<PAGE> 1
File Nos. 2-86837
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. 27 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ X ]
Amendment No. 20
(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 January 29, 1998 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 February 27, 1998.
<PAGE> 2
VARIABLE SEPARATE ACCOUNT
Cross Reference Sheet
PART A - PROSPECTUS
<TABLE>
<CAPTION>
Item Number in Form N-4 Caption
- ----------------------- -------
<S> <C> <C>
1. Cover Page............................. Cover Page
2. Definitions............................ Definitions
3. Synopsis............................... Summary of the Contracts
4. Condensed Financial Information........ Condensed Financial
Information; Financial
Information
5. General Description of Registrant,
Depositor and Portfolio Companies...... Separate Account;
Insurance Company;
Anchor Pathway Fund
6. Deductions............................. Charges and Deductions
7. General Description of
Variable Annuity Contracts............. Contract; Exercise of
Rights Under the
Contract
8. Annuity Period......................... Fixed and Variable
Annuity Provisions;
Additional Variable
Annuity Provisions
9. Death Benefit.......................... Death Benefit
10. Purchases and Contract Value........... Contract; Variable
Account Accumulation
Provisions; Distribution
of Contracts
11. Redemptions............................ Exercise of Rights Under
the Contract
12. Taxes.................................. Federal Income Tax Status
13. Legal Proceedings...................... Other Information
14. Table of Contents of Statement
of Additional Information.............. Statement of Additional
Information
</TABLE>
<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.
<TABLE>
<CAPTION>
Item Number in Form N-4 Caption
- ----------------------- -------
<S> <C> <C>
15. Cover Page............................. Cover Page
16. Table of Contents...................... Table of Contents
17. General Information and History........ Not Applicable
18. Services............................... Not Applicable
19. Purchase of Securities Being Offered... Contract (P)
20. Underwriters........................... Distribution of Contracts
21. Calculation of Performance Data........ Performance Data
22. Annuity Payments....................... Fixed and Variable
Annuity Provisions (P);
Additional Variable
Annuity Provisions (P);
Variable Account
Accumulation Provisions
23. Financial Statements................... Financial Statements
</TABLE>
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
AMERICAN PATHWAY II
AN INDIVIDUAL DEFERRED VARIABLE BENEFIT AND FIXED BENEFIT ANNUITY
FLEXIBLE PURCHASE PAYMENT-NONPARTICIPATING CONTRACT
ISSUED BY
VARIABLE SEPARATE ACCOUNT
The contract described in this Prospectus is an Individual Deferred
Variable Benefit and Fixed Benefit Annuity Contract ("Contract") designed to
provide annuity benefits to individual purchasers in connection with retirement
plans that do not qualify for special federal income tax treatment under the
Internal Revenue Code, as amended ("Code"). The Contract described herein,
however, may also be used to provide annuity benefits to individual purchasers
in connection with retirement plans that do qualify under the Code. This
Prospectus describes only the variable portion of the Contract. Purchase
payments under the Contract may be allocated to the underlying investments of
the Variable Separate Account ("Separate Account"). The Separate Account will be
invested in shares of the Anchor Pathway Fund, a diversified, open-end
investment company registered under the Investment Company Act of 1940, as
amended ("1940 Act"). Anchor Pathway Fund consists of seven series each of which
has its own investment objective and policies.
Anchor National Life Insurance Company discontinued new sales of the
Contract as of the close of business on August 31, 1993. The Company will
continue to accept subsequent payments on existing contracts and to issue the
Contract to new participants in existing qualified retirement plans using the
Contract as a funding vehicle.
This Prospectus and the Prospectus for Anchor Pathway Fund set forth
concisely the information a prospective investor ought to know before investing.
Additional information about the Separate Account has been filed with the
Securities and Exchange Commission in a Statement of Additional Information,
dated January 29, 1998, incorporated herein by reference. The Statement of
Additional Information is available without charge upon written request to
Anchor National Life Insurance Company, Service Center, P.O. Box 54299, Los
Angeles, California 90054-0299, or by telephoning (800) 445-7862. The Table of
Contents of the Statement of Additional Information appears on page 24 of this
Prospectus.
In addition, the Securities and Exchange Commission maintains a website
(http://www.sec.gov) that contains the Statement of Additional Information,
materials incorporated by reference and other information filed electronically
with the Securities and Exchange Commission.
------------------------
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY A
CURRENT PROSPECTUS OF ANCHOR PATHWAY FUND. BOTH
PROSPECTUSES SHOULD BE READ CAREFULLY AND
RETAINED FOR FUTURE REFERENCE.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS JANUARY 29, 1998.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
TOPIC PAGE
----
<S> <C>
DEFINITIONS..................................... 2
SUMMARY OF THE CONTRACTS........................ 3
CONDENSED FINANCIAL INFORMATION................. 8
FINANCIAL INFORMATION........................... 9
INSURANCE COMPANY............................... 9
SEPARATE ACCOUNT................................ 9
CHARGES AND DEDUCTIONS.......................... 10
ANCHOR PATHWAY FUND............................. 12
CONTRACT........................................ 13
VARIABLE ACCOUNT ACCUMULATION
PROVISIONS.................................... 13
DEATH BENEFIT................................... 14
EXERCISE OF RIGHTS UNDER THE
CONTRACT...................................... 14
FIXED AND VARIABLE ANNUITY
PROVISIONS.................................... 18
ANNUITY OPTIONS AVAILABLE ON A FIXED
OR VARIABLE BASIS............................. 18
ANNUITY OPTIONS AVAILABLE ON A FIXED
BASIS ONLY.................................... 19
ADDITIONAL VARIABLE ANNUITY
PROVISIONS.................................... 19
MISCELLANEOUS PROVISIONS........................ 20
FEDERAL INCOME TAX STATUS....................... 20
DISTRIBUTION OF CONTRACTS....................... 23
VOTING RIGHTS................................... 23
OTHER INFORMATION............................... 23
STATEMENT OF ADDITIONAL
INFORMATION -- Table of Contents.............. 24
APPENDIX -- The General Account................. A-1
</TABLE>
DEFINITIONS
Accumulation Unit: A measuring unit used to determine the value of a
Contract Owner's interest in a Variable Account of the Separate Account prior to
the Annuity Date.
Annuitant: The person on whose continuation of life annuity payments under
a Contract are based.
Annuity: A series of income payments made to the Contract Owner or
Contract Owner's designee for a defined period of time.
Annuity Date: The date on which annuity payments are to start.
Annuity Unit: A measuring unit used to compute the annuity payments from a
Variable Account of the Separate Account.
Beneficiary(ies): The person(s) designated to receive any benefits under a
Contract upon the death of the Annuitant.
Company: Anchor National Life Insurance Company, an Arizona corporation.
Contract: The Individual Deferred Variable Benefit and Fixed Benefit
Annuity Contract issued by the Company. Only the variable portion of the
Contract is described in this Prospectus.
Contract Owner: The person entitled to exercise all rights under a
Contract.
Contract Value: The sum of the Contract Owner's interest in the Variable
Accounts of the Separate Account and the Contract Owner's interest in the
General Account. The Contract Owner's interest in the Separate Account is the
sum of the Accumulation Unit values. The Contract Owner's interest in the
General Account is the accumulated value of the amounts allocated to the General
Account, plus the interest credited thereon as guaranteed in the Contract, less
any prior withdrawals and/or amounts applied to annuity options and transaction
charges.
Contract Year: A year starting from the date a Contract is issued in one
calendar year and ending in the succeeding calendar year.
Due Proof of Death: (1) A certified copy of a death certificate; or (2) a
certified copy of a decree of a court of competent jurisdiction as to the
finding of death; or (3) a written statement by a medical doctor who attended
the deceased at the time of death; or (4) any other proof satisfactory to the
Company.
Fixed Annuity: An Annuity providing guaranteed level payments. These
payments are not based upon the investment experience of the Separate Account.
General Account: All assets of the Company other than those in the Separate
Account or in any other segregated asset account of the Company.
2
<PAGE> 6
Net Contract Value: The Contract Value less any applicable charges and
deductions.
Net Investment Factor: An index used to measure the investment experience
of a Variable Account from one Valuation Period to the next.
Purchase Payments: The money paid for a Contract.
Separate Account: Variable Separate Account, formerly known as American
Pathway II -- Separate Account of Anchor National Life Insurance Company, a
segregated asset account established by the Company to receive and invest
amounts allocated to provide variable and fixed benefits under the Contract.
Valuation Period: The interval from one valuation date on which the
Separate Account's Accumulation and Annuity Units are valued to the following
valuation date on which these Units are valued.
Variable Account: A division of the Separate Account. The Separate Account
consists of seven Variable Accounts. Each Variable Account is invested in a
specified series of Anchor Pathway Fund ("Fund").
Variable Annuity: A series of periodic payments that vary in amount
according to the investment experience of the Variable Accounts.
SUMMARY OF THE CONTRACTS
QUALIFIED AND NON-QUALIFIED CONTRACTS -- The Contract is intended to be
issued primarily for retirement plans that do not qualify for special tax
treatment ("Non-Qualified Contracts") and for individuals seeking to accumulate
funds for retirement whether or not the individuals are otherwise participating
in qualified or non-qualified retirement plans. The Contract may also be issued
to plans qualifying for special tax treatment ("Qualified Contracts"), such as
individual retirement annuities ("IRAs"), section 403(b) tax-sheltered
annuities, section 457 deferred compensation plans, money purchase pension plans
and profit-sharing plans. This Prospectus is intended to serve as a disclosure
document for the variable portion of the Contract only.
PURCHASE PAYMENTS -- The full amount of each Purchase Payment, undiminished
by an initial sales charge, is credited to the Separate Account, the General
Account or allocated between them, according to the Contract Owner's
designation. A contingent deferred sales charge, however, may be imposed in the
event of an early withdrawal (redemption) of Contract Value. See "Charges and
Deductions".
The Contract permits Purchase Payments to be made on a flexible basis at
any time prior to annuitization subject to the following restrictions. The
minimum initial Purchase Payment the Company will accept is $5,000 for
Non-Qualified Contracts and $2,000 for Qualified Contracts. The minimum
subsequent Purchase Payment the Company will accept is $500 for Non-Qualified
Contracts and $250 for Qualified Contracts. Subsequent Purchase Payments into
either a Non-Qualified or Qualified Contract are subject to a $25 minimum if
they are paid through the Automatic Payment Authorization Program, provided the
Contract Owner's financial institution is a member of the National Data
Corporation clearinghouse network. An enrollment form for this program is
available from the Company. Subsequent Purchase Payments for all policies issued
on or before March 31, 1991, will continue to be subject to an annual minimum of
$300 with a minimum payment amount of $25, the minimum requirements in effect at
the time such policies were issued. See "Purchase Payments".
In general, the Company will not issue a Non-Qualified Contract to anyone
who is age 80 or older or a Qualified Contract to anyone who is age 70 1/2 or
older unless the Contract Owner can show that the minimum distributions required
by the Internal Revenue Service ("IRS") are being made.
VARIABLE ACCOUNTS -- The Separate Account is divided into seven Variable
Accounts, each of which is invested in shares of a designated series of the
Fund. One or more Variable Accounts may be selected by Contract Owners and the
selections may be changed subject to certain conditions described herein. The
Contract Value and the amount of the periodic Variable Annuity payments reflect
the investment experience of the particular Variable Account selected, subject
to the deduction of certain fees and charges. See "Separate Account" and
"Charges and Deductions".
ANCHOR PATHWAY FUND -- The Fund consists of seven series: the Growth
Series, the International Series, the Growth-Income Series, the Asset Allocation
Series, the High-Yield Bond Series, the U.S. Government/ AAA-Rated Securities
Series and the Cash Management Series. See "Anchor Pathway Fund".
3
<PAGE> 7
CHARGES AND DEDUCTIONS -- A contingent deferred sales charge is deducted in
the event of early withdrawals of the Contract Value, with certain exceptions.
The charge will be 5% of any amounts withdrawn that are attributable to Purchase
Payments made within five years prior to the date of withdrawal, determined on a
first-in, first-out basis. No charge will be made for the part of the first
withdrawal in a Contract Year that does not exceed 10% of the sum of Purchase
Payments made more than one year prior to the date of withdrawal. In addition,
no charge will apply to scheduled withdrawals made under the Systematic
Withdrawal Program. However, during the time a Contract Owner is participating
in the Systematic Withdrawal Program, the charge will apply to all nonscheduled
withdrawals, including the first in any Contract Year.
The cumulative sum of contingent deferred sales charges against amounts
attributable to Purchase Payments made within five years prior to the date of
withdrawal will never be more than 5% of the sum of all Purchase Payments made
during the same period. See "Contingent Deferred Sales Charge".
A Contract administration charge of $30 is deducted from the Contract Value
on each Contract anniversary that occurs on or prior to the Annuity Date. The
Contract administration charge is also deducted, without proration, if a full
withdrawal is made before the next Contract anniversary. See "Contract
Administration Charge".
Premium taxes payable to a state or other governmental entity are deducted
from the Contract Value at the time of surrender, upon death of the Annuitant or
when annuity payments begin. Premium taxes currently range from 0% to 3.5%. See
"Premium Taxes".
The Company deducts a daily mortality risk premium at an annual rate of
0.80% of the total net assets of the Separate Account. See "Mortality Risk
Charge". The Company deducts a daily expense risk charge at an annual rate of
0.35% of the total net assets of the Separate Account. See "Expense Risk
Charge". In addition, the Company deducts a daily distribution expense risk
charge at an annual rate of 0.15% of the total net assets of the Separate
Account. See "Distribution Expense Risk Charge". If the enhanced death benefit
is selected, the Company will deduct an enhanced death benefit charge at an
annual rate of .10% of the total net assets of the Separate Account.
A charge of $25 per transaction ($10 in Texas and Pennsylvania) is assessed
against any transaction effecting transfer in excess of the fifteen permitted
without charge in any Contract Year. See "Certain Transfers Charge".
An investment advisory fee and a management fee are charged on a monthly
basis, and accrued daily, for each series of the Fund. See the Anchor Pathway
Fund Prospectus for a discussion of the deductions and expenses paid out of the
assets of the Fund.
4
<PAGE> 8
CONTRACT OWNER TRANSACTION EXPENSES:
As a percentage of Purchase Payments during first 5 Contract Years.....5.00%
ANNUAL CONTRACT ADMINISTRATION CHARGE1:...................................$30.00
TRANSFER FEE..............................................................$25.00
(applies solely to transfers in excess of fifteen in a Contract Year, $10 in
Pennsylvania and Texas)
SEPARATE ACCOUNT ANNUAL FEES AND CHARGES, as a percentage of total net assets:
<TABLE>
<S> <C> <C>
Mortality Risk Charge................................................................................0.80%
Expense Risk Charge.............................................................................0.35%
Distribution Expense Charge.....................................................................0.15%
-----
Total Separate Account Annual Fees and Charges (excluding Optional Enhanced Death Benefit
Charge).........................................................................................1.30%
Optional Enhanced Death Benefit Charge..........................................................0.10%
-----
Total Separate Account Annual Fees and Charges (including Optional Enhanced Death Benefit
Charge)........................................................................................1.40%
======
</TABLE>
ANNUAL OPERATING EXPENSES OF ANCHOR PATHWAY FUND2, as a percentage of average
net assets for the November 30, 1997 fiscal year:
<TABLE>
<CAPTION>
U.S.
GROWTH- ASSET GOVERNMENT/ CASH
GROWTH INTERNATIONAL INCOME ALLOCATION HIGH-YIELD AAA RATED MANAGEMENT
SERIES SERIES SERIES SERIES BOND SERIES SERIES SERIES
------ ------------- ------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory Fee..... 0.30% 0.60% 0.30% 0.31% 0.31% 0.32% 0.32%
Business Management Fee..... 0.20% 0.24% 0.20% 0.21% 0.21% 0.21% 0.22%
Other Expenses:
Custodian and trustee
fees.................... 0.03% 0.17% 0.03% 0.04% 0.05% 0.05% 0.04%
Auditing and legal fees... 0.00% 0.01% 0.00% 0.02% 0.02% 0.03% 0.03%
Other expenses............ 0.01% 0.02% 0.01% 0.01% 0.02% 0.02% 0.02%
TOTAL FUND OPERATING
EXPENSES.................. 0.54% 1.04% 0.54% 0.59% 0.61% 0.63% 0.63%
</TABLE>
- ------------
1 The administrative charge is deducted from the Contract Value on each Contract
anniversary prior to the Annuity Date, or in full upon surrender of the
Contract. The administrative charge is not deducted after the Annuity Date.
2 The operating expenses of Anchor Pathway Fund, the underlying investment of
the Separate Account, are paid by the Fund and accordingly, are borne
indirectly by Contract Owners.
Premium taxes, currently ranging between 0% and 3.5%, are not included. The rate
of the premium tax varies depending upon the Contract Owner's state of
residence, and not all states impose premium taxes.
EXAMPLES(1), for a Contract on which you have not elected the enhanced death
benefit, you would pay the following expenses on a $1,000 investment assuming 5%
annual return on assets and:
(a) surrender the Contract at the end of the stated time period;
(b) the Contract is not surrendered or annuitized.
<TABLE>
<CAPTION>
SERIES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------- ------- -------- -------- --------
<S> <C> <C> <C> <C>
Growth................................................. (a) $69 (a) $110 (a) $153 (a) $224
(b) $19 (b) $ 60 (b) $103 (b) $224
International.......................................... (a) $74 (a) $125 (a) $179 (a) $275
(b) $24 (b) $ 75 (b) $129 (b) $275
Growth-Income.......................................... (a) $69 (a) $110 (a) $153 (a) $224
(b) $19 (b) $ 60 (b) $103 (b) $224
Asset Allocation....................................... (a) $70 (a) $112 (a) $156 (a) $229
(b) $20 (b) $ 62 (b) $106 (b) $229
High-Yield Bond........................................ (a) $70 (a) $112 (a) $157 (a) $231
(b) $20 (b) $ 62 (b) $107 (b) $231
U.S. Government/AAA Rated.............................. (a) $70 (a) $113 (a) $158 (a) $233
(b) $20 (b) $ 63 (b) $108 (b) $233
Cash Management........................................ (a) $70 (a) $113 (a) $158 (a) $233
(b) $20 (b) $ 63 (b) $108 (b) $233
</TABLE>
5
<PAGE> 9
EXAMPLES(1), for a Contract on which you have elected the enhanced death
benefit, you would pay the following expenses on a $1,000 investment assuming 5%
annual return on assets and:
(a) surrender the Contract at the end of the stated time period;
(b) the Contract is not surrendered or annuitized.
<TABLE>
<CAPTION>
SERIES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------- ------- -------- -------- --------
<S> <C> <C> <C> <C>
Growth................................................. (a) $70 (a) $113 (a) $159 (a) $234
(b) $20 (b) $ 63 (b) $109 (b) $234
International.......................................... (a) $75 (a) $128 (a) $184 (a) $285
(b) $25 (b) $ 78 (b) $134 (b) $285
Growth-Income.......................................... (a) $70 (a) $113 (a) $159 (a) $234
(b) $20 (b) $ 63 (b) $109 (b) $234
Asset Allocation....................................... (a) $71 (a) $115 (a) $161 (a) $239
(b) $21 (b) $ 65 (b) $111 (b) $239
High-Yield Bond........................................ (a) $71 (a) $115 (a) $162 (a) $242
(b) $21 (b) $ 65 (b) $112 (b) $242
U.S. Government/AAA Rated.............................. (a) $71 (a) $116 (a) $163 (a) $244
(b) $21 (b) $ 66 (b) $113 (b) $244
Cash Management........................................ (a) $71 (a) $116 (a) $163 (a) $244
(b) $21 (b) $ 66 (b) $113 (b) $244
</TABLE>
- ------------
(1) The EXAMPLE, a projection, should not be considered a representation of past
or future expenses. Actual expenses may be greater or lesser than those
shown.
THE PURPOSE OF THE TABLE IS TO ASSIST CONTRACT OWNERS IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT THEY BEAR
DIRECTLY AND INDIRECTLY. SEE "CHARGES AND DEDUCTIONS" AND
THE PROSPECTUS FOR ANCHOR PATHWAY FUND.
6
<PAGE> 10
TEN DAY REVIEW -- Within 10 days (or longer period if required by state
law) of receipt of the Contract by a purchaser, it may be returned to the
Company for cancellation. Except as otherwise required by law, the Company will
refund the Contract Value for the Valuation Period in which the Contract is
received. The Contract Owner bears the investment risk during the ten day review
period, except that for IRAs, the Purchase Payments or Contract Value, whichever
is greater, will be returned.
ANNUITY PAYMENTS -- Monthly annuity payments will start on the Annuity
Date. The Contract Owner selects the Annuity Date and an annuity payment option.
These selections may be changed prior to the Annuity Date. See "Change of
Annuity Date or Annuity Option". The amount of Variable Annuity payments vary
with the investment experience of the series in which the Contract Value is
invested.
If the Net Contract Value at the Annuity Date is less than $5,000, the
Company reserves the right to pay the Net Contract Value in a lump sum. If any
annuity payment would be less than $50, the Company reserves the right to change
the frequency of payments to such intervals as will result in payments of at
least $50, or to pay the Contract Value in a lump sum. See "Minimum Annuity
Payments".
DEATH BENEFIT -- Under the standard death benefit, if the Annuitant dies
prior to the Annuity Date, the Company will pay to the Beneficiary the greater
of (a) the sum of all Purchase Payments net of withdrawals, or (b) the current
Contract Value. Following the fifth Contract anniversary, the Company will pay
the Beneficiary the greater of (a) above, (b) above or (c) the Contract Value on
the Contract anniversary preceding the death of the Annuitant less withdrawals
and/or partial annuitizations since such anniversary. The Company also offers an
optional enhanced guaranteed minimum death benefit (the "enhanced death
benefit") which is an alternative to the standard death benefit described above.
See "Death Benefit -- Before the Annuity Date" for more information on both
death benefit options.
WITHDRAWALS -- Prior to the Annuity Date, the Contract Owner may withdraw
all or part of the Contract Value. No withdrawals are permitted after annuity
payments commence. The amount withdrawn must be at least $500 ($250 for
withdrawals made under the Systematic Withdrawal Program) and, if the Contract
is to continue in force, the remaining Contract Value must be at least $500. See
"Exercise of Rights Under the Contract -- Withdrawals". A contingent deferred
sales charge and a Contract administration charge may be imposed. See
"Contingent Deferred Sales Charge" and "Contract Administration Charge". In
addition, with the exception of section 403(b) Contracts, the earnings withdrawn
are taxable as ordinary income and may be subject to a 10% federal tax penalty
if withdrawn before age 59 1/2. Values may not be withdrawn from section 403(b)
Contracts except under certain circumstances. See "Federal Income Tax Status".
TRANSFERS TO AND FROM SEPARATE ACCOUNT -- Contract Owners may transfer all
or part of Contract Value between the Separate Account and the General Account,
subject to certain conditions. See "Transfers".
TRANSFERS AMONG VARIABLE ACCOUNTS -- Contract Owners may, subject to
certain conditions, transfer all or part of Contract Value from one Variable
Account to one or more of the remaining Variable Accounts. See "Transfers".
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS
IN CONNECTION WITH THE OFFER DESCRIBED HEREIN AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER IN ANY JURISDICTION TO ANY PERSON TO WHOM SUCH OFFER
WOULD BE UNLAWFUL THEREIN.
7
<PAGE> 11
CONDENSED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED
VARIABLE ACCOUNTS YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR 11/30/97
OF SEPARATE ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED --------------------
ACCOUNT 11/30/88 11/30/89 11/30/90 11/30/91 11/30/92 11/30/93 11/30/94 11/30/95 11/30/96 * **
- ------------------ -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth
Beg. AUV...... $14.72 $17.70 $25.99 $23.47 $29.37 $35.17 $41.05 $41.86 $57.00 $ 64.16 $83.15
End AUV....... $17.70 $25.99 $23.47 $29.37 $35.17 $41.05 $41.86 $57.00 $64.16 $ 78.39 $78.38
End # AUs
(000)....... 5,299 7,318 11,434 15,619 18,313 17,915 17,020 15,740 12,673 10,204,566 14,836
International(1)
Beg. AUV...... -- -- $10.00 $ 9.61 $10.01 $ 9.91 $12.48 $13.32 $14.62 $ 17.31 $21.44
End AUV....... -- -- $ 9.61 $10.01 $ 9.91 $12.48 $13.32 $14.62 $17.31 $ 19.34 $19.34
End # AUs
(000)....... -- -- 1,426 5,058 8,666 15,403 19,494 15,613 14,410 11,562,592 8,450
Growth-Income
Beg. AUV...... $16.12 $19.50 $25.58 $23.35 $27.93 $31.99 $35.47 $35.70 $47.04 $ 56.59 $70.36
End AUV....... $19.50 $25.58 $23.35 $27.93 $31.99 $35.47 $35.70 $47.04 $56.59 $ 69.61 $69.61
End # AUs
(000)....... 10,819 14,235 18,151 20,935 24,304 24,321 21,452 18,752 16,244 13,632,089 19,603
Asset
Allocation(2)
Beg. AUV...... -- $10.00 $10.91 $10.61 $12.41 $13.96 $15.25 $14.93 $19.31 $ 22.74 $26.52
End AUV....... -- $10.91 $10.61 $12.41 $13.96 $15.25 $14.93 $19.31 $22.74 $ 26.46 $26.45
End # AUs
(000)....... -- 2,138 5,189 6,306 9,611 10,926 9,558 7,954 6,731 5,869,579 6,278
High-Yield Bond
Beg. AUV...... $16.03 $18.40 $19.78 $19.55 $24.93 $28.06 $32.25 $30.34 $35.62 $ 40.11 $44.53
End AUV....... $18.40 $19.78 $19.55 $24.93 $28.06 $32.25 $30.34 $35.62 $40.11 $ 44.64 $44.64
End # AUs
(000)....... 4,258 4,338 4,051 4,723 5,272 5,907 4,200 4,115 3,274 2,656,533 1,362
U.S. Government/
AAA-Rated
Securities
Beg. AUV...... $11.17 $12.13 $13.39 $14.16 $15.89 $17.23 $19.15 $18.12 $20.73 $ 21.58 $22.27
End AUV....... $12.13 $13.39 $14.16 $15.89 $17.23 $19.15 $18.12 $20.73 $21.58 $ 22.61 $22.60
End # AUs
(000)....... 3,676 6,415 9,061 12,105 13,392 11,935 8,242 6,505 5,045 3,606,704 3,251
Cash Management
Beg. AUV...... $12.39 $13.10 $14.08 $15.01 $15.69 $15.99 $16.20 $16.56 $17.24 $ 17.86 ***
End AUV....... $13.10 $14.08 $15.01 $15.69 $15.99 $16.20 $16.56 $17.24 $17.86 $ 18.51 ***
End # AUs
(000)....... 4,891 5,637 10,920 12,618 12,728 11,875 11,258 5,852 4,993 3,738,705 0
</TABLE>
- ------------
AUV -- Accumulation Unit Value
AU -- Accumulation Units
(1) First offered May 9, 1990.
(2) First offered March 31, 1989.
* Applies to Contracts Without Optional Enhanced Death Benefit feature.
** Applies to Contracts With Optional Enhanced Death Benefit feature. Inception
dates for the Variable Accounts are 10/15/97, 10/16/97, 10/16/97, 10/17/97,
11/12/97 and 10/16/97, respectively.
*** As of November 30, 1997, there were no funds in this Variable Account.
PERFORMANCE DATA -- From time to time the Cash Management Account may
advertise its "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 Account refers to the net income generated for a
Contract funded by an investment in the Account 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 Cash Management
Account 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 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 Variable Accounts may advertise "total return" data. 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 Variable Account 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 Account. The effect of applicable withdrawal charges
due
8
<PAGE> 12
to the assumed redemption will be reflected in the return figures, but may be
omitted in additional return figures given for comparison.
For a more complete description of Contract charges, see "Charges and
Deductions". For a more detailed description of the performance data
computations, please refer to the Statement of Additional Information.
FINANCIAL INFORMATION
Financial statements of the Separate Account may be found in the Statement
of Additional Information. Financial statements of the Company are also
contained in the Statement of Additional Information. A copy of the Statement of
Additional Information may be obtained without charge by sending a written
request to Anchor National Life Insurance Company, Service Center, P.O. Box
54299, Los Angeles, California 90054-0299 or by calling (800) 445-7862.
INSURANCE COMPANY
The Company is a stock life insurance company originally organized under
the laws of the state of California in April 1965. On January 1, 1996, the
Company redomesticated under the laws of the state of Arizona. Its principal
business address is 1 SunAmerica Center, Los Angeles, California 90067-6022. The
Company is an indirect wholly owned subsidiary of SunAmerica Inc., a Maryland
corporation.
The Company and its affiliates, SunAmerica Life Insurance Company, First
SunAmerica Life Insurance Company,
CalAmerica Life Insurance Company, SunAmerica National Life Insurance Company,
SunAmerica Asset Management Corp., Imperial Premium Finance, Inc., Resources
Trust Company and four broker-dealers, specialize in retirement savings and
investment products and services, including fixed and variable annuities, mutual
funds, premium finance, broker-dealer and trust administration services.
The Company may from time to time publish in advertisements, sales
literature and reports to Contract Owners, the ratings and other information
assigned to it by one or more 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 ("Standard & Poor's"), and Duff & Phelps. A.M.
Best and Moody's ratings reflect their current opinion on the relative financial
strength and operating performance of an insurance company in comparison to the
norms of the life/health insurance industry. Standard & Poor's and Duff & Phelps
provide ratings which measure the claims-paying ability of insurance companies.
These ratings are opinions of an operating insurance company's financial
capacity to meet the obligations of its insurance policies in accordance with
their terms. Claims-paying ability ratings do not refer to an insurer's ability
to meet non-policy obligations (i.e., debt/commercial paper). These ratings do
not apply to the Separate Account. However, the contractual obligations under
the Contracts are the general corporate obligations of the Company.
The Company is admitted to conduct life insurance business in the District
of Columbia and in all states except New York. It markets the Contract in all
jurisdictions in which it is admitted to conduct life insurance business.
SEPARATE ACCOUNT
The Separate Account was initially established by the Company on June 25,
1981, pursuant to the provisions of California law, as a segregated investment
account of the Company. In connection with the redomestication of the Company,
the Separate Account was assumed intact by the Company. The Separate Account is
divided into seven Variable Accounts, each of which is invested in shares of a
designated series of the Fund. The Separate Account and each Variable Account
therein is administered as part of the general business of the Company, but the
income, gains and losses, whether or not realized, from assets allocated to each
Variable Account are credited to or charged against that Variable Account in
accordance with the terms of the Contract, without regard to other income, gains
or losses of any other Variable Account or arising out of any other business the
Company may conduct. The assets within each Variable Account are not chargeable
with liabilities arising out of the business conducted by any other Variable
Account, nor will the Separate Account be chargeable with liabilities arising
out of any other business the Company may conduct.
All obligations arising under a Contract, including the guarantee to make
annuity payments, are general corporate obligations of the Company, and all of
the Company's assets are available to meet its expenses and obligations under
the
9
<PAGE> 13
Contract. While the Company is obligated to make the variable benefit annuity
payments under a Contract, the amount of these payments is not guaranteed. The
Contract Value allocated to the Separate Account and the amount of the Variable
Annuity payments vary with the investment experience of the Variable Account(s)
and are subject to certain fees and charges. See "Charges and Deductions".
The Company has caused the Separate Account to be registered with the
Securities and Exchange Commission as a unit investment trust under the 1940
Act. Such registration does not involve supervision of the management or
investment practices or policies of the Separate Account or the Company by the
Securities and Exchange Commission.
CHARGES AND DEDUCTIONS
CONTINGENT DEFERRED SALES CHARGE -- No initial sales charge is deducted
from Purchase Payments. A contingent deferred sales charge, however, may be
imposed in the event of withdrawal (redemption) of the Contract Value. The
contingent deferred sales charge is intended to recover the Company's expenses
relating to the sale of the Contract, including commissions, preparation of
sales literature and other sales activities.
The contingent deferred sales charge is 5% of the amount withdrawn
attributable to Purchase Payments made within five years prior to the date of
withdrawal, determined on a first-in, first-out basis. The charge is assessed
against the amount requested, but is deducted from the remaining Contract Value
after the Contract Owner is paid the requested amount. If the Contract Owner is
not participating in the Systematic Withdrawal Program, no charge is made for
the part of the first withdrawal in a Contract Year that does not exceed 10% of
the sum of Purchase Payments made more than one year prior to the date of
withdrawal. If the Contract Owner is participating in the Systematic Withdrawal
Program, the charge will be assessed against all withdrawals other than those
made under that Program.
In no event will the cumulative sum of contingent deferred sales charges
against amounts attributable to Purchase Payments made within five years prior
to the day of withdrawal be more than 5% of the sum of all Purchase Payments
made during the same period.
The 10% free withdrawal right discussed above will result in a monetary
benefit to the Contract Owner only where the amount withdrawn is less than 110%
of applicable Purchase Payments.
The contingent deferred sales charge is eliminated when Contracts are
issued to officers, directors or bona fide full-time employees of the Company,
the investment adviser to the Fund or the principal underwriter of the Contract.
Contracts so purchased are purchased for investment purposes and may not be
resold.
In addition, the contingent deferred sales charge may be waived by the
Company on withdrawals from the Separate Account where the amount withdrawn is
used to purchase another annuity contract issued by the Company. Additional
information regarding the elimination or waiver of the contingent deferred sales
charge may be obtained by contacting the Company.
CONTRACT ADMINISTRATION CHARGE -- The Company has primary responsibility
for administration of the Contract. Administrative services include issuing
Contracts and maintaining Contract Owner records, including accounting,
valuation and reporting services. The Company deducts a Contract administration
charge of $30 per Contract Year. The Company does not anticipate realizing a
gain from this charge. The Company, in its sole discretion, reserves the right
to reduce the administration charge for Qualified Contracts where certain
economies in administration costs are realized. The charge is deducted from the
Contract Value on each Contract anniversary that occurs on or prior to the
Annuity Date. The charge is also deducted upon full withdrawal of the Contract
Value, without proration, if the withdrawal is made other than on a Contract
anniversary. Even though administrative expenses may increase, the amount of
this charge will not increase.
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 of surrender or when annuity payments begin. The
Company currently intends to advance any premium taxes due at the time Purchase
Payments are made and then deduct premium taxes from a Contract Owner's Contract
Value at the time of surrender, upon death of the Annuitant or when annuity
payments begin. The Company, however, reserves the right to deduct premium taxes
when incurred. Premium taxes currently range from 0% to 3.5%.
10
<PAGE> 14
CERTAIN TRANSFERS CHARGE -- Up to fifteen transactions transferring amounts
from the General Account or one or more Variable Accounts of the Separate
Account, to one or more of the Variable Accounts or to the General Account may
be made each Contract Year without charge. A charge of $25 per transaction ($10
in Texas and Pennsylvania) is assessed against any transaction in excess of the
fifteen permitted without charge in any Contract Year. The charge will be
deducted from the account or accounts from which the transfer was made. If the
entire Contract Value in an account is transferred then the charge will be
deducted from the transferred Contract Value.
MORTALITY RISK CHARGE -- Annuity payments are not affected by the mortality
experience (death rate) of persons receiving annuity payments or of the general
population. For assuming this mortality risk and the risk inherent in the death
benefit (see "Death Benefit -- Before the Annuity Date"), the Company deducts a
mortality risk premium from the Separate Account daily. The premium is computed
and deducted from each Variable Account at an annual rate of 0.80% of the total
net assets of the Variable Account for the standard death benefit. However, if
the Contract Owner elects the optional enhanced guaranteed minimum death
benefit, the mortality risk premium is computed and deducted from each Variable
Account at an annual rate of 0.90% of the total net assets in the Variable
Account. If the mortality risk premium is insufficient to cover the actual costs
of the mortality risk, the Company will bear the loss. However, if the amount
proves more than sufficient, the excess will be a gain that the Company may use
in its discretion to pay distribution and other expenses. The rate imposed for
the mortality risk premium may not be increased.
EXPENSE RISK CHARGE -- The Company guarantees that the Contract
administration charge will not increase, regardless of actual expenses incurred
by the Company. For assuming this expense risk, the Company deducts an expense
risk charge from the Separate Account. The charge is computed and deducted daily
from each Variable Account, at an annual rate of 0.35% of the total net assets
of the Variable Account. If the expense risk charge is insufficient to cover the
actual cost of the expense risk, the Company will bear the loss. However, if the
charge is more than sufficient, the excess will be a gain that the Company may
use in its discretion to pay distribution and other expenses. The rate imposed
for the expense risk charge may not be increased.
DISTRIBUTION EXPENSE CHARGE -- The Company guarantees that the contingent
deferred sales charge stated in the Contract will not be increased. For assuming
this distribution expense risk, the Company deducts a distribution expense
charge daily from each Variable Account at an annual rate of 0.15% of the total
net assets of the Variable Account. If the distribution expense charge and the
contingent deferred sales charge are insufficient to cover the actual cost of
distribution, the Company will bear the loss. However, if the charges are more
than sufficient, the excess will be a gain that the Company may use in its
discretion. The rate imposed for the distribution expense charge may not be
increased.
11
<PAGE> 15
ANCHOR PATHWAY FUND
Anchor Pathway Fund was organized as a Massachusetts business trust on
March 23, 1987, and is registered as a diversified, open-end management
investment company under the 1940 Act. Such registration does not involve
supervision by the Securities and Exchange Commission of the investments or
investment policies of the Fund. The Fund consists of seven series: the Growth
Series, the International Series, the Growth-Income Series, the Asset Allocation
Series, the High-Yield Bond Series, the U.S. Government/AAA-Rated Securities
Series and the Cash Management Series. The Board of Trustees of the Fund may
establish additional series at any time. Series' assets are segregated and a
shareholder's interest is limited to the series in which he or she owns shares.
Capital Research and Management Company, 333 South Hope Street, Los
Angeles, California 90071, one of the nation's largest and oldest investment
management organizations, serves as the investment adviser to the Fund. The
administration and business affairs of the Fund are managed by SunAmerica Asset
Management Corp., an indirectly wholly owned subsidiary of the Company.
The seven series have, and are subject to, certain investment policies and
restrictions that may not be changed without a majority vote of the shareholders
in that series. The rights of Contract Owners to instruct the Company on the
voting of the Fund shares are described under "Voting Rights".
The GROWTH SERIES seeks growth of capital by investing primarily in common
stocks or securities with common stock characteristics.
The INTERNATIONAL SERIES seeks long-term growth of capital by investing in
securities of issuers domiciled outside the United States.
The GROWTH-INCOME SERIES seeks growth of capital and income by investing
primarily in securities which demonstrate the potential for appreciation and/or
dividends.
The ASSET ALLOCATION SERIES seeks high total return (including income and
capital gains) consistent with preservation of capital over the long term
through a diversified portfolio that can include common stocks and other
equity-type securities (such as convertible bonds and preferred stocks), 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 HIGH-YIELD BOND SERIES seeks a high level of current income and
secondarily seeks capital appreciation by investing primarily in intermediate
and long-term corporate obligations, with emphasis on higher-yielding,
higher-risk, lower-rated or unrated securities.
The U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES seeks a high level of
current income consistent with prudent investment risk and preservation of
capital by investing primarily in a combination of (i) securities guaranteed by
the U.S. Government and (ii) other debt securities rated AAA by Standard &
Poor's Corporation or Aaa by Moody's Investors Service, Inc. or that have not
received a rating but are determined to be of comparable quality by the
investment adviser.
The CASH MANAGEMENT SERIES seeks high current yield while preserving
capital by investing in a diversified selection of money market instruments.
The Fund offers its shares solely to the Separate Account. Fund shares are
used solely as the underlying investment medium for the Contracts offered in
this Prospectus. In the future, however, Fund shares may be used as the
underlying investment medium for other annuity contracts or variable life
contracts offered by the Company. The offering of Fund shares to variable
annuity and variable life separate accounts is referred to as "mixed funding."
It may be disadvantageous for variable life separate accounts and variable
annuity separate accounts to invest in the Fund simultaneously. Although neither
the Company nor the Fund currently foresees such disadvantages either to
variable life or variable annuity owners, the Board of Trustees of the Fund
would monitor events in order to identify any material conflicts to determine
what action, if any, would need to be taken in response thereto.
DETAILED INFORMATION ABOUT THE FUND IS CONTAINED IN THE ACCOMPANYING
CURRENT PROSPECTUS OF THE FUND. AN INVESTOR SHOULD CAREFULLY
REVIEW THE FUND'S PROSPECTUS BEFORE ALLOCATING AMOUNTS
TO BE INVESTED IN ITS SERIES.
12
<PAGE> 16
CONTRACT
CONTRACT DESCRIPTION -- This Prospectus describes only the variable portion
and not the fixed portion of the Contract. See the Appendix for a description of
the fixed portion of the Contract.
PURCHASE PAYMENTS -- The minimum initial Purchase Payment the Company will
accept is $5,000 for Non-Qualified Contracts and $2,000 for Qualified Contracts.
The minimum subsequent Purchase Payment the Company will accept is $500 for
Non-Qualified Contracts and $250 for Qualified Contracts. Subsequent Purchase
Payments into either a Non-Qualified or Qualified Contract are subject to a $25
minimum if they are paid through the Automatic Payment Authorization Program,
provided the Contract Owner's financial institution is a member of the National
Data Corporation clearinghouse network. An enrollment form for this program is
available from the Company. Subsequent Purchase Payments for all policies issued
on or before March 31, 1991, will continue to be subject to an annual minimum of
$300 with a minimum payment amount of $25, the minimum requirements in effect at
the time such policies were issued.
At the time the initial Purchase Payment is made, Contract Owners should
instruct the Company how to allocate the Purchase Payment among the General
Account and the seven Variable Accounts. If no allocation is indicated, the
entire amount of the initial Purchase Payment will be allocated to the Cash
Management Series pending instruction from the Contract Owner. Subsequent
Purchase Payments may be made at any time prior to the Annuity Date and will be
allocated in accordance with the Contract Owner's instructions. If no allocation
instructions are provided, the Payment will be deposited in accordance with the
most recent allocation instructions received by the Company. The Contract will
not be in default if subsequent Purchase Payments are not made. No Purchase
Payments will be accepted after the Annuity Date.
The Company reserves the right to reject any application or Purchase
Payments not in compliance with the terms of the Contract or applicable state
law provisions. In general, the Company will not issue a Non-Qualified Contract
to anyone who is age 80 or older or a Qualified Contract to anyone who is age
70 1/2 or older unless the Contract Owner can show that the minimum
distributions required by the IRS are being made. In the event that an
application fails to provide all necessary information, the Company will
promptly request that the Contract Owner furnish further instructions and will
hold the initial Purchase Payment in a suspense account, without interest, for a
period of up to five business days pending receipt of the information by the
Company. If the necessary information is not received within five business days,
the Company will return the initial Purchase Payment to the prospective Contract
Owner unless the prospective Contract Owner, after being informed of the reasons
for the delay, specifically consents to the Company retaining the initial
Purchase Payment until the application is made complete.
VARIABLE ACCOUNT ACCUMULATION PROVISIONS
ACCUMULATION UNITS -- The number of Accumulation Units purchased for a
Contract Owner with respect to his or her initial Purchase Payment is determined
by dividing the amount credited to each Variable Account by the Accumulation
Unit value for that Variable Account next computed following acceptance of the
application (generally the next business day after receipt of payment by the
Company). The number of Accumulation Units purchased with respect to subsequent
Purchase Payments is determined by dividing the amount credited to each Variable
Account by the applicable Accumulation Unit value for the Valuation Period next
determined following receipt of the payment by the Company. The Accumulation
Unit value of each Variable Account varies in accordance with the investment
experience of that Variable Account and is affected by the investment experience
of the respective Fund series, by expenses and by the deduction of certain
charges.
VALUE OF AN ACCUMULATION UNIT -- The value of an Accumulation Unit of a
particular Variable Account may increase or decrease from one Valuation Period
to the next. The value is determined by multiplying the value of an Accumulation
Unit for the last prior Valuation Period by the Net Investment Factor for that
Variable Account for the current Valuation Period. The value of an Accumulation
Unit is independently computed for each Variable Account using the Net
Investment Factor applicable to that Variable Account. The Contract Owner bears
the investment risk that the aggregate value of the amounts allocated to the
Separate Account may at any time be less than, equal to, or more than the
amounts invested in the Separate Account. Accumulation Unit value calculations
are made at the close of general trading on the New York Stock Exchange,
currently 4 p.m., New York time.
NET INVESTMENT FACTOR -- The Net Investment Factor is an index used to
measure the investment performance of a Variable Account from one Valuation
Period to the next. For each Variable Account, the Net Investment Factor for a
Valuation Period may be greater or less than 1.0, depending upon the investment
performance of the particular series in whose shares the Variable Account is
invested.
13
<PAGE> 17
DEATH BENEFIT
BEFORE THE ANNUITY DATE -- If the Annuitant dies prior to the Annuity Date,
the Company will pay to the Beneficiary, upon receipt by the Company of Due
Proof of Death of the Annuitant, a death benefit. As an additional selection,
the Company also offers an optional enhanced guaranteed minimum death benefit
(the "enhanced death benefit") which is an alternative to the standard death
benefit described below. The enhanced death benefit is not yet available in all
states. Payment will be in a lump sum unless the Beneficiary elects an annuity
option or elects to apply the amount payable under the Contract to the purchase
of a new Contract on the death benefit election form.
STANDARD DEATH BENEFIT -- The standard death benefit is the greater of (a)
the sum of all Purchase Payments, adjusted for withdrawals; or (b) the
Contract Value for the Valuation Period in which such proof is received at
the Company. After the fifth Contract anniversary, the Company will pay to
the beneficiary the greater of (a) above, (b) above or, (c) the Contract
Value on the Contract anniversary preceding the death of the Annuitant less
withdrawals since such anniversary.
ENHANCED DEATH BENEFIT -- The enhanced death benefit is the greater of (a)
the Contract Value as of the day on which the Company receives Due Proof of
Death; or (b) the maximum Contract anniversary value between the date the
enhanced death benefit takes effect and the Annuitant's 75th birthday. A
Contract anniversary value is equal to the Contract Value on a Contract
anniversary, increased by any Purchase Payments and reduced by any
withdrawals and partial annuitizations since that anniversary, as of the
day on which the Company receives Due Proof of Death of the Annuitant. If
the enhanced death benefit is elected prior to May 31, 1998, the Company
will pay the greater of (a) the Contract Value as of the day on which the
Company receives Due Proof of Death; or (b) the maximum Contract
anniversary value between the date one year prior to the election of the
enhanced death benefit and the Annuitant's 75th birthday.
Contract Owners may elect the enhanced death benefit by completing the
Optional Enhanced Guaranteed Minimum Death Benefit Election Form provided
by the Company. If the enhanced death benefit is elected prior to May 31,
1998, it will take effect on the date of election. If the enhanced death
benefit is elected on or after May 31, 1998, it will take effect on the
Contract anniversary following election, or on the Contract anniversary
date if election occurs on a Contract anniversary. The Company will
transfer the Accumulation Units in each Variable Account to corresponding
Accumulation Units of that Variable Account with the enhanced death benefit
and begin deducting the charge described below on the Contract anniversary
following election of the enhanced death benefit.
Contract Owners may cancel the enhanced death benefit at any time by
sending a written request to the Company. If canceled, the enhanced death
benefit will terminate on the next Contract anniversary and the standard
death benefit, as described above, will be reinstated. If the enhanced
death benefit is canceled on a Contract anniversary, the cancellation will
take effect on that date. The Company will also cease deducting the charge
for the enhanced death benefit upon cancellation and transfer the
Accumulation Units in each Variable Account to corresponding Accumulation
Units of that Variable Account without the enhanced death benefit. Once
canceled, the enhanced death benefit cannot be reinstated.
There is a daily charge for the enhanced death benefit so long as the
enhanced death benefit is elected and remains in effect. If the enhanced
death benefit is elected prior to May 31, 1998, the daily charge for the
enhanced death benefit will be waived until the Contract anniversary
following election. This charge is equal to the annual rate of 0.10% of the
daily net asset value of the Separate Account. See "Separate Account Annual
Fees and Charges" and "Examples" for more information on the fees and
expenses for a Contract with the enhanced death benefit.
AFTER THE ANNUITY DATE -- If the Annuitant dies after the Annuity Date, the
amount payable, if any, is specified in the annuity option selected. See
"Fixed and Variable Annuity Provisions".
The death benefit is calculated upon receipt by the Company of Due Proof of
Death.
EXERCISE OF RIGHTS UNDER THE CONTRACT
BENEFICIARY -- The Beneficiary is named in the application. Unless the
Beneficiary has been irrevocably designated, the Beneficiary may be changed
while the Annuitant is living if a written request of the Contract Owner is
received by the Company. The estate or heirs of any Beneficiary who dies before
the Annuitant have no rights under the Contract. If no
14
<PAGE> 18
Beneficiary survives the Annuitant, payment is made to the Contract Owner, the
contingent owner (if any), or to the Contract Owner's estate.
OWNERSHIP -- The Contract Owner is the person entitled to exercise all
rights under the Contract. The Annuitant is the Contract Owner unless otherwise
designated in the application or by endorsement. If permitted by the retirement
plan under which a Contract is purchased, a contingent owner may be designated
by a Contract Owner other than the Annuitant. The interest of any contingent
owner who dies before the Contract Owner will end at the death of such
contingent owner. If ownership passes to the contingent owner and the contingent
owner is the surviving spouse of the Contract Owner, the new Contract Owner will
have all the rights and privileges of the previous Contract Owner. If the
contingent owner is not the surviving spouse, the contingent owner must elect to
continue the Contract and receive the entire Contract Value within five years of
the Contract Owner's death, unless an Annuity for the life or a period not
exceeding the life expectancy of the contingent owner is elected and commenced
within one year of the Contract Owner's death. Ownership of the Contract may be
transferred to a new Contract Owner. Such a transfer of ownership cancels any
designation of a contingent owner, but does not affect a Beneficiary
designation. The Contract Owner should consult a competent tax adviser prior to
making any such designations or transfers.
ASSIGNMENT -- Unless the Contract is issued in connection with a Qualified
Plan, a Contract Owner may assign the Contract at any time prior to the earlier
of the Annuity Date or the date of death of the Annuitant. The right to change
the Beneficiary under the Contract may be assigned after the Annuity Date, if
prior to the date of death of the Annuitant. Amounts payable under a Contract
may not be assigned or encumbered and, to the extent permitted by law, are not
subject to levy, attachment or any other judicial process for the payment of the
payee's debts or obligations, except that the right to change the Beneficiary
may be assigned prior to the date of death of the Annuitant. Moreover, in the
event that the Contract is issued pursuant to a Qualified Plan or a
Non-Qualified Plan that is subject to Title I of the Employee Retirement Income
Security Act of 1974 ("ERISA"), it may not be assigned, pledged or transferred
except as permitted by law. A collateral assignment does not change Contract
ownership. Because an assignment may be a taxable event, the Contract Owner
should consult a competent tax adviser prior to making any such designations,
transfers or assignments.
No assignment of any interest under the Contract is binding upon the
Company until a written assignment is filed with the Company, and the Company
assumes no obligation with respect to the effect or validity of any such
assignment. An assignment will not affect any payments the Company may make or
actions it may take before it receives notice of the assignment.
TRANSFERS -- Transfers, subject to the restrictions listed below, may be
made before or after the Annuity Date by sending a written request to the
Company or by telephone authorization. Telephone transfers are automatically
accepted unless the Company is otherwise instructed by the Contract Owner. The
Company has in place procedures which are designed to provide reasonable
assurance that telephone authorizations are genuine, including tape recording
all telephone communications and requesting identifying information.
Accordingly, the Company and its affiliates disclaim all liability for any
claim, loss or expense resulting from any alleged error or mistake in connection
with a telephone transfer which was not properly authorized by the Contract
Owner. However, if the Company fails to employ reasonable procedures to ensure
that all telephone transfer or withdrawal instructions are properly authorized,
the Company may be held liable for such losses. Telephone calls authorizing
transfers must be completed before closing of the New York Stock Exchange in
order to effect the transfer the day of receipt. All other transfers will be
processed on the next business day. The Company reserves the right to modify,
suspend or terminate the telephone transfer service at any time. Transfers are
effected at the first valuation date after receipt of written instructions.
MINIMUM AMOUNTS, ALL TRANSFERS -- The amount transferred must be at least
$500. No transfer is permitted if such transfer would result in the
transferor account having a balance of less than $500, unless the entire
amount is transferred. For transfers made after the Annuity Date, also see
"Additional Variable Annuity Provisions -- Transfers".
TIME LIMITATIONS, ALL TRANSFERS; CHARGES -- Transfers may not be made
during the first 30 days after the date of issue of the Contract, and
transactions effecting transfer may not be made more often than fifteen
times in any Contract year without charge. A charge of $25 per transaction
is assessed ($10 in Texas and Pennsylvania) against any transaction
effecting transfer in excess of the fifteen permitted without charge in any
Contract year. Transfers made under the Dollar Cost Averaging Program,
described below, are counted against this limitation in the same manner as
other transfers.
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TRANSFER WITHIN THE SEPARATE ACCOUNT -- The Contract Owner may transfer all
or part of the Contract Value or Annuity Unit value from one Variable
Account of the Separate Account to one or more of the remaining Variable
Accounts.
TRANSFER TO SEPARATE ACCOUNT -- The Contract Owner may transfer all or part
of the Contract Value from the General Account to the Separate Account
subject to the following additional limitations: (a) no more than 25% of
the total amount allocated to the General Account may be transferred to the
Separate Account in any one Contract Year, and (b) any such transfer may be
made not later than 90 days before the Annuity Date. These limitations also
apply to transfers made from the General Account under the Automatic Dollar
Cost Averaging Program, below.
TRANSFER TO GENERAL ACCOUNT -- The Contract Owner may transfer all or part
of the Contract Value from the Separate Account to the General Account. To
the extent that monies are transferred to the General Account, they are not
affected by the investment performance of the Fund.
AUTOMATIC DOLLAR COST AVERAGING PROGRAM -- Contract Owners who wish to
purchase units of the Variable Accounts over a period of time may be able to do
so through the Dollar Cost Averaging ("DCA") Program. Under the DCA Program, a
Contract Owner may authorize the automatic transfer of a fixed dollar amount
($100 minimum) of his or her choice at regular intervals from either the Cash
Management Account or the General Account to one or more of the Variable
Accounts (other than the Cash Management Account) at the unit values determined
on the dates of the transfers. The intervals between transfers may be monthly,
quarterly, semi-annually or annually, at the option of the Contract Owner. The
theory of Dollar Cost Averaging is that greater numbers of units are purchased
at times when the unit prices are relatively low than are purchased when the
prices are higher. This has the effect of reducing the aggregate average cost
per unit to less than the average of the unit prices on the same purchase dates.
However, participation in the DCA Program does not assure the Contract Owner of
a greater profit, or any profit, from his or her purchases under the program;
nor will it prevent or necessarily alleviate losses in a declining market.
Another option under the DCA Program is the periodic transfer of a selected
percentage of the value of the Cash Management Account or the General Account to
one of the Variable Accounts (other than the Cash Management Account). Although
the various options under the DCA Program will allow transfers to be made either
from the Cash Management Account or the General Account, a Contract Owner must
elect to have the transfers made exclusively from one of these two sources.
A Contract Owner may not simultaneously participate in both the DCA Program
and the Systematic Withdrawal Program described below. Participation in the DCA
Program will be effective one month after the Company has received and approved
the application to participate in the DCA Program, which application must be in
writing. A Contract Owner may elect to increase, decrease or change the
frequency or amount of Purchase Payments under the DCA Program. The Company
reserves the right to modify, suspend or terminate the DCA Program at any time.
WITHDRAWALS -- A Contract Owner may effect a withdrawal by submitting a
written request to the Company or by completing a Systematic Withdrawal Program
enrollment form. The request must be signed by the Contract Owner. The signature
should be in exactly the same form as the name reflected on the Contract Owner's
account. The request should include the name of the General Account and/or the
Variable Accounts involved, and the Contract Owner's account number. The request
must also be accompanied by the Contract or a Lost Contract Affidavit (which may
be obtained by calling the Company) where a complete withdrawal is requested.
The Contract Owner may make a partial or complete withdrawal (redemption)
of the Net Contract Value. A request for withdrawal must be received prior to
the earlier of the Annuity Date or the death of the Annuitant. Upon request for
a complete withdrawal, the Contract Owner will receive his or her Net Contract
Value as of the date that the written request for the withdrawal is received by
the Company. If the withdrawal is partial, the amount withdrawn must be at least
$500 ($250 for withdrawals made pursuant to the Systematic Withdrawal Program
described below). Moreover, no partial withdrawal may be effected if it would
cause the remaining Contract Value to be less than $500. Unless otherwise
directed by the Contract Owner, a partial withdrawal will be made from the
General Account and each Variable Account in which Contract Value is invested,
in the ratio that the Contract Value in the General Account and each Variable
Account bears to total Contract Value. Under certain circumstances, withdrawals
are subject to a contingent deferred sales charge as well as a Contract
administration charge. See "Contingent Deferred Sales Charge" and "Contract
Administration Charge".
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A withdrawal may result in adverse federal income tax consequences. See
"Federal Income Tax Status". In regard to section 403(b) contracts, neither
salary reduction contributions nor earnings accrued after December 31, 1988, may
be withdrawn except under certain circumstances.
Payment of withdrawals are normally made within seven days. The Company
reserves the right, however, to defer any withdrawal payment or transfer of
values if (a) the New York Stock Exchange is closed (other than customary
weekend and holiday closings), (b) trading on the New York Stock Exchange is
restricted, (c) an emergency exists making disposal of the Separate Account's
securities or the valuation of net assets of the Separate Account not reasonably
practicable, or (d) the Securities and Exchange Commission has by order
permitted suspension of redemptions for the protection of Contract Owners. The
Securities and Exchange Commission by rules and regulations determines the
conditions under which trading of securities shall be deemed to be restricted
and the conditions under which an emergency shall be deemed to exist.
SYSTEMATIC WITHDRAWAL PROGRAM -- The Systematic Withdrawal ("SW") Program
allows Contract Owners to initiate, at the time the Contract is issued or on or
after the first anniversary of the Contract issuance date, a procedure for
automatically withdrawing a portion of their investment at either monthly,
quarterly, semi-annual or annual intervals, subject to certain limitations.
Under the SW Program, the minimum payout amount is $250 per withdrawal and the
maximum amount that can be withdrawn in any twelve month period is equal to 10%
of the aggregate Purchase Payments paid under the Contract. A Contract Owner
electing the SW Program must specify, subject to the foregoing limits, the
amount to be withdrawn by prescribing either a fixed dollar amount per
withdrawal or a fixed percentage of the aggregate Purchase Payments paid to the
date of the withdrawal. The Contract Owner may, at least one month in advance,
specify a date for the termination of scheduled withdrawals under the SW
Program, which cannot be later than the Annuity Date (see "Annuity Date").
Applications for participating in the SW Program must be in writing.
Participation under the SW Program will commence one month after the Company has
received and approved the application. If participation under the SW Program is
terminated, it cannot be reinstated before one year after the last withdrawal
made under the SW Program prior to termination.
The contingent deferred sales charge will be waived for withdrawals made
under the SW Program. Nonscheduled withdrawals made during the time the SW
Program is in effect (i.e., any withdrawals other than those scheduled under the
SW Program) will be subject to the contingent deferred sales charge, including
the charge that would normally not apply to the first withdrawal in each
calendar year. See "Contingent Deferred Sales Charge".
Amounts withdrawn under to the SW Program may be electronically wired to
the Contract Owner's financial institution by completing the instructions on the
Electronic Fund Transfer Form or by written request delivered to the Company. A
voided check (for checking accounts), the account number and bank ABA number
must accompany all requests. Electronic transfers may also be requested on the
Systematic Withdrawal Request Form. The Company reserves the right to modify,
suspend or terminate the availability of electronic fund transfers at any time.
A Contract Owner may not simultaneously participate in both the SW Program
and the DCA Program. Like other withdrawals, withdrawals under the SW Program
may have adverse tax consequences. See "Federal Income Tax Status".
SUBSTITUTION AND CHANGE -- The Company reserves the right to offer Contract
Owners, at some future date and in accordance with the requirements of the 1940
Act, the option of directing their Purchase Payments to an investment company
other than the Fund, or to substitute another fund or series of the Fund for
their current investment in the Fund.
If shares of the Fund are not available for purchase by the Separate
Account, or if in the judgment of the Company, further investment in such shares
is no longer appropriate in view of the purposes of the Separate Account, then
(i) shares of another registered open-end, diversified management investment
company ("mutual fund") may be substituted for Fund shares held in the Separate
Account and/or (ii) payments received after a date specified by the Company may
be applied to the purchase of shares of another mutual fund in lieu of Fund
shares. In either event, approval of the Securities and Exchange Commission
shall be obtained. It is intended that any substitution would be of shares of a
mutual fund with investment objectives similar to those of the Fund.
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FIXED AND VARIABLE ANNUITY PROVISIONS
MINIMUM ANNUITY PAYMENTS -- Annuity payments are made monthly, but if any
payment would be less than $50, the Company may change the frequency so payments
are at least $50 each. If the Net Contract Value to be applied at the Annuity
Date is less than $5,000, the Company may elect to pay such amount in a lump
sum. For tax consequences of a lump-sum payment, see "Federal Income Tax
Status".
ANNUITY DATE -- The Contract Owner selects the Annuity Date, which must be
the first day of a calendar month. It must be at least two years after the date
of issue of the Contract. It may not be later than the first day of the next
month after the Annuitant's 80th birthday (85th birthday for Contracts issued on
or after June 1, 1990).
PROOF OF AGE, SEX AND SURVIVAL -- The Company may require proof of age, sex
or survival of any payee upon whose continuation of life annuity payments
depend.
MISSTATEMENT OF AGE OR SEX -- If the age or sex of the Annuitant has been
misstated, any annuity amount payable shall be the annuity amount which the
proceeds applied would have purchased using the correct age and sex.
Overpayments made by the Company because of such misstatement, with interest at
6% per year, compounded annually, will be charged against benefits payable
subsequent to adjustment. The dollar amount of any underpayment made by the
Company as a result of a misstatement will be paid in full with the next payment
due under the Contract.
CHANGE OF ANNUITY DATE OR ANNUITY OPTION -- The Contract Owner may change
the Annuity Date or the annuity option on written notice to the Company at least
30 days prior to the Annuity Date previously selected. The Annuity Date may not
be changed to a date later than the first day of the month following the
Annuitant's 80th birthday (85th birthday for Contracts issued on or after June
1, 1990).
IF NO ANNUITY OPTION IS SELECTED -- For amounts allocated to the Separate
Account, a variable life Annuity with 120 monthly payments guaranteed (option 4
below), will be paid if no annuity option has been made by the Annuity Date. If
the Contract Owner has not chosen an annuity option prior to the Annuitant's
death, a Beneficiary may make this choice upon the Annuitant's death.
ANNUITY OPTIONS UNDER EMPLOYER SPONSORED PLANS -- The Contract contains
annuity options calculated on the basis of the sex of the Annuitant. The United
States Supreme Court in its decision entitled Arizona Governing Committee for
Tax Deferred Annuity and Deferred Compensation Plans v. Norris determined that
an employer subject to Title VII of the Civil Rights Act of 1964 (primarily
section 403(b) tax-sheltered annuities) may not offer to its employees the
option of receiving retirement benefits calculated on the basis of sex. In
accordance with the Norris decision, the Company does not offer participants of
these plans the option of receiving retirement benefits calculated on the basis
of sex, but offers retirement benefits calculated on a unisex basis, as included
in the Contract.
ANNUITY OPTIONS -- Subject to the provisions of a retirement plan under
which a Contract is purchased, the Contract Owner shall select in the
application any one of the following annuity options.
Upon written election filed with the Company, the Contract Value, as
computed 10 days before the Annuity Date, is applied to provide one of the
following options. The Company will allow the Contract Owner the option of
choosing both a fixed and a variable annuity option if the Contract Owner so
desires.
Contract Owners may elect to have annuity payments electronically wired to
his or her financial institution by completing the instructions on the
Electronic Fund Transfer Form or by written request delivered to the Company. A
voided check (for checking accounts), the account number and bank ABA number
must accompany all requests. Electronic transfers may also be requested on the
Annuity Option Selection Form. The Company reserves the right to modify, suspend
or terminate the availability of electronic fund transfers at any time.
ANNUITY OPTIONS AVAILABLE ON A FIXED OR VARIABLE BASIS
OPTION 1: LIFE ANNUITY, LIFETIME MONTHLY PAYMENTS GUARANTEED -- Monthly
payments during the lifetime of the Annuitant. No further payments are payable
after the death of the Annuitant and there is no provision for a death benefit
payable to a Beneficiary. While this option will generally offer a higher level
of monthly payments than the other options discussed below, it is possible that
only one payment could be made if the Annuitant dies before the due date of the
second payment, two if the Annuitant dies before the third payment, and so on.
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OPTION 2: JOINT AND TWO-THIRDS SURVIVOR ANNUITY -- Monthly payments
payable during the joint lifetime of the payee and a designated second person
and during the lifetime of the survivor. During the lifetime of the survivor,
variable monthly payments will be determined using two-thirds of the number of
each type of Annuity Units credited to the Contract. Fixed monthly payments
during the lifetime of the survivor will be equal to two-thirds of the fixed
monthly payment payable during the joint lifetimes.
OPTION 3: JOINT AND SURVIVOR LIFE ANNUITY, 120 MONTHLY PAYMENTS
GUARANTEED -- Monthly payments, during the joint lifetime of two persons and
continuing during the remaining lifetime of the survivor, with the guarantee
that payments will be made for not less than 120 months. Payments will be made
as follows:
(a) If the Annuitant was the payee, then upon the death of the Annuitant,
any guaranteed annuity payments will be continued during the remainder of
the selected period to the Beneficiary. The Beneficiary may elect to have
the present value of the guaranteed number of annuity payments remaining
paid in a lump sum as specified in (b) immediately below.
(b) If the Beneficiary was the payee, then upon the death of the
Beneficiary, the present value of the remaining unpaid guaranteed annuity
payments shall be paid in a lump sum to the estate of the Beneficiary. Such
present value shall be determined as of the end of the Valuation Period
during which notice of the Beneficiary's death is received by the Company
and by discounting each remaining unpaid guaranteed annuity payment at the
effective annual interest rate assumed in determining the annuity purchase
rate.
OPTION 4: LIFE ANNUITY, 120 OR 240 MONTHLY PAYMENTS GUARANTEED -- An
Annuity payable monthly during the lifetime of the Annuitant, with the guarantee
that if, at the death of the Annuitant, payments have been made for less than
the 120 or 240 monthly periods, as selected, payments will be made in the same
manner as provided in paragraph (a) and (b) under option 3 above.
ANNUITY OPTIONS AVAILABLE ON A FIXED BASIS ONLY
OPTION 5: MONTHLY PAYMENTS FOR A SPECIFIED PERIOD CERTAIN -- Monthly
payments for any specified period of time (three (3) years or more, but not
exceeding thirty (30) years), as elected. In the event of death of the payee
under this option, the Contract provides that in certain circumstances, the
discounted value of the remaining payments, if any, will be calculated and paid
in one sum.
OPTION 6: FIXED PAYMENTS -- The amount applied to provide fixed payments in
accordance with this option will be held by the Company at interest. Fixed
payments will be made in such amounts and at such times as may be agreed upon
with the Company, and will continue until the amount held by the Company with
interest is exhausted. The final payment will be for the balance remaining and
may be less than the amount of each preceding payment. Interest will be credited
yearly on the amount remaining unpaid at a rate determined by the Company from
time to time, but not less than 4% per year compounded annually. The rate may be
changed at any time and as often as may be determined by the Company, provided,
however, that the rate may not be reduced more frequently than once during each
calendar year.
ADDITIONAL VARIABLE ANNUITY PROVISIONS
FIRST VARIABLE ANNUITY PAYMENT -- The dollar amount of the first monthly
annuity payment is determined by applying the Contract Value to the Annuity
table applicable to the annuity option chosen. If more than one Variable Account
has been selected, the value of the interest in each series is applied
separately to the Annuity table to determine the amount of the first annuity
payment attributable to that Variable Account. The Annuity tables are in the
Contract, and are based on the 1971 Individual Annuity Mortality Table with
interest at 4% for the life of the Contract.
ASSUMED INVESTMENT RATE -- A 4% assumed investment rate is built into the
Annuity tables in the Contract. A higher assumption would mean a higher first
annuity payment but more slowly rising and more rapidly falling subsequent
payments. A lower assumption would have the opposite effect. If the actual net
investment rate is 4% annually, annuity payments would be level.
NUMBER OF ANNUITY UNITS -- The number of Annuity Units for each applicable
Variable Account is the amount of the first monthly annuity payment attributable
to that Variable Account divided by the value of an Annuity Unit of that
Variable
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Account as of the Annuity Date. The number used in computing monthly payments
remains constant during the annuity period unless amounts are transferred among
the Variable Accounts.
SUBSEQUENT VARIABLE ANNUITY PAYMENTS -- Subsequent monthly annuity payments
vary in amount according to the investment performance of the applicable
Variable Account. The part of each subsequent Variable Annuity payment
attributable to a Variable Account is the number of Annuity Units of that
Variable Account multiplied by the value of an Annuity Unit of that Variable
Account for the Valuation Period in which payment is due. The amount of each
subsequent annuity payment is not affected by variations in expenses or
mortality experience.
VALUE OF EACH ANNUITY UNIT -- The Annuity Unit value of each Variable
Account was arbitrarily set at $10 when the Variable Account was established.
The value may increase or decrease from one Valuation Period to the next. For
any Valuation Period, the value of an Annuity Unit of a particular Variable
Account is the value of that Annuity Unit during the last Valuation Period
multiplied by the Net Investment Factor for that Variable Account for the
current Valuation Period. The result is then multiplied by a factor that
neutralizes the assumed investment rate.
TRANSFERS -- After the Annuity Date, transfers may be requested at the end
of any month. Transfers will then be effected on the first day of the month
following such request.
MISCELLANEOUS PROVISIONS
NOTICES AND ELECTIONS -- All notices and elections under the Contract must
be in writing, signed by the proper party and received at the Company to be
effective. All notices and elections should refer to the General Account and/or
the Variable Accounts involved, and should note the Contract Owner's account
number. If acceptable to the Company, notices or elections relating to
beneficiaries and ownership will take effect as of the date signed, unless the
Company has already acted in reliance on the prior status. The Company is not
responsible for the validity of such notices and elections.
AMENDMENT OF CONTRACT -- A condition or provision of the Contract may be
waived or modified only in writing signed by the Chairman, President, a Vice
President, Secretary or Assistant Secretary of the Company.
The Contract may be amended at any time as required to make it conform with
any law or regulation issued by any government agency to which the Contract is
subject.
TEN DAY RIGHT TO REVIEW -- Within 10 days (or longer period if required by
state law) of the receipt of a Contract, it may be returned to the Company for
cancellation. Except as otherwise required by law, the Company will refund the
Contract Value for the Valuation Period in which the Contract is received.
Except for IRA Contracts, the Contract Owner bears the investment risk during
the ten day review period. For IRA Contracts, the Owner will receive the greater
of Contract Value or Purchase Payments made.
RETIREMENT PLAN CONDITIONS -- A Contract acquired in connection with a
Qualified Plan may be subject to special restrictions or consequences. The
Contract Owner should understand the features of any Qualified Plan in which he
or she participates and, if necessary, seek an explanation thereof from a
competent tax adviser.
REPORTS TO CONTRACT OWNERS -- The Company keeps all records relating to the
Contracts. At least once a year, a report setting forth information regarding
Contract Value is sent to Contract Owners. Contract Owners will also be
furnished notices, proxies and solicitation materials relating to the Fund.
FEDERAL INCOME TAX STATUS
GENERAL -- The operations of the Separate Account form part of the
operations of the Company; however, the Internal Revenue Code of 1986, as
amended ("Code") provides that no federal income tax will be payable by the
Company on the investment income and capital gains of the Separate Account
provided it complies with certain requirements.
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
Contract Owner. Withholding on other types of distributions can be waived.
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<PAGE> 24
An "eligible rollover distribution" is the estimated taxable portion of any
amount received by a covered employee from a plan qualified under section 401(a)
or 403(a) of the Code, or from a tax-sheltered annuity qualified under section
403(b) of the Code (other than (1) 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 Contract 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.
NON-QUALIFIED CONTRACTS -- Distributions before the Annuity Date are
treated as coming first from earnings, rather than Purchase Payments, until the
entire amount of earnings has been distributed. For federal tax purposes, these
distributions include the receipt of proceeds from loans and the assignment or
pledge of any portion of the Contract Value, as well as partial withdrawals and
surrenders. Distributions before the Annuity Date are taxable as ordinary income
to the extent that Contract Value, unreduced by surrender charges, exceeds
Purchase Payments.
A 10% penalty may apply to the income portion of any distribution. However,
the penalty is not imposed on amounts received: (1) after the taxpayer reaches
age 59 1/2; (2) after the death of the Contract Owner; (3) if the taxpayer is
disabled as defined in the Code; (4) in a series of substantially equal payments
made not less frequently than annually for the life (or life expectancy) of the
taxpayer or for the joint lives (or life expectancies) of the taxpayer and his
or her Beneficiary; (5) under an immediate annuity; or (6) which are allocable
to Purchase Payments made prior to August 14, 1982.
The Contract provides that upon death of the Annuitant prior to the Annuity
Date, the death benefit will be paid to the named Beneficiary. Such payments
made upon the death of the Annuitant who is not the Contract Owner do not
qualify for the death of Contract Owner exception described above, and will be
subject to the 10% distribution penalty unless the Beneficiary is 59 1/2 years
old or one of the other exceptions to the penalty applies.
Section 817(h) of the Code authorized the Secretary of the Treasury
("Treasury") to set standards by regulation or otherwise for the investments of
separate accounts to be considered "adequately diversified" in order for the
contract to be treated as an annuity contract for federal tax purposes. The
Separate Account, through the Fund, intends to comply with the diversification
requirements. The Company has entered into an agreement regarding participation
in the Fund, that requires the Fund to be operated in compliance with the
requirements prescribed by the Treasury. Thus, the Company believes that the
Contract will be treated as an annuity contract for federal tax purposes.
In certain circumstances, variable Contract Owners may be considered the
owners, for federal tax purposes, of the assets of the separate account used to
support such contracts. In those circumstances, income and gains from separate
account assets would be includible in the variable Contract Owners' gross
income.
QUALIFIED CONTRACTS -- If the Contract is used with a corporate pension or
profit-sharing plan described in section 401(a) of the Code, an annuity plan
described in section 403(a), a simplified employee pension plan described in
section 408(k), or a tax-sheltered annuity described in section 403(b) of the
Code ("Qualified Plans"), deductible employer contributions up to prescribed
limits are permitted. Employers may deduct their contributions to self-employed
and corporate pension and profit-sharing plans and tax-sheltered annuities in
the year when made, up to the limits specified in the Code. In addition, some
Qualified Plans may permit nondeductible employee contributions. If the Contract
is used as an IRA, all or a portion of the contribution up to $2,000 may be
deducted. Under present interpretations and authority, until a distribution is
made, no federal income tax is payable on the investment earnings.
The taxable portion of a withdrawal or distribution from Contracts issued
under certain types of plans may, under some circumstances, be "rolled over"
into another eligible plan so as to continue to defer income tax on the taxable
portion. Effective January 1, 1993, such treatment is available for any
"eligible rollover distribution" made by certain types of plans (as described
above under "Federal Income Tax Status -- Withholding Tax on Distributions")
that is transferred within 60 days of receipt into a plan qualified under
section 401(a) or 403(a) of the Code, a tax-sheltered annuity, an IRA, or an
individual
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retirement account described in section 408(a) of the Code. Plans making such
eligible rollover distributions are also required, with some exceptions
specified in the Code, to provide for a direct "trustee to trustee" transfer of
the distribution to the transferee plan designated by the recipient.
Distributions to a participant in a Qualified Plan under section 401(a)
that are made prior to age 59 1/2 and that are not on account of death,
disability, a domestic relations order, for deductible medical expense, early
retirement after age 55, or that are not received as a series of substantially
equal payments for the life or a period equal to the life expectancy of the
participant or the joint life expectancy of the participant and a designated
beneficiary, will be subject to an additional 10% tax. The 10% tax also applies
to certain distributions from IRAs under similar circumstances.
The Code also contains requirements as to the ages by which distributions
must begin under Qualified Plans, and the percentage of payments that must go to
the participant vis-a-vis a Beneficiary.
All distributions, with the exception of a return of nondeductible employee
contributions, received from a section 401, 403(b), 457 plan or IRA are included
in gross income. After the Annuity Date, any nondeductible contributions are
recovered tax-free as a portion of each annuity payment. In the case of section
401 or 403(b) plans and IRAs, a distribution is includible in the year in which
it is paid. In the case of a section 457 plan, a distribution is includible in
the year it is paid or when made available, depending upon whether certain Code
requirements are met.
The Code imposes restrictions on distributions (i.e., withdrawals or
surrenders) from annuity contracts sold to plans qualified under section 403(b)
of the Code. Section 403(b)(11) of the Code requires that for these annuity
contracts to receive tax-deferred treatment, they must provide that
distributions attributable to contributions made pursuant to a salary reduction
agreement be paid only:
(1) when the employee attains age 59 1/2, separates from service, dies,
or becomes disabled (within the meaning of section 72(m)(7)); or
(2) in hardship cases, where only the distribution of contributed
amounts is permitted; distribution of any income attributable to these
amounts is prohibited.
Assets held as of December 31, 1988, are not subject to such Code
restrictions.
The Contracts have been modified to comply with these changes in the Code.
The Company is relying on a no-action letter from the Securities and Exchange
Commission that was issued to the American Council of Life Insurance and made
publicly available on November 28, 1988. That letter outlines further conditions
that must be met if a company offering registered annuity contracts imposes the
limitations required by the Code. The Company will comply with the conditions of
the no-action letter.
TAXATION OF ANNUITY PAYMENTS AND OTHER DISTRIBUTIONS -- Where Purchase
Payments were nondeductible, a portion of each annuity payment is treated as a
nontaxable return of Purchase Payments. The remaining portion of this Annuity
payment is taxable as ordinary income. The taxable amount of each annuity
payment is based on the period over which payments are to be made or, in the
case of a life Annuity, the life expectancy of the Annuitant. On annuities paid
out under Qualified Contracts consisting of Purchase Payments that were not
taxed currently to the Contract Owner, the entire annuity payment is taxable
since the Purchase Payments have not been included in taxable income when made.
The Company is required to withhold federal income tax on annuity payments,
distributions, and partial and full surrenders. However, recipients of such
Contract distributions are allowed to make an election not to have federal
income tax withheld, except as provided in "Federal Income Tax
Status -- Withholding Tax on Distributions". After an election is made with
respect to annuity payments, an Annuitant may revoke the election at any time,
and thereafter commence withholding. The Company will notify the payee at least
annually of his or her right to revoke the election. Payees are required by law
to provide the Company (as payor) with their correct taxpayer identification
number ("TIN"). If the payee is an individual, the TIN is his or her Social
Security number.
The above discussion is for information only and is not to be considered to
constitute tax advice. For advice regarding your particular tax situation, you
should consult a competent tax adviser.
22
<PAGE> 26
DISTRIBUTION OF CONTRACTS
Contracts are sold by broker-dealers who are licensed insurance agents of
the Company, either individually or through an incorporated insurance agency.
Sales commissions are paid by the Company and typically range to 5.5% of
Purchase Payments paid.
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. SunAmerica Capital Services, Inc., an indirect wholly
owned subsidiary of SunAmerica Inc., is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended, and is a member of the National
Association of Securities Dealers, Inc.
VOTING RIGHTS
Unless otherwise restricted by the plan under which a Contract is issued,
each Contract Owner has the right to instruct the Company with respect to voting
his or her interest in the shares of the Fund held by the Separate Account at
all shareholder meetings. Shareholder meetings ordinarily will not be held
unless required by the 1940 Act.
The number of votes that may be cast by a Contract Owner is based on the
number of units owned as of the record date of the meeting. Shares for which no
instructions are received are voted in the same proportion as the shares for
which instructions have been received. Contract Owners receive various
materials, such as proxy materials and voting instruction forms, that relate to
voting Fund shares. Contract Owners will also receive periodic reports relating
to the Fund series in which they have an interest.
OTHER INFORMATION
LEGAL PROCEEDINGS -- There are no legal proceedings to which the Separate
Account is a party or to which the assets of the Separate Account are subject.
The Company is engaged in various kinds of routine litigation that in the
Company's judgment are not material to the Company's economic condition. None of
this litigation relates to the Separate Account.
REGISTRATION STATEMENT -- A registration statement has been filed with the
Securities and Exchange Commission under the Securities Act of 1933 with respect
to the Contract. This Prospectus does not contain all information set forth in
the registration statement, its amendments and exhibits, to all of which
reference is made for further information concerning the Separate Account, the
Company and the Contract. Statements contained in this Prospectus as to the
content of the Contract and other legal instruments are summaries. For a
complete statement of the terms thereof, reference is made to these instruments
as filed.
CUSTODIAN OF ASSETS -- State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, serves as the custodian of the assets of
the Separate Account. The custodian is remunerated by the Company based on a
schedule of fees under an agreement between the custodian and the Company.
CONTRACT OWNER INQUIRIES -- Any questions regarding the Contract should be
directed to the insurance agent from whom the Contract was purchased, or to the
Company. Contract Owners may telephone the Company at (800) 445-7862.
23
<PAGE> 27
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
TOPIC PAGE
<S> <C>
Variable Account Accumulation Provisions........................................................... 2
Performance Data................................................................................... 3
Additional Federal Income Tax Information.......................................................... 5
The Company and the Separate Account.......................................................... 5
Non-Qualified Plans........................................................................... 5
Qualified Plans............................................................................... 5
Distributions................................................................................. 6
Tax Withholding............................................................................... 7
Withholding Tax on Distributions.............................................................. 7
Distribution of Contracts.......................................................................... 8
Financial Statements............................................................................... 8
</TABLE>
24
<PAGE> 28
APPENDIX
THE GENERAL ACCOUNT
Contributions under the fixed portion of the Contract become part of the
General Account of the Company, that supports insurance and annuity obligations.
Because of exemptive and exclusionary provisions, interests in the General
Account have not been registered under the Securities Act of 1933, as amended
("1933 Act"), nor is the General Account registered as an investment company
under the Investment Company Act of 1940, as amended ("1940 Act"). Accordingly,
neither the General Account nor any interests therein is generally subject to
the provisions of the 1933 or 1940 Acts. Disclosures regarding the fixed portion
of the Annuity Contract and the General Account, however, may be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of statements made in prospectuses. The staff
of the Securities and Exchange Commission has not reviewed this portion of the
Prospectus relating to the General Account.
If selected by the Contract Owner, Purchase Payments may be allocated to
the General Account in addition to, or in lieu of, the Separate Account.
Interest is credited to the General Account from the day the amounts are
received at a guaranteed rate of 4%. The Company may in its discretion determine
an effective annual rate of interest to be applied to the General Account over
and above the guaranteed interest rate ("excess interest"). The rate of excess
interest is declared in advance of the date that amounts are credited, and may
vary from time to time except that once a rate of excess interest is declared,
that rate is maintained by the Company for at least twelve months. Interest is
compounded annually on the anniversary of the date amounts are first allocated
to the General Account by the Contract Owner.
GENERAL ACCOUNT ACCUMULATION PROVISION
ACCUMULATION VALUE -- The General Account Accumulation Value under a
Contract shall be the sum of all monies allocated or transferred to the General
Account after giving effect to the crediting of and compounding of all
guaranteed interest and excess interest on the General Account during the period
that the Contract has been in effect. This amount shall be adjusted for all
transfers out of the General Account and withdrawals from the General Account.
A-1
<PAGE> 29
Please forward a copy (without charge) of the Statement of Additional
Information concerning American Pathway II Variable Annuity Contracts to:
(Please print or type and fill in all information.)
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip
Date: ___________________ Signed:
Return to: Anchor National Life Insurance Company, Service Center,
P.O. Box 54299, Los Angeles, California 90054-0299
<PAGE> 30
STATEMENT OF ADDITIONAL INFORMATION
VARIABLE SEPARATE ACCOUNT
INDIVIDUAL DEFERRED VARIABLE BENEFIT AND FIXED BENEFIT ANNUITY
FLEXIBLE PURCHASE PAYMENT - NON-PARTICIPATING CONTRACT
ANCHOR NATIONAL LIFE INSURANCE COMPANY
JANUARY 29, 1998
This Statement of Additional Information is not a prospectus,
but should be read in conjunction with the American Pathway II Prospectus, dated
January 29, 1998, as it may be supplemented, a copy of which may be obtained
without charge by writing to Anchor National Life Insurance Company, Service
Center, P.O. Box 54299, Los Angeles, California 90054-0299, or by calling (800)
445-7862.
<PAGE> 31
TABLE OF CONTENTS
<TABLE>
<CAPTION>
TOPIC PAGE
- ----- ----
<S> <C>
Variable Account Accumulation Provision ..................... 2
Performance Data ............................................ 3
Additional Federal Income Tax Information ................... 5
The Company and the Separate Account ..................... 5
Non-Qualified Plans ...................................... 5
Qualified Plans .......................................... 5
Distributions ............................................ 6
Tax Withholding .......................................... 7
Withholding Tax on Distributions.......................... 7
Distribution of Contracts.................................... 8
Financial Statements......................................... 8
</TABLE>
<PAGE> 32
VARIABLE ACCOUNT ACCUMULATION PROVISIONS
ACCUMULATION UNITS - The number of accumulation units purchased for a
Contract Owner with respect to his or her initial purchase payment is determined
by dividing the amount credited to each Variable Account by the accumulation
unit value for that Variable Account next computed following acceptance of the
application (generally the next business day after receipt of payment by the
Company). In the event that an application fails to recite all necessary
information, the Company will promptly request that the Contract Owner furnish
further instructions and will hold the initial purchase payment in a suspense
account, without interest, for a period not exceeding five business days from
receipt of the application at the Company. If the necessary information is not
received within five business days, the Company will return the initial purchase
payment to the prospective Contract Owner unless the prospective Contract Owner,
after being informed of the reasons for the delay, specifically consents to the
Company retaining the initial purchase payment until the application is made
complete. The number of accumulation units purchased with respect to subsequent
purchase payments is determined by dividing the amount credited to each Variable
Account by the applicable accumulation unit value for the valuation period next
determined following receipt of the payment by the Company. The accumulation
unit value of each Variable Account varies in accordance with the investment
experience of that Variable Account, and is affected by the investment
experience of the respective Fund series, by expenses and by the deduction of
certain charges.
VALUE OF AN ACCUMULATION UNIT - The accumulation unit value of each
Variable Account was arbitrarily set at $10 when the Variable Account was
established. The value of an accumulation unit may increase or decrease from one
valuation period to the next. All Variable Accounts are valued as of the close
of general trading on the New York Stock Exchange. The value for any valuation
period is determined by multiplying the value of an accumulation unit for the
last prior valuation period by the net investment factor for that Variable
Account for the current valuation period. The value of an accumulation unit is
independently computed for each Variable Account using the net investment factor
applicable to that Variable Account.
NET INVESTMENT FACTOR - This is an index used to measure the investment
performance of a Variable Account from one valuation period to the next. For
each Variable Account, the net investment factor for a valuation period is found
by dividing (a) by (b), and reducing the result by (c):
Where (a) is:
The net asset value as of the end of the current valuation
period of a share of the series of the Fund in which the
assets of the Variable Account are invested, plus the per
share amount of any dividends and other distributions on those
shares since the end of the immediately preceding valuation
period;
Where (b) is:
The net asset value of a share of the specified series of the
Fund as of the end of the immediately preceding valuation
period;
And where (c) is:
The deduction for mortality, expense and distribution expense
risks, that shall remain constant at .00356% for each day in
the current valuation period. The maximum daily deduction for
mortality, expense risks and distribution risks is equivalent
to an annual rate of 1.30%.
To the extent that the net investment factor is less than 1, the
accumulation unit value will decrease. To the extent that the net investment
factor is greater than 1, the accumulation unit value will increase.
2
<PAGE> 33
PERFORMANCE DATA
Performance data for the various Variable Accounts are determined in
the manner described below.
CASH MANAGEMENT ACCOUNT
The annualized current yield and the effective yield for the Cash
Management Account for the 7 day period ended November 30, 1997 were 3.44% and
3.50%, 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)
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 $30 annual Contract
Administration Charge, prorated for 7 days
The change in the value of the Accumulation Unit during the 7 day
period reflects the income received, minus any expenses incurred during such 7
day period. The Contract Administration Charge is first allocated among the
Fixed and Variable Accounts so that each Account's allocated portion of the
charge is proportional to the percentage of the number of Contract Owners'
accounts that have money allocated to that Account. The portion of the Charge
allocable to the Cash Management Account 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 Account. 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 Account 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 Cash Management Series. 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 yields quoted should not be considered a representation of the
yield of the Cash Management Account 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 Cash Management Account and changes
3
<PAGE> 34
in interest rates on such investments, but also on factors such as a Contract
Owner's account size (since the impact of fixed dollar charges will be greater
for small accounts than for larger accounts).
Yield information may be useful in reviewing the performance of the
Cash Management Account and for providing a basis for comparison with other
investment alternatives. However, the Cash Management Account's yield
fluctuates, unlike bank deposits or other investments that typically pay a fixed
yield for a stated period of time.
ALL OTHER VARIABLE ACCOUNTS
The Variable Accounts other than the Cash Management Account compute
their performance data as "total return." The total returns of the various
Accounts over the last 1, 5, and 10 year periods, and since their inception, are
shown below, both with/without an assumed complete redemption at the end of the
period.
TOTAL ANNUAL RETURN (IN PERCENT) FOR PERIODS ENDING ON
NOVEMBER 30, 1997
(RETURN WITH/WITHOUT REDEMPTION)*
<TABLE>
<CAPTION>
INCEPTION SINCE
VARIABLE ACCOUNT DATE 1 YEAR 5 YEARS 10 YEARS INCEPTION
------- ----------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
Growth 2/07/84 17.15/22.15 16.81/17.34 18.16 16.03
International 5/03/90 6.65/11.65 13.62/14.22 ** 8.96
Growth-Income 2/07/84 17.97/22.97 16.23/16.78 15.71 15.04
Asset Allocation 3/31/89 11.28/16.28 12.97/13.58 ** 11.08
High-Yield Bond 2/07/84 6.21/11.21 8.95/9.65 10.71 11.38
U.S. Government/ 11/20/85 -0.35/4.65 4.67/5.49 7.24 6.95
AAA-Rated Securities
</TABLE>
- -------------------
* Returns reflecting the optional Enhanced Death Benefit feature are not
provided because the Enhanced Death Benefit program had only been in effect
for two months as of November 30, 1997. However, had the Enhanced Death
Benefit been in effect at the beginning of the period, the returns for
Contracts with the Enhanced Death Benefit option would be approximately
one-tenth of a percent lower than the returns provided above. In the future,
return figures will be provided with and without the optional Enhanced Death
Benefit feature.
** These returns are not applicable since this Variable Account has not been
available for these periods of time.
These figures show the total return hypothetically experienced by
Contracts funded through the various Accounts over the time periods shown.
Total return for an Account represents a 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 Account 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 $1000
T = average annual total return
n = number of year
ERV = ending redeemable value of a hypothetical $1000
payment made at the beginning of the 1, 5, or 10 year
periods at the end of the 1, 5, or 10 year periods
(or fractional portion thereof).
4
<PAGE> 35
The total return figures given above reflect the effect of both
non-recurring 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 Account, 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 in the case of the first of the two sets of
figures given in the table for each Account, tax qualification status and time
period. Because the impact of Contract Administration Charges on a particular
Contract Owner's account would generally have differed from those assumed in the
computation, due to differences between most actual allocations and the assumed
ones, as well as differences due to varying account sizes, the total return
experienced by an actual account over these same time periods would generally
have been different from those given above. As with the Cash Management
Account's yield figures, total return figures are derived from historical data
and are not intended to be a projection of future performance.
ADDITIONAL FEDERAL INCOME TAX INFORMATION
THE COMPANY AND THE SEPARATE ACCOUNT
The Company is taxed as a life insurance company under subchapter L of
the Internal Revenue Code, as amended (the "Code"). The operations of the
Separate Account form, and are taxed as, a part of the total operations of the
Company. The Company intends that the Separate Account be operated in a manner
so that the Contracts will meet the definition of a "variable contract" under
section 817(d) of the Code. The Code provides that if the Separate Account meets
certain diversification requirements, set forth in Treasury Regulations under
section 817(h) of the Code, the income from the assets of the Separate Account
used to fund the Contracts will be treated as earned by the Company. The Company
will not be subject to tax on this income to the extent it is offset by an
addition to Contract Owner reserves. There is no capital gain or loss recognized
with respect to the assets of the Separate Account.
NON-QUALIFIED PLANS
ACCUMULATION PERIOD - The Contract may be issued to individuals in
connection with retirement plans that do not qualify for the tax benefits
available to qualified plans. A so-called "non-qualified plan" may be
established by an individual seeking to accumulate funds for retirement or by an
employer for one or more employees. With certain exceptions, such a Contract
held by a non-natural person is not treated as an annuity contract. The tax
consequences of participation in a non-qualified plan vary from plan to plan.
Income credited to a non-qualified Contract is not includible in the gross
income of the Contract Owner. Amounts received before the annuity date are
includible as ordinary income to the extent Contract value exceeds the Contract
Owner's purchase payments.
WITHDRAWALS - A partial or complete withdrawal from a non-qualified
Contract before commencement of annuity payments is treated first as a
withdrawal of income earned on investments to the extent of such income, then as
a tax-free return of capital. Moreover, amounts received upon assignment or
pledge of the Contract are treated as amounts withdrawn under the Contract and
therefore subject to income taxes. A withdrawal before the Contract Owner
attains age 59 1/2 is subject to an additional income (penalty) tax of 10% of
the income amount withdrawn. This penalty would not apply where the withdrawal
is made on account of the Contract Owner's death or disability or where
substantially equal annuity payments are to be paid over the life expectancy of
the annuitant or the lives of the annuitant and a designated beneficiary. A
portion of each payment after the annuity date is ordinary income based on the
ratio of purchase payments made to total payments expected to be received.
QUALIFIED PLANS
TAX ADVANTAGES - Certain tax advantages are available for retirement
plans ("qualified plans") that satisfy the requirements of sections 401(a),
403(b), 408(b) or 457 of the Code. The tax advantages available under a
qualified plan may include: the deductibility of employer or Contract Owner
contributions; the inclusion of contributions and their earnings in the
participant's gross income only when received or made available to the
participant and, within certain limits, the exclusion from
5
<PAGE> 36
the beneficiary's gross income of distributions to the beneficiary of a deceased
participant. A general information outline with respect to each type is provided
below. If the Contract is used to fund a qualified plan, competent tax advice
should be sought.
PLANS FOR CORPORATIONS AND SELF-EMPLOYED INDIVIDUALS - Under section
401(a) of the Code, contributions may be made on behalf of the participants up
to the limits provided by section 415, and the payments are deductible as
provided by section 404. Participants are also permitted to make non-deductible
voluntary contributions subject to certain non-discrimination rules.
The tax treatment of plans established by self-employed individuals
("Keogh" or "H.R. 10" plans) is essentially the same as corporate plans. Some
special restrictions apply to self-employed individuals who are
"owner-employees". An owner-employee is a sole proprietor or a partner who owns
more than a 10% capital or profits interest in the partnership.
TAX-SHELTERED ANNUITIES - Contributions made by public school systems,
churches and certain tax-exempt organizations to purchase Contracts on behalf of
their employees are excludible from the employees' gross income, within certain
limits, if the requirements of section 403(b) of the Code are met.
DEFERRED COMPENSATION PLANS FOR STATE AND LOCAL GOVERNMENT EMPLOYEES -
Section 457 of the Code provides special tax treatment for certain deferred
compensation plans for employees of state and local governments, their political
subdivisions, agencies, instrumentalities and affiliates, and certain tax-exempt
rural electric cooperatives. These plans permit employees to specify the form of
investment for their deferred compensation that can include investment in the
Contract. However, the investments are owned by, and subject to, the claims of
the general creditors of the employer.
INDIVIDUAL RETIREMENT ANNUITIES - Section 408(b) of the Code permits
individuals to establish an Individual Retirement Annuity ("IRA"). No more than
$2,000 or 100% of compensation may be contributed to an IRA. Under section 219
of the Code, the entire amount is deductible if the individual is not a
participant in an employer's qualified plan (except a section 457 plan). If the
individual participates in an employer's qualified plan, all, a portion or none
of the contribution may be deductible, depending on adjusted gross income. An
IRA is subject to penalty and excise taxes on excess contributions and
insufficient distributions, as well as early distributions (see below).
DISTRIBUTIONS
A participant who has attained age 50 before January 1, 1986, may elect
favorable tax treatment for a lump-sum distribution from a section 401(a) plan.
This may include capital gains treatment on the pre-1974 portion and 5-year or
10-year forward averaging. A distribution before age 59 1/2 from a qualified
plan (except a section 457 plan) is subject to a 10% additional income tax on
the amount of the distribution. However, there should be no penalty tax on
distributions (1) made as a result of death or disability, or (2) received in
substantially equal installments as a life or life expectancy annuity. The
penalty will also be imposed if an individual receiving substantially equal
annuity payments changes the method of distribution before age 59 1/2 or before
payments have been received for five years. Except for the recovery of
non-deductible contributions, the entire amount of the annuity payments are
included in the participant's gross income. The participant is entitled to
recover tax-free any non-deductible contributions as a portion of each annuity
payment. In the case of an annuity for life, the portion excluded remains the
same no matter how long the annuitant lives.
The Code, as amended by the Tax Reform Act of 1986, imposes
restrictions on distributions (i.e., withdrawals or surrenders) from annuity
contracts sold to plans qualified under section 403(b) of the Code. Section
403(b)(11) of the Code requires that for these annuity contracts to receive
tax-deferred treatment, they must provide that distributions attributable to
contributions made pursuant to a salary reduction agreement be paid only:
(1) when the employee attains age 59 1/2, separates from service,
dies, or becomes disabled (within the meaning of section
72(m)(7)); or
6
<PAGE> 37
(2) in the case of hardship. In hardship cases, only the
distribution of contributed amounts is permitted; distribution
of any income attributable to these amounts is prohibited.
Assets held as of December 31, 1988, are not subject to these Code
restrictions.
The Contracts have been modified to comply with these changes in the
Code. The Company is relying on a no-action letter from the Securities and
Exchange Commission that was issued to the American Council of Life Insurance
and made publicly available on November 28, 1988. That letter outlines further
conditions that must be met if a company offering registered annuity contracts
imposes the limitations required by the Code. The Company will comply with the
conditions of the no-action letter.
TAX WITHHOLDING
With certain exceptions, withholding on annuity payments and other
distributions (such as lump-sum distributions or partial withdrawals) is
required. However, recipients of annuity payments or other distributions are
allowed to make an election not to have federal income tax withheld except as
described in "Additional Federal Income Tax Information - Withholding Tax on
Distributions" below. After such election is made with respect to annuity
payments, a payee may revoke the election at any time, and thereafter, commence
withholding. In such a case, the Company notifies the payee at least annually of
his or her right to change this election.
The withholding rate followed by the Company is applied only against
the taxable portion of annuity payments or other distributions. This rate is
determined based upon the nature of the distribution(s). Federal income tax is
withheld from annuity payments pursuant to the recipient's withholding
certificate. If no withholding certificate is filed with the Company, federal
income tax is withheld from annuity payments on the basis that the payee is
married with three withholding exemptions. If a qualified total distribution is
made from a qualified plan on account of the participant's death, the amount of
withholding reflects the exclusion from federal income tax for employer-provided
death benefits. On all other non-periodic payments or distributions, federal
income tax is withheld at a flat 10% rate.
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 within 60 days.
This requirement is mandatory and cannot be waived by the Contract Owner.
Withholding on other types of distributions can be waived.
An "eligible rollover distribution" is the estimated taxable portion of
any amount received by a covered employee from a plan qualified under section
401(a) or 403(a) of the Code, or from a tax-sheltered annuity qualified under
section 403(b) of the code (other than (1) 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 Contract 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
7
<PAGE> 38
rate under (1) above is computed by treating the payee as a married individual
claiming 3 withholding exemptions.
DISTRIBUTION OF CONTRACTS
Effective as of January 28, 1994, 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 (the
"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 Contract. 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, 1997, the aggregate amount of
underwriting commissions paid by the Company to SunAmerica Capital Services was
$401,597. For the year ended November 30, 1996, the aggregate amount of
underwriting commissions paid by the Company to SunAmerica Capital Services,
Inc. was $504,981. For the year ended November 30, 1995, the aggregate amount of
underwriting commissions paid by the Company to SunAmerica Capital Services was
$565,395. Of these amounts, $48,363, $55,739, and $80,741 in 1997, 1996, and
1995, respectively, were retained by SunAmerica Capital Services, Inc.
Contracts are offered on a continuous basis.
FINANCIAL STATEMENTS
The consolidated financial statements of the Company as of September
30, 1997 and 1996 and for each of the three years in the period ended September
30, 1997 are presented in this Statement of Additional Information. The
consolidated financial statements of the Company should be considered only as
bearing on the ability of the Company to meet its obligation under the
Contracts. The financial statements of the Separate Account (Portion Relating to
PATHWAY Variable Annuity) as of November 30, 1997 and for each of the two years
in the period ended November 30, 1997, also 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 included in this Statement
of Additional Information 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.
8
<PAGE> 39
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, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1997, 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.
Price Waterhouse LLP
Los Angeles, California
November 7, 1997
9
<PAGE> 40
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------------
1997 1996
--------------- --------------
<S> <C> <C>
ASSETS
INVESTMENTS:
Cash and short-term investments......................... $ 113,580,000 $ 122,058,000
Bonds, notes and redeemable preferred stocks:
Available for sale, at fair value (amortized cost:
1997, $1,942,485,000; 1996, $2,001,024,000)........ 1,986,194,000 1,987,271,000
Mortgage loans.......................................... 339,530,000 98,284,000
Common stocks, at fair value (cost: 1997, $271,000;
1996, $2,911,000).................................... 1,275,000 3,970,000
Real estate............................................. 24,000,000 39,724,000
Other invested assets................................... 143,722,000 77,925,000
-------------- -------------
Total investments....................................... 2,608,301,000 2,329,232,000
Variable annuity assets................................... 9,343,200,000 6,311,557,000
Receivable from brokers for sales of securities........... -- 52,348,000
Accrued investment income................................. 21,759,000 19,675,000
Deferred acquisition costs................................ 536,155,000 443,610,000
Other assets.............................................. 61,524,000 48,113,000
-------------- -------------
TOTAL ASSETS.............................................. $12,570,939,000 $9,204,535,000
============== =============
LIABILITIES AND SHAREHOLDER'S EQUITY
Reserves, payables and accrued liabilities:
Reserves for fixed annuity contracts.................... $ 2,098,803,000 $1,789,962,000
Reserves for guaranteed investment contracts............ 295,175,000 415,544,000
Payable to brokers for purchases of securities.......... 263,000 --
Income taxes currently payable.......................... 32,265,000 21,486,000
Other liabilities....................................... 122,728,000 74,710,000
-------------- -------------
Total reserves, payables and accrued liabilities........ 2,549,234,000 2,301,702,000
-------------- -------------
Variable annuity liabilities.............................. 9,343,200,000 6,311,557,000
-------------- -------------
Subordinated notes payable to Parent...................... 36,240,000 35,832,000
-------------- -------------
Deferred income taxes..................................... 67,047,000 70,189,000
-------------- -------------
Shareholder's equity:
Common Stock............................................ 3,511,000 3,511,000
Additional paid-in capital.............................. 308,674,000 280,263,000
Retained earnings....................................... 244,628,000 207,002,000
Net unrealized gains (losses) on debt and equity
securities available for sale........................ 18,405,000 (5,521,000)
-------------- -------------
Total shareholder's equity.............................. 575,218,000 485,255,000
-------------- -------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY................ $12,570,939,000 $9,204,535,000
============== =============
</TABLE>
See accompanying notes.
10
<PAGE> 41
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED INCOME STATEMENT
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------------
1997 1996 1995
------------- ------------- ------------
<S> <C> <C> <C>
Investment income.......................... $ 210,759,000 $ 164,631,000 $129,466,000
------------- ------------- ------------
Interest expense on:
Fixed annuity contracts.................. (109,217,000) (82,690,000) (72,975,000)
Guaranteed investment contracts.......... (22,650,000) (19,974,000) (3,733,000)
Senior indebtedness...................... (2,549,000) (2,568,000) (227,000)
Subordinated notes payable to Parent..... (3,142,000) (2,556,000) (2,448,000)
------------- ------------- ------------
Total interest expense................... (137,558,000) (107,788,000) (79,383,000)
------------- ------------- ------------
NET INVESTMENT INCOME...................... 73,201,000 56,843,000 50,083,000
------------- ------------- ------------
NET REALIZED INVESTMENT LOSSES............. (17,394,000) (13,355,000) (4,363,000)
------------- ------------- ------------
Fee income:
Variable annuity fees.................... 139,492,000 103,970,000 84,171,000
Net retained commissions................. 39,143,000 31,548,000 24,108,000
Surrender charges........................ 5,529,000 5,184,000 5,889,000
Asset management fees.................... 25,764,000 25,413,000 26,935,000
Other fees............................... 3,218,000 3,390,000 4,002,000
------------- ------------- ------------
TOTAL FEE INCOME........................... 213,146,000 169,505,000 145,105,000
------------- ------------- ------------
GENERAL AND ADMINISTRATIVE EXPENSES........ (98,802,000) (81,552,000) (64,457,000)
------------- ------------- ------------
AMORTIZATION OF DEFERRED ACQUISITION
COSTS.................................... (66,879,000) (57,520,000) (58,713,000)
------------- ------------- ------------
ANNUAL COMMISSIONS......................... (8,977,000) (4,613,000) (2,658,000)
------------- ------------- ------------
PRETAX INCOME.............................. 94,295,000 69,308,000 64,997,000
Income tax expense......................... (31,169,000) (24,252,000) (25,739,000)
------------- ------------- ------------
NET INCOME................................. $ 63,126,000 $ 45,056,000 $ 39,258,000
============= ============= ============
</TABLE>
See accompanying notes
11
<PAGE> 42
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 63,126,000 $ 45,056,000 $ 39,258,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Interest credited to:
Fixed annuity contracts.............................. 109,217,000 82,690,000 72,975,000
Guaranteed investment contracts...................... 22,650,000 19,974,000 3,733,000
Net realized investment losses....................... 17,394,000 13,355,000 4,363,000
Accretion of net discounts on investments............ (18,576,000) (8,976,000) (6,865,000)
Amortization of goodwill............................. 1,187,000 1,169,000 1,168,000
Provision for deferred income taxes.................. (16,024,000) (3,351,000) (1,489,000)
Change in:
Accrued investment income................................. (2,084,000) (5,483,000) 3,373,000
Deferred acquisition costs................................ (113,145,000) (60,941,000) (7,180,000)
Other assets.............................................. (14,598,000) (8,000,000) 7,047,000
Income taxes currently payable............................ 10,779,000 5,766,000 3,389,000
Other liabilities......................................... 14,187,000 5,474,000 4,063,000
Other, net.................................................. 418,000 (129,000) 7,000
------------- ------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES..................... 74,531,000 86,604,000 123,842,000
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Premium receipts on:
Fixed annuity contracts................................... 1,097,937,000 651,649,000 245,320,000
Guaranteed investment contracts........................... 55,000,000 134,967,000 275,000,000
Net exchanges to (from) the fixed accounts of variable
annuity contracts......................................... (620,367,000) (236,705,000) 10,475,000
Withdrawal payments on:
Fixed annuity contracts................................... (242,589,000) (173,489,000) (237,977,000)
Guaranteed investment contracts........................... (198,062,000) (16,492,000) (1,638,000)
Claims and annuity payments on fixed annuity contracts...... (35,731,000) (31,107,000) (31,237,000)
Net receipts from (repayments of) other short-term
financings................................................ 34,239,000 (119,712,000) 3,202,000
Capital contribution received............................... 28,411,000 27,387,000 --
Dividends paid.............................................. (25,500,000) (29,400,000) --
------------- ------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES..................... 93,338,000 207,098,000 263,145,000
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of:
Bonds, notes and redeemable preferred stocks.............. $(2,566,211,000) $(1,937,890,000) $(1,556,586,000)
Mortgage loans............................................ (266,771,000) (15,000,000) --
Other investments, excluding short-term investments....... (75,556,000) (36,770,000) (13,028,000)
Sales of:
Bonds, notes and redeemable preferred stocks.............. 2,299,063,000 1,241,928,000 1,026,078,000
Real estate............................................... -- 900,000 36,813,000
Other investments, excluding short-term investments....... 6,421,000 4,937,000 5,130,000
Redemptions and maturities of:
Bonds, notes and redeemable preferred stocks.............. 376,847,000 288,969,000 178,688,000
Mortgage loans............................................ 25,920,000 11,324,000 14,403,000
Other investments, excluding short-term investments....... 23,940,000 20,749,000 13,286,000
------------- ------------- -------------
NET CASH USED BY INVESTING ACTIVITIES......................... (176,347,000) (420,853,000) (295,216,000)
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS.... (8,478,000) (127,151,000) 91,771,000
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD........ 122,058,000 249,209,000 157,438,000
------------- ------------- -------------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD.............. $ 113,580,000 $ 122,058,000 $ 249,209,000
============= ============= =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid on indebtedness............................... $ 7,032,000 $ 5,982,000 $ 3,235,000
============= ============= =============
Net income taxes paid....................................... $ 36,420,000 $ 22,031,000 $ 23,656,000
============= ============= =============
</TABLE>
See accompanying notes.
12
<PAGE> 43
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
Anchor National Life Insurance Company (the "Company") is a wholly owned
indirect subsidiary of SunAmerica, Inc. (the "Parent"). The Company is an
Arizona-domiciled life insurance company and conducts its business through three
segments: annuity operations, asset management and broker-dealer operations.
Annuity operations include the sale and administration of fixed and variable
annuities and guaranteed investment contracts. Asset management, which includes
the sale and management of mutual funds, is conducted by SunAmerica Asset
Management Corp. Broker-dealer operations include the sale of securities and
financial services products, and are conducted by Royal Alliance Associates,
Inc.
The operations of the Company are influenced by many factors, including
general economic conditions, monetary and fiscal policies of the federal
government, and policies of state and other regulatory authorities. The level of
sales of the Company's financial products is influenced by many factors,
including general market rates of interest; strength, weakness and volatility of
equity markets; and terms and conditions of competing financial products. The
Company is exposed to the typical risks normally associated with a portfolio of
fixed-income securities, namely interest rate, option, liquidity and credit
risk. The Company controls its exposure to these risks by, among other things,
closely monitoring and matching the duration of its assets and liabilities,
monitoring and limiting prepayment and extension risk in its portfolio,
maintaining a large percentage of its portfolio in highly liquid securities, and
engaging in a disciplined process of underwriting, reviewing and monitoring
credit risk. The Company also is exposed to market risk, as market volatility
may result in reduced fee income in the case of assets managed in mutual funds
and held in separate accounts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The accompanying consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
and include the accounts of the Company and all of its wholly owned
subsidiaries. All significant intercompany accounts and transactions are
eliminated in consolidation. Certain prior period amounts have been reclassified
to conform with the 1997 presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
that affect the amounts reported in the financial statements and the
accompanying notes. Actual results could differ from those estimates.
INVESTMENTS: Cash and short-term investments primarily include cash,
commercial paper, money market investments, repurchase agreements and short-term
bank participations. All such investments are carried at cost plus accrued
interest, which approximates fair value, have maturities of three months or less
and are considered cash equivalents for purposes of reporting cash flows.
Bonds, notes and redeemable preferred stocks available for sale and common
stocks are carried at aggregate fair value and changes in unrealized gains or
losses, net of tax, are credited or charged directly to shareholder's equity.
Bonds, notes and redeemable preferred stocks are reduced to estimated net
realizable value when necessary for declines in value considered to be other
than temporary. Estimates of net realizable value are subjective and actual
realization will be dependent upon future events.
Mortgage loans are carried at amortized unpaid balances, net of provisions
for estimated losses. Real estate is carried at the lower of cost or fair value.
Other invested assets include investments in limited partnerships, which are
accounted for by using the cost method of accounting; separate account
investments; leveraged leases; policy loans, which are carried at unpaid
balances; and collateralized mortgage obligation residuals.
13
<PAGE> 44
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
INTEREST RATE SWAP AGREEMENTS: The net differential to be paid or received
on interest rate swap agreements ("Swap Agreements") entered into to reduce the
impact of changes in interest rates is recognized over the lives of the
agreements, and such differential is classified as Interest Expense in the
income statement. All outstanding Swap Agreements are designated as hedges and,
therefore, are not marked to market. However, in the event that a hedged
asset/liability were to be sold or repaid before the related Swap Agreement
matures, the Swap Agreement would be marked to market and any gain/loss
classified with any gain/loss realized on the disposition of the hedged
asset/liability. Subsequently, the Swap Agreement would be marked to market and
the resulting change in fair value would be included in Investment Income in the
income statement. In the event that a Swap Agreement that is designated as a
hedge were to be terminated before its contractual maturity, any resulting
gain/loss would be credited/charged to the carrying value of the asset/liability
that it hedged.
DEFERRED ACQUISITION COSTS: Policy acquisition costs are deferred and
amortized, with interest, in relation to the incidence of estimated gross
profits to be realized over the estimated lives of the annuity contracts.
Estimated gross profits are composed of net interest income, net realized
investment gains and losses, variable annuity fees, surrender charges and direct
administrative expenses. Costs incurred to sell mutual funds are also deferred
and amortized over the estimated lives of the funds obtained. Deferred
acquisition costs 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 decreased by $16,400,000 at September 30, 1997 and
increased by $4,200,000 at September 30, 1996 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 $18,311,000 at September 30, 1997, is
amortized by using the straight-line method over periods averaging 25 years and
is included in Other Assets in the balance sheet. Goodwill is evaluated for
impairment when events or changes in economic conditions indicate that the
carrying amount may not be recoverable.
CONTRACTHOLDER RESERVES: Contractholder reserves for fixed annuity
contracts and guaranteed investment contracts are accounted for as
investment-type contracts in accordance with Statement of Financial Accounting
Standards No. 97, "Accounting and Reporting by Insurance Enterprises for Certain
Long-Duration Contracts and for Realized Gains and Losses from the Sale of
Investments," and are recorded at accumulated value (premiums received, plus
accrued interest, less withdrawals and assessed fees).
FEE INCOME: Variable annuity fees, asset management fees and surrender
charges are recorded in income as earned. Net retained commissions are
recognized as income on a trade-date basis.
14
<PAGE> 45
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
3. INVESTMENTS
The amortized cost and estimated fair value of bonds, notes and redeemable
preferred stocks available for sale by major category follow:
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED FAIR
COST VALUE
-------------- --------------
<S> <C> <C>
AT SEPTEMBER 30, 1997:
Securities of the United States
Government.............................. $ 18,496,000 $ 18,962,000
Mortgage-backed securities................. 636,018,000 649,196,000
Securities of public utilities............. 22,792,000 22,893,000
Corporate bonds and notes.................. 984,573,000 1,012,559,000
Redeemable preferred stocks................ 6,125,000 6,681,000
Other debt securities...................... 274,481,000 275,903,000
-------------- --------------
Total available for sale................... $1,942,485,000 $1,986,194,000
============== ==============
AT SEPTEMBER 30, 1996:
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
============== ==============
</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,
1997, follow:
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED FAIR
COST VALUE
-------------- --------------
<S> <C> <C>
Due in one year or less...................... $ 19,067,000 $ 20,575,000
Due after one year through five years........ 277,350,000 281,296,000
Due after five years through ten years....... 631,083,000 650,242,000
Due after ten years.......................... 378,967,000 384,885,000
Mortgage-backed securities................... 636,018,000 649,196,000
-------------- --------------
Total available for sale..................... $1,942,485,000 $1,986,194,000
============== ==============
</TABLE>
Actual maturities of bonds, notes and redeemable preferred stocks will
differ from those shown above due to prepayments and redemptions.
15
<PAGE> 46
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVESTMENTS (CONTINUED)
Gross unrealized gains and losses on bonds, notes and redeemable preferred
stocks available for sale by major category follow:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED
GAINS LOSSES
----------- ------------
<S> <C> <C>
AT SEPTEMBER 30, 1997:
Securities of the United States Government..... $ 498,000 $ (32,000)
Mortgage-backed securities..................... 14,998,000 (1,820,000)
Securities of public utilities................. 141,000 (40,000)
Corporate bonds and notes...................... 28,691,000 (705,000)
Redeemable preferred stocks.................... 556,000 --
Other debt securities.......................... 1,569,000 (147,000)
----------- ------------
Total available for sale....................... $46,453,000 $ (2,744,000)
=========== ============
AT SEPTEMBER 30, 1996:
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)
=========== ============
</TABLE>
At September 30, 1997, gross unrealized gains on equity securities
available for sale aggregated $1,004,000 and there were no unrealized losses. At
September 30, 1996, gross unrealized gains on equity securities available for
sale aggregated $1,368,000 and gross unrealized losses aggregated $309,000.
16
<PAGE> 47
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVESTMENTS (CONTINUED)
Gross realized investment gains and losses on sales of investments are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
BONDS, NOTES AND REDEEMABLE
PREFERRED STOCKS:
Available for sale:
Realized gains............................... $ 22,179,000 $ 14,532,000 $ 15,983,000
Realized losses.............................. (25,310,000) (10,432,000) (21,842,000)
Held for investment:
Realized gains............................... -- -- 2,413,000
Realized losses.............................. -- -- (586,000)
COMMON STOCKS:
Realized gains.................................. 4,002,000 511,000 994,000
Realized losses................................. (312,000) (3,151,000) (114,000)
OTHER INVESTMENTS:
Realized gains.................................. 2,450,000 1,135,000 3,561,000
Realized losses................................. -- -- (12,000)
IMPAIRMENT WRITEDOWNS............................. (20,403,000) (15,950,000) (4,760,000)
------------ ------------ ------------
Total net realized investment losses.............. $(17,394,000) $(13,355,000) $ (4,363,000)
============ ============ ============
</TABLE>
The sources and related amounts of investment income are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Short-term investments............................ $ 11,780,000 $ 10,647,000 $ 8,308,000
Bonds, notes and redeemable preferred stocks...... 163,038,000 140,387,000 107,643,000
Mortgage loans.................................... 17,632,000 8,701,000 7,419,000
Common stocks..................................... 16,000 8,000 3,000
Real estate....................................... (296,000) (196,000) (51,000)
Limited partnerships.............................. 6,725,000 4,073,000 5,128,000
Other invested assets............................. 11,864,000 1,011,000 1,016,000
------------ ------------ ------------
Total investment income......................... $210,759,000 $164,631,000 $129,466,000
============ ============ ============
</TABLE>
Expenses incurred to manage the investment portfolio amounted to $2,050,000
for the year ended September 30, 1997, $1,737,000 for the year ended September
30, 1996, and $1,983,000 for the year ended September 30, 1995 and are included
in General and Administrative Expenses in the income statement.
At September 30, 1997, no investment exceeded 10% of the Company's
consolidated shareholder's equity.
At September 30, 1997, mortgage loans were collateralized by properties
located in 21 states, with loans totaling approximately 13% of the aggregate
carrying value of the portfolio secured by properties located in New York and
approximately 12% by properties located in California. No more than 10% of the
portfolio was secured by properties in any other single state.
17
<PAGE> 48
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVESTMENTS (CONTINUED)
At September 30, 1997, bonds, notes and redeemable preferred stocks
included $216,877,000 (fair value of $227,169,000) of bonds and notes not rated
investment grade. The Company had no material concentrations of
noninvestment-grade assets at September 30, 1997.
At September 30, 1997, the amortized cost of investments in default as to
the payment of principal or interest was $1,378,000, consisting of $500,000 of
non-investment-grade bonds and $878,000 of mortgage loans. Such nonperforming
investments had an estimated fair value of $1,378,000.
As a component of its asset and liability management strategy, the Company
utilizes Swap Agreements to match assets more closely to liabilities. Swap
Agreements are agreements to exchange with a counterparty interest rate payments
of differing character (for example, variable-rate payments exchanged for
fixed-rate payments) based on an underlying principal balance (notional
principal) to hedge against interest rate changes. The Company typically
utilizes Swap Agreements to create a hedge that effectively converts
floating-rate assets and liabilities to fixed-rate instruments. At September 30,
1997, the Company had one outstanding Swap Agreement with a notional principal
amount of $15.9 million, which matures in December, 2024. The net interest paid
amounted to $0.1 million for the year ended September 30, 1997, and is included
in Interest Expense on Guaranteed Investment Contracts in the income statement.
At September 30, 1997, $5,276,000 of bonds, at amortized cost, were on
deposit with regulatory authorities in accordance with statutory requirements.
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value disclosures are limited to reasonable
estimates of the fair value of only the Company's financial instruments. The
disclosures do not address the value of the Company's recognized and
unrecognized nonfinancial assets (including its real estate investments and
other invested assets except for cost-method partnerships) and liabilities or
the value of anticipated future business. The Company does not plan to sell most
of its assets or settle most of its liabilities at these estimated fair values.
The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. Selling expenses and potential taxes
are not included. The estimated fair value amounts were determined using
available market information, current pricing information and various valuation
methodologies. If quoted market prices were not readily available for a
financial instrument, management determined an estimated fair value.
Accordingly, the estimates may not be indicative of the amounts the financial
instruments could be exchanged for in a current or future market transaction.
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.
18
<PAGE> 49
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
COMMON STOCKS: Fair value is based principally on independent pricing
services, broker quotes and other independent information.
COST-METHOD PARTNERSHIPS: Fair value of limited partnerships accounted for
by using the cost method is based upon the fair value of the net assets of the
partnerships as determined by the general partners.
VARIABLE ANNUITY ASSETS: 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 and is net of the
estimated fair value of hedging Swap Agreements, determined from independent
broker quotes.
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.
SUBORDINATED NOTES PAYABLE TO PARENT: Fair value is estimated based on the
quoted market prices for similar issues.
19
<PAGE> 50
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Company's financial instruments at
September 30, 1997 and 1996, compared with their respective carrying values, are
as follows:
<TABLE>
<CAPTION>
CARRYING
VALUE FAIR VALUE
-------------- --------------
<S> <C> <C>
1997:
ASSETS:
Cash and short-term investments........ $ 113,580,000 $ 113,580,000
Bonds, notes and redeemable preferred
stocks.............................. 1,986,194,000 1,986,194,000
Mortgage loans......................... 339,530,000 354,495,000
Common stocks.......................... 1,275,000 1,275,000
Cost-method partnerships............... 46,880,000 84,186,000
Variable annuity assets................ 9,343,200,000 9,343,200,000
LIABILITIES:
Reserves for fixed annuity contracts... 2,098,803,000 2,026,258,000
Reserves for guaranteed investment
contracts........................... 295,175,000 295,175,000
Payable to brokers for purchases of
securities.......................... 263,000 263,000
Variable annuity liabilities........... 9,343,200,000 9,077,200,000
Subordinated notes payable to Parent... 36,240,000 37,393,000
============== ==============
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
Common stocks.......................... 3,970,000 3,970,000
Cost-method partnerships............... 45,070,000 70,553,000
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
============== ==============
</TABLE>
5. SUBORDINATED NOTES PAYABLE TO PARENT
Subordinated notes payable to Parent equalled $36,240,000 at an interest
rate of 9% at September 30, 1997 and require principal payments of $7,500,000 in
1998, $23,060,000 in 1999 and $5,400,000 in 2000.
20
<PAGE> 51
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. CONTINGENT LIABILITIES
The Company has entered into three agreements in which it has provided
liquidity support for certain short-term securities of three municipalities by
agreeing to purchase such securities in the event there is no other buyer in the
short-term marketplace. In return the Company receives a fee. The maximum
liability under these guarantees is $242,600,000. Management does not anticipate
any material future losses with respect to these liquidity support facilities.
The Company is involved in various kinds of litigation common to its
businesses. These cases are in various stages of development and, based on
reports of counsel, management believes that provisions made for potential
losses relating to such litigation are adequate and any further liabilities and
costs will not have a material adverse impact upon the Company's financial
position or results of operations.
7. SHAREHOLDER'S EQUITY
The Company is authorized to issue 4,000 shares of its $1,000 par value
Common Stock. At September 30, 1997 and 1996, 3,511 shares were outstanding.
Changes in shareholder's equity are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
ADDITIONAL PAID-IN CAPITAL:
Beginning balance......... $280,263,000 $252,876,000 $252,876,000
Capital contributions
received............... 28,411,000 27,387,000 --
----------- ----------- -----------
Ending balance............ $308,674,000 $280,263,000 $252,876,000
=========== =========== ===========
RETAINED EARNINGS:
Beginning balance......... 207,002,000 191,346,000 152,088,000
Net income................ 63,126,000 45,056,000 39,258,000
Dividend paid............. (25,500,000) (29,400,000) --
----------- ----------- -----------
Ending balance............ $244,628,000 $207,002,000 $191,346,000
=========== =========== ===========
NET UNREALIZED GAINS/LOSSES
ON DEBT AND EQUITY
SECURITIES AVAILABLE FOR
SALE:
Beginning balance......... $ (5,521,000) $ (5,673,000) $(24,953,000)
Change in net unrealized
gains/losses on debt
securities available
for sale............... 57,463,000 (2,904,000) 71,302,000
Change in net unrealized
gains/losses on equity
securities available
for sale............... (55,000) 3,538,000 (1,240,000)
Change in adjustment to
deferred acquisition
costs.................. (20,600,000) (400,000) (40,400,000)
Tax effects of net
changes................ (12,882,000) (82,000) (10,382,000)
----------- ----------- -----------
Ending balance............ $ 18,405,000 $ (5,521,000) $ (5,673,000)
=========== =========== ===========
</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
21
<PAGE> 52
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. SHAREHOLDER'S EQUITY (CONTINUED)
can be paid to shareholders of insurance companies domiciled in the state of
Arizona without obtaining the prior approval of the Insurance Commissioner is
limited to the lesser of either 10% of the preceding year's statutory surplus or
the preceding year's statutory net gain from operations. Dividends in the
amounts of $25,500,000 and $29,400,000 were paid on April 1, 1997 and March 18,
1996, respectively. No dividends were paid in fiscal year 1995.
Under statutory accounting principles utilized in filings with insurance
regulatory authorities, the Company's net income for the nine months ended
September 30, 1997 was $45,743,000. The statutory net income for the year ended
December 31, 1996 was $27,928,000 and for the year ended December 31, 1995 was
$30,673,000. The Company's statutory capital and surplus was $325,712,000 at
September 30, 1997, $311,176,000 at December 31, 1996 and $294,767,000 at
December 31, 1995.
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>
1997:
Currently payable................. $ (3,635,000) $ 50,828,000 $ 47,193,000
Deferred.......................... (2,258,000) (13,766,000) (16,024,000)
------------ ------------ ------------
Total income tax
expense............... $ (5,893,000) $ 37,062,000 $ 31,169,000
============ ============ ============
1996:
Currently payable................. $ 5,754,000 $ 21,849,000 $ 27,603,000
Deferred.......................... (10,347,000) 6,996,000 (3,351,000)
------------ ------------ ------------
Total income tax
expense............... $ (4,593,000) $ 28,845,000 $ 24,252,000
============ ============ ============
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
============ ============ ============
</TABLE>
22
<PAGE> 53
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. INCOME TAXES (CONTINUED)
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
-------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Amount computed at statutory
rate........................... $33,003,000 $24,258,000 $22,749,000
Increases (decreases) resulting
from:
Amortization of differences
between book and tax bases
of net assets acquired...... 666,000 464,000 3,049,000
State income taxes, net of
federal tax benefit......... 1,950,000 2,070,000 437,000
Dividends-received deduction... (4,270,000) (2,357,000) --
Tax credits.................... (318,000) (257,000) (168,000)
Other, net..................... 138,000 74,000 (328,000)
----------- ----------- -----------
Total income tax
expense.............. $31,169,000 $24,252,000 $25,739,000
=========== =========== ===========
</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, 1997. The Company does not anticipate any
transactions which would cause any part of this surplus to be taxable.
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,
-----------------------------
1997 1996
------------- ------------
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Investments.................................... $ 13,160,000 $ 15,036,000
Deferred acquisition costs..................... 154,949,000 136,747,000
State income taxes............................. 1,777,000 1,466,000
Net unrealized gains on debt and equity
securities available for sale................ 9,910,000 --
------------- ------------
Total deferred tax liabilities....... 179,796,000 153,249,000
------------- ------------
DEFERRED TAX ASSETS:
Contractholder reserves........................ (108,090,000) (77,522,000)
Guaranty fund assessments...................... (2,707,000) (1,031,000)
Other assets................................... (1,952,000) (1,534,000)
Net unrealized losses on debt and equity
securities available for sale................ -- (2,973,000)
------------- ------------
Total deferred tax assets............ (112,749,000) (83,060,000)
------------- ------------
Deferred income taxes.......................... $ 67,047,000 $ 70,189,000
============= ============
</TABLE>
23
<PAGE> 54
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. RELATED PARTY MATTERS
The Company pays commissions to two affiliated companies, SunAmerica
Securities, Inc. and Advantage Capital Corp. Commissions paid to these
broker-dealers totaled $25,492,000 in 1997, $16,906,000 in 1996, and $9,435,000
in 1995. These broker-dealers, when combined with the Company's wholly owned
broker-dealer, represent a significant portion of the Company's business,
amounting to approximately 36.1%, 38.3%, and 40.6% of premiums in 1997, 1996,
and 1995, respectively. The Company also sells its products through unaffiliated
broker-dealers, the largest two of which represented approximately 19.2% and
10.1% of premiums in 1997, 19.7% and 10.2% in 1996, and 18.8% and 4.3% in 1995,
respectively.
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 $86,116,000 for the year ended September 30, 1997,
$65,351,000 for the year ended September 30, 1996 and $42,083,000 for the year
ended September 30, 1995. Such amounts are included in General and
Administrative Expenses in the income statement.
The Parent made capital contributions of $28,411,000 in December, 1996 and
$27,387,000 in December 1995 to the Company, through the Company's direct
parent, in exchange for the termination of its guaranty with respect to certain
real estate owned in Arizona. Accordingly, the Company reduced the carrying
value of this real estate to estimated fair value to reflect the termination of
the guaranty.
During the year ended September 30, 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, 1997, the Company sold various invested
assets to SunAmerica Life Insurance Company and to CalAmerica Life Insurance
Company for cash equal to their current market values of $15,776,000 and
$15,000, respectively. The Company recorded net gains aggregating $276,000 on
such transactions.
During the year ended September 30, 1997, the Company also purchased
certain invested assets from SunAmerica Life Insurance Company and from
CalAmerica Life Insurance Company for cash equal to their current market values
of $8,717,000 and $284,000, respectively.
During the year ended September 30, 1996, the Company sold various invested
assets to the Parent and to SunAmerica Life Insurance Company for cash equal to
their current market values of $274,000 and $47,321,000, respectively. The
Company recorded net losses aggregating $3,000 on such transactions.
During the year ended September 30, 1996, the Company also purchased
certain invested assets from SunAmerica Life Insurance Company for cash equal to
their current market values, which aggregated $28,379,000.
24
<PAGE> 55
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. BUSINESS SEGMENTS
Summarized data for the Company's business segments follow:
<TABLE>
<CAPTION>
TOTAL
DEPRECIATION
AND
TOTAL AMORTIZATION PRETAX TOTAL
REVENUES EXPENSE INCOME ASSETS
------------ ------------ ----------- ---------------
<S> <C> <C> <C> <C>
1997:
Annuity operations................ $332,845,000 $55,675,000 $74,792,000 $12,438,021,000
Broker-dealer operations.......... 38,005,000 689,000 16,705,000 51,400,000
Asset management.................. 35,661,000 16,357,000 2,798,000 81,518,000
------------ ----------- ----------- ---------------
Total................... $406,511,000 $72,721,000 $94,295,000 $12,570,939,000
============ =========== =========== ===============
1996:
Annuity operations................ $256,681,000 $43,974,000 $53,827,000 $ 9,092,770,000
Broker-dealer operations.......... 31,053,000 449,000 13,033,000 37,355,000
Asset management.................. 33,047,000 18,295,000 2,448,000 74,410,000
------------ ----------- ----------- ---------------
Total................... $320,781,000 $62,718,000 $69,308,000 $ 9,204,535,000
============ =========== =========== ===============
1995:
Annuity operations................ $211,587,000 $38,350,000 $55,462,000 $ 7,667,946,000
Broker-dealer operations.......... 24,194,000 411,000 9,025,000 29,241,000
Asset management.................. 34,427,000 24,069,000 510,000 86,510,000
------------ ----------- ----------- ---------------
Total................... $270,208,000 $62,830,000 $64,997,000 $ 7,783,697,000
============ =========== =========== ===============
</TABLE>
25
<PAGE> 56
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE PATHWAY VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
FINANCIAL STATEMENTS
NOVEMBER 30, 1997
26
<PAGE> 57
REPORT OF INDEPENDENT ACCOUNTANTS
January 28, 1998
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 PATHWAY 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 PATHWAY Variable Annuity), a separate account of Anchor
National Life Insurance Company (the "Separate Account") at November 30, 1997,
the results of their operations for the year then ended, and the changes in
their net assets for the two years then ended, 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, 1997 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
27
<PAGE> 58
VARIABLE SEPARATE ACCOUNT
(PORTION RELATED TO THE PATHWAY VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
Growth International Growth-Income Asset Allocation
Series Series Series Series
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments in Anchor Pathway Fund,
at market value $801,240,368 $223,340,847 $950,430,166 $155,446,290
Liabilities 0 0 0 0
-------------------------------------------------------------
Net Assets $801,240,368 $223,340,847 $950,430,166 $155,446,290
=============================================================
Series Without Enhanced Death Benefit:
Net Assets $800,077,413 $223,177,459 $949,065,570 $155,280,217
Accumulation units outstanding 10,204,566 11,562,592 13,632,089 5,869,579
Unit value of accumulation units $ 78.39 $ 19.34 $ 69.61 $ 26.46
Series With Enhanced Death Benefit:
Net Assets $ 1,162,955 $ 163,388 $ 1,364,596 $ 166,073
Accumulation units outstanding 14,836 8,450 19,603 6,278
Unit value of accumulation units $ 78.38 $ 19.34 $ 69.61 $ 26.45
</TABLE>
<TABLE>
<CAPTION>
U.S. Government/ Cash
High-Yield AAA-Rated Management
Bond Series Securities Series Series TOTAL
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments in Anchor Pathway Fund,
at market value $118,671,479 $81,608,951 $69,225,989 $2,399,964,090
Liabilities 0 0 0 0
-------------------------------------------------------------------
Net Assets $118,671,479 $81,608,951 $69,225,989 $2,399,964,090
==================================================================
Series Without Enhanced Death Benefit:
Net Assets $118,610,658 $81,535,473 $69,225,989
Accumulation units outstanding 2,656,533 3,606,704 3,738,705
Unit value of accumulation units $ 44.64 $ 22.61 $ 18.51
Series With Enhanced Death Benefit:
Net Assets $60,821 $73,478 $0
Accumulation units outstanding 1,362 3,251 0
Unit value of accumulation units $ 44.64 $ 22.60
</TABLE>
See accompanying notes to financial statements.
28
<PAGE> 59
VARIABLE SEPARATE ACCOUNT
(PORTION RELATED TO THE PATHWAY VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
SCHEDULE OF PORTFOLIO INVESTMENTS
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
Market Value Market
Variable Accounts Shares Per Share Value Cost
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Series 18,283,134 $43.82 $ 801,240,368 $ 615,507,721
International Series 13,727,777 16.27 223,340,847 181,978,762
Growth-Income Series 25,669,220 37.03 950,430,166 642,904,631
Asset Allocation Series 9,420,553 16.50 155,446,290 119,669,464
High-Yield Bond Series 8,447,131 14.05 118,671,479 112,579,118
U.S. Government/
AAA-Rated Securities Series 7,350,933 11.10 81,608,951 84,874,652
Cash Management Series 6,122,294 11.31 69,225,989 68,685,069
-------------------------------
$2,399,964,090 $1,826,199,417
===============================
</TABLE>
See accompanying notes to financial statements.
29
<PAGE> 60
VARIABLE SEPARATE ACCOUNT
(PORTION RELATED TO THE PATHWAY VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
Growth International Growth-Income Asset Allocation
Series Series Series Series
------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $122,315,000 $21,590,000 $142,510,000 $20,620,000
------------------------------------------------------------
Total investment income 122,315,000 21,590,000 142,510,000 20,620,000
------------------------------------------------------------
Expenses:
Mortality risk charge (6,373,979) (2,005,660) (7,438,727) (1,233,456)
Expense risk charge (2,788,652) (877,482) (3,254,476) (539,642)
Distribution expense charge (1,195,137) (376,064) (1,394,775) (231,275)
Enhanced death benefit charge (82) (11) (76) (13)
------------------------------------------------------------
Total expenses (10,357,850) (3,259,217) (12,088,054) (2,004,386)
------------------------------------------------------------
Net investment income 111,957,150 18,330,783 130,421,946 18,615,614
------------------------------------------------------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 223,591,699 92,140,220 185,649,433 27,269,238
Cost of shares sold (180,484,358) (71,566,087) (130,720,188) (21,701,676)
------------------------------------------------------------
Net realized gains (losses) from
securities transactions 43,107,341 20,574,133 54,929,245 5,567,562
------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 184,049,658 51,238,847 300,597,522 36,602,837
End of period 185,732,647 41,362,085 307,525,535 35,776,827
------------------------------------------------------------
Change in net unrealized appreciation/depreciation
of investments 1,682,989 (9,876,762) 6,928,013 (826,010)
------------------------------------------------------------
Increase in net assets from operations $156,747,480 $29,028,154 $192,279,204 $23,357,166
============================================================
</TABLE>
<TABLE>
<CAPTION>
U.S. Government/ Cash
High-Yield AAA-Rated Management
Bond Series Securities Series Series TOTAL
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $12,665,000 $8,435,000 $4,852,000 $332,987,000
---------------------------------------------------------------
Total investment income 12,665,000 8,435,000 4,852,000 332,987,000
---------------------------------------------------------------
Expenses:
Mortality risk charge (1,000,499) (729,604) (652,358) (19,434,283)
Expense risk charge (437,719) (319,206) (285,406) (8,502,583)
Distribution expense charge (187,594) (136,802) (122,317) (3,643,964)
Enhanced death benefit charge (2) (9) 0 (193)
---------------------------------------------------------------
Total expenses (1,625,814) (1,185,621) (1,060,081) (31,581,023)
---------------------------------------------------------------
Net investment income 11,039,186 7,249,379 3,791,919 301,405,977
---------------------------------------------------------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 49,924,123 35,719,309 179,935,383 794,229,405
Cost of shares sold (49,081,575) (37,730,151)(180,776,607) (672,060,642)
---------------------------------------------------------------
Net realized gains (losses) from
securities transactions 842,548 (2,010,842) (841,224) 122,168,763
--------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 4,627,362 (1,783,744) 567,969 575,900,451
End of period 6,092,361 (3,265,700) 540,920 573,764,675
--------------------------------------------------------------
Change in net unrealized appreciation/depreciation
of investments 1,464,999 (1,481,956) (27,049) (2,135,776)
--------------------------------------------------------------
Increase in net assets from operations $13,346,733 $3,756,581 $2,923,646 $421,438,964
==============================================================
</TABLE>
See accompanying notes to financial statements.
30
<PAGE> 61
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE PATHWAY VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
NOVEMBER 30, 1996
<TABLE>
<CAPTION>
Growth International Growth-Income Asset Allocation
Series Series Series Series
--------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $115,510,986 $ 9,173,233 $65,150,384 $ 14,975,567
Net realized gains (losses)
from securities transactions 44,960,946 6,907,009 39,328,857 5,594,066
Change in net unrealized
appreciation/depreciation
of investments (71,433,125) 23,858,462 59,111,041 3,942,515
--------------------------------------------------------------
Increase in net assets
from operations 89,038,807 39,938,704 163,590,282 24,512,148
--------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 17,843,677 6,548,080 15,725,475 2,732,107
Cost of units redeemed (156,337,476) (47,337,310) (148,465,506) (28,024,353)
Net transfers (34,656,167) 21,859,961 6,362,361 232,137
--------------------------------------------------------------
Decrease in net assets
from capital
transactions (173,149,966) (18,929,269) (126,377,670) (25,060,109)
--------------------------------------------------------------
Increase (decrease) in net assets (84,111,159) 21,009,435 37,212,612 (547,961)
Net assets at beginning of period 897,275,485 228,134,336 882,143,460 153,608,289
--------------------------------------------------------------
Net assets at end of period $813,164,326 $249,143,771 $919,356,072 $153,060,328
=============================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 310,207 430,428 319,204 138,060
Units redeemed (2,717,251) (3,026,384) (2,943,661) (1,368,513)
Units transferred (660,002) 1,392,908 116,017 7,955
--------------------------------------------------------------
Decrease in units outstanding (3,067,046) (1,203,048) (2,508,440) (1,222,498)
Beginning units 15,740,421 15,613,034 18,752,182 7,953,647
--------------------------------------------------------------
Ending units 12,673,375 14,409,986 16,243,742 6,731,149
==============================================================
</TABLE>
<TABLE>
<CAPTION>
U.S. Government/ Cash
High-Yield AAA-Rated Management
Bond Series Securities Series Series TOTAL
------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $12,225,428 $ 9,593,056 $ 6,222,874 $ 232,851,528
Net realized gains (losses)
from securities transactions 373,406 (1,677,745) (1,696,018) 93,790,521
Change in net unrealized
appreciation/depreciation
of investments 3,547,084 (3,640,867) (969,539) 14,415,571
------------------------------------------------------------
Increase in net assets
from operations 16,145,918 4,274,444 3,557,317 341,057,620
------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 2,228,121 1,424,312 3,872,552 50,374,324
Cost of units redeemed (24,728,660) (25,503,716) (45,284,698) (475,681,719)
Net transfers (8,898,289) (6,280,708) 26,218,823 4,838,118
------------------------------------------------------------
Decrease in net assets
from capital
transactions (31,398,828) (30,360,112) (15,193,323) (420,469,277)
------------------------------------------------------------
Increase (decrease) in net assets (15,252,910) (26,085,668) (11,636,006) (79,411,657)
Net assets at beginning of period 146,590,026 134,938,013 100,872,015 2,543,561,624
------------------------------------------------------------
Net assets at end of period $131,337,116 $108,852,345 $ 89,236,009 $2,464,149,967
============================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 61,598 74,200 222,509
Units redeemed (659,399) (1,232,100) (2,577,596)
Units transferred (242,416) (302,844) 1,496,689
---------------------------------------------
Decrease in units outstanding (840,217) (1,460,744) (858,398)
Beginning units 4,114,675 6,505,460 5,851,566
---------------------------------------------
Ending units 3,274,458 5,044,716 4,993,168
=============================================
</TABLE>
See accompanying notes to financial statements.
31
<PAGE> 62
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE PATHWAY VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
Growth International Growth-Income Asset Allocation
Series Series Series Series
-----------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 111,957,150 $ 18,330,783 $ 130,421,946 $ 18,615,614
Net realized gains (losses)
from securities
transactions 43,107,341 20,574,133 54,929,245 5,567,562
Change in net unrealized
appreciation/depreciation
of investments 1,682,989 (9,876,762) 6,928,013 (826,010)
-----------------------------------------------------------
Increase in net assets
from operations 156,747,480 29,028,154 192,279,204 23,357,166
-----------------------------------------------------------
From capital transactions without
enhanced death benefit:
Net proceeds from units sold 12,831,407 5,880,570 13,922,416 2,166,878
Cost of units redeemed (161,360,779) (59,337,362) (173,358,230) (28,179,699)
Net transfers (21,309,594) (1,541,401) (3,107,592) 4,876,445
-----------------------------------------------------------
Decrease in net assets (169,838,966) (54,998,193) (162,543,406) (21,136,376)
-----------------------------------------------------------
From capital transactions with
enhanced death benefit:
Net proceeds from units sold 194 167 193 16
Cost of units redeemed (39,316) (12,846) (671) (36,585)
Net transfers 1,206,650 179,794 1,338,774 201,741
-----------------------------------------------------------
Increase in net assets 1,167,528 167,115 1,338,296 165,172
-----------------------------------------------------------
Total decrease in net assets
from capital transactions (168,671,438) (54,831,078) (161,205,110) (20,971,204)
Increase (decrease) in net assets (11,923,958) (25,802,924) 31,074,094 2,385,962
Net assets at beginning of period 813,164,326 249,143,771 919,356,072 153,060,328
-----------------------------------------------------------
Net assets at end of period $ 801,240,368 $223,340,847 $ 950,430,166 $155,446,290
===========================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Series without enhanced death
benefit:
Units sold 186,747 314,590 225,903 90,801
Units redeemed (2,297,524) (3,095,729) (2,777,907) (1,154,224)
Units transferred (358,032) (66,255) (59,649) 201,853
-----------------------------------------------------------
Decrease in units outstanding (2,468,809) (2,847,394) (2,611,653) (861,570)
Beginning units 12,673,375 14,409,986 16,243,742 6,731,149
-----------------------------------------------------------
Ending units 10,204,566 11,562,592 13,632,089 5,869,579
============================================================
Series with enhanced death
benefit:
Units sold 2 8 3 1
Units redeemed (529) (660) (11) (1,439)
Units transferred 15,363 9,102 19,611 7,716
-----------------------------------------------------------
Increase in units outstanding 14,836 8,450 19,603 6,278
Beginning units 0 0 0 0
-----------------------------------------------------------
Ending units 14,836 8,450 19,603 6,278
============================================================
</TABLE>
<TABLE>
<CAPTION>
U.S. Government/ Cash
High-Yield AAA-Rated Management
Bond Series Securities Series Series TOTAL
------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 11,039,186 $ 7,249,379 $ 3,791,919 $ 301,405,977
Net realized gains (losses)
from securities
transactions 842,548 (2,010,842) (841,224) 122,168,763
Change in net unrealized
appreciation/depreciation
of investments 1,464,999 (1,481,956) (27,049) (2,135,776)
-------------------------------------------------------------
Increase in net assets
from operations 13,346,733 3,756,581 2,923,646 421,438,964
-------------------------------------------------------------
From capital transactions without
enhanced death benefit:
Net proceeds from units sold 1,877,609 790,626 1,788,824 39,258,330
Cost of units redeemed (28,666,386) (25,107,597) (53,717,792) (529,727,845)
Net transfers 715,689 (6,755,159) 28,995,302 1,873,690
-------------------------------------------------------------
Decrease in net assets (26,073,088) (31,072,130) (22,933,666) (488,595,825)
-------------------------------------------------------------
From capital transactions with
enhanced death benefit:
Net proceeds from units sold 15 15 0 600
Cost of units redeemed (34) (25,968) 0 (115,420)
Net transfers 60,737 98,108 0 3,085,804
-------------------------------------------------------------
Increase in net assets 60,718 72,155 0 2,970,984
-------------------------------------------------------------
Total decrease in net assets
from capital transactions (26,012,370) (30,999,975) (22,933,666) (485,624,841)
Increase (decrease) in net assets (12,665,637) (27,243,394) (20,010,020) (64,185,877)
Net assets at beginning of period 131,337,116 108,852,345 89,236,009 2,464,149,967
-------------------------------------------------------------
Net assets at end of period $118,671,479 $ 81,608,951 $ 69,225,989 $2,399,964,090
=============================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Series without enhanced death
benefit:
Units sold 45,079 37,070 100,054
Units redeemed (680,389) (1,160,448) (2,957,589)
Units transferred 17,385 (314,634) 1,603,072
-----------------------------------------------
Decrease in units outstanding (617,925) (1,438,012) (1,254,463)
Beginning units 3,274,458 5,044,716 4,993,168
-----------------------------------------------
Ending units 2,656,533 3,606,704 3,738,705
===============================================
Series with enhanced death
benefit:
Units sold 0 1 0
Units redeemed (1) (1,154) 0
Units transferred 1,363 4,404 0
-----------------------------------------------
Increase in units outstanding 1,362 3,251 0
Beginning units 0 0 0
-----------------------------------------------
Ending units 1,362 3,251 0
===============================================
</TABLE>
See accompanying notes to financial statements.
32
<PAGE> 63
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE PATHWAY 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 PATHWAY 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 seven variable series (the "Variable
Accounts"). Each of the Variable Accounts is invested solely in shares of a
designated series of the Anchor Pathway Fund (the "Fund"). The Fund is a
diversified, open-end, affiliated investment company, which retains an
investment advisor to assist in the investment activities of the Fund. The
contractholder may elect to have payments allocated to a guaranteed-interest
fund of the Company (the "General Account"), which is not a part of the
Separate Account. If no election is made, all payments are allocated to the
Cash Management Series of the Separate Account. The financial statements
include balances allocated by the contractholder to the seven Variable
Accounts and do not include balances allocated to the General Account.
The investment objectives and policies of the seven series of the Fund are
summarized below:
The GROWTH SERIES seeks growth of capital. This portfolio invests primarily
in common stocks or securities with common stock characteristics.
The INTERNATIONAL SERIES seeks long-term growth of capital. This portfolio
invests in securities of issuers domiciled outside the United States.
The GROWTH-INCOME SERIES seeks growth of capital and income. This portfolio
invests primarily in securities which demonstrate the potential for
appreciation and/or dividends.
33
<PAGE> 64
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE PATHWAY VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The ASSET ALLOCATION SERIES 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
equity-type securities (such as convertible bonds and preferred stocks),
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 HIGH-YIELD BOND SERIES 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 U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES seeks a high level of current
income consistent with prudent investment risk and preservation of capital.
This portfolio invests primarily in a combination of (i) securities
guaranteed by the U.S. Government and (ii) other debt securities rated AAA by
Standard & Poor's Corporation or Aaa by Moody's Investors Service, Inc. or
that have not received a rating but are determined to be of comparable
quality by the investment advisor.
The CASH MANAGEMENT SERIES 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 series of the Fund 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 Fund are
recognized at the date of sale and are determined on an average cost basis.
In October, 1997, the Company began to offer an enhanced death benefit to
existing and new policyholders. Choice of this benefit results in a 0.10%
increase in the Mortality Risk Charge (Note 2), and therefore in slightly
reduced accumulation unit values. The two accumulation unit values for each
Variable Account are computed daily based on the total net assets applicable
to policies with and without the enhanced death benefit, respectively. The
accumulation unit values, the transactions, the number of units and the
separate account assets related to policies with and without the enhanced
death benefit are shown separately in the fiscal 1997 financial statements.
34
<PAGE> 65
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE PATHWAY 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:
CONTINGENT DEFERRED SALES 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 equals 10% of the total of purchase payments made
more than one year prior to the date of withdrawal. Should a withdrawal
exceed the free withdrawal amount, a contingent deferred sales charge of 5%
is imposed and paid to the Company on the excess.
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 to the
oldest purchase payments first so that all withdrawals are allocated to
purchase payments to which that the lowest (if any) withdrawal charge will
apply.
CONTRACT ADMINISTRATION CHARGE: An annual contract administration charge of
$30 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 entire charge will be assessed as of the date of surrender.
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
35
<PAGE> 66
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE PATHWAY VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
2. CHARGES AND DEDUCTIONS (continued)
PREMIUM TAXES: (Continued)
surrender, upon death of the contractholder or upon annuitization; however,
it reserves the right to deduct premium taxes when incurred. Premium taxes
generally range from 0% to 3.5%.
MORTALITY RISK CHARGE: The Company deducts a mortality risk charge, which
equals an annual rate of 0.80% of the net asset value of each series,
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 and to provide a death benefit if the contractholder dies prior to
the date annuity payments begin. If the contractholder elects the optional
enhanced guaranteed minimum death benefit, the mortality risk premium will
equal an annual rate of 0.90% of the net asset value of each series, computed
on a daily basis.
EXPENSE RISK CHARGE: The Company deducts an expense risk charge, which equals
an annual rate of 0.35% of the net asset value of each series, computed on a
daily basis. 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 series,
computed on a daily basis. The distribution expense charge is designed to
compensate the Company for assuming a distribution expense risk due to the
guarantee that the contingent deferred sales charge stated in the Contract
will not be increased.
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.
36
<PAGE> 67
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE PATHWAY VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
3. INVESTMENT IN ANCHOR PATHWAY FUND
The aggregate cost of the Fund's shares acquired and the aggregate proceeds
from shares sold during the year ended November 30, 1997 consist of the
following:
<TABLE>
<CAPTION>
Cost of Shares Proceeds from
Variable Accounts Acquired Shares Sold
----------------- --------------- ---------------
<S> <C> <C>
Growth Series $ 166,877,411 $ 223,591,699
International Series 55,639,924 92,140,220
Growth-Income Series 154,866,270 185,649,433
Asset Allocation Series 24,913,648 27,269,238
High-Yield Bond Series 34,950,940 49,924,123
U.S. Government/AAA-Rated
Securities Series 11,968,714 35,719,309
Cash Management Series 160,793,636 179,935,383
=============== ==============
</TABLE>
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.
37
<PAGE> 68
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:
None.
The following financial statements are included in Part B of the
Registration Statement:
Consolidated Financial Statements of Anchor
National Life Insurance Company for the fiscal
year ended September 30, 1997.
Financial Statements of Variable Separate
Account (Portion Relating to the PATHWAY
Variable Annuity) for the fiscal year ended
November 30, 1997.
(b) Exhibits
- ----------------
<TABLE>
<S> <C> <C>
(1) Resolutions Establishing Separate Account...... Filed Herewith
(2) Custody Agreements............................. Not Applicable
(3) (a) Distribution Contract...................... Filed Herewith
(b) Selling Agreement.......................... Filed Herewith
(4) Variable Annuity Contract...................... Filed Herewith
(5) Application for Contract....................... Filed Herewith
(6) Depositor - Corporate Documents
(a) Certificate of Incorporation............... Filed Herewith
(b) By-Laws.................................... Filed Herewith
(7) Reinsurance Contract........................... Not Applicable
(8) Fund Participation Agreement................... Filed Herewith
(9) Opinion of Counsel............................. Filed Herewith
Consent of Counsel............................. Filed Herewith
(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........... Filed Herewith
(15) Powers of Attorney............................. Previously Filed
(27) Financial Data Schedules....................... Not Applicable
</TABLE>
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
Peter McMillan Director
James R. Belardi Director and Senior Vice President
Jana W. Greer Director and Senior Vice President
<PAGE> 69
Lorin M. Fife Director, Senior Vice President,
General Counsel and Assistant
Secretary
Susan L. Harris Director, Senior Vice President
and Secretary
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
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 November 30, 1997, the number of Contracts funded by the
Variable Separate Account was 44,912, of which 22,140 were owners of Qualified
Contracts and 22,772 were 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.
<TABLE>
<CAPTION>
Name Position with Distributor
---- -------------------------
<S> <C>
J. Steven Neamtz Director and President
Robert M. Zakem Director, Executive Vice
President and Assistant
Secretary
Peter Harbeck Director
Gary W. Krat Director
Enrique Lopez-Balboa Vice President
Steven Rothstein Treasurer
Susan L. Harris Secretary
Lorin M. Fife Assistant Secretary
Net
Distribution Compensation
</TABLE>
<PAGE> 70
<TABLE>
Name of Discounts and on Redemption Brokerage
Distributor Commissions Annuitization Commission Commissions*
- ------------ -------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
SunAmerica None None None None
Capital
Services, Inc.
</TABLE>
- ------------------
* Distribution fee is paid by Anchor National Life Insurance Company.
<PAGE> 71
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.
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),
<PAGE> 72
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> 73
SIGNATURES
As required by the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets the requirements
of Securities Act Rule 485 for effectiveness of this Registration Statement
and 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 28th day of January, 1998.
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 Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
ELI BROAD* President, Chief
- ------------------------ Executive Officer and
Eli Broad Chairman of the Board
(Principal Executive
Officer)
SCOTT L. ROBINSON* Senior Vice President
- ------------------------ and Director
Scott L. Robinson (Principal Financial
Officer)
N. SCOTT GILLIS* Senior Vice President
- ------------------------ and Controller
N. Scott Gillis (Principal Accounting
Officer)
JAMES R. BELARDI* Director
- ------------------------
</TABLE>
<PAGE> 74
<TABLE>
<S> <C> <C>
James R. Belardi
LORIN M. FIFE* Director
- ------------------------
Lorin M. Fife
JANA W. GREER* Director
- ------------------------
Jana W. Greer
/S/ SUSAN L. HARRIS Director January 28, 1998
- ------------------------
Susan L. Harris
PETER MCMILLAN* Director
- ------------------------
Peter McMillan
JAMES W. ROWAN* Director
- ------------------------
James W. Rowan
JAY S. WINTROB* Director
- ------------------------
Jay S. Wintrob
</TABLE>
* By: /S/ SUSAN L. HARRIS Attorney-in-Fact
----------------------
Susan L. Harris
Date: January 28, 1998
<PAGE> 75
EXHIBIT INDEX
Exhibit Description
- ------- -----------
(1) Resolution Establishing Separate Account
(3)(a) Distribution Agreement
(3)(b) Selling Agreement
(4) Variable Annuity Contract
(5) Application for Contract
(6)(a) Certificate of Incorporation
(6)(b) By-Laws
(8) Fund Participation Agreement
(9) Opinion of Counsel
Consent of Counsel
(10) Consent of Independent Accountants
(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
<PAGE> 1
EXHIBIT (1)
CERTIFIED COPY OF BOARD MINUTES
I, Susan L. Harris, do hereby certify that I am the duly elected and
qualified Secretary of ANCHOR NATIONAL LIFE INSURANCE COMPANY, a California
corporation (herein this "Corporation"), that attached hereto is a true and
correct copy of the minutes of the Board of Directors' meeting of this
Corporation held on June 25, 1981 and that such minutes have not been amended or
rescinded from the date of their adoption and are in full force and effect on
the date thereof.
IN WITNESS WHEREOF, I have executed this Certificate and affixed the
seal of this Corporation this 31st day of March, 1992.
/s/ SUSAN L. HARRIS
----------------------------------
Susan L. Harris
Secretary
(SEAL)
<PAGE> 2
ANCHOR NATIONAL LIFE INSURANCE COMPANY
REGULAR MEETING OF THE BOARD OF DIRECTORS
JUNE 25, 1981
The Regular Meeting of the Board of Directors of Anchor National Life
Insurance Company, a company organized and existing under the laws of the state
of California, was held at Anchor National Life Plaza, 2202 E. Camelback Road,
Phoenix, Arizona, 85016, on Thursday, June 25, 1981, at 9:00 a.m. Mountain
Standard Time.
There were present:
Messrs Edward B. Burr, Chairman
Richards D. Barger
Ernest E. Cragg
Carroll E. Dietle, II
Robert G. Frank
John R. Haire
Stanley P. Hutchison
George P. Kendall, Jr.
Eugene J. Ryan, M.D.
Thomas C. Schaefer
Charles Shafer
William G. Stalnaker
John P. Young, II
constituting the entire board. Also present was James A. Deer.
Edward B. Burr, Chairman of the Board of the Corporation, called the
meeting to order and presided; Carroll E. Dietle, II, Secretary of the
Corporation, acted as Secretary of the meeting.
The Secretary presented a copy of the Notice of meeting and Proof by
Affidavit of Mailing of the Notice to the Directors, both of which, upon motion
duly made, seconded and unanimously carried, were ordered filed with the minutes
of the meeting.
Minutes of the Regular Organizational meeting of the Board of Directors
held on March 9, 1981, were presented and reviewed, and upon motion duly made,
seconded and unanimously carried, were approved. Minutes of the Special meeting
of the Board of Directors of April 8, 1981, were presented and reviewed, and
upon motion duly made, seconded and unanimously carried, were approved.
The Chairman of the Executive Committee then reported to the Directors
concerning actions taken by that committee at its meetings held on January 15,
1981; February 25, 1981; March 17, 1981; March 30 1981; April 8, 1981; April 14,
1981; April 28, 1981; April 29, 1981; and June 1, 1981. The minutes of those
meetings were then presented to the Directors. After discussion, upon motion
duly made, seconded and unanimously carried, it was:
<PAGE> 3
RESOLVED, that the actions of the Executive Committee taken at its
meetings held January 15, 1980; February 25, 1981; March 17, 1981; March
30, 1981; April 8, 1981; April 14, 1981; April 28, 1981; April 29, 1981;
and June 1, 1981 be and the same are hereby ratified, approved and
confirmed.
Thomas C. Schaefer then presented the Financials for the year to date
through May 31, 1981. The Directors then reviewed and discussed these reports,
copies of which were ordered annexed to these minutes.
Mr. Schaefer then reported on the results of the Insurance Department
Examination for the three year period ending on December 31, 1980. Mr. Schaefer
indicated that the report was expected to be favorable but would include minor
reserve adjustments along with offsetting adjustments in tax liabilities.
The Marketing report was presented by Robert G. Frank and Charles
Shafer. Life insurance production volumes were less than budgeted. The launching
of the re-entry term product on the first of July was expected to provide strong
production results for the second half of the year. It was reported that annuity
volumes had been improved by the sales incentive program with strong
participation by agents of Anchor National Financial Services and the
independent general agents and smaller amounts coming from the New York Stock
Exchange member firms.
It was reported that the Product Development Committee was considering a
universal life type product. External sources of administrative support are
being considered for the universal life product. An additional delay in the
offering of the Interplan product was reported. The SEC filing was to be amended
to add a death benefit and the ability to utilize the product in the qualified
plan market.
Charles Shafer reported that Dan Spradling and Greg Hidden were leaving
the Regional office Staff to join different mutual funds as wholesalers.
A report was given on discussions with the American Funds group for
joint production of a variable annuity product. Both wrapper and separate
account approaches were being discussed.
A discussion was held regarding the authorization of the officers of the
Company to take appropriate steps to establish one or more separate accounts and
to issue variable annuities. Upon motion duly made, seconded and unanimously
carried the following resolution was adopted:
WHEREAS, the Company desires to develop and market certain types of
variable and fixed annuity contracts which may require registration with
the Securities and Exchange Commission pursuant to the various
securities laws; and
<PAGE> 4
WHEREAS, it may be necessary to take certain actions including, but not
limited to, the establishment of separate accounts;
NOW THEREFORE, BE IT RESOLVED, that the Proper Officers of the Company
be, and they hereby are, authorized and directed, to take all necessary
steps to issue and sell said variable and fixed annuity contracts; and
FURTHER RESOLVED, that the Proper Officers be, and they hereby are,
authorized to establish one or more separate accounts of this company,
in accordance with the California Insurance Code, to provide an
investment medium for such variable annuity contracts issued by this
Company as may be designated as participating therein. Any such separate
account shall receive, hold, invest and reinvest only the monies arising
from: (i) premiums, contributions or payments made pursuant to the
variable and fixed annuity contracts participating therein; (ii) such
assets of the Company as may be deemed suitable for investment in the
same manner as the assets received pursuant to (i) under the variable
and fixed annuity contracts participating in such separate accounts, or
as may be necessary for the establishment of such separate accounts; and
(iii) the dividends, interest and gains produced by the foregoing; and
FURTHER RESOLVED, that the Proper Officers of the Company be, and they
are, hereby authorized;
(i) to register the variable and fixed annuity contracts issued or to
be issued by the Company under the provisions of the Securities
Act of 1933 to the extent that they shall determine that such
registration is necessary;
(ii) to register any such separate accounts with the Securities and
Exchange Commission under the provisions of the Investment
Company Act of 1940 to the extent that they shall determine that
such registration is necessary;
(iii) to prepare, execute and file such amendments to any registration
statements filed under the aforementioned Acts (including such
pre-effective and post-effective amendments), supplements and
exhibits thereto as they may deem necessary or desirable;
(iv) to apply for exemption from those provisions of the
aforementioned Acts as they may deem necessary or desirable and
to take any and all other actions which they may deem necessary,
desirable, or appropriate in connection with such Acts;
<PAGE> 5
(v) to file the variable and fixed annuity contract participating in
any such separate accounts with the appropriate state insurance
departments and to prepare and execute all necessary documents to
obtain approval of the insurance departments; and
(vi) to prepare or have prepared and execute all necessary documents
to obtain approval of, or clearance with, or other appropriate
actions required, of any other regulatory authority that may be
necessary; and
FURTHER RESOLVED, that to facilitate the execution and filing of any
registration statement and the remedying of any deficiencies therein by
appropriate amendments (including any pre-effective or post-effective
amendments) or supplements thereto, any two of the Proper Officers of
the Company be, and they hereby are, designated as agents of the
Company; and they hereby are authorized and directed to grant a power of
attorney on behalf of the Company to such individuals as they may elect
by executing and delivering to such individuals, on behalf of the
Company, a power of attorney; and
FURTHER RESOLVED, that in connection with the offering and sale of the
fixed and variable annuity contracts in the various States of the United
States, any two of the Proper Officers of the Company be and they hereby
are, authorized to take any and all such action, on behalf of the
Company, as may be required to permit the offering and sale of the fixed
and variable annuity contracts in such jurisdictions;
FURTHER RESOLVED, that the form of any resolutions required by any State
authority to be filed in connection with any of the documents or
instruments referred to in any of the preceding resolutions be, and the
same hereby are, adopted as if fully set forth herein if: (i) in the
opinion of the Proper officers of the Company, the adoption of the
resolutions is advisable; and ( ii) the Corporate Secretary or any
Assistant Secretary of the Company evidences such adoption by inserting
into these minutes copies of such resolutions; and
FURTHER RESOLVED, that any two of the Proper officers of this Company,
are hereby authorized to prepare and to execute the necessary documents
and to take such further actions as they may deem necessary or
appropriate, in their discretion, to implement the purpose of these
resolutions.
Edward B. Burr presented a report on the status of the ANROC project.
Mr. Burr reported that there would be a hearing on the Company's request for a
zoning variance before the City Council on July 6, 1981.
Carroll E. Dietle, II, then presented a report on the Camelsquare
project. Mr. Dietle reported that final documents had been negotiated and that
the closing would take place the next day.
<PAGE> 6
John P. Young, II, presented the Investment Committee report. Mr. Young
reported on actions taken by the committee at meetings held on February 24,
1981; March 17, 1981; March 19, 1981; April 23, 1981; and May 26, 1981. The
minutes of these meetings were presented to the Directors and upon motion duly
made, seconded and unanimously carried, it was:
RESOLVED, that the actions of the Investment Committee in executing the
purchases of general and excess fund investments as reflected in the
minutes of the meetings of said committee held February 24, 1981; March
17, 1981; March 19, 1981; April 23, 1981 and May 26, 1981 be and the
same are hereby ratified, approved and confirmed.
Mr. Young continued his report with a discussion of the status of the
portfolio. Mr. Young then presented the recommendations of the Investment
Committee for changes in the approved list of issuers of short term investments.
The committee recommended that the approved list of issuers of short term
investments be amended by deleting Carter Hawley Hale Credit Corp., RCA Corp.,
Ford Credit Corp., Engelhard Minerals and Chemicals Corp from the list. The
proposed changes were, upon motion duly made, seconded and unanimously carried,
approved.
The Board requested that Mr. Young review guideline 5 of the Investment
Guidelines and present a recommendation for its amendment at the next meeting.
The Real Estate Committee report was presented by Messrs. Dietle,
Schaefer and Young. The outlook for the Phoenix real estate market was
discussed. A proposed acquisition of several parcels of raw land from the Hahn
Brothers Development Company was discussed. It was reported that negotiations
had been concluded to clean up difficult areas in the ground lease for the ANROC
project. A report was given on the status of the Laughlin, Nevada real estate
mortgage investment.
William G. Stalnaker gave a report on administrative matters. Mr.
Stalnaker reported that the design phase of the ANICON project would be
completed by October of this year, with completion of the installation phase
by fall of 1982. Mr. Stalnaker reported that a relocation committee had been
formed to develop an office space plan for the projected occupancy of space in
the ANROC project.
Mr. Stalnaker reported an improvement in the employee matching gift
program. Matching gifts under this plan, will be subject to a minimum of $25 and
a maximum of $1,000 per year. Mr. Stalnaker further reported that the ASU Center
for Executive Development was presenting a series of management workshops to
company personnel. Other lower level employee training courses have been
developed which include workshops on supervision, letter writing and grammer.
The turnover rate for employees has been continuing to improve despite strong
competition in the Phoenix market for certain skills.
<PAGE> 7
Carroll E. Dietle, II, then presented the General Counsel's report. Mr.
Dietle reported that deliberations on the excess interest issue appeared to be
going favorably and that discussions were being conducted to determine the
appropriate period for which prospective interest guarantees must be set. Mr.
Dietle further reported that the ACLI proposed bill on life company taxation
would support our position on excess interest.
Mr. Dietle then presented the Claims report. The Directors discussed
and reviewed this report and ordered copies of the report annexed to these
minutes.
Mr. Dietle reported that in the Florida Power and Light case
defendant's motion for a summary judgement had been denied and that the court
would shortly rule on the certification of the matter as a class action. Mr.
Dietle further reported that in the case Sharon Steel Corp. vs. Chase Manhattan
Bank et. al. that a motion for summary judgement had been granted in favor-of
plaintiffs and the Company as an intervenor. The award included repayment of
principal along with interest on the fund at a rate in excess of the coupon
rate. Attorneys fees were not awarded and the issue will be raised in the event
of an appeal. Mr. Dietle further reported that the challenge by Western and
Southern Life Insurance Company to the California retaliatory tax statutes had
been decided by the U.S. Supreme Court. The Court upheld the constitutionality
of the statutes.
Mr. Burr then suggested that it would be appropriate to consider the
date for the next meeting. Upon motion duly made, seconded and unanimously
carried, it was:
RESOLVED, that a regular meeting of the Board of Directors shall be held
at Anchor National Life Plaza, Camelback at 22nd street, Phoenix,
Arizona, 85016, on Thursday, December 10, 1981, at 9:00 a.m. Mountain
Standard Time.
There being no further business to come before the meeting, it was, upon
motion duly made, seconded and unanimously carried, adjourned.
/s/ Carroll E. Dietle
-------------------------------
Secretary
<PAGE> 1
EXHIBIT (3)(a)
DISTRIBUTION AGREEMENT
THIS AGREEMENT, entered into as of this 28th day of January, 1994, by
and between ANCHOR NATIONAL LIFE INSURANCE COMPANY ("Anchor"), a life insurance
company organized under the laws of the State of California, on behalf of itself
and VARIABLE SEPARATE ACCOUNT ("Separate Account") , a Separate Account
established by Anchor pursuant to the insurance laws of the State of California,
and SUNAMERICA CAPITAL SERVICES, INC., ("Distributor"), a corporation organized
under the laws of the state of Delaware.
WITNESSETH:
WHEREAS, Anchor issues to the public certain variable annuity contracts
identified on the contract specification sheet attached hereto as Attachment A
("Contracts") , which Contracts are currently distributed by SunAmerica
Securities, Inc.; and
WHEREAS, Anchor, by resolution adopted on June 25, 1981, established the
Separate Account on its books of account, for the purpose of issuing variable
annuity contracts; and
WHEREAS, the Separate Account is registered with the Securities and
Exchange Commission ("Commission") as a unit investment trust under the
Investment Company Act of 1940 (File No. 811-3859); and
WHEREAS, the Contracts to be issued by Anchor are registered with the
Commission under the Securities Act of 1933 (the "Act") (File No. 2-86837) for
offer and sale to the public, and otherwise are in compliance with all
applicable laws; and
WHEREAS, the Distributor, a broker-dealer registered under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc., proposes to act as distributor on an agency basis in
the marketing and distribution of said Contracts; and
WHEREAS, Anchor desires to obtain the services of the Distributor as
distributor of said Contracts issued by Anchor through the Separate Account to
replace SunAmerica Securities, Inc.;
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and conditions set forth herein, and for other good and valuable
consideration, Anchor, the Separate Account, and Distributor hereby agree as
follows:
1. The Distributor will serve as distributor on an agency basis
for the Contracts which will be issued by Anchor through the Separate
Account.
<PAGE> 2
2. The Distributor will, either directly or through an affiliate,
provide information and marketing assistance to licensed insurance
agents and broker-dealers on a continuing basis. The Distributor shall
be responsible for compliance with the requirements of state
broker-dealer regulations and the Securities Exchange Act of 1934 as
each applies to Distributor in connection with its duties as distributor
of said Contracts. Moreover,, the Distributor shall conduct its affairs
in accordance with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc.
3. Subject to the agreement of Anchor, the Distributor may enter
into dealer agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and authorized by applicable law to sell
variable annuity contracts issued by Anchor through the Separate
Account. Any such contractual arrangement is expressly made subject to
this Agreement, and the Distributor will at all times be responsible to
Anchor for purposes of the federal securities laws for the distribution
of Contracts issued through the Separate Account. The Distributor
expressly assumes any dealer agreements entered into by SunAmerica
Securities, Inc. with respect to the Contracts.
4. Warranties
----------
(a) Anchor represents and warrants to the Distributor
that:
(i) Registration Statements on Form N-4 for each of the
Contracts identified on Attachment A have been filed with
the Commission in the form previously delivered to the
Distributor and that copies of any and all amendments
thereto will be forwarded to the Distributor at the time
that they are filed with the Commission;
(ii) The Registration Statement and any further amendments
or supplements thereto will, when they become effective,
conform in all material respects to the requirements of
the Securities Act of 1933 and the Investment Company Act
of 1940, and the rules and regulations of the Commission
under such Acts, and will not contain an untrue statement
of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any
statement or omission made in reliance upon and in
conformity with information furnished in writing to Anchor
by the Distributor expressly for use therein;
-2-
<PAGE> 3
(iii) Anchor is validly existing as a stock life
insurance company in good standing under the laws of the
State of California, with power (corporate or other) to
own its properties and conduct its business as described
in the Prospectus, and has been duly qualified for the
transaction of business and is in good standing under the
laws of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require
such qualification;
(iv) The Contracts to be issued through the Separate
Account and offered for sale by the Distributor on behalf
of Anchor hereunder have been duly and validly authorized
and, when issued and delivered against payment therefor as
provided herein, will be duly and validly issued and will
conform to the description of such Contracts contained in
the Prospectuses relating thereto;
(v) Those persons who offer and sell the Contracts
are to be appropriately licensed in a manner as to comply
with the state insurance laws;
(vi) The performance of this Agreement and the
consummation of the transactions contemplated by this
Agreement will not result in a breach or violation of any
of the terms or provisions of, or constitute a default
under any statute, any indenture, mortgage, deed of trust,
note agreement or other agreement or instrument to which
Anchor is a party or by which Anchor is bound, Anchor's
Charter as a stock life insurance company or Bylaws, or
any order, rule or regulation of any court or governmental
agency or body having jurisdiction over Anchor or any of
its properties; and no consent, approval, authorization or
order of any court or governmental agency or body is
required for the consummation by Anchor of the
transactions contemplated by this Agreement, except such
as may be required under the Securities Exchange Act of
1934 or state insurance or securities laws in connection
with the distribution of the Contracts by the Distributor;
and
(vii) There are no material legal or governmental
proceedings pending to which Anchor or the Separate
Account is a party or of which any property of Anchor or
the Separate Account is the subject, other than as set
forth in the Prospectus relating to the Contracts, and
other than
-3-
<PAGE> 4
litigation incident to the kind of business conducted by
Anchor, if determined adversely to Anchor, would
individually or in the aggregate have a material adverse
effect on the financial position, surplus or operations of
Anchor.
(b) The Distributor represents and warrants to Anchor that:
(i) It is a broker-dealer duly registered with the
Commission pursuant to the Securities Exchange Act of 1934
and a member in good standing of the National Association
of Securities Dealers, Inc., and is in compliance with the
securities laws in those states in which it conducts
business as a broker-dealer;
(ii) The performance of this Agreement and the
consummation of the transactions herein contemplated will
not result in a breach or violation of any of the terms or
provisions of or constitute a default under any statute,
any indenture, mortgage, deed of trust, note agreement or
other agreement or instrument to which the Distributor is
a party or by which the Distributor is bound, the
Certificate of Incorporation or Bylaws of the Distributor,
or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the
Distributor or its property; and
(iii) To the extent that any statements or omissions
made in the Registration Statement, or any amendment or
supplement thereto are made in reliance upon and in
conformity with written information furnished to Anchor by
the Distributor expressly for use therein, such
Registration Statement and any amendments or supplements
thereto will, when they become effective or are filed with
the Commission, as the case may be, conform in all
material respects to the requirements of the Securities
Act of 1933 and the rules and regulations of the
Commission thereunder and will not contain any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make
the statements therein not misleading.
- 4 -
<PAGE> 5
5. The Distributor, or an affiliate thereof, shall keep, or shall
cause to be kept, in a manner and form prescribed or approved by Anchor
and in accordance with Rules 17a-3 and 17a-4 under the Securities
Exchange Act of 1934, correct records and books of account as required
to be maintained by a registered broker-dealer, acting as distributor,
of all transactions entered into on behalf of Anchor and with respect to
its activities under this Agreement for Anchor. The party maintaining
the books and records required hereunder shall make such records and
books of account available for inspection by the Commission, and Anchor
shall have the right to inspect, make copies of or take possession of
such records and books of account at any time on demand.
6. Subsequent to having been authorized to commence the activities
contemplated herein, the Distributor, or an affiliate thereof, will
cause the currently effective Prospectus relating to the subject
Contracts in connection with its marketing and distribution efforts to
be utilized. As to the other types of sales material, the Distributor,
or an affiliate thereof, agrees that it will cause to be used only sales
materials as have been authorized for use by Anchor and which conform to
the requirements of federal and state laws and regulations, and which
have been filed where necessary with the appropriate regulatory
authorities, including the National Association of Securities Dealers,
Inc.
7. The Distributor, or such other person as referred to in paragraph
6 above, will not distribute any Prospectus, sales literature, or any
other printed matter or material in the marketing and distribution of
any Contract if, to the knowledge of the Distributor, or such other
person, any of the foregoing misstates the duties, obligation or
liabilities of Anchor or the Distributor.
8. Expenses of providing sales presentations, mailings, advertising
and any other marketing efforts conducted in connection with the
distribution or sale of the Contracts shall be borne by Anchor.
9. The Distributor, as distributor of the Contracts, shall not be
entitled to remuneration for its services.
10. All premium payments collected on the sale of the Contracts by
the Distributor, if any, shall be transmitted to Anchor for immediate
allocation to the Separate Account in accordance with the directions
furnished by the purchasers of such Contracts at the time of purchase.
11. The Distributor makes no representations or warranties regarding
the number of Contracts to be sold by licensed
-5-
<PAGE> 6
broker-dealers and insurance agents or the amount to be paid thereunder.
The Distributor does, however, represent that it will actively engage in
its duties under this Agreement on a continuous basis while there is an
effective registration statement with the Commission.
12. It is understood and agreed that the Distributor may render similar
services or act as a distributor or dealer in the distribution of other
variable contracts.
13. Anchor will use its best efforts to assure that the Contracts are
continuously registered under the Securities Act of 1933 and, should it
ever be required, under state Blue Sky Laws and to file for approval
under state insurance laws when necessary.
14. Anchor reserves the right at any time to suspend or limit the
public offering of the subject Contracts.
15. Anchor agrees to advise the Distributor immediately of:
(a) any request by the commission (i) for amendment of the
Registration Statement relating to the Contracts, or (ii) for
additional information;
(b) the issuance by the commission of any stop order suspending
the effectiveness of the Registration Statement relating to the
Contracts or the initiation of any proceedings for that purpose;
and
(c) the happening of any material event, if known, which makes
untrue any statement made in the Registration Statement relating
to the Contracts or which requires the making of a change therein
in order to make any statement made therein not misleading.
16. Anchor will furnish to the Distributor such information with
respect to the Separate Account and the Contracts in such form and
signed by such of its officers as the Distributor may reasonably
request; and will warrant that the statements therein contained when so
signed will be true and correct.
17. Each of the undersigned parties agrees to notify the other in
writing upon being apprised of the institution of any proceeding,
investigation or hearing involving the offer or sale of the subject
Contracts.
18. This Agreement will terminate automatically upon its
assignment to any person other than a person which is a wholly owned
subsidiary of SunAmerica Inc. This Agreement
-6-
<PAGE> 7
shall terminate, without the payment of any penalty by either party:
(a) at the option of Anchor, upon sixty days' advance
written notice to the Distributor; or
(b) at the option of the Distributor upon 90 days' written
notice to Anchor; or
(c) at the option of Anchor upon institution of formal
proceedings against the Distributors by the National Association
of Securities Dealers, Inc. or by the Commission; or
(d) at the option of either party, if the other party or any
representative thereof at any time (i) employs any device,
scheme, or artifice to defraud; makes any untrue statement of a
material fact or omits to state a material fact necessary in
order to make the statements made, in light of the circumstances
under which they were made, not misleading; or engages in any
act, practice, or course of business which operates or would
operate as a fraud or deceit upon any person; or (ii) violates
the conditions of this Agreement.
19. Each notice required by this Agreement may be given by telephone
or telefax and confirmed in writing.
20. (a) Anchor will indemnify and hold harmless the Distributor and
each person, if any, who controls the Distributor within the meaning of
the Act against any losses, claims, damages or liabilities to which the
Distributor or such controlling person may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement, Prospectus or Statement of Additional
Information or any other written sales material prepared by Anchor which
is utilized by the Distributor in connection with the sale of Contracts
or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or (in the
case of the Registration Statement, Prospectus and Statement of
Additional Information) necessary to make the statement therein not
misleading or (in the case of such other sales material) necessary to
make the statement therein not misleading or (in the case of such other
sales material) necessary to make the statements therein not misleading
in the light of the circumstances under which they were made and will
reimburse the Distributor and each such controlling person for any legal
or other expenses reasonably incurred
-7-
<PAGE> 8
by the Distributor or such controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action, provided, however, that Anchor will not be liable in any such
case to the extent that any such loss, claim, or omission or alleged
omission made in such Registration Statement, Prospectus or Statement of
Additional Information in conformity with information furnished to
Anchor specifically for use therein; and provided, further, that nothing
herein shall be so construed as to protect the Distributor against any
liability to Anchor or the Contract Owners to which the Distributor
would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence, in the performance of its duties, or by reason of
the reckless disregard by the Distributor of its obligations and duties
under this Agreement.
(b) The Distributor will likewise indemnify and hold harmless
Anchor, each of its directors and officers and each person, if any, who
controls the Trust within the meaning of the Act to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in conformity with written
information furnished to the Trust by the Distributor specifically for
use therein.
21. This Agreement shall be subject to the laws of the State of
California and construed so as to interpret the Contracts and insurance
contracts written within the business operation of Anchor.
22. This Agreement covers and includes all agreements, verbal and
written, between Anchor and the Distributor with regard to the marketing
and distribution of the Contracts, and supersedes and annuls any and all
agreements between the parties with regard to the distribution of the
Contracts; except that this Agreement shall not affect the operation of
previous or future agreements entered into between Anchor and the
Distributor unrelated to the sale of the Contracts.
- 8 -
<PAGE> 9
THIS AGREEMENT, along with any Attachment attached hereto and
incorporated herein by reference, may be amended from time to time by the mutual
agreement and consent of the undersigned parties; provided that such amendment
shall not affect the rights of existing Contract Owners, and that such amendment
be in writing and duly executed.
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement
to be duly executed and their respective corporate seals to be hereunto affixed
and attested on the date first stated above.
ANCHOR NATIONAL LIFE
INSURANCE COMPANY
By: /s/ JAY S. WINTROB
--------------------------------
Jay S. Wintrob
Executive Vice President
VARIABLE ANNUITY ACCOUNT ONE
By: ANCHOR NATIONAL LIFE
INSURANCE COMPANY
By: /s/ JAY S. WINTROB
--------------------------
Jay S. Wintrob
Executive Vice President
SUNAMERICA CAPITAL SERVICES, INC.
By: /s/ PETER HARBECK
----------------------------------
PETER HARBECK
Executive Vice President
- 9 -
<PAGE> 10
Attachment A
------------
CONTRACT SPECIFICATION SHEET
----------------------------
The following variable annuity contracts are the subject of the Distribution
Agreement between Anchor National Life Insurance Company and SunAmerica Capital
services, Inc. dated January 28, 1994 regarding the sale of the following
contracts funded in Variable Separate Account:
1. AMERICAN PATHWAY II
<PAGE> 1
EXHIBIT 3(b)
SELLING AGREEMENT
- --------------------------------------------------------------------------------
This Selling Agreement ("Agreement"), dated _____________________, is by and
among Anchor National Life Insurance Company ("Insurer"), SunAmerica Capital
Services, Inc. ("Distributor") and ________________________________________,
together with its duly licensed insurance affiliates indicated on the attached
Annex I (the "Affiliates" and collectively, "Broker/Dealer"). Where permitted by
state law, Broker/Dealer is acting as general agent hereunder and shall be
responsible for the duties of broker/dealer and general agent hereunder. If
state law does not permit Broker/Dealer to hold a corporate insurance license,
the appropriate duly licensed insurance affiliate identified on Annex I shall
act as general agent hereunder. Upon execution of Annex I, such entity or
entities agree to be bound by the terms hereof as if it were included in the
definition of Broker/Dealer.
1. Appointment. This Agreement is for the purpose of arranging for the
distribution of certain variable and fixed annuity contracts and any other life
insurance products identified on Exhibit 1 (the "Contracts"), issued by the
Insurer and, in the case of variable contracts, for which Distributor is
distributor, through sales people who are licensed agents of the Insurer for
insurance purposes, are associated with and registered representatives of
Broker/Dealer (each, a "Subagent"). In consideration of the mutual promises and
covenants contained in this Agreement, the Insurer and Distributor each appoint
Broker/Dealer and, as provided in Section 3, its Subagents, to solicit and
procure applications for the Contracts. This appointment is not deemed to be
exclusive in any manner and only extends to those jurisdictions where the
Contracts have been approved for sale and in which Insurer and Broker/Dealer are
both licensed as required by prevailing regulatory requirements.
2. Representations and Warranties.
A. Each party hereto represents and warrants to each other party,
as follows:
(i) It is duly organized, validly existing and in good standing under
the laws of the state of its incorporation or other corresponding applicable law
and has all requisite power, corporate or otherwise to carry on its business as
now being conducted and to perform its obligations as contemplated by this
Agreement.
(ii) It has all licenses, approvals, permits and authorizations of, and
registrations with, all authorities and agencies, including non-governmental
self-regulatory agencies, required under all federal, state, and local laws and
regulations to enable it to perform its obligations as contemplated by this
Agreement.
(iii) The execution, delivery and performance of this Agreement have
been duly and validly authorized by all necessary corporate action, if
applicable, and this Agreement constitutes the legal, valid and binding
agreement of such party, enforceable against it in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and general principles of equity.
B. Broker/Dealer additionally represents and warrants as follows:
(i) It is registered as a broker and dealer under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and is a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD").
(ii) It will comply with all applicable laws, rules and regulations of,
as well as any and all directives and guidelines issued by any agency or other
regulatory body with authority over Broker/Dealer or over the premises on which
Broker/Dealer and its Subagents are soliciting the sale of Contracts.
(iii) It is duly licensed as a corporate insurance agent, or it has
identified on Annex I hereto its Affiliates which hold such licenses and are
permitted to do so under applicable laws.
<PAGE> 2
3. Subagents. Broker/Dealer is authorized to recommend Subagents for
appointment to solicit sales of the Contracts. Broker/Dealer is responsible for
investigating the character, work experience and background of any proposed
Subagent prior to recommending appointment by Insurer. No Subagent shall act on
behalf of Insurer until properly appointed by Insurer. To the extent that
Exhibit 1 does not include all annuity Contracts of Insurer which are registered
as securities under the Federal Securities laws, Broker/Dealer is responsible
for ensuring that its Subagents, unless otherwise agreed to with Insurer in
writing, do not offer to sell any other variable annuity contracts issued by
Insurer, other than the Contracts, unless a selling agreement with respect
thereto has been executed by the parties. Broker/Dealer is responsible for
supervising the activities of its Subagents and for ensuring that Subagents are
properly licensed and in compliance with all applicable federal, state and local
laws and regulations and all rules and procedures of Insurer. Broker/Dealer
shall notify Insurer promptly, in writing, of any giving or receiving of notice
of termination of any subagent. Insurer reserves the right to refuse to appoint
any proposed Subagent and to terminate any relationship with any Subagent, with
or without cause, at any time. By submitting a Subagent for appointment,
Broker/Dealer warrants that: (1) such Subagent is recommended for appointment;
(2) such Subagent is fully licensed under applicable laws to transact business
with Insurer and is a duly registered representative of Broker/Dealer; and (3)
all background investigations required by state and federal laws have been made
with respect to such Subagent.
4. Sales Material.
A. Broker/Dealer shall not use any written or audiovisual sales material
(including prepared scripts for oral presentations) in connection with the sales
of the Contracts or solicitations thereof, unless such material has been
provided by, or approved in writing in advance of such use by, the Insurer and
Distributor.
B. In accordance with the requirements of federal and certain state
laws, Broker/Dealer shall, to the extent required by such laws, maintain
complete records indicating the manner and extent of distribution of any such
sales material. This material shall be made available to appropriate federal and
state regulatory agencies as required by law or regulation and to Distributor
and Insurer upon written request.
5. Prospectuses. For any Contract which is a registered security, Broker/Dealer
warrants that solicitation will be made by use of currently effective
prospectuses for the Contract and the underlying funds; and if required by state
law, the Statement of Additional Information for the Contract; that the
prospectuses will be delivered concurrently with each sales presentation and
that no statements shall be made to a client superseding or controverting or
otherwise inconsistent with any statement made in the prospectus. The Insurer
and Distributor shall furnish Broker/Dealer, at no cost to such party,
reasonable quantities of currently effective prospectuses.
6. Conduct of Business.
A. Broker/Dealer will fully comply with the requirements of all
applicable laws, rules and regulations of regulatory authorities (including
self-regulatory organizations) having jurisdiction over the activities of
Broker/Dealer or over the activities contemplated by this Agreement to be
conducted by Broker/Dealer.
B. Neither Broker/Dealer nor any Subagent shall solicit an application
from, or recommend the purchase of a Contract to, an applicant without having
reasonable grounds to believe, in accordance with, among other things,
applicable regulations of any state insurance commission, the Securities and
Exchange Commission ("SEC") and the NASD, that such purchase is suitable for the
applicant. While not limited to the following, a determination of suitability
shall be based on information supplied after a reasonable inquiry concerning the
applicant's insurance and investment objectives and financial situation and
needs.
<PAGE> 3
C. Broker/Dealer has or will have established, prior to its commencement
of any solicitation of sales of Contracts pursuant to the terms of this
Agreement, such rules, procedures, supervisory and inspection techniques as
necessary to diligently supervise the activities of its Subagents pursuant to
this Agreement and to ensure compliance with the terms of this Agreement
necessary to establish diligent supervision. Broker/Dealer shall be responsible
for securities training, supervision and control of its Subagents in connection
with their solicitation activities with respect to the Contracts and shall
supervise compliance with applicable federal and state securities laws and NASD
requirements in connection with such solicitation activities. Broker/Dealer will
observe, and will comply with, all requirements of any bank on whose premises
Broker/Dealer engages in sales activities pursuant to this Agreement. Upon
request by Insurer or Distributor, Broker/Dealer will furnish appropriate
records as are necessary to establish diligent supervision.
D. Broker/Dealer will fully comply with the requirements of applicable
state insurance laws and regulations and will maintain all books and records and
file all reports required thereunder to be maintained or filed by a licensed
insurance agent. Broker/Dealer shall comply with the terms and conditions of any
letter issued by the Staff of the SEC with respect to the non-registration as a
broker-dealer under the 1934 Act of a corporation licensed as an insurance agent
and associated with a registered broker-dealer. Broker/Dealer shall notify
Distributor immediately in writing if Broker/Dealer fails to comply with any
such terms and conditions and shall take such measures as may be necessary to
comply with any such terms and conditions.
E. Broker/Dealer shall promptly notify Insurer and Distributor of any
written customer complaint or notice of any regulatory investigation or
proceeding received by Broker/Dealer or any Subagent relating to a Contract or
any activities undertaken in connection with this Agreement. Insurer and
Broker/Dealer shall each cooperate fully in any investigation or proceeding
including but not limited to any securities or insurance regulatory
investigation or proceeding or judicial proceeding arising in connection with
the Contracts.
F. Broker/Dealer shall pay all expenses incurred by it in the
performance of this Agreement unless otherwise specifically provided for in this
Agreement or in a writing signed by Insurer and/or Distributor and
Broker/Dealer.
G. Applications shall be taken only on preprinted application forms
supplied by the Insurer. The Contract forms and applications are the sole
property of the Insurer. No person other than the Insurer has the authority to
make, alter or discharge any policy, Contract application, Contract certificate,
supplemental contract or form issued by the Insurer. No person other than the
Insurer has the right to waive any provision with respect to any Contract or
policy. No person other than the Insurer has the authority to enter into any
proceeding in a court of law or before a regulatory agency in the name of or on
behalf of the Insurer.
H. Broker/Dealer and Subagent shall accept premiums in the form of a
check or money order made payable to Insurer. Broker/Dealer shall ensure that
all checks and money orders and applications for the Contracts received by it or
any Subagent are remitted promptly to Insurer. In the event that any other
premiums are sent to a Subagent or Broker/Dealer rather than to Insurer, they
shall promptly remit such premiums to Insurer. Broker/Dealer acknowledges that
if any premium is held at any time by it, such premium shall be held on behalf
of Insurer, and Broker/Dealer shall segregate such premium from its own funds
and promptly remit such premium to Insurer. All such premiums, whether by check,
money order or wire, shall at all times be the property of Insurer.
I. Upon issuance of a Contract by Insurer and delivery of such Contract
to Broker/Dealer, Broker/Dealer shall promptly deliver such Contract to its
purchaser. For purposes of this provision, "promptly" shall be deemed to mean
not later than five calendar days, or such shorter period as is reasonable under
the circumstances. Broker/Dealer shall return promptly to Insurer all receipts
for delivered Contracts, all undelivered Contracts and all receipts for
cancellation, in accordance with the instructions from Insurer.
<PAGE> 4
J. Unless required by a determination of suitability, during the term of
this Agreement and after termination hereof, Broker/Dealer covenants on behalf
of itself and any Subagent appointed hereunder, that they shall not solicit,
induce or attempt to solicit or induce Contract owners to terminate, surrender,
cancel, replace or exchange such Contract. Broker/Dealer acknowledges and agrees
that the provisions contained in this Section 6 may be enforced by an action for
an injunction, as well as or in addition to any action for damages.
7. Commission Payments.
A. Broker/Dealer shall be entitled to receive a commission based upon
premiums received and accepted by the Insurer for Contracts issued pursuant to
this Agreement, based on the applicable rate of commission set forth in the
Commission Schedule attached hereto as Exhibit 1 which is incorporated herein by
reference. Broker/Dealer shall be solely responsible for the payment of any
commission or consideration of any kind to Subagents.
B. In no event shall the Insurer be liable for the payment of any
commissions with respect to any solicitation made, in whole or in part, by any
person not appropriately licensed and registered prior to the commencement of
such solicitation.
C. If a Contract is returned to the Insurer pursuant to the "Free Look"
provision or any other right to examine provision of the Contract, the full
commission paid by the Insurer will be unearned and shall be returned to the
Insurer upon demand or, in the absence of such demand, charged back to the
recipient of the commission. Broker/Dealer covenants and agrees to promptly
deliver Contracts and to hold the Insurer harmless from and against any claim
arising from market loss resulting from their breach of this covenant.
D. In no event shall Insurer incur obligations under this Agreement to
issue any Contracts or pay any commission in connection therewith if the
Contract owner is over the maximum issue age with respect to that product when
the Contract application was accepted. With respect to such Contracts, the full
commission paid by the Insurer will be unearned and shall be returned to the
Insurer upon demand or, in the absence of such demand, charged back to the
recipient of the commission.
E. With respect to any Contract that is rescinded, as determined by the
Insurer in its sole discretion (other than a rescission with respect to which a
surrender charge applies), or if the Insurer otherwise determines that a
commission has not been earned (but such determination may not contravene any
other provision of this Agreement), 100% of such unearned commission will be
returned to the Insurer upon demand or, in the absence of such demand, charged
back to the recipient of the commission.
F. Compensation for the sale of any Contract which is renewed, changed,
exchanged or otherwise converted from any other contract issued by the Company
shall be paid according to the Insurer's guidelines and practices.
G. With respect to any Contract, or group of Contracts which the Insurer
in its sole discretion deems to be a single case, and which at the time of
application submission the initial purchase payment is greater than $500,000,
the Insurer may determine in its sole discretion that the commissions set forth
on Exhibit 1 not apply. In the event the Insurer determines that the
commission(s) do not apply, the Insurer may establish an alternate commission
for such Contract or Contracts.
8. Indemnification
A. Broker/Dealer shall indemnify, defend and hold harmless Insurer and
Distributor and each person who controls or is associated with Insurer or
Distributor within the meaning of the federal securities laws and any director,
officer, corporate agent, employee, attorney and any representative thereof,
from and against all losses, expenses, claims, damages and liabilities
(including any costs of investigation and legal expenses and any amounts paid in
settlement of any action, suit or proceeding of any claim asserted) which result
from, arise out of or are based upon:
(i) any breach by Broker/Dealer or its Affiliates of any representation,
warranty or other provision of this Agreement, including any acts or
omissions of Broker/Dealer, Affiliates, Subagents and other associated
persons; or
<PAGE> 5
(ii) any violation by Broker/Dealer, any Affiliate or any Subagent of
any federal or state securities law or regulation, insurance law or
regulation or any rule or requirement of the NASD;
(iii) the use by Broker/Dealer, any Affiliate or any Subagent of any
sales or promotional material which has not received specific written
approval of Insurer and Distributor as provided in Section 4 of this
Agreement, any oral or written misrepresentations or any unlawful sales
practices concerning the Contracts by Broker/Dealer, any Affiliate or
any Subagent; or
(iv) Claims by Subagents or other agents or representatives of
Broker/Dealer for commissions or other compensation or remuneration of
any type.
B. The indemnification provided for herein shall survive termination of
this Agreement.
9. Fidelity Bond. Broker/Dealer represents that all directors, officers,
employees, representatives and/or Subagents who are appointed pursuant to this
Agreement or who have access to funds of the Insurer are and will continue to be
covered by a blanket fidelity bond including coverage for larceny, embezzlement
or any other defalcation, issued by a reputable bonding company. This bond shall
be maintained at Broker/Dealer's expense. Such bond shall be at least equivalent
to the minimal coverage required under the NASD Rules of Fair Practice, endorsed
to extend coverage to life insurance and annuity transactions. Broker/Dealer
acknowledges that the Insurer may require evidence that such coverage is in
force and Broker/Dealer shall promptly give notice to the Insurer of any notice
of cancellation or change of coverage. Broker/Dealer assigns any proceeds
received from the fidelity bond company to the Insurer to the extent of the
Insurer's loss due to activities covered by the bond. If there is any
deficiency, Broker/Dealer will promptly pay the Insurer that amount on demand,
and Broker/Dealer shall indemnify and hold harmless the Insurer from any
deficiency and from the cost of collection.
10. Market Timer Program. Insurer has available a Market Timer Program
which allows a market timer service to effect multiple transfers or other
transactions. Parties may use this program at the discretion of Insurer and upon
execution of a Market Timer Agreement. Among other provisions, the Market Timer
Agreement specifies that if the impact of processing exchange transactions
received from all outside sources is deemed to be injurious to one of the
separate accounts or a subaccount thereof, then Insurer in its sole discretion
may elect not to process the exchanges and that Insurer will notify the Market
Timer Service of the inability to process the requested exchange. Insurer
reserves the right to terminate participation in or the entire Market Timer
Program at any time and for any reason.
11. RapidApp Program. If applications are transmitted to the Insurer
pursuant to the Insurer's RapidApp Program, the following provisions shall apply
to such applications and Contracts issued pursuant to the RapidApp Program.
A. Broker/Dealer agrees to communicate with owners of the Contracts
issued through the RapidApp Program in order to obtain and deliver to the
Insurer the signed confirmation for the Contract. Broker/Dealer further agrees
to provide any assistance or cooperation required to enforce a Contract issued
under the RapidApp Program which shall include, but not be limited to, providing
the Insurer access to recordings of telephone conversations with customers
containing their consent to the purchase of Contracts, or providing statements
or affidavits from such Subagents as to the customer's consent to the making of
the Contract.
B. In the event the owner of a Contract repudiates or rescinds the
Contract and the Insurer, in its sole discretion, waives any surrender charges,
the full commission paid by the Insurer will be returned to the Insurer upon
demand or, in the absence of such demand, charged back to the recipient of the
commission. In addition, all amounts equal to any market loss arising from such
rescission or repudiation will be paid by Broker/Dealer on demand, or in the
absence of such demand, charged back to Broker/Dealer.
C. Broker/Dealer agrees that it will be solely responsible for the
transmission or failure of transmission of application information to the
Insurer. Broker/Dealer warrants that all application information will be
accurate and can be relied upon by the Insurer.
<PAGE> 6
D. Broker/Dealer agrees to pay the Insurer all amounts equal to any
market loss resulting from the misallocation of the initial purchase payment
into the subaccounts, which misallocation was the result of Insurer relying on
Broker/Dealer's or their Subagents' application information. In the absence of a
demand for payment, such amounts shall be charged back to Broker/Dealer.
E. Broker/Dealer agrees that its Subagents who are resident and licensed
in those jurisdictions approved by the Insurer may submit applications to the
Insurer pursuant to the RapidApp Program and agree to the provisions of this
Section 11. Broker/Dealer acknowledges that agreeing to the provisions of this
Section 11 does not require its Subagents to submit all applications to the
Insurer pursuant to the RapidApp Program.
12. Termination.
A. Normal Termination. This Agreement shall continue for an indefinite
term, subject to the termination by either party upon written notice to the
other parties hereto, which shall be effective upon receipt thereof. In
addition, Insurer may terminate this Agreement without notice if Broker/Dealer
fails to satisfy the Insurer's production requirements, as determined in the
sole discretion of the Insurer.
B. Automatic Termination for Cause. This Agreement shall automatically
terminate upon: (1) a material breach of this Agreement, including without
limitation the failure to comply with the laws or regulations of any state or
other governmental agency or body having jurisdiction over the sale of
insurance; and (2) the suspension, revocation or non-renewal of any then
required insurance or securities license of Broker/Dealer or any of its
Affiliates, or the deregistration of the Broker/Dealer or its termination of
membership with the NASD.
C. Rights and Obligations. Upon termination of this Agreement, except as
otherwise provided herein, all authorizations,rights and obligations shall
cease. If this Agreement is terminated for cause as described above,
Broker/Dealer's right to receive compensation shall immediately terminate.
13. General Provisions.
A. Waiver. Waiver by any of the parties to promptly insist upon strict
compliance with any of the obligations of any other party under this Agreement
will not be deemed to constitute a waiver of the right to enforce strict
compliance.
B. Independent Contractor. Broker/Dealer is an independent
contractor and its Subagents who are appointed as insurance agents of Insurer
are agents of Broker/Dealer and not employees, agents or representatives of
Insurer or Distributor.
C. Independent Assignment. No assignment of this Agreement or of
commissions or other payments under this Agreement shall be valid without the
prior written consent of the Insurer.
D. Notice. Any notice pursuant to this Agreement shall be
mailed, postage paid, to the last address communicated by the receiving party
to the other parties to this Agreement.
E. Severability. To the extent this Agreement may be in conflict with
any applicable law or regulation, this Agreement shall be construed in a manner
not inconsistent with such law or regulation. The invalidity or illegality of
any provision of this Agreement shall not be deemed to affect the validity or
legality of any other provision of this Agreement.
F. Amendment. No Amendment to this Agreement shall be effective unless
in writing and signed by all the parties hereto.
G. California Law. This Agreement shall be construed in accordance with
the laws of the State of California.
<PAGE> 7
H. Effectiveness. This Agreement shall be effective as of the
date set forth above.
IN WITNESS WHEREOF, this Agreement has been executed by duly authorized
representatives of the parties to this Agreement as of the date set forth above.
"INSURER":
ANCHOR NATIONAL LIFE INSURANCE COMPANY
By: __________________________________
Name:
Title:
"DISTRIBUTOR":
SUNAMERICA CAPITAL SERVICES, INC.
By: ____________________________________
Mathew Lobas, President
"BROKER/DEALER":
- ---------------------------------------
By: ___________________________________
<PAGE> 8
ANNEX I
This Annex I appends that certain Selling Agreement dated
_______________________ (the "Agreement") between Anchor National Life Insurance
Company, SunAmerica Capital Services, Inc. and _______________________________
("Broker/Dealer"). Each of the undersigned is affiliated with Broker/Dealer and
represents that it holds the necessary corporate insurance license to act as
general agent in connection with the sale of Contracts, as defined in the
Agreement, in those states so identified next to its name. By executing this
Annex I each of the undersigned agrees to be bound by the terms and conditions
of the Agreement as if it were a party thereto.
COMPANY STATE(S) TAX I.D. NO.
Signature:
Signature:
Signature:
Signature:
Signature:
Signature:
Signature:
Signature:
Signature:
Signature:
Signature:
Signature:
Signature:
Signature:
Signature:
Signature:
Signature:
Signature:
<PAGE> 9
BANK RIDER
This rider is appended to that certain Selling Agreement date
____________________________between Anchor National Life Insurance Company
("Insurer"), SunAmerica Capital Services, Inc. ("Distributor") and
_____________________________, together with its duly licensed insurance
affiliates indicated on Annex I of the Selling Agreement ("Broker/Dealer"). This
Rider is to be executed by any Broker/Dealer which is selling, or intends to
sell, Contracts on the premises of any federal or state chartered bank, thrift
or savings and loan institution (collectively, "Bank"). Pursuant hereto,
Broker/Dealer represents and warrants that it will comply with the requirements
of applicable laws, regulations and guidelines of any regulatory authority
having jurisdiction over the activities of Bank or occurring on Bank premises,
including without limitation, the Interagency Statement on Retail Sales of
Nondeposit Investment Products (Board of Governors of the Federal Reserve
System, Federal Deposit Insurance Corporation, Office of the Comptroller of the
Currency, and Office of Thrift Supervision, February 14, 1994) and any
subsequent release designed to provide governance to banks in connection with
the sale of nondeposit investment products ("applicable banking laws").
Broker/Dealer agrees that it shall be responsible for ensuring that applicable
banking laws are complied with in connection with the activities undertaken
pursuant to the Selling Agreement, including without limitation, ensuring that
all advertisements and sales literature used by Broker/Dealer comply with
applicable banking laws. Broker/Dealer further agrees that it shall inform the
Insurer in writing of any legends and other disclosures that are required by
applicable banking laws to be contained in advertisements or sales literature
for policies issued by the Insurer.
"Broker/Dealer"
By:
-------------------------------
-------------------------------
Printed Name & Title
<PAGE> 1
EXHIBIT (4)
Anchor National Life Insurance Company
A STOCK COMPANY - LOS ANGELES, CALIFORNIA
CONTRACT NUMBER
ANNUITANT
EXECUTIVE OFFICE ANNUITY SERVICE OFFICE
ANCHOR CENTER P.O. Box 56993
2201 EAST CAMELBACK ROAD ATLANTA, GEORGIA 30343
PHOENIX, ARIZONA 85016
ANCHOR NATIONAL LIFE INSURANCE COMPANY ("the Company" or "Anchor National") will
make monthly annuity payments for the Life of the Annuitant or as provided in
this Contract. According to the settlement option elected by the owner and based
upon the Life of the Annuitant, annuity payments under this contract will be
either guaranteed as to fixed dollar amount, or will vary in accordance with the
investment experience of the American Pathway II Separate Account of the Company
("Separate Account"). Payments will be made to the Owner starting on the Annuity
Date.
The value of amounts allocated to the Separate Account during the accumulation
and annuity periods are not guaranteed, and will increase or decrease based upon
the investment experience of The American Pathway Fund ("Fund"), the mutual fund
underlying the Separate Account.
THIS IS A LEGAL CONTRACT. READ IT CAREFULLY.
This contract is issued in consideration of the attached application and the
payment of a Purchase Payment. The provisions on the following pages are a part
of the contract.
FLEXIBLE PURCHASE PAYMENTS - NONPARTICIPATING
/s/ JAMES E. STARK /s/ HOWARD R. FRIKE
Assistant Secretary Chairman and Chief Executive Officer
Countersigned:
TEN DAY RIGHT TO REVIEW CONTRACT: The Owner may cancel this Contract within ten
days after he or she receives it. Simply return or mail it to the Annuity
Service Office. Upon receipt by the Annuity Service Office, the Company will
refund the Contract value for the valuation period in which the Contract is
received. Upon such refund, the Contract shall be void.
INDIVIDUAL DEFERRED FIXED BENEFIT AND
VARIABLE BENEFIT ANNUITY CONTRACT
I-60
<PAGE> 2
TABLE OF CONTENTS
-----------------
Accumulation Provisions .......... 12 Definitions .................... 4
Fixed Account Values ........... 12
Separate Account Values ........ 12 Fixed Account Provisions ....... 10
Annuity Option Tables General Provisions ............. 5
See Rider of the same name attached
Annuity Provisions ............... 13 Policy Date .................... 3
Change of Annuity Date and Purchase Payment Provisions .... 6
Settlement Option .............. 15
Separate Account Provisions ...... 11
Charges and Deductions ........... 9 Transfers ...................... 11
Fixed and Separate Account ..... 9
Separate Account Only .......... 9 Settlement Options ............. 14
Fixed Account Only ........... 14
Death Benefit and Payment
at Death ....................... 8 Withdrawal Provisions........... 7
2
<PAGE> 3
ENDORSEMENT
-----------
This Endorsement forms a part of the Variable Benefit Annuity Contract (Policy
Form 1-60, et al.) to which it is attached and modifies said Contract by
deleting the Separate Account Provisions contained therein (page 11) and by
inserting in its place the following Language:
SEPARATE ACCOUNT PROVISIONS
---------------------------
TRANSFERS
1. VARIABLE ACCOUNTS AND SUB ACCOUNTS: The Separate Account is registered
as a unit investment trust company under the Investment Company Act of
1940, and is divided into various Variable Accounts. Each Variable
Account invests in a separate Series of the Fund. For each eligible
Variable Account there is one sub-account for Qualified Plans and one
sub-account for Non-qualified Plans. Current participating Series of the
Fund are named on the Policy Data page.
2. The Owner may transfer part or all of the Contract Value or annuity unit
value from one variable Account of the Separate Account without charge.
Such transfers may be made during the first thirty days and subsequent
transfers may not be made more often than six times each contract year.
3. The amount transferred must be at Least $500. No transfer will be
permitted if such transfer would result in any Variable Account having a
balance of Less than $500, unless the entire account is transferred.
IN WITNESS WHEREOF, Anchor National Life insurance Company has caused this
Endorsement to be signed and made a part of the Contract to which it is attached
on the Date of Issue of said Contract.
ANCHOR NATIONAL LIFE INSURANCE COMPANY
/s/ HOWARD R. FRICKE
HOWARD R. FRICKE
Chairman and Chief Executive Officer
<PAGE> 4
ENDORSEMENT
This Endorsement forms a part of the Individual Deferred Fixed Benefit and
Variable Benefit Contract (Policy Form I-60, et al.) to which it is attached and
modifies said contract by replacing all occurrences of The American Pathway Fund
with The Anchor Pathway fund.
Wherever in this contract a reference is made to The American Pathway Fund or
The Fund, it shall be construed to be a reference to The Anchor Pathway Fund.
In witness whereof, Anchor National Life Insurance Company has caused the
Endorsement to be signed and made a part of the Contract to which it is attached
on the Date of Issue of said Contract.
ANCHOR NATIONAL LIFE INSURANCE COMPANY
/s/ GAIL A. LIONE
Gail A. Lione
Secretary
<PAGE> 5
DEFINITIONS
-----------
1. ACCUMULATION UNIT: A unit of measurement used to compute the Contract
Value in the Separate Account prior to the Annuity Date.
2. ACCUMULATION VALUE: The accumulation value under a Contract shall be the
sum of all moneys allocated or transferred to the Fixed Account after
giving effect to the crediting of and compounding of all guaranteed
interest and excess interest on the Fixed Account during the period that
the Contract has been in effect. This amount shall be adjusted for all
transfers out of the Fixed Account and withdrawals from the Fixed
Account.
3. ANNUITANT: The person on whose continuation of Life annuity payments
are based. The Annuitant for this Contract is named on the policy data
page.
4. ANNUITY DATE: The date on which annuity payments are to start.
5. ANNUITY SERVICE CENTER: P.O. Box 56993, Atlanta, GA 30343
6. ANNUITY UNIT: A unit of measurement used to compute annuity payments in
the Separate Account.
7. CONTINGENT OWNER: The person who becomes Owner at death of the prior
owner.
8. CONTRACT VALUE: The sum of the values of Accumulation Units in the
Separate Account and the accumulation value in the fixed account.
9. CURRENT INTEREST: The sum of the guaranteed rate of interest and the
excess rate of interest declared by the Company.
10. DEFERRED ANNUITY: An annuity contract under which the start of annuity
payments is deferred to a future date.
11. EXCESS INTEREST: A rate of interest declared by the Company on amounts
allocated to the Fixed Accounts that is in excess of the guaranteed rate
of interest. Excess interest will be declared by the Company for not
Less than 12 months in advance.
12. FIXED ACCOUNT: Purchase payments allocated to the Fixed Account under
the Contract are allocated to and made a part of the general account
assets of the Company. Amounts allocated to the Fixed Account by the
Owner will be credited with interest at a minimum guaranteed rate, and
in addition, at such excess rates of interest as the Company may declare
in its discretion.
13. FIXED ANNUITY: A series of periodic payments of predetermined amounts
that do not vary with investment experience. Such payments are made out
of the general account of the Company.
14. FUND: The American Pathway Fund, a mutual fund consisting of various
Series, each Series having its own investment objective as stated in the
Fund prospectus. The Series available are shown on the Policy Data page.
The Fund prospectus should be read for complete details.
15. GUARANTEED INTEREST: The minimum amount of interest which may be
credited to the Fixed Account. The rate of Guaranteed Interest is 4%.
16. NET CONTRACT VALUE: The Contract Value remaining after any applicable
deductions.
17. NONQUALIFIED PLAN: A retirement plan other than a Qualified Plan.
18. OWNER: The person entitled to exercise all rights under the Contract.
Unless otherwise indicated, the Annuitant is the Owner.
19. PURCHASE PAYMENTS: Payments made to the Company for the Contract.
<PAGE> 6
20. QUALIFIED PLAN: A retirement plan that qualifies for favorable tax
treatment under the Internal Revenue Code.
21. SEPARATE ACCOUNT: The American Pathway 11 Separate Account is segregated
asset account of Anchor National, and was established by the Company in
accordance with California Law. The Separate Account is registered as a
unit investment trust under the Investment Company Act of 1940. The
Separate Account consists of various Variable Accounts, each investing
in a separate Series of the Fund.
22. SERIES: A separate investment portfolio of the Fund which has distinct
investment objectives. Each Series serves as an underlying investment
medium for purchase payments and allocations made to one of the Variable
Accounts of the Separate Account.
23. VARIABLE ACCOUNT: A division of the Separate Account the assets of which
consists of shares of a specified Series of the Fund.
24. VARIABLE ANNUITY: A series of periodic payments which vary in amount
according to the investment experience of the Separate Account.
4
<PAGE> 7
GENERAL PROVISIONS
------------------
1. BENEFICIARY: The beneficiary is the person who is to receive: (1)
Payment upon the death of the Annuitant prior to the Annuity Date or (2)
Guaranteed annuity payments, if any, upon the death of the Annuitant on
or after the Annuity Date.
The beneficiary, stated in the application, may be changed while the
Annuitant is alive. In the case of an irrevocable beneficiary, however,
a change can be made only with the beneficiary's written consent.
2. OWNERSHIP OF CONTRACT: Unless another owner is named in the application
or an endorsement, the Annuitant is the Owner of the Contract.
Only an Owner other than the Annuitant may name or change a Contingent
Owner.
Upon notice to the Company the Contract may be transferred to a new
owner. Such transfer or assignment cancels a contingent owner, but does
not change the beneficiary.
3. RESTRICTIONS FOR QUALIFIED PLANS: If this Contract is issued pursuant
to a Qualified Plan, the plan may impose restrictions on assignment or
transfer.
4. MISSTATEMENT OF AGE OR SEX: If the age or sex o been misstated, any
amount payable shall be that which I would have purchased at the
correct age and sex. Overpayments by the Company because of such
misstatement, with interest at 6% compounded annually, will be charged
against benefits falling due after the adjustment. The dollar amount
of any underpayment made by the Company as a result of any such
misstatement shall be paid in full with the next payment due under this
Contract.
5. PROOF OF AGE, SEX OR SURVIVAL: The Company may require satisfactory
proof of correct age or sex at any time. If any payment under this
Contract depends on the payee being alive, the Company may require
satisfactory proof of survival.
6. INCONTESTABILITY: This Contract is incontestable from its date of issue.
7. ENTIRE CONTRACT: This Contract, together with any endorsements and its
attached application constitute the entire Contract.
8. MODIFICATION OF CONTRACT: A condition or provision of this Contract may
be waived or modified only in writing signed by the Chairman, President,
a Vice President, Secretary or Assistant Secretary of the Company.
The Company may change the provisions of this Contract where such change
is necessary for continued compliance with any federal or state Law that
affect this Contract. This Contract shall include any provision required
by the state in which it was purchased which may have been omitted when
it was issued.
9. NONPARTICIPATING: This Contract is non-participating. It does not share
in the Company's surplus.
10. DATES: Contract years and anniversaries are measured from the Date of
Issue.
11. NOTICES, CHANGES AND ELECTIONS: To be effective, all notices, changes
and elections made under this Contract must be in writing, signed and
received at the Annuity Service Office. If they are in acceptable form,
notices, changes and choices relating to beneficiaries and ownership
will take effect as of the date signed unless the Company has already
acted in reliance on the prior status, and the Company is not
responsible for their validity.
<PAGE> 8
12. PROTECTION OF PROCEEDS: Payments under this Contract may not be assigned
by any payee prior to their due dates. To the extent allowed by Law,
payments are not subject to legal process for debts of a payee.
13. ANNUITY DATE: Unless a specific Annuity Date is elected, the normal
Annuity Date is the Contract Anniversary following the Annuitant's 65th
birthday. You may choose a different date if agreed upon prior to the
Annuity Date. In no event, however, may the Annuity Date be Later than
the 80th birthday of the Annuitant or joint Annuitant named in the
application. To change Annuity Dates a request to do so must be received
at Least 30 days before the current Annuity Date.
14. ANNUAL REPORTS: Annually, the Company will furnish each Owner with a
statement of the balances in his or her accounts. In regard to Fixed
Account accumulations, the Company will notify the Owner of the current
rate of interest being credited to the account and the current balance
of that account. This notice will be included in the report but may also
be obtained at other times upon request.
5
<PAGE> 9
PURCHASE PAYMENT PROVISIONS
---------------------------
1. FIRST PURCHASE PAYMENT: The first Purchase Payment under the Contract
is due on the Date of Issue. The minimum first Purchase Payment is:
(a) Qualified Plans - $300
(b) Nonqualified Plans - $1,500
2. SUBSEQUENT PURCHASE PAYMENTS: The minimum annual amount of subsequent
Purchase Payment is $300 for either Qualified Plans or Nonqualified
Plans, with a minimum payment amount of $25.
3. ALLOCATION OF PURCHASE PAYMENTS: Purchase Payments may be allocated
between the Fixed Account and one or more Variable Accounts of the
Separate Account in accordance with instructions from the Owner. In no
event, however, may Less than $300 be allocated to a Variable Account
under a Contract.
4. NO DEFAULT: The Contract will not be in default for the failure to make
Purchase Payments. The Contract will continue in force unless the full
Contract Value is withdrawn.
6
<PAGE> 10
WITHDRAWAL PROVISIONS
---------------------
1. WITHDRAWAL: The Owner may withdraw all or part of the Net Contract
Value. Request for withdrawal must be received prior to the earlier of
the Annuity Date or the death of the Annuitant. For full withdrawal,
this Contract must be surrendered to the Annuity Service Office. For
partial withdrawals the minimum amount to be withdrawn is $500, and the
remaining Contract Value must be at least $500 unless the entire amount
is withdrawn.
2. CONTINGENT DEFERRED SALES CHARGE: This charge will be made upon
withdrawal. The charge will be 5% of the amount withdrawn that is
attributable to Purchase Payments made within 7 years prior to the date
of withdrawal.
The cumulative sum of such charges against purchase payments made within
7 years prior to the day of withdrawal will never be more than 5% of the
sum of all Purchase Payments made during the same period.
No charge will be made for such part of the first withdrawal in a
Contract year as does not exceed 10% of the sum of Purchase Payments
made more than one year prior to the date of withdrawal.
3. PAYMENT OF WITHDRAWALS: Absent written notification to-the contrary,
withdrawals and related charges will be deducted from the Fixed Account
and each Variable Account of the Separate Account in proportion to the
Contract Value. Withdrawals will be based on values for the valuation
period in which the request for withdrawal (and Contract, if required),
is received at the Annuity Service office. Payment of withdrawals will
be made within seven days. Payment may be deferred, however, if:
(a) The New York Stock Exchange is closed.
(b) Trading on the New York Stock Exchange is restricted.
(c) An emergency exists such that is not reasonably practical to
dispose of securities in the Separate Account or to determine the
value of its assets, or
(d) The Securities and Exchange Commission by order so permits for
the protection of security holders.
Conditions in (b) and (c) will be decided by or in accordance with rules
of the Securities and Exchange Commission.
7
<PAGE> 11
DEATH BENEFIT AND PAYMENT AT DEATH
----------------------------------
1. DEATH BEFORE THE ANNUITY DATE: Upon receipt of due proof of the death
of the Annuitant prior to the Annuity Date, the Company will pay to the
beneficiary the greater of:
(1) The sum of all Purchase Payments, adjusted for withdrawals or,
(2) The Contract Value for the valuation period in which such proof
is received at our Annuity Service Office.
Payment will be in a Lump sum unless an annuity settlement option is
chosen by the beneficiary, or the beneficiary elects to apply the amount
payable to the purchase of a new Contract on this form.
2. PROOF OF DEATH: Due proof of death of the Annuitant shall consist of a
certified copy of the Annuitant's death certificate, a certified decree
establishing the Annuitant's death by a court having competent
jurisdiction, a written statement by a medical doctor who attended the
deceased Annuitant, or any other proof satisfactory to the Company. If a
Lump sum settlement is desired, payment will be made in accordance with
any applicable Laws and regulations governing payments on death.
8
<PAGE> 12
CHARGES AND DEDUCTIONS
----------------------
FIXED AND SEPARATE ACCOUNTS:
1. CONTRACT ADMINISTRATION CHARGE: The charge specified on the Policy Data
page will be deducted on each Contract anniversary that occurs on or
prior to the annuity date. It will also be deducted when the Contract
Value is withdrawn in full if withdrawal is not on a Contract
anniversary. This charge will not increase.
2. PREMIUM TAXES: Any premium taxes imposed by a state or other government
will be deducted when paid by the Company.
3. CONTINGENT DEFERRED SALES CHARGE: This charge may be deducted upon
withdrawal of the Contract Value, in whole or in part. See "WITHDRAWAL
PROVISIONS".
SEPARATE ACCOUNT ONLY:
1. EXPENSE RISK CHARGE: On an annual basis this charge equals 0.35% of the
average daily total net asset value of the Separate Account. This charge
is to compensate the Company for the guarantee that the Contract
administration charge will be sufficient to pay all Contract
administration expenses through the terms of this Contract.
2. DISTRIBUTION EXPENSE RISK CHARGE: On an annual basis this charge equals
0.15% of the average daily total net asset value of the Separate
Account. This charge is to compensate the Company for the guarantee that
the contingent deferred sales charge will be sufficient to cover all
distribution expenses associated with the Contract.
3. MORTALITY RISK PREMIUM: On an annual basis this charge equals 0.8% of
the average dairy total net asset value of the Separate Account. This
premium is to compensate for the assumption of the mortality risk and
the risk inherent in the death benefit.
PAYMENT OF DEDUCTIONS: The expense risk charge, distribution expense
risk charge and the mortality risk premium will be accrued against each
Variable Account for each day the Contract is in force. Other charges
will be deducted by canceling Accumulation Units of a value equal to the
deduction.
9
<PAGE> 13
FIXED ACCOUNT PROVISIONS
------------------------
1. ALLOCATIONS AND CREDITS TO THE FIXED ACCOUNT: During the accumulation
period, the owner may allocate amounts to the Fixed Account either
directly from Purchase Payments or by allocating amounts from the
Separate Account. Interest will be credited to the Fixed Account from
the day the amounts are received at the guaranteed rate of 4%. Interest
will be compounded annually on the anniversary of the date amounts were
first allocated to the Fixed Account by the Owner.
2. EXCESS INTEREST: The Company may in its discretion determine an
effective annual rate of interest to be applied to the Fixed Account
over and above the guaranteed interest rate. The rate of excess
interest will be declared in advance of the date that amounts are
credited, and may vary from time to time, except that once a rate of
excess interest is declared with respect to amounts in the Fixed
Account, that rate will be maintained by the Company for at Least
twelve months.
3. TRANSFER OF SEPARATE ACCOUNT: The Owner may transfer all or part of his
Contract Value or annuity unit value to the Separate Account subject
to the following Limitations; (a) no more than 25% of the total amount
allocated to the Fixed Account may be transferred to the Separate
Account in any one contract year, (b) at Least $500 must be transferred
at any one time, (c) such transfers may not be made during the first
six months and may not be made more often than once every 30 days, and
(d) any such transfer may be made not Later than 90 days before the
Annuity Date.
Transfers will not be allowed, however, if such transfer would result in
the Fixed Account having a balance of Less than $500, unless the entire
amount is transferred.
10
<PAGE> 14
SEPARATE ACCOUNT PROVISIONS
---------------------------
TRANSFERS
1. VARIABLE ACCOUNTS AND SUB ACCOUNTS: The Separate Account is registered
as a unit investment trust company under the investment Company Act of
1940, and is divided into various Variable Accounts. Each Variable
Account invests in a separate Series of the Fund. For each eligible
Variable Account there is one sub-account for Qualified Plans and one
sub-account for Nonqualified Plans. Current participating Series of the
Fund are named on the Policy Data page.
2. The Owner may transfer part or all of the Contract Value or annuity unit
value from one Variable Account of the Separate Account to one or more
of the remaining Variable Accounts or to the Fixed Account without
charge. Such transfers may not be made during the first six months and
not be made more often than once every 30 days.
3. The amount transferred must be at Least $500. No transfer will be
permitted if such transfer would result in any Variable Account having a
balance of Less than $500, unless the entire amount is transferred.
11
<PAGE> 15
ACCUMULATION PROVISIONS
-----------------------
1. SEPARATE ACCOUNT VALUES: The Separate Account accumulation value under
a contract shall be the sum of all accumulation units held in the
Variable Accounts by the Owner.
(a) NUMBER OF ACCUMULATION UNITS: For each Variable Account, the
number of Accumulation Units is the sum of:
Each Purchase Payment and transfer allocated to the Variable
Account, reduced by applicable premium taxes, if any:
Divided by
The value of an Accumulation Unit for that Variable Account for
the valuation period in which the Purchase Payment or transfer
amount is received.
The number will be adjusted for withdrawals and charges.
Adjustments will be made as of the valuation period in which we
receive all requirements for the transaction, as appropriate.
(b) VALUE OF EACH ACCUMULATION UNIT: For each Variable Account, the
Accumulation Unit value was arbitrarily set at $10 when the
Separate Account was established. The value may increase or
decrease from one valuation period to the next. For any valuation
period the value is:
The value of an Accumulation Unit for the Last prior valuation
period;
Multiplied by
The Net Investment Factor for that Variable Account for the
current valuation period.
(c) NET INVESTMENT FACTOR: This is an index used to measure the
investment performance of a Variable Account from one valuation
period to the next. For each Variable Account, the net investment
factor for a valuation period is found by dividing (a) by (b) and
reducing the result by (c):
Where (a) is:
The net asset value as of the end of the current valuation period
of a share of a Series of the Fund in which the assets of such
Variable Account are invested, plus the per share amount of any
dividends and other distributions on such shares since the end of
the immediately preceding valuation period, minus any adjustments
for taxes attributable to owner's interest in the Variable
Account;
Where (b) is:
The net asset value of a share of the specified Series of the
Fund as of the end of the immediately preceding valuation period;
minus any adjustments for taxes attributable to Owner's interest
in the Variable Account,
And where (c) is:
The deduction for mortality, expense and distribution expense
risks which shall not exceed .00356% for each day in the current
valuation period.
<PAGE> 16
The adjustment for taxes, if any, in (a) above is determined by
dividing the amount of any tax reserves held in the Variable
Account for which the net investment factor is being determined
at the end of the current Valuation Period, appropriately
adjusted for any taxes actually paid, by the number of shares of
the Series held in such Variable Account at the @d of the current
valuation period. The adjustment for taxes, if any, in (b) above
is determined by dividing the amount of any tax reserves held in
such Variable Account at the end of the immediately preceding
valuation period by the number of shares of the Series held in
such Variable Account at the end of such preceding valuation
period. The term "tax reserves" means any amount held for taxes
and reserves for taxes incurred by such Variable Account. Hence,
each Variable Account will consist of two sub-accounts -- one for
which tax reserves are incurred (in the case of Nonqualified
Plans), and one without such reserves (in the case of Qualified
Plans).
The maximum daily deduction for mortality expense risks and
distribution expenses in (c) above is at an annual rate of 1.30%.
(d) VALUATION PERIOD: This is the interval from one trading day on
the New York Stock Exchange to the next trading day. It is
measured from the time each day at which each portfolio is
valued.
2. FIXED ACCOUNT VALUES: The Fixed Account accumulation value under a
Contract shall be the sum of all moneys allocated or transferred to the
Fixed Account after giving effect to the crediting of and compounding of
all guaranteed interest and excess interest on the Fixed Account during
the period that the Contract has been in effect. This amount shall be
adjusted for all transfers out of the Fixed Account and withdrawals from
the Fixed Account.
12
<PAGE> 17
ANNUITY PROVISIONS
------------------
1. PAYMENTS TO OWNER: Unless otherwise requested by the owner, the Company
wilt make annuity payments to the Owner.
2. PAYMENTS TO ANNUITANT: At the request of an owner who is not the
Annuitant, the Company will make payments to the Annuitant subject to
the following:
(a) Adequate written request must be filed at the Annuity Service
Center.
(b) Such request must be filed not Later than thirty days before the
due date of the first annuity payment.
Any such request is subject to the rights of any assignee. Any such
request will not be revocable after payments to the Annuitant have
begun. No payments available to or being paid to the Annuitant while
alive can be transferred, commuted, anticipated or encumbered.
3. ANNUITY DATE: The Annuity Date will be the first day of a month. It must
be at least two years after the Date of Issue. It may not be later than
the first day of the next month after the Annuitant's 80th birthday. The
Contract Owner chooses the annuity date in the application. If no
Annuity Date is elected, annuity payments will start the month after
Annuitant attains age 65.
4. MINIMUM ANNUITY PAYMENTS: If the Net Contract Value to be applied at the
Annuity Date is Less than $5,000. the Company reserves the right to pay
such amount in a Lump sum. Annuity payments will be made monthly. But if
any payment would be Less than $50.00 the Company may change the
frequency so payments are at Least $50.00 each, or pay the Contract
Value in a Lump sum.
5. ASSUMED INVESTMENT RATE: A 4% assumed investment rate is built into the
annuity tables set forth in the policy.
6. FIXED ANNUITY PAYMENTS: To the extent a fixed annuity option has been
elected, the proceeds payable under this Contract shall be applied to
the payment of the settlement option elected at whichever of the
following is more favorable to the payee: (a) the annuity rates based
upon the applicable tables in the policy; or (b) the then current rates
provided by the Company on individual single payment immediate annuity
contracts being issued by the Company on the maturity date. In no
event will the fixed annuity payments be changed once they begin.
7. AMOUNT OF FIXED ANNUITY PAYMENTS: The amount of each fixed annuity
payment is calculated by: (a) determining the amount payable per
thousand dollars for the adjusted age of the payee from the annuity
table chosen; and (b) multiplying the factor from the table for the
annuity option elected, by the amount available (divided by $1,000).
8. AMOUNT OF VARIABLE PAYMENTS:
(a) FIRST VARIABLE PAYMENT: The dollar amount of the first monthly
annuity payment will be determined by applying the Contract value
to the annuity table applicable to the annuity option chosen. If
more than one Variable Account has been selected. the value of
the interest in each Variable Account is applied separately to
the annuity table to determine the amount Of the first annuity
payment attributable to that Variable Account.
(b) NUMBER OF VARIABLE ANNUITY UNITS: The number of annuity units for
each applicable Variable Account is the amount of the first
annuity payment attributable to that Variable Account divided by
the value of the applicable annuity unit for that Variable
Account as of the annuity date. The number will not change as a
result of investment experience.
<PAGE> 18
(c) VALUE OF EACH VARIABLE ANNUITY UNIT: The value of an annuity
unit of each Variable Account was arbitrarily set at $10 when
the Separate Account was established. The value may increase
or decrease from one valuation period to the next. For any
valuation period, the value of an annuity unit of a particular
Variable Account is the value of that annuity unit during the
Last valuation period, multiplied by the net investment factor
for that Variable Account for the current valuation period.
The result is then multiplied by a factor that neutralizes the
Assumed Investment Rate.
(d) SUBSEQUENT VARIABLE ANNUITY PAYMENTS: After the first variable
annuity payment, payments will vary in amount according to the
investment performance of the applicable Variable Accounts. The
amount may change from month to month. The amount of each
subsequent payment is the sum of:
The number of annuity units for each Variable Account as
determined for the first annuity payment
Multiplied by
The value of an annuity unit for that Variable Account for the
valuation period in which payment is due.
The Company guarantees that the amount of each variable annuity
payment will not be affected by variations in expenses or
mortality experience.
13
<PAGE> 19
SETTLEMENT OPTIONS
------------------
Upon written election filed with the Company to the Annuity Service Office. all
or a part of the Contract Value may be applied to provide one of the following
options or any settlement option mutually agreeable
OPTION 1 - LIFE ANNUITY, LIFETIME MONTHLY PAYMENTS GUARANTEED - Monthly payments
during the Lifetime of the Payee. No further payments are payable after the
death of the Payee and there is no provision for a death benefit payable to the
beneficiary.
OPTION 2 - JOINT AND TWO-THIRDS SURVIVOR ANNUITY - Monthly payments payable
during the joint Lifetime of the Payee and a designated second person and during
the lifetime of the survivor. During the Lifetime of the survivor variable
monthly payments, if any, will be determined using two-thirds of the number of
each type of annuity unit credit to the Contract. Fixed monthly payments, if
any, will be equal to two-thirds of the fixed monthly payment payable during the
joint lifetime of the Payee and the designated second person.
OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY. MONTHLY PAYMENTS GUARANTEED Monthly
payments, during the joint lifetime of two Payees and continuing during the
remaining lifetime of the survivor, with the guarantee that if, at the death of
the survivor, payments have been made for Less than 120 monthly periods,
payments will be made as follows:
(a) If an Annuitant was the Payee, any guaranteed annuity payments
will be continued to the beneficiary during the remainder of the
selected period. The beneficiary may elect to have the present
value of the guaranteed number of annuity payments remaining paid
in a lump sum as specified in (b) below.
(b) If the beneficiary was the Payee, then upon the death of the
beneficiary, the present value of the remaining unpaid
guaranteed annuity payments shall be paid in a lump sum to the
estate of such beneficiary. Such present value shall be
determined as of the end of the valuation period during which
notification of the beneficiary's death is received by the
Annuity Service office and by discounting each remaining
unpaid guaranteed annuity payment at the effective annual
interest rate assumed in determining the annuity purchase
rate.
OPTION 4 - LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED - An annuity
payable monthly during the Lifetime of the Annuitant, with the guarantee that
if, at the death of the Annuitant, payments have been made for less than the 120
or 240 monthly periods, as selected, payments will be made in the same manner as
provided in Paragraphs (a) and (b) under OPTION 3 above.
FIXED ACCOUNT ONLY OPTIONS:
OPTION 5 - FIXED PAYMENTS FOR A SPECIFIED PERIOD CERTAIN - Fixed monthly
payments for any specified period of time (three (3) years or more, but not
exceeding thirty (30) years), as elected. - In the event of death of the Payee
under this option, the Contract provides that in certain circumstances, the
discounted value of the remaining payments, if any, will be calculated and paid
in one sum.
OPTION 6 - FIXED PAYMENTS - The amount applied to provide fixed payments in
accordance with this option will be held by the Company at interest - Fixed
payments will be made in such amounts and at such times as may be agreed upon
with the Company and will continue until the amount held by the Company with
interest is exhausted. The final payment will be for the balance remaining and
may be Less than the amount of each preceding payment. Interest will be credited
yearly on the amount remaining unpaid at a rate which shall be determined by the
Company from time to time but which shall not be Less than 4% per year
compounded annually. The rate so determined may be changed at any time and as
often as may be determined by the Company, provided, however, that the rate may
not be reduced more frequently than once during each calendar year.
14
<PAGE> 20
CHANGE OF ANNUITY DATE AND SETTLEMENT OPTION
--------------------------------------------
RIGHT TO CHANGE: At any time prior to the Annuity Date. the Contract Owner may,
upon at Least thirty (30) days prior written notice to the Company, filed with
the Annuity Service Office, elect one of the Settlement Options and/or change
the Annuity Date. Should there be no election of a Settlement Option, the
accumulation amounts will be applied to provide a Life annuity with 120 monthly
payments guaranteed (Option 4). The date to which a change in Annuity Date may
be made must be at the first day of the calendar month and may not be beyond the
first day of the calendar month following the Annuitant's 80th birthday.
ANNUITY PAYMENTS: Payments will be made on the first day of each month starting
with the Annuity Date. Payments under any option will be made to the Contract
Owner, except payments under Options 2 and 3 will be made jointly while both
Payees are alive.
15
<PAGE> 21
INDIVIDUAL DEFERRED FIXED BENEFIT AND
VARIABLE BENEFIT ANNUITY CONTRACT
<PAGE> 1
EXHIBIT (5)
Anchor National Life Mailing Address:
Insurance Company P.O. Box 54197 [LOGO] Anchor National
1 SunAmerica Center Los Angeles, CA 90054-0197 a SunAmerica Company
Los Angeles, CA 90067-6022
- --------------------------------------------------------------------------------
P-5236
AMERICAN PATHWAY II VARIABLE ANNUITY APPLICATION
A. OWNER(S) --Mr. --Mrs. --Ms. --Miss --Dr. --Sr. --Jr.
- --------------------------------------------------------------------------------
LAST NAME OR CORPORATION/PLAN/TRUST FIRST NAME MIDDLE INITIAL
- --------------------------------------------------------------------------------
STREET ADDRESS CITY STATE ZIP CODE
MO DAY YR --M --F
- ------------------- -------------- -------------------- -----------------
DATE OF BIRTH SEX SOC.SEC. OR TAX ID NO. PHONE NO.
B. ANNUITANT) --Mr. --Mrs. --Ms. --Miss --Dr. --Sr. --Jr.
(Complete only if different than owner)
MONTH DAY YEAR MONTH DAY YEAR
- --------------------------------------------------------------------------------
ANNUITIZATION DATE DATE OF BIRTH
- --------------------------------------------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL
- --------------------------------------------------------------------------------
STREET ADDRESS CITY STATE ZIP CODE
( ) -- M -- F
- --------------------------------------------------------------------------------
PHONE NUMBER SEX SOCIAL SECURITY #
- --------------------------------------------------------------------------------
C. BENEFICIARY (USE ADDITIONAL PAGES IF NECESSARY.)
- ------------------------------------------------ ---------------------------
RELATIONSHIP
- ------------------------------------------------ ---------------------------
RELATIONSHIP
- --------------------------------------------------------------------------------
D. CONTINGENT OWNER (COMPLETE ONLY IF DIFFERENT THAN OWNER)
- ----------------------------------------------- ---------------------------
LAST NAME OR CORPORATION/PLAN/TRUST FIRST NAME PHONE NO.
- --------------------------------------------------------------------------------
STREET ADDRESS CITY STATE ZIP CODE
MONTH DAY YEAR -- M -- F
- --------------------------------------------------------------------------------
DATE OF BIRTH SEX SOC.SECURITY OR TAX ID #
- --------------------------------------------------------------------------------
E. PURCHASE PAYMENT/PROGRAM ENROLLMENT (CHECK ALL THAT APPLY.)
-- INITIAL PAYMENT: $ -------------------------. Minimum initial
payment is $5,000 for nonqualified contracts; $2,000 for qualified contracts.
Payments my be wired or mailed. Make check payable to Anchor National Life
Insurance Company.
-- AUTOMATIC PAYMENTS: $-------------------. To establish
automatic bank draft for future payments, include an "Automatic Payment
Authorization" (Form G-5233) and a voided check.
-- SYSTEMATIC WITHDRAWAL: To establish systematic withdrawal,
check box at left and include completed systematic withdrawal application (Form
P-5242SW).
-- "AUTOMATIC DOLLAR COST AVERAGING: To establish automatic
dollar cost averaging, check box at left and include completed dollar cost
averaging application (Form P-5243DC).
- --------------------------------------------------------------------------------
F. ALLOCATION OF PURCHASE PAYMENT (USE FULL PERCENTAGES.)
------------ % Variable Growth-Account
The total allocation must ------------ % Variable Growth-Income equal 100%. (If
no ------------ % Variable Asset Allocation Account allocations are indicated
- ------------ % Variable High-Yield Bond Account at right, the total ------------
% Variable Government/AAA Rated purchase payment will be Securities Account
allocated to the Variable ------------ % Variable Cash Management Account Cash
Management Account ------------ % Anchor National's Fixed Account pending
instructions from ------------ % Variable International Account the Owner.)
<PAGE> 2
AMERICAN PATHWAY II VARIABLE ANNUITY APPLICATION
G. PLAN INFORMATION (x Appropriate Box, All Qualified Plans will have restricted
ownership.)
- -- Qualified. If qualified, is this a direct transfer? -- Yes -- No
If yes, please complete a "Request for Transfer of Retirement Account" (G-5223)
form. Please note: Appropriate retirement plan/prototype must be established for
purposes of qualified monies.
- -- IRA Tax Year ---- -- SEP -- Terminal Funding -- Deferred Compensation
- -- IRA Rollover -- Keogh/H.R.-10 (Complete section A with name of plan)
- -- IRA Transfer -- Corporate Plan (Complete section A with name of plan)
- -- TSA Contributions begin ---------------------
Month/Day/Year
- -- Nonqualified. If nonqualified, is this a 1035 exchange? -- YES -- NO If
yes, please complete a "Notification of Exchange" (G-5226) form.
In issuing an annuity pursuant to this application, Anchor National does not
express any opinion on or accept any responsibility for the tax-qualified status
of any plan and does not represent that the annuity issued pursuant to this
application satisfies the requirements of the Internal Revenue Code of 1986, as
amended, or the Employee Retirement Income Security Act (ERISA), as amended,
with respect to plan distributions.
- --------------------------------------------------------------------------------
H. REPLACEMENT
Will this policy replace or change any existing life insurance or annuity in
this or any other company? -- YES -- NO If yes, give name(s) of insurance
company and policy number(s).
- ----------------------------------- --------------------------------------
COMPANY NAME POLICY NUMBER
I. STATEMENT OR OWNER AND ANNUITANT
No agent can make or change any of the provisions in the policy or waive any of
the Company's rights. I hereby verify my understanding that all payments and
values provided by the contract, when based on investment experience of a
variable account(s), are variable and not guaranteed as to dollar amount. I
ACKNOWLEDGE RECEIPT OF CURRENT AMERICAN PATHWAY II/ANCHOR PATHWAY FUND
PROSPECTUSES. I HAVE READ THEM CAREFULLY AND UNDERSTAND THEIR CONTENTS.
CONDITIONS FOR TELEPHONE TRANSFER AUTHORIZATION
The Company is authorized, either directly or through its agents, to transfer
Contract Values among the investment options available under the Contract upon
telephone instructions from the Contract Owner or any other person, subject to
the restrictions and limitations contained in the Contract and related
prospectus. The Contract Owner waives all rights to dispute any transfers
affected in accordance with such instructions. Neither of the Company nor any of
its affiliates will be liable for any claim, loss or expense resulting from any
alleged error or mistake in connection with a transfer which was authorized by
the Contract Owner, or by anyone else who purports to give instructions on his
or her behalf. The Company is authorized, without prior disclosure, to record
telephone conversations containing transfer instructions. The Contract Owner
agrees to examine promptly all confirmation statements reflecting transfers made
in accordance with telephone instructions. Errors shall be reported to the
Company immediately. The telephone transfer privilege may be modified, suspended
or discontinued by the Company at any time without prior notice.
Under penalty of perjury, I certify (1) that the number shown on this form is my
correct Social Security/Taxpayer ID number and (2) that I -- AM -- AM NOT
subject to a backup withholding order under Section 3406(a)(1)(C) of the
Internal Revenue Code.
SIGNED AT -----------------------------------
CITY STATE
- ------------------------ ---------------------------------------------------
SIGNATURE OF OWNER SIGNATURE OF ANNUITANT (IF OTHER THAN OWNER DATE
<PAGE> 3
J. STATEMENT OF AGENT (Complete Comparison Form if Required by the Issuing
state.) The agent hereby certifies he/she witnessed the signature(s) in Section
I above and that his/her answer to the question below is true to the best of
his/her knowledge and belief:
Will this policy replace or change any existing life insurance or annuity in
this or any other company -- YES -- NO
- --------------------------------------------------------------------------------
SIGNATURE OF AGENT DATE
- ------------------------------------------------------------------------------K.
AGENT INFORMATION
- --------------------------------------------------------------------------------
AGENT'S LAST NAME AGENT'S FIRST NAME MIDDLE INITIAL
- --------------------------------------------------------------------------------
GENERAL AGENT/BROKER DEALER/FINANCIAL INSTITUTION
- --------------------------------------------------------------------------------
MAILING ADDRESS CITY STATE
- ----------------------------------- --------------------------------------------
AGENTS'S PHONE NUMBER ANCHOR AGENT ID#
<PAGE> 1
EXHIBIT (6)(a)
AMENDED AND RESTATED ARTICLES OF INCORPORATION
AND ARTICLES OF REDOMESTICATION
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
We, the undersigned, acting as incorporators for the purpose of
redomesticating Anchor National Life Insurance Company, a California
corporation, which intends to continue its existence, without interruption, as a
corporation organized under the laws of the State of Arizona pursuant to Arizona
Revised Statutes Section 20-231.A, do hereby adopt the following Amended and
Restated Articles of Incorporation and Articles of Redomestication for said
corporation.
ARTICLE I
The name of the corporation shall be Anchor National Life Insurance
Company.
ARTICLE II
The corporation was incorporated in the State of California on April 12,
1965.
ARTICLE III
The existence of the corporation shall be perpetual.
ARTICLE IV
Upon the approval of these Amended and Restated Articles of
Incorporation and Articles of Redomestication by the necessary regulatory
authorities, Anchor National Life Insurance Company shall be and continue to be
possessed of all privileges, franchises and powers to the same extent as if it
had been originally incorporated under the laws of the State of Arizona; and all
privileges, franchises and powers belonging to said corporation, and all
property, real, personal and mixed, and all debts due on whatever account, all
Certificates of Authority, agent appointments, and all chooses in action, shall
be and the same are hereby ratified, approved, confirmed and assured to Anchor
National Life Insurance Company with like effect and to all intents and purposes
as if it had been originally incorporated under the laws of the State of
Arizona. Said corporation shall be given recognition as a domestic corporation
of the State of Arizona from and after April 12, 1965, and as a domestic insurer
of the State of Arizona from and after December 2, 1966, the dates of its
initial incorporation and authorization to transact insurance business under the
laws of the State of California, effective the latter of January 1, 1996 or the
date of filing with the Arizona Corporation Commission.
ARTICLE V
The nature of the business to be transacted and the objects and purposes
for which this corporation is organized include the transaction of any and all
lawful business for which insurance corporations may be incorporated under the
laws of the State of Arizona without limitation, and as said laws may be amended
from time to time, and specifically said corporation shall be authorized to
transact life insurance, disability insurance and annuities, as defined under
Arizona Revised Statutes, Section 20-254, 20-253 and 20-254.01 respectively,
together with such other kinds of insurance as the corporation may from time to
time be authorized to transact, and to act as a reinsurer of business for which
it is duly authorized. Consistent with the applicable federal and state
requirements, the Company may issue funding agreements and guaranteed investment
contracts as defined under Arizona Revised Statutes, Section 20-208.
<PAGE> 2
ARTICLE VI
The authorized capital of the corporation shall be $4,000,000, and shall
consist of 4,000 shares of voting common stock with a par value of $1,000.00 per
share. No holders of stock of the corporation shall have any preferential right
to subscription to any shares or securities convertible into shares of stock of
the corporation, nor any right of subscription to any thereof other than such,
if any, as the Board of Directors in its discretion may determine, and at such
price as the Board of Directors in its discretion may fix; and any shares or
convertible securities which the Board of Directors may determine to offer for
subscription to the holders of stock at the time existing.
Nothing herein contained shall be construed as prohibiting the
corporation from issuing any shares of authorized but unissued common stock for
such consideration as the Board of Directors may determine, provided such
issuance is approved by the shareholders of the corporation by a majority of the
votes entitled to be cast at any annual or special meeting of shareholders
called for that purpose. No such authorized but unissued stock may, however, be
issued to the shareholders of the corporation by way of a stock dividend,
split-up or in any other manner of distribution unless the same ratable stock
dividend, stock split-up or other distribution be declared or made in voting
common stock to the holder of such voting common stock at the time outstanding.
Each holder of common stock shall be entitled to participate share for share in
any cash dividends which may be declared from time to time on the common stock
of the corporation by the Board of Directors and to receive pro rata the net
assets of the corporation on liquidation.
ARTICLE VII
The affairs of the corporation shall be conducted by a Board of
Directors consisting of not less than five (5) nor more than fifteen (15)
directors as fixed by the bylaws, and such officers as said directors may at any
time elect or appoint. No officer or director need be a shareholder of this
corporation. Ten (10) directors shall constitute the initial Board of Directors.
The names and addresses of the persons who are to serve as directors until the
next annual meeting of shareholders or until their successors are elected and
qualified, and of the persons who are to serve as officers until the next annual
meeting of the directors or until their successors are elected and qualify, are:
Board of Directors
------------------
Eli Broad, Chairman
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
James Richard Belardi, Director
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Lorin Merrill Fife, III, Director
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Jana Waring Greer, Director
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Susan Louis Harris, Director
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Gary Walden Krat, Director
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
, Director (Vacant)
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Peter McMillian, Director
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
<PAGE> 3
Scott Lawrence Robinson, Director
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Jay Steven Wintrob, Director
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Officers
--------
Victor Edward Akin, Vice President
Eli Broad, President and Chief Executive Officer
James Richard Belardi, Senior Vice President
Lorin Merrill Fife, III, Senior Vice President, General Counsel
and Assistant Secretary
Michael Lee Fowler, Vice President Nelson Scott Gillis, Vice President
and Controller Jana Waring Greer, Senior Vice President J. Franklin
Grey, Vice President Susan Louise Harris, Senior Vice President and
Secretary Keith Bernard Jones, Vice President Gary Walden Krat, Senior
Vice President Michael Lee Lindquist, Vice President Edward Poli Nolan,
Jr., Vice President Gregory Mark Outcalt, Vice President Edwin Raquel
Reoliquio, Senior Vice President and Actuary Scott Harris Richland, Vice
President and Treasurer Scott Lawrence Robinson, Senior Vice President
James Warren Rowan, Vice President Jay Steven Wintrob, Executive Vice
President
The directors shall have the power to adopt, amend, alter and repeal the
Bylaws, to manage the corporate affairs and make all rules and regulations
expedient for the management of the affairs of the corporation, to remove any
officer and to fill all vacancies occurring in the Board of Directors and
offices for any cause, and to appoint from their own number an executive
committee and other committees and vest said committees with all the powers
permitted by the Bylaws.
ARTICLE VIII
Subject to the further provisions hereof, the corporation shall
indemnify any and all of its existing and former directors and officers and
their spouses against all expenses incurred by them and each of them, including
but not confined to legal fees, judgments and penalties which may be incurred,
rendered or levied in any legal or administrative action brought against any of
them, for or on account of any action or omission alleged to have been committed
while acting within the scope of employment as a director or officer of the
corporation to the fullest extent allowable pursuant to A.R.S. Section 10-005,
et al. as my be amended from time to time. Whenever any such person has grounds
to believe that he may incur any such aforementioned expense, he shall promptly
make a full report of the matter to the President and the Secretary of the
Corporation. Thereafter, the Board of Directors of the corporation shall, within
a reasonable time, determine if such person acted, or failed to act, in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interest of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. If the
Board of Directors determines that such person acted, or failed to act, in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful, then
indemnification shall be mandatory and shall be automatically extended as
specified herein, provided, however, that the corporation shall have the right
to refuse indemnification, wholly or partially, in any instance in which the
person to whom indemnification would otherwise have been applicable shall have
unreasonably refused to permit the corporation, at its own expense and through
counsel of its own choosing, to defend him in the action, or shall have
unreasonable refused to cooperate in the defense of such action.
<PAGE> 4
ARTICLE IX
All directors of the corporation shall be elected at the annual meeting
of the shareholders, which shall be held on the third Thursday of March of each
year or such other date and time as may be determined by the Board of Directors,
unless such day falls on a holiday, in which event the regular annual meeting
shall be held on the next succeeding business day.
ARTICLE X
The principal place of business of the corporation shall be located in
the City of Phoenix, Maricopa County, Arizona, but it may have other places of
business and transact business, and its Board of Directors or shareholders may
meet for the transaction of business, at such other place or places within or
without the State of Arizona which its Board of Directors may designate.
ARTICLE XI
The fiscal year of the corporation shall be the calendar year.
ARTICLE XII
In no event shall the corporation incur indebtedness in excess of the
amount authorized by law.
ARTICLE XIII
The shares of the corporation, when issued, shall be non-assessable,
except to the extent required by the Constitution, specifically, but not in
limitation thereof, as provided by Article XIV, Section 11 of the Constitution
of the State of Arizona and the laws of the State of Arizona.
ARTICLE XIV
The private property of the shareholders, directors and officers of the
corporation shall be forever exempt from debts and obligations of the
corporation.
ARTICLE XV
The Bylaws of the corporation may be repealed, altered amended, or
substitute Bylaws may be adopted, by the directors or the shareholders, in
accordance with the provisions contained in said Bylaws.
ARTICLE XVI
J. Michael Low of 2999 North 44th Street, Suite 250, Phoenix, Arizona,
85018, having been a bona fide resident of Arizona for at least three (3) years,
is hereby appointed the statutory agent of this corporation in the State of
Arizona, upon whom notices and processes, including service of summons, may be
served, and which, when so served shall have lawful personal service on the
corporation. The Board of Directors may revoke this appointment at any time, and
shall fill the vacancy in such position whenever one exists.
ARTICLE XVII
The names and addresses of the incorporators of the corporation are:
J. Michael Low
Low & Childers, P.C.
2999 North 44th Street, Suite 250
Phoenix, Arizona 85018
S. David Childers
Low & Childers, P.C.
2999 North 44th Street, Suite 250
Phoenix, Arizona 85018
Steven R. Henry
Low & Childers, P.C.
2999 North 44th Street, Suite 250
Phoenix, Arizona 85018
<PAGE> 5
Carrie M. McDonald
Low & Childers, P.C.
2999 North 44th Street, Suite 250
Phoenix, Arizona 85018
Kathy A. Steadman
Low & Childers, P.C.
2999 North 44th Street, Suite 250
Phoenix, Arizona 85018
All individual incorporators are eighteen (18) years of age or older.
All powers, duties and responsibilities of the incorporators shall cease
at the time of delivery of these Amended and Restated Articles of Incorporation
and Articles of Redomestication to the Arizona Corporation Commission for
filing.
IN WITNESS WHEREOF, we hereunto affix our signatures as of the 14th day
of December, 1995.
/s/ J. Michael Low /s/ S. David Childers
- ------------------------------ ----------------------------
J. Michael Low S. David Childers
/s/ Steven R. Henry /s/ Carrie M. McDonald
- ------------------------------ ----------------------------
Steven R. Henry Carrie M. McDonald
/s/ Kathy A. Steadman
- ------------------------------
Kathy A. Steadman
Subscribed, sworn to and acknowledged before me this 14th day of
December, 1995.
/s/ Lori Marlow
--------------------------
Notary Public
My Commission Expires:
August 15, 1999
- ----------------------
<PAGE> 6
APPOINTMENT OF STATUTORY AGENT
I, J. Michael Low, being a resident of the State of Arizona for at least
three (3) years preceding this appointment, do hereby accept appointment as
Statutory Agent for Anchor National Life Insurance Company in accordance with
the Arizona Revised Statutes until appointment of a successor Statutory Agent
and removal.
DATED, this 14th day of December, 1995.
/s/ J. Michael Low
------------------------------
J. Michael Low, Esq.
Low & Childers, P.C.
<PAGE> 1
EXHIBIT (6)(b)
AMENDED AND RESTATED
BYLAWS
of
ANCHOR NATIONAL LIFE INSURANCE COMPANY
ARTICLE I.
Shareholders.
Section 1. Annual Meetings. The annual meeting of the
shareholders of the Corporation shall be held on the fourth Thursday in April of
each year or such other dates and times as may be determined. Not less than ten
(10) nor more than fifty (50) days' written or printed notice stating the place,
day and hour of each annual meeting shall be given in the manner provided in
Section 1 of Article IX hereof. The business to be transacted at the annual
meeting shall include the election of directors, consideration and action upon
the reports of officers and directors and any other business within the power of
the Corporation. All annual meetings shall be general meetings.
Section 2. Special Meetings Called by President or Board of
Directors. At any time in the interval between annual meetings, special meetings
of shareholders may be called by the President, the Secretary or by two (2) or
more directors, upon ten (10) days' written or printed notice, stating the
place, day and hour of such meeting and the business proposed to be transacted
thereat. Such notice shall be given in the manner provided in Section 1 of
Article IX. No business shall be transacted at any special meeting except that
named in the notice.
Section 3. Special Meeting Called by Shareholders. Upon the
request in writing delivered to the President or Secretary of the Corporation by
the holders of ten percent (10%) or more of all shares outstanding and entitled
to vote, it shall be the duty of the President or Secretary of the Corporation
to call forthwith a special meeting of the shareholders. Such request shall
state the purpose or purposes of such meeting and the matters proposed to be
acted on thereat. The Secretary of the Corporation shall inform such
shareholders of the reasonably estimated cost of preparing and mailing the
notice of the meeting. If upon payment of such costs to the corporation, the
person to whom such request in writing shall have been delivered shall fail to
issue a call for such meeting within ten (10) days after the receipt of such
request and payment of costs, then the shareholders owning ten percent (10%) or
more of the voting shares may do so upon giving fifteen (15) days' notice of the
time, place and object of the meeting in the manner provided in Section 1 of
Article IX.
Section 4. Removal of Directors. At any special meeting of the
shareholders called in the manner provided for by this Article, the
shareholders, by a vote of a majority of all shares of stock outstanding and
entitled to vote, may remove any director or the entire Board of Directors from
office and may elect a successor or successors to fill any resulting vacancies
for the remainder of his or their terms.
Section 5. Voting; Proxies; Record Date. At all meetings of
shareholders any shareholder entitled to vote may vote by proxy. Such proxy
shall be in writing and signed by the shareholder or by his duly authorized
attorney in fact. It shall be dated, but need not be sealed, witnessed or
acknowledged. The Board of Directors may fix the record date for the
determination of shareholders entitled to vote in the manner provided in Section
4 of Article IX hereof.
Section 6. Quorum. The presence in person or by proxy of the
persons entitled to vote a majority of the voting shares of any meeting shall
constitute a quorum for the transaction of business. If at any annual or special
meeting of shareholders a quorum shall fail to attend in person or by proxy, a
majority in interest attending in person or by proxy may adjourn the meeting
from time to time, not exceeding thirty (30) days in all, and thereupon any
business may be transacted which might have been transacted at the meeting
originally called had the same been held at the time so called.
<PAGE> 2
Section 7. Filing Proxies. At all meetings of shareholders, the
proxies shall be filed with and be verified by the Secretary of the Corporation
or, if the meeting shall so decide, by the Secretary of the meeting.
Section 8. Place of Meetings. All meetings of shareholders shall
be held at such place, either within or without the State of Arizona, on such
date and at such time as may be determined from time to time by the Board of
Directors (or the Chairman in the absence of a designation by the Board of
Directors).
Section 9. Order of Business. The order of business at all
meetings of shareholders shall be as determined by the Chairman of the meeting.
Section 10. Action Without Meeting. Directors may be elected
without a shareholders' meeting by a consent in writing, setting forth the
action so taken, signed by all persons entitled to vote for the election of
directors; provided, however, that the foregoing shall not limit the power of
directors to fill vacancies in the Board of Directors, and that a director may
be elected to fill a vacancy not filled by the directors by written consent in
the manner provided by the General Corporation Law.
Any other action, which under any provision of the General
Corporation Law, may be taken at a meeting of the shareholders, may be taken
without a meeting, and without notice except as hereinafter set forth, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted.
All written consents shall be filed with the Secretary of the
Corporation. Any shareholder giving a written consent, or the shareholder's
proxyholders, or a transferee of the shares of a personal representative of the
shareholder or their respective proxyholders, may revoke the consent by a
writing receiving by the Corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the Secretary of the Corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the Secretary of the Corporation.
ARTICLE II.
Directors.
Section 1. Powers. The Board of Directors shall have the control
and management of the affairs, business and properties of the Corporation. They
shall have and exercise in the name of the Corporation and on behalf of the
Corporation all the rights and privileges legally exercisable by the
Corporation, except as otherwise provided by law, by the Charter or by these
Bylaws. A director need not be a shareholder or a resident of Arizona.
Section 2. Number; Term of Office; Removal. The number of
directors of the Corporation shall be not less than five (5) nor more than
fifteen (15). The number to be elected at each annual meeting shall be fixed by
resolution of the directors and stated in the notice of the meeting, subject,
however, to approval by the shareholders voting at the meeting. The directors
shall hold office for the term of one year, or until their successors are
elected and qualify. A director may be removed from office as provided in
Section 4 of Article I hereof.
Section 3. Vacancies. If the office of a director becomes vacant,
or if the number of directors is increased, such vacancy may be filled by the
Board by a vote of a majority of directors then in office though not less than a
quorum. The shareholders may, however, at any time during the term of such
director, elect some other person to fill said vacancy and thereupon the
election by the Board shall be superseded and such election by the shareholders
shall be deemed a filling of the vacancy and not a removal and may be made at
any special meeting called for that purpose.
Section 4. Organization Meetings; Regular Meetings. The Board of
Directors shall meet for the election of officers and any other business as soon
as practicable after the adjournment of the annual meeting of the shareholders.
No notice of the organization meeting shall be required if it is held at the
same place and immediately following the annual meeting of the shareholders.
Other regular meetings of the Board of Directors may be held at such intervals
as the Board may from time to time prescribe.
<PAGE> 3
Any action required or permitted to be taken at a meeting of the
Board of Directors or of a committee of the Board may be taken without a
meeting, if a unanimous written consent which sets forth the action is signed by
each member of the Board or committee and filed with the minutes of proceedings
of the Board or committee.
Unless otherwise restricted by the Articles of Incorporation or
these Bylaws, members of the Board of Directors, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors,
or such committee, as the case may be, by means of telephone conference or
similar communications equipment by means of which are persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
Section 5. Special Meetings. Special meetings of the Board may be
called by the President or by a majority of the directors. At least twenty-four
(24) hours' notice shall be given of all special meetings; with the consent of
the majority of the directors, a shorter notice may be given.
Section 6. Quorum. A majority of the Board of Directors shall
constitute a quorum for the transaction of business, but such number may be
decreased and/or increased at any time or from time to time by vote of a
majority of the entire Board to any number not less than two (2) directors or
not less than one-third of the directors, whichever is greater.
Section 7. Place of Meetings. The Board of Directors shall hold
its meetings at such place, either within or without the State of Arizona, and
at such time as may be determined from time to time by the Board of Directors
(or the Chairman in the absence of a determination by the Board of Directors).
Section 8. Rules and Regulations. The Board of Directors may
adopt such rules and regulations for the conduct of its meetings and the
management of the affairs of the Corporation as the Board may deem proper and
not inconsistent with the laws of the State of Arizona or these Bylaws or the
Charter.
Section 9. Compensation. The directors, as such, may receive a
stated salary for their services and/or a fixed sum and expenses of attendance
may be allowed for attendance at each regular or special meeting of the Board of
Directors. Such stated salary and/or attendance fee shall be determined by
resolution of the Board unless the shareholders have adopted a resolution
relating thereto, provided that nothing herein contained shall be construed to
preclude a director from serving in any other capacity and receiving
compensation therefor.
Section 10. Chairman of the Board. The Board of Directors shall
provide for a Chairman of the Board from among its members. So long as there
shall be a person so active, he shall preside at all meetings of the Board and
at all joint meetings of officers and directors. In the absence of the Chairman,
the Vice Chairman, if any, or in his absence, the President, shall preside at
all meetings of the Board and all joint meetings of officers and directors.
Section 11. Investment Committee. There shall be an Investment
Committee consisting of the President of the Corporation ex officio and such
members of the Board of Directors and/or officers and employees as the Board may
by resolution prescribe. No investments or loans (other than policy loans or
annuity contract loans) shall be made unless the same be authorized or approved
by the Board of Directors or the Investment Committee. The Investment Committee
shall maintain minutes of its meetings and shall submit regular reports to the
Board of Directors.
Section 12. Executive Committee. The Board of Directors may
appoint from among its members an Executive Committee composed of three (3) or
more directors, and may delegate to such Committee, in the interval between the
meetings of the Board of Directors, any and all of the powers of the Board of
Directors in the management of the business and affairs of the Corporation,
except the power to declare dividends, issue stock, select directors to fill
vacancies in the membership of the Executive Committee or recommend to
shareholders any action requiring shareholders' approval. The members of such
Committee shall constitute a quorum for the transaction of business at any
meeting and the act of a majority of the members present at any meeting at which
the quorum requirement is satisfied shall be the act of the Board of Directors.
In the absence of any member of the Executive Committee necessary to constitute
<PAGE> 4
a quorum, the members thereof present at any meeting, whether or not they
constitute a quorum, may, with telephonic approval of one of the absent members
of the Executive Committee, appoint a member of the Board of Directors to act in
place of such absent member.
Section 13. Other Committees. The Board of Directors may appoint
from its own members and, where permitted by law, from the Corporation's
officers and/or employees, such standing, temporary, special or ad hoc
committees as the Board may determine, investing such committees with such
powers, duties and functions as the Board may prescribe. All such committees
shall include the President, ex officio.
Section 14. Advisory Board. The Board of Directors may elect an
Advisory Board to serve until the next annual meeting of the Board of Directors
or until their successors are elected and qualify. Such Board shall consist of a
number as determined from time to time by the Board of Directors, and they shall
be advised of the meetings of the Board of Directors and authorized to attend
the meetings and counsel with them, but shall have no vote. The Board of
Directors (and between meeting of the Board of Directors, the Executive
Committee) shall have the authority to increase or decrease the number of
members to the Advisory Board and to elect one or more members to the Advisory
Board to serve until the next meeting of the Board of Directors and until their
successors are elected and qualify, and may provide for the compensation and
other rules and regulations with respect to such Board.
Section 15. Procedures; Meetings. The Committees shall keep
minutes of their proceedings and shall report the same to the Board of Directors
at the meeting next succeeding, and any action by the Committees shall be
subject to revision and alteration by the Board of Directors, provided that no
rights of third persons shall be affected by any such revision or alteration.
ARTICLE III.
Officers.
Section 1. In General. The officers of the Corporation shall
consist of a President, one or more Vice Presidents, a Secretary, a Treasurer,
and one or more Assistant Secretaries and Assistant Treasurers, and such other
officers bearing such titles as may be fixed pursuant to these Bylaws. The
President, Vice Presidents, Secretary, and Treasurer shall be chosen by the
Board of Directors and, except those persons holding contracts for fixed terms,
shall hold office only during the pleasure of the Board or until their
successors are chosen and qualify. The President may from time to time appoint
Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers, and
other officers bearing such titles and exercising such authority as he may from
time to time deem appropriate, and except those persons holding contracts for
fixed terms, those officers appointed by the President shall hold office only
during his pleasure or until their successors are appointed and qualify. Any two
(2) officers, except those of President, Executive Vice President and Secretary,
may be held by the same persons, but no officer shall execute, acknowledge or
verify any instrument in more than one capacity when such instrument is required
to be executed, acknowledged, or verified by any two (2) or more officers. The
Board of Directors or the President may from time to time appoint other agents
and employees, with such powers and duties as they may deem proper.
Section 2. President. The President shall be Chief Executive
Officer of the Corporation and shall have the general management of the
Corporation's business in all departments. In the absence of the Chairman of the
Board, the President shall preside at all meetings of the Board of Directors and
shall call to order all meetings of shareholders. The President shall perform
such other duties as the Board of Directors may direct.
Section 3. Vice Presidents. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as designated by
the Board of Directors or, if not ranked, the Vice President designated by the
Board of Directors, shall perform all the duties of the President, and when so
acting shall have all the powers of, and be subject to all the restrictions
upon, the President. The Vice Presidents shall have such other powers and
perform such other duties as from time to time may be prescribed for them
respectively by the Board of Directors or the Bylaws.
<PAGE> 5
Section 4. Treasurer. Unless there shall be a financial Vice
President designated by the Board of Directors as the chief financial officer of
the Corporation, having general supervision over its finances, the Treasurer
shall be the chief financial officer with such authority. He shall also have
authority to attest to the seal of the Corporation and shall perform such other
duties as may be assigned to him by the Board of Directors.
Section 5. Secretary of the Corporation. The Secretary of the
Corporation shall keep the minutes of the meetings of the shareholders and of
the Board of Directors, and shall attend to the giving and serving of all
notices of the Corporation required by law or these Bylaws. The Secretary shall
maintain at all times in the principal office of the Corporation at least one
copy of the Bylaws with all amendments to date, and shall make the same,
together with the minutes of the meetings of the shareholders, the annual
statement of the affairs of the Corporation and any voting trust agreement on
file at the office of the Corporation, available for inspection by any officer,
director, or shareholder during reasonable business hours. The Secretary shall
have authority to attest to the seal of the Corporation and shall perform such
other duties as may be assigned to the Secretary by the Board of Directors.
Section 6. Other Secretaries, Assistant Treasurers and Assistant
Secretaries. Secretaries other than the Secretary of the Corporation, the
Assistant Treasurers and the Assistant Secretaries shall have authority to
attest to the seal of the Corporation and shall perform such other duties as may
from time to time be assigned to them by the Board of Directors or the
President.
Section 7. Substitutes. The Board of Directors may from time to
time in the absence of any one of said officers or, at any other time, designate
any other person or persons on behalf of the Corporation, to sign any contracts,
deeds, notes, or other instruments in the place or stead of any of said
officers, and designate any person to fill any one of said offices, temporarily
or for any particular purpose; and any instruments so signed in accordance with
a resolution of the Board shall be the valid act of this Corporation as fully as
if executed by any regular officer.
ARTICLE IV.
Resignation.
Any director or officer may resign his office at any time. Such
resignation shall be made in writing and shall take effect from the time of its
receipt by the Corporation, unless some time be fixed in the resignation, and
then from that date. The acceptance of a resignation shall not be required to
make it effective.
ARTICLE V.
Indemnification of Directors and Officers.
The Corporation shall indemnify any and all of its existing and
former directors and officers and their spouses against all expenses incurred by
them and each of them, including but not confined to legal fees, judgments and
penalties which may be incurred, rendered or levied in any legal or
administrative action brought against any of then, for or on account of any
action or omission alleged to have been committed while acting within the scope
of employment as director of officer of the Corporation to the fullest extent
allowable pursuant to the Arizona General Corporation Law as may be amended from
time to time. Whenever any such person has grounds to believe that he may incur
any such aforementioned expense, he shall promptly make a full report of the
matter to the President and the Secretary of the Corporation. Thereafter, the
Board of Directors of the Corporation shall, within a reasonable time, determine
if such person acted, or failed to act, in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. If the Board of Directors
determines that such person acted, or failed to act, in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful, then indemnification shall
be mandatory and shall be automatically extended as specified herein, provided,
however, that the Corporation shall have the right to refuse indemnification,
wholly or partially, in any instance in which the person to whom indemnification
would otherwise have been applicable shall have unreasonably refused to permit
<PAGE> 6
the Corporation, at its own expense and through counsel of its own choosing, to
defend him in the action, or shall have unreasonably refused to cooperate in the
defense of such action.
ARTICLE VI.
Fiscal Year.
The fiscal year of the Corporation shall be the calendar year.
ARTICLE VII.
Seal.
The seal of the Corporation shall be a circular disc inscribed
with the name of the Corporation, "Anchor National Life Insurance Company" and
the word "Incorporated".
ARTICLE VIII.
Miscellaneous Provisions - Stock.
Section 1. Issue. All certificates of shares of the Corporation
shall be signed by the manual or facsimile signatures of the President or any
Vice President, and countersigned by the Treasurer or Secretary of the
Corporation and sealed with the seal or facsimile seal of the Corporation. Any
stock certificates bearing the facsimile signatures of the officers above named
shall be manually signed by an authorized representative of the Corporation's
duly constituted transfer agent. If an officer whose signature appears on a
certificate ceases to be an officer before the certificate is issued, it may,
nevertheless, be issued with the same effect as if such officer were still in
office.
Section 2. Transfers. No transfers of shares shall be recognized
or binding upon the Corporation until recorded on the transfer books of the
Corporation upon surrender and cancellation of certificates for a like number of
shares. All transfers shall be effected only by the holder of record of such
shares or by his legal representative, or by his attorney thereunto authorized
by power of attorney duly executed. The person in whose name shares shall stand
on the books of the Corporation may be deemed by the Corporation the owner
thereof for all purposes. The Corporation's transfer agent shall maintain a
stock transfer book, shall record therein all stock transfers and shall forward
copies of all transfer sheets at regular prompt intervals to the Corporation's
registrar, if there be one, or, if not, then to the Corporation's principal
office for transcription on the stock registry books.
Section 3. Form of Certificates; Procedure. The Board of
Directors shall have power and authority to determine the form of stock
certificates (except insofar as prescribed by law), and to make all such rules
and regulations as the Board may deem expedient concerning the issue; transfer
and registration of said certificates, and to appoint one or more transfer
agents and/or registrars to countersign and register the same. The transfer
agent and registrar may be the same party.
Section 4. Record Dates for Dividends and Shareholders' Meetings.
The Board of Directors may fix the time, not exceeding twenty (20) days
preceding the date of any meeting of shareholders, any dividend payment date or
any date for the allotment of rights, during which the books of the Corporation
shall be closed against transfers of stock, or the Board of Directors may fix a
date not exceeding forty (40) days preceding the date of any meeting of
shareholders, any dividend payment date or any date for the allotment of rights,
as a record date for the determination of the shareholders entitled to notice of
and to vote at such meeting, or entitled to receive such dividends or rights, as
the case may be, and only shareholders of record on such date shall be entitled
to notice of and to vote at such meeting or to receive such dividends or rights,
as the case may be. In the case of a meeting of shareholders, the record date
shall be fixed not less than ten (10) days prior to the date of the meeting.
<PAGE> 7
Section 5. Lost Certificates. In case any certificate of shares
is lost, mutilated or destroyed, the Board of Directors may issue a new
certificate in place thereof, upon indemnity to the Corporation against loss and
upon such other terms and conditions as the Board of Directors may deem
advisable.
ARTICLE IX.
Notice.
Section 1. Notice to Shareholders. Whenever by law or these
Bylaws notice is required to be given to any shareholder, such notice may be
given to each shareholder, whether or not such shareholder is entitled to vote,
by leaving the same with him or at his residence or usual place of business, or
by mailing it, postage prepaid, and addressed to him at his address as it
appears on the books of the Corporation. Such leaving or mailing of notice shall
be deemed the time of giving such notice.
Section 2. Notice to Directors and Officers. Whenever by law of
these Bylaws notice is required to be given to any director or officer, such
notice may be given in any one of the following ways: by personal notice to such
director or officer; by telephone communication with such director or officer
personally; by wire, addressed to such director or officer at his then address
or at his address as it appears on the books of the Corporation; or by
depositing the same in writing in the post office or in a letter box in a
postage paid, sealed wrapper addressed to such director or officer at his then
address or at his address as it appears on the books of the Corporation; and the
time when such notice shall be mailed or consigned to a telegraph company for
delivery shall be deemed to be the time of the giving of such notice.
ARTICLE X.
Voting of Securities in Other Corporations.
Any stock or other voting securities in other corporations, which
may from time to time be held by the Corporation, may be represented and voted
at any meeting of shareholders of such other corporation by the President, any
Vice President, or the Treasurer, or by proxy or proxies appointed by the
President, any Vice President, or the Treasurer, or otherwise pursuant to
authorization thereunto given by a resolution of the Board of Directors.
ARTICLE XI.
Amendments.
These Bylaws may be added to, altered, amended or repealed by a
majority vote of the entire Board of Directors at any regular meeting of the
Board or at any special meeting called for that purpose. Any action of the Board
of Directors in adding to, altering, amending or repealing these Bylaws shall be
reported to the shareholders at the next annual meeting and may be changed or
rescinded by majority vote of all of the stock then outstanding and entitled to
vote, without, however, affecting the validity of any action taken in the
meanwhile in reliance on these Bylaws so added to, altered, amended or repealed
as aforesaid by the Board of Directors. In no event shall the Board of Directors
have any power to amend this Article.
<PAGE> 1
EXHIBIT (8)
FUND PARTICIPATION AGREEMENT
----------------------------
THIS AGREEMENT, entered into as of this 29th day of March, 1988, among
ANCHOR NATIONAL LIFE INSURANCE COMPANY ("Anchor"), a life insurance company
organized under the laws of the State of California, on behalf of itself and
AMERICAN PATHWAY II - SEPARATE ACCOUNT OF ANCHOR NATIONAL LIFE INSURANCE
COMPANY, ("Separate Account") a Separate Account established by Anchor in
accordance with the laws of the State of California, ANCHOR PATHWAY FUND
("Fund"), an open-end management investment company organized under the laws of
the State of Massachusetts, and ANCHOR NATIONAL FINANCIAL SERVICES, INC.
("Distributor"), a Maryland corporation.
WITNESSETH:
WHEREAS, the Separate Account has been established by Anchor pursuant to
the California Insurance Code in connection with certain variable annuity
contracts ("Contracts") issued to the public by Anchor; and
WHEREAS, the Separate Account is registered as a unit investment trust
under the Investment Company Act of 1940;
WHEREAS, the income, gains and losses, whether or not realized, from
assets allocated to the Separate Account are, in accordance with the applicable
Contracts, to be credited to or charged against such Separate Account without
regard to other income, gains or losses of Anchor; and
WHEREAS, the Separate Account is subdivided into various "Variable
Accounts" under which income, gains and losses, whether or not realized, from
assets allocated to each such Variable Account are, in accordance with the
applicable Contracts, to be credited to or charged against the Variable Accounts
without regard to other income, gains or losses of other Variable Accounts or of
Anchor; and
WHEREAS, the Fund is divided into various "Series", each Series being
subject to separate investment policies and restrictions which may not be
changed without a majority vote of the shareowners of such Series; and
WHEREAS, the Fund agrees to make its shares available to serve as
underlying investment media for the Separate Account, with shares of each Series
of the Fund to serve as the underlying investment medium for each of the various
Variable Accounts in the Separate Account; and
WHEREAS, Distributor, the principal underwriter for the Contracts to be
funded in the Separate Account, is a broker-dealer registered as such under the
Securities and Exchange Act of 1934;
NOW THEREFORE, in consideration of the foregoing and of mutual covenants
and conditions set forth herein and for other good and valuable consideration,
Anchor, the Separate Account, the Fund, and Distributor hereby agree as follows:
1. The Contracts funded through the Separate Account will provide for
the allocation of net amounts among the various Variable Accounts of the
Separate Account for investment in the shares of the Series of the fund
underlying each Variable Account. The selection of the particular Variable
Account is to be made by the Contract Owner and such selection may be changed in
accordance with the terms of the Contracts.
2. No representation is made as to the number or amount of such
Contracts to be sold. Anchor and Distributor will make reasonable efforts to
market such Contracts and will comply with all applicable Federal or state laws
in connection therewith.
3. Fund shares to be made available to each Variable Account of the
Separate Account shall be sold by each of the respective Series of the fund and
purchased by anchor for the corresponding Variable Account at the net asset
value (without the imposition of a sales load) next computed after receipt of
each order, as established in accordance with the provisions of the then current
prospectus of the fund. Shares of a particular Series shall be ordered in such
quantities and at such times as determined by anchor to be necessary to meet the
<PAGE> 2
requirements of those contracts issued by anchor in that Variable Account of the
Separate Account for which the Series shares serve as the underlying investment
medium. Orders or payments for shares purchased will be sent promptly to the
fund and will be made payable in the manner established from time to time by the
fund for the receipt of such payments. The Fund reserves the right to delay
transfer of its shares until the payment check has cleared. The Fund has the
obligation to insure that its shares are registered at all times.
4. Transfer of the Fund's shares will be by book entry only. No Stock
Certificates will be issued to the Separate Account. Shares ordered from a
particular Series of the fund will be restored in an appropriate title for the
corresponding Variable Account of the Separate Account by Anchor.
5. The Fund shall furnish notice promptly to Anchor of any dividend or
distribution payable on its shares. All of such dividends and distributions as
are payable on each Series' shares in the title for the corresponding Variable
Account of the Separate Account shall be automatically reinvestment in
additional shares of that Series. The Fund shall notify Anchor of the number of
shares so issued.
6. All expenses incident to the performance by the Fund under this
Agreement shall be paid by that Fund. The Fund shall see to it that all its
shares are registered and authorized for issue in accordance with applicable
federal and state laws prior to their purchase for the Separate Account. Anchor
shall bear none of the expenses for the cost of registration of the Fund's
shares, preparation of the Fund's prospectuses, proxy materials and reports, the
distribution of such items to each Contract Owner who has allocated net amounts
to any Variable Account of the Separate Account, the preparation of all
statements and notices required by any federal or state law, or taxes on the
issue or transfer of Fund's shares subject to this Agreement.
7. Anchor and Distributer shall make no representations concerning the
Fund's shares except those contained in the then current prospectus of the Fund
and in printed information subsequently issued on behalf of the Fund as
supplemental to such prospectus.
8. This Agreement shall terminate:
a. at the option of Anchor or of the fund upon sixty
days advance written notice to all others;
b. at the option of Anchor if any of Fund's shares are
not reasonably available to meet the requirements of
the Contracts as determined by Anchor. Prompt notice
of election to terminate shall be furnished by
Anchor;
c. at the option of Anchor upon institution of formal
proceedings against the Fund by the Securities and
Exchange Commission.
d. upon requisition vote of the Contract Owners having
an interest in a particular Variable Account of the
Separate Account to substitute the shares of another
investment company for the corresponding fund shares
in accordance with the terms of the Contracts for
which those Fund shares had been selected to serve as
the underlying investment medium. Anchor will give
30 days prior written notice to the Fund of the date
of any proposed vote to replace the Fund shares;
e. in the event the Fund's shares are not registered,
issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of
such shares as the underlying investment medium of
the Contracts issued or to be issued by Anchor.
Prompt notice shall be given to any party to all
other parties in the event that the conditions stated
in this subsection (e) or in any subsection of this
Section 8 should occur.
<PAGE> 3
9. The obligations of the Fund under this Agreement are not binding upon
any of the Trustees, officer, employees, agents or shareholders of the Fund
individually, but bind only the Fund. Anchor, the Separate Account and
Distributor agree to look solely to the assets of the Fund for the satisfaction
of any liability of the Fund in respect of this Agreement and will not see
recourse against such Trustees, officers, employees, agents or shareholders, or
any of them, or any of their personal assets for such satisfaction.
10. This Agreement shall be construed in accordance with the laws of the
State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be duly executed and attested as of the date first above written.
ANCHOR NATIONAL LIFE INSURANCE COMPANY
Attest:
/s/ SUSAN L. HARRIS By: /s/ ROBERT P. SALTZMAN
- -------------------------- ----------------------------------
Robert P. Saltzman
President & Chief Executive Officer
AMERICAN PATHWAY II - SEPARATE ACCOUNT OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
By: ANCHOR NATIONAL LIFE INSURANCE COMPANY
Attest:
/s/ SUSAN L. HARRIS By: /s/ ROBERT P. SALTZMAN
- -------------------------- ----------------------------------
Robert P. Saltzman
President & Chief Executive Officer
ANCHOR PATHWAY FUND
Attest:
/s/ SUSAN L. HARRIS By: /s/ ROBERT P. SALTZMAN
- -------------------------- ----------------------------------
Robert P. Saltzman
Chief Executive Officer
ANCHOR NATIONAL FINANCIAL SERVICES, INC.
Attest:
/s/ LORIN M. FIFE By: /s/ SUSAN L. HARRIS
- -------------------------- ----------------------------------
Susan L. Harris
Secretary
<PAGE> 1
OPINION OF COUNSEL
Having examined and being familiar with the articles of incorporation
and by-laws of Anchor National Life Insurance Company ("Anchor"), the
applicable resolutions relating to the American Pathway II -- Separate Account
("the Account") and other pertinent records and documents, it is our opinion
(i) that Anchor is a duly organized and existing corporation under the laws of
the State of California and that its principal business is to be an insurer,
(ii) that the Account is a duly organized and existing separate account of
Anchor under the laws of the State of California, and is registered as a unit
investment trust under the Investment Company Act of 1940 (File No. 811-3859),
and (iii) that variable annuity contracts being registered by this Registration
Statement under the Securities Act of 1933 (File No. 2-86837) will, upon
issuance thereof, be validly authorized and issued.
ROUTIER AND JOHNSON, P.C.
By /s/ ROBERT J. ROUTIER
-----------------------------
Robert J. Routier
Suite 500
1725 K Street, N.W.
Washington, D.C. 20006
<PAGE> 2
CONSENT OF COUNSEL
We hereby consent to the use of our Opinion of Counsel which is
contained in Pre-Effective No. 1 (File No. 2-86837) to the Registration
Statement on Form S-6 on behalf of American Pathway II -- Separate Account of
Anchor National Life Insurance Company. We further consent to the reference to
this law firm under the caption "Legal Matters" in the prospectus contained in
this Registration Statement.
ROUTIER AND JOHNSON, P.C.
By /s/ ROBERT J. ROUTIER
-----------------------------
Robert J. Routier
Suite 500
1725 K Street, N.W.
Washington, D.C. 20006
<PAGE> 1
EXHIBIT 10
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 PATHWAY Variable Annuity) of
Anchor National Life Insurance Company, of our report dated November 7, 1997
relating to the consolidated financial statements of Anchor National Life
Insurance Company, and of our report dated January 28, 1998 relating to the
financial statements of Variable Separate Account (Portion Relating to the
PATHWAY Variable Annuity) of Anchor National Life Insurance Company, which
appear in such Statement of Additional Information. We also consent to the
reference to us under the heading "Financial Statements" in such Statement of
Additional Information.
PRICE WATERHOUSE LLP
Los Angeles, California
January 29, 1998
<PAGE> 1
EXHIBIT 14
SunAmerica Inc. (a Maryland corporation) owns 100% of SunAmerica Financial, Inc.
(a Georgia corporation); Resources Trust Company (a Colorado corporation, which
owns 100% of Resources Consolidated Inc. (a Colorado corporation); SunAmerica
Life Insurance Company (an Arizona corporation); Imperial Premium Finance, Inc.
(a Delaware corporation); SA Investment Group, Inc. (a California corporation);
SunAmerica Capital Trust I (a Delaware business trust); SunAmerica Capital Trust
II (a Delaware business trust); SunAmerica Capital Trust III (a Delaware
business trust); SunAmerica Capital Trust IV (a Delaware business trust);
SunAmerica Capital Trust V (a Delaware business trust); SunAmerica Capital Trust
VI (a Delaware business trust); SunAmerica Affordable Housing Finance Corp. (a
Delaware corporation); Stanford Ranch, Inc. (a Delaware corporation) which owns
100% of Stanford Ranch, Inc. (a Califoria corporation); Arrowhead SAHP Corp. (a
New Mexico corporation); Bear Run SAHP Corp. (a Delaware corporation); Chelsea
SAHP Corp. (a Florida corporation); Tierra Vista SAHP Corp. (a Florida
corporation); Westwood SAHP Corp. (a New Mexico corporation); Bryton SAHP Corp.
(a Delaware close corporation); Crossings SAHP Corp. (a Delaware close
corporation); Emerald SAHP Corp. (a Delaware close corporation); Forest SAHP
Corp. (a Delaware close corporation); Pleasant SAHP Corp. (a Delaware close
corporation); Westlake SAHP Corp. (a Delaware close corporation); Williamsburg
SAHP Corp. (a Delaware close corporation); and Willow SAHP Corp. (a Delaware
close corporation). In addition, SunAmerica Inc. owns 80% of AMSUN Realty
Holdings (a California corporation); and 33% of New California Life Holdings,
Inc. (a Delaware corporation) which owns 100% of Aurora National Life Assurance
Company (a California corporation).
SunAmerica Financial, Inc. owns 100% of SunAmerica Marketing, Inc. (a Maryland
corporation); SunAmerica Advertising, Inc. (a Georgia corporation); SunAmerica
Investments, Inc. (a Delaware corporation) which owns 100% of Accelerated
Capital Corp. (a Florida corporation); 1401 Sepulveda Corp. (a California
corporation); SunAmerica Louisiana Properties, Inc. (a California corporation);
SunAmerica Real Estate and Office Administration, Inc. (a Delaware corporation);
SunAmerica Affordable Housing Partners, Inc. (a California corporation); Hampden
I & II Corp. (a California corporation); Sunport Holdings, Inc. (a California
corporation) which owns 100% of Sunport Property Co. (a Florida corporation);
SunAmerica Mortgages, Inc. (a Delaware corporation); Sun Princeton II, Inc. (a
California corporation) which owns 100% of Sun Princeton I (a California
corporation); Advantage Capital Corporation (a New York corporation); SunAmerica
Planning, Inc. (a Maryland corporation which owns 100% of SunAmerica Securities,
Inc. (a Delaware corporation) and 100% of Anchor Insurance Services, Inc. (a
Hawaii corporation) which owns 50% of Royal Alliance Associates Inc. (a Delaware
corporation); SunAmerica Insurance Company (Cayman), Ltd. (a Cayman Islands
corporation); Sun Mexico Holdings, Inc. (a Delaware corporation) which owns 100%
of Sun Cancun I, Inc. (a Delaware corporation), Sun Cancun II, Inc. (a Delaware
corporation), Sun Ixtapa I, Inc. (a Delaware corporation) and Sun Ixtapa II,
Inc. (a Delaware corporation); Sun Hechs, Inc. (a California corporation); and
SunAmerica Travel Services, Inc. (a California corporation); SAI Investment
Adviser, Inc. (a Delaware corporation); Sun GP Corp. (a California corporation);
The Financial Group, Inc. (a Georgia Corporation) which owns 100% of Keogler,
Morgan Co., Keogler Investment Advisory, Inc., and Keogler, Morgan investment
Inc. (all Georgia Corporations); Sun CRC, Inc. (a California corporation);
Sun-Dollar, Inc. (a California close corporation); and 70% of Home Systems
Partners (a California limited partnership) which owns 100% of Extraneous
Holdings Corp. (a Delaware corporation).
SunAmerica Life Insurance Company owns 100% of First SunAmerica Life Insurance
Company (a New York corporation); SunAmerica National Life Insurance Company (an
Arizona corporation); John Alden Life Insurance Company of New York (a New York
corporation); CalAmerica Life Insurance Company (a California corporation);
Anchor National Life Insurance Company (a California corporation) which owns
100% of Anchor Pathway Fund, Anchor Series Trust, SunAmerica Series Trust, and
Seasons Series Trust, (all Massachusetts business trusts); UG Corporation (a
Georgia corporation); Export Leasing FSC, Inc. (a U.S. Virgin Islands
corporation); SunAmerica Virginia Properties, Inc. (a California corporation);
SAL Investment Group (a California corporation); and Saamsun Holding Corporation
(a Delaware corporation) which owns 100% of SAM Holdings Corporation (a
California corporation) which owns 100% of SunAmerica Asset Management Corp. (a
Delaware corporation), SunAmerica Capital Services, Inc. (a Delaware
corporation), SunAmerica Fund Services, Inc. (a Delaware corporation), ANF
Property Holdings, Inc. (a California corporation), Capitol Life Mortgage Corp.
(a Delaware corporation) and Sun Royal Holdings Corporation (a California
corporation) which owns 50% of Royal Alliance Associates, Inc. In addition,
SunAmerica Life Insurance Company owns 80% of SunAmerica Realty Partners (a
California corporation) and 33% of New California Life Holdings, Inc. (a
Delaware corporation) which owns 100% of Aurora National Life Assurance Company
(a California corporation; and 88.75% of Sun Quorum L.L.C. (a Delaware limited
liability company).
Imperial Premium Finance, Inc. (Delaware) owns 100% of Imperial Premium Finance,
Inc. (a California
<PAGE> 2
corporation); Imperial Premium Funding, Inc. (a Delaware corporation); and
SunAmerica Financial Resources, Inc. (a Delaware corporation).
Updated As of 10/21/97
