<PAGE> 1
File Nos. 33-47473
811-3859
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 10 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ X ]
Amendment No. 27
(Check appropriate box or boxes)
VARIABLE SEPARATE ACCOUNT
(Exact Name of Registrant)
Anchor National Life Insurance Company
(Name of Depositor)
1 SunAmerica Center
Los Angeles, California 90067-6022
(Address of Depositor's Principal Offices) (Zip Code)
Depositor's Telephone Number, including Area Code
(310) 772-6000
Susan L. Harris, Esq.
Anchor National Life Insurance Company
1 SunAmerica Center
Los Angeles, California 90067-6022
(Name and Address of Agent for Service)
Title and Amount
of Securities Amount of
Being Registered Registration Fee
- ---------------- ----------------
Flexible Payment Pursuant to Rule 24f-2, the $
Deferred Annuity Registrant has filed an election
Contracts to register an indefinite
number of securities
under the Securities Act of 1933
It is proposed that this filing will become effective:
-- immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 14, 1997 pursuant to paragraph (b) of Rule 485
-- 60 days after filing pursuant to paragraph (a) of Rule 485
-- on [date] pursuant to paragraph (a) of Rule 485
The registrant has elected pursuant to Rule 24f-2 under the Investment Company
Act of 1940 to register an indefinite amount of securities. The Registrant
intends to file its Rule 24f-2 Notice for the fiscal year ended November 30,
1997 on or about January 29, 1998.
<PAGE> 2
VARIABLE SEPARATE ACCOUNT
Cross Reference Sheet
PART A - PROSPECTUS
Item Number in Form N-4 Caption
- ----------------------- -------
1. Cover Page............................. Cover Page
2. Definitions............................ Definitions
3. Synopsis............................... Profile; Fee Tables;
Portfolio Expenses;
Examples
4. Condensed Financial Information........ Appendix A - Condensed
Financial Information
5. General Description of Registrant,
Depositor and Portfolio Companies...... The Polaris Variable
Annuity; Other
Information
6. Deductions............................. Expenses
7. General Description of
Variable Annuity Contracts............. The Polaris Variable
Annuity; Purchasing a
Polaris Variable Annuity
Contract; Investment
Options
8. Annuity Period......................... Annuity Income Options
9. Death Benefit.......................... Death Benefit
10. Purchases and Contract Value........... Purchasing a Polaris
Variable Annuity Contract
11. Redemptions............................ Access to Your Money
12. Taxes.................................. Taxes
13. Legal Proceedings...................... Other Information - Legal
Proceedings
14. Table of Contents of Statement
of Additional Information.............. Table of Contents of
Statement of Additional
Information
<PAGE> 3
PART B - STATEMENT OF ADDITIONAL INFORMATION
Certain information required in part B of the Registration Statement
has been included within the Prospectus forming part of this Registration
Statement; the following cross-references suffixed with a "P" are made by
reference to the captions in the Prospectus.
Item Number in Form N-4 Caption
- ----------------------- -------
15. Cover Page............................. Cover Page
16. Table of Contents...................... Table of Contents
17. General Information and History........ The Polaris Variable
Annuity (P); Separate
Account; General Account;
Investment Options (P);
Other Information (P)
18. Services............................... Other Information (P)
19. Purchase of Securities Being Offered... Purchasing a Polaris
Variable Contract (P)
20. Underwriters........................... Distribution of Contracts
21. Calculation of Performance Data........ Performance Data
22. Annuity Payments....................... Annuity Income Options
(P); Annuity Payments;
Annuity Unit Values
23. Financial Statements................... Depositor: Other
Information - Financial
Statements (P)
Registrant: Financial
Statements
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE> 4
[POLARIS LOGO]
P R O F I L E This profile is a summary of some of the
more important points that you
should know and consider before purchasing the
Polaris Variable Annuity. The sections in this profile
May 14, 1997 correspond to sections in the accompanying prospectus which
discuss the topics in more detail. The annuity is more fully
described in the prospectus. Please read the prospectus
carefully.
1. THE POLARIS VARIABLE ANNUITY
The Polaris Variable Annuity is a contract between you and Anchor National
Life Insurance Company. It is designed to help you invest on a tax-deferred
basis and meet long-term financial goals, such as retirement funding. Tax
deferral means all your money, including the amount you would otherwise pay
in current income taxes, remains in your contract to generate more earnings.
Your money could grow faster than it would in a comparable taxable
investment.
Polaris offers a diverse selection of money managers and investment options.
You may divide your money among any or all of our 25 variable investment
portfolios and 5 fixed investment options. Your investment is not
guaranteed. The value of your Polaris contract can fluctuate up or down,
based on the performance of the underlying investments you select, and you
may experience a loss.
The variable investment portfolios offer professionally managed investment
choices with goals ranging from capital preservation to aggressive growth.
Your choices for the various investment options are found on the next page.
The contract also offers 5 fixed investment options, for different time
periods and each with a different interest rate that is guaranteed by Anchor
National.
Like most annuities, the contract has an Accumulation Phase and an Income
Phase. During the Accumulation Phase, you invest money in your contract.
Your earnings are based on the investment performance of the variable
investment portfolios to which your money is allocated and/or the interest
rate 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 a combination of both, depending
on the annuity income option you select. 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.
2. ANNUITY INCOME OPTIONS
You can select from one of five annuity income options:
(1) payments for your lifetime;
(2) payments for your lifetime and your survivor's lifetime;
(3) payments for your lifetime and your survivor's lifetime, but for not
less than 10 years;
(4) payments for your lifetime, but for not less than 10 or 20 years; and
(5) payments for a specified period of 5 to 30 years.
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 annuity option. If your contract is part of a non-qualified retirement
plan (one that is established with after tax dollars), payments during the
Income Phase are considered partly a return of your original investment. The
"original investment" part of each payment is not taxable as income. For
contracts which are part of a qualified retirement plan using before tax
dollars, the entire payment is taxable as income.
3. PURCHASING A POLARIS VARIABLE
ANNUITY CONTRACT
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 $5,000 and subsequent amounts of $500 or more may be
added to your contract at any time during the Accumulation Phase. For
Qualified contracts, the minimum initial investment is $2,000 and subsequent
amounts of $250 or more may be added to your contract at any time during the
Accumulation Phase.
<PAGE> 5
4. INVESTMENT OPTIONS
You may allocate money to the following variable investment portfolios of
the Anchor Series Trust and/or the SunAmerica Series Trust:
ANCHOR SERIES TRUST
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Capital Appreciation Portfolio
- Growth Portfolio
- Natural Resources Portfolio
- Government and Quality Bond Portfolio
SUNAMERICA SERIES TRUST
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Global Equities Portfolio
- Alliance Growth Portfolio
- Growth-Income Portfolio
MANAGED BY DAVIS SELECTED ADVISERS, L.P.
- Venture Value Portfolio
- Real Estate Portfolio
MANAGED BY FEDERATED INVESTORS
- Federated Value Portfolio
- Utility Portfolio
- Corporate Bond Portfolio
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT/
GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
- Asset Allocation Portfolio
- Global Bond Portfolio
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT INC.
- International Diversified Equities Portfolio
- Worldwide High Income Portfolio
MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
- Growth/Phoenix Investment Counsel Portfolio
- Balanced/Phoenix Investment Counsel Portfolio
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
- Putnam Growth Portfolio
- International Growth and Income Portfolio
- Emerging Markets Portfolio
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio
- SunAmerica Balanced Portfolio
- High-Yield Bond Portfolio
- Cash Management Portfolio
You may also allocate money to the 1, 3, 5, 7 and 10 year fixed investment
options. The interest rate may differ from time to time but will never be
less than 3%. Once established, the rate will not change during the selected
period. Your contract value will be adjusted up or down for withdrawals or
transfers from the 3, 5, 7 and 10 year fixed investment options prior to the
end of the selected period.
5. EXPENSES
Each year, we deduct a $35 contract maintenance fee from your contract. This
fee is currently waived if the value of your contract is at least $50,000.
We also deduct insurance charges which equal 1.52% annually of the average
daily value of your contract allocated to the variable portfolios. The
insurance charges include: Mortality and Expense Risk, 1.37%, and
Distribution Expense, .15%.
As with other professionally managed investments, there are also investment
charges imposed on contracts with money allocated to the variable
portfolios, which are estimated to range from .62% to 2.00%.
If you take money out in excess of the amount allowed for in your contract,
you may be assessed a withdrawal charge which is a percentage of the money
you withdraw. The percentage declines with each year the money is in the
contract as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------
YEAR 1 2 3 4 5 6 7 8+
---------------------------------------------------
WITHDRAWAL
CHARGE 7% 6% 5% 4% 3% 2% 1% 0%
---------------------------------------------------
</TABLE>
After your first 15 free transfers, a $25 transfer fee will apply to each
subsequent transfer.
The following chart is designed to help you understand the charges in your
contract. The column "Total Annual Charges" shows the total of the 1.52%
insurance charges, the $35 contract maintenance fee and the investment
charges for each variable portfolio. We converted the contract maintenance
fee to a percentage using the current average contract size of $55,000. The
actual impact of this charge on your contract may differ from this
percentage.
The next two columns show two examples of the charges you would pay under
the contract. The examples assume that you invested $1,000 in a contract
which earns 5% annually and that you withdraw your money: (1) at the end of
year 1, and (2) at the end of year 10.
<PAGE> 6
<TABLE>
<CAPTION>
LOGO
- -----------------------------------------------------------------------------------------------------------------
EXAMPLES:
TOTAL ANNUAL TOTAL ANNUAL TOTAL EXPENSES TOTAL EXPENSES
INSURANCE INVESTMENT TOTAL ANNUAL AT END OF AT END OF
ANCHOR SERIES TRUST PORTFOLIO CHARGES CHARGES CHARGES 1 YEAR 10 YEARS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Appreciation 1.58% .75% 2.33% $ 94 $273
Growth 1.58% .81% 2.39% $ 94 $273
Natural Resources 1.58% .94% 2.52% $ 96 $286
Government and Quality Bond 1.58% .71% 2.29% $ 93 $263
- -----------------------------------------------------------------------------------------------------------------
SUNAMERICA SERIES TRUST PORTFOLIO
Emerging Markets 1.58% 2.00% 3.58% $106 $385
International Diversified
Equities 1.58% 1.59% 3.17% $102 $348
Global Equities 1.58% 1.03% 2.61% $ 96 $295
International Growth and
Income 1.58% 1.70% 3.28% $103 $358
Aggressive Growth 1.58% 1.05% 2.63% $ 97 $297
Real Estate 1.58% 1.15% 2.73% $ 98 $306
Putnam Growth* 1.58% .90% 2.48% $ 95 $282
Growth/Phoenix 1.58% .74% 2.32% $ 94 $266
Alliance Growth 1.58% .71% 2.29% $ 93 $263
Venture Value 1.58% .85% 2.43% $ 95 $277
Federated Value 1.58% 1.05% 2.63% $ 97 $297
Growth-Income 1.58% .72% 2.30% $ 93 $264
Utility 1.58% 1.05% 2.63% $ 97 $297
Asset Allocation 1.58% .74% 2.32% $ 94 $266
Balanced/Phoenix 1.58% .84% 2.42% $ 95 $276
SunAmerica Balanced 1.58% 1.00% 2.58% $ 96 $292
Worldwide High Income 1.58% 1.18% 2.76% $ 98 $309
High-Yield Bond 1.58% .77% 2.35% $ 94 $269
Corporate Bond 1.58% .97% 2.55% $ 96 $289
Global Bond 1.58% .89% 2.47% $ 95 $282
Cash Management 1.58% .62% 2.20% $ 92 $254
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
*Formerly named Provident Growth.
For more detailed information, see the Fee Tables and Examples in the
prospectus.
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
like an IRA), all amounts are taxable when they are withdrawn.
When you begin taking distributions or withdrawals from your contract,
earnings are considered to be taken out first and will be taxed at your
ordinary income rate. You may be subject to a 10% IRS tax penalty for
distributions or withdrawals before age 59 1/2.
7. ACCESS TO YOUR MONEY
Earnings may be withdrawn at any time free of a withdrawal charge. After the
first year, the first withdrawal of the year will be free of a withdrawal
charge if it does not exceed the greater of: (1) earnings in your contract
as of the date you make the withdrawal or (2) 10% of the money you have
invested for at least one year and not yet withdrawn, less any withdrawals
made during the year.
Although amounts withdrawn using the 10% provision may reduce principal for
purposes of calculating amounts available for future withdrawals of
earnings, they do not reduce the amount of money you invested for purposes
of calculating the withdrawal charge if you withdraw your entire contract
value.
Withdrawals in excess of these limits will be assessed a withdrawal charge.
Withdrawals may be made from your contract in the amount of $1,000 or more.
You may request a withdrawal in writing or by establishing systematic
withdrawals. Under systematic withdrawals, the minimum withdrawal amount is
$250.
If you withdraw your entire contract value, you will not receive the benefit
of any free withdrawal amount. After your money has been in the contract for
seven full years, there are no withdrawal charges on that portion of the
money that you have invested for at least seven full years. Of course, you
may have to pay income tax and a 10% IRS tax penalty may apply if you are
under age 59 1/2. Additionally, withdrawal charges are not assessed when a
death benefit is paid.
8. PERFORMANCE
The value of your annuity will fluctuate depending upon the investment
performance of the portfolio(s) you choose.
The following chart shows total returns for each portfolio for the time
periods shown. These numbers reflect the insurance charges, the contract
maintenance fee and the investment charges. Withdrawals charges are not
reflected in the chart. Past performance is not a guarantee of future
results.
<PAGE> 7
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
ANCHOR SERIES CALENDAR YEAR
TRUST PORTFOLIO 1996 1995 1994 1993
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Appreciation 23.17% 32.41% (5.60)% 13.72%
Growth 23.06% 24.30% (6.27)% 11.22%
Natural Resources 12.20% 15.45% (5.93)% --
Gov't and Quality
Bond 1.35% 17.49% (4.44)% 3.68%
- ------------------------------------------------------------------
SUNAMERICA SERIES
TRUST PORTFOLIO
Emerging Markets -- -- -- --
Int'l Diversified
Equities 7.59% 8.52% (3.68)% --
Global Equities 12.37% 17.33% (1.96)% 15.93%
Int'l Growth and
Income -- -- -- --
Aggressive Growth 4.33% -- -- --
Real Estate -- -- -- --
Putnam Growth* 18.46% 22.83% (3.25)% --
Growth/Phoenix 14.12% 30.12% (9.52)% 8.91%
Alliance Growth 27.10% 41.58% (3.76)% 9.93%
Venture Value 22.86% 35.36% (1.23)% --
Federated Value 7.32% -- -- --
Growth-Income 22.11% 31.95% (4.20)% 6.65%
Utility 8.26% -- -- --
Asset Allocation 17.05% 24.33% (1.80)% 5.11%
Balanced/Phoenix 8.18% 25.51% (0.58)% --
SunAmerica Balanced 9.39% -- -- --
Worldwide High Income 23.38% 19.04% (2.39)% --
High-Yield Bond 12.71% 12.44% (6.98)% 11.35%
Corporate Bond 2.86% 15.82% (4.73)% 1.64%
Global Bond 7.58% 15.83% (6.27)% 4.22%
Cash Management 3.31% 3.85% 2.12% 0.83%
- ------------------------------------------------------------------
</TABLE>
*Formerly named Provident Growth.
Inception date for each portfolio varies.
9. DEATH BENEFIT
If you should die during the Accumulation Phase, your beneficiary will
receive a death benefit. The death benefit is the greater of:
(1) the value of your contract, or
(2) the money you put in less any withdrawals, all compounded at 4%
annually (3% if age 70 or older at time of issue), or
(3) the value of your contract on the seventh contract anniversary
less any withdrawals plus any additional money you put in since
the seventh anniversary, all compounded at 4% annually (3% if age
70 or older at time of issue).
10. OTHER INFORMATION
FREE LOOK: You may cancel your contract within ten days (or longer if
required by your state) by mailing it to our Annuity Service Center. Your
contract will be treated as void on the date we receive it and we will
pay you an amount equal to the value of your contract (unless otherwise
required by state law). Its value may be more or less than the money you
initially invested.
ASSET ALLOCATION REBALANCING: If selected by you, this program seeks to
keep your investment in line with your goals. We will maintain your
specified allocation mix in the variable investment portfolios and the
1-year fixed investment option by readjusting your money on a calendar
quarter, semiannual or annual basis.
SYSTEMATIC WITHDRAWAL PROGRAM: If selected by you, this program allows
you to receive either monthly, quarterly, semiannual or annual checks
during the Accumulation Phase. Systematic withdrawals may also be
electronically wired to your bank account. Of course, withdrawals may be
taxable and a 10% IRS tax penalty may apply if you are under age 59 1/2.
PRINCIPAL ADVANTAGE: If selected by you, this program allows you to
obtain growth potential without any market risk to your principal. We
will guarantee that the portion of your money allocated to the 1, 3, 5, 7
or 10 year fixed investment options will grow to equal your principal
investment when it is allocated in accordance with the program.
DOLLAR COST AVERAGING: If selected by you, this program allows you to
invest gradually in the equity and bond portfolios from any of the
variable investment portfolios or the 1-year fixed investment option.
AUTOMATIC PAYMENT PLAN: You can add to your contract directly from your
bank account with as little as $20 per month.
CONFIRMATIONS AND QUARTERLY STATEMENTS: You will receive a confirmation
of each transaction within your contract. On a quarterly basis, you will
receive a complete statement of your transactions over the past quarter
and a summary of your account values.
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
Telephone Number: (800) 445-SUN2
If money accompanies your correspondence, you should direct it to:
Anchor National Life Insurance Company
P.O. Box 100330
Pasadena, California 91189-0001
<PAGE> 8
[POLARIS LOGO]
PROSPECTUS
MAY 14, 1997
<TABLE>
<S> <C> <C>
Please read this prospectus FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACTS
carefully before investing and issued by
keep it for future reference. ANCHOR NATIONAL LIFE INSURANCE COMPANY
It contains important in connection with
information about the Polaris VARIABLE SEPARATE ACCOUNT
Variable Annuity. The annuity has 30 investment choices -- 5 fixed investment options
and 25 variable investment portfolios listed below. The 5 fixed
To learn more about the annuity investment options include specified periods of 1, 3, 5, 7 and 10
offered by this prospectus, you years. The 25 variable investment portfolios are part of the Anchor
can obtain a copy of the Series Trust or the SunAmerica Series Trust.
Statement of Additional ANCHOR SERIES TRUST:
Information ("SAI") dated May MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
14, 1997. The SAI has been - Capital Appreciation Portfolio
filed with the Securities and - Growth Portfolio
Exchange Commission ("SEC") and - Natural Resources Portfolio
is incorporated by reference - Government and Quality Bond Portfolio
into this prospectus. The Table SUNAMERICA SERIES TRUST:
of Contents of the SAI appears MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
on page 30 of this prospectus. - Global Equities Portfolio
For a free copy of the SAI, - Alliance Growth Portfolio
call us at (800) 445-SUN2 or - Growth-Income Portfolio
write to us at our Annuity MANAGED BY DAVIS SELECTED ADVISERS, L.P.
Service Center, P.O. Box 54299, - Venture Value Portfolio
Los Angeles, California - Real Estate Portfolio
90054-0299. MANAGED BY FEDERATED INVESTORS
- Federated Value Portfolio
ANNUITIES INVOLVE RISKS, - Utility Portfolio
INCLUDING POSSIBLE LOSS OF - Corporate Bond Portfolio
PRINCIPAL, AND ARE NOT A MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT/
DEPOSIT OR OBLIGATION OF, OR GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
GUARANTEED OR ENDORSED BY, ANY - Asset Allocation Portfolio
BANK. THEY ARE NOT FEDERALLY - Global Bond Portfolio
INSURED BY THE FEDERAL DEPOSIT MANAGED BY MORGAN STANLEY ASSET MANAGEMENT INC.
INSURANCE CORPORATION, THE - International Diversified Equities Portfolio
FEDERAL RESERVE BOARD OR ANY - Worldwide High Income Portfolio
OTHER AGENCY. MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
- Growth/Phoenix Investment Counsel Portfolio
- Balanced/Phoenix Investment Counsel Portfolio
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
- Putnam Growth Portfolio
- International Growth and Income Portfolio
- Emerging Markets Portfolio
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio
- SunAmerica Balanced Portfolio
- High-Yield Bond Portfolio
- Cash Management Portfolio
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 9
=============================================================
TABLE OF CONTENTS
=============================================================
<TABLE>
<S> <C> <C>
GLOSSARY.......................................... 2
FEE TABLES........................................ 3
Owner Transaction Expenses.................. 3
Annual Separate Account Expenses............ 3
Portfolio Expenses.......................... 3
EXAMPLES.......................................... 4
1. THE POLARIS VARIABLE ANNUITY................ 6
2. ANNUITY INCOME OPTIONS...................... 6
Allocation of Annuity Payments.............. 7
Annuity Payments............................ 7
Transfers During the Income Phase........... 7
Deferment of Payments....................... 7
3. PURCHASING A POLARIS VARIABLE ANNUITY....... 7
Allocation of Purchase Payments............. 7
Accumulation Units.......................... 8
Free Look................................... 8
4. INVESTMENT OPTIONS.......................... 8
Variable Investment Options................. 8
Anchor Series Trust..................... 8
SunAmerica Series Trust................. 8
Fixed Investment Options.................... 9
Market Value Adjustment................. 9
Transfers During the Accumulation Phase..... 9
Dollar Cost Averaging Program............... 10
Asset Allocation Rebalancing Program........ 10
Principal Advantage Program................. 10
Voting Rights............................... 11
Substitution................................ 11
5. EXPENSES.................................... 11
Insurance Charges........................... 11
Mortality and Expense Risk Charge....... 11
Distribution Expense Charge............. 11
Withdrawal Charges.......................... 11
Investment Charges.......................... 11
Contract Maintenance Fee.................... 11
Transfer Fee................................ 12
Premium Taxes............................... 12
Income Taxes................................ 12
Reduction or Elimination of Certain Charges. 12
6. TAXES....................................... 12
Annuity Contracts in General................ 12
Tax Treatment of Distributions--
Non-qualified Contracts..................... 12
Tax Treatment of Distributions--
Qualified Contracts......................... 13
Diversification............................. 13
7. ACCESS TO YOUR MONEY........................ 13
Systematic Withdrawal Program............... 14
Nursing Home Waiver......................... 14
Minimum Contract Value...................... 14
8. PERFORMANCE................................. 14
9. DEATH BENEFIT............................... 14
10. OTHER INFORMATION........................... 15
Anchor National............................. 15
The Separate Account........................ 15
The General Account......................... 15
Distribution................................ 15
Administration.............................. 16
Legal Proceedings........................... 16
Custodian................................... 16
Additional Information...................... 16
Selected Consolidated Financial Data........ 17
Management Discussion and Analysis.......... 18
Properties.................................. 27
Directors and Executive Officers............ 28
Executive Compensation...................... 29
Security Ownership of Owners and Management. 29
State Regulation............................ 29
Independent Accountants..................... 30
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL
INFORMATION....................................... 30
FINANCIAL STATEMENTS.............................. 30
APPENDIX A -- CONDENSED FINANCIAL INFORMATION.....
A-1
APPENDIX B -- MARKET VALUE ADJUSTMENT............. A-2
APPENDIX C -- PREMIUM TAXES....................... A-3
</TABLE>
================================================================================
GLOSSARY
================================================================================
We have capitalized some of the technical terms used in this prospectus. To help
you understand these terms, we have defined them in this glossary.
ACCUMULATION PHASE - The period during which you invest money in your contract.
ACCUMULATION UNITS - A measurement we use to calculate the value of the variable
portion of your contract during the Accumulation Phase.
ANNUITANT(S) - The person(s) on whose life (lives) we base 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.
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").
PORTFOLIO(S) - The variable investment options available under the contract.
Each Portfolio has its own investment objective and is invested in the
underlying investments of the Anchor Series Trust or the SunAmerica Series
Trust.
PURCHASE PAYMENTS - The money you give us to buy the contract, as well as any
additional money you give us to invest in the contract after you own it.
QUALIFIED (CONTRACT) - A contract purchased with pretax dollars. These contracts
are generally purchased under a pension plan, specially sponsored program or
individual retirement account ("IRA").
TRUSTS - Refers to the Anchor Series Trust and the SunAmerica Series Trust
collectively.
2
<PAGE> 10
================================================================================
FEE TABLES
================================================================================
OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C> <C>
WITHDRAWAL CHARGE (AS A PERCENTAGE OF EACH PURCHASE PAYMENT)
Year 1........... 7% Year 5............... 3%
Year 2........... 6% Year 6............... 2%
Year 3........... 5% Year 7............... 1%
Year 4........... 4% Year 8+.............. 0%
TRANSFER FEE........... No charge for first 15 transfers
each year; thereafter, fee is $25
($10 in Pennsylvania and Texas)
CONTRACT MAINTENANCE FEE*.... $35 ($30 in North Dakota
and Utah)
*waived if contract value is $50,000 or more
</TABLE>
ANNUAL SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF DAILY NET ASSET VALUE)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge............... 1.37%
Distribution Expense Charge..................... 0.15%
-----
TOTAL SEPARATE ACCOUNT EXPENSES............. 1.52%
=====
</TABLE>
PORTFOLIO EXPENSES
ANCHOR SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S TWELVE-MONTH PERIOD ENDED
NOVEMBER 30, 1996)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
<S> <C> <C> <C>
====================================================================================================
Capital Appreciation .67% .08% .75%*
----------------------------------------------------------------------------------------------------
Growth .73% .08% .81%*
----------------------------------------------------------------------------------------------------
Natural Resources .75% .19% .94%*
----------------------------------------------------------------------------------------------------
Government and Quality Bond .62% .09% .71%*
====================================================================================================
</TABLE>
SUNAMERICA SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S FISCAL YEAR ENDED
NOVEMBER 30, 1996)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
<S> <C> <C> <C>
====================================================================================================
Emerging Markets** 1.25% .75% 2.00%
----------------------------------------------------------------------------------------------------
International Diversified Equities 1.00% .59% 1.59%
----------------------------------------------------------------------------------------------------
Global Equities .80% .23% 1.03%
----------------------------------------------------------------------------------------------------
International Growth and Income** 1.00% .70% 1.70%
----------------------------------------------------------------------------------------------------
Aggressive Growth .75% .30% 1.05%*
----------------------------------------------------------------------------------------------------
Real Estate** .80% .35% 1.15%
----------------------------------------------------------------------------------------------------
Putnam Growth*** .82% .08% .90%
----------------------------------------------------------------------------------------------------
Growth/Phoenix .66% .08% .74%
----------------------------------------------------------------------------------------------------
Alliance Growth .64% .07% .71%
----------------------------------------------------------------------------------------------------
Venture Value .77% .08% .85%
----------------------------------------------------------------------------------------------------
Federated Value .75% .30% 1.05%*
----------------------------------------------------------------------------------------------------
Growth-Income .64% .08% .72%
----------------------------------------------------------------------------------------------------
Utility .75% .30% 1.05%*
----------------------------------------------------------------------------------------------------
Asset Allocation .65% .09% .74%
----------------------------------------------------------------------------------------------------
Balanced/Phoenix .70% .14% .84%
----------------------------------------------------------------------------------------------------
SunAmerica Balanced .70% .30% 1.00%*
----------------------------------------------------------------------------------------------------
Worldwide High Income 1.00% .18% 1.18%
----------------------------------------------------------------------------------------------------
High-Yield Bond .68% .09% .77%
----------------------------------------------------------------------------------------------------
Corporate Bond .70% .27% .97%
----------------------------------------------------------------------------------------------------
Global Bond .73% .16% .89%
----------------------------------------------------------------------------------------------------
Cash Management .54% .08% .62%
====================================================================================================
</TABLE>
* Annualized
** As of the date of this prospectus, the sale of contracts offering the
Emerging Markets, Real Estate and International Growth and Income
Portfolios had not begun. The percentages are based on estimated amounts
for the current fiscal year.
*** As of April 16, 1997, the Provident Growth Portfolio was renamed the
Putnam Growth Portfolio, managed by Putnam Investment Management, Inc.
The expenses shown here are those of the former Provident Growth
Portfolio managed by Provident Investment Counsel.
THE ABOVE PORTFOLIO EXPENSES WERE PROVIDED BY THE TRUSTS. WE HAVE NOT
INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
3
<PAGE> 11
================================================================================
EXAMPLES
================================================================================
You will pay the following expenses on a $1,000 investment in each Portfolio,
assuming a 5% annual return on assets and:
(a) surrender of the contract at the end of the stated time period;
(b) if the contract is not surrendered or annuitized.
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
========================================================================================================
Capital Appreciation (a) $ 94 (a) $123 (a) $155 (a) $267
(b) $ 24 (b) $ 73 (b) $125 (b) $267
--------------------------------------------------------------------------------------------------------
Growth (a) $ 94 (a) $125 (a) $158 (a) $273
(b) $ 24 (b) $ 75 (b) $128 (b) $273
--------------------------------------------------------------------------------------------------------
Natural Resources (a) $ 96 (a) $129 (a) $164 (a) $286
(b) $ 26 (b) $ 79 (b) $134 (b) $286
--------------------------------------------------------------------------------------------------------
Government and Quality Bond (a) $ 93 (a) $122 (a) $153 (a) $263
(b) $ 23 (b) $ 72 (b) $123 (b) $263
--------------------------------------------------------------------------------------------------------
Emerging Markets (a) $106 (a) $160 (a) $216 (a) $385
(b) $ 36 (b) $110 (b) $186 (b) $385
--------------------------------------------------------------------------------------------------------
International Diversified Equities (a) $102 (a) $148 (a) $196 (a) $348
(b) $ 32 (b) $ 98 (b) $166 (b) $348
--------------------------------------------------------------------------------------------------------
Global Equities (a) $ 96 (a) $131 (a) $169 (a) $295
(b) $ 26 (b) $ 81 (b) $139 (b) $295
--------------------------------------------------------------------------------------------------------
International Growth and Income (a) $103 (a) $151 (a) $201 (a) $358
(b) $ 33 (b) $101 (b) $171 (b) $358
--------------------------------------------------------------------------------------------------------
Aggressive Growth (a) $ 97 (a) $132 (a) $170 (a) $297
(b) $ 27 (b) $ 82 (b) $140 (b) $297
--------------------------------------------------------------------------------------------------------
Real Estate (a) $ 98 (a) $135 (a) $175 (a) $306
(b) $ 28 (b) $ 85 (b) $145 (b) $306
--------------------------------------------------------------------------------------------------------
Putnam Growth (a) $ 95 (a) $127 (a) $162 (a) $282
(b) $ 25 (b) $ 77 (b) $133 (b) $282
--------------------------------------------------------------------------------------------------------
Growth/Phoenix (a) $ 94 (a) $123 (a) $154 (a) $266
(b) $ 24 (b) $ 73 (b) $124 (b) $266
--------------------------------------------------------------------------------------------------------
Alliance Growth (a) $ 93 (a) $122 (a) $153 (a) $263
(b) $ 23 (b) $ 72 (b) $123 (b) $263
--------------------------------------------------------------------------------------------------------
Venture Value (a) $ 95 (a) $126 (a) $160 (a) $277
(b) $ 25 (b) $ 76 (b) $130 (b) $277
--------------------------------------------------------------------------------------------------------
Federated Value (a) $ 97 (a) $132 (a) $170 (a) $297
(b) $ 27 (b) $ 82 (b) $140 (b) $297
--------------------------------------------------------------------------------------------------------
Growth-Income (a) $ 93 (a) $122 (a) $153 (a) $264
(b) $ 23 (b) $ 72 (b) $123 (b) $264
--------------------------------------------------------------------------------------------------------
Utility (a) $ 97 (a) $132 (a) $170 (a) $297
(b) $ 27 (b) $ 82 (b) $140 (b) $297
--------------------------------------------------------------------------------------------------------
Asset Allocation (a) $ 94 (a) $123 (a) $154 (a) $266
(b) $ 24 (b) $ 73 (b) $124 (b) $266
--------------------------------------------------------------------------------------------------------
Balanced/Phoenix (a) $ 95 (a) $126 (a) $159 (a) $276
(b) $ 25 (b) $ 76 (b) $129 (b) $276
--------------------------------------------------------------------------------------------------------
SunAmerica Balanced (a) $ 96 (a) $130 (a) $167 (a) $292
(b) $ 26 (b) $ 80 (b) $137 (b) $292
--------------------------------------------------------------------------------------------------------
Worldwide High Income (a) $ 98 (a) $136 (a) $176 (a) $309
(b) $ 28 (b) $ 86 (b) $146 (b) $309
--------------------------------------------------------------------------------------------------------
High-Yield Bond (a) $ 94 (a) $123 (a) $156 (a) $269
(b) $ 24 (b) $ 73 (b) $126 (b) $269
--------------------------------------------------------------------------------------------------------
Corporate Bond (a) $ 96 (a) $129 (a) $166 (a) $289
(b) $ 26 (b) $ 79 (b) $136 (b) $289
--------------------------------------------------------------------------------------------------------
Global Bond (a) $ 95 (a) $127 (a) $162 (a) $282
(b) $ 25 (b) $ 77 (b) $132 (b) $282
--------------------------------------------------------------------------------------------------------
Cash Management (a) $ 92 (a) $119 (a) $148 (a) $254
(b) $ 22 (b) $ 69 (b) $118 (b) $254
========================================================================================================
</TABLE>
4
<PAGE> 12
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you would
incur directly and indirectly by investing in the contract.
2. For certain Portfolios, the adviser, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or reimburse certain expenses, if
necessary, to keep annual operating expenses at or below the lesser of the
maximum allowed by any applicable state expense limitations or the following
percentages of each Portfolio's average net assets: Aggressive Growth
(1.05%); Federated Value (1.05%); SunAmerica Balanced (1.00%); and Utility
(1.05%). The adviser also may voluntarily waive or reimburse additional
amounts to increase a Portfolio's investment return. All waivers and/or
reimbursements may be terminated at any time. Furthermore, the adviser may
recoup any waivers or reimbursements within the following two years,
provided that the Portfolio is able to make such payment and remain in
compliance with the foregoing expense limitations.
3. The Examples assume that no transfer fees were imposed. Premium taxes are
not reflected.
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 ARE CONTAINED IN
APPENDIX A -- CONDENSED FINANCIAL INFORMATION
5
<PAGE> 13
================================================================================
1. THE POLARIS VARIABLE ANNUITY
================================================================================
An annuity is a contract between you, as the owner, and an insurance company.
The contract provides tax deferral for your earnings, as well as a death benefit
and a guaranteed income in the form of annuity payments beginning on a date you
select. Until you decide to begin receiving annuity payments, your annuity is in
the Accumulation Phase. Once you begin receiving annuity payments, your contract
switches to the Income Phase. If you die during the Accumulation Phase, the
insurance company guarantees a death benefit to your Beneficiary.
The Polaris Variable Annuity Contract is issued by Anchor National Life
Insurance Company ("Anchor National"), a stock life insurance company organized
under the laws of the state of Arizona. Its principal business address is 1
SunAmerica Center, Los Angeles, California 90067-6022. Anchor National conducts
life insurance and annuity business in the District of Columbia and in all
states except New York. Anchor National is an indirect wholly owned subsidiary
of SunAmerica Inc., a Maryland corporation.
During the Accumulation Phase, the value of your annuity benefits from tax
deferral. This means your earnings accumulate on a tax-deferred basis until you
take money out of your contract. The Income Phase occurs if you decide to
receive annuity payments. You select the date on which annuity payments are to
begin.
The contract is called a variable annuity because you can choose among 25
variable investment Portfolios. Depending upon market conditions, you can make
or lose money in any of these Portfolios. If you allocate money to the
Portfolios, the amount of money you are able to accumulate in your contract
during the Accumulation Phase depends upon the investment performance of the
Portfolio(s) you select. The amount of the annuity payments you receive during
the Income Phase from the variable portion of your contract also depends upon
the investment performance of the Portfolios you select for the Income Phase.
The contract also contains 5 fixed investment options. Your money will earn
interest at the rate set by Anchor National. The interest rate is guaranteed by
Anchor National for the time you agree to leave your money in the fixed
investment option. We currently offer fixed investment options for 1, 3, 5, 7
and 10 year periods. If you allocate money to the fixed investment options, the
amount of money you are able to accumulate in your contract during the
Accumulation Phase depends upon the total interest credited to your contract. An
adjustment to your contract will apply to withdrawals or transfers from the 3,
5, 7 and 10 year fixed investment options prior to the end of the selected
period. The amount of annuity payments you receive during the Income Phase from
the fixed portion of your contract will remain level for the entire Income
Phase.
================================================================================
2. ANNUITY INCOME OPTIONS
================================================================================
When you switch to the Income Phase, you will receive regular income payments
under the contract. Annuity payments will be made on a monthly basis unless you
request in writing that payments be made on a quarterly, semiannual or annual
basis. You can choose to have your annuity payments sent to you by check or
electronically wired to your bank.
You select the date on which annuity payments are to begin, which must be the
first day of a month and must be at least two years after the date your contract
is issued. We call this the Annuity Date. You may change your Annuity Date at
least seven days prior to the date that your payments are to begin. However,
annuity payments must begin by your 90th birthday. If no Annuity Date is
selected, annuity payments will begin on your 90th birthday. If the Annuity Date
is past your 85th birthday, it is possible that the contract would not be
treated as an annuity and you may incur adverse tax consequences.
The Annuitant is the person on whose life annuity payments are based. You may
change the Annuitant at any time prior to the Annuity Date if you are an
individual designated as the owner of the contract. You may also designate a
second person on whose life annuity payments are based. If the Annuitant dies
before the Annuity Date, you must notify us and designate a new Annuitant.
If you do not choose an annuity income option, annuity payments will be made in
accordance with option 4 (below) for 10 years. If the annuity payments are for
joint lives, then we will make payments in accordance with option 3. We may pay
the annuity in one lump sum if your contract is less than $5,000, where
permitted by state law. Likewise, if your annuity payments would be less than
$50 monthly, we have the right to change the frequency of your payment to be on
a quarterly, semiannual or annual basis so that your annuity payments are at
least $50. Annuity payments will be made to you unless you designate another
person to receive them. In that case, you must notify us in writing at least
thirty days before the Annuity Date. You will remain fully responsible for any
taxes related to the annuity payments.
The contract offers 5 annuity income options. Other annuity income options may
be available in the future.
OPTION 1 - LIFE INCOME
Under this option, we will make annuity payments as long as the Annuitant is
alive. Annuity payments stop when the Annuitant dies.
OPTION 2 - JOINT AND SURVIVOR ANNUITY
Under this option, we will make annuity payments as long as the Annuitant and a
designated second person are alive.
6
<PAGE> 14
Upon the death of either person, we will continue to make payments so long as
the survivor is alive. You choose the amount of the annuity payments to the
survivor, which can be equal to 100%, 66.66% or 50% of the full amount. Annuity
payments stop upon the death of the survivor.
OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY WITH 10
YEARS GUARANTEED
This option is similar to option 2 above, with the additional guarantee that
payments will be made for at least 10 years. If the Annuitant and designated
second person die before all guaranteed payments have been made, the rest will
be made to the Beneficiary.
OPTION 4 - LIFE ANNUITY WITH 10 OR 20 YEARS
GUARANTEED
This option is similar to option 1 above, with the additional guarantee that
payments will be made for at least 10 or 20 years, as selected by you. Under
this option, if the Annuitant dies before all guaranteed payments have been
made, the rest will be made to the Beneficiary.
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
Under this option, we will make annuity payments for any period of time from 5
to 30 years, as selected by you. However, the period must be for full 12-month
periods. Under this option, if the Annuitant dies before all guaranteed payments
have been made, the rest will be made to the Beneficiary. This option does not
contain an element of mortality risk. Therefore, you will not get the benefit of
the mortality component of the mortality and expense risk charge if this option
if selected.
ALLOCATION OF ANNUITY PAYMENTS
On the Annuity Date, if your money is invested in the fixed investment options,
your annuity payments will be fixed in amount. If your money is invested in the
variable Portfolios, your annuity payments will vary depending on the investment
performance of the Portfolios. If you have money in the fixed and variable
investment options, your annuity payments will be based on the investment
allocations. You may not convert between fixed and variable payments once
annuity payments begin.
ANNUITY PAYMENTS
If you choose to have any portion of your annuity payments come from the
variable Portfolios, the dollar amount of your payment will depend upon three
things: (1) the value of your contract in the Portfolios on the Annuity Date,
(2) the 3.5% assumed investment rate used in the annuity table for the contract
and (3) the performance of the Portfolios you selected. If the actual
performance exceeds the 3.5% assumed rate, your annuity payments will increase.
Similarly, if the actual rate is less than 3.5%, your annuity payments will
decrease. The SAI contains detailed information and sample calculations.
TRANSFERS DURING THE INCOME PHASE
Transfers are subject to the same limitations as transfers during the
Accumulation Phase. (See "Investment Options- Transfers During the Accumulation
Phase"). However, you can only make one transfer each month. You may not
transfer money from the fixed investment options to the variable Portfolios or
from the variable Portfolios to the fixed investment options during the Income
Phase. You may transfer money among the variable Portfolios.
DEFERMENT OF PAYMENTS
We may defer making fixed payments for up to six months, or less if required by
state law. Interest will be credited to you during the deferral period.
================================================================================
3. PURCHASING A POLARIS
VARIABLE ANNUITY
================================================================================
A Purchase Payment is 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. You can
purchase a Non-qualified contract with a minimum initial investment of $5,000
and a Qualified contract with a minimum initial investment of $2,000. The
maximum we accept is $1,000,000 without prior approval. Payments in amounts of
$500 or more may be added to your Non-qualified contract ($250 or more for
Qualified contracts) at any time during the Accumulation Phase. You can make
scheduled subsequent Purchase Payments of $20 or more per month by enrolling in
the Automatic Payment Plan.
We may refuse any Purchase Payment. In general, we will not issue a
Non-qualified contract to anyone who is older than age 80 or a Qualified
contract to anyone who is age 70 1/2 or older unless you can show that the
minimum distributions required by the IRS are being made.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, you will allocate your Purchase Payment to the
variable investment Portfolios and/or the fixed investment options. If you make
additional Purchase Payments, we will allocate them in the same way unless you
tell us otherwise.
Once we receive your Purchase Payment and a complete application at our
principal place of business, we will issue your contract and allocate your first
Purchase Payment within two business days. If you do not give us all the
necessary information, we will contact you to obtain it. If we are unable to
complete this process within five business days, we will either send back your
money or get your
7
<PAGE> 15
permission to keep it until we get all the necessary information.
ACCUMULATION UNITS
The value of the variable portion of your contract will go up or down depending
upon the investment performance of the Portfolio(s) you choose. 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.
The value of an Accumulation Unit is determined each day that the New York Stock
Exchange ("NYSE") is open. We calculate an Accumulation Unit value for each
Portfolio after the NYSE closes each day. We do this by:
(1) determining the total value of money invested in the particular
Portfolio;
(2) subtracting from that amount any insurance charges and any other
charges such as taxes; and
(3) dividing this amount by the number of outstanding Accumulation Units.
The value of an Accumulation Unit may go up or down from day to day. When you
make a Purchase Payment, we credit your contract with Accumulation Units. The
number of Accumulation Units credited is determined by dividing the amount of
the Purchase Payment allocated to a Portfolio by the value of the Accumulation
Unit for that Portfolio.
EXAMPLE:
We receive a $25,000 Purchase Payment from you on Wednesday. You want the
money to go to the Global Bond Portfolio. We determine that the value of an
Accumulation Unit for the Global Bond Portfolio is $11.10 when the NYSE
closes on Wednesday. We then divide $25,000 by $11.10 and credit your
contract on Wednesday night with 2252.252 Accumulation Units for the Global
Bond Portfolio.
FREE LOOK
If you change your mind about owning this contract, you can cancel it within ten
days after receiving it (or longer if required by your state) by mailing it back
to our Annuity Service Center at P.O. Box 54299, Los Angeles, California
90054-0299. You will receive back whatever your contract is worth on the day we
receive your request (unless otherwise required by your state). 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.
================================================================================
4. INVESTMENT OPTIONS
================================================================================
VARIABLE INVESTMENT OPTIONS
The contract offers 25 variable investment Portfolios which invest in shares of
the Anchor Series Trust or the SunAmerica Series Trust. These Portfolios are
listed below. Additional Portfolios may be available in the future. SunAmerica
Asset Management Corp., an indirect wholly owned subsidiary of SunAmerica Inc.,
is the investment adviser for both Trusts. The Trusts serve as underlying
investments for other variable contracts sold by Anchor National, its affiliate,
First SunAmerica Life Insurance Company, and other unaffiliated insurance
companies. Neither Anchor National nor the Trusts believes offering shares of
the Trusts in this manner will be disadvantageous to you. We will monitor the
Trusts for any conflicts that may arise between contract owners. Additional
information is contained in the prospectuses for the Trusts.
ANCHOR SERIES TRUST
Wellington Management Company, LLP serves as subadviser to the Anchor Series
Trust Portfolios. Anchor Series Trust has Portfolios in addition to those listed
below which are not available for investment under the contract. The 4 available
Portfolios are:
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Capital Appreciation Portfolio
- Growth Portfolio
- Natural Resources Portfolio
- Government and Quality Bond Portfolio
SUNAMERICA SERIES TRUST
Various subadvisers provide investment advice for the SunAmerica Series Trust
Portfolios. The 21 Portfolios and the subadvisers are:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Global Equities Portfolio
- Alliance Growth Portfolio
- Growth-Income Portfolio
MANAGED BY DAVIS SELECTED ADVISERS, L.P.
- Venture Value Portfolio
- Real Estate Portfolio
MANAGED BY FEDERATED INVESTORS
- Federated Value Portfolio
- Utility Portfolio
- Corporate Bond Portfolio
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT/ GOLDMAN SACHS ASSET MANAGEMENT
INTERNATIONAL
- Asset Allocation Portfolio
- Global Bond Portfolio
8
<PAGE> 16
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT INC.
- International Diversified Equities Portfolio
- Worldwide High Income Portfolio
MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
- Growth/Phoenix Investment Counsel Portfolio
- Balanced/Phoenix Investment Counsel Portfolio
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
- Putnam Growth Portfolio
- International Growth and Income Portfolio
- Emerging Markets Portfolio
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio
- SunAmerica Balanced Portfolio
- High-Yield Bond Portfolio
- Cash Management Portfolio
YOU SHOULD READ THE PROSPECTUSES FOR THE ANCHOR SERIES TRUST AND THE SUNAMERICA
SERIES TRUST CAREFULLY BEFORE INVESTING. THESE PROSPECTUSES CONTAIN DETAILED
INFORMATION ABOUT THE PORTFOLIOS AND ARE ATTACHED TO THIS PROSPECTUS.
FIXED INVESTMENT OPTIONS
The contract also offers 5 fixed investment options. We currently offer fixed
investment options for 1, 3, 5, 7 and 10 year periods. The fixed investment
options offer interest rates that are guaranteed by Anchor National. Interest
rates may differ from time to time due to changes in market conditions but will
not be less than 3%. The interest rates offered for a specified period for new
Purchase Payments may differ from the interest rates offered for money already
in the fixed investment option. Once an interest rate is established, it will
not change during the specified period. The interest rates are set at Anchor
National's sole discretion.
If you have money allocated to the 1, 3, 5, 7 or 10 year fixed investment
options, you can renew for another 1, 3, 5, 7 or 10 year period or put your
money into one or more of the variable Portfolios after the end of the specified
period. Unless you specify otherwise before the end of the period, we will keep
your money in the fixed investment option for the same period you previously
selected. You will receive the interest rate then in effect.
MARKET VALUE ADJUSTMENT
NOTE: THE FOLLOWING DISCUSSION APPLIES TO THE 3, 5, 7 AND 10 YEAR FIXED
INVESTMENT OPTIONS ONLY.
If you take your money out of the fixed investment options (whether by
withdrawal, transfer or annuitization) before the end of the specified period,
we will make an adjustment to the value of your contract. This adjustment,
called a "market value adjustment," can increase or decrease the value of your
contract. The market value adjustment reflects the differing interest rate
environments between the time you put your money into the fixed investment
option and the time you take your money out of the fixed investment option.
We calculate the market value adjustment by comparing the interest rate you
received on the money you put into the fixed investment option against the
interest rate we are currently offering to contract owners for the period of
time remaining in the specified period. If we do not offer an interest rate for
that period, the interest rate will be determined by linear interpolation
between interest rates for the two nearest periods that are available.
Generally, if interest rates have dropped between the time you put your money
into the fixed investment option and the time you take it out, there will be a
positive adjustment to the value of your contract. Conversely, if interest rates
have increased between the time you put your money into the fixed investment
option and the time you take it out, there will be a negative adjustment to the
value of your contract.
If the market value adjustment is negative, it will be assessed first against
any money remaining in the fixed investment option and then against the money
you take out of the fixed investment option. If the market value adjustment is
positive, it will be added to the amount you take out of the fixed account.
We will not assess a negative market value adjustment to the value of your
contract for money in the 1-year fixed investment option. The 1-year fixed
investment option is not registered under the Securities Act of 1933 and is not
subject to other provisions of the Investment Company Act of 1940.
Appendix B provides more information about how we calculate the market value
adjustment and gives some examples of the impact of the adjustment.
TRANSFERS DURING THE ACCUMULATION PHASE
You can transfer money among the Portfolios and the fixed investment options by
written request or by telephone. You can make fifteen transfers every year
without charge. We measure a year from the anniversary of the day we issued your
contract. If you make more than 15 transfers in a year, there is a $25 transfer
fee for each transfer thereafter ($10 in Pennsylvania and Texas).
The minimum amount you can transfer is $100. You cannot make a partial transfer
if the value of the Portfolio from which the transfer is being made would be
less than $100 after the transfer. Your request for transfer must clearly state
which investment options are involved and the amount. We will accept transfers
by telephone unless you specify otherwise on your contract application. We have
in
9
<PAGE> 17
place procedures to provide reasonable assurance that instructions given to us
by telephone are genuine. Thus, we disclaim all liability for any claim, loss or
expense from any error. If we fail to use such procedures, we may be liable for
any losses due to unauthorized or fraudulent instructions.
We reserve the right to modify, suspend or terminate the transfer provisions at
any time. We also reserve the right to waive the $100 minimum amount for Dollar
Cost Averaging and Asset Allocation Rebalancing.
DOLLAR COST AVERAGING PROGRAM
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount or percentage from one variable Portfolio or the 1-year fixed investment
option to any other variable Portfolio(s). You can also select to transfer the
entire value in a variable Portfolio or the 1-year fixed investment option in a
stated number of transfers. Transfers may be on a monthly, quarterly, semiannual
or annual basis. You can change the amount or frequency at any time by notifying
us in writing. The minimum amount that can be transferred is $100.
By allocating amounts on a regular schedule as opposed to allocating the total
amount at one particular time, you may be less susceptible to the impact of
market fluctuations. However, there is no assurance that you will make a greater
profit. You are still subject to loss in a declining market. Dollar cost
averaging involves continuous investment in securities regardless of fluctuating
price levels. You should consider your financial ability to continue to invest
through periods of fluctuating prices.
Transfers under the program are included as part of your 15 free transfers each
year. We reserve the right to modify, suspend or terminate this program at any
time.
EXAMPLE:
Assume that you want to gradually move $750 each quarter from the Cash
Management Portfolio to the Aggressive Growth Portfolio over six quarters.
You set up dollar cost averaging and purchase Accumulation Units at the
following values:
<TABLE>
<S> <C> <C>
- -----------------------------------------
ACCUMULATION UNITS
QUARTER UNIT PURCHASED
- -----------------------------------------
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 the 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.
ASSET ALLOCATION REBALANCING PROGRAM
Once your money has been allocated among the investment options, the earnings
may cause the percentage invested in each investment option to differ from your
original allocations. You can direct us to automatically rebalance your contract
to return to your original percentage allocations by selecting our Asset
Allocation Rebalancing Program. Rebalancing may be on a calendar quarter,
semiannual or annual basis. Rebalancing will occur on the last business day of
the month for the period you selected.
Transfers under the program are not counted against your 15 free transfers each
year. We reserve the right to modify, suspend or terminate this program at any
time.
EXAMPLE:
Assume that you want your initial Purchase Payment split between two
Portfolios. You want 50% in the Corporate Bond Portfolio and 50% in the
Growth Portfolio. Over the next calendar quarter, the bond market does very
well while the stock market performs poorly. At the end of the calendar
quarter, the Corporate Bond Portfolio now represents 60% of your holdings
because it has increased in value and the Growth Portfolio represents 40%
of your holdings. If you had chosen quarterly rebalancing, on the last day
of that quarter, we would sell some of your units in the Corporate Bond
Portfolio to bring its holdings back to 50% and use the money to buy more
units in the Growth Portfolio to increase those holdings to 50%.
PRINCIPAL ADVANTAGE PROGRAM
The Principal Advantage Program allows you to allocate Purchase Payments to a
fixed investment option and one or more variable Portfolios without any market
risk to your principal. You decide how much you want to invest and when you
would like a return of your principal. We will calculate how much of your
Purchase Payment needs to be allocated to the 1, 3, 5, 7 or 10 year fixed
investment options to ensure that this money will grow to equal the full amount
of your Purchase Payment by the end of the selected period. The rest of your
Purchase Payment may then be divided among the variable Portfolios where it has
the potential to achieve greater growth.
We reserve the right to modify, suspend or terminate this program at any time.
10
<PAGE> 18
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 7% interest rate, we will
allocate $62,275 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
$37,725 may be allocated among the variable Portfolios, as determined by
you, to provide opportunity for greater growth.
VOTING RIGHTS
Anchor National is the legal owner of the Trusts' shares. However, when a
Portfolio solicits proxies in conjunction with a vote of shareholders, we are
required to obtain from you instructions as to how to vote those shares. When we
receive those instructions, we will vote all of the shares we own in proportion
to those instructions. This will also include any shares that we own on our
behalf. Should we determine that we are no longer required to comply with the
above, we will vote the shares in our own right.
SUBSTITUTION
If any of the Portfolios you selected are no longer available, we may be
required to substitute shares of another Portfolio. We will seek prior approval
of the SEC and give you notice before doing this.
================================================================================
5. EXPENSES
================================================================================
There are charges and other expenses associated with the contract that will
reduce your investment return. These charges and expenses are described below.
INSURANCE CHARGES
Each day, we make a deduction for our insurance charges. This is done as part of
our calculation of the value of the Accumulation Units during the Accumulation
Phase and the Annuity Units during the Income Phase. The insurance charges
consist of the mortality and expense risk and the distribution expense charge.
MORTALITY AND EXPENSE RISK CHARGE
This charge is equal, on an annual basis, to 1.37% of the daily value of the
contract invested in a Portfolio. This charge is for our obligation to make
annuity payments, to provide the death benefits and for assuming the risk that
the current charges will be insufficient in the future to cover the cost of
administering the contract.
If the charges under the contract are not sufficient, we will bear the loss. We
will not increase this charge. We may use any profits from this charge to pay
for the costs of distributing the contract.
DISTRIBUTION EXPENSE CHARGE
This charge is equal, on an annual basis, to .15% of the daily value of the
contract invested in a Portfolio. This charge is for all expenses associated
with the distribution of the contract. These expenses include preparing the
contract, confirmations and statements, providing sales support, and maintaining
contract records. If this charge is not enough to cover the costs of
distributing the contract, we will bear the loss.
WITHDRAWAL CHARGES
Withdrawals in excess of your free withdrawal amount, as described in more
detail under "Access To Your Money," will be assessed a withdrawal charge. You
will not receive the benefit of any free withdrawal amount if you withdraw your
entire contract value.
We keep track of each Purchase Payment and assess a charge based on the length
of time a Purchase Payment is in your contract before it is withdrawn. After a
Purchase Payment has been in your contract for seven years, no withdrawal
charges are assessed on withdrawals of that Purchase Payment.
The withdrawal charge is assessed as a percentage of the Purchase Payment you
withdraw, which declines each year the Purchase Payment is in the contract as
follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------
YEAR 1 2 3 4 5 6 7 8+
- ---------------------------------------------------------------------
WITHDRAWAL 7% 6% 5% 4% 3% 2% 1% 0%
CHARGE
- ---------------------------------------------------------------------
</TABLE>
If the withdrawal is for only part of the contract, we will deduct the
withdrawal charge from the remaining value in your contract. For purposes of
calculating the withdrawal charge, we treat withdrawals as coming from the
oldest Purchase Payment first. However, for tax purposes, earnings are
considered withdrawn first.
We will not assess a withdrawal charge for money withdrawn to pay a death
benefit or for annuity payments during the Income Phase.
INVESTMENT CHARGES
If you have money allocated to the variable Portfolios, there are deductions
from and expenses paid out of the assets of the various Portfolios. These
investment charges are summarized in the Fee Tables. For more detailed
information, you should refer to the prospectuses for the Anchor Series Trust
and the SunAmerica Series Trust.
CONTRACT MAINTENANCE FEE
During the Accumulation Phase, we will deduct a $35 contract maintenance fee
($30 in North Dakota and Utah)
11
<PAGE> 19
from your contract on each contract anniversary. This fee is for expenses
incurred to establish and maintain your contract. This fee cannot be increased.
If you make a complete withdrawal from your contract, the entire contract
maintenance fee will be deducted prior to the withdrawal.
We will not deduct the contract maintenance fee if the value of your contract is
$50,000 or more when the deduction is to be made. We may discontinue this
practice at any time.
TRANSFER FEE
You can make 15 free transfers every year. We measure a year from the day we
issue your contract. If you make more than 15 transfers a year, we will deduct a
$25 transfer fee on each subsequent transfer ($10 in Pennsylvania and Texas).
PREMIUM TAXES
We are responsible for the payment of premium taxes, if any, charged by some
states and will make a deduction from your contract for them. These taxes are
due either when the contract is issued or when annuity payments begin. It is our
current practice not to charge you for these taxes until annuity payments begin
or a full surrender is made. In the future, we may discontinue this practice and
assess the tax when it is due or upon the payment of the death benefit.
Appendix C provides more information about the premium taxes assessed in each
state.
INCOME TAXES
Although we do not currently deduct any income taxes borne under your contract,
we reserve the right to do so in the future.
REDUCTION OR ELIMINATION OF CERTAIN CHARGES
We will reduce or eliminate the amount of certain insurance charges when the
contract is sold to groups of individuals under circumstances which reduce its
sales expenses. We will determine the eligibility of such groups by considering
the following factors: (1) the size of the group; (2) the total amount of
Purchase Payments we expect to receive from the group; (3) the nature of the
purchase and the persistency we expect in that group; (4) the purpose of the
purchase and whether that purpose makes it likely that expenses will be reduced;
and (5) any other circumstances which we believe to be relevant in determining
whether reduced sales expenses may be expected.
================================================================================
6. TAXES
================================================================================
NOTE: WE HAVE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL
DISCUSSION OF THE SUBJECT. IT IS NOT INTENDED AS TAX ADVICE. YOU ARE CAUTIONED
TO SEEK COMPETENT TAX ADVICE ABOUT YOUR OWN CIRCUMSTANCES. WE DO NOT GUARANTEE
THE TAX STATUS OF THE ANNUITY.
ANNUITY CONTRACTS IN GENERAL
The Internal Revenue Code ("IRC") provides for special rules regarding the tax
treatment of annuity contracts. Generally, you will not be taxed on the earnings
in your annuity contract until you take the money out. Different rules apply
depending on how you take the money out and whether your contract is Qualified
or Non-qualified.
If you do not purchase your contract under a pension plan, specially sponsored
program or an individual retirement account, your contract is referred to as a
Non-qualified contract and 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, specially sponsored program
or as an individual retirement account, your contract is referred to as a
Qualified contract. Examples of qualified plans are: Individual Retirement
Annuities, 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 further provides
for a 10% tax penalty on any earnings that are withdrawn other than in
conjunction with the following circumstances: (1) after reaching age 59 1/2; (2)
by 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) under an immediate
12
<PAGE> 20
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 or on any earnings and therefore, any amount you take out as
a withdrawal or as annuity payments will be taxable income. The IRC further
provides for a 10% tax penalty on any withdrawal or annuitization paid to you
other than in conjunction with the following circumstances: (1) after reaching
age 59 1/2; (2) by 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; and,
except in the case of an IRA as to the following (5) after you separate from
service after attaining age 55; (6) to the extent such withdrawals do not exceed
limitations set by the IRC for amounts paid during the taxable year for medical
care; and (7) 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 an amount equal to Purchase Payments and not any earnings.
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity in order to be treated as a variable annuity
for tax purposes. We believe that the variable Portfolios are being managed so
as to comply with 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 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.
================================================================================
7. ACCESS TO YOUR MONEY
================================================================================
Under your contract, money can be accessed in the following ways: (1) by making
a withdrawal, either for a part of the value of your contract or for the entire
value of your contract during the Accumulation Phase; (2) by receiving annuity
payments during the Income Phase; and (3) when a death benefit is paid to your
Beneficiary.
Generally, withdrawals are subject to a withdrawal charge, a market value
adjustment if the money is withdrawn from the 3, 5, 7 or 10 year fixed
investment options and, if you withdraw your entire contract value, a contract
maintenance fee. (See "Expenses" for more complete information).
Your contract provides for a free withdrawal amount. Purchase Payments that are
no longer subject to a withdrawal charge and not previously withdrawn, plus
earnings, may be withdrawn free of a withdrawal charge at any time.
After the first year, the first withdrawal of the year will be free of a
withdrawal charge if it does not exceed the greater of: (1) earnings in your
contract as of the date you make the withdrawal or (2) 10% of the Purchase
Payments you invested for at least one year and not yet withdrawn, less any
withdrawals made during the year.
The portion of a free withdrawal which exceeds the sum of: (1) earnings in the
contract and (2) Purchase Payments which are both no longer subject to a
withdrawal charge and not yet withdrawn is assumed to be a withdrawal against
future earnings. Although amounts withdrawn free of a withdrawal charge under
the 10% provision may reduce principal for purposes of calculating amounts
available for future withdrawals of earnings, they do not reduce the amount you
invested for purposes of calculating the withdrawal charge if you withdraw your
entire contract value. As a result, you will not receive the benefit of any free
withdrawal amounts if you make a complete withdrawal of your contract.
If you make a complete withdrawal, you will receive the value of your contract,
less any applicable fees and charges, as calculated on the day following receipt
by us at our principal place of business of a complete withdrawal request. Your
contract must be submitted as well.
Under most circumstances, partial withdrawals must be for a minimum of $1,000.
We require that the value left in any Portfolio or the fixed investment option
be at least $100 after the withdrawal. Unless you provide us with different
instructions, partial withdrawals will be made pro rata from each Portfolio and
the fixed investment option in which your contract is invested. You must send a
written withdrawal request to us prior to any withdrawal being made.
13
<PAGE> 21
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 on 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 the
fixed investment option for the period permitted by law but not for more than
six months.
SYSTEMATIC WITHDRAWAL PROGRAM
This program allows you to receive either monthly, quarterly, semiannual or
annual checks during the Accumulation Phase. You can also choose to have
systematic withdrawals electronically wired to your bank account. The minimum
amount of each withdrawal is $250. Withdrawals may be taxable and a 10% IRS tax
penalty may apply if you are under age 59 1/2. There is no charge for
participating in this program.
This program is not available to everyone. Please check with our Annuity Service
Center, which can provide the necessary enrollment forms. We reserve the right
to modify, suspend or terminate this program at any time.
WITHDRAWAL CHARGES, MARKET VALUE ADJUSTMENTS, INCOME TAXES, TAX PENALTIES AND
CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL YOU MAKE.
NURSING HOME WAIVER
If you are confined to a nursing home for 60 days or longer, we may waive the
withdrawal charge and/or market value adjustment on certain withdrawals prior to
the Annuity Date (not available in Texas). The waiver applies only to
withdrawals made while you are in a nursing home or within 90 days after you
leave the nursing home.
This waiver may not be used during the first 90 days after you purchase your
contract. In addition, the confinement period for which you seek the waiver must
begin after you purchase your contract.
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) no Purchase Payments have been made during the past three years. We will
provide you with sixty days written notice and distribute the contract's
remaining value to you.
===============================================================================
8. PERFORMANCE
===============================================================================
From time to time we may advertise the Cash Management Portfolio's yield and
effective yield. In addition, the other variable investment Portfolios may also
advertise total return, gross yield and yield to maturity information. These
figures are based on historical data and are not intended to indicate future
performance.
We will calculate total return by determining the percentage change in value of
an Accumulation Unit by dividing the increase (decrease) for that unit by the
value of the Accumulation Unit at the beginning of the period. This performance
number reflects the deduction of any applicable withdrawal charges, insurance
charges, investment charges and the contract maintenance fee. We may also
include in advertisements total return figures which do not reflect the
deduction of the contract maintenance fee and/or the withdrawal charges.
At times Anchor National may also advertise the ratings and other information
assigned to it by independent rating organizations such as A.M. Best Company
("A.M. Best"), Moody's Investors Service, Inc. ("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/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 and do not measure the ability of
such companies to meet other non-policy obligations.
The performance of each Portfolio may also be measured against unmanaged market
indices, including but not limited to the Dow Jones Industrial Average, the
Standard & Poor's 500, the Russell 1000 Growth Index, the Morgan Stanley Capital
International Europe, Australia, and Far East Index (EAFE) and the Morgan
Stanley Capital International World Index, and may be compared to that of other
variable annuities with similar objectives and policies as reported by
independent rating services such as Morningstar, Inc., Lipper Analytical
Services, Inc. or Variable Annuity Reporting Data Service.
More detailed information on the method used to calculate performance for the
Portfolios is contained in the SAI.
================================================================================
9. DEATH BENEFIT
================================================================================
If you should die during the Accumulation Phase of your contract, we will pay a
death benefit to your Beneficiary.
14
<PAGE> 22
The death benefit is the greater of:
(1) The value of your contract at the time we receive adequate proof of
death,
(2) total Purchase Payments less any withdrawals, all compounded at 4%
annually until the date of death (3% if age 70 or older at time of
issue), or
(3) the value of your contract on the seventh contract anniversary less any
withdrawals plus any additional Purchase Payments since the seventh
anniversary, all compounded at 4% annually until the date of death (3%
if age 70 or older at time of issue).
The death benefit is not paid after you switch to the Income Phase. During the
Income Phase, your Beneficiary(ies) will receive any remaining guaranteed
annuity payments in accordance with the annuity option you choose.
You may select the Beneficiary(ies) 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 is immediately payable under the contract. However, in any
event, the entire death benefit must be paid within five years of the date of
death unless the Beneficiary elects to have it payable in the form of an
annuity. If the Beneficiary elects an annuity option, it must be paid over the
Beneficiary's lifetime or for a period not extending beyond the Beneficiary's
life expectancy. If the Beneficiary is the spouse of the owner, he or she can
elect to continue the contract at the then current value, in which case he or
she will not receive the death benefit.
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. If the
Beneficiary does not make a specific election within sixty days of our receipt
of such proof of death, the death benefit will be paid in a lump sum.
================================================================================
10. OTHER INFORMATION
================================================================================
ANCHOR NATIONAL
Anchor National and its affiliates, SunAmerica Life Insurance Company, First
SunAmerica Life Insurance Company, CalFarm Life Insurance Company, SunAmerica
Asset Management Corp., Imperial Premium Finance, Inc., Resources Trust Company
and three broker-dealers, offer a full line of financial services, including
fixed and variable annuities, mutual funds, premium finance, broker-dealer and
trust administration services. Anchor National is an indirect wholly owned
subsidiary of SunAmerica Inc. Anchor National is licensed to do business in the
District of Columbia and in all states except New York.
THE SEPARATE ACCOUNT
Anchor National originally established a separate account, Variable Separate
Account, under California law on June 25, 1981. We redomesticated under Arizona
law on January 1, 1996 and the separate account was assumed by Anchor National.
The separate account is registered with the SEC as a unit investment trust under
the Investment Company Act of 1940.
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 Anchor National may conduct. Income, gains and losses (realized
and unrealized) resulting from the assets in the separate account are credited
to or charged against the separate account without regard to other income, gains
or losses of Anchor National.
THE GENERAL ACCOUNT
If you put your money into the fixed investment options, it goes into Anchor
National's general account. The general account is made up 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 owners as well as all creditors. The general account is
invested in assets permitted by state insurance law.
DISTRIBUTION
The contract is sold through registered representatives of broker-dealers.
Commissions are paid to registered representatives for the sale of contracts.
Commissions are not expected to exceed 7% of your Purchase Payment. Under some
circumstances, we may pay a persistency bonus in addition to standard
commissions. Usually the standard commission is lower when we pay a persistency
bonus, which is not anticipated to exceed 1.5% annually. Commissions paid to
registered representatives are not directly deducted from your Purchase Payment.
SunAmerica Capital Services, Inc., 733 Third Avenue, 4th Floor, New York, New
York 10017 acts as the distributor of the contracts. SunAmerica Capital
Services, Inc., an affiliate of Anchor National, is registered as a brokerdealer
under the Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc.
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<PAGE> 23
ADMINISTRATION
We are responsible for all the administrative servicing of your contract. Please
contact Anchor National's Annuity Service Center at the telephone number and
address provided in the profile section of this prospectus if you have any
comment, question or service request.
We will send out transaction confirmations and quarterly statements. Please
review these documents carefully and notify us of any inaccuracies immediately.
We will investigate all questions and, to the extent we have made an error, we
will retroactively adjust your contract provided you have notified us within
thirty days of receiving the transaction confirmation or quarterly statement, as
applicable. All other adjustments will be made as of the time we receive notice
of the error.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the separate account. Anchor
National and its subsidiaries are engaged in various kinds of routine litigation
which, in management's judgment, are not of material importance to their
respective total assets or material with respect to the separate account.
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, serves as the custodian of the assets of the separate account. Anchor
National pays State Street Bank for services based on a schedule of fees.
ADDITIONAL INFORMATION
Anchor National is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. In accordance with such requirements, we file
reports and other information with the SEC. Such reports and other information
we file can be inspected and copied. Copies can be obtained at the public
reference facilities of the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, or at the regional offices in Chicago and New York. The
addresses of these regional offices are as follows: 500 West Madison Street,
Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of such material also can be obtained by mail from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549,
upon payment of the fees prescribed by the rules and regulations of the SEC at
prescribed rates.
Registration statements have been filed with the SEC, Washington, D.C., under
the Securities Act of 1933 as amended, relating to the contracts offered by this
prospectus. This prospectus does not contain all the information set forth in
the registration statements and the exhibits filed as part of the registration
statements Reference should be made to such registration statements and exhibits
for further information concerning the separate account, Anchor National and its
general account, the Portfolios and the contract.
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<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial information of Anchor National
insofar as it relates to each of the years 1992-1996, has been derived from
audited financial statements, including the consolidated balance sheets at
September 30, 1995 and 1996 and the related consolidated statements of income
and cash flow for each of the three years in the period ended September 30, 1996
and the notes thereto appearing elsewhere herein. The information for the three
months ended December 31, 1995 and 1996 has been derived from unaudited
financial information also appearing herein and which, in the opinion of
management, includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for the unaudited
interim periods.
This information should be read in conjunction with the consolidated financial
statements and notes thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations, both of which follow this
selected information.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, DECEMBER 31,
-------------------------------------------------------------- ------------------------
1992 1993 1994 1995 1996 1995 1996
---------- ---------- ---------- ---------- ---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net investment income............... $ 36,499 $ 48,912 $ 58,996 $ 50,083 $ 56,843 $ 14,617 $ 14,544
Net realized investment losses...... (22,749) (22,247) (33,713) (4,363) (13,355) (12,800) (19,116)
Fee income.......................... 97,220 118,247 131,225 135,214 160,931 37,284 44,820
General and administrative
expenses.......................... (55,615) (55,142) (52,636) (61,629) (80,048) (16,997) (22,322)
Provision for future guaranty fund
assessments....................... -- (4,800) -- -- -- -- --
Amortization of deferred acquisition
costs............................. (18,224) (30,825) (44,195) (58,713) (57,520) (13,658) (13,817)
Annual commissions.................. (215) (312) (1,158) (2,658) (4,613) (939) (1,433)
Other income and expenses........... 9,218 9,679 8,801 7,063 7,070 1,768 2,270
---------- ---------- ---------- ---------- ---------- ---------- -----------
PRETAX INCOME....................... 46,134 63,512 67,320 64,997 69,308 9,275 4,946
Income tax expense.................. (15,361) (21,794) (22,705) (25,739) (24,252) (3,449) (1,600)
---------- ---------- ---------- ---------- ---------- ---------- -----------
Income from continuing operations... 30,773 41,718 44,615 39,258 45,056 5,826 3,346
Net income of subsidiaries sold to
affiliates........................ 1,312 -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING FOR INCOME
TAXES............................. 32,085 41,718 44,615 39,258 45,056 5,826 3,346
Cumulative effect of change in
accounting for income taxes....... -- -- (20,463) -- -- -- --
NET INCOME.......................... $ 32,085 $ 41,718 $ 24,152 $ 39,258 $ 45,056 $ 5,826 $ 3,346
========== ========== ========== ========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
-------------------------------------------------------------- ------------------------
1992 1993 1994 1995 1996 1995 1996
---------- ---------- ---------- ---------- ---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION
Investments......................... $2,126,899 $2,093,100 $1,632,072 $2,114,908 $2,329,232 $1,964,418 $ 2,703,683
Variable annuity assets............. 3,284,507 4,170,275 4,486,703 5,230,246 6,311,557 5,418,534 6,784,374
Deferred acquisition costs.......... 288,264 336,677 416,289 383,069 443,610 379,922 461,637
Other assets........................ 91,588 71,337 67,062 55,474 120,136 81,466 76,014
---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL ASSETS........................ $5,791,258 $6,671,389 $6,602,126 $7,783,697 $9,204,535 $7,844,340 $10,025,708
========== ========== ========== ========== ========== ========== ===========
Reserves for fixed annuity
contracts......................... $1,735,565 $1,562,136 $1,437,488 $1,497,052 $1,789,962 $1,473,964 $ 2,024,873
Reserves for guaranteed investment
contracts......................... -- -- -- 277,095 415,544 277,167 420,871
Variable annuity liabilities........ 3,284,507 4,170,275 4,486,703 5,230,246 6,311,557 5,418,534 6,784,374
Other reserves, payables and accrued
liabilities....................... 398,045 495,308 195,134 227,953 96,196 79,466 157,622
Subordinated notes payable to
Parent............................ 15,500 34,432 34,712 35,832 35,832 35,832 35,903
Deferred income taxes............... 35,163 38,145 64,567 73,459 70,189 72,934 71,943
Shareholder's equity................ 322,478 371,093 383,522 442,060 485,255 486,443 530,122
---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S
EQUITY............................ $5,791,258 $6,671,389 $6,602,126 $7,783,697 $9,204,535 $7,844,340 $10,025,708
========== ========== ========== ========== ========== ========== ===========
</TABLE>
17
<PAGE> 25
MANAGEMENT DISCUSSION AND ANALYSIS
Management's discussion and analysis of financial condition and results of
operations of Anchor National for the three years in the period ended September
30, 1996 follows. In connection with, and because it desires to take advantage
of, the "safe harbor" provisions of the Private Securities Litigation Reform Act
of 1995, Anchor National cautions readers regarding certain forward-looking
statements contained in the following discussion and in any other statements
made by, or on behalf of, Anchor National, whether or not in future filings with
the Securities and Exchange Commission (the "SEC"). Forward-looking statements
are statements not based on historical information and which relate to future
operations, strategies, financial results, or other developments. In particular,
statements using verbs such as "expect," "anticipate," "believe" or words of
similar import generally involve forward-looking statements. Without limiting
the foregoing, forward-looking statements which represent Anchor National's
beliefs concerning future or projected levels of sales of Anchor National's
products, investment spreads or yields, or the earnings or profitability of
Anchor National's activities.
Forward-looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond Anchor National's
control and many of which, with respect to future business decisions, are
subject to change. These uncertainties and contingencies can affect actual
results and could cause actual results to differ materially from those expressed
in any forward-looking statements made by, or on behalf of, Anchor National.
Whether or not actual results differ materially from the forward-looking
statements may depend on numerous foreseeable and unforeseeable events or
developments, some of which may be national in scope, such as general economic
conditions and changes in interest rates, some of which may be related to the
insurance industry generally, such as pricing competition, regulatory
developments and industry consolidation, and others of which may relate to
Anchor National specifically, such as credit, volatility, and other risks
associated with Anchor National's investment portfolio, and other factors.
Investors are also directed to consider other risks and uncertainties discussed
in documents filed by Anchor National with the SEC. Anchor National disclaims
any obligation to update forward-looking information.
RESULTS OF OPERATIONS FOR THE FISCAL YEARS 1994, 1995 AND 1996
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES totaled
$45.1 million in 1996, compared with $39.3 million in 1995 and $44.6 million in
1994. The cumulative effect of the change in accounting for income taxes
resulting from the 1994 implementation of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," amounted to a nonrecurring
non-cash charge of $20.5 million. Accordingly, net income amounted to $24.1
million in 1994.
PRETAX INCOME totaled $69.3 million in 1996, $65.0 million in 1995, and $67.3
million in 1994. The $4.3 million improvement in 1996 over 1995 primarily
resulted from increased net investment income and significantly increased fee
income partially offset by increased net realized investment losses and
additional general and administrative expenses. The $2.3 million decline in 1995
over 1994 primarily resulted from additional amortization of deferred
acquisition costs, increased general and administrative expenses and decreased
net investment income, partially offset by decreased net realized investment
losses.
NET INVESTMENT INCOME, which is the spread between the income earned on invested
assets and the interest paid on fixed annuities and other interest-bearing
liabilities, totaled $56.8 million in 1996, $50.1 million in 1995 and $59.0
million in 1994. These amounts represent 2.59% on average invested assets
(computed on a daily basis) of $2.19 billion in 1996, 2.95% on average invested
assets of $1.70 billion in 1995 and 3.78% on average invested assets of $1.56
billion in 1994.
Net investment income also includes the effect of income earned on the excess of
average invested assets over average interest-bearing liabilities. This excess
amounted to $142.9 million in 1996, $108.4 million in 1995 and $49.5 million in
1994. The difference between Anchor National's yield on average invested assets
and the rate paid on average interest-bearing liabilities was 2.25% in 1996,
2.63% in 1995 and 3.64% in 1994.
Investment income and the related yields on average invested assets totaled
$164.6 million or 7.50% in 1996, compared with $129.5 million or 7.62% in 1995
and $127.8 million or 8.20% in 1994.
Investment income rose during 1996 as a result of higher levels of average
invested assets, partially offset by reduced investment yields. Investment
yields were lower in 1996 because of a generally declining interest rate
environment since early 1995 and lower contributions from Anchor National's
investments in partnerships. Partnership income totaled $4.1 million in 1996,
$5.1 million in 1995 and $9.5 million in 1994. This income represents a yield of
10.12% on average investments in partnerships of $40.2 million in 1996, compared
with 10.60% on average investments in partnerships of $48.4 million in 1995 and
23.78% on average investments in partnerships of $39.9 million in 1994.
Partnership income is based upon cash distributions received from limited
partnerships, the operations of which Anchor National does not significantly
influence. Consequently, such income is not predictable and there can be no
assurance that Anchor National will realize comparable levels of such income in
the future.
18
<PAGE> 26
The decline in investment yield in 1995 compared with 1994 is primarily due to
lower contributions from Anchor National's investments in partnerships and a
significant decline from the $3.7 million of yield enhancement recorded in 1994
through Anchor National's use of dollar roll transactions ("Dollar Rolls").
Although Anchor National continues to use Dollar Rolls, their use did not have a
significant impact on investment income in 1995 or 1996.
Total interest expense aggregated $107.8 million in 1996, $79.4 million in 1995
and $68.8 million in 1994. The average rate paid on all interest-bearing
liabilities increased to 5.25% (5.11% on fixed annuity contracts and 5.87% on
guaranteed investment contracts ("GICs")) in 1996, compared with 4.99% (4.90% on
fixed annuity contracts and 6.14% on GICs) in 1995 and 4.56% (4.50% on fixed
annuity contracts) in 1994. Interest-bearing liabilities averaged $2.05 billion
during 1996, compared with $1.59 billion during 1995 and $1.51 billion during
1994.
The increase in the average rates paid on all interest-bearing liabilities
during 1996 primarily resulted from the growth in average reserves for GICs,
which credit at higher rates of interest than fixed annuity contracts. Average
GIC reserves were $340.5 million in 1996 and $60.8 million in 1995. The increase
in average crediting rates in 1995 resulted from higher crediting rates on fixed
annuity contracts as interest rates rose from the low levels experienced in
1994.
The growth in average invested assets since 1994 primarily reflects sales of
Anchor National's fixed-rate products, consisting of both fixed accounts of
variable annuity products and GICs. Fixed annuity premiums totaled $741.8
million in 1996, compared with $284.4 million in 1995 and $140.7 million in
1994. These increased premiums resulted from greater inflows into the one-year
fixed account of Anchor National's Polaris variable annuity product.
GIC premiums totaled $135.0 million in 1996 and $275.0 million in 1995. In 1995,
Anchor National began to issue GICs, which guarantee the payment of principal
and interest at fixed or variable rates for a term of one year. Anchor
National's GICs that are purchased by asset management firms either prohibit
withdrawals or permit withdrawals with notice ranging from 90 to 270 days.
Contracts that are purchased by banks or state and local governmental
authorities either prohibit withdrawals or permit scheduled book value
withdrawals subject to terms of the underlying indenture or agreement. In
pricing GICs, Anchor National analyzes cash flow information and prices
accordingly so that it is compensated for possible withdrawals prior to
maturity.
NET REALIZED INVESTMENT LOSSES totaled $13.4 million in 1996, $4.4 million in
1995 and $33.7 million in 1994. Net realized investment losses include
impairment writedowns of $16.0 million in 1996, $4.8 million in 1995 and $14.2
million in 1994. Therefore, net gains from sales of investments totaled $2.6
million in 1996 and $0.4 million in 1995. In 1994, Anchor National incurred
$19.5 million of net losses from sales of investments.
Net gains from sales of investments in 1996 include $4.1 million of net gains
realized on $1.27 billion of sales of bonds and $288.6 million of redemptions of
bonds. Net gains from sales of investments in 1995 include a $4.4 million gain
on sales of real estate, common stock and other invested assets offset by $4.0
million of net losses realized on $1.11 billion of sales of bonds. Net losses
from sales of investments in 1994 include $17.3 million of net losses realized
on $673.6 million of sales of bonds. These bond sales include approximately
$289.3 million of sales of MBSs made primarily to acquire other MBSs that were
then used in Dollar Rolls. Sales of investments are generally made to maximize
total return.
Impairment writedowns in 1996 include $13.4 million of provisions applied to
certain real estate owned in Arizona on December 31, 1995. Prior to that date,
the statutory carrying value of this real estate had been guaranteed by Anchor
National's ultimate parent, SunAmerica Inc. ("SunAmerica"). On December 31,
1995, SunAmerica made a $27.4 million capital contribution to Anchor National
through Anchor National's direct parent in exchange for the termination of its
guaranty with respect to this real estate. Accordingly, Anchor National reduced
the carrying value of this real estate to estimated fair value to reflect the
termination of the guaranty. (SunAmerica's guaranty of the statutory carrying
value of Anchor National's other real estate owned in Arizona was fully
terminated on December 31, 1996).
Impairment writedowns in 1995 include $2.0 million of additional provisions
applied to defaulted bonds and $1.8 million of additional provisions applied to
certain interest-only strips ("IOs"). IOs, a type of MBS used as an
asset-liability matching tool to hedge against rising interest rates, are
investment grade securities that give the holder the right to receive only the
interest payments on a pool of underlying mortgage loans. At September 30, 1996,
the amortized cost of the IOs held by Anchor National was $2.6 million and their
fair value was $3.7 million. Impairment writedowns in 1994 of $14.2 million
reflect additional provisions applied to bonds, primarily made in response to
the adverse impact of declining interest rates on certain MBSs.
Impairment writedowns represent 0.73%, 0.28% and 0.91% of average invested
assets in 1996, 1995 and 1994, respectively. Such writedowns are based upon
estimates of the net realizable value of the applicable assets. Actual
realization will be dependent upon future events.
VARIABLE ANNUITY FEES are based on the market value of assets supporting
variable annuity contracts in separate accounts. Such fees totaled $104.0
million in 1996, $84.2 million in 1995 and $79.1 million in 1994. Increases in
variable annuity fees in 1996 and 1995 reflect growth in
19
<PAGE> 27
average variable annuity assets, principally due to increased market values and
the receipt of variable annuity premiums, partially offset by surrenders.
Variable annuity assets averaged $5.70 billion during 1996, $4.65 billion during
1995 and $4.40 billion during 1994. Variable annuity premiums, which exclude
premiums allocated to the fixed accounts of variable annuity products, totaled
$919.8 million in 1996, $577.2 million in 1995 and $769.6 million in 1994. The
increase in premiums in 1996 may be attributed, in part, to a heightened demand
for equity investments, principally as a result of generally improved market
performance. The decline in premiums in 1995 may be attributed, in part, to a
heightened demand for fixed-rate investment options, including the fixed
accounts of variable annuities. Anchor National has encountered increased
competition in the variable annuity marketplace during recent years and
anticipates that the market will remain highly competitive for the foreseeable
future.
NET RETAINED COMMISSIONS are primarily derived from commissions on the sales of
nonproprietary investment products by Anchor National's broker-dealer
subsidiary, after deducting the substantial portion of such commissions that is
passed on to registered representatives. Net retained commissions totaled $31.5
million in 1996, $24.1 million in 1995 and $20.8 million in 1994. Broker-dealer
sales (mainly sales of general securities, mutual funds, and annuities) totaled
$8.75 billion in 1996, $5.67 billion in 1995 and $5.21 billion in 1994. The
significant increases in sales and net retained commissions during 1996 reflect
a greater number of registered representatives and higher average production,
combined with generally favorable market conditions. Increases in net retained
commissions may not be proportionate to increases in sales primarily due to
differences in sales mix.
ASSET MANAGEMENT FEES, which include investment advisory fees and 12b-1
distribution fees, are based on the market value of assets managed in mutual
funds by SunAmerica Asset Management Corp. Such fees totaled $25.4 million on
average assets managed of $2.14 billion in 1996, $26.9 million on average assets
managed of $2.07 billion in 1995 and $31.3 million on average assets managed of
$2.39 billion in 1994. Asset management fees decreased slightly in 1996, despite
a modest increase in average assets managed, principally due to changes in
product mix. The decrease in asset management fees during 1995 principally
resulted from the decline in average assets managed, primarily due to an excess
of redemptions over sales. Redemptions of mutual funds, excluding redemptions of
money market accounts, amounted to $379.9 million in 1996, compared with $426.5
million in 1995 and $561.0 million in 1994. Sales of mutual funds, excluding
sales of money market accounts, amounted to $223.4 million in 1996, compared
with $140.2 million in 1995 and $342.6 million in 1994. Higher mutual fund sales
and lower redemptions in 1996 both reflect the combined effects of additional
advertising, the favorable performance records of certain of Anchor National's
mutual funds and heightened demand for equity investments, principally as a
result of improved market performance.
SURRENDER CHARGES on fixed and variable annuities totaled $5.2 million in 1996,
$5.9 million in 1995 and $5.0 million in 1994. Surrender charges generally are
assessed on annuity withdrawals at declining rates during the first five to
seven years of the contract. Withdrawal payments, which include surrenders and
lump-sum annuity benefits, totaled $898.0 million in 1996, $908.9 million in
1995 and $723.9 million in 1994. These payments represent 12.4%, 15.1% and
12.5%, respectively, of average fixed and variable annuity reserves. Withdrawals
include variable annuity payments from the separate accounts totaling $634.1
million in 1996, $646.4 million in 1995 and $459.1 million in 1994. Such
variable annuity surrenders represent 11.2%, 14.0% and 10.5%, respectively, of
average variable annuity liabilities in 1996, 1995 and 1994. Variable annuity
surrender rates increased in 1995 primarily due to surrenders on a closed lock
of business, policies coming off surrender charge restrictions and increased
competition in the marketplace. Fixed annuity surrenders have remained
relatively constant, totaling $263.8 million in 1996, $262.4 million in 1995 and
$264.8 million in 1994. Management anticipates that withdrawal rates will remain
relatively stable for the foreseeable future
GENERAL AND ADMINISTRATIVE EXPENSES totaled $80.0 million in 1996, compared with
$61.6 million in 1995 and $52.6 million in 1994. Expenses in 1996 include
expenses related to a national advertising campaign, as well as additional
administrative expenses related to a growing block of business. Expenses remain
closely controlled through a company-wide cost containment program and represent
approximately 1% of average total assets.
AMORTIZATION OF DEFERRED ACQUISITION COSTS totaled $57.5 million in 1996, $58.7
million in 1995 and $44.2 million in 1994. The decline in amortization for 1996
is due to lower redemptions of mutual funds from the rate experienced in 1995,
partially offset by additional fixed and variable annuity and mutual fund sales
in recent years and the subsequent amortization of related deferred commissions
and other acquisition costs. The increase in amortization in 1995 was primarily
caused by the substantial reduction in net realized capital losses from the
level experienced in 1994.
ANNUAL COMMISSIONS represent renewal commissions paid quarterly in arrears to
maintain the persistency of certain of Anchor National's variable annuity
contracts. Substantially all of Anchor National's currently available variable
annuity products allow for an annual commission payment option in return for a
lower immediate commission. Annual commissions totaled $4.6 million in 1996,
$2.7 million in 1995 and $1.2 million in 1994. The increase in annual
commissions since 1994 reflects increased sales of annuities that offer this
commission option. Anchor National estimates that during
20
<PAGE> 28
1996 approximately 35% of the average balances of its variable annuity products
are currently subject to such annual commissions. Based on current sales, this
percentage is expected to increase in future periods.
INCOME TAX EXPENSE totaled $24.3 million in 1996, $25.7 million in 1995 and
$22.7 million in 1994, representing effective tax rates of 35% in 1996, 40% in
1995 and 34% in 1994. The increase in the effective tax rate in 1995 was due to
a prior year tax settlement. Without such payment, the effective tax rate would
have been 33%.
FINANCIAL CONDITION AND LIQUIDITY AT SEPTEMBER 30, 1996
SHAREHOLDER'S EQUITY increased by $43.2 million to $485.3 million at September
30, 1996 from $442.1 million at September 30, 1995, primarily as a result of the
$45.1 million of net income recorded in 1996 and a $0.2 million reduction of net
unrealized losses on debt and equity securities available for sale charged
directly to shareholder's equity. In addition, Anchor National received a
contribution of capital of $27.4 million in December 1995 and paid a dividend of
$29.4 million in March 1996.
TOTAL ASSETS increased by $1.42 billion to $9.20 billion at September 30, 1996
from $7.78 billion at September 30, 1995, principally due to a $1.08 billion
increase in the separate accounts for variable annuities and a $214.3 million
increase in invested assets.
INVESTED ASSETS at year end totaled $2.33 billion in 1996, compared with $2.11
billion in 1995. This $214.3 million increase primarily resulted from a $208.2
million increase in amounts receivable from brokers for sales of securities.
Anchor National manages most of its invested assets internally. Anchor
National's general investment philosophy is to hold fixed maturity assets for
long-term investment. Thus, it does not have a trading portfolio. Effective
December 1, 1995, pursuant to guidelines issued by the Financial Accounting
Standards Board, Anchor National determined that all of its portfolio of bonds,
notes and redeemable preferred stocks (the "Bond Portfolio") is available to be
sold in response to changes in market interest rates, changes in prepayment
risk, Anchor National's need for liquidity and other similar factors.
Accordingly, Anchor National no longer classifies a portion of its Bond
Portfolio as held for investment.
THE BOND PORTFOLIO had an aggregate amortized cost that exceeded its fair value
by $13.8 million at September 30, 1996, compared with $3.7 million at September
30, 1995 (including net unrealized losses of $10.8 million on the portion of the
portfolio that was designated as available for sale September 30, 1995). The
increase in net unrealized losses on the Bond Portfolio since September 30,
1995, principally reflects the higher prevailing interest rates at September 30,
1996 and their corresponding effect on the fair value of the Bond Portfolio.
All of the Bond Portfolio ($1.99 billion at amortized cost, excluding $9.1
million of redeemable preferred stocks) at September 30, 1996 was rated by
Standard & Poor's Corporation ("S&P"), Moody's Investors Service ("Moody's"),
Duff and helps Credit Rating Co. ("DCR"), Fitch Investors Service, L.P.
("Fitch") or under comparable statutory rating guidelines established by the
National Association of Insurance Commissioners ("NAIC") and implemented by
either the NAIC or Anchor National. At September 30, 1996, approximately $1.83
billion of the Bond Portfolio (at amortized cost) was rated investment grade by
one or more of these agencies or by Anchor National or the NAIC, pursuant to
applicable NAIC guidelines, including $1.05 billion of U.S. government/agency
securities and MBSs.
At September 30, 1996, the Bond Portfolio included $160.8 million (fair value,
$160.2 million) of bonds not rated investment grade by S&P, Moody's, DCR, Fitch
or the NAIC. Based on their September 30, 1996 amortized cost, these non-
investment-grade bonds accounted for 1.8% of Anchor National's total assets and
6.9% of its invested assets.
Non-investment-grade securities generally provide higher yields and involve
greater risks than investment-grade securities because their issuers typically
are more highly leveraged and more vulnerable to adverse economic conditions
than investment-grade issuers. In addition, the trading market for these
securities is usually more limited than for investment-grade securities. Anchor
National intends that the proportion of its portfolio in such securities not
exceed current levels, but its policies may change from time to time, including
in connection with any possible acquisition. Anchor National had no material
concentrations of non-investment-grade securities at September 30, 1996.
The table on the next page summarizes Anchor National's rated bonds by rating
classification as of September 30, 1996.
21
<PAGE> 29
<TABLE>
<CAPTION>
ISSUES NOT RATED BY S&P/MOODY'S/
ISSUES RATED BY S&P/MOODY'S/D&P/FITCH D&P/FITCH, BY NAIC CATEGORY TOTAL
-------------------------------------------- ----------------------------------- ---------------------------------
S&P/(MOODY'S)/ ESTIMATED NAIC ESTIMATED PERCENT OF ESTIMATED
[D&P]/FITCH AMORTIZED FAIR CATEGORY AMORTIZED FAIR AMORTIZED INVESTED FAIR
CATEGORY(1) COST VALUE (2) COST VALUE COST ASSETS VALUE
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AAA to A-
(Aaa to A3)
[AAA to A-]
[AAA to A-]..... $1,345,960 $1,333,515 1 $125,115 $125,046 $1,471,075 62.81% $1,458,561
BBB+ to BBB-
(Baa1 to Baa3)
[BBB+ to BBB-]
[BBB+ to BBB-].. 226,312 226,191 2 133,773 133,698 360,085 15.38 359,889
BB+ to BB-
(Ba1 to Baa3)
[BB+ to BB-]
[BB+ to BB-].... 30,023 30,368 3 5,597 5,597 35,620 1.52 35,965
B+ to B-
(B1 to B3)
[B+ to B-]
[B+ to B-]...... 87,580 90,468 4 17,136 18,089 104,716 4.47 108,557
CCC+ to C
(Caa to C)
[CCC]
[CCC+ to C-].... 19,847 15,018 5 -- -- 19,847 0.85 15,018
C1 to D
[DD]
[D]............. -- -- 6 618 618 618 0.03 618
---------- ---------- -------- -------- ---------- ----------
Total rated
issues.......... $1,709,722 $1,695,560 $282,239 $283,048 $1,991,961 $1,978,608
========== ========== ======== ======== ========== ==========
</TABLE>
(1) S&P and Fitch rate debt securities in rating categories ranging from AAA
(the highest) to D (in payment default). A plus (+) or minus (-) indicates
the debt's relative standing within the rating category. A security rated
BBB- or higher is considered investment grade. Moody's rates debt securities
in rating categories ranging from Aaa (the highest) to C (extremely poor
prospects of ever attaining any real investment standing). The number 1, 2
or 3 (with 1 the highest and 3 the lowest) indicates the debt's relative
standing within the rating category. A security rated Baa3 or higher is
considered investment grade. D&P rates debt securities in rating categories
ranging from AAA (the highest) to DD (in payment default). A plus (+) or
minus (-) indicates the debt's relative standing within the rating category.
A security rated BBB- or higher is considered investment grade. Issues are
categorized based on the highest of the S&P, Moody's, D&P and Fitch ratings
if rated by multiple agencies.
(2) Bonds and short-term promissory instruments are divided into six quality
categories for NAIC rating purposes, ranging from 1 (highest) to 5 (lowest)
for nondefaulted bonds plus one category, 6, for bonds in or near default.
These six categories correspond with the S&P/Moody's/D&P/Fitch rating groups
listed above, with categories 1 and 2 considered investment grade. A
substantial portion of the assets in the NAIC categories were rated by First
SunAmerica pursuant to applicable NAIC rating guidelines.
(3) At amortized cost.
SENIOR SECURED LOANS ("Secured Loans") are included in the Bond Portfolio and
their amortized cost aggregated $200.8 million at September 30, 1996. Secured
Loans are senior to subordinated debt and equity, and are secured by assets of
the issuer. At September 30, 1996, Secured Loans consisted of loans to 52
borrowers spanning 20 industries, with 22% of these assets (at amortized cost)
concentrated in the leisure industry. No other industry concentration
constituted more than 9% of these assets.
While the trading market for Secured Loans is more limited than for publicly
traded corporate debt issues, management believes that participation in these
transactions has enabled Anchor National to improve its investment yield.
Although, as a result of restrictive financial covenants, Secured Loans involve
greater risk of technical default than do publicly traded investment-grade
securities, management believes that the risk of loss upon default for its
Secured Loans is mitigated by their financial covenants and senior secured
positions. Anchor National's Secured Loans are rated by S&P, Moody's, DCR, Fitch
or by the Company or the NAIC, pursuant to comparable statutory rating
guidelines established by the NAIC.
MORTGAGE LOANS aggregated $98.3 million at September 30, 1996 and consisted of
17 first mortgage loans with an average loan balance of approximately $5.8
million, collateralized by properties located in 11 states. At September 30,
1996, the Company had no concentrations in any single state or in any single
type of property that amounted to more than 23% of the mortgage loan portfolio.
At September 30, 1996, there were four loans with outstanding balances of $10
million or more, the largest of which had a balance of approximately $21
million, which collectively aggregated
22
<PAGE> 30
approximately 61% of the portfolio. At September 30, 1996, approximately 33% of
the mortgage loan portfolio consisted of loans with balloon payments due before
October 1, 1999. At September 30, 1996, loans delinquent by more than 90 days
totaled $1.5 million (1.6% of total mortgages). There were no loans foreclosed
upon and transferred to real estate in the balance sheet during 1996. At
September 30, 1996, mortgage loans having an aggregate carrying value of $21.3
million had been previously restructured. Of this amount, $16.5 million was
restructured during 1995 and $4.8 million was restructured during 1992. No
mortgage loans were restructured during 1996.
Approximately 62% of the mortgage loans in the portfolio at September 30, 1996
were seasoned loans underwritten to Anchor National's standards and purchased at
or near par from another financial institution which was downsizing its
portfolio. Such loans generally have higher average interest rates than loans
that could be originated today. The balance of the mortgage loan portfolio has
been originated by Anchor National under strict underwriting standards.
Commercial mortgage loans on properties such as offices, hotels and shopping
centers generally represent a higher level of risk than do mortgage loans
secured by multifamily residences. This greater risk is due to several factors,
including the larger size of such loans and the effects of general economic
conditions on these commercial properties. However, due to the seasoned nature
of Anchor National's mortgage loans and its strict underwriting standards,
Anchor National believes that it has reduced the risk attributable to its
mortgage loan portfolio while maintaining attractive yields.
REAL ESTATE aggregated $39.7 million at September 30, 1996 and consisted of
non-income producing land in the Phoenix, Arizona metropolitan area. Of this
amount, Anchor National has undertaken to dispose of $28.4 million during the
next year, either to affiliated or nonaffiliated parties, and SunAmerica Inc.,
the ultimate parent, has guaranteed that Anchor National will receive its
statutory carrying value of these assets. (This guaranty was terminated on
December 31, 1996-See "Results of Operations for the First Three Months of
Fiscal 1997").
OTHER INVESTED ASSETS aggregated $77.9 million at September 30, 1996, including
$45.1 million of investments in limited partnerships and an aggregate of $32.8
million of miscellaneous investments, including policy loans, residuals,
separate account investments, and leveraged leases. Anchor National's limited
partnership interests, accounted for by using the cost method of accounting,
invest mainly in equity securities.
ASSET-LIABILITY MATCHING is utilized by Anchor National to minimize the risks of
interest rate fluctuations and disintermediation. Anchor National believes that
its fixed-rate liabilities should be backed by a portfolio principally composed
of fixed maturities that generate predictable rates of return. Anchor National
does not have a specific target rate of return. Instead, its rates of return
vary over time depending on the current interest rate environment, the slope of
the yield curve, the spread at which fixed maturities are priced over the yield
curve and general competitive conditions within the industry. Its portfolio
strategy is designed to achieve adequate risk-adjusted returns consistent with
its investment objectives of effective asset-liability matching, liquidity and
safety.
Anchor National designs its fixed-rate products and conducts its investment
operations in order to closely match the duration of the assets in its
investment portfolio to its annuity and GIC obligations. Anchor National seeks
to achieve a predictable spread between what it earns on its assets and what it
pays on its liabilities by investing principally in fixed-rate securities.
Anchor National's fixed-rate products incorporate surrender charges or other
limitations on when contracts can be surrendered for cash to encourage
persistency. Approximately 63% of Anchor National's fixed annuity and GIC
reserves had surrender penalties or other restrictions at September 30, 1996.
As part of its asset-liability matching discipline, Anchor National conducts
detailed computer simulations that model its fixed-maturity assets and
liabilities under commonly used stress-test interest rate scenarios. Based on
the results of these computer simulations, the investment portfolio has been
constructed with a view to maintaining a desired investment spread between the
yield on portfolio assets and the rate paid on its reserves under a variety of
possible future interest rate scenarios. At September 30, 1996 the weighted
average life of Anchor National's investments was approximately five years and
the duration was approximately three. Weighted average life is the average time
to receipt of all principal, incorporating the effects of scheduled amortization
and expected prepayments, weighted by book value. Duration is a common
option-adjusted measure for the price sensitivity of a fixed-income portfolio to
changes in interest rates. It measures the approximate percentage change in
market value of a portfolio if interest rates change by 100 basis points,
recognizing the changes in portfolio cashflows resulting from embedded options
such as prepayments and bond calls.
As a component of its investment strategy, Anchor National utilizes interest
rate swap agreements ("Swap Agreements") to match assets more closely to
liabilities. Swap Agreements are agreements to exchange with a counterparty
interest rate payments of differing character (for example, variable-rate
payments exchanged for fixed-rate payments) based on an underlying principal
balance (notional principal) to hedge against interest rate changes. Anchor
National typically utilizes Swap Agreements to create a hedge that effectively
converts floating-rate assets and liabilities into fixed-rate instruments.
Anchor National also seeks to provide liquidity from time to time by using
reverse repurchase agreements ("Reverse Repos"), Dollar Rolls and by investing
in MBSs. It also seeks to enhance its spread income by using Reverse Repos and
23
<PAGE> 31
Dollar Rolls. Reverse Repos involve a sale of securities and an agreement to
repurchase the same securities at a later date at an agreed upon price and are
generally over-collateralized. Dollar Rolls are similar to Reverse Repos except
that the repurchase involves securities that are only substantially the same as
the securities sold and the arrangement is not collateralized, nor is it
governed by a repurchase agreement. MBSs are generally investment-grade
securities collateralized by large pools of mortgage loans. MBSs generally pay
principal and interest monthly. The amount of principal and interest payments
may fluctuate as a result of prepayments of the underlying mortgage loans.
There are risks associated with some of the techniques Anchor National uses to
provide liquidity, enhance its spread income and match its assets and
liabilities. The primary risk associated with Anchor National's Dollar Rolls,
Reverse Repos and Swap Agreements is counterparty risk. Anchor National
believes, however, that the counterparties to its Dollar Rolls, Reverse Repos
and Swap Agreements are financially responsible and that the counterparty risk
associated with those transactions is minimal. Counterparty risk associated with
Dollar Rolls is further mitigated by Anchor National's participation in an MBS
trading clearinghouse. The sell and buy transactions that are submitted to this
clearinghouse are marked to market on a daily basis and each participant is
required to over-collateralize its net loss position by 30% with either cash,
letters of credit or government securities. In addition to counterparty risk,
Swap Agreements also have interest rate risk. However, Anchor National's Swap
Agreements typically hedge variable-rate assets or liabilities, and interest
rate fluctuations that adversely affect the net cash received or paid under the
terms of a Swap Agreement would be offset by increased interest income earned on
the variable-rate assets or reduced interest expense paid on the variable-rate
liabilities. The primary risk associated with MBSs is that a changing interest
rate environment might cause prepayment of the underlying obligations at speeds
slower or faster than anticipated at the time of their purchase.
INVESTED ASSETS EVALUATION routinely includes a review by Anchor National of its
portfolio of debt securities. Management identifies monthly those investments
that require additional monitoring and carefully reviews the carrying value of
such investments at least quarterly to determine whether specific investments
should be placed on a nonaccrual basis and to determine declines in value that
may be other than temporary. In making these reviews for bonds, management
principally considers the adequacy of collateral (if any), compliance with
contractual covenants, the borrower's recent financial performance, news reports
and other externally generated information concerning the creditor's affairs. In
the case of publicly traded bonds, management also considers market value
quotations, if available. For mortgage loans, management generally considers
information concerning the mortgaged property and, among other things, factors
impacting the current and expected payment status of the loan and, if available,
the current fair value of the underlying collateral.
The carrying values of bonds that are determined to have declines in value that
are other than temporary are reduced to net realizable value and no further
accruals of interest are made. The valuation allowances on mortgage loans are
based on losses expected by management to be realized on transfers of mortgage
loans to real estate, on the disposition and settlement of mortgage loans and on
mortgage loans that management believes may not be collectible in full. Accrual
of interest is suspended when principal and interest payments on mortgage loans
are past due more than 90 days.
DEFAULTED INVESTMENTS, comprising all investments that are in default as to the
payment of principal or interest, totaled $3.1 million at September 30, 1996 (at
amortized cost, with a fair value of $2.9 million) including $1.6 million of
bonds and notes and $1.5 million of mortgage loans. At September 30, 1996,
defaulted investments constituted 0.1% of total invested assets. At September
30, 1995, defaulted investments totaled $5.0 million which constituted 0.2% of
total invested assets.
SOURCES OF LIQUIDITY are readily available to Anchor National in the form of
Anchor National's existing portfolio of cash and short-term investments, Reverse
Repo capacity on invested assets and, if required, proceeds from invested asset
sales. At September 30, 1996, approximately $936.8 million of Anchor National's
Bond Portfolio had an aggregate unrealized gain of $20.1 million, while
approximately $1.06 billion of the Bond Portfolio had an aggregate unrealized
loss of $33.9 million. In addition, Anchor National's investment portfolio
currently provides approximately $21.6 million of monthly cash flow from
scheduled principal and interest payments.
Management is aware that prevailing market interest rates may shift
significantly and has strategies in place to manage either an increase or
decrease in prevailing rates. In a rising interest rate environment, Anchor
National's average cost of funds would increase over time as it prices its new
and renewing annuities and GICs to maintain a generally competitive market rate.
Management would seek to place new funds in investments that were matched in
duration to, and higher yielding than, the liabilities assumed. Anchor National
believes that liquidity to fund withdrawals would be available through incoming
cash flow, the sale of short-term or floating-rate instruments or Reverse Repos
on Anchor National's substantial MBS segment of the Bond Portfolio, thereby
avoiding the sale of fixed-rate assets in an unfavorable bond market.
In a declining rate environment, Anchor National's cost of funds would decrease
over time, reflecting lower interest crediting rates on its fixed annuities and
GICs. Should increased liquidity be required for withdrawals, Anchor
24
<PAGE> 32
National believes that a significant portion of its investments could be sold
without adverse consequences in light of the general strengthening that would be
expected in the bond market.
RESULTS OF OPERATIONS FOR THE FIRST THREE MONTHS OF FISCAL 1997
NET INCOME totaled $3.3 million for the three months ended December 31, 1996
("Fiscal 1997"), compared with $5.8 million for the three months ended December
31, 1995 ("Fiscal 1996").
PRETAX INCOME totaled $4.9 million in Fiscal 1997 and $9.3 million in Fiscal
1996. This $4.4 million decline primarily resulted from increased net realized
investment losses and general and administrative expenses, partially offset by
an increase in fee income.
NET INVESTMENT INCOME totaled $14.5 million in Fiscal 1997 and $14.6 million in
Fiscal 1996. These amounts represent 2.32% on average invested assets (computed
on a daily basis) of $2.50 billion in Fiscal 1997 and 3.00% on average invested
assets of $1.95 billion in Fiscal 1996.
The excess of average invested assets over average interest-bearing liabilities
amounted to $150.5 million in Fiscal 1997 and $131.2 million in Fiscal 1996. The
difference between Anchor National's yield on average invested assets and the
rate paid on average interest-bearing liabilities was 1.99% in Fiscal 1997 and
2.65% in Fiscal 1996.
Investment income and the related yields on average invested assets totaled
$46.7 million or 7.46% in Fiscal 1997, compared with $38.7 million or 7.95% in
Fiscal 1996.
Investment income rose during Fiscal 1997 as a result of higher levels of
average invested assets, partially offset by reduced investment yields.
Investment yields were lower in Fiscal 1997 because of a generally declining
interest rate environment since early 1995 and lower contributions from Anchor
National's investments in partnerships. Partnership income totaled $0.7 million
in Fiscal 1997 and $1.4 million in Fiscal 1996. This income represents a yield
of 6.71% on related average assets of $44.6 million in Fiscal 1997, compared
with 11.60% on related average assets of $48.7 million in Fiscal 1996.
Partnership income is based upon cash distributions received from limited
partnerships, the operations of which Anchor National does not significantly
influence. Consequently, such income is not predictable and there can be no
assurance that Anchor National will realize comparable levels of such income in
the future.
Total interest expense aggregated $32.2 million in Fiscal 1997 and $24.0 million
in Fiscal 1996. The average rate paid on all interest-bearing liabilities was
5.47% (5.34% on fixed annuity contracts and 5.81% on GICs) in Fiscal 1997,
compared with 5.30% (5.10% on fixed annuity contracts and 6.19% on GICs) in
Fiscal 1996. Interest-bearing liabilities averaged $2.35 billion during Fiscal
1997, compared with $1.81 billion during Fiscal 1996.
The increase in the average rates paid on fixed annuity contracts during Fiscal
1997 primarily resulted from the impact of certain promotional one-year interest
rates offered on Anchor National's Polaris variable annuity product. The decline
in interest paid on GICs reflects the generally declining interest rate
environment and its effect on the variable-rate GIC portfolio.
The growth in average invested assets since 1995 primarily reflects sales of
Anchor National's fixed-rate products, consisting of both fixed accounts of
variable annuity products and GICs. Since December 31, 1995, fixed annuity
premiums have aggregated $1.04 billion and GIC premiums have totaled $140.0
million. Fixed annuity premiums totaled $362.8 million in Fiscal 1997, compared
with $62.5 million in Fiscal 1996. This increase in premiums resulted primarily
from greater inflows into the one-year fixed account of Anchor National's
Polaris variable annuity product. Anchor National has observed that many
purchasers of its variable annuity contracts allocate new premiums to the
one-year fixed account and concurrently sign up for the option to dollar costs
average into the variable fund. Accordingly, Anchor National anticipates that it
will see a large portion of these premiums transferred into the separate
accounts.
GIC premiums totaled $5.0 million in Fiscal 1997. There were no GIC premiums in
Fiscal 1996.
NET REALIZED INVESTMENT LOSSES totaled $19.1 million in Fiscal 1997 and $12.8
million in Fiscal 1996. Net realized investment losses include impairment
writedowns of $16.1 million in Fiscal 1997 and $14.9 million in Fiscal 1996.
Therefore, net losses from sales of investments totaled $3.0 million in Fiscal
1997, compared with net gains of $2.1 million in Fiscal 1996.
Impairment writedowns reflect $15.7 million and $14.9 million of provisions
applied to non-income producing land in Arizona in Fiscal 1997 and Fiscal 1996,
respectively. The statutory carrying value of this land had been guaranteed by
Anchor National's ultimate Parent, SunAmerica. SunAmerica made capital
contributions of $28.4 million and $27.4 million on December 31, 1996 and 1995,
respectively, to Anchor National through Anchor National's direct parent in
exchange for the termination of its guaranty with respect to this land.
Accordingly, Anchor National reduced the carrying value of this land to
estimated fair value to reflect the termination of the guaranty. The Parent's
guaranty has been fully terminated. Impairment writedowns, on an annualized
basis, represent 2.51% and 3.06% of average invested assets in Fiscal 1997 and
1996, respectively. Such writedowns are based upon estimates of the net
realizable value of the applicable assets. Actual realization will be dependent
upon future events.
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<PAGE> 33
VARIABLE ANNUITY FEES increased to $30.6 million in Fiscal 1997 from $24.3
million in Fiscal 1996. The increase in variable annuity fees in Fiscal 1997
reflects growth in average variable annuity assets, principally due to increased
market values and the receipt of variable annuity premiums, partially offset by
surrenders. Variable annuity assets averaged $6.60 billion during Fiscal 1997
and $5.29 billion during Fiscal 1996. Variable annuity premiums, which exclude
premiums allocated to the fixed accounts of variable annuity products, have
aggregated $937.1 million since December 31, 1995. Variable annuity premiums
increased to $226.8 million in Fiscal 1997 from $209.5 million in Fiscal 1996.
This increase may be attributed, in part, to a heightened demand for equity
investments, principally as a result of generally improved market performance.
NET RETAINED COMMISSIONS totaled $7.8 million in Fiscal 1997 and $6.5 million in
Fiscal 1996. Broker-dealer sales (mainly sales of general securities, mutual
funds and annuities) totaled $2.03 billion in Fiscal 1997 and $1.75 billion in
Fiscal 1996. The significant increases in sales and net retained commissions
during Fiscal 1997 reflect a greater number of registered representatives and
higher average production, combined with generally favorable market conditions.
ASSET MANAGEMENT FEES totaled $6.4 million on average assets managed of $2.21
billion in Fiscal 1997 and $6.5 million on average assets managed of $2.15
billion in Fiscal 1996. Asset management fees decreased slightly in Fiscal 1997,
despite a modest increase in average assets managed, principally due to changes
in product mix. Sales of mutual funds, excluding sales of money market accounts,
have aggregated $249.5 million since December 31, 1995. Mutual fund sales
totaled $62.3 million in Fiscal 1997 and $36.3 million in Fiscal 1996. Higher
mutual funds sales in Fiscal 1997 include $14.3 million of sales from Anchor
National's "Style Select Series," a product introduced in November 1996. Sales
in Fiscal 1997 also reflect the combined effects of additional advertising,
increased distribution, the favorable performance records of certain of Anchor
National's mutual funds, and heightened demand for equity investments,
principally as a result of improved market performance. Redemptions of mutual
funds, excluding redemptions of money market accounts, amounted to $103.7
million in Fiscal 1997 and $97.6 million in Fiscal 1996.
SURRENDER CHARGES on fixed and variable annuities totaled $1.4 million in Fiscal
1997 and $1.3 million in Fiscal 1996. Withdrawal payments, which include
surrenders and lump-sum annuity benefits, totaled $238.1 million in Fiscal 1997
and $215.1 million in Fiscal 1996. These payments represent 11.4% and 12.9%,
respectively, of the aggregate of average fixed and variable annuity reserves.
Withdrawals include variable annuity payments from the separate accounts
totaling $176.0 million in Fiscal 1997 and $154.5 million in Fiscal 1996.
Approximately 67% of Anchor National's fixed annuity and GIC reserves had
surrender penalties or other restrictions at December 31, 1996. Although
variable annuity surrenders have increased, principally as a result of growth in
the variable annuity separate accounts, variable annuity withdrawal rates have
declined. Variable annuity surrenders represent 10.7% and 11.8%, respectively,
of average variable annuity liabilities in Fiscal 1997 and Fiscal 1996. Fixed
annuity surrenders have increased slightly to $62.1 million in Fiscal 1997 from
$60.6 million in Fiscal 1996 as the fixed annuity reserves have grown.
Management anticipates that withdrawal rates will remain relatively stable for
the foreseeable future.
GENERAL AND ADMINISTRATIVE EXPENSES totaled $22.3 million in Fiscal 1997,
compared with $17.0 million in Fiscal 1996. Expenses in Fiscal 1997 increased
primarily due to a growing block of business. Expenses remain closely controlled
through a company-wide cost containment program and continue to represent
approximately 1% of average total assets on an annualized basis.
AMORTIZATION OF DEFERRED ACQUISITION COSTS totaled $13.8 million in Fiscal 1997
and $13.7 million in Fiscal 1996 and represent for each period, on an annualized
basis, approximately 14% of the balance of deferred acquisition costs at the
beginning of each period. The slight increase in Fiscal 1997 was primarily due
to additional fixed and variable annuity and mutual fund sales and the
subsequent amortization of related deferred commissions and other acquisition
costs.
ANNUAL COMMISSIONS totaled $1.4 million in Fiscal 1997 and $0.9 million in
Fiscal 1996. The increase in annual commissions reflects increased sales of
annuities that offer this commission option. Anchor National estimates that
approximately 43% of the average balances of its variable annuity products are
currently subject to such annual commissions. Based on current sales, this
percentage is expected to increase in future periods.
INCOME TAX EXPENSE totaled $1.6 million in Fiscal 1997 and $3.4 million in
Fiscal 1996, representing effective tax rates of 32% and 37%, respectively. The
lower rate in Fiscal 1997 is primarily due to the impact of state taxes in the
prior year.
FINANCIAL CONDITION AND LIQUIDITY AT DECEMBER 31, 1996
SHAREHOLDER'S EQUITY increased by $44.9 million to $530.1 million at December
31, 1996 from $485.3 million at September 30, 1996, primarily as a result of a
$28.4 million capital contribution and $3.3 million of net income recorded in
Fiscal 1997. Shareholder's equity at December 31, 1996 was also favorably
impacted by the recording of a $7.6 million net unrealized gain on debt and
equity securities available for sale, a $13.1 million improvement over the $5.5
million net unrealized loss recorded at September 30, 1996.
TOTAL ASSETS increased by $821.2 million to $10.03 billion at December 31, 1996
from $9.20 billion at September 30, 1996,
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<PAGE> 34
principally due to a $472.8 million increase in the separate accounts for
variable annuities and a $374.5 million increase in invested assets.
INVESTED ASSETS at December 31, 1996 totaled $2.70 billion, compared with $2.33
billion at September 30, 1996. This $374.5 million increase primarily resulted
from the sales of fixed annuities and a net increase in the amount payable to
brokers for purchases of securities.
THE BOND PORTFOLIO had an aggregate fair value that exceeded its amortized cost
by $17.0 million at December 31, 1996. At September 30, 1996, the amortized cost
of the Bond Portfolio exceeded its fair value by $13.8 million. The net
unrealized gain on the Bond Portfolio since September 30, 1996 principally
reflects the lower relative prevailing interest rates at December 31, 1996 and
their corresponding effect on the fair value of the Bond Portfolio.
All of the Bond Portfolio ($2.26 billion at amortized cost, excluding $6.5
million of redeemable preferred stocks), at December 31, 1996 was rated by S&P,
Moody's, DCR, Fitch or under comparable statutory rating guidelines established
by the NAIC and implemented by either the NAIC or Anchor National. At December
31, 1996, approximately $2.06 billion of the Bond Portfolio (at amortized cost)
was rated investment grade by one or more of these agencies or by Anchor
National or the NAIC, pursuant to applicable NAIC guidelines, including $1.13
billion of U.S. government/agency securities and MBSs.
At December 31, 1996, the Bond Portfolio included $198.9 million (fair value,
$202.8 million) of bonds not rated investment grade by S&P, Moody's, DCR, Fitch
or the NAIC. Based on their December 31, 1996 amortized cost, these
noninvestment-grade bonds accounted for 2.0% of Anchor National's total assets
and 7.4% of invested assets. Anchor National had no material concentrations of
non-investment-grade securities at December 31, 1996.
SENIOR SECURED LOANS are included in the Bond Portfolio and their amortized cost
aggregated $201.4 million at December 31, 1996. At December 31, 1996, Secured
Loans consisted of loans to 65 borrowers spanning 22 industries, with 12.7% of
these assets (at amortized cost) concentrated in the air transport industry. No
other industry concentration constituted more than 11.7% of these assets.
MORTGAGE LOANS aggregated $120.7 million at December 31, 1996 and consisted of
22 first mortgage loans with an average loan balance of approximately $5.5
million, collateralized by properties located in 13 states. At December 31,
1996, Anchor National had no concentrations in any single state or in any single
type of property that amounted to more than 24% of the mortgage loan portfolio.
At December 31, 1996, there were four loans with outstanding balances of $10
million or more, the largest of which had a balance of approximately $20.5
million, which collectively aggregated approximately 49% of the portfolio. At
December 31, 1996, approximately 26% of the mortgage loan portfolio consisted of
loans with balloon payments due before January 1, 2000. During Fiscal 1997 and
Fiscal 1996, loans delinquent by more than 90 days, foreclosed loans and
restructured loans have not been significant in relation to the portfolio.
Approximately 49% of the mortgage loans in the portfolio at December 31, 1996
were seasoned loans underwritten to Anchor National's standards and purchased at
or near par from another financial institution which was downsizing its
portfolio.
OTHER INVESTED ASSETS aggregated $77.5 million at December 31, 1996, including
$45.6 million of investments in limited partnerships and an aggregate of $31.9
million of miscellaneous investments, including policy loans, residuals,
separate account investments and leveraged leases. Anchor National's limited
partnership interests, accounted for by using the cost method of accounting,
invest mainly in equity securities.
DEFAULTED INVESTMENTS, comprising all investments that are in default as to the
payment of principal or interest, totaled $6.5 million at December 31, 1996 (at
amortized cost, with a fair value of $5.4 million) including $5.0 million of
bonds and notes and $1.5 million of mortgage loans. At December 31, 1996
defaulted investments constituted 0.2% of total invested assets. At September
30, 1996, defaulted investments totaled $3.1 million, which constituted 0.1% of
total invested assets.
SOURCES OF LIQUIDITY are readily available to Anchor National in the form of
Anchor National's existing portfolio of cash and short-term investments, Reverse
Repo capacity on invested assets and, if required, proceeds from invested asset
sales. At December 31, 1996, approximately $1.22 billion of Anchor National's
Bond Portfolio had an aggregate unrealized gain of $38.4 million, while
approximately $1.04 billion of the Bond Portfolio had an aggregate unrealized
loss of $21.4 million. In addition, Anchor National's investment portfolio
currently provides approximately $22.6 million of monthly cash flow from
scheduled principal and interest payments.
PROPERTIES
Anchor National's principal office is leased at 1 SunAmerica Center, Los
Angeles, California 90067-6022. We also lease office space in Torrance,
California for recordkeeping and data processing functions. Anchor National's
asset manager and broker-dealer subsidiaries lease office space in New York, New
York.
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<PAGE> 35
DIRECTORS AND EXECUTIVE OFFICERS
Anchor National's directors and officers as of February 28, 1997 are listed
below:
<TABLE>
<CAPTION>
OTHER POSITIONS AND
YEAR OTHER BUSINESS
PRESENT ASSUMED EXPERIENCE WITHIN
NAME AGE POSITION(S) POSITION(S) LAST FIVE YEARS** FROM-TO
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Eli Broad* 63 Chairman, Chief Executive 1994 Co-founded SunAmerica Inc. (SAI)
Officer and President of Anchor in 1957
National
Chairman, Chief Executive 1986
Officer and President of SAI
- ----------------------------------------------------------------------------------------------------------------------------------
Joseph M. Tumbler* 48 Executive Vice President of 1996 President and Chief Executive 1989-1995
Anchor National Officer, Providian Capital
Vice Chairman of SAI 1995 Management
- ----------------------------------------------------------------------------------------------------------------------------------
Jay S. Wintrob* 39 Executive Vice President of 1991 Senior Vice President 1989-1991
Anchor National
Vice Chairman of SAI 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Victor E. Akin 32 Senior Vice President of Anchor 1996 Vice President, SunAmerica Life 1995-1996
National Companies
Director, SunAmerica Life 1994-1995
Companies
Manager, SunAmerica Life 1993-1994
Companies
Actuary, Milliman & Robertson 1992-1993
Consultant, Chalke Inc. 1991-1992
- ----------------------------------------------------------------------------------------------------------------------------------
James R. Belardi* 39 Senior Vice President of Anchor 1992 Vice President and Treasurer 1989-1992
National
Executive Vice President of SAI 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Lorin M. Fife* 43 Senior Vice President, General 1994 Vice President and General 1994-1995
Counsel and Assistant Secretary Counsel -- Regulatory Affairs of
of Anchor National SAI
Senior Vice President and 1995 Vice President and Associate 1989-1994
General Counsel -- Regulatory General Counsel of SAI
Affairs of SAI
- ----------------------------------------------------------------------------------------------------------------------------------
N. Scott Gillis 43 Senior Vice President and 1994 Vice President and Controller, 1989-1994
Controller of Anchor National SunAmerica Life Companies
- ----------------------------------------------------------------------------------------------------------------------------------
Jana W. Greer* 45 Senior Vice President of Anchor 1991 Vice President 1981-1991
National and SAI
President of SunAmerica 1995
Marketing, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
Susan L. Harris* 40 Senior Vice President and 1994 Vice President, General 1994-1995
Secretary of Anchor National Counsel -- Corporate Affairs and
Secretary of SAI
Senior Vice President, General 1995 Vice President, Associate 1989-1994
Counsel -- Corporate Affairs General Counsel and Secretary of
and Secretary of SAI SAI
- ----------------------------------------------------------------------------------------------------------------------------------
Peter McMillan, III* 39 Executive Vice President and 1994 Senior Vice President, 1989-1994
Chief Investment Officer of SunAmerica Investments, Inc.
SunAmerica Investments, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
Edwin R. Reoliquio 39 Senior Vice President and Chief 1995 Vice President and Actuary, 1989-1994
Actuary of Anchor National SunAmerica Life Companies
- ----------------------------------------------------------------------------------------------------------------------------------
Scott L. Robinson* 50 Senior Vice President and 1991 Vice President and Controller 1986-1991
Treasurer of Anchor National
Senior Vice President and
Controller of SAI
- ----------------------------------------------------------------------------------------------------------------------------------
James W. Rowan* 34 Senior Vice President of Anchor 1996 Vice President 1993-1995
National and SAI Assistant to the Chairman 1992
Senior Vice President, Security 1986-1992
Pacific Corp.
===================================================================================================================================
</TABLE>
* Also serves as a director.
** Unless otherwise noted, positions with SunAmerica Inc.
28
<PAGE> 36
EXECUTIVE COMPENSATION
All of Anchor National's executive officers are also employees of SunAmerica
Inc. or its affiliates and do not receive direct compensation from Anchor
National. Some of the executive officers also serve as officers of other
companies affiliated with Anchor National. We allocated the time each executive
officer spent devoted to his or her duties as an executive officer of Anchor
National to determine the executive compensation set forth below for the Chief
Executive Officer and the other four highest compensated executive officers, as
well as the executive officers as a group, for services rendered during 1996.
<TABLE>
<CAPTION>
----------------------------------------------------------------
NAME OF INDIVIDUAL CAPACITIES ALLOCATED
OR NUMBER IN WHICH CASH
IN GROUP SERVED COMPENSATION
----------------------------------------------------------------
<S> <C> <C>
Eli Broad Chairman, Chief Executive
Officer and President $1,444,146
Joseph M. Tumbler Executive Vice President 834,708
Jay S. Wintrob Executive Vice President 836,327
James R. Belardi Senior Vice President 341,329
Jana W. Greer Senior Vice President 420,171
All Executive Officers
as a Group(12) $5,056,560
- -------------------------------------------------------------------
</TABLE>
SECURITY OWNERSHIP OF OWNERS AND MANAGEMENT
No shares of Anchor National are owned by any executive officer or director.
Anchor National is an indirect wholly-owned subsidiary of SunAmerica Inc. The
only officer or director that owned more than 1% of the shares of SunAmerica
Inc. is Mr. Eli Broad. At February 28, 1997, Mr. Broad beneficially owned
6,655,176 shares of Common Stock (approximately 5.8% of the class outstanding)
and 9,160,294 shares of Class B Common Stock (approximately 84.4% of the class
outstanding). Of the Common Stock, 715,872 shares represent restricted shares
granted under the Anchor National's employee stock plans as to which Mr. Broad
has no investment power; 75,846 shares are registered in the name of a
corporation to which Mr. Broad is a director and has sole voting and investment
power; 4,150,932 shares represent employee stock options which are or will
become within the next 60 days and as to which he has no voting or investment
power. At February 28, 1997, all directors and officers as a group beneficially
owned 10,344,440 shares of Common Stock (approximately 9% of the class
outstanding) and 9,160,294 shares of Class B Common Stock (approximately 84.4%
of the class outstanding).
STATE REGULATION
Anchor National is subject to regulation and supervision by the states in which
it is authorized to transact business. State insurance laws establish
supervisory agencies with broad administrative and supervisory powers related to
granting and revoking licenses to transact business, regulating marketing and
other trade practices, operating guaranty associations, licensing agents,
approving policy forms, regulating certain premium rates, regulating insurance
holding company systems, establishing reserve requirements, prescribing the form
and content of required financial statements and reports, performing financial
and other examinations, determining the reasonableness and adequacy of statutory
capital and surplus, regulating the type, valuation and amount of investments
permitted, limiting the amount of dividends that can be paid and the size of
transactions that can be consummated without first obtaining regulatory approval
and other related matters.
During the last decade, the insurance regulatory framework has been placed under
increased scrutiny by various states, the federal government and the NAIC.
Various states have considered or enacted legislation that changes, and in many
cases increases, the states' authority to regulate insurance companies.
Legislation has been introduced from time to time in Congress that could result
in the federal government assuming some role in the regulation of insurance
companies. In recent years, the NAIC has approved and recommended to the states
for adoption and implementation several regulatory initiatives designed to
reduce the risk of insurance company insolvencies and market conduct violations.
These initiatives include investment reserve requirements, risk-based capital
standards, new investment standards and restrictions on an insurance company's
ability to pay dividends to its stockholders. The NAIC is also currently
developing model laws relating to product design and illustrations for annuity
products. Current proposals are still being debated and Anchor National is
monitoring developments in this area and the effects any changes would have on
Anchor National.
SunAmerica Asset Management Corp. is registered with the SEC as a registered
investment adviser under the Investment Advisers Act of 1940. The mutual funds
that it markets are subject to regulation under the Investment Company Act of
1940. SunAmerica Asset Management Corp. and the mutual funds are subject to
regulation and examination by the SEC. In addition, variable annuities and the
related separate accounts of Anchor National are subject to regulation by the
SEC under the Securities Act of 1933 and the Investment Company Act of 1940.
29
<PAGE> 37
INDEPENDENT ACCOUNTANTS
The consolidated financial statements of Anchor National as of September 30,
1996 and 1995 and for each of the three years in the period ended September 30,
1996 included in this prospectus have been included in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
================================================================================
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
================================================================================
<TABLE>
<S> <C>
Separate Account.......................................................... 3
General Account........................................................... 4
Performance Data.......................................................... 4
Annuity Payments.......................................................... 8
Annuity Unit Values....................................................... 9
Taxes..................................................................... 12
Distribution of Contracts................................................. 16
Financial Statements...................................................... 16
</TABLE>
================================================================================
FINANCIAL STATEMENTS
================================================================================
The consolidated financial statements of Anchor National which are included in
this prospectus should be considered only as bearing on the ability Anchor
National to meet its obligations with respect to amounts allocated to the fixed
investment options and with respect to the death benefit and our assumption of
the mortality and expense risks and the risks that the withdrawal charge will
not be sufficient to cover the cost of distributing the contracts. They should
not be considered as bearing on the investment performance of the variable
Portfolios. The value of the variable Portfolios is affected primarily by the
performance of the underlying investments.
30
<PAGE> 38
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
Anchor National Life Insurance Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated income statement and statement of cash flows present fairly, in all
material respects, the financial position of Anchor National Life Insurance
Company and its subsidiaries at September 30, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 2, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," in fiscal 1994.
Price Waterhouse LLP
Los Angeles, California
November 8, 1996
31
<PAGE> 39
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1995 1996 1996
-------------- -------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Investments:
Cash and short-term investments.......................... $ 249,209,000 $ 122,058,000 $ 196,142,000
Bonds, notes and redeemable preferred stocks:
Available for sale, at fair value (amortized cost:
September 1995, $1,500,062,000; September 1996,
$2,001,024,000; December 1996, $2,264,485,000)...... 1,489,213,000 1,987,271,000 2,281,527,000
Held for investment, at amortized cost (fair value:
September 1995, $165,004,000)......................... 157,901,000 -- --
Mortgage loans........................................... 94,260,000 98,284,000 120,680,000
Common stocks, at fair value (cost: September 1995,
$6,576,000; September 1996, $2,911,000; December 1996,
$2,510,000)........................................... 4,097,000 3,970,000 3,842,000
Real estate.............................................. 55,798,000 39,724,000 24,000,000
Other invested assets.................................... 64,430,000 77,925,000 77,492,000
-------------- -------------- ---------------
Total investments................................ 2,114,908,000 2,329,232,000 2,703,683,000
Variable annuity assets.................................... 5,230,246,000 6,311,557,000 6,784,374,000
Receivable from brokers for sales of securities............ -- 52,348,000 --
Accrued investment income.................................. 14,192,000 19,675,000 20,404,000
Deferred acquisition costs................................. 383,069,000 443,610,000 461,637,000
Other assets............................................... 41,282,000 48,113,000 55,610,000
-------------- -------------- ---------------
TOTAL ASSETS..................................... $7,783,697,000 $9,204,535,000 $10,025,708,000
-------------- -------------- ---------------
LIABILITIES AND SHAREHOLDER'S EQUITY
Reserves, payables and accrued liabilities:
Reserves for fixed annuity contracts..................... $1,497,052,000 $1,789,962,000 $ 2,024,873,000
Reserves for guaranteed investment contracts............. 277,095,000 415,544,000 420,871,000
Payable to brokers for purchases of securities........... 155,861,000 -- 49,991,000
Income taxes currently payable........................... 15,720,000 21,486,000 23,807,000
Other liabilities........................................ 56,372,000 74,710,000 83,824,000
-------------- -------------- ---------------
Total reserves, payables and accrued
liabilities.................................... 2,002,100,000 2,301,702,000 2,603,366,000
-------------- -------------- ---------------
Variable annuity liabilities............................... 5,230,246,000 6,311,557,000 6,784,374,000
-------------- -------------- ---------------
Subordinated notes payable to Parent....................... 35,832,000 35,832,000 35,903,000
-------------- -------------- ---------------
Deferred income taxes...................................... 73,459,000 70,189,000 71,943,000
-------------- -------------- ---------------
Shareholder's equity:
Common Stock............................................. 3,511,000 3,511,000 3,511,000
Additional paid-in capital............................... 252,876,000 280,263,000 308,674,000
Retained earnings........................................ 191,346,000 207,002,000 210,348,000
Net unrealized gains (losses) on debt and equity
securities available for sale......................... (5,673,000) (5,521,000) 7,589,000
-------------- -------------- ---------------
Total shareholder's equity....................... 442,060,000 485,255,000 530,122,000
-------------- -------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY....... $7,783,697,000 $9,204,535,000 $10,025,708,000
-------------- -------------- ---------------
</TABLE>
See accompanying notes
32
<PAGE> 40
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED INCOME STATEMENT
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, DECEMBER 31,
---------------------------------------------- ----------------------------
1994 1995 1996 1995 1996
------------ ------------- ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Investment income.................. $127,758,000 $ 129,466,000 $ 164,631,000 $ 38,653,000 $ 46,712,000
------------ ------------- ------------- ------------ ------------
Interest expense on:
Fixed annuity contracts.......... (66,311,000) (72,975,000) (82,690,000) (18,936,000) (25,191,000)
Guaranteed investment
contracts..................... -- (3,733,000) (19,974,000) (4,272,000) (6,038,000)
Senior indebtedness.............. (71,000) (227,000) (2,568,000) (195,000) (181,000)
Subordinated notes payable to
Parent........................ (2,380,000) (2,448,000) (2,556,000) (633,000) (758,000)
------------ ------------- ------------- ------------ ------------
Total interest expense........... (68,762,000) (79,383,000) (107,788,000) (24,036,000) (32,168,000)
------------ ------------- ------------- ------------ ------------
NET INVESTMENT INCOME.............. 58,996,000 50,083,000 56,843,000 14,617,000 14,544,000
------------ ------------- ------------- ------------ ------------
NET REALIZED INVESTMENT LOSSES..... (33,713,000) (4,363,000) (13,355,000) (12,800,000) (19,116,000)
------------ ------------- ------------- ------------ ------------
Fee income:
Variable annuity fees............ 79,101,000 84,171,000 103,970,000 24,290,000 30,606,000
Net retained commissions......... 20,822,000 24,108,000 31,548,000 6,491,000 7,796,000
Asset management fees............ 31,302,000 26,935,000 25,413,000 6,503,000 6,418,000
------------ ------------- ------------- ------------ ------------
TOTAL FEE INCOME................... 131,225,000 135,214,000 160,931,000 37,284,000 44,820,000
------------ ------------- ------------- ------------ ------------
Other income and expenses:
Surrender charges................ 5,034,000 5,889,000 5,184,000 1,261,000 1,350,000
General and administrative
expenses...................... (52,636,000) (61,629,000) (80,048,000) (16,997,000) (22,322,000)
Amortization of deferred
acquisition costs............. (44,195,000) (58,713,000) (57,520,000) (13,658,000) (13,817,000)
Annual commissions............... (1,158,000) (2,658,000) (4,613,000) (939,000) (1,433,000)
Other, net....................... 3,767,000 1,174,000 1,886,000 507,000 920,000
------------ ------------- ------------- ------------ ------------
TOTAL OTHER INCOME AND EXPENSES.... (89,188,000) (115,937,000) (135,111,000) (29,826,000) (35,302,000)
------------ ------------- ------------- ------------ ------------
PRETAX INCOME...................... 67,320,000 64,997,000 69,308,000 9,275,000 4,946,000
Income tax expense................. (22,705,000) (25,739,000) (24,252,000) (3,449,000) (1,600,000)
------------ ------------- ------------- ------------ ------------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING FOR INCOME
TAXES............................ 44,615,000 39,258,000 45,056,000 5,826,000 3,346,000
Cumulative effect of change in
accounting for income taxes...... (20,463,000) -- -- -- --
------------ ------------- ------------- ------------ ------------
NET INCOME......................... $ 24,152,000 $ 39,258,000 $ 45,056,000 $ 5,826,000 $ 3,346,000
------------ ------------- ------------- ------------ ------------
</TABLE>
See accompanying notes
33
<PAGE> 41
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, DECEMBER 31,
--------------------------------------------------- -------------------------------
1994 1995 1996 1995 1996
--------------- --------------- --------------- ------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................ $ 24,152,000 $ 39,258,000 $ 45,056,000 $ 5,826,000 $ 3,346,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Interest credited to:
Fixed annuity contracts............... 66,311,000 72,975,000 82,690,000 18,936,000 25,191,000
Guaranteed investment contracts....... -- 3,733,000 19,974,000 4,272,000 6,038,000
Net realized investment losses........ 33,713,000 4,363,000 13,355,000 12,800,000 19,116,000
Accretion of net discounts on
investments......................... (2,050,000) (6,865,000) (8,976,000) (1,669,000) (2,615,000)
Amortization of goodwill.............. 1,169,000 1,168,000 1,169,000 293,000 291,000
Provision for deferred income taxes... 19,395,000 (1,489,000) (3,351,000) (6,541,000) (5,305,000)
Cumulative effect of change in
accounting for income taxes......... 20,463,000 -- -- -- --
Change in:
Accrued investment income............... (1,310,000) 3,373,000 (5,483,000) (3,683,000) (729,000)
Deferred acquisition costs.............. (34,612,000) (7,180,000) (60,941,000) (5,853,000) (28,927,000)
Other assets............................ 5,133,000 7,047,000 (8,000,000) (6,902,000) (7,788,000)
Income taxes currently payable.......... 6,559,000 3,389,000 5,766,000 5,749,000 2,321,000
Other liabilities....................... 46,000 4,063,000 5,474,000 428,000 3,924,000
Other, net................................ 360,000 7,000 (129,000) 85,000 (6,000)
--------------- --------------- --------------- ------------- ---------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES:............................. 139,329,000 123,842,000 86,604,000 23,741,000 14,857,000
--------------- --------------- --------------- ------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Premium receipts on:
Fixed annuity contracts............... 138,526,000 245,320,000 651,649,000 62,536,000 325,993,000
Guaranteed investment contracts....... -- 275,000,000 134,967,000 -- 5,000,000
Net exchanges to (from) the fixed
accounts of variable annuity
contracts............................. (29,286,000) 10,475,000 (236,705,000) (36,865,000) (82,234,000)
Withdrawal payments on:
Fixed annuity contracts............... (269,412,000) (237,977,000) (173,489,000) (60,577,000) (25,292,000)
Guaranteed investment contracts....... -- (1,638,000) (16,492,000) (4,200,000) (5,711,000)
Claims and annuity payments on fixed
annuity contracts..................... (31,146,000) (31,237,000) (31,107,000) (7,202,000) (8,741,000)
Net receipts from (repayments of) other
short-term financings................. (166,685,000) 3,202,000 (119,712,000) (131,379,000) 10,308,000
Capital contributions received.......... -- -- 27,387,000 27,387,000 28,411,000
Dividend paid........................... -- -- (29,400,000) -- --
--------------- --------------- --------------- ------------- ---------------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES.............................. (358,003,000) 263,145,000 207,098,000 (150,300,000) 247,734,000
--------------- --------------- --------------- ------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of:
Bonds, notes and redeemable preferred
stocks.............................. (1,197,743,000) (1,556,586,000) (1,937,890,000) (230,071,000) (1,068,608,000)
Mortgage loans........................ (10,666,000) -- (15,000,000) -- (25,124,000)
Other investments, excluding
short-term investments.............. (26,317,000) (13,028,000) (36,770,000) (2,698,000) (3,108,000)
Sales of:
Bonds, notes and redeemable preferred
stocks.............................. 877,068,000 1,026,078,000 1,241,928,000 186,979,000 833,249,000
Real estate........................... 33,443,000 36,813,000 900,000 -- --
Other investments, excluding
short-term investments.............. 2,353,000 5,130,000 4,937,000 1,397,000 856,000
Redemptions and maturities of:
Bonds, notes and redeemable preferred
stocks.............................. 173,763,000 178,688,000 288,969,000 44,943,000 67,201,000
Mortgage loans........................ 10,087,000 14,403,000 11,324,000 1,428,000 2,806,000
Other investments, excluding
short-term investments.............. 13,500,000 13,286,000 20,749,000 2,658,000 4,221,000
--------------- --------------- --------------- ------------- ---------------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES.............................. (124,512,000) (295,216,000) (420,853,000) 4,636,000 (188,507,000)
--------------- --------------- --------------- ------------- ---------------
NET INCREASE (DECREASE) IN CASH AND
SHORT-TERM INVESTMENTS.................. (343,186,000) 91,771,000 (127,151,000) (121,923,000) 74,084,000
CASH AND SHORT-TERM INVESTMENTS AT
BEGINNING OF PERIOD..................... 500,624,000 157,438,000 249,209,000 249,209,000 122,058,000
--------------- --------------- --------------- ------------- ---------------
CASH AND SHORT-TERM INVESTMENTS AT END OF
PERIOD.................................. $ 157,438,000 $ 249,209,000 $ 122,058,000 $ 127,286,000 $ 196,142,000
--------------- --------------- --------------- ------------- ---------------
Supplemental cash flow information:
Interest paid on indebtedness........... $ 1,175,000 $ 3,235,000 $ 5,982,000 $ 661,000 $ 288,000
--------------- --------------- --------------- ------------- ---------------
Net income taxes paid (recovered)....... $ (3,328,000) $ 23,656,000 $ 22,031,000 $ 4,247,000 $ 4,584,000
--------------- --------------- --------------- ------------- ---------------
</TABLE>
See accompanying notes
34
<PAGE> 42
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
Anchor National Life Insurance Company (the "Company") is a wholly owned
indirect subsidiary of SunAmerica, Inc. (the "Parent"). The Company is an
Arizona-domiciled life insurance company and, on a consolidated basis, conducts
its business through three segments: annuity operations, asset management
operations and broker-dealer operations. Annuity operations include the sale and
administration of fixed and variable annuities and guaranteed investment
contracts. Asset management operations, which include the sale and management of
mutual funds, is conducted by SunAmerica Asset Management Corp. Broker-dealer
operations include the sale of securities and financial services products, and
is conducted by Royal Alliance Associates, Inc.
The operations of the Company are influenced by many factors, including general
economic conditions, monetary and fiscal policies of the federal government, and
policies of state and other regulatory authorities. The level of sales of the
Company's financial products is influenced by many factors, including general
market rates of interest; strength, weakness and volatility of equity markets;
and terms and conditions of competing financial products. The Company is exposed
to the typical risks normally associated with a portfolio of fixed-income
securities, namely interest rate, option, liquidity and credit risks. The
Company controls its exposure to these risks by, among other things, closely
monitoring and matching the duration of its assets and liabilities, monitoring
and limiting prepayment and extension risk in its portfolio, maintaining a large
percentage of its portfolio in highly liquid securities, and engaging in a
disciplined process of underwriting, reviewing and monitoring credit risk. The
Company also is exposed to market risk, as market volatility may result in
reduced fee income in the case of assets managed in mutual funds and held in
separate accounts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The accompanying consolidated financial statements have
been prepared in accordance with generally accepted accounting principles and
include the accounts of the Company and all of its wholly owned subsidiaries.
All significant intercompany accounts and transactions are eliminated in
consolidation. Certain 1995 and 1994 amounts have been reclassified to conform
with the 1996 presentation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the amounts reported in the financial statements and the accompanying notes.
Actual results could differ from those estimates.
The interim financial information is unaudited; however, in the opinion of the
Company, the interim financial information includes all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of
financial condition, results of operations and cash flows.
RECENTLY ISSUED ACCOUNTING STANDARDS: Effective October 1, 1993, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Accordingly, the cumulative effect of this change
in accounting for income taxes was recorded on October 1, 1993 to increase the
liability for Deferred Income Taxes by $20,463,000.
INVESTMENTS: Cash and short-term investments primarily include cash, commercial
paper, money market investments, repurchase agreements and short-term bank
participations. All such investments are carried at cost plus accrued interest,
which approximates fair value, have maturities of three months or less and are
considered cash equivalents for purposes of reporting cash flows.
Bonds, notes and redeemable preferred stocks available for sale and common
stocks are carried at aggregate fair value and changes in unrealized gains or
losses, net of tax, are credited or charged directly to shareholder's equity.
Bonds, notes and redeemable preferred stocks held for investment (the "Held for
Investment Portfolio") are carried at amortized cost. On December 1, 1995, the
Company reassessed the appropriateness of classifying a portion of its portfolio
of bonds, notes and redeemable preferred stocks as held for investment. This
reassessment was made pursuant to the provisions of "Special Report: A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities," issued by the Financial Accounting Standards Board in
November 1995. As a result of its reassessment, the Company reclassified all of
its Held for Investment Portfolio as available for sale. At December 1, 1995,
the amortized cost of the Held for Investment Portfolio aggregated $157,830,000
and its fair value was $166,215,000. Upon reclassification, the resulting net
unrealized gain of $8,385,000 was credited to Net Unrealized Losses on Debt and
Equity Securities Available for Sale in the shareholder's equity section of the
balance sheet.
35
<PAGE> 43
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Bonds, notes and redeemable preferred stocks are reduced to estimated net
realizable value when necessary for declines in value considered to be other
than temporary. Estimates of net realizable value are subjective and actual
realization will be dependent upon future events.
Mortgage loans are carried at amortized unpaid balances, net of provisions for
estimated losses. Real estate is carried at the lower of cost or fair value.
Other invested assets include investments in limited partnerships, which are
accounted for by using the cost method of accounting; separate account
investments; leveraged leases; policy loans, which are carried at unpaid
balances; and collateralized mortgage obligation residuals.
Realized gains and losses on the sale of investments are recognized in
operations at the date of sale and are determined using the specific cost
identification method. Premiums and discounts on investments are amortized to
investment income using the interest method over the contractual lives of the
investments.
DEFERRED ACQUISITION COSTS: Policy acquisition costs are deferred and
amortized, with interest, over the estimated lives of the contracts in relation
to the present value of estimated gross profits, which are composed of net
interest income, net realized investment gains and losses, variable annuity
fees, surrender charges and direct administrative expenses. Costs incurred to
sell mutual funds are also deferred and amortized over the estimated lives of
the funds obtained. Deferred acquisition costs consist of commissions and other
costs that vary with, and are primarily related to, the production or
acquisition of new business.
As debt and equity securities available for sale are carried at aggregate fair
value, an adjustment is made to deferred acquisition costs equal to the change
in amortization that would have been recorded if such securities had been sold
at their stated aggregate fair value and the proceeds reinvested at current
yields. The change in this adjustment, net of tax, is included with the change
in net unrealized gains or losses on debt and equity securities available for
sale that is credited or charged directly to shareholder's equity. Deferred
Acquisition Costs have been increased by $4,200,000 at September 30, 1996, and
by $4,600,000 at September 30, 1995 for this adjustment.
VARIABLE ANNUITY ASSETS AND LIABILITIES: The assets and liabilities resulting
from the receipt of variable annuity premiums are segregated in separate
accounts. The Company receives administrative fees for managing the funds and
other fees for assuming mortality and certain expense risks. Such fees are
included in Variable Annuity Fees in the income statement.
GOODWILL: Goodwill, amounting to $19,478,000 at September 30, 1996, is
amortized by using the straight-line method over periods averaging 25 years and
is included in Other Assets in the balance sheet.
CONTRACTHOLDER RESERVES: Contractholder reserves for fixed annuity contracts
and guaranteed investment contracts are accounted for as investment-type
contracts in accordance with Statement of Financial Accounting Standards No. 97,
"Accounting and Reporting by Insurance Enterprises for Certain Long-Duration
Contracts and for Realized Gains and Losses from the Sale of Investments," and
are recorded at accumulated value (premiums received, plus accrued interest,
less withdrawals and assessed fees).
FEE INCOME: Variable annuity fees and asset management fees are recorded in
income as earned. Net retained commissions are recognized as income on a
trade-date basis.
INCOME TAXES: The Company is included in the consolidated federal income tax
return of the Parent and files as a "life insurance company" under the
provisions of the Internal Revenue Code of 1986. Income taxes have been
calculated as if the Company filed a separate return. Deferred income tax assets
and liabilities are recognized based on the difference between financial
statement carrying amounts and income tax bases of assets and liabilities using
enacted income tax rates and laws.
36
<PAGE> 44
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INVESTMENTS
The amortized cost and estimated fair value of bonds, notes and redeemable
preferred stocks available for sale and held for investment by major category
follow:
<TABLE>
<CAPTION>
AMORTIZED COST ESTIMATED FAIR VALUE
-------------- --------------------
<S> <C> <C>
AT SEPTEMBER 30, 1996:
AVAILABLE FOR SALE:
Securities of the United States Government................... $ 311,458,000 $ 304,538,000
Mortgage-backed securities................................... 747,653,000 741,876,000
Securities of public utilities............................... 3,684,000 3,672,000
Corporate bonds and notes.................................... 590,071,000 591,148,000
Redeemable preferred stocks.................................. 9,064,000 8,664,000
Other debt securities........................................ 339,094,000 337,373,000
-------------- --------------
Total available for sale..................................... $2,001,024,000 $1,987,271,000
-------------- --------------
AT SEPTEMBER 30, 1995:
AVAILABLE FOR SALE:
Securities of the United States Government................... $ 59,756,000 $ 60,258,000
Mortgage-backed securities................................... 1,121,064,000 1,110,676,000
Securities of public utilities............................... 792,000 774,000
Corporate bonds and notes.................................... 290,924,000 288,883,000
Redeemable preferred stocks.................................. 3,945,000 4,937,000
Other debt securities........................................ 23,581,000 23,685,000
-------------- --------------
Total available for sale..................................... $1,500,062,000 $1,489,213,000
-------------- --------------
HELD FOR INVESTMENT:
Securities of the United States Government................... $ 10,379,000 $ 10,797,000
Mortgage-backed securities................................... 8,378,000 8,378,000
Corporate bonds and notes.................................... 105,980,000 112,665,000
Other debt securities........................................ 33,164,000 33,164,000
-------------- --------------
Total held for investment.................................... $ 157,901,000 $ 165,004,000
-------------- --------------
</TABLE>
The amortized cost and estimated fair value of bonds, notes and redeemable
preferred stocks available for sale by contractual maturity, as of September 30,
1996, follow:
<TABLE>
<CAPTION>
AMORTIZED COST ESTIMATED FAIR VALUE
-------------- --------------------
<S> <C> <C>
AVAILABLE FOR SALE:
Due in one year or less...................................... $ 18,792,000 $ 19,357,000
Due after one year through five years........................ 505,564,000 499,163,000
Due after five years through ten years....................... 378,249,000 378,250,000
Due after ten years.......................................... 350,766,000 348,625,000
Mortgage-backed securities................................... 747,653,000 741,876,000
-------------- --------------
Total available for sale..................................... $2,001,024,000 $1,987,271,000
-------------- --------------
</TABLE>
Actual maturities of bonds, notes and redeemable preferred stocks will differ
from those shown above due to prepayments and redemptions.
37
<PAGE> 45
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INVESTMENTS -- (CONTINUED)
Gross unrealized gains and losses on bonds, notes and redeemable preferred
stocks available for sale and held for investment by major category follow:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED
GAINS LOSSES
---------------- ----------------
<S> <C> <C>
AT SEPTEMBER 30, 1996:
AVAILABLE FOR SALE:
Securities of the United States Government....................... $ 284,000 $ (7,204,000)
Mortgage-backed securities....................................... 7,734,000 (13,511,000)
Securities of public utilities................................... 1,000 (13,000)
Corporate bonds and notes........................................ 11,709,000 (10,632,000)
Redeemable preferred stocks...................................... 16,000 (416,000)
Other debt securities............................................ 431,000 (2,152,000)
------------ ------------
Total available for sale......................................... $ 20,175,000 $(33,928,000)
------------ ------------
AT SEPTEMBER 30, 1995:
AVAILABLE FOR SALE:
Securities of the United States Government....................... $ 553,000 $ (51,000)
Mortgage-backed securities....................................... 12,013,000 (22,401,000)
Securities of public utilities................................... -- (18,000)
Corporate bonds and notes........................................ 5,344,000 (7,385,000)
Redeemable preferred stocks...................................... 992,000 --
Other debt securities............................................ 104,000 --
------------ ------------
Total available for sale......................................... $ 19,006,000 $(29,855,000)
------------ ------------
HELD FOR INVESTMENT:
Securities of the United States Government....................... $ 432,000 $ (14,000)
Corporate bonds and notes........................................ 6,685,000 --
------------ ------------
Total held for investment........................................ $ 7,117,000 $ (14,000)
------------ ------------
</TABLE>
At September 30, 1996, gross unrealized gains on equity securities aggregated
$1,368,000 and gross unrealized losses aggregated $309,000. At September 30,
1995, gross unrealized gains on equity securities aggregated $1,082,000 and
gross unrealized losses aggregated $3,561,000.
38
<PAGE> 46
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INVESTMENTS -- (CONTINUED)
Gross realized investment gains and losses on sales of all types of investments
are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
BONDS, NOTES AND REDEEMABLE PREFERRED STOCKS:
Available for sale:
Realized gains.................................. $ 14,532,000 $ 15,983,000 $ 12,760,000
Realized losses................................. (10,432,000) (21,842,000) (31,066,000)
Held for investment:
Realized gains.................................. -- 2,413,000 890,000
Realized losses................................. -- (586,000) (1,913,000)
EQUITIES:
Realized gains..................................... 511,000 994,000 467,000
Realized losses.................................... (3,151,000) (114,000) (303,000)
OTHER INVESTMENTS:
Realized gains..................................... 1,135,000 3,561,000 --
Realized losses.................................... (1,729,000) (12,000) (358,000)
IMPAIRMENT WRITEDOWNS................................ (14,221,000) (4,760,000) (14,190,000)
------------ ------------ ------------
Total net realized investment losses................. $(13,355,000) $ (4,363,000) $(33,713,000)
------------ ------------ ------------
</TABLE>
The sources and related amounts of investment income are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Short-term investments............................... $ 10,647,000 $ 8,308,000 $ 4,648,000
Bonds, notes and redeemable preferred stocks......... 140,387,000 107,643,000 98,935,000
Mortgage loans....................................... 8,701,000 7,419,000 12,133,000
Common stocks........................................ 8,000 3,000 1,000
Real estate.......................................... (196,000) (51,000) 1,379,000
Limited partnerships................................. 4,073,000 5,128,000 9,487,000
Other invested assets................................ 1,011,000 1,016,000 1,175,000
------------ ------------ ------------
Total investment income.................... $164,631,000 $129,466,000 $127,758,000
------------ ------------ ------------
</TABLE>
Expenses incurred to manage the investment portfolio amounted to $1,737,000 for
the year ended September 30, 1996, $1,983,000 for the year ended September 30,
1995, and $1,714,000 for the year ended September 30, 1994 and are included in
General and Administrative Expenses in the income statement.
At September 30, 1996, no investment exceeded 10% of the Company's consolidated
shareholder's equity.
At September 30, 1996, mortgage loans were collateralized by properties located
in 11 states, with loans totaling approximately 21% of the aggregate carrying
value of the portfolio secured by properties located in Colorado, approximately
17% by properties located in New Jersey and approximately 14% by properties
located in California. No more than 12% of the portfolio was secured by
properties in any other single state.
At September 30, 1996, bonds, notes and redeemable preferred stocks included
$160,801,000 (fair value, $160,158,000) of bond and notes not rated investment
grade by either Standard & Poor's Corporation, Moody's Investors Service, Duff
and Phelps Credit Rating Co., Fitch Investor Service, Inc. or under National
Association of Insurance Commissioners' guidelines. The Company had no material
concentrations of non-investment-grade assets at September 30, 1996.
39
<PAGE> 47
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INVESTMENTS -- (CONTINUED)
At September 30, 1996, the amortized cost of investments in default as to the
payment of principal or interest was $3,115,000, consisting of $1,580,000 of
non-investment-grade bonds and $1,535,000 of mortgage loans. Such nonperforming
investments had an estimated fair value of $2,935,000.
At September 30, 1996, $6,486,000 of bonds, at amortized cost, were on deposit
with regulatory authorities in accordance with statutory requirements.
The Company has undertaken to dispose of certain real estate investments, having
an aggregate carrying value of $28,410,000, during the next year, to affiliated
or nonaffiliated parties, and the Parent has guaranteed that the Company will
receive its current carrying value for these assets. (This guaranty was
terminated on December 31, 1996. See Note 11 "Subsequent Event").
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value disclosures are limited to reasonable
estimates of the fair value of only the Company's financial instruments. The
disclosures do not address the value of the Company's recognized and
unrecognized nonfinancial assets (including its other invested assets, equity
investments and real estate investments) and liabilities or the value of
anticipated future business. The Company does not plan to sell most of its
assets or settle most of its liabilities at these estimated fair values.
The fair value of a financial instrument is the amount at which the instrument
could be exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. Selling expenses and potential taxes are not
included. The estimated fair value amounts were determined using available
market information, current pricing information and various valuation
methodologies. If quoted market prices were not readily available for a
financial instrument, management determined an estimated fair value.
Accordingly, the estimates may not be indicative of the amounts the financial
instruments could be exchanged for in a current or future market transaction.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
CASH AND SHORT TERM INVESTMENTS: Carrying value is considered to be a
reasonable estimate of fair value.
BONDS, NOTES AND REDEEMABLE PREFERRED STOCKS: Fair value is based principally
on independent pricing services, broker quotes and other independent
information.
MORTGAGE LOANS: Fair values are primarily determined by discounting future cash
flows to the present at current market rates, using expected prepayment rates.
VARIABLE ANNUITY ASSETS: Variable annuity assets are carried at the market
value of the underlying securities.
RECEIVABLE FROM (PAYABLE TO) BROKERS FOR SALES (PURCHASES) OF SECURITIES: Such
obligations represent net transactions of a short-term nature for which the
carrying value is considered a reasonable estimate of fair value.
RESERVES FOR FIXED ANNUITY CONTRACTS: Deferred annuity contracts and single
premium life contracts are assigned a fair value equal to current net surrender
value. Annuitized contracts are valued based on the present value of future cash
flows at current pricing rates.
RESERVES FOR GUARANTEED INVESTMENT CONTRACTS: Fair value is based on the
present value of future cash flows at current pricing rates.
VARIABLE ANNUITY LIABILITIES: Fair values of contracts in the accumulation
phase are based on net surrender values. Fair values of contracts in the payout
phase are based on the present value of future cash flows at assumed investment
rates.
40
<PAGE> 48
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
SUBORDINATED NOTES PAYABLE TO PARENT: Fair value is estimated based on the
quoted market prices for similar issues.
The estimated fair values of the Company's financial instruments at September
30, 1996 and 1995, compared with their respective carrying values, are as
follows:
<TABLE>
<CAPTION>
CARRYING VALUE FAIR VALUE
--------------- ---------------
<S> <C> <C>
1996:
ASSETS:
Cash and short-term investments........................ $ 122,058,000 $ 122,058,000
Bonds, notes and redeemable preferred stocks........... 1,987,271,000 1,987,271,000
Mortgage loans......................................... 98,284,000 102,112,000
Receivable from brokers for sales of securities........ 52,348,000 52,348,000
Variable annuity assets................................ 6,311,557,000 6,311,557,000
LIABILITIES:
Reserves for fixed annuity contracts................... 1,789,962,000 1,738,784,000
Reserves for guaranteed investment contracts........... 415,544,000 416,695,000
Variable annuity liabilities........................... 6,311,557,000 6,117,508,000
Subordinated notes payable to Parent................... 35,832,000 37,339,000
============== ==============
1995:
ASSETS:
Cash and short-term investments........................ $ 249,209,000 $ 249,209,000
Bonds, notes and redeemable preferred stocks........... 1,647,114,000 1,654,217,000
Mortgage loans......................................... 94,260,000 95,598,000
Variable annuity assets................................ 5,230,246,000 5,230,246,000
LIABILITIES:
Reserves for fixed annuity contracts................... 1,497,052,000 1,473,757,000
Reserves for guaranteed investment contracts........... 277,095,000 277,095,000
Payable to brokers for purchases of securities......... 155,861,000 155,861,000
Variable annuity liabilities........................... 5,230,246,000 5,077,257,000
Subordinated notes payable to Parent................... 35,832,000 34,620,000
============== ==============
</TABLE>
5. SUBORDINATED NOTES PAYABLE TO PARENT
Subordinated notes payable to Parent averaged $35,832,000 at a weighted average
interest rate of 8.71% (with rates ranging from 7% to 9%) at September 30, 1996
and require principal payments of $5,272,000 in 1997, $7,500,000 in 1998 and
$23,060,000 in 1999.
6. CONTINGENT LIABILITIES
The Company has entered into two agreements in which it has guaranteed the
liquidity of certain short-term securities of two municipalities by agreeing to
purchase such securities in the event there is no other buyer in the short-term
marketplace. In return the Company receives a fee. These guarantees total up to
$182,600,000. Management does not anticipate any material future losses with
respect to these guarantees.
The Company is involved in various kinds of litigation common to its businesses.
These cases are in various stages of development and, based on reports of
counsel, management believes that provisions made for potential losses are
adequate and any further liabilities and costs will not have a material adverse
impact upon the Company's financial position or results of operations.
41
<PAGE> 49
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. SHAREHOLDER'S EQUITY
The Company is authorized to issue 4,000 shares of its $1,000 par value Common
Stock. At September 30, 1996, 1995 and 1994, 3,511 shares are outstanding.
Changes in shareholder's equity are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
ADDITIONAL PAID-IN CAPITAL:
Beginning balance.................................. $252,876,000 $252,876,000 $252,876,000
Capital contributions received..................... 27,387,000 -- --
------------ ------------ ------------
Ending balance..................................... $280,263,000 $252,876,000 $252,876,000
------------ ------------ ------------
RETAINED EARNINGS:
Beginning balance.................................. $191,346,000 $152,088,000 $127,936,000
Net income......................................... 45,056,000 39,258,000 24,152,000
Dividend paid...................................... (29,400,000) -- --
------------ ------------ ------------
Ending balance..................................... $207,002,000 $191,346,000 $152,088,000
------------ ------------ ------------
<CAPTION>
YEARS ENDED SEPTEMBER 30,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
NET UNREALIZED LOSSES ON DEBT AND EQUITY SECURITIES
AVAILABLE FOR SALE:
Beginning balance.................................. $ (5,673,000) $(24,953,000) $(13,230,000)
Change in net unrealized gains/losses on debt
securities available for sale................... (2,904,000) 71,302,000 (69,407,000)
Change in net unrealized gains/losses on equity
securities available for sale................... 3,538,000 (1,240,000) (753,000)
Change in adjustment to deferred acquisition
costs........................................... (400,000) (40,400,000) 45,000,000
Tax effects of net changes......................... (82,000) (10,382,000) 13,437,000
------------ ------------ ------------
Ending balance..................................... $ (5,521,000) $ (5,673,000) $(24,953,000)
------------ ------------ ------------
</TABLE>
Dividends that the Company may pay to its shareholder in any year without prior
approval of the Arizona Department of Insurance are limited by statute. The
maximum amount of dividends which can be paid to shareholders of insurance
companies domiciled in the state of Arizona without obtaining the prior approval
of the Insurance Commissioner is limited to the lesser of either 10% of the
preceding year's Statutory Surplus or the preceding year's statutory net gain
from operations. A dividend in the amount of $29,400,000 was paid on March 18,
1996. No dividends were paid in fiscal years 1995 or 1994.
Under statutory accounting principles utilized in filings with insurance
regulatory authorities, the Company's net income for the nine months ended
September 30, 1996 was $21,898,000. The statutory net income for the year ended
December 31, 1995 was $30,673,000 and for the year ended December 31, 1994 was
$35,060,000. The Company's statutory capital and surplus was $282,275,000 at
September 30, 1996, $294,767,000 at December 31, 1995 and $219,577,000 at
December 31, 1994.
42
<PAGE> 50
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES
The components of the provisions for federal income taxes on pretax income
consist of the following:
<TABLE>
<CAPTION>
NET REALIZED
INVESTMENT GAINS
(LOSSES) OPERATIONS TOTAL
---------------- ----------- -----------
<S> <C> <C> <C>
1996:
Currently payable................................. $ 5,754,000 $21,849,000 $27,603,000
Deferred.......................................... (10,347,000) 6,996,000 (3,351,000)
------------ ----------- -----------
Total income tax expense..................... $ (4,593,000) $28,845,000 $24,252,000
------------ ----------- -----------
1995:
Currently payable................................. $ 4,248,000 $22,980,000 $27,228,000
Deferred.......................................... (6,113,000) 4,624,000 (1,489,000)
------------ ----------- -----------
Total income tax expense..................... $ (1,865,000) $27,604,000 $25,739,000
------------ ----------- -----------
1994:
Currently payable................................. $ (6,825,000) $10,135,000 $ 3,310,000
Deferred.......................................... (1,320,000) 20,715,000 19,395,000
------------ ----------- -----------
Total income tax expense..................... $ (8,145,000) $30,850,000 $22,705,000
------------ ----------- -----------
</TABLE>
Income taxes computed at the United States federal income tax rate of 35% and
income taxes provided differ as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Amount computed at statutory rate................... $24,258,000 $22,749,000 $23,562,000
Increases (decreases) resulting from:
Amortization of differences between book and tax
bases of net assets acquired................... 464,000 3,049,000 465,000
State income taxes, net of federal tax benefit.... 2,070,000 437,000 (662,000)
Dividends-received deduction...................... (2,357,000) -- --
Tax credits....................................... (257,000) (168,000) (612,000)
Other, net........................................ 74,000 (328,000) (48,000)
----------- ----------- -----------
Total income tax expense....................... $24,252,000 $25,739,000 $22,705,000
----------- ----------- -----------
</TABLE>
For United States federal income tax purposes, certain amounts from life
insurance operations are accumulated in a memorandum policyholders' surplus
account and are taxed only when distributed to shareholders or when such account
exceeds prescribed limits. The accumulated policyholders' surplus was
$14,300,000 at September 30, 1996. The Company does not anticipate any
transactions which would cause any part of this surplus to be taxable.
43
<PAGE> 51
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES -- (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax reporting purposes. The significant
components of the liability for Deferred Income Taxes are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------------
1996 1995
------------ ------------
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Investments................................................. $ 15,036,000 $ 14,181,000
Deferred acquisition costs.................................. 136,747,000 118,544,000
State income taxes.......................................... 1,466,000 1,847,000
------------ ------------
Total deferred tax liabilities.............................. 153,249,000 134,572,000
------------ ------------
DEFERRED TAX ASSETS:
Contractholder reserves..................................... (77,522,000) (55,910,000)
Guaranty fund assessments................................... (1,031,000) (1,123,000)
Other assets................................................ (1,534,000) (1,025,000)
Net unrealized losses on certain debt and equity
securities................................................ (2,973,000) (3,055,000)
------------ ------------
Total deferred tax assets................................... (83,060,000) (61,113,000)
------------ ------------
Deferred income taxes....................................... $ 70,189,000 $ 73,459,000
------------ ------------
</TABLE>
9. RELATED PARTY MATTERS
The Company pays commissions to two affiliated companies, SunAmerica Securities,
Inc. and Advantage Capital Corp. These broker-dealers represent a significant
portion of the Company's business, amounting to approximately 15.6%, 14.1% and
14.5% of premiums in 1996, 1995 and 1994, respectively. Commissions paid to
these broker-dealers totaled $16,906,000 in 1996, $9,435,000 in 1995 and
$9,725,000 in 1994.
The Company purchases administrative, investment management, accounting,
marketing and data processing services from SunAmerica Financial, Inc., whose
purpose is to provide services to the SunAmerica companies. Amounts paid for
such services totaled $65,351,000 for the year ended September 30, 1996,
$42,083,000 for the year ended September 30, 1995 and $36,934,000 for the year
ended September 30, 1994. Such amounts are included in General and
Administrative Expenses in the income statement.
On December 31, 1995, the Parent made a $27,387,000 capital contribution to the
Company, through the Company's direct parent, in exchange for the termination of
its guaranty with respect to certain real estate owned in Arizona. Accordingly,
the Company reduced the carrying value of this real estate to estimated fair
value to reflect the termination of the guaranty. On December 31, 1996, the
Parent made a similar capital contribution for $28,410,000 in exchange for the
termination of the remaining guaranty with respect to such real estate.
During the year ended September 30, 1995, the Company sold to the Parent real
estate for cash equal to its carrying value of $29,761,000.
During the year ended September 30, 1996, the Company sold various invested
assets to the Parent, SunAmerica Life Insurance Company and Ford Life Insurance
Company ("Ford") for cash equal to their current market values of $274,000,
$8,968,000 and $38,353,000, respectively. The Company recorded net losses of
$3,000 on such transactions.
During the year ended September 30, 1996, the Company also purchased certain
invested assets from SunAmerica Life Insurance Company and Ford for cash equal
to their current market values of $5,159,000 and $23,220,000, respectively.
44
<PAGE> 52
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. BUSINESS SEGMENTS
Summarized data for the Company's business segments follow:
<TABLE>
<CAPTION>
TOTAL
DEPRECIATION AND
TOTAL REVENUES AMORTIZATION EXPENSE PRETAX INCOME TOTAL ASSETS
-------------- -------------------- ------------- --------------
<S> <C> <C> <C> <C>
1996:
Annuity operations............... $ 250,645,000 $ 43,974,000 $ 53,827,000 $9,092,770,000
Asset management................. 29,711,000 18,295,000 2,448,000 74,410,000
Broker-dealer operations......... 31,851,000 449,000 13,033,000 37,355,000
------------- ------------ ------------ --------------
Total....................... $ 312,207,000 $ 62,718,000 $ 69,308,000 $9,204,535,000
------------- ------------ ------------ --------------
1995:
Annuity operations............... $ 205,698,000 $ 38,350,000 $ 55,462,000 $7,667,946,000
Asset management................. 30,253,000 24,069,000 510,000 86,510,000
Broker-dealer operations......... 24,366,000 411,000 9,025,000 29,241,000
------------- ------------ ------------ --------------
Total....................... $ 260,317,000 $ 62,830,000 $ 64,997,000 $7,783,697,000
------------- ------------ ------------ --------------
1994:
Annuity operations............... $ 171,553,000 $ 26,501,000 $ 52,284,000 $6,473,065,000
Asset management................. 32,803,000 19,330,000 7,916,000 102,192,000
Broker-dealer operations......... 20,914,000 408,000 7,120,000 26,869,000
------------- ------------ ------------ --------------
Total....................... $ 225,270,000 $ 46,239,000 $ 67,320,000 $6,602,126,000
------------- ------------ ------------ --------------
</TABLE>
11. SUBSEQUENT EVENT (UNAUDITED)
On December 31, 1996, the Parent made a capital contribution of $28,410,000 to
the Company through the Company's direct parent, in exchange for the termination
of its guaranty with respect to the remainder of the land owned in Arizona.
Accordingly, on December 31, 1996, the Company reduced the carrying value of
this land to estimated fair value to reflect the termination of the guaranty.
45
<PAGE> 53
================================================================================
APPENDIX A -- CONDENSED FINANCIAL INFORMATION
================================================================================
<TABLE>
<CAPTION>
INCEPTION TO FISCAL YEAR FISCAL YEAR FISCAL YEAR
PORTFOLIOS 11/30/93 11/30/94 11/30/95 11/30/96
=======================================================================================================================
<S> <C> <C> <C> <C>
Capital Appreciation (Inception Date -- 2/9/93)
Beginning AUV............................................ $ 10.00 $ 11.14 $ 10.64 14.19
End AUV.................................................. $ 11.14 $ 10.64 $ 14.19 17.63
End #AUs................................................. 3,606,855 8,462,152 13,247,155 20,470,395
- -----------------------------------------------------------------------------------------------------------------------
Growth (Inception Date -- 2/9/93)
Beginning AUV............................................ $ 10.00 $ 10.78 $ 10.41 $ 12.95
End AUV.................................................. $ 10.78 $ 10.41 $ 12.95 $ 16.32
End #AUs................................................. 1,719,857 3,950,678 5,968,263 7,557,844
- -----------------------------------------------------------------------------------------------------------------------
Natural Resources (Inception Date -- 10/31/94)
Beginning AUV............................................ -- $ 10.00 $ 9.27 $ 10.78
End AUV.................................................. -- $ 9.27 $ 10.78 $ 12.13
End #AUs................................................. -- 51,412 848,159 2,171,050
- -----------------------------------------------------------------------------------------------------------------------
Government and Quality Bond (Inception Date -- 2/9/93)
Beginning AUV............................................ $ 10.00 $ 10.32 $ 9.81 $ 11.51
End AUV.................................................. $ 10.32 $ 9.81 $ 11.51 $ 11.94
End #AUs................................................. 6,479,985 7,008,717 8,504,677 9,176,239
- -----------------------------------------------------------------------------------------------------------------------
Aggressive Growth (Inception Date 6/3/96)
Beginning AUV............................................ -- -- -- $ 10.00
End AUV.................................................. -- -- -- $ 10.29
End #AUs................................................. -- -- -- 3,165,900
- -----------------------------------------------------------------------------------------------------------------------
International Diversified Equities (Inception
Date -- 10/31/94)
Beginning AUV............................................ -- $ 10.00 $ 9.77 $ 10.07
End AUV.................................................. -- $ 9.77 $ 10.07 $ 11.39
End #AUs................................................. -- 271,316 4,659,066 12,762,343
- -----------------------------------------------------------------------------------------------------------------------
Global Equities (Inception Date -- 2/9/93)
Beginning AUV............................................ $ 10.00 $ 10.86 $ 11.43 $ 13.01
End AUV.................................................. $ 10.86 $ 11.43 $ 13.01 $ 15.15
End #AUs................................................. 3,964,021 11,705,418 12,350,883 15,583,207
- -----------------------------------------------------------------------------------------------------------------------
Putnam Growth* (Inception Date -- 2/9/93)
Beginning AUV............................................ $ 10.00 $ 9.92 $ 9.79 $ 12.60
End AUV.................................................. $ 9.92 $ 9.79 $ 12.60 $ 14.88
End #AUs................................................. 4,322,769 7,610,104 8,932,998 10,354,025
- -----------------------------------------------------------------------------------------------------------------------
Growth/Phoenix Investment Counsel (Inception
Date -- 2/9/93)
Beginning AUV............................................ $ 10.00 $ 10.65 $ 9.79 $ 12.81
End AUV.................................................. $ 10.65 $ 9.79 $ 12.81 $ 14.94
End #AUs................................................. 6,078,952 10,477,818 11,457,899 12,077,737
- -----------------------------------------------------------------------------------------------------------------------
Alliance Growth (Inception Date -- 2/9/93)
Beginning AUV............................................ $ 10.00 $ 10.78 $ 10.53 $ 15.44
End AUV.................................................. $ 10.78 $ 10.53 $ 15.44 $ 19.46
End #AUs................................................. 2,153,075 4,997,778 10,560,070 18,333,555
- -----------------------------------------------------------------------------------------------------------------------
Venture Value (Inception Date -- 10/31/94)
Beginning AUV............................................ -- $ 10.00 $ 9.77 $ 13.29
End AUV.................................................. -- $ 9.77 $ 13.29 $ 16.68
End #AUs................................................. -- 355,083 11,270,792 29,247,554
- -----------------------------------------------------------------------------------------------------------------------
Federated Value (Inception Date -- 6/3/96)
Beginning AUV............................................ -- -- -- $ 10.00
End AUV.................................................. -- -- -- $ 11.00
End #AUs................................................. -- -- -- 1,021,137
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Formerly named Provident Growth.
A-1
<PAGE> 54
<TABLE>
<CAPTION>
INCEPTION TO FISCAL YEAR FISCAL YEAR FISCAL YEAR
PORTFOLIOS 11/30/93 11/30/94 11/30/95 11/30/96
=======================================================================================================================
<S> <C> <C> <C> <C>
Growth-Income (Inception Date -- 2/9/93)
Beginning AUV............................................ $ 10.00 $ 10.47 $ 10.09 $ 13.32
End AUV.................................................. $ 10.47 $ 10.09 $ 13.32 $ 16.70
End #AUs................................................. 4,302,869 8,329,322 12,560,865 18,546,142
- -----------------------------------------------------------------------------------------------------------------------
Utility (Inception Date -- 6/3/96)
Beginning AUV............................................ -- -- -- $ 10.00
End AUV.................................................. -- -- -- $ 10.67
End #AUs................................................. -- -- -- 543,461
- -----------------------------------------------------------------------------------------------------------------------
Asset Allocation (Inception Date -- 7/1/93)
Beginning AUV............................................ $ 10.00 $ 10.30 $ 10.17 $ 12.64
End AUV.................................................. $ 10.30 $ 10.17 $ 12.64 $ 14.97
End #AUs................................................. 3,386,288 10,372,954 15,418,350 19,940,733
- -----------------------------------------------------------------------------------------------------------------------
Balanced/Phoenix Investment Counsel (Inception Date -- 10/31/94)
Beginning AUV............................................ -- $ 10.00 $ 9.95 $ 12.33
End AUV.................................................. -- $ 9.95 $ 12.33 $ 13.82
End #AUs................................................. -- 51,759 2,441,901 4,583,234
- -----------------------------------------------------------------------------------------------------------------------
SunAmerica Balanced (Inception Date -- 6/3/96)
Beginning AUV............................................ -- -- -- $ 10.00
End AUV.................................................. -- -- -- $ 11.04
End #AUs................................................. -- -- -- 817,039
- -----------------------------------------------------------------------------------------------------------------------
Worldwide High Income (Inception Date -- 10/31/94)
Beginning AUV............................................ -- $ 10.00 $ 9.95 $ 11.36
End AUV.................................................. -- $ 9.95 $ 11.36 $ 14.20
End #AUs................................................. -- 53,315 1,040,828 3,196,739
- -----------------------------------------------------------------------------------------------------------------------
High-Yield Bond (Inception Date -- 2/9/93)
Beginning AUV............................................ $ 10.00 $ 10.98 $ 10.35 $ 11.48
End AUV.................................................. $ 10.98 $ 10.35 $ 11.48 $ 12.99
End #AUs................................................. 3,812,374 5,370,944 7,075,451 8,358,195
- -----------------------------------------------------------------------------------------------------------------------
Corporate Bond (Inception Date -- 7/1/93)
Beginning AUV............................................ $ 10.00 $ 10.12 $ 9.63 $ 11.10
End AUV.................................................. $ 10.12 $ 9.63 $ 11.10 $ 11.65
End #AUs................................................. 1,152,407 1,643,694 2,623,065 3,059,808
- -----------------------------------------------------------------------------------------------------------------------
Global Bond (Inception Date -- 7/1/93)
Beginning AUV............................................ $ 10.00 $ 10.25 $ 9.78 $ 11.20
End AUV.................................................. $ 10.25 $ 9.78 $ 11.20 $ 12.25
End #AUs................................................. 2,439,405 4,532,386 5,288,158 5,413,149
- -----------------------------------------------------------------------------------------------------------------------
Cash Management (Inception Date -- 2/9/93)
Beginning AUV............................................ $ 10.00 $ 10.07 $ 10.27 $ 10.67
End AUV.................................................. $ 10.07 $ 10.27 $ 10.67 $ 11.04
End #AUs................................................. 2,442,124 8,623,034 8,372,979 8,005,908
=======================================================================================================================
</TABLE>
AUV -- Accumulation Unit Value
AU -- Accumulation Units
AS OF THE DATE OF THIS PROSPECTUS, THE SALE OF CONTRACTS OFFERING THE EMERGING
MARKETS, REAL ESTATE
AND INTERNATIONAL GROWTH AND INCOME PORTFOLIOS HAD NOT BEGUN. THEREFORE, NO
CONDENSED FINANCIAL INFORMATION IS PRESENTED HERE FOR THESE PORTFOLIOS.
A-2
<PAGE> 55
================================================================================
APPENDIX B -- MARKET VALUE ADJUSTMENT
================================================================================
The market value adjustment reflects the impact that changing interest rates
have on the value of money invested at a fixed interest rate. The longer the
period of time remaining in the term you initially agreed to leave your money in
the fixed investment option, the greater the impact of changing interest rates.
The impact of the market value adjustment can be either positive or negative,
and is computed by multiplying the amount withdrawn, transferred or annuitized
by the following factor:
(N/12)
[(1+I/(1+J+0.005)] - 1
The market value adjustment formula may differ in certain states
where:
I is the interest rate you are earning on the money invested in the
fixed investment option;
J is the interest rate then currently available for the period of time
equal to the number of years remaining in the term you initially agreed
to leave your money in the fixed investment option; and
N is the number of full months remaining in the term you initially
agreed to leave your money in the fixed investment option.
EXAMPLES OF THE MARKET VALUE ADJUSTMENT
The examples below assume the following:
(1) You made an initial Purchase Payment of $10,000 and allocated it to the
10-year fixed investment option at a rate of 7%;
(2) You make a partial withdrawal of $4,000 when 3 1/2 years (42 months)
remain in the 10-year term you initially agreed to leave your money in
the fixed investment option (N=42);
(3) The value of your contract on the date you make the withdrawal is
$16,297.02 which reflects the deduction of all applicable fees and
charges; and
(4) You have not made any other transfers, additional Purchase Payments, or
withdrawals.
No withdrawal charges are reflected because your Purchase Payment has been in
the contract for seven full years. If a withdrawal charge applies, it is
deducted before the market value adjustment.
NEGATIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 3-year fixed investment option is 7.5% and the 5-year
fixed investment option is 8.5%. By linear interpolation, the interest rate for
the remaining 4 years (3 1/2 years rounded up to the next full year) in the
contract is calculated to be 8%.
<TABLE>
<C> <C> <S>
(N/12)
The market value adjustment factor is = [(1+I)/(1+J+0.005)] - 1
(42/12)
= [(1.07)/(1.08+0.005)] - 1
(3.5)
= (0.986175) - 1
= 0.952443 - 1
= - 0.047557
</TABLE>
The requested withdrawal amount is multiplied by the market value adjustment
factor to determine the market value adjustment:
<TABLE>
<C> <C> <S>
$4,000 x (- 0.047557) = -$190.23
</TABLE>
$190.23 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 3-year fixed investment option is 5.5% and the 5-year
fixed investment option is 6.5%. By linear interpolation, the interest rate for
the remaining 4 years (3 1/2 years rounded up to the next full year) in the
contract is calculated to be 6%.
<TABLE>
<C> <C> <S>
(N/12)
The market value adjustment factor is = [(1+I/(1+J+0.005)] - 1
(42/12)
= [(1.07)/(1.06+0.005)] - 1
(3.5)
= (1.004695) - 1
= 1.016528 - 1
= + 0.01653
</TABLE>
The requested withdrawal amount is multiplied by the market value adjustment
factor to determine the market value adjustment:
$4,000 x (+0.01653)=+$66.11
$66.11 represents the market value adjustment that would be added to your
withdrawal.
B-1
<PAGE> 56
================================================================================
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%
- -----------------------------------------------------------------
District of Columbia 2.25% 2.25%
- -----------------------------------------------------------------
Kansas 0% 2%
- -----------------------------------------------------------------
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> 57
- --------------------------------------------------------------------------------
Please forward a copy (without charge) of the Polaris 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 54299, Los Angeles, California 90054-0299.
- --------------------------------------------------------------------------------
<PAGE> 58
STATEMENT OF ADDITIONAL INFORMATION
Fixed and Variable Group Deferred Contracts
issued by
VARIABLE SEPARATE ACCOUNT
DEPOSITOR: ANCHOR NATIONAL LIFE INSURANCE COMPANY
This Statement of Additional Information is not a prospectus; it should be read
with the prospectus relating to the annuity contracts described above, a copy of
which may be obtained without charge by written request addressed to:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS
May 14, 1997
<PAGE> 59
TABLE OF CONTENTS
PAGE
----
Separate Account............................................ 3
General Account............................................. 4
Performance Data............................................ 4
Annuity Payments............................................ 8
Annuity Unit Values......................................... 9
Taxes....................................................... 12
Distribution of Contracts................................... 16
Financial Statements........................................ 16
-2-
<PAGE> 60
SEPARATE ACCOUNT
Variable Separate Account was originally established by the Anchor National
Life Insurance Company (the "Company") on June 25, 1981, pursuant to the
provisions of California law, as a segregated asset account of the Company. The
separate account meets the definition of a "separate account" under the federal
securities laws and is registered with the Securities and Exchange Commission
(the "SEC") as a unit investment trust under the Investment Company Act of 1940.
This registration does not involve supervision of the management of the separate
account or the Company by the SEC.
The assets of the separate account are the property of the Company.
However, the assets of the separate account, equal to its reserves and other
contract liabilities, are not chargeable with liabilities arising out of any
other business the Company may conduct. Income, gains, and losses, whether or
not realized, from assets allocated to the separate account are credited to or
charged against the separate account without regard to other income, gains, or
losses of the Company.
The separate account is divided into Portfolios, with the assets of each
Portfolio invested in the shares of one of the underlying funds. The Company
does not guarantee the investment performance of the separate account, its
Portfolios or the underlying funds. Values allocated to the separate account and
the amount of variable annuity payments will vary with the values of shares of
the underlying funds, and are also reduced by contract charges.
The basic objective of a variable annuity contract is to provide variable
annuity payments which will be to some degree responsive to changes in the
economic environment, including inflationary forces and changes in rates of
return available from various types of investments. The contract is designed to
seek to accomplish this objective by providing that variable annuity payments
will reflect the investment performance of the separate account with respect to
amounts allocated to it both before and after the Annuity Date. Since the
separate account is always fully invested in shares of the underlying funds, its
investment performance reflects the investment performance of those entities.
The values of such shares held by the separate account fluctuate and are subject
to the risks of changing economic conditions as well as the risk inherent in the
ability of the underlying funds' managements to make necessary changes in their
Portfolios to anticipate changes in economic conditions. Therefore, the owner
bears the entire investment risk that the basic objectives of the contract may
not be realized, and that the adverse effects of inflation may not be lessened.
There can be no assurance that the aggregate amount of variable annuity payments
will equal or exceed the Purchase Payments made with respect to a particular
account for the reasons described above, or because of the premature death of an
Annuitant.
Another important feature of the contract related to its basic objective is
the Company's promise that the dollar amount of variable annuity payments made
during the lifetime of the Annuitant will not be adversely affected by the
actual mortality experience of the Company or by the actual expenses incurred by
the Company in excess of expense deductions provided for in the contract
(although the Company does not guarantee the
-3-
<PAGE> 61
amounts of the variable annuity payments).
GENERAL ACCOUNT
The general account is made up of all of the general assets of the Company
other than those allocated to the separate account or any other segregated asset
account of the Company. A Purchase Payment may be allocated to the one-year
fixed investment option available in connection with the general account, as
elected by the owner at the time of purchasing a contract. Assets supporting
amounts allocated to fixed investment option become part of the Company's
general account assets and are available to fund the claims of all classes of
customers of the Company, as well as of its creditors. Accordingly, all of the
Company's assets held in the general account will be available to fund the
Company's obligations under the contracts as well as such other claims.
The Company will invest the assets of the general account in the manner
chosen by the Company and allowed by applicable state laws regarding the nature
and quality of investments that may be made by life insurance companies and the
percentage of their assets that may be committed to any particular type of
investment. In general, these laws permit investments, within specified limits
and subject to certain qualifications, in federal, state and municipal
obligations, corporate bonds, preferred and common stocks, real estate
mortgages, real estate and certain other investments.
PERFORMANCE DATA
From time to time the separate account may advertise the Cash Management
Portfolio's "yield" and "effective yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of the Cash Management Portfolio refers to the net income generated for
a contract funded by an investment in the Portfolio (which invests in shares of
the Cash Management Portfolio of SunAmerica Trust) over a seven-day period
(which period will be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the
Portfolio is assumed to be reinvested at the end of each seven day period. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. Neither the yield nor the
effective yield takes into consideration the effect of any capital changes that
might have occurred during the seven day period, nor do they reflect the impact
of premium taxes or any withdrawal charges. The impact of other recurring
charges on both yield figures is, however, reflected in them to the same extent
it would affect the yield (or effective yield) for a contract of average size.
In addition, the separate account may advertise "total return" data for its
other
-4-
<PAGE> 62
Portfolios. Like the yield figures described above, total return figures
are based on historical data and are not intended to indicate future
performance. The "total return" is a computed rate of return that, when
compounded annually over a stated period of time and applied to a hypothetical
initial investment in a Portfolio made at the beginning of the period, will
produce the same contract value at the end of the period that the hypothetical
investment would have produced over the same period (assuming a complete
redemption of the contract at the end of the period). Recurring contract charges
are reflected in the total return figures in the same manner as they are
reflected in the yield data for contracts funded through the Cash Management
Portfolio. The effect of applicable withdrawal charges due to the assumed
redemption will be reflected in the return figures, but may be omitted in
additional return figures given for comparison.
For periods starting prior to the date the contracts were first offered to
the public, the total return data for the Capital Appreciation, Growth, Natural
Resources and the Government and Quality Bond Portfolios of the separate account
will be derived from the performance of the corresponding Portfolios of Anchor
Trust, modified to reflect the charges and expenses as if the separate account
Portfolio had been in existence since the inception date of each respective
Anchor Trust Portfolio. Thus, such performance figures should not be construed
to be actual historic performance of the relevant separate account Portfolio.
Rather, they are intended to indicate the historic performance of the four
corresponding Portfolios of Anchor Trust, adjusted to provide direct
comparability to the performance of the Portfolios after the date the contracts
were first offered to the public (which will reflect the effect of fees and
charges imposed under the contracts). The Capital Appreciation, Growth, Natural
Resources and Government and Quality Bond Portfolios of Anchor Trust have served
since their inception as underlying investment media for separate accounts of
other insurance companies in connection with variable contracts not having the
same fee and charge schedules as those imposed under the contracts.
Performance data for the various Portfolios are computed in the manner
described below.
CASH MANAGEMENT PORTFOLIO
The annualized current yield and the effective yield for the Cash
Management Portfolio for the 7 day period ending November 30, 1996 were 3.67%
and 3.74%, respectively.
Current yield is computed by first determining the Base Period Return
attributable to a hypothetical contract having a balance of one Accumulation
Unit at the beginning of a 7 day period using the formula:
Base Period Return = (EV-SV-CAC)/(SV)
-5-
<PAGE> 63
where:
SV = value of one Accumulation Unit at the start of a 7 day period
EV = value of one Accumulation Unit at the end of the 7 day period
CAC = an allocated portion of the $35 annual Contract Administration
Charge, prorated for 7 days
The change in the value of an Accumulation Unit during the 7 day period
reflects the income received minus any expenses accrued, during such 7 day
period. The Contract Administration Charge (CAC) is first allocated among the
Portfolios and the general account so that each Portfolio's allocated portion of
the charge is proportional to the percentage of the number of accounts that have
money allocated to that Portfolio. The charge is further reduced, for purposes
of the yield computation, by multiplying it by the ratio that the value of the
hypothetical contract bears to the value of an account of average size for
contracts funded by the Cash Management Portfolio. Finally, as is done with the
other charges discussed above, the result is multiplied by the fraction 7/365 to
arrive at the portion attributable to the 7 day period.
The current yield is then obtained by annualizing the Base Period Return:
Current Yield = (Base Period Return) x (365/7)
The Cash Management Portfolio also quotes an "effective yield" that differs
from the current yield given above in that it takes into account the effect of
dividend reinvestment in the underlying fund. The effective yield, like the
current yield, is derived from the Base Period Return over a 7 day period.
However, the effective yield accounts for dividend reinvestment by compounding
the current yield according to the formula:
365/7
Effective Yield = [(Base Period Return + 1) - 1].
Net investment income for yield quotation purposes will not include either
realized capital gains and losses or unrealized appreciation and depreciation,
whether reinvested or not. The yield quotations also do not reflect any impact
of premium taxes, transfer fees, or withdrawal charges.
The yield quoted should not be considered a representation of the yield of
the Cash Management Portfolio in the future since the yield is not fixed. Actual
yields will depend not only on the type, quality and maturities of the
investments held by the underlying fund and changes in interest rates on such
investments, but also on factors such as an owner's account size (since the
impact of fixed dollar charges will be greater for small accounts than for
larger accounts).
-6-
<PAGE> 64
Yield information may be useful in reviewing the performance of the Cash
Management Portfolio and for providing a basis for comparison with other
investment alternatives. However, the Cash Management Portfolio's yield
fluctuates, unlike bank deposits or other investments that typically pay a fixed
yield for a stated period of time.
OTHER PORTFOLIOS
The Portfolios of the separate account other than the Cash Management
Portfolio compute their performance data as "total return".
The total returns of the various Portfolios for 1 year and since each
Portfolio's inception date are shown below, both with and without an assumed
complete redemption at the end of the period.
TOTAL ANNUAL RETURN (IN PERCENT) FOR
PERIOD ENDING ON NOVEMBER 30, 1996
(RETURN WITH/WITHOUT REDEMPTION)
<TABLE>
<CAPTION>
INCEPTION SINCE
PORTFOLIO DATE 1 YEAR INCEPTION
--------- ---- ------ ---------
<S> <C> <C> <C>
Anchor Trust
Capital Appreciation 2/12/93 17.19/24.19 15.32/16.02
Growth 2/19/93 18.94/25.94 13.00/13.75
Natural Resources 10/31/94 5.38/12.38 7.33/9.52
Gov't & Quality Bond 2/22/93 -3.35/3.65 3.79/4.73
SunAmerica Trust
Aggressive Growth 6/3/96 ---- -4.17/2.83
International Diversified Equities 10/31/94 6.03/13.03 4.04/6.32
Global Equities 2/9/93 9.38/16.38 10.67/11.45
Putnam Growth* 2/9/93 11.03/18.03 10.11/10.91
Growth/Phoenix Investment Counsel 2/9/93 9.51/16.51 10.24/11.03
Alliance Growth 2/9/93 19.02/26.02 18.38/19.03
Venture Value 10/31/94 18.46/25.46 25.90/27.76
Federated Value 6/3/96 ---- 2.97/9.97
Growth-Income 2/9/93 18.36/25.36 13.62/14.35
Utility 6/3/96 ---- -0.33/6.68
Asset Allocation 7/1/93 11.40/18.40 11.58/12.47
Balanced/Phoenix Investment Counsel 10/31/94 4.94/11.94 14.59/16.64
SunAmerica Balanced 6/3/96 ---- 3.40/10.40
Worldwide High Income 10/31/94 17.92/24.92 16.19/18.21
High-Yield Bond 2/9/93 6.06/13.06 6.18/7.06
Corporate Bond 7/1/93 -2.17/4.83 3.41/4.47
Global Bond 7/1/93 2.27/9.27 4.98/6.01
</TABLE>
- -----------------
*Formerly named Provident Growth.
Total return figures are based on historical data and are not intended to
indicate future performance.
-7-
<PAGE> 65
Total return for a Portfolio represents a single computed annual rate of
return that, when compounded annually over the time period shown and applied to
a hypothetical initial investment in a contract funded by that Portfolio made at
the beginning of the period, will produce the same contract value at the end of
the period that the hypothetical investment would have produced over the same
period. The total rate of return (T) is computed so that it satisfies the
formula:
n
P(1+T) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the 1, 5,
or 10 year period as of the end of the period (or
fractional portion thereof).
The total return figures reflect the effect of both nonrecurring and
recurring charges, as discussed herein. Recurring charges are taken into account
in a manner similar to that used for the yield computations for the Cash
Management Portfolio, described above. The applicable withdrawal charge (if any)
is deducted as of the end of the period, to reflect the effect of the assumed
complete redemption. Because the impact of Contract Administration Charges on a
particular account will generally differ from that assumed in the computation,
due to differences between most actual allocations and the assumed one, as well
as differences due to varying account sizes, the total return experienced by an
actual Portfolio over the same time periods would generally have been different
from those produced by the computation. As with the Cash Management Portfolio
yield figures, total return figures are derived from historical data and are not
intended to be a projection of future performance.
ANNUITY PAYMENTS
INITIAL MONTHLY ANNUITY PAYMENTS
The initial annuity payment is determined by applying separately that
portion of the contract value allocated to the fixed investment option and the
variable Portfolio(s), less any premium tax, and then applying it to the annuity
table specified in the contract for fixed and variable annuity payments. Those
tables are based on a set amount per $1,000 of proceeds applied. The appropriate
rate must be determined by the sex (except where, as in the case of certain
Qualified contracts and other employer-sponsored retirement plans, such
classification is not permitted) and age of the Annuitant and designated second
person, if any.
The dollars applied are then divided by 1,000 and the result multiplied by
the appropriate annuity factor appearing in the table to compute the amount of
the first monthly
-8-
<PAGE> 66
annuity payment. In the case of a variable annuity, that amount is divided by
the value of an Annuity Unit as of the Annuity Date to establish the number of
Annuity Units representing each variable annuity payment. The number of Annuity
Units determined for the first variable annuity payment remains constant for the
second and subsequent monthly variable annuity payments, assuming that no
reallocation of contract values is made.
SUBSEQUENT MONTHLY PAYMENTS
For fixed annuity payments, the amount of the second and each subsequent
monthly annuity payment is the same as that determined above for the first
monthly payment.
For variable annuity payments, the amount of the second and each subsequent
monthly annuity payment is determined by multiplying the number of Annuity
Units, as determined in connection with the determination of the initial monthly
payment, above, by the Annuity Unit value as of the day preceding the date on
which each annuity payment is due.
ANNUITY UNIT VALUES
The value of an Annuity Unit is determined independently for each
Portfolio.
The annuity tables contained in the contract are based on a 3.5% per annum
assumed investment rate. If the actual net investment rate experienced by a
Portfolio exceed 3.5%, variable annuity payments derived from allocations to
that Portfolio will increase over time. Conversely, if the actual rate is less
than 3.5%, variable annuity payments will decrease over time. If the net
investment rate equals 3.5%, the variable annuity payments will remain constant.
If a higher assumed investment rate had been used, the initial monthly payment
would be higher, but the actual net investment rate would also have to be higher
in order for annuity payments to increase (or not to decrease).
The payee receives the value of a fixed number of Annuity Units each month.
The value of a fixed number of Annuity Units will reflect the investment
performance of the Portfolios elected, and the amount of each annuity payment
will vary accordingly.
For each Portfolio, the value of an Annuity Unit is determined by
multiplying the Annuity Unit value for the preceding month by the Net Investment
Factor for the month for which the Annuity Unit value is being calculated. The
result is then multiplied by a second factor which offsets the effect of the
assumed net investment rate of 3.5% per annum which is assumed in the annuity
tables contained in the contract.
NET INVESTMENT FACTOR
The Net Investment Factor ("NIF") is an index applied to measure the net
investment performance of a Portfolio from one day to the next. The NIF may be
greater or less than or equal to one; therefore, the value of an Annuity Unit
may increase, decrease or remain the
-9-
<PAGE> 67
same.
The NIF for any Portfolio for a certain month is determined by dividing (a)
by (b) where:
(a) is the Accumulation Unit value of the Portfolio determined as of the
end of that month, and
(b) is the Accumulation Unit value of the Portfolio determined as of the
end of the preceding month.
The NIF for a Portfolio for a given month is a measure of the net
investment performance of the Portfolio from the end of the prior month to the
end of the given month. A NIF of 1.000 results from no change in the value of
the Portfolio; a NIF greater than 1.000 results from an increase in the value of
the Portfolio; and a NIF less than 1.000 results from a decrease in the value of
the Portfolio. The NIF is increased (or decreased) in accordance with the
increases (or decreases, respectively) in the value of a share of the underlying
fund in which the Portfolio invests; it is also reduced by separate account
asset charges.
Illustrative Example
Assume that one share of a given Portfolio had an Accumulation Unit value
of $11.46 as of the close of the New York Stock Exchange ("NYSE") on the last
business day in September; that its Accumulation Unit value had been $11.44 at
the close of the NYSE on the last business day at the end of the previous month.
The NIF for the month of September is:
NIF = ($11.46/$11.44)
= 1.00174825
Illustrative Example
The change in Annuity Unit value for a Portfolio from one month to the next
is determined in part by multiplying the Annuity Unit value at the prior month
end by the NIF for that Portfolio for the new month. In addition, however, the
result of that computation must also be multiplied by an additional factor that
takes into account, and neutralizes, the assumed investment rate of 3.5 percent
per annum upon which the annuity payment tables are based. For example, if the
net investment rate for a Portfolio (reflected in the NIF) were equal to the
assumed investment rate, the variable annuity payments should remain constant
(i.e., the Annuity Unit value should not change). The monthly factor that
neutralizes the assumed investment rate of 3.5 percent per annum is:
1/[(1.035)(1/12)] = 0.99713732
In the example given above, if the Annuity Unit value for the Portfolio was
-10-
<PAGE> 68
$10.103523 on the last business day in August, the Annuity Unit value on the
last business day in September would have been:
$10.103523 x 1.00174825 x 0.99713732 = $10.092213
VARIABLE ANNUITY PAYMENTS
Illustrative Example
Assume that a male owner, P, owns a contract in connection with which P has
allocated all of his contract value to a single Portfolio. P is also the sole
Annuitant and, at age 60, has elected to annuitize his contract under Option 4,
a Life Annuity With 120 Monthly Payments Guaranteed. As of the last valuation
preceding the Annuity Date, P's Account was credited with 7543.2456 Accumulation
Units each having a value of $15.432655, (i.e., P's account value is equal to
7543.2456 x $15.432655 = $116,412.31). Assume also that the Annuity Unit value
for the Portfolio on that same date is $13.256932, and that the Annuity Unit
value on the day immediately prior to the second annuity payment date is
$13.327695.
P's first variable annuity payment is determined from the annuity rate
tables in P's contract, using the information assumed above. From the tables,
which supply monthly annuity payments for each $1,000 of applied contract value,
P's first variable annuity payment is determined by multiplying the monthly
installment of $5.42 (Option 4 tables, male Annuitant age 60 at the Annuity
Date) by the result of dividing P's account value by $1,000:
First Payment = $5.42 x ($116,412.31/$1,000) = $630.95
The number of P's Annuity Units (which will be fixed; i.e., it will not
change unless he transfers his Account to another Account) is also determined at
this time and is equal to the amount of the first variable annuity payment
divided by the value of an Annuity Unit on the day immediately prior to
annuitization:
Annuity Units = $630.95/$13.256932 = 47.593968
P's second variable annuity payment is determined by multiplying the number
of Annuity Units by the Annuity Unit value as of the day immediately prior to
the second payment due date:
Second Payment = 47.593968 x $13.327695 = $634.32
The third and subsequent variable annuity payments are computed in a manner
similar to the second variable annuity payment.
Note that the amount of the first variable annuity payment depends on the
contract value in the relevant Portfolio on the Annuity Date and thus reflects
the investment performance of the Portfolio net of fees and charges during the
Accumulation Phase. The
-11-
<PAGE> 69
amount of that payment determines the number of Annuity Units, which will remain
constant during the Income Phase (assuming no transfers from the Portfolio). The
net investment performance of the Portfolio during the Income Phase is reflected
in continuing changes during this phase in the Annuity Unit value, which
determines the amounts of the second and subsequent variable annuity payments.
TAXES
GENERAL
Section 72 of the Internal Revenue Code of 1986, as amended (the "Code")
governs taxation of annuities in general. An owner is not taxed on increases in
the value of a contract until distribution occurs, either in the form of a
non-annuity distribution or as annuity payments under the annuity option
elected. For a lump sum payment received as a total surrender (total
redemption), the recipient is taxed on the portion of the payment that exceeds
the cost basis of the contract. For a payment received as a withdrawal (partial
redemption), federal tax liability is determined on a last-in, first-out basis,
meaning taxable income is withdrawn before the cost basis of the contract is
withdrawn. For contracts issued in connection with Non-qualified plans, the cost
basis is generally the Purchase Payments, while for contracts issued in
connection with Qualified plans there may be no cost basis. The taxable portion
of the lump sum payment is taxed at ordinary income tax rates. Tax penalties may
also apply.
For annuity payments, the taxable portion is determined by a formula which
establishes the ratio that the cost basis of the contract bears to the total
value of annuity payments for the term of the annuity contract. The taxable
portion is taxed at ordinary income tax rates. Owners, Annuitants and
Beneficiaries under the contracts should seek competent financial advice about
the tax consequences of distributions under the retirement plan under which the
contracts are purchased.
The Company is taxed as a life insurance company under the Code. For
federal income tax purposes, the separate account is not a separate entity from
the Company and its operations form a part of the Company.
WITHHOLDING TAX ON DISTRIBUTIONS
The Code generally requires the Company (or, in some cases, a plan
administrator) to withhold tax on the taxable portion of any distribution or
withdrawal from a contract. For "eligible rollover distributions" from contracts
issued under certain types of Qualified plans, 20% of the distribution must be
withheld, unless the payee elects to have the distribution "rolled over" to
another eligible plan in a direct "trustee to trustee" transfer. This
requirement is mandatory and cannot be waived by the owner. Withholding on other
types of distributions can be waived.
An "eligible rollover distribution" is the estimated taxable portion of any
amount
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<PAGE> 70
received by a covered employee from a plan qualified under Section 401(a)
or 403(a) of the Code, or from a tax-sheltered annuity qualified under Section
403(b) of the Code (other than (1) annuity payments for the life (or life
expectancy) of the employee, or joint lives (or joint life expectancies) of the
employee and his or her designated Beneficiary, or for a specified period of ten
years or more; and (2) distributions required to be made under the Code).
Failure to "roll over" the entire amount of an eligible rollover distribution
(including an amount equal to the 20% portion of the distribution that was
withheld) could have adverse tax consequences, including the imposition of a
penalty tax on premature withdrawals, described later in this section.
Withdrawals or distributions from a contract other than eligible rollover
distributions are also subject to withholding on the estimated taxable portion
of the distribution, but the owner may elect in such cases to waive the
withholding requirement. If not waived, withholding is imposed (1) for periodic
payments, at the rate that would be imposed if the payments were wages, or (2)
for other distributions, at the rate of 10%. If no withholding exemption
certificate is in effect for the payee, the rate under (1) above is computed by
treating the payee as a married individual claiming 3 withholding exemptions.
DIVERSIFICATION - SEPARATE ACCOUNT INVESTMENTS
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not adequately
diversified, in accordance with regulations prescribed by the United States
Treasury Department ("Treasury Department"). Disqualification of the contract as
an annuity contract would result in imposition of federal income tax to the
owner with respect to earnings allocable to the contract prior to the receipt of
payments under the contract. The Code contains a safe harbor provision which
provides that annuity contracts such as the contracts meet the diversification
requirements if, as of the close of each calendar quarter, the underlying assets
meet the diversification standards for a regulated investment company, and no
more than 55% of the total assets consist of cash, cash items, U.S. government
securities and securities of other regulated investment companies.
The Treasury Department has issued regulations which establish
diversification requirements for the investment portfolios underlying variable
contracts such as the contracts. The regulations amplify the diversification
requirements for variable contracts set forth in the Code and provide an
alternative to the safe harbor provision described above. Under the regulations
an investment portfolio will be deemed adequately diversified if (1) no more
than 55% of the value of the total assets of the portfolio is represented by any
one investment; (2) no more than 70% of the value of the total assets of the
portfolio is represented by any two investments; (3) no more than 80% of the
value of the total assets of the portfolio is represented by any three
investments; and (4) no more than 90% of the value of the total assets of the
portfolio is represented by any four investments. For purposes of determining
whether or not the diversification standards imposed on the underlying assets of
variable contracts by Section 817(h) of the Code have been met, "each United
States government
-13-
<PAGE> 71
agency or instrumentality shall be treated as a separate issuer."
MULTIPLE CONTRACTS
Multiple annuity contracts which are issued within a calendar year to the
same contract owner by one company or its affiliates are treated as one annuity
contract for purposes of determining the tax consequences of any distribution.
Such treatment may result in adverse tax consequences including more rapid
taxation of the distributed amounts from such multiple contracts. The Company
believes that Congress intended to affect the purchase of multiple deferred
annuity contracts which may have been purchased to avoid withdrawal income tax
treatment. Owners should consult a tax adviser prior to purchasing more than one
annuity contract in any calendar year.
TAX TREATMENT OF ASSIGNMENTS
An assignment of a contract may have tax consequences, and may also be
prohibited by ERISA in some circumstances. Owners should therefore consult
competent legal advisers should they wish to assign their contracts.
QUALIFIED PLANS
The contracts offered by this prospectus are designed to be suitable for
use under various types of Qualified plans. Taxation of owners in each Qualified
plan varies with the type of plan and terms and conditions of each specific
plan. Owners, Annuitants and Beneficiaries are cautioned that benefits under a
Qualified plan may be subject to the terms and conditions of the plan,
regardless of the terms and conditions of the contracts issued pursuant to the
plan.
Following are general descriptions of the types of Qualified plans with
which the contracts may be used. Such descriptions are not exhaustive and are
for general information purposes only. The tax rules regarding Qualified plans
are very complex and will have differing applications depending on individual
facts and circumstances. Each purchaser should obtain competent tax advice prior
to purchasing a contract issued under a Qualified plan.
Contracts issued pursuant to Qualified plans include special provisions
restricting contract provisions that may otherwise be available and described in
this prospectus. Generally, contracts issued pursuant to Qualified plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified contracts.
(A) H.R. 10 Plans
Section 401 of the Code permits self-employed individuals to establish
Qualified plans for themselves and their employees, commonly referred to as
"H.R. 10" or
-14-
<PAGE> 72
"Keogh" Plans. Contributions made to the plan for the benefit of the employees
will not be included in the gross income of the employees until distributed from
the plan. The tax consequences to owners may vary depending upon the particular
plan design. However, the Code places limitations and restrictions on all plans
and such items as: amounts of allowable contributions; form, manner and timing
of distributions; vesting and nonforfeitability of interests; nondiscrimination
in eligibility and participation; and the tax treatment of distributions,
withdrawals and surrenders.
(B) Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered
annuities" by public schools and certain charitable, educational and scientific
organizations described in Section 501 (c)(3) of the Code. These qualifying
employers may make contributions to the contracts for the benefit of their
employees. Such contributions are not includible in the gross income of the
employee until the employee receives distributions from the contract. The amount
of contributions to the tax-sheltered annuity is limited to certain maximums
imposed by the Code. Furthermore, the Code sets forth additional restrictions
governing such items as transferability, distributions, nondiscrimination and
withdrawals.
(C) Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to an
IRA which will be deductible from the individual's gross income. These IRAs are
subject to limitations on eligibility, contributions, transferability and
distributions. Sales of contracts for use with IRAs are subject to special
requirements imposed by the Code, including the requirement that certain
informational disclosure be given to persons desiring to establish an IRA.
(D) Corporate Pension and Profit-Sharing Plans
Section 401(a) and 401(k) of the Code permit corporate employers to
establish various types of retirement plans for employees. These retirement
plans may permit the purchase of the contracts to provide benefits under the
plan. Contributions to the plan for the benefit of employees will not be
includible in the gross income of the employee until distributed from the plan.
The tax consequences to owners may vary depending upon the particular plan
design. However, the Code places limitations on all plans on such items as
amount of allowable contributions; form, manner and timing of distributions;
vesting and nonforfeitability of interest; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders.
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<PAGE> 73
(E) Deferred Compensation Plans - Section 457
Under Section 457 of the Code, governmental and certain other tax-exempt
employers may establish, for the benefit of their employees, deferred
compensation plans which may invest in annuity contracts. The Code, as in the
case of Qualified plans, establishes limitations and restrictions on
eligibility, contributions and distributions. Under these plans, contributions
made for the benefit of the employees will not be includible in the employees'
gross income until distributed from the plan. However, under a 457 plan all the
plan assets shall remain solely the property of the employer, subject only to
the claims of the employer's general creditors until such time as made available
to an owner or a Beneficiary.
DISTRIBUTION OF CONTRACTS
Effective as of August 6, 1993, SunAmerica Capital Services, Inc., located
at 733 Third Avenue, 4th Floor, New York, New York 10017, serves as the
distributor of the contracts pursuant to a distribution agreement. Prior to this
date SunAmerica Securities, Inc. and Royal Alliance Associates, Inc., both
affiliates of SunAmerica Capital Services, Inc. and located at 2201 East
Camelback Road, Phoenix, Arizona 85016 and 733 Third Avenue, 4th Floor, New
York, New York 10017, respectively, served as co-distributors of the contracts.
SunAmerica Capital Services, Inc., SunAmerica Securities, Inc. and Royal
Alliance Associates, Inc. are each an indirect wholly-owned subsidiary of
SunAmerica Inc. and each is registered as a broker-dealer under the Securities
Exchange Act of 1934, as amended, and is a member of the National Association of
Securities Dealers, Inc.
For the year ended November 30, 1996, the aggregate amount of underwriting
commissions paid by the Company to SunAmerica Capital Services, Inc. was
$36,909,230, of which $3,757,245 was retained by them. For the year ended
November 30, 1995, the aggregate amount of underwriting commissions paid by the
Company to SunAmerica Capital Services, Inc. was $19,493,608, of which
$2,054,297 was retained by it. For the year ended November 30, 1994, the
aggregate amount of underwriting commissions paid by the Company to SunAmerica
Capital Services, Inc. was $13,562,019, of which $1,418,685 was retained by it.
Contracts are offered on a continuous basis.
FINANCIAL STATEMENTS
The audited consolidated financial statements of the Company as of
September 30, 1996 and 1995 and for each of the three years in the period ended
September 30, 1996 are presented in the prospectus. The consolidated financial
statements of the Company should be considered only as bearing on the ability of
the Company to meet its obligation under the
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<PAGE> 74
contracts for amounts allocated to the 1, 3, 5, 7 or 10 year fixed investment
options. The financial statements of Variable Separate Account (Portion Relating
to the POLARIS Variable Annuity) as of November 30, 1996 and for each of the two
years in the period ended November 30, 1996, are included in this Statement of
Additional Information.
Price Waterhouse LLP, 400 South Hope Street, Los Angeles, California 90071,
serves as the independent accountants for the separate account and the Company.
The financial statements referred to above have been so included in reliance on
the reports of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The consolidated unaudited interim financial information of the Company for
the three months ended December 31, 1995 and 1996 are also presented in the
prospectus. This interim financial information should be considered only as
bearing on the ability of the Company to meet its obligation under the contracts
for amounts allocated to the 1, 3, 5, 7 or 10 year fixed investment options.
-17-
<PAGE> 75
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
FINANCIAL STATEMENTS
NOVEMBER 30, 1996
- 18 -
<PAGE> 76
REPORT OF INDEPENDENT ACCOUNTANTS
January 17, 1997
To the Board of Directors of Anchor National Life Insurance Company
and the Contractholders of its separate account,
Variable Separate Account (Portion Relating to the POLARIS Variable Annuity)
In our opinion, the accompanying statement of net assets, including the schedule
of portfolio investments, and the related statements of operations and of
changes in net assets present fairly, in all material respects, the financial
position of each of the Variable Accounts constituting Variable Separate Account
(Portion Relating to the POLARIS Variable Annuity), a separate account of Anchor
National Life Insurance Company (the "Separate Account") at November 30, 1996,
the results of their operations for the year then ended, and the changes in
their net assets for the years indicated, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Separate Account's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at November 30, 1996 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
- 19 -
<PAGE> 77
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
November 30, 1996
<TABLE>
<CAPTION>
Government International
Capital Natural and Diversified
Appreciation Growth Resources Quality Bond Equities
Portfolio Portfolio Portfolio Portfolio Portfolio
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in Anchor
Series Trust, at
market value $360,976,677 $123,373,134 $ 26,328,927 $109,520,077 $ 0
Investments in
SunAmerica Series
Trust, at market
value 0 0 0 0 145,376,243
Liabilities 0 0 0 0 0
------------------------------------------------------------------------
Net Assets $360,976,677 $123,373,134 $ 26,328,927 $109,520,077 $145,376,243
========================================================================
Accumulation units
outstanding 20,470,395 7,557,844 2,171,050 9,176,239 12,762,343
========================================================================
Unit value of
accumulation units $ 17.63 $ 16.32 $ 12.13 $ 11.94 $ 11.39
========================================================================
</TABLE>
<TABLE>
<CAPTION>
Global Aggressive Venture
Equities Growth Value
Portfolio Portfolio Portfolio
------------------------------------------
<S> <C> <C> <C>
Assets:
Investments in Anchor
Series Trust, at
market value $ 0 $ 0 $ 0
Investments in
SunAmerica Series
Trust, at market
value 236,114,107 32,570,387 487,989,263
Liabilities 0 0 0
------------------------------------------
Net Assets $236,114,107 $ 32,570,387 $487,989,263
==========================================
Accumulation units
outstanding 15,583,207 3,165,900 29,247,554
==========================================
Unit value of
accumulation units $ 15.15 $ 10.29 $ 16.68
==========================================
</TABLE>
See accompanying notes to financial statements.
- 20 -
<PAGE> 78
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
November 30, 1996
(Continued)
<TABLE>
<CAPTION>
Growth/Phoenix
Federated Provident Investment Alliance
Value Growth Counsel Growth
Portfolio Portfolio Portfolio Portfolio
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments in Anchor
Series Trust, at
market value $ 0 $ 0 $ 0 $ 0
Investments in
SunAmerica Series
Trust, at market
value 11,234,062 154,096,914 180,451,620 356,815,327
Liabilities 0 0 0 0
------------------------------------------------------------------
Net Assets $ 11,234,062 $154,096,914 $180,451,620 $356,815,327
==================================================================
Accumulation units
outstanding 1,021,137 10,354,025 12,077,737 18,333,555
==================================================================
Unit Value of
accumulation units $ 11.00 $ 14.88 $ 14.94 $ 19.46
==================================================================
</TABLE>
<TABLE>
<CAPTION>
Balanced/Phoenix
Growth- Asset SunAmerica Investment
Income Allocation Balanced Counsel
Portfolio Portfolio Portfolio Portfolio
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments in Anchor
Series Trust, at
market value $ 0 $ 0 $ 0 $ 0
Investments in
SunAmerica Series
Trust, at market
value 309,755,916 298,525,829 9,023,203 63,333,105
Liabilities 0 0 0 0
------------------------------------------------------------------
Net Assets $309,755,916 $298,525,829 $ 9,023,203 $ 63,333,105
==================================================================
Accumulation units
outstanding 18,546,142 19,940,733 817,039 4,583,234
==================================================================
Unit Value of
accumulation units $ 16.70 $ 14.97 $ 11.04 $ 13.82
==================================================================
</TABLE>
See accompanying notes to financial statements.
- 21 -
<PAGE> 79
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
November 30, 1996
(Continued)
<TABLE>
<CAPTION>
Worldwide High-Yield Global Corporate Cash
Utility High Income Bond Bond Bond Management
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio TOTAL
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments in
Anchor Series Trust,
at market value $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 620,198,815
Investments in
SunAmerica Series
Trust, at market
value 5,799,140 45,408,414 108,664,366 66,296,884 35,643,830 88,383,977 2,635,482,587
Liabilities 0 0 0 0 0 0 0
------------------------------------------------------------------------------------------------------
Net Assets $5,799,140 $45,408,414 $108,664,366 $66,296,884 $35,643,830 $88,383,977 $3,255,681,402
======================================================================================================
Accumulation units
outstanding 543,461 3,196,739 8,358,195 5,413,149 3,059,808 8,005,908
=====================================================================================
Unit value of
accumulation units $ 10.67 $ 14.20 $ 12.99 $ 12.25 $ 11.65 $ 11.04
=====================================================================================
</TABLE>
See accompanying notes to financial statements.
- 22 -
<PAGE> 80
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
SCHEDULE OF PORTFOLIO INVESTMENTS
November 30, 1996
<TABLE>
<CAPTION>
Market Value Market
Variable Accounts Shares Per Share Value Cost
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ANCHOR SERIES TRUST:
Capital Appreciation Portfolio 12,851,136 $28.09 $ 360,976,677 $ 311,987,366
Growth Portfolio 5,217,704 23.65 123,373,134 108,557,021
Natural Resources Portfolio 1,576,055 16.71 26,328,927 25,223,740
Government and Quality Bond Portfolio 7,941,903 13.79 109,520,077 110,846,719
------------------------------
620,198,815 556,614,846
------------------------------
SUNAMERICA SERIES TRUST:
International Diversified Equities Portfolio 12,787,383 11.37 145,376,243 133,852,944
Global Equities Portfolio 15,820,695 14.92 236,114,107 197,245,936
Aggressive Growth Portfolio 3,142,976 10.36 32,570,387 30,258,726
Venture Value Portfolio 28,881,911 16.90 487,989,263 391,621,073
Federated Value Portfolio 1,013,673 11.08 11,234,062 10,115,608
Provident Growth Portfolio 9,808,723 15.71 154,096,914 109,853,888
Growth/Phoenix Investment Counsel Portfolio 12,544,248 14.39 180,451,620 139,910,426
Alliance Growth Portfolio 19,054,564 18.73 356,815,327 282,750,919
Growth-Income Portfolio 18,420,920 16.82 309,755,916 230,363,373
Asset Allocation Portfolio 20,560,635 14.52 298,525,829 236,460,639
SunAmerica Balanced Portfolio 810,990 11.13 9,023,203 8,253,434
Balanced/Phoenix Investment Counsel Portfolio 4,645,507 13.63 63,333,105 55,171,273
Utility Portfolio 539,414 10.75 5,799,140 5,443,567
Worldwide High Income Portfolio 3,401,810 13.35 45,408,414 39,614,346
High-Yield Bond Portfolio 9,839,321 11.04 108,664,366 102,845,658
Global Bond Portfolio 5,815,710 11.40 66,296,884 60,250,898
Corporate Bond Portfolio 3,213,408 11.09 35,643,830 33,265,397
Cash Management Portfolio 8,213,699 10.76 88,383,977 87,236,993
------------------------------
2,635,482,587 2,154,515,098
------------------------------
$3,255,681,402 $2,711,129,944
===============================
</TABLE>
See accompanying notes to financial statements.
- 23 -
<PAGE> 81
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
November 30, 1996
<TABLE>
<CAPTION>
Government
Capital Natural and
Appreciation Growth Resources Quality Bond
Portfolio Portfolio Portfolio Portfolio
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital
gains distributions $ 10,629,382 $ 4,912,568 $ 515,438 $ 6,902,075
----------------------------------------------------------------
Total investment income 10,629,382 4,912,568 515,438 6,902,075
----------------------------------------------------------------
Expenses:
Mortality risk charge (2,648,085) (951,794) (194,548) (1,056,467)
Expense risk charge (908,657) (326,596) (66,757) (362,513)
Distribution expense charge (389,424) (139,969) (28,610) (155,363)
----------------------------------------------------------------
Total expenses (3,946,166) (1,418,359) (289,915) (1,574,343)
----------------------------------------------------------------
Net investment income (loss) 6,683,216 3,494,209 225,523 5,327,732
----------------------------------------------------------------
Net realized gains (losses)
from securities transactions:
Proceeds from shares sold 148,137,759 67,389,079 15,113,019 29,025,327
Cost of shares sold (124,723,485) (65,621,226) (14,479,690) (29,470,908)
----------------------------------------------------------------
Net realized gains (losses) from
securities transactions 23,414,274 1,767,853 633,329 (445,581)
----------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments:
Beginning of period 25,195,537 (2,443,209) 195,557 (437,002)
End of period 48,989,311 14,816,113 1,105,187 (1,326,642)
----------------------------------------------------------------
Change in net unrealized
appreciation/depreciation
of investments 23,793,774 17,259,322 909,630 (889,640)
----------------------------------------------------------------
Increase in net assets
from operations $ 53,891,264 $ 22,521,384 $ 1,768,482 $ 3,992,511
================================================================
</TABLE>
<TABLE>
<CAPTION>
International
Diversified Global Aggressive Venture
Equities Equities Growth Value
Portfolio Portfolio Portfolio Portfolio
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital
gains distributions $ 1,287,958 $ 6,158,712 $ 0 $ 2,694,478
----------------------------------------------------------------
Total investment income 1,287,958 6,158,712 0 2,694,478
----------------------------------------------------------------
Expenses:
Mortality risk charge (991,512) (2,010,515) (85,376) (2,943,626)
Expense risk charge (340,225) (689,882) (29,296) (1,010,068)
Distribution expense charge (145,810) (295,664) (12,555) (432,886)
----------------------------------------------------------------
Total expenses (1,477,547) (2,996,061) (127,227) (4,386,580)
----------------------------------------------------------------
Net investment income (loss) (189,589) 3,162,651 (127,227) (1,692,102)
----------------------------------------------------------------
Net realized gains (losses)
from securities transactions:
Proceeds from shares sold 17,240,967 20,913,096 2,094,329 27,920,686
Cost of shares sold (16,379,961) (18,509,688) (2,119,212) (25,543,792)
----------------------------------------------------------------
Net realized gains (losses) from
securities transactions 861,006 2,403,408 (24,883) 2,376,894
----------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments:
Beginning of period 2,201,317 14,441,934 0 16,656,771
End of period 11,523,299 38,868,171 2,311,661 96,368,190
----------------------------------------------------------------
Change in net unrealized
appreciation/depreciation
of investments 9,321,982 24,426,237 2,311,661 79,711,419
----------------------------------------------------------------
Increase in net assets
from operations $ 9,993,399 $ 29,992,296 $ 2,159,551 $ 80,396,211
================================================================
</TABLE>
See accompanying notes to financial statements.
- 24 -
<PAGE> 82
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
November 30, 1996
(Continued)
<TABLE>
<CAPTION>
Growth/Phoenix
Federated Provident Investment Alliance
Value Growth Counsel Growth
Portfolio Portfolio Portfolio Portfolio
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital
gains distributions $ 0 $ 0 $ 11,620,131 $ 13,166,311
---------------------------------------------------------------------
Total investment income 0 0 11,620,131 13,166,311
---------------------------------------------------------------------
Expenses:
Mortality risk charge (30,819) (1,298,791) (1,611,312) (2,303,864)
Expense risk charge (10,575) (445,664) (552,901) (790,542)
Distribution expense charge (4,533) (190,998) (236,958) (338,803)
---------------------------------------------------------------------
Total expenses (45,927) (1,935,453) (2,401,171) (3,433,209)
---------------------------------------------------------------------
Net investment income (loss) (45,927) (1,935,453) 9,218,960 9,733,102
---------------------------------------------------------------------
Net realized gains (losses) from securities transactions:
Proceeds from shares sold 78,340 15,535,140 15,785,704 44,852,549
Cost of shares sold (82,055) (12,506,834) (13,240,092) (40,610,915)
---------------------------------------------------------------------
Net realized gains (losses) from
securities transactions (3,715) 3,028,306 2,545,612 4,241,634
---------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments:
Beginning of period 0 22,299,756 27,141,195 25,552,610
End of period 1,118,454 44,243,026 40,541,194 74,064,408
---------------------------------------------------------------------
Change in net unrealized
appreciation/depreciation
of investments 1,118,454 21,943,270 13,399,999 48,511,798
---------------------------------------------------------------------
Increase in net assets
from operations $ 1,068,812 $ 23,036,123 $ 25,164,571 $ 62,486,534
=====================================================================
</TABLE>
<TABLE>
<CAPTION>
Balanced/Phoenix
Growth Asset SunAmerica Investment
Income Allocation Balanced Counsel
Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital
gains distributions $ 7,430,014 $ 11,914,087 $ 0 $ 1,328,008
---------------------------------------------------------------------
Total investment income 7,430,014 11,914,087 0 1,328,008
---------------------------------------------------------------------
Expenses:
Mortality risk charge (2,260,837) (2,449,195) (28,002) (476,794)
Expense risk charge (775,777) (840,410) (9,609) (163,606)
Distribution expense charge (332,476) (360,176) (4,118) (70,117)
---------------------------------------------------------------------
Total expenses (3,369,090) (3,649,781) (41,729) (710,517)
---------------------------------------------------------------------
Net investment income (loss) 4,060,924 8,264,306 (41,729) 617,491
---------------------------------------------------------------------
Net realized gains (losses) from securities transactions:
Proceeds from shares sold 15,533,878 5,808,109 1,487,724 3,846,983
Cost of shares sold (12,651,913) (5,095,547) (1,427,216) (3,639,612)
---------------------------------------------------------------------
Net realized gains (losses) from
securities transactions 2,881,965 712,562 60,508 207,371
---------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments:
Beginning of period 30,879,678 27,798,482 0 2,988,701
End of period 79,392,543 62,065,190 769,769 8,161,832
---------------------------------------------------------------------
Change in net unrealized
appreciation/depreciation
of investments 48,512,865 34,266,708 769,769 5,173,131
---------------------------------------------------------------------
Increase in net assets
from operations $ 55,455,754 $ 43,243,576 $ 788,548 $ 5,997,993
=====================================================================
</TABLE>
See accompanying notes to financial statements.
- 25 -
<PAGE> 83
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
November 30, 1996
(Continued)
<TABLE>
<CAPTION>
Worldwide High-Yield Global
Utility High Income Bond Bond
Portfolio Portfolio Portfolio Portfolio
----------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital
gains distributions $ 0 $ 1,015,605 $ 7,311,532 $ 4,009,120
----------------------------------------------------------
Total investment income 0 1,015,605 7,311,532 4,009,120
----------------------------------------------------------
Expenses:
Mortality risk charge (18,004) (272,281) (941,481) (629,902)
Expense risk charge (6,178) (93,430) (323,057) (216,143)
Distribution expense charge (2,648) (40,041) (138,453) (92,633)
----------------------------------------------------------
Total expenses (26,830) (405,752) (1,402,991) (938,678)
----------------------------------------------------------
Net investment income (loss) (26,830) 609,853 5,908,541 3,070,442
----------------------------------------------------------
Net realized gains (losses) from securities transactions:
Proceeds from shares sold 43,370 11,243,295 42,828,618 13,904,255
Cost of shares sold (42,297) (10,799,111) (42,422,892) (13,124,438)
----------------------------------------------------------
Net realized gains (losses) from
securities transactions 1,073 444,184 405,726 779,817
----------------------------------------------------------
Net unrealized appreciation (depreciation) of investments:
Beginning of period 0 848,076 208,018 4,235,183
End of period 355,573 5,794,068 5,818,708 6,045,986
----------------------------------------------------------
Change in net unrealized
appreciation/depreciation
of investments 355,573 4,945,992 5,610,690 1,810,803
----------------------------------------------------------
Increase in net assets
from operations $ 329,816 $ 6,000,029 $ 11,924,957 $ 5,661,062
==========================================================
</TABLE>
<TABLE>
<CAPTION>
Corporate Cash
Bond Management
Portfolio Portfolio TOTAL
------------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends and capital
gains distributions $ 1,203,871 $ 4,155,250 $ 96,254,540
------------------------------------------------
Total investment income 1,203,871 4,155,250 96,254,540
------------------------------------------------
Expenses:
Mortality risk charge (326,403) (1,293,546) (24,823,154)
Expense risk charge (112,001) (443,864) (8,517,751)
Distribution expense charge (48,000) (190,227) (3,650,462)
------------------------------------------------
Total expenses (486,404) (1,927,637) (36,991,367)
------------------------------------------------
Net investment income (loss) 717,467 2,227,613 59,263,173
------------------------------------------------
Net realized gains (losses) from securities transactions:
Proceeds from shares sold 6,091,029 406,095,300 910,968,556
Cost of shares sold (5,958,947) (403,880,580) (862,330,411)
------------------------------------------------
Net realized gains (losses) from
securities transactions 132,082 2,214,720 48,638,145
------------------------------------------------
Net unrealized appreciation (depreciation) of investments:
Beginning of period 1,607,962 1,315,471 200,686,037
End of period 2,378,433 1,146,984 544,551,458
------------------------------------------------
Change in net unrealized
appreciation/depreciation
of investments 770,471 (168,487) 343,865,421
------------------------------------------------
Increase in net assets
from operations $ 1,620,020 $ 4,273,846 $ 451,766,739
===============================================
</TABLE>
See accompanying notes to financial statements.
- 26 -
<PAGE> 84
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
November 30, 1996
<TABLE>
<CAPTION>
Government
Capital Natural and
Appreciation Growth Resources Quality Bond
Portfolio Portfolio Portfolio Portfolio
----------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 6,683,216 $ 3,494,209 $ 225,523 $ 5,327,732
Net realized gains (losses) from
securities transactions 23,414,274 1,767,853 633,329 (445,581)
Change in net unrealized appreciation/
depreciation of investments 23,793,774 17,259,322 909,630 (889,640)
----------------------------------------------------------------
Increase in net assets from
operations 53,891,264 22,521,384 1,768,482 3,992,511
----------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 76,601,464 23,740,929 9,561,486 27,653,612
Cost of units redeemed (12,784,433) (3,837,533) (1,065,244) (6,633,414)
Net transfers 55,273,130 3,644,446 6,924,307 (13,348,877)
----------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 119,090,161 23,547,842 15,420,549 7,671,321
----------------------------------------------------------------
Increase (decrease) in net assets 172,981,425 46,069,226 17,189,031 11,663,832
Net assets at beginning of period 187,995,252 77,303,908 9,139,896 97,856,245
----------------------------------------------------------------
Net assets at end of period $ 360,976,677 $ 123,373,134 $ 26,328,927 $ 109,520,077
================================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 4,765,562 1,677,049 817,912 2,417,937
Units redeemed (795,327) (270,932) (91,245) (579,841)
Units transferred 3,253,005 183,464 596,224 (1,166,534)
----------------------------------------------------------------
Increase (decrease) in units
outstanding 7,223,240 1,589,581 1,322,891 671,562
Beginning units 13,247,155 5,968,263 848,159 8,504,677
----------------------------------------------------------------
Ending units 20,470,395 7,557,844 2,171,050 9,176,239
================================================================
</TABLE>
<TABLE>
<CAPTION>
International
Diversified Global Aggressive Venture
Equities Equities Growth Value
Portfolio Portfolio Portfolio Portfolio
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (189,589) $ 3,162,651 $ (127,227) $ (1,692,102)
Net realized gains (losses) from
securities transactions 861,006 2,403,408 (24,883) 2,376,894
Change in net unrealized appreciation/
depreciation of investments 9,321,982 24,426,237 2,311,661 79,711,419
-----------------------------------------------------------------
Increase in net assets from
operations 9,993,399 29,992,296 2,159,551 80,396,211
-----------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 54,527,145 39,115,494 19,138,811 163,175,644
Cost of units redeemed (3,080,515) (8,799,730) (2,278,942) (9,283,640)
Net transfers 37,024,165 15,135,906 13,550,967 103,880,931
-----------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 88,470,795 45,451,670 30,410,836 257,772,935
-----------------------------------------------------------------
Increase (decrease) in net assets 98,464,194 75,443,966 32,570,387 338,169,146
Net assets at beginning of period 46,912,049 160,670,141 0 149,820,117
-----------------------------------------------------------------
Net assets at end of period $ 145,376,243 $ 236,114,107 $ 32,570,387 $ 487,989,263
=================================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 5,008,240 2,792,651 1,986,190 11,480,599
Units redeemed (282,701) (628,827) (229,445) (646,042)
Units transferred 3,377,738 1,068,500 1,409,155 7,142,205
-----------------------------------------------------------------
Increase (decrease) in units
outstanding 8,103,277 3,232,324 3,165,900 17,976,762
Beginning units 4,659,066 12,350,883 0 11,270,792
-----------------------------------------------------------------
Ending units 12,762,343 15,583,207 3,165,900 29,247,554
=================================================================
</TABLE>
See accompanying notes to financial statements.
- 27 -
<PAGE> 85
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
November 30, 1996
(Continued)
<TABLE>
<CAPTION>
Growth/Phoenix
Federated Provident Investment Alliance
Value Growth Counsel Growth
Portfolio Portfolio Portfolio Portfolio
----------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (45,927) $ (1,935,453) $ 9,218,960 $ 9,733,102
Net realized gains (losses) from
securities transactions (3,715) 3,028,306 2,545,612 4,241,634
Change in net unrealized appreciation/
depreciation of investments 1,118,454 21,943,270 13,399,999 48,511,798
----------------------------------------------------------------
Increase in net assets from
operations 1,068,812 23,036,123 25,164,571 62,486,534
----------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 6,696,816 20,936,991 21,818,159 93,131,739
Cost of units redeemed (63,953) (6,599,755) (7,626,629) (9,663,521)
Net transfers 3,532,387 4,171,906 (5,709,622) 47,853,520
----------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 10,165,250 18,509,142 8,481,908 131,321,738
----------------------------------------------------------------
Increase (decrease) in net assets 11,234,062 41,545,265 33,646,479 193,808,272
Net assets at beginning of period 0 112,551,649 146,805,141 163,007,055
----------------------------------------------------------------
Net assets at end of period $ 11,234,062 $ 154,096,914 $ 180,451,620 $ 356,815,327
================================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 672,856 1,613,854 1,626,331 5,705,725
Units redeemed (6,317) (506,275) (567,756) (588,952)
Units transferred 354,598 313,448 (438,737) 2,656,712
----------------------------------------------------------------
Increase (decrease) in units
outstanding 1,021,137 1,421,027 619,838 7,773,485
Beginning units 0 8,932,998 11,457,899 10,560,070
----------------------------------------------------------------
Ending units 1,021,137 10,354,025 12,077,737 18,333,555
================================================================
</TABLE>
<TABLE>
<CAPTION>
Balanced/Phoenix
Growth- Asset SunAmerica Investment
Income Allocation Balanced Counsel
Portfolio Portfolio Portfolio Portfolio
----------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 4,060,924 $ 8,264,306 $ (41,729) $ 617,491
Net realized gains (losses) from
securities transactions 2,881,965 712,562 60,508 207,371
Change in net unrealized appreciation/
depreciation of investments 48,512,865 34,266,708 769,769 5,173,131
----------------------------------------------------------------
Increase in net assets from
operations 55,455,754 43,243,576 788,548 5,997,993
----------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 66,216,411 61,800,477 6,831,490 24,730,811
Cost of units redeemed (8,604,568) (10,673,978) (1,556,007) (1,651,786)
Net transfers 29,425,995 9,326,845 2,959,172 4,146,437
----------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 87,037,838 60,453,344 8,234,655 27,225,462
----------------------------------------------------------------
Increase (decrease) in net assets 142,493,592 103,696,920 9,023,203 33,223,455
Net assets at beginning of period 167,262,324 194,828,909 0 30,109,650
----------------------------------------------------------------
Net assets at end of period $ 309,755,916 $ 298,525,829 $ 9,023,203 $ 63,333,105
================================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 4,586,759 4,629,094 675,529 1,946,479
Units redeemed (595,761) (793,782) (150,415) (130,093)
Units transferred 1,994,279 687,071 291,925 324,947
----------------------------------------------------------------
Increase (decrease) in units
outstanding 5,985,277 4,522,383 817,039 2,141,333
Beginning units 12,560,865 15,418,350 0 2,441,901
----------------------------------------------------------------
Ending units 18,546,142 19,940,733 817,039 4,583,234
================================================================
</TABLE>
See accompanying notes to financial statements.
- 28 -
<PAGE> 86
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
November 30, 1996
(Continued)
<TABLE>
<CAPTION>
Worldwide High-Yield Global
Utility High Income Bond Bond
Portfolio Portfolio Portfolio Portfolio
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (26,830) $ 609,853 $ 5,908,541 $ 3,070,442
Net realized gains (losses) from
securities transactions 1,073 444,184 405,726 779,817
Change in net unrealized appreciation/
depreciation of investments 355,573 4,945,992 5,610,690 1,810,803
------------------------------------------------------------------------
Increase in net assets from operations 329,816 6,000,029 11,924,957 5,661,062
------------------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 4,523,252 19,367,963 24,099,082 12,135,788
Cost of units redeemed (25,056) (1,780,947) (5,893,480) (3,222,889)
Net transfers 971,128 9,991,617 (2,720,348) (7,531,416)
------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 5,469,324 27,578,633 15,485,254 1,381,483
------------------------------------------------------------------------
Increase (decrease) in net assets 5,799,140 33,578,662 27,410,211 7,042,545
Net assets at beginning of period 0 11,829,752 81,254,155 59,254,339
------------------------------------------------------------------------
Net assets at end of period $ 5,799,140 $ 45,408,414 $ 108,664,366 $ 66,296,884
------------------------------------------------------------------------
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 450,097 1,521,018 1,991,539 1,053,412
Units redeemed (2,465) (141,970) (484,674) (278,565)
Units transferred 95,829 776,863 (224,121) (649,856)
------------------------------------------------------------------------
Increase (decrease) in units outstanding 543,461 2,155,911 1,282,744 124,991
Beginning units 0 1,040,828 7,075,451 5,288,158
------------------------------------------------------------------------
Ending units 543,461 3,196,739 8,358,195 5,413,149
========================================================================
</TABLE>
<TABLE>
<CAPTION>
Corporate Cash
Bond Management
Portfolio Portfolio TOTAL
----------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 717,467 $ 2,227,613 $ 59,263,173
Net realized gains (losses) from
securities transactions 132,082 2,214,720 48,638,145
Change in net unrealized appreciation/
depreciation of investments 770,471 (168,487) 343,865,421
----------------------------------------------------
Increase in net assets from operations 1,620,020 4,273,846 451,766,739
----------------------------------------------------
From capital transactions:
Net proceeds from units sold 13,578,677 99,349,340 888,731,581
Cost of units redeemed (1,537,267) (20,113,324) (126,776,611)
Net transfers (7,137,549) (84,506,732) 226,858,315
----------------------------------------------------
Increase (decrease) in net assets
from capital transactions 4,903,861 (5,270,716) 988,813,285
----------------------------------------------------
Increase (decrease) in net assets 6,523,881 (996,870) 1,440,580,024
Net assets at beginning of period 29,119,949 89,380,847 1,815,101,378
----------------------------------------------------
Net assets at end of period $ 35,643,830 $ 88,383,977 5,681,402
----------------------------------------------------
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 1,222,601 9,156,831
Units redeemed (138,031) (1,854,726)
Units transferred (647,827) (7,669,176)
----------------------------------
Increase (decrease) in units outstanding 436,743 (367,071)
Beginning units 2,623,065 8,372,979
----------------------------------
Ending units 3,059,808 8,005,908
==================================
</TABLE>
See accompanying notes to financial statements.
- 29 -
<PAGE> 87
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
November 30, 1995
<TABLE>
<CAPTION>
Government
Capital Natural and
Appreciation Growth Resources Quality Bond
Portfolio Portfolio Portfolio Portfolio
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 570,003 $ 9,904,658 $ 153,506 $ 4,958,126
Net realized gains (losses)
from securities transactions 2,963,222 (1,431,103) 210,905 (670,807)
Change in net unrealized
appreciation/depreciation
of investments 33,765,331 4,074,868 216,779 7,832,852
----------------------------------------------------------------------
Increase in net assets from
operations 37,298,556 12,548,423 581,190 12,120,171
----------------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 42,357,073 19,800,527 5,060,794 25,989,678
Cost of units redeemed (6,609,644) (3,636,812) (499,798) (4,747,872)
Net transfers 24,930,957 7,461,569 3,521,229 (4,272,209)
----------------------------------------------------------------------
Increase (decrease) in net
assets from capital
transactions 60,678,386 23,625,284 8,082,225 16,969,597
----------------------------------------------------------------------
Increase in net assets 97,976,942 36,173,707 8,663,415 29,089,768
Net assets at beginning of period 90,018,310 41,130,201 476,481 68,766,477
----------------------------------------------------------------------
Net assets at end of period $ 187,995,252 $ 77,303,908 $ 9,139,896 $ 97,856,245
======================================================================
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Units sold 3,333,538 1,693,821 491,213 2,393,360
Units redeemed (534,760) (308,208) (47,001) (447,719)
Units transferred 1,986,225 631,972 352,535 (449,681)
----------------------------------------------------------------------
Increase (decrease) in units outstanding 4,785,003 2,017,585 796,747 1,495,960
Beginning units 8,462,152 3,950,678 51,412 7,008,717
----------------------------------------------------------------------
Ending units 13,247,155 5,968,263 848,159 8,504,677
======================================================================
</TABLE>
<TABLE>
<CAPTION>
International
Diversified Global Alliance
Equities Equities Growth
Portfolio Portfolio Portfolio
---------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (330,770) $ 1,830,720 $ (540,076)
Net realized gains (losses)
from securities transactions 124,626 1,022,606 7,754,256
Change in net unrealized
appreciation/depreciation
of investments 2,219,382 14,698,645 25,644,378
---------------------------------------------------
Increase in net assets from
operations 2,013,238 17,551,971 32,858,558
---------------------------------------------------
From capital transactions:
Net proceeds from units sold 30,376,693 24,925,733 53,356,915
Cost of units redeemed (921,045) (6,609,249) (5,209,891)
Net transfers 12,791,423 (9,028,619) 29,389,582
---------------------------------------------------
Increase (decrease) in net
assets from capital
transactions 42,247,071 9,287,865 77,536,606
---------------------------------------------------
Increase in net assets 44,260,309 26,839,836 110,395,164
Net assets at beginning of period 2,651,740 133,830,305 52,611,891
Net assets at end of period $ 46,912,049 $ 160,670,141 $ 163,007,055
===================================================
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Units sold 3,144,375 2,050,963 3,825,275
Units redeemed (94,741) (551,261) (389,548)
Units transferred 1,338,116 (854,237) 2,126,565
---------------------------------------------------
Increase (decrease) in units outstanding 4,387,750 645,465 5,562,292
Beginning units 271,316 11,705,418 4,997,778
---------------------------------------------------
Ending units 4,659,066 12,350,883 10,560,070
===================================================
</TABLE>
See accompanying notes to financial statements.
- 30 -
<PAGE> 88
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
November 30, 1995
(Continued)
<TABLE>
<CAPTION>
Growth/Phoenix
Investment Provident Venture Growth-
Counsel Growth Value Income
Portfolio Portfolio Portfolio Portfolio
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (437,667) $ (1,225,512) $ (927,802) $ (910,358)
Net realized gains (losses)
from securities transactions 699,193 2,101,636 653,352 580,640
Change in net unrealized
appreciation/depreciation
of investments 32,756,918 22,518,338 16,698,220 32,299,532
----------------------------------------------------------------------
Increase in net assets from
operations 33,018,444 23,394,462 16,423,770 31,969,814
----------------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 20,915,713 22,224,063 84,358,541 40,298,458
Cost of units redeemed (6,233,578) (4,402,786) (2,067,508) (6,156,717)
Net transfers (3,503,959) (3,201,712) 47,635,058 17,079,909
----------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 11,178,176 14,619,565 129,926,091 51,221,650
----------------------------------------------------------------------
Increase in net assets 44,196,620 38,014,027 146,349,861 83,191,464
Net assets at beginning of period 102,608,521 74,537,622 3,470,256 84,070,860
----------------------------------------------------------------------
Net assets at end of period $ 146,805,141 $ 112,551,649 $ 149,820,117 $ 167,262,324
======================================================================
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Units sold 1,856,045 1,943,456 7,004,516 3,356,768
Units redeemed (561,002) (397,000) (170,265) (527,958)
Units transferred (314,962) (223,562) 4,081,458 1,402,733
----------------------------------------------------------------------
Increase (decrease) in units outstanding 980,081 1,322,894 10,915,709 4,231,543
Beginning units 10,477,818 7,610,104 355,083 8,329,322
----------------------------------------------------------------------
Ending units 11,457,899 8,932,998 11,270,792 12,560,865
======================================================================
</TABLE>
<TABLE>
<CAPTION>
Balanced/Phoenix
Asset Investment Worldwide
Allocation Counsel High Income
Portfolio Portfolio Portfolio
-----------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 427,584 $ (179,498) $ (69,898)
Net realized gains (losses)
from securities transactions 251,145 7,129 6,721
Change in net unrealized
appreciation/depreciation
of investments 29,479,521 2,989,423 850,752
-----------------------------------------------------
Increase in net assets from
operations 30,158,250 2,817,054 787,575
-----------------------------------------------------
From capital transactions:
Net proceeds from units sold 56,181,431 18,078,605 6,567,534
Cost of units redeemed (7,323,815) (332,367) (270,872)
Net transfers 10,269,136 9,031,583 4,215,266
-----------------------------------------------------
Increase (decrease) in net assets
from capital transactions 59,126,752 26,777,821 10,511,928
-----------------------------------------------------
Increase in net assets 89,285,002 29,594,875 11,299,503
Net assets at beginning of period 105,543,907 514,775 530,249
-----------------------------------------------------
Net assets at end of period $ 194,828,909 $ 30,109,650 $ 11,829,752
===================================================
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Units sold 4,816,380 1,620,169 615,871
Units redeemed (639,916) (28,907) (24,872)
Units transferred 868,932 798,880 396,514
-----------------------------------------------------
Increase (decrease) in units outstanding 5,045,396 2,390,142 987,513
Beginning units 10,372,954 51,759 53,315
-----------------------------------------------------
Ending units 15,418,350 2,441,901 1,040,828
===================================================
</TABLE>
See accompanying notes to financial statements.
- 31 -
<PAGE> 89
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
November 30, 1995
(Continued)
<TABLE>
<CAPTION>
High-Yield Global Fixed Cash
Bond Bond Income Management
Portfolio Portfolio Portfolio Portfolio TOTAL
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 5,258,721 $ 952,548 $ 568,827 $ 988,181 $ 20,991,293
Net realized gains (losses)
from securities transactions (854,461) 2,396 48,899 1,920,234 15,390,589
Change in net unrealized
appreciation/depreciation
of investments 2,735,466 5,667,720 2,168,479 131,698 236,748,302
----------------------------------------------------------------------------------------
Increase in net assets
from operations 7,139,726 6,622,664 2,786,205 3,040,113 273,130,184
----------------------------------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 19,227,582 9,890,548 14,637,938 123,077,885 617,325,711
Cost of units redeemed (5,289,224) (2,414,192) (1,077,291) (11,770,536) (75,573,197)
Net transfers 4,565,493 830,402 (3,053,289) (113,501,827) 35,159,992
----------------------------------------------------------------------------------------
Increase (decrease) in net
assets from capital transactions 18,503,851 8,306,758 10,507,358 (2,194,478) 576,912,506
----------------------------------------------------------------------------------------
Increase in net assets 25,643,577 14,929,422 13,293,563 845,635 850,042,690
Net assets at beginning of period 55,610,578 44,324,917 15,826,386 88,535,212 965,058,688
----------------------------------------------------------------------------------------
Net assets at end of period $ 81,254,155 $ 59,254,339 $ 29,119,949 $ 89,380,847 $ 1,815,101,378
========================================================================================
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Units sold 1,741,347 940,231 1,378,923 11,717,307
Units redeemed (482,184) (232,251) (104,083) (1,122,299)
Units transferred 445,344 47,792 (295,469) (10,845,063)
---------------------------------------------------------------------
Increase (decrease) in units outstanding 1,704,507 755,772 979,371 (250,055)
Beginning units 5,370,944 4,532,386 1,643,694 8,623,034
---------------------------------------------------------------------
Ending units 7,075,451 5,288,158 2,623,065 8,372,979
=====================================================================
</TABLE>
See accompanying notes to financial statements.
- 32 -
<PAGE> 90
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the Polaris Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Variable Separate Account (Portion Relating to the POLARIS Variable Annuity)
of Anchor National Life Insurance Company (the "Separate Account") is a
segregated investment account of Anchor National Life Insurance Company (the
"Company"). The Company is an indirect, wholly owned subsidiary of
SunAmerica Inc. The Separate Account is registered as a segregated unit
investment trust pursuant to the provisions of the Investment Company Act of
1940, as amended.
The Separate Account is composed of twenty-two variable portfolios (the
"Variable Accounts"). Each of the Variable Accounts is invested solely in
the shares of either (1) one of the four currently available investment
portfolios of Anchor Series Trust ("Anchor Trust") or (2) one of the
eighteen currently available investment portfolios of SunAmerica Series
Trust ("SunAmerica Trust"). The Anchor Trust and the SunAmerica Trust (the
"Trusts") are each diversified, open-end, affiliated investment companies,
which retain investment advisors to assist in the investment activities of
the Trusts. The participant may elect to have payments allocated to any of
five guaranteed-interest funds of the Company (the "General Account"), which
are not a part of the Separate Account. The financial statements include
balances allocated by the participant to the twenty-two Variable Accounts
and do not include balances allocated to the General Account.
The inception date of the Aggressive Growth, Federated Value, SunAmerica
Balanced, and Utility Portfolios was June 3, 1996. The inception date of the
Natural Resources, International Diversified Equities, Venture Value,
Balanced/Phoenix Investment Counsel and Worldwide High Income Portfolios was
October 31, 1994. The inception date of the Asset Allocation, Global Bond
and Corporate Bond (formerly the Fixed Income Portfolio) Portfolios was July
1, 1993. The inception date of the remaining portfolios was February 9,
1993.
The investment objectives and policies of the four portfolios of the Anchor
Trust are summarized below:
The CAPITAL APPRECIATION PORTFOLIO seeks long-term capital appreciation.
This portfolio invests in growth equity securities which are widely
diversified by industry and company
- 33 -
<PAGE> 91
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the Polaris Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) and may engage in
transactions involving stock index futures and options thereon as a hedge
against changes in market conditions.
The GROWTH PORTFOLIO seeks long-term capital appreciation. This portfolio
invests in growth equity securities and may engage in transactions involving
stock index futures and options thereon as a hedge against changes in market
conditions.
The NATURAL RESOURCES PORTFOLIO seeks a total return in excess of the U.S.
rate of inflation as represented by the Consumer Price Index. This portfolio
invests primarily in equity securities of U.S. or foreign companies which
are expected to provide favorable returns in periods of rising inflation.
The GOVERNMENT AND QUALITY BOND PORTFOLIO seeks relatively high current
income, liquidity and security of principal. This portfolio invests in
obligations issued, guaranteed or insured by the U.S. Government, its
agencies or instrumentalities and in corporate debt securities rated Aa or
better by Moody's Investor Service, Inc. or AA or better by Standard &
Poor's Corporation.
Anchor Trust has portfolios in addition to those identified above; however,
none of these other portfolios is currently available for investment under
the Separate Account.
The investment objectives and policies of the eighteen portfolios of the
SunAmerica Trust are summarized below:
The INTERNATIONAL DIVERSIFIED EQUITIES PORTFOLIO seeks long-term capital
appreciation. This portfolio invests in accordance with country weightings
as determined by the investment subadvisor in common stocks of foreign
issuers which, in the aggregate, replicate broad country indices.
The GLOBAL EQUITIES PORTFOLIO seeks long-term growth of capital. This
portfolio invests primarily in common stocks or securities of U.S. and
foreign issuers with common stock characteristics which demonstrate the
potential for appreciation and engages in transactions in foreign
currencies.
- 34 -
<PAGE> 92
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the Polaris Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The AGGRESSIVE GROWTH PORTFOLIO seeks capital appreciation. This portfolio
invests primarily in equity securities of small capitalization growth
companies.
The VENTURE VALUE PORTFOLIO seeks growth of capital. This portfolio invests
primarily in common stocks.
The FEDERATED VALUE PORTFOLIO seeks growth of capital and income. This
portfolio invests primarily in the securities of high quality companies.
The PROVIDENT GROWTH, GROWTH/PHOENIX INVESTMENT COUNSEL AND ALLIANCE GROWTH
PORTFOLIOS, each seek long-term growth of capital. These portfolios invest
primarily in common stocks or securities with common stock characteristics
which demonstrate the potential for appreciation.
The GROWTH-INCOME PORTFOLIO seeks growth of capital and income. This
portfolio invests primarily in common stocks or securities which demonstrate
the potential for appreciation and/or dividends.
The ASSET ALLOCATION PORTFOLIO seeks high total return (including income and
capital gains) consistent with preservation of capital over the long-term.
This portfolio invests in a diversified selection of common stocks and other
securities having common stock characteristics, bonds and other intermediate
and long-term fixed-income securities and money market instruments (debt
securities maturing in one year or less) in any combination.
The SUNAMERICA BALANCED PORTFOLIO seeks to conserve principal. This
portfolio maintains at all times a balanced portfolio of stocks and bonds.
The BALANCED/PHOENIX INVESTMENT COUNSEL PORTFOLIO seeks reasonable income,
long-term capital growth and conservation of capital. This portfolio invests
primarily in common stocks and fixed-income securities, with an emphasis on
income-producing securities which appear to have some potential for capital
enhancement.
- 35 -
<PAGE> 93
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the Polaris Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The UTILITY PORTFOLIO
seeks high current income and moderate capital appreciation. This portfolio
invests primarily in the equity and debt securities of utility companies.
The WORLDWIDE HIGH INCOME PORTFOLIO seeks high current income and,
secondarily, capital appreciation. This portfolio invests primarily in a
selection of high-yielding fixed-income securities of issuers located
throughout the world.
The HIGH-YIELD BOND PORTFOLIO seeks a high level of current income and,
secondarily, seeks capital appreciation. This portfolio invests primarily in
intermediate and long-term corporate obligations, with emphasis on
higher-yielding, higher-risk, lower- rated or unrated securities.
The GLOBAL BOND PORTFOLIO seeks a high total return, emphasizing current
income and, to a lesser extent, providing opportunities for capital
appreciation. This portfolio invests in high quality fixed-income securities
of U.S. and foreign issuers and engages in transactions in foreign
currencies.
The CORPORATE BOND PORTFOLIO (formerly the Fixed Income Portfolio) seeks a
high total return with only moderate price risk. This portfolio invests
primarily in investment grade fixed-income securities.
The CASH MANAGEMENT PORTFOLIO seeks high current yield while preserving
capital. This portfolio invests in a diversified selection of money market
instruments.
Purchases and sales of shares of the portfolios of the Trusts are valued at
the net asset values of the shares on the date the shares are purchased or
sold. Dividends and capital gains distributions are recorded when received.
Realized gains and losses on the sale of investments in the Trusts are
recognized at the date of sale and are determined on an average cost basis.
Accumulation unit values are computed daily based on the total net assets of
the Variable Accounts.
- 36 -
<PAGE> 94
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the Polaris Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
2. CHARGES AND DEDUCTIONS
Charges and deductions are applied against the current value of the Separate
Account and are paid as follows:
WITHDRAWAL CHARGE: The contract value may be withdrawn at any time during
the accumulation period. There is a free withdrawal amount for the first
withdrawal during a contract year after the first contract year. The free
withdrawal amount is the greater of earnings in the contract or 10% of the
purchase payments made more than one year prior to the date of withdrawal
that remain subject to the withdrawal charge and that have not previously
been withdrawn. Should a withdrawal exceed the free withdrawal amount, a
withdrawal charge, in certain circumstances, is imposed and paid to the
Company.
Withdrawal charges vary in amount depending upon the contribution year in
which the purchase payment being withdrawn was made. The withdrawal charge
is deducted from the remaining contract value so that the actual reduction
in contract value as a result of the withdrawal will be greater than the
withdrawal amount requested and paid. For purposes of determining the
withdrawal charge, withdrawals will be allocated first to investment income,
if any (which may generally be withdrawn free of a withdrawal charge), and
then to purchase payments on a first-in, first-out basis so that all
withdrawals are allocated to purchase payments to which the lowest (if any)
withdrawal charge applies.
Any amount withdrawn which exceeds a free withdrawal may be subject to a
withdrawal charge in accordance with the withdrawal charge table shown
below:
<TABLE>
<CAPTION>
Contribution Applicable Withdrawal
Year Charge Percentage
-----------------------------------------------------
<S> <C>
Zero 7%
First 6%
Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and later 0%
</TABLE>
- 37 -
<PAGE> 95
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the Polaris Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
2. CHARGES AND DEDUCTIONS (continued)
CONTRACT ADMINISTRATION CHARGE: An annual contract administration
charge of $35 is charged against each contract, which reimburses the
Company for expenses incurred in establishing and maintaining
records relating to a contract. The contract administration charge
will be assessed on each anniversary of the issue date of the
contract prior to the date when annuity payments begin. In the event
that a total surrender of contract value is made, the charge will be
assessed as of the date of surrender without proration.
TRANSFER FEE: A transfer fee of $25 ($10 in Pennsylvania and Texas)
is assessed on each transfer of funds in excess of fifteen
transactions within a contract year.
PREMIUM TAXES: Premium taxes or other taxes payable to a state or
other governmental entity will be charged against the contract
values. Some states assess premium taxes at the time purchase
payments are made; others assess premium taxes at the time annuity
payments begin. The Company currently intends to deduct premium
taxes at the time of surrender, upon death of the participant or
upon annuitization; however, it reserves the right to deduct any
premium taxes when incurred. Premium taxes generally range from 0%
to 3.5%.
MORTALITY AND EXPENSE RISK CHARGE: The Company deducts mortality and
expense risk charges, which total to an annual rate of 1.37% of the
net asset value of each portfolio, computed on a daily basis. The
mortality risk charge is compensation for the mortality risks
assumed by the Company from its contractual obligations to make
annuity payments after the contract has annuitized for the life of
the annuitant, to waive the withdrawal charge in the event of the
death of the participant and to provide both a standard and an
enhanced death benefit if the participant dies prior to the date
annuity payments begin. The expense risk charge is compensation for
the risk assumed by the Company that the cost of administering the
contracts will exceed the amount received from the contract
administration charge.
DISTRIBUTION EXPENSE CHARGE: The Company deducts a distribution
expense charge at an annual rate of 0.15% of the net asset value of
each portfolio, computed on a daily basis. The distribution expense
charge is designed to compensate the Company for assuming the risk
that the cost of distributing the contracts will exceed the revenues
from the withdrawal charge.
- 38 -
<PAGE> 96
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the Polaris Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
2. CHARGES AND DEDUCTIONS (continued)
SEPARATE ACCOUNT INCOME TAXES: The Company currently does not
maintain a provision for taxes, but has reserved the right to
establish such a provision for taxes in the future if it determines,
in its sole discretion, that it will incur a tax as a result of the
operation of the Separate Account.
- 39 -
<PAGE> 97
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the Polaris Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
3. INVESTMENT IN ANCHOR TRUST AND SUNAMERICA TRUST The aggregate cost
of the Trusts' shares acquired and the aggregate proceeds from
shares sold during the year ended November 30, 1996 consist of the
following:
<TABLE>
<CAPTION>
Cost of Shares Proceeds from
Variable Accounts Acquired Shares Sold
--------------------------- -------------------------------------------
<S> <C> <C>
ANCHOR TRUST:
Capital Appreciation Portfolio $ 273,911,135 $ 148,137,759
Growth Portfolio 94,431,132 67,389,079
Natural Resources Portfolio 30,759,092 15,113,019
Government and Quality Bond
Portfolio 42,024,380 29,025,327
SUNAMERICA TRUST:
International Diversified
Equities Portfolio 105,522,173 17,240,967
Global Equities Portfolio 69,527,417 20,913,096
Aggressive Growth Portfolio 32,377,938 2,094,329
Venture Value Portfolio 284,001,520 27,920,686
Federated Value Portfolio 10,197,663 78,340
Provident Growth Portfolio 32,108,828 15,535,140
Growth/Phoenix Investment
Counsel Portfolio 33,486,572 15,785,704
Alliance Growth Portfolio 185,907,389 44,852,549
Growth-Income Portfolio 106,632,640 15,533,878
Asset Allocation Portfolio 74,525,759 5,808,109
SunAmerica Balanced Portfolio 9,680,649 1,487,724
Balanced/Phoenix Investment
Counsel Portfolio 31,689,936 3,846,983
Utility Portfolio 5,485,864 43,370
Worldwide High Income Portfolio 39,431,780 11,243,295
High-Yield Bond Portfolio 64,222,413 42,828,618
Global Bond Portfolio 18,356,180 13,904,255
Corporate Bond Portfolio 11,712,355 6,091,029
Cash Management Portfolio 403,052,198 406,095,300
=============== ==============
</TABLE>
- 40 -
<PAGE> 98
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the Polaris Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
4. FEDERAL INCOME TAXES
The Company qualifies for federal income tax treatment granted to
life insurance companies under subchapter L of the Internal Revenue
Service Code (the "Code"). The operations of the Separate Account
are part of the total operations of the Company and are not taxed
separately. The Separate Account is not treated as a regulated
investment company under the Code.
- 41 -
<PAGE> 99
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- ----------------------------------------------
(a) Financial Statements
- ---------------------------
The following financial statements are included in Part A of the
Registration Statement:
Consolidated Financial Statements of Anchor National Life
Insurance Company for the fiscal year ended September 30, 1996
The following financial statements are included in Part B of the
Registration Statement:
Financial Statements of Variable Separate Account (Portion
Relating to the POLARIS Variable Annuity) for the fiscal year
ended November 30, 1996
(b) Exhibits
- ----------------
(1) Resolutions Establishing Separate Account...... Previously Filed
(2) Custody Agreements............................. Not Applicable
(3) (a) Distribution Contract...................... Previously Filed
(b) Selling Agreement.......................... Previously Filed
(4) Variable Annuity Contract...................... Previously Filed
(5) Application for Contract....................... Previously Filed
(6) Depositor - Corporate Documents
(a) Certificate of Incorporation........... Previously Filed
(b) By-Laws................................ Previously Filed
(7) Reinsurance Contract........................... Not Applicable
(8) Fund Participation Agreement................... Previously Filed
(9) Opinion of Counsel............................. Previously Filed
Consent of Counsel............................. Previously Filed
(10) Consent of Independent Accountants............. Filed Herewith
(11) Financial Statements Omitted from Item 23...... None
(12) Initial Capitalization Agreement............... Not Applicable
(13) Performance Computations....................... Not Applicable
(14) Diagram and Listing of All Persons Directly
or Indirectly Controlled By or Under Common
Control with Anchor National Life Insurance
Company, the Depositor of Registrant........... Previously Filed
(15) Powers of Attorney............................. Previously Filed
(27) Financial Data Schedules....................... Filed Herewith
Item 25. Directors and Officers of the Depositor
- -------------------------------------------------
The officers and directors of Anchor National Life Insurance Company
are listed below. Their principal business address is 1 SunAmerica Center, Los
Angeles, California 90067-6022, unless otherwise noted.
Name Position
- ---- --------
Eli Broad Chairman, President and
Chief Executive Officer
Jay S. Wintrob Director and Executive Vice President
Joseph M. Tumbler Director and Executive Vice President
Peter McMillan Director
James R. Belardi Director and Senior Vice President
Lorin M. Fife Director, Senior Vice President,
General Counsel and Assistant
Secretary
Susan L. Harris Director, Senior Vice President
and Secretary
Jana W. Greer Director and Senior Vice President
Scott L. Robinson Director and Senior Vice President
James W. Rowan Director and Senior Vice President
N. Scott Gillis Senior Vice President and Controller
Edwin R. Reoliquio Senior Vice President and Chief Actuary
Victor E. Akin Senior Vice President
Scott H. Richland Vice President and Treasurer
J. Franklin Grey Vice President
Keith B. Jones Vice President
Michael Lindquist Vice President
Edward P. Nolan* Vice President
Greg Outcalt Vice President
- ------------------
* 88 Bradley Road, P.O. Box 4005, Woodbridge, Connecticut 06525
<PAGE> 100
Item 26. Persons Controlled By or Under Common Control With Depositor or
- -------------------------------------------------------------------------
Registrant
- ----------
The Registrant is a separate account of Anchor National Life Insurance
Company (Depositor). For a complete listing and diagram of all persons directly
or indirectly controlled by or under common control with the Depositor or
Registrant, see Exhibit 14 which is incorporated herein by reference.
Item 27. Number of Contract Owners
- ------------------------------------
As of March 31, 1997, there were 33,878 owners of Qualified Contracts
and 57,584 owners of Non-Qualified Contracts.
Item 28. Indemnification
- -------------------------
None.
Item 29. Principal Underwriter
- --------------------------------
SunAmerica Capital Services, Inc. serves as distributor to the
Registrant.
Its principal business address is 733 Third Avenue, 4th Floor, New
York, New York 10017. The following are the directors and officers of SunAmerica
Capital Services, Inc.
Name Position with Distributor
---- -------------------------
J. Steven Neamtz Director and President
Robert M. Zakem Director, Executive Vice
President and Assistant
Secretary
Peter Harbeck Director
Gary W. Krat Director
Joseph M. Tumbler Director
Enrique Lopez-Balboa Vice President
Steven Rothstein Treasurer
Susan L. Harris Secretary
Lorin M. Fife Assistant Secretary
Net
Distribution Compensation
Name of Discounts and on Redemption Brokerage
Distributor Commissions Annuitization Commission Commissions*
- ------------ -------------- ------------- ----------- ------------
SunAmerica None None None None
Capital
Services, Inc.
- ------------------
* Distribution fee is paid by Anchor National Life Insurance Company.
Item 30. Location of Accounts and Records
- --------------------------------------------
Anchor National Life Insurance Company, the Depositor for the
Registrant, is located at 1 SunAmerica Center, Los Angeles, California 90067-
6022. SunAmerica Capital Services, Inc., the distributor of the Contracts, is
located at 733 Third Avenue, 4th Floor, New York, New York 10017. Each maintains
those accounts and records required to be maintained by it pursuant to Section
31(a) of the Investment Company Act and the rules promulgated thereunder.
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02100, maintains certain accounts and records pursuant to the
instructions of the Registrant.
Item 31. Management Services
- -----------------------------
Not Applicable.
<PAGE> 101
Item 32. Undertakings
- ----------------------
Registrant undertakes to (1) file post-effective amendments to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old for so long as payments under the variable annuity Contracts may be
accepted; (2) include either (A) as part of any application to purchase a
Contract offered by the prospectus forming a part of the Registration Statement,
a space that an applicant can check to request a Statement of Additional
Information, or (B) a postcard or similar written communication affixed to or
included in the Prospectus that the Applicant can remove to send for a Statement
of Additional Information; and (3) deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form N-4 promptly upon written or oral request.
Further, Registrant undertakes to deduct mortality and expense risk
charges, distribution expense charges, withdrawal charges (contingent deferred
sales charges), contract maintenance fees and transfer fees that are in the
aggregate (1) reasonable in relation to the risks assumed by the Company and (2)
reasonable in amount as compared with other variable annuity products. Those
determinations are based on the Company's analysis of publicly available
information about similar industry practices, and by taking into consideration
factors such as current charge levels and benefits provided, the existence of
expense charge guarantees and guaranteed annuity rates.
Item 33. Representation
- ------------------------
The Company hereby represents that it is relying upon a No-Action
Letter issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been complied
with:
1. Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in each registration
statement, including the prospectus, used in connection with the
offer of the contract;
2. Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in any sales literature
used in connection with the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase the
contract specifically to bring the redemption restrictions imposed by
Section 403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed
statement acknowledging the participant's understanding of (1) the
restrictions on redemption imposed by Section 403(b)(11), and (2) other
investment alternatives available under the employer's Section 403(b)
arrangement to which the participant may elect to transfer his contract
value.
<PAGE> 102
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant has caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf, in the City of Los Angeles,
and the State of California, on this 1st day of May, 1997.
VARIABLE SEPARATE ACCOUNT
(Registrant)
By: ANCHOR NATIONAL LIFE INSURANCE COMPANY
(Depositor)
By: /s/ JAY S. WINTROB
----------------------------------------
Jay S. Wintrob
Executive Vice President
By: ANCHOR NATIONAL LIFE INSURANCE COMPANY
(Depositor, on behalf of itself and Registrant)
By: /s/ JAY S. WINTROB
----------------------------------------
Jay S. Wintrob
Executive Vice President
As required by the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed by the following persons
in the capacity and on the dates indicated.
SIGNATURE TITLE DATE
ELI BROAD* President, Chief
- -------------------- Executive Officer and
Eli Broad Chairman of the Board
(Principal Executive
Officer)
SCOTT L. ROBINSON* Senior Vice President
- -------------------- and Director
Scott L. Robinson (Principal Financial
Officer)
SCOTT GILLIS* Senior Vice President
- -------------------- and Controller
N. Scott Gillis (Principal Accounting
Officer)
JAMES R. BELARDI* Director
- --------------------
James R. Belardi
LORIN M. FIFE* Director
- --------------------
Lorin M. Fife
JANA W. GREER* Director
- --------------------
Jana W. Greer
/s/ SUSAN L. HAEEIS Director May 1, 1997
- --------------------
Susan L. Harris
PETER MCMILLAN* Director
- --------------------
Peter McMillan
JAY S. WINTROB* Director
- --------------------
Jay S. Wintrob
JAMES W. ROWAN* Director
- ---------------------
James W. Rowan
<PAGE> 103
JOSEPH M. TUMBLER* Director
- ---------------------
Joseph M. Tumbler
* By: /s/ SUSAN L. HARRIS Attorney-in-Fact
----------------------
Susan L. Harris
Date: May 1, 1997
<PAGE> 104
EXHIBIT INDEX
Exhibit Description
- ------- -----------
(10) Consent of Independent Accountants
(27) Financial Data Schedules
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus and Statement of Additional
Information constituting part of this Registration Statement on Form N-4 for
Variable Separate Account (Portion Relating to the POLARIS Variable Annuity) of
Anchor National Life Insurance Company, of our report dated November 8, 1996
relating to the consolidated financial statements of Anchor National Life
Insurance Company, and of our report dated January 17, 1997 relating to the
financial statements of Variable Separate Account (Portion Relating to the
POLARIS Variable Annuity) of Anchor National Life Insurance Company, which
appear in such Prospectus and Statement of Additional Information, respectively.
We also consent to the references to us under the headings "Independent
Accountants" and "Financial Statements" in such Prospectus and Statement of
Additional Information, respectively.
PRICE WATERHOUSE LLP
Los Angeles, California
May 1, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> CAPITAL APPRECIATION
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 311,987,366
<INVESTMENTS-AT-VALUE> 360,976,677
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 360,976,677
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 20,470,395
<SHARES-COMMON-PRIOR> 13,247,155
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 360,976,677
<DIVIDEND-INCOME> 10,629,382
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 3,946,166
<NET-INVESTMENT-INCOME> 6,683,216
<REALIZED-GAINS-CURRENT> 23,414,274
<APPREC-INCREASE-CURRENT> 23,793,774
<NET-CHANGE-FROM-OPS> 53,891,264
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,018,567
<NUMBER-OF-SHARES-REDEEMED> 795,327
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 172,981,425
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 14.19
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.63
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> GROWTH
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 108,557,021
<INVESTMENTS-AT-VALUE> 123,373,134
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 123,373,134
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 7,557,844
<SHARES-COMMON-PRIOR> 5,968,263
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 123,373,134
<DIVIDEND-INCOME> 4,912,568
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,418,359
<NET-INVESTMENT-INCOME> 3,494,209
<REALIZED-GAINS-CURRENT> 1,767,853
<APPREC-INCREASE-CURRENT> 17,259,322
<NET-CHANGE-FROM-OPS> 22,521,384
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,860,513
<NUMBER-OF-SHARES-REDEEMED> 270,932
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 46,069,226
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 12.95
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.32
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> NATURAL RESOURCES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 25,223,740
<INVESTMENTS-AT-VALUE> 26,328,927
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 26,328,927
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 2,171,050
<SHARES-COMMON-PRIOR> 848,159
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 26,328,927
<DIVIDEND-INCOME> 515,438
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 289,915
<NET-INVESTMENT-INCOME> 225,523
<REALIZED-GAINS-CURRENT> 633,329
<APPREC-INCREASE-CURRENT> 909,630
<NET-CHANGE-FROM-OPS> 1,768,482
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,414,136
<NUMBER-OF-SHARES-REDEEMED> 91,245
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 17,189,031
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.78
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.13
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> GOVERNMENT AND QUALITY BOND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 110,846,719
<INVESTMENTS-AT-VALUE> 109,520,077
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 109,520,077
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 9,176,239
<SHARES-COMMON-PRIOR> 8,504,677
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 109,520,077
<DIVIDEND-INCOME> 6,902,075
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,574,343
<NET-INVESTMENT-INCOME> 5,327,732
<REALIZED-GAINS-CURRENT> (445,581)
<APPREC-INCREASE-CURRENT> (889,640)
<NET-CHANGE-FROM-OPS> 3,992,511
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,417,937
<NUMBER-OF-SHARES-REDEEMED> 1,746,375
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 11,663,832
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 11.51
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.94
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 5
<NAME> INTERNATIONAL DIVERSIFIED EQUITIES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 133,852,944
<INVESTMENTS-AT-VALUE> 145,376,243
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 145,376,243
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 12,762,343
<SHARES-COMMON-PRIOR> 4,659,066
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 145,376,243
<DIVIDEND-INCOME> 1,287,958
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,477,547
<NET-INVESTMENT-INCOME> (189,589)
<REALIZED-GAINS-CURRENT> 861,006
<APPREC-INCREASE-CURRENT> 9,321,982
<NET-CHANGE-FROM-OPS> 9,993,399
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,385,978
<NUMBER-OF-SHARES-REDEEMED> 282,701
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 98,464,194
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.07
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.39
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 6
<NAME> GLOBAL EQUITIES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 197,245,936
<INVESTMENTS-AT-VALUE> 236,114,107
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 236,114,107
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 15,583,207
<SHARES-COMMON-PRIOR> 12,350,883
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 236,114,107
<DIVIDEND-INCOME> 6,158,712
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 2,996,061
<NET-INVESTMENT-INCOME> 3,162,651
<REALIZED-GAINS-CURRENT> 2,403,408
<APPREC-INCREASE-CURRENT> 24,426,237
<NET-CHANGE-FROM-OPS> 29,992,296
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,861,151
<NUMBER-OF-SHARES-REDEEMED> 628,827
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 75,443,966
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 13.01
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.15
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 7
<NAME> AGGRESSIVE GROWTH
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 30,258,726
<INVESTMENTS-AT-VALUE> 32,570,387
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 32,570,387
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3,165,900
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 32,570,387
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 127,227
<NET-INVESTMENT-INCOME> (127,227)
<REALIZED-GAINS-CURRENT> (24,883)
<APPREC-INCREASE-CURRENT> 2,311,661
<NET-CHANGE-FROM-OPS> 2,159,551
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,395,345
<NUMBER-OF-SHARES-REDEEMED> 229,445
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 32,570,387
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.29
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 8
<NAME> VENTURE VALUE
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 391,621,073
<INVESTMENTS-AT-VALUE> 487,989,263
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 487,989,263
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 29,247,554
<SHARES-COMMON-PRIOR> 11,270,792
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 487,989,263
<DIVIDEND-INCOME> 2,694,478
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4,386,580
<NET-INVESTMENT-INCOME> (1,692,102)
<REALIZED-GAINS-CURRENT> 2,376,894
<APPREC-INCREASE-CURRENT> 79,711,419
<NET-CHANGE-FROM-OPS> 80,396,211
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,622,804
<NUMBER-OF-SHARES-REDEEMED> 646,042
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 338,169,146
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 13.29
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.68
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 9
<NAME> FEDERATED VALUE
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 10,115,608
<INVESTMENTS-AT-VALUE> 11,234,062
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,234,062
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,021,137
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 11,234,062
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 45,927
<NET-INVESTMENT-INCOME> (45,927)
<REALIZED-GAINS-CURRENT> (3,715)
<APPREC-INCREASE-CURRENT> 1,118,454
<NET-CHANGE-FROM-OPS> 1,068,812
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,027,454
<NUMBER-OF-SHARES-REDEEMED> 6,317
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 11,234,062
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 10
<NAME> PROVIDENT GROWTH
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 109,853,888
<INVESTMENTS-AT-VALUE> 154,096,914
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 154,096,914
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 10,354,025
<SHARES-COMMON-PRIOR> 8,932,998
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 154,096,914
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,935,453
<NET-INVESTMENT-INCOME> (1,935,453)
<REALIZED-GAINS-CURRENT> 3,028,306
<APPREC-INCREASE-CURRENT> 21,943,270
<NET-CHANGE-FROM-OPS> 23,036,123
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,927,302
<NUMBER-OF-SHARES-REDEEMED> 506,275
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 41,545,265
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 12.60
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.88
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 11
<NAME> GROWTH/PHOENIX
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 139,910,426
<INVESTMENTS-AT-VALUE> 180,451,620
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 180,451,620
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 12,077,737
<SHARES-COMMON-PRIOR> 11,457,899
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 180,451,620
<DIVIDEND-INCOME> 11,620,131
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 2,401,171
<NET-INVESTMENT-INCOME> 9,218,960
<REALIZED-GAINS-CURRENT> 2,545,612
<APPREC-INCREASE-CURRENT> 13,399,999
<NET-CHANGE-FROM-OPS> 25,164,571
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,626,331
<NUMBER-OF-SHARES-REDEEMED> 1,006,493
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 33,646,479
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 12.81
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.94
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 12
<NAME> ALLIANCE GROWTH
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 282,750,919
<INVESTMENTS-AT-VALUE> 356,815,327
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 356,815,327
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 18,333,555
<SHARES-COMMON-PRIOR> 10,560,070
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 356,815,327
<DIVIDEND-INCOME> 13,166,311
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 3,433,209
<NET-INVESTMENT-INCOME> 9,733,102
<REALIZED-GAINS-CURRENT> 4,241,634
<APPREC-INCREASE-CURRENT> 48,511,798
<NET-CHANGE-FROM-OPS> 62,486,534
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,362,437
<NUMBER-OF-SHARES-REDEEMED> 588,952
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 193,808,272
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 15.44
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.46
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 13
<NAME> GROWTH-INCOME
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 230,363,373
<INVESTMENTS-AT-VALUE> 309,755,916
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 309,755,916
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 18,546,142
<SHARES-COMMON-PRIOR> 12,560,865
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 309,755,916
<DIVIDEND-INCOME> 7,430,014
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 3,369,090
<NET-INVESTMENT-INCOME> 4,060,924
<REALIZED-GAINS-CURRENT> 2,881,965
<APPREC-INCREASE-CURRENT> 48,512,865
<NET-CHANGE-FROM-OPS> 55,455,754
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,581,038
<NUMBER-OF-SHARES-REDEEMED> 595,761
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 142,493,592
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 13.32
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.70
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 14
<NAME> ASSET ALLOCATION
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 236,460,639
<INVESTMENTS-AT-VALUE> 298,525,829
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 298,525,829
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 19,940,733
<SHARES-COMMON-PRIOR> 15,418,350
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 298,525,829
<DIVIDEND-INCOME> 11,914,087
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 3,649,781
<NET-INVESTMENT-INCOME> 8,264,306
<REALIZED-GAINS-CURRENT> 712,562
<APPREC-INCREASE-CURRENT> 34,266,708
<NET-CHANGE-FROM-OPS> 43,243,576
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,316,165
<NUMBER-OF-SHARES-REDEEMED> 793,782
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 103,696,920
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 12.64
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.97
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 15
<NAME> SUNAMERICA BALANCED PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 8,253,434
<INVESTMENTS-AT-VALUE> 9,023,203
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,023,203
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 817,039
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 9,023,203
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 41,729
<NET-INVESTMENT-INCOME> (41,729)
<REALIZED-GAINS-CURRENT> 60,508
<APPREC-INCREASE-CURRENT> 769,769
<NET-CHANGE-FROM-OPS> 788,548
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 967,454
<NUMBER-OF-SHARES-REDEEMED> 150,415
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 9,023,203
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.04
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 16
<NAME> BALANCED/PHOENIX
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 55,171,273
<INVESTMENTS-AT-VALUE> 63,333,105
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 63,333,105
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 4,583,234
<SHARES-COMMON-PRIOR> 2,441,901
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 63,333,105
<DIVIDEND-INCOME> 1,328,008
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 710,517
<NET-INVESTMENT-INCOME> 617,491
<REALIZED-GAINS-CURRENT> 207,371
<APPREC-INCREASE-CURRENT> 5,173,131
<NET-CHANGE-FROM-OPS> 5,997,993
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,271,426
<NUMBER-OF-SHARES-REDEEMED> 130,093
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 33,223,455
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 12.33
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.82
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 17
<NAME> UTILITY PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 5,443,567
<INVESTMENTS-AT-VALUE> 5,799,140
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,799,140
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 543,461
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 5,799,140
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 26,830
<NET-INVESTMENT-INCOME> (26,830)
<REALIZED-GAINS-CURRENT> 1,073
<APPREC-INCREASE-CURRENT> 355,573
<NET-CHANGE-FROM-OPS> 329,816
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 545,926
<NUMBER-OF-SHARES-REDEEMED> 2,465
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,799,140
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.67
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 18
<NAME> WORLDWIDE HIGH-INCOME
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 39,614,346
<INVESTMENTS-AT-VALUE> 45,408,414
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 45,408,414
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3,196,739
<SHARES-COMMON-PRIOR> 1,040,828
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 45,408,414
<DIVIDEND-INCOME> 1,015,605
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 405,752
<NET-INVESTMENT-INCOME> 609,853
<REALIZED-GAINS-CURRENT> 444,184
<APPREC-INCREASE-CURRENT> 4,945,992
<NET-CHANGE-FROM-OPS> 6,000,029
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,297,881
<NUMBER-OF-SHARES-REDEEMED> 141,970
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 33,578,662
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 11.36
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.20
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 19
<NAME> HIGH-YIELD BOND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 102,845,658
<INVESTMENTS-AT-VALUE> 108,664,366
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 108,664,366
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 8,358,195
<SHARES-COMMON-PRIOR> 7,075,451
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 108,664,366
<DIVIDEND-INCOME> 7,311,532
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,402,991
<NET-INVESTMENT-INCOME> 5,908,541
<REALIZED-GAINS-CURRENT> 405,726
<APPREC-INCREASE-CURRENT> 5,610,690
<NET-CHANGE-FROM-OPS> 11,924,957
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,991,539
<NUMBER-OF-SHARES-REDEEMED> 708,795
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 27,410,211
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 11.48
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.99
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 20
<NAME> GLOBAL BOND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 60,250,898
<INVESTMENTS-AT-VALUE> 66,296,884
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 66,296,884
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 5,413,149
<SHARES-COMMON-PRIOR> 5,288,158
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 66,296,884
<DIVIDEND-INCOME> 4,009,120
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 938,678
<NET-INVESTMENT-INCOME> 3,070,442
<REALIZED-GAINS-CURRENT> 779,817
<APPREC-INCREASE-CURRENT> 1,810,803
<NET-CHANGE-FROM-OPS> 5,661,062
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,053,412
<NUMBER-OF-SHARES-REDEEMED> 928,421
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,042,545
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 11.20
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.25
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 21
<NAME> CORPORATE BOND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 33,265,397
<INVESTMENTS-AT-VALUE> 35,643,830
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 35,643,830
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3,059,808
<SHARES-COMMON-PRIOR> 2,623,065
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 35,643,830
<DIVIDEND-INCOME> 1,203,871
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 486,404
<NET-INVESTMENT-INCOME> 717,467
<REALIZED-GAINS-CURRENT> 132,082
<APPREC-INCREASE-CURRENT> 770,471
<NET-CHANGE-FROM-OPS> 1,620,020
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,222,601
<NUMBER-OF-SHARES-REDEEMED> 785,858
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6,523,881
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 11.10
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.65
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VARIABLE SEPARATE ACCOUNT (PORTION RELATING TO THE
POLARIS VARIABLE ANNUITY) OF ANCHOR NATIONAL LIFE INSURANCE COMPANY FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 22
<NAME> CASH MANAGEMENT
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 87,236,993
<INVESTMENTS-AT-VALUE> 88,383,977
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 88,383,977
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 8,005,908
<SHARES-COMMON-PRIOR> 8,372,979
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 88,383,977
<DIVIDEND-INCOME> 4,155,250
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,927,637
<NET-INVESTMENT-INCOME> 2,227,613
<REALIZED-GAINS-CURRENT> 2,214,720
<APPREC-INCREASE-CURRENT> (168,487)
<NET-CHANGE-FROM-OPS> 4,273,846
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,156,831
<NUMBER-OF-SHARES-REDEEMED> 9,523,902
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (996,870)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.67
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.04
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
