficiary is the spouse of the owner, he or she can elect
to continue the contract at the then current value, rather than receive a death
benefit.
If the Beneficiary does not make a specific election as to how they want the
death benefit distributed within sixty days of our receipt of adequate proof of
death, it will be paid in a lump sum.
DEATH OF THE ANNUITANT
If the Annuitant dies before annuity payments begin, you can name a new
Annuitant. If no Annuitant is named within 30 days, you will become the
Annuitant. However, if the owner is a non-natural person (for example, a
corporation), then the death of the Annuitant will be treated as the death of
the owner, no new Annuitant may be named and the death benefit will be paid.
EXPENSES
- --------------------------------------------------------------------------------
There are charges and expenses associated with your contract. These charges and
expenses reduce your investment return. We will not increase the contract
maintenance fee or withdrawal charges under your contract. However the
investment charges under your contract may increase or decrease. Some states may
require that we charge less than the amounts described below.
INSURANCE CHARGES
If you are age 80 or younger when your contract is issued, the amount of this
charge is 1.40% annually of the value of your contract invested in the SELECT
PORTFOLIO(S) and/or STRATEGY(IES). If you are are 81 or older at the time of
contract issue, the insurance charge is 1.52% annually of the value of your
contract invested in the SELECT PORTFOLIO(S) and/or STRATEGY(IES).
We deduct the charge daily, on a pro-rata basis, from the value of your contract
allocated to the SELECT PORTFOLIOS and/or STRATEGIES. The insurance charge
compensates us for the mortality and expense risks and the costs of contract
distribution assumed by Anchor National.
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<PAGE>
If these charges do not cover all of our expenses, we will pay the difference.
Likewise, if these charges exceed our expenses, we will keep the difference.
WITHDRAWAL CHARGES
During the Accumulation Phase you may make withdrawals from your contract.
However, a withdrawal charge may apply. We apply a withdrawal charge upon an
early withdrawal against each Purchase Payment you put into the contract. The
withdrawal charge equals a percentage of the Purchase Payment you take out of
the contract. The withdrawal charge percentage declines each year a purchase
payment is in the contract, as follows:
<TABLE>
<CAPTION>
YEAR 1 2 3 4 5 6 7 8
- ------------------ ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WITHDRAWAL CHARGE 9% 8% 7% 6% 6% 5% 4% 3%
<CAPTION>
YEAR 9 10
- ------------------ ----- -----
<S> <C> <C>
WITHDRAWAL CHARGE 2% 0%
</TABLE>
After a Purchase Payment has been in the contract for nine complete years, the
withdrawal charge no longer applies to that payment.
When calculating the withdrawal charge, we treat withdrawals as coming first
from the Purchase Payments that have been in your contract the longest. However,
for tax purposes, your withdrawals are considered earnings first, then Purchase
Payments.
Whenever possible, we deduct the withdrawal charge from the money remaining in
your contract from each of your investment options on a pro-rata basis. If you
withdraw all of your contract value, we deduct any applicable withdrawal charges
from the amount withdrawn.
The contract provides a free withdrawal amount every year. SEE ACCESS TO YOUR
MONEY PAGE 19.
We will not assess a withdrawal charge for money withdrawn to pay a death
benefit. We do not currently assess a withdrawal charge upon election to receive
income payments from your contract.
Withdrawals made prior to age 59 1/2 may result in tax penalties. SEE TAXES PAGE
30.
INVESTMENT CHARGES
Charges are deducted from the assets of the investment portfolios underlying the
SELECT PORTFOLIO(S) or STRATEGY(IES) for the advisory and other expenses of the
portfolios. THE FEE TABLE BEGINNING ON PAGE 4 ILLUSTRATES THESE CHARGES AND
EXPENSES. FOR MORE DETAILED INFORMATION ON THESE INVESTMENT CHARGES, REFER TO
THE PROSPECTUS FOR THE SEASONS SERIES TRUST, ATTACHED.
CONTRACT MAINTENANCE FEE
During the Accumulation Phase, we subtract a contract maintenance fee from your
account once per year. This charge compensates us for the cost of contract
administration. We will deduct the $35 ($30 in North Dakota) contract
maintenance fee on a pro-rata basis from your account value on your contract
anniversary. In the state of Washington a contract maintenance fee will be
deducted pro-rata from the SELECT PORTFOLIOS and/or STRATEGIES in which you are
invested, only. If you withdraw your entire contract value, we deduct the fee
from that withdrawal.
If your contract value is $50,000 or more on your contract anniversary date, we
will waive the charge. This waiver is subject to change without notice.
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<PAGE>
TRANSFER FEE
We currently permit four free transfers between investment options, every
contract year. We charge you $25 for each transfer over four in any one year
($10 in Pennsylvania and Texas). We deduct the transfer fee from the SELECT
PORTFOLIO(S), STRATEGY and/or fixed investment option from which you request the
transfer. SEE INVESTMENT OPTIONS, PAGE 10.
PREMIUM TAX
Certain states charge the Company a tax on the premiums you pay into the
contract. We deduct from your contract these premium tax charges. Currently we
deduct the charge for premium taxes when you take a full withdrawal or annuitize
the contract. In the future, we may assess this deduction at the time you put
Purchase Payment(s) into the contract or upon payment of a death benefit.
APPENDIX C provides more information about premium taxes.
INCOME TAXES
We do not currently deduct income taxes from your contract. We reserve the right
to do so in the future.
REDUCTION OR ELIMINATION OF CHARGES AND EXPENSES, AND ADDITIONAL AMOUNTS
CREDITED
Sometimes sales of the contracts to groups of similarly situated individuals may
lower our administrative and/or sales expenses. We reserve the right to reduce
or waive certain charges and expenses when this type of sale occurs. In
addition, we may also credit additional interest to policies sold to such
groups. We determine which groups are eligible for such treatment. Some of the
criteria we evaluate to make a determination are: size of the group; amount of
expected Purchase Payments; relationship existing between us and prospective
purchaser; nature of the purchase; length of time a group of contracts is
expected to remain active; purpose of the purchase and whether that purpose
increases the likelihood that our expenses will be reduced; and/or any other
factors that we believe indicate that administrative and/or sales expenses may
be reduced.
Anchor National may make such a determination regarding sales to its employees,
it affiliates' employees and employees of currently contracted broker-dealers;
its registered representatives and immediate family members of all of those
described.
We reserve the right to change or modify any such determination or the treatment
applied to a particular group, at any time.
INCOME OPTIONS
- --------------------------------------------------------------------------------
ANNUITY DATE
During the Income Phase, the money in your Contract is used to make regular
income payments to you. You may switch to the Income Phase any time after your
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 discussed under Option
5, once you begin receiving income payments, you cannot otherwise access your
money through a withdrawal or surrender.
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<PAGE>
Income payments must begin on or before your 90th birthday or on your tenth
contract anniversary, whichever occurs later. If you do not choose an Annuity
Date, your income payments will automatically begin on this date. Certain states
may require your income payments to start earlier.
If the Annuity Date is past your 85th birthday, your contract could lose its
status as an annuity under Federal tax laws. This may cause you to incur adverse
tax consequences. In addition, certain Qualified contracts require you to take
minimum distributions after you reach age 70 1/2. SEE TAXES, PAGE 30.
INCOME OPTIONS
Currently, this Contract offers 5 Income Options. If you elect to receive income
payments but do not select an option, your income payments will be made in
accordance with option 4 for a period of 10 years. For income payments selected
for joint lives, we pay according to option 3.
We base our calculation of income payments on the life of the Annuitant and the
annuity rates set forth in your contract. As the contract owner, you may change
the Annuitant at any time prior to the Annuity Date. You must notify us if the
Annuitant dies before the Annuity Date and then designate a new Annuitant.
OPTION 1 - LIFE INCOME ANNUITY
This option provides income payments for the life of the Annuitant. Income
payments stop when the Annuitant dies.
OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY
This option provides income payments for the life of the Annuitant and for the
life of another designated person. Upon the death of either person, we will
continue to make income payments during the lifetime of the survivor. Income
payments stop whenever the survivor dies.
OPTION 3 - JOINT AND 100% SURVIVOR LIFE ANNUITY WITH 10 OR 20 YEAR PERIOD
CERTAIN
This option is similar to option 2 above, with an additional guarantee of
payments for at least 10 or 20 years. If the Annuitant and the Survivor die
before all of the payments have been made, the remaining payments are made to
the Beneficiary under your Contract.
OPTION 4 - LIFE ANNUITY WITH 10 OR 20 YEAR PERIOD CERTAIN
This option is similar to option 1 above. In addition, this option provides a
guarantee that income payments will be made for at least 10 or 20 years. You
select the number of years. If the Annuitant dies before all guaranteed income
payments are made, the remaining income payments go to the Beneficiary under
your Contract.
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
This option provides income payments for a guaranteed period ranging from 5 to
30 years. If the Annuitant dies before all the guaranteed income payments are
made, the remaining income payments are made to the Beneficiary under your
contract. Additionally, if variable income payments are elected under this
option, you (or the Beneficiary under the contract if the Annuitant dies prior
to all guaranteed payments being made) may redeem the contract value after the
Annuity Date. The amount available upon such redemption would be the discounted
present value of any remaining guaranteed payments.
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<PAGE>
The value of an Annuity Unit, regardless of the option chosen, takes into
account the Mortality and Expense Risk Charge. Since Option 5 does not contain
an element of mortality risk, no benefit is derived from this charge.
We make Income Payments on a monthly, quarterly, semi-annual or annual basis.
You instruct us to send you a check or to have the payments direct deposited
into your bank account. If state law allows, we distribute annuities with a
contract value of $5,000 or less in a lump sum. Also, if the selected income
option results in annuity payments of less than $50 per payment, we may decrease
the frequency of the payments, state law allowing.
ALLOCATION OF ANNUITY PAYMENTS
You can choose income payments that are fixed, variable or both. If payments are
fixed, Anchor National guarantees the amounts of each payment. If the payments
are variable, the amounts are not guaranteed. They will go up and/or down based
upon the performance of the SELECT PORTFOLIO(S) or STRATEGY(IES) in which you
invest.
FIXED OR VARIABLE INCOME PAYMENTS
You can choose income payments that are fixed, variable or both. If at the date
when income payments begin you are invested in the SELECT PORTFOLIO(S) and/or
STRATEGY(IES) only, your income payments will be variable. If your money is only
in fixed accounts at that time, your income payments will be fixed in amount. If
you are invested in both fixed and variable options at the time you begin the
Income Phase, a portion of your income payments will be fixed and a portion will
be variable.
INCOME PAYMENTS
Your income payments will vary if you are invested in the SELECT PORTFOLIO(S)
and/or STRATEGY(IES) after the Annuity date depending on four things:
- for life options, your age when payments begin, and;
- the value of your contract in the SELECT PORTFOLIO(S) and/or STRATEGY(IES)
on the Annuity Date, and;
- the 3.5% assumed investment rate for variable income payments used in the
annuity table for the contract, and;
- the performance of the SELECT PORTFOLIO(S) and/or STRATEGY(IES) in which
you are invested during the time you receive income payments.
If you are invested in both the fixed account options and the SELECT
PORTFOLIO(S) and/or STRATEGY(IES) after the Annuity Date, the allocation of
funds between the fixed accounts and SELECT PORTFOLIO(S) and/or STRATEGY(IES)
also impacts the amount of your annuity payments.
TRANSFERS DURING THE INCOME PHASE
You may transfer money among the SELECT PORTFOLIO(S) and/or STRATEGY(IES) during
the Income Phase. Transfers are subject to the same limitations as transfers
during the Accumulation Phase. However, you may not transfer money from the
fixed accounts into the SELECT PORTFOLIO(S) and/or STRATEGY(IES) or from the
SELECT PORTFOLIO(S) and/or STRATEGY(IES) into the fixed accounts during the
Income Phase. SEE EXPENSES, PAGE 22.
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<PAGE>
DEFERMENT OF PAYMENTS
We may defer making fixed payments for up to six months, or less if required by
law. Interest is credited to you during the deferral period.
Please read the Statement of Additional Information ("SAI") for a more detailed
discussion of the income options.
THE INCOME PROTECTOR
If elected, this feature provides a future "safety net" in the event that, when
you choose to begin receiving annuity payments, your contract has not performed
within a historically anticipated range. The Income Protector feature offers you
the ability to receive a guaranteed fixed minimum retirement income upon
annuitization. With the Income Protector you can know the level of minimum
income that will be available to you if, when you chose to begin taking income
payments, down markets have negatively impacted your contract value. In order to
utilize the benefit of this program, you must follow the provisions discussed
below.
The Income Protector provides two levels of minimum retirement income. The two
available options are the Income Protector PLUS and MAX. If you enroll in the
Income Protector program, we charge a fee based on the level of protection you
select. The amount of the fee and how to enroll are described below.
Certain IRC restrictions on the income options available to qualified retirement
investors may have an impact on your ability to benefit from this feature.
Qualified investors should read NOTE TO QUALIFIED CONTRACT HOLDERS, below.
HOW WE DETERMINE THE AMOUNT OF YOUR MINIMUM GUARANTEED INCOME
We base the amount of minimum income available to you if you annuitize using the
Income Protector upon a calculation we call the Income Benefit Base. At the time
your enrollment in the Income Protector program becomes effective, your Income
Benefit Base is equal to your contract value. Your participation becomes
effective on either the date of issue of the contract (if elected at the time of
application) or at the contract anniversary following your enrollment in the
program.
The Income Benefit Base is only a calculation. It does not represent a contract
value, nor does it guarantee performance of the Variable Portfolios in which you
invest.
Your Income Benefit Base increases if you make subsequent Purchase Payments and
decreases if you withdraw money from your contract. The exact Income Benefit
Base calculation is equal to (a) plus (b) minus (c) where:
(a) is,
- for the first year of calculation, your contract value on the date
your participation in the program became effective, or;
- for each subsequent year of calculation, the Income Benefit Base on
the prior contract anniversary, and;
(b) is the sum of all 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 (excluding any MVA), in an amount proportionate to
the amount by which such withdrawals decreased your contract value.
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<PAGE>
The Income Benefit Base accumulates at one of the following annual growth rates
from the date your enrollment becomes effective through your election to begin
receiving income under the program:
<TABLE>
<CAPTION>
OPTION GROWTH RATE
<S> <C>
THE INCOME PROTECTOR PLUS 3.25%
The Income Protector MAX 5.25%
</TABLE>
The growth rates for the PLUS or MAX features cease on the contract anniversary
following the Annuitant's 90th birthday.
ENROLLING IN THE PROGRAM
If you decide that you want the protection offered by the Income Protector
program, you must elect the option of your choice by completing the Income
Protector Election Form available through our Annuity Service Center. You may
only elect one of the options, you cannot change your election once made, and
you cannot terminate your election. If you enroll in the program at contract
issue your Income Benefit Base will begin accumulating at the applicable growth
rate from the issue date. Otherwise, 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 Income Protector program you may not begin the income phase for at least
seven years following your enrollment. Thus, you must make your election prior
to the later of:
- your 83rd birthday, or
- your 3rd anniversary.
STEP-UP OF YOUR INCOME BENEFIT BASE
You may also have the opportunity to "Step-Up" your Income Benefit Base. The
Step-Up feature allows you to increase your Income Benefit Base to the amount of
your contract value on your contract anniversary. You can only elect to Step-Up
within the 30 days before the next contract anniversary. The seven year waiting
period required prior to electing income payments through the Income Protector
is restarted if you step-up your Income Benefit Base. Thus, your last
opportunity to step-up is the later of:
- your 83rd birthday, or
- your 3rd anniversary
You must complete the appropriate portion of the contract holders Income
Protector Election Form to effect a Step-Up. The form is available from our
Annuity Service Center.
ELECTING TO RECEIVE INCOME PAYMENTS
You may elect to begin the Income Phase of your contract using the Income
Protector Program ONLY within the 30 days after the seventh or later contract
anniversary following the later of,
- the effective date of your enrollment in the Income Protector program, or
- the contract anniversary of your most recent Step-Up.
The contract anniversary prior to your election to begin receiving income
payments is your Income Benefit Date. This is the date as of which we calculate
your Income Benefit Base to use in determining your guaranteed minimum fixed
retirement income. To arrive at the minimum guaranteed fixed retirement income
available to you, we apply the annuity rates stated in your Income Protector
Endorsement for the income option you select, to your final
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<PAGE>
Income Benefit Base. You then choose if you would like to receive that income
annually, quarterly or monthly for the time guaranteed under your selected
annuity option. Your final Income Benefit Base is equal to (a) minus (b) where:
(a) is your Income Benefit Base as of your Income Benefit Date, and;
(b) is any partial withdrawals of contract value and any charges applicable
to those withdrawals (excluding any MVA) and any withdrawal charges
otherwise applicable, calculated as if you fully surrender your contract
as the Income Benefit Date, and any applicable premium taxes.
The income options available when using the Income Protector program to receive
your retirement income are:
- Life Annuity with 10 Year Period Certain, or
- Joint and 100% Survivor Annuity with 20 Year Period Certain
At the time you elect to begin the income phase, we will calculate your annual
income using both your final Income Benefit Base and your contract value. We
will use the same income option for each calculation, however, the annuity
factors used to calculate your income under the Income Protector will be
different. You will receive whichever provides a greater stream of income. If
you annuitize using the Income Protector your income payments will be fixed in
amount. You are not required to use the Income Protector to receive income
payments. The general provisions of your contract provide other income options.
However, we will not refund fees paid for the Income Protector if you begin
taking annuity payments under the general provisions of your contract. YOU MAY
NEVER NEED TO RELY UPON THE INCOME PROTECTOR, IF YOUR CONTRACT PERFORMS WITHIN A
HISTORICALLY ANTICIPATED RANGE. HOWEVER, PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS.
NOTE TO QUALIFIED CONTRACT HOLDERS
Qualified contracts generally require that you select an annuity income option
which does not exceed your life expectancy. That restriction, if it applies to
you, may limit the benefit of the Income Protector program. As discussed above,
in order to utilize the Income Protector you must annuitize under one of two
annuity income options. If those income options exceed your life expectancy you
may be prohibited from receiving your guaranteed fixed income under the program.
If you own a Qualified contract to which this restriction applies and you elect
the Income Protector program, you may pay for this guarantee and not be able to
realize the benefit.
Generally, for qualified contracts:
- for the Life Annuity with 10 Year Period Certain, you must annuitize
before age 79, and;
- for the Joint and 100% Survivor Annuity with 20 Year Period Certain, both
Annuitants must be 70 or younger or one of the annuitants must be 65 or
younger upon annuitization. Other age combinations may be available.
You should consult your tax advisor for information concerning your particular
circumstances.
FEES ASSOCIATED WITH THE INCOME PROTECTOR
We charge a fee for the Income Protector program, as follows:
<TABLE>
<CAPTION>
OPTION FEE AS A % OF YOUR INCOME BENEFIT BASE
<S> <C>
Income Protector PLUS .15%
Income Protector MAX .30%
</TABLE>
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<PAGE>
Since the Income Benefit Base is only a calculation and does not provide a
contract value, we deduct the fee from your actual contract value beginning on
the contract anniversary on which your enrollment in the program becomes
effective.
If you enroll in the Income Protector program at contract issue, we begin
deducting the annual fee for the PLUS or MAX option on the contract anniversary
when your enrollment becomes effective. If you elect to participate in the
Income Protector program at some time after contract issue, we begin deducting
the annual fee on the contract anniversary following of or following election.
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.
We will deduct the charge from your contract value on every contract anniversary
up to and including your Income Benefit Date. Additionally, we deduct the entire
annual fee from any full surrender of your contract requested prior to your
contract anniversary.
HYPOTHETICAL EXAMPLE OF THE OPERATION OF THE INCOME PROTECTOR
This table assumes a $100,000 initial investment in a Non-qualified contract
with no further premiums, no withdrawals, no step-ups and no premium taxes; and
the election of optional Income Protector program at contract issue.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
ANNUAL INCOME IF YOU ANNUITIZE ON THE FOLLOWING
IF AT ISSUE YOU CONTRACT ANNIVERSARIES: BENEFIT
ARE... 1-6 7 10 15 20 LEVEL
Male N/A 8,046 9,633 12,971 17,313 Plus
age 60* N/A 9,202 11,670 17,296 25,410 Max
Female N/A 7,145 8,542 11,652 15,948 Plus
Age 60* N/A 8,172 10,349 15,538 23,407 Max
Male, Age 60** N/A 6,290 7,353 9,442 11,785 Plus
Female, Age 60 N/A 7,194 8,908 12,590 17,296 Max
</TABLE>
* 10 Year and Life
** Joint and 100% Survivor with 20 Year Certain
The Income Protector may not be available in your state. Please consult your
financial adviser for information regarding availability of this program in your
state.
TAXES
- --------------------------------------------------------------------------------
NOTE: WE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL DISCUSSION OF
THE SUBJECT. IT IS NOT TAX ADVICE. WE CAUTION YOU TO SEEK COMPETENT TAX ADVICE
ABOUT YOUR OWN CIRCUMSTANCES. WE DO NOT GUARANTEE THE TAX STATUS OF YOUR
ANNUITY. TAX LAWS CONSTANTLY CHANGE, THEREFORE WE 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
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<PAGE>
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 annuity payments, any portion of each payment that is
considered a return of your Purchase Payment will not be taxed. Withdrawn
earnings are treated as income to you and are taxable. The IRC provides for a
10% 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) 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 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) in the case of hardship. In the case of hardship, the owner can
only withdraw Purchase Payments.
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<PAGE>
MINIMUM DISTRIBUTIONS
If you have a Qualified contract, distributions must begin by April 1 of the
calendar year following the later of (1) the calendar year in which you attain
age 70 1/2 or (2) the calendar year in which you retire. Failure to satisfy the
minimum distribution requirements may result in a tax penalty. You should
contact your tax advisor for more information.
We currently waive surrender charges and MVA on withdrawals taken to meet
minimum distribution requirements. Current operational practice is to provide a
free withdrawal of the greater of the contract's maximum penalty free amount or
the required minimum distribution amount for a particular contract (but not
both).
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity. We believe that the underlying Portfolios'
management monitors the variable Portfolios so as to comply with these
requirements. To be treated as a variable annuity for tax purposes, the
underlying investments must meet these requirements.
The diversification regulations do not provide guidance as to the circumstances
under which you, because of the degree of control you exercise over the
underlying investments, and not Anchor National, would be considered the owner
of the shares of the Portfolios. It is unknown to what extent owners are
permitted to select investments, to make transfers among Portfolios or the
number and type of Portfolios owners may select from. If any guidance is
provided which is considered a new position, then the guidance would generally
be applied prospectively. However, if such guidance is considered not to be a
new position, it may be applied retroactively. This would mean you, as the owner
of the contract, could be treated as the owner of the underlying variable
investment Portfolios. Due to the uncertainty in this area, we reserve the right
to modify the contract in an attempt to maintain favorable tax treatment.
PERFORMANCE
- --------------------------------------------------------------------------------
From time to time we will advertise the performance of the SELECT PORTFOLIO(S)
and/or STRATEGY(IES). Any such performance results are based on historical
earnings and are not intended to indicate future performance.
We advertise the Cash Management SELECT PORTFOLIO's yield and effective yield.
In addition, the other SELECT PORTFOLIO(S) and STRATEGY(IES) advertise total
return, gross yield and yield-to-maturity. These figures represent past
performance of the SELECT PORTFOLIO(S) and STRATEGY(IES). These performance
numbers do not indicate future results.
We may show performance of each SELECT PORTFOLIO and/or STRATEGY in comparison
to various appropriate indexes and the performance of other similar variable
annuity products with similar objectives as reported by such independent
reporting services as Morningstar, Inc., Lipper Analytical Services, Inc. and
the Variable Annuity Research Data Service ("VARDS").
Please see the Statement of Additional Information for additional information
regarding the methods used to calculate performance data.
Anchor National may also advertise the rating and other information assigned to
it by independent industry ratings organizations. Some of those organizations
are A.M. Best Company ("A.M. Best"), Moody's Investor's Service ("Moody's"),
Standard & Poor's Insurance Rating Services ("S&P"), and Duff & Phelps. A.M.
Best's and Moody's ratings reflect their current opinion of our financial
strength and performance in comparison to others in the life
32
<PAGE>
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 the SunAmerica Financial Network, Inc. (comprising six wholly owned
broker-dealers), specialize in retirement savings and investment products and
services. Business focuses include, fixed and variable annuities, mutual funds,
broker-dealer services and trust administration services.
THE SEPARATE ACCOUNT
Anchor National originally established a separate account, Variable Annuity
Account Five (the "Separate Account"), under Arizona law on July 8, 1996. The
Separate Account is registered with the SEC as a unit investment trust under the
Investment Company Act of 1940, as amended.
Anchor National owns the assets in the Separate Account. However, the assets in
the Separate Account are not chargeable with liabilities arising out of any
other business conducted by Anchor National. Income gains and losses (realized
and unrealized) resulting from assets in the Separate Account are credited to or
charged against the Separate Account without regard to other income, gains or
losses of Anchor National.
CUSTODIAN
State Street Bank and Trust Company, 255 Franklin Street, Boston, Massachusetts
02110, serves as the custodian of the assets of the Separate Account. Anchor
National pays State Street Bank for services provided, based on a schedule of
fees.
THE GENERAL ACCOUNT
Money allocated to the fixed account options goes into Anchor National's general
account. The general account consists of all of Anchor National's assets other
than assets attributable to a separate account. All of the assets in the general
account are chargeable with the claims of any Anchor National contract holders
as well as all of its creditors. The general account funds are invested as
permitted under state insurance laws.
DISTRIBUTION OF THE CONTRACT
Registered representatives of broker-dealers sell the contract. We pay
commissions to these representatives for the sale of the contracts. We do not
expect the total commissions to exceed 7.5% of your Purchase Payments. We may
also pay a bonus to representatives for contracts which stay active for a
particular period of time, in addition to standard commissions. We do not deduct
commissions paid to registered representatives directly from your Purchase
Payments.
33
<PAGE>
From time to time, we may pay or allow additional promotional incentives in the
form of cash or other compensation. We reserve the right to offer these
additional incentives only to certain broker-dealers that sell or are expected
to sell, certain minimum amounts of the contract, or other contracts offered by
us. Promotional incentives may change at any time.
SunAmerica Capital Services, Inc., 733 Third Avenue, 4th Floor, New York, New
York 10017 distributes the contracts. SunAmerica Capital Services is an
affiliate of Anchor National, and is a registered as a broker-dealer under the
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc.
No underwriting fees are paid in connection with the distribution of the
contracts.
ADMINISTRATION
We are responsible for the administrative servicing of your contract. During the
accumulation phase, you will receive confirmation of transactions within your
contract. Transactions made pursuant to contractual or systematic agreements,
such as deduction of the annual maintenance fee and dollar cost averaging, may
be confirmed quarterly. Purchase payments received through the automatic payment
plan or a salary reduction arrangement, may also be confirmed quarterly. For all
other transactions, we send confirmations immediately.
During the accumulation and income phases, you will receive a statement of your
transactions over the past quarter and a summary of your account values. Please
contact our Annuity Service Center at 1-800-445-SUN2, if you have any comment,
question or service request.
We send out transaction confirmations and quarterly statements. It is your
responsibility to review these documents carefully and notify us of any
inaccuracies immediately. We investigate all inquiries. To the extent that we
believe we made an error, we retroactively adjust your contract, provided you
notify us within 30 days of receiving the transaction confirmation or quarterly
statement. Any other adjustments we deem warranted are made as of the time we
receive notice of the error.
YEAR 2000
We rely significantly on computer systems and applications in our daily
operations. Many of our systems are not presently year 2000 compliant, which
means that because they have historically used only two digits to identify the
year in a date, they will fail to distinguish dates in the "2000s" from dates in
the "1900s." Anchor National's business, financial condition and results of
operations could be materially and adversely affected by the failure of our
systems and applications (and those operated by third parties interfacing with
our systems and applications) to properly operate or manage these dates.
Anchor National has a coordinated plan to repair or replace these noncompliant
systems and to obtain similar assurances from third parties interfacing with our
systems and applications. In fiscal 1997, the Company's parent recorded a $15.0
million provision for estimated programming costs to make necessary repairs of
certain specific noncompliant systems of which $6.2 million was allocated to
Anchor National. In addition, the Company's parent is making expenditures which
it expects will ultimately total $12.3 million to replace certain other
noncompliant systems. Of these expenditures, approximately $5.0 million will be
allocated to Anchor National. Total expenditures relating to the replacement of
noncompliant systems will be capitalized as software costs and will be amortized
over future periods. Both phases of the project are progressing according to
plan and were substantially completed by the end of the calendar 1998. Testing
of both the repaired and replacement systems is expected to be substantially
completed by July 31, 1999. However, Anchor National will continue to test all
of its computer systems and applications through 1999 to ensure continued
compliance.
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
34
<PAGE>
determine how our systems and applications may be affected by their failure to
solve their own year 2000 issues. To date, however, we have only received
preliminary feedback from such parties and have not independently confirmed any
information received from other parties with respect to the year 2000 issues.
Therefore, we cannot assure that such other parties will complete their year
2000 conversions in a timely fashion or will not suffer a year 2000 business
disruption that may adversely affect our financial condition and results of
operations.
Because we expect to complete our year 2000 conversion prior to any potential
disruption to our business, we have not developed a comprehensive year 2000
contingency plan. Anchor National closely monitors the progression of its plan
for compliance, and if necessary, would devote additional resources to assure
the timely completion of our year 2000 plan. If we determine that our business
is at material risk of disruption due to the year 2000 issue or anticipate that
we will not complete our year 2000 conversion in a timely fashion, we will work
to enhance our contingency plans.
The above statements are forward-looking. The costs of our year 2000 conversion,
the date which we have set to complete such conversion and the possible risks
associated with the year 2000 issue are based on our current estimates and are
subject to various uncertainties that could cause the actual results to differ
materially from our expectations. Such uncertainties include, among others, our
success in identifying systems and applications that are not year 2000
compliant, the nature and amount of programming required to upgrade or replace
each of the affected systems and applications, the availability of qualified
personnel, consultants and other resources, and the success of the year 2000
conversion efforts of others.
LEGAL PROCEEDINGS
There are no pending legal 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.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
The consolidated financial statements of Anchor National Life Insurance Company
as of September 30, 1998 and 1997 and for each of the three years in the period
ended September 30, 1998 and the financial statements of Variable Annuity
Account Five (Portion Relating to the SEASONS SELECT Variable Annuity), as of
March 31, 1999 and for the period from inception to March 31, 1999 are included
in the Statement of Additional Information and have been so included in reliance
on the reports of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
35
<PAGE>
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
Separate Account.............................................................................. 3
General Account............................................................................... 4
Performance Data.............................................................................. 4
Annuity Payments.............................................................................. 5
Annuity Unit Values........................................................................... 5
Taxes......................................................................................... 8
Distribution of Contracts..................................................................... 12
Financial Statements.......................................................................... 13
</TABLE>
36
<PAGE>
APPENDIX A - CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION TO
STRATEGIES 3/31/99
- ----------------------------------------------------------------------------------- ------------------
<S> <C>
- -------------------------------------------------------------------------------------------------------
Growth (Inception Date 3/4/99)
Beginning AUV.................................................................... (a) 15.05
(b) 0
End AUV.......................................................................... (a) 15.89
(b) 0
Ending Number of AUs............................................................. (a) 31,169
(b) 0
- -------------------------------------------------------------------------------------------------------
Moderate Growth (Inception Date 3/3/99)
Beginning AUV.................................................................... (a) 14.25
(b) 0
End AUV.......................................................................... (a) 15.09
(b) 0
Ending Number of AUs............................................................. (a) 93,136
(b) 0
- -------------------------------------------------------------------------------------------------------
Balanced Growth (Inception Date 3/5/99)
Beginning AUV.................................................................... (a) 13.80
(b) 0
End AUV.......................................................................... (a) 14.05
(b) 0
Ending Number of AUs............................................................. (a) 85,553
(b) 0
- -------------------------------------------------------------------------------------------------------
Conservative Growth (Inception Date 3/5/99)
Beginning AUV.................................................................... (a) 13.03
(b) 13.25
End AUV.......................................................................... (a) 13.21
(b) 13.21
Ending Number of AUs............................................................. (a) 33,892
(b) 5,689
- -------------------------------------------------------------------------------------------------------
</TABLE>
AUV-Accumulation Unit Value
AU-Accumulation Units
(a) Reflects age 80 or younger
(b) Reflects age 81 or older
A-1
<PAGE>
<TABLE>
<CAPTION>
INCEPTION TO
SELECT PORTFOLIOS 3/31/99
- ----------------------------------------------------------------------------------- ------------------
<S> <C>
- -------------------------------------------------------------------------------------------------------
Large Cap Growth (Inception Date 3/1/99)
Beginning AUV.................................................................... (a) 10.00
(b) 0
End AUV.......................................................................... (a) 10.68
(b) 0
Ending Number of AUs............................................................. (a) 85,647
(b) 0
- -------------------------------------------------------------------------------------------------------
Large Cap Composite (Inception Date 3/1/99)
Beginning AUV.................................................................... (a) 10.00
(b) 0
End AUV.......................................................................... (a) 10.41
(b) 0
Ending Number of AUs............................................................. (a) 33,347
(b) 0
- -------------------------------------------------------------------------------------------------------
Large Cap Value (Inception Date 3/1/99)
Beginning AUV.................................................................... (a) 10.00
(b) 0
End AUV.......................................................................... (a) 10.32
(b) 0
Ending Number of AUs............................................................. (a) 34,004
(b) 0
- -------------------------------------------------------------------------------------------------------
Mid Cap Growth (Inception Date 3/1/99)
Beginning AUV.................................................................... (a) 10.00
(b) 0
End AUV.......................................................................... (a) 10.62
(b) 0
Ending Number of AUs............................................................. (a) 27,096
(b) 0
- -------------------------------------------------------------------------------------------------------
Mid Cap Value (Inception Date 3/1/99)
Beginning AUV.................................................................... (a) 10.00
(b) 0
End AUV.......................................................................... (a) 10.10
(b) 0
Ending Number of AUs............................................................. (a) 11,278
(b) 0
- -------------------------------------------------------------------------------------------------------
</TABLE>
AUV-Accumulation Unit Value
AU-Accumulation Units
(a) Reflects age 80 or younger
(b) Reflects age 81 or older
A-2
<PAGE>
<TABLE>
<CAPTION>
INCEPTION TO
SELECT PORTFOLIOS 3/31/99
- ----------------------------------------------------------------------------------- ------------------
<S> <C>
- -------------------------------------------------------------------------------------------------------
Small Cap (Inception Date 3/1/99)
Beginning AUV.................................................................... (a) 10.00
(b) 0
End AUV.......................................................................... (a) 10.35
(b) 0
Ending Number of AUs............................................................. (a) 22,807
(b) 0
- -------------------------------------------------------------------------------------------------------
International Equity (Inception Date 3/1/99)
Beginning AUV.................................................................... (a) 10.00
(b) 0
End AUV.......................................................................... (a) 10.51
(b) 0
Ending Number of AUs............................................................. (a) 23,961
(b) 0
- -------------------------------------------------------------------------------------------------------
Diversified Fixed Income (Inception Date 3/10/99)
Beginning AUV.................................................................... (a) 10.00
(b) 0
End AUV.......................................................................... (a) 10.02
(b) 0
Ending Number of AUs............................................................. (a) 31,762
(b) 0
- -------------------------------------------------------------------------------------------------------
Cash Management (Inception Date 3/26/99)
Beginning AUV.................................................................... (a) 10.00
(b) 0
End AUV.......................................................................... (a) 10.00
(b) 0
Ending Number of AUs............................................................. (a) 970
(b) 0
- -------------------------------------------------------------------------------------------------------
</TABLE>
AUV-Accumulation Unit Value
AU-Accumulation Units
(a) Reflects age 80 or younger
(b) Reflects age 81 or older
A-3
<PAGE>
APPENDIX B - MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------
The market value adjustment reflects the impact that changing interest rates
have on the value of money invested at a fixed interest rate. The longer the
period of time remaining in the term you initially agreed to leave your money in
the fixed investment option, the greater the impact of changing interest rates.
The impact of the market value adjustment can be either positive or negative,
and is computed by multiplying the amount withdrawn, transferred or annuitized
by the following factor:
[(1+I/(1+J+L)](to the power of N/12) - 1
THE MARKET VALUE ADJUSTMENT FORMULA
MAY DIFFER IN CERTAIN STATES
where:
I is the interest rate you are earning on the money invested in
the fixed investment option;
J is the interest rate then currently available for the period
of time equal to the number of years remaining in the term you initially agreed
to leave your money in the fixed investment option; and
L is equal to 0.005, except in Pennsylvania where it is equal to
zero and Florida where it is equal to .0025.
N is the number of full months remaining in the term you
initially agreed to leave your money in the fixed investment option.
EXAMPLES OF THE MARKET VALUE ADJUSTMENT
The examples below assume the following:
(1) You made an initial Purchase Payment of $10,000 and allocated it to the
10-year fixed investment option at a rate of 5%;
(2) You make a partial withdrawal of $4,000 when 1 year (12 months) remain
in the 10-year term you initially agreed to leave your money in the fixed
investment option (N=12); and
(3) You have not made any other transfers, additional Purchase Payments, or
withdrawals.
No withdrawal charges are reflected because your Purchase Payment has been in
the contract for nine full years. If a withdrawal charge applies, it is deducted
before the market value adjustment. The market value adjustment is assessed on
the amount withdrawn less any withdrawal charges.
NEGATIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 1-year fixed investment option is 6%.
The market value adjustment factor is
= [(1+I)/(1+J+0.005)](to the power of N/12) - 1
= [(1.05)/(1.06+0.005)](to the power of 12/12) - 1
= (0.985915)(1) - 1
= 0.985915 - 1
= -0.014085
The requested withdrawal amount is multiplied by the market value adjustment
factor to determine the market value adjustment:
$4,000 X (-0.014085) = -$56.34
B-1
<PAGE>
$56.34 represents the market value adjustment that will be deducted from the
money remaining in the 10-year fixed investment option.
POSITIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for a new
Purchase Payments in the 1-year fixed investment option is 4%.
The market value adjustment factor is
= [(1+I/(1+J+0.005)](N/12) - 1
= [(1.05)/(1.04+0.005)](12/12) - 1
= (1.004785)1 - 1
= 1.004785 - 1
= +0.004785
The requested withdrawal amount is multiplied by the market value adjustment
factor to determine the market value adjustment:
$4,000 x (+0.004785) = +$19.14
$19.14 represents the market value adjustment that would be added to your
withdrawal.
B-2
<PAGE>
APPENDIX C - PREMIUM TAXES
- --------------------------------------------------------------------------------
Premium taxes vary according to the state and are subject to change without
notice. In many states, there is no tax at all. Listed below are the current
premium tax rates in those states that assess a premium tax. For current
information, you should consult your tax adviser.
<TABLE>
<CAPTION>
QUALIFIED NON-QUALIFIED
STATE CONTRACT CONTRACT
- ----------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
California................................................................... .50% 2.35%
Kentucky..................................................................... 2% 2%
Maine........................................................................ 0% 2%
Nevada....................................................................... 0% 3.5%
South Dakota................................................................. 0% 1.25%
West Virginia................................................................ 1% 1%
Wyoming...................................................................... 0% 1%
</TABLE>
C-1
<PAGE>
Please forward a copy (without charge) of the Seasons Select Variable Annuity
Statement of Additional Information to:
(Please print or type and fill in all information.)
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City/State/Zip
- --------------------------------------------------------------------------------
Date: ___________________ Signed: _____________________________________________
Return to: Anchor National Life Insurance Company, Annuity Service Center, P.O.
Box 52499, Los Angeles, California 90054-0299
