<PAGE> 1
File Nos. 33-47473
811-3859
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 11 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No. 28
(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)
<TABLE>
<CAPTION>
Title and Amount
of Securities Amount of
Being Registered Registration Fee
- ---------------- ----------------
<S> <C> <C>
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
</TABLE>
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on February 2, 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>
Item Number in Form N-4 Caption
- ----------------------- -------
<S> <C>
1. Cover Page............................. Cover Page
2. Definitions............................ Definitions
3. Synopsis............................... Profile; Fee Tables;
Portfolio Expenses;
Examples
4. Condensed Financial Information........ Appendix A - Condensed
Financial Information
5. General Description of Registrant, Depositor and
Portfolio Companies...... The Polaris Variable
Annuity; Other Information
6. Deductions............................. Expenses
7. General Description of
Variable Annuity Contracts............. The Polaris Variable
Annuity; Purchasing a
Polaris Variable Annuity
Contract; Investment
Options
8. Annuity Period......................... Annuity Income Options
9. Death Benefit.......................... Death Benefit
10. Purchases and Contract Value........... Purchasing a Polaris
Variable Annuity Contract
11. Redemptions............................ Access to Your Money
12. Taxes.................................. Taxes
13. Legal Proceedings...................... Other Information - Legal
Proceedings
14. Table of Contents of Statement
of Additional Information.............. Table of Contents of
Statement of Additional
Information
</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>
15. Cover Page............................. Cover Page
16. Table of Contents...................... Table of Contents
17. General Information and History........ The Polaris Variable
Annuity (P); Separate
Account; General Account;
Investment Options (P);
Other Information (P)
18. Services............................... Other Information (P)
19. Purchase of Securities Being Offered... Purchasing a Polaris
Variable Contract (P)
20. Underwriters........................... Distribution of Contracts
21. Calculation of Performance Data........ Performance Data
22. Annuity Payments....................... Annuity Income Options
(P); Annuity Payments;
Annuity Unit Values
23. Financial Statements................... Depositor: Other
Information - Financial
Statements (P)
Registrant: Financial
Statements
</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
[POLARIS PROFILE LOGO]
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD
KNOW AND CONSIDER BEFORE PURCHASING THE POLARIS VARIABLE ANNUITY. THE SECTIONS
IN THIS PROFILE CORRESPOND TO SECTIONS IN THE ACCOMPANYING PROSPECTUS WHICH
DISCUSS THE TOPICS IN MORE DETAIL. THE ANNUITY IS MORE FULLY DESCRIBED IN THE
PROSPECTUS. PLEASE READ THE PROSPECTUS CAREFULLY.
February 2, 1998
================================================================================
1. THE POLARIS VARIABLE ANNUITY
================================================================================
The Polaris Variable Annuity is a contract between you and Anchor National Life
Insurance Company. It is designed to help you invest on a tax-deferred basis and
meet long-term financial goals, such as retirement funding. Tax deferral means
all your money, including the amount you would otherwise pay in current income
taxes, remains in your contract to generate more earnings. Your money could grow
faster than it would in a comparable taxable investment.
Polaris offers a diverse selection of money managers and investment options. You
may divide your money among any or all of our 25 variable investment portfolios
and 5 fixed investment options. Your investment is not guaranteed. The value of
your Polaris contract can fluctuate up or down, based on the performance of the
underlying investments you select, and you may experience a loss.
The variable investment portfolios offer professionally managed investment
choices with goals ranging from capital preservation to aggressive growth. Your
choices for the various investment options are found on the next page.
The contract also offers 5 fixed investment options, for different time periods
and each with a different interest rate that is guaranteed by Anchor National.
Like most annuities, the contract has an Accumulation Phase and an Income Phase.
During the Accumulation Phase, you invest money in your contract. Your earnings
are based on the investment performance of the variable investment portfolios to
which your money is allocated and/or the interest rate earned on the fixed
investment options. You may withdraw money from your contract during the
Accumulation Phase. However, as with other tax-deferred investments, you will
pay taxes on earnings and untaxed contributions when you withdraw them. An IRS
tax penalty may apply if you make withdrawals before age 59 1/2. During the
Income Phase, you will receive payments from your annuity. Your payments may be
fixed in dollar amount, vary with investment performance or a combination of
both, depending on where your money is allocated. Among other factors, the
amount of money you are able to accumulate in your contract during the
Accumulation Phase will determine the amount of your payments during the Income
Phase.
================================================================================
2. ANNUITY INCOME OPTIONS
================================================================================
You can select from one of five annuity income options:
(1) payments for your lifetime;
(2) payments for your lifetime and your survivor's lifetime;
(3) payments for your lifetime and your survivor's lifetime, but for not less
than 10 years;
(4) payments for your lifetime, but for not less than 10 or 20 years; and
(5) payments for a specified period of 5 to 30 years.
You will also need to decide if you want your payments to fluctuate with
investment performance or remain constant, and the date on which your payments
will begin. Once you begin receiving payments, you cannot change your annuity
option. If your contract is part of a non-qualified retirement plan (one that is
established with after tax dollars), payments during the Income Phase are
considered partly a return of your original investment. The "original
investment" part of each payment is not taxable as income. For contracts which
are part of a qualified retirement plan using before tax dollars, the entire
payment is taxable as income.
================================================================================
3. PURCHASING A POLARIS VARIABLE
ANNUITY CONTRACT
================================================================================
You can buy a contract through your financial representative, who can also help
you complete the proper forms. For Non-qualified contracts, the minimum initial
investment is $5,000 and subsequent amounts of $500 or more may be added to your
contract at any time during the Accumulation Phase. For Qualified contracts, the
minimum initial investment is $2,000 and subsequent amounts of $250 or more may
be added to your contract at any time during the Accumulation Phase.
<PAGE> 5
================================================================================
4. INVESTMENT OPTIONS
================================================================================
You may allocate money to the following variable investment portfolios of the
Anchor Series Trust and/or the SunAmerica Series Trust:
ANCHOR SERIES TRUST
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Capital Appreciation Portfolio
- Growth Portfolio
- Natural Resources Portfolio
- Government and Quality Bond Portfolio
SUNAMERICA SERIES TRUST
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Global Equities Portfolio
- Alliance Growth Portfolio
- Growth-Income Portfolio
MANAGED BY DAVIS SELECTED ADVISERS, L.P.
- Venture Value Portfolio
- Real Estate Portfolio
MANAGED BY FEDERATED INVESTORS
- Federated Value Portfolio
- Utility Portfolio
- Corporate Bond Portfolio
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT/
GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
- Asset Allocation Portfolio
- Global Bond Portfolio
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT INC.
- International Diversified Equities Portfolio
- Worldwide High Income Portfolio
MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
- Growth/Phoenix Investment Counsel Portfolio
- Balanced/Phoenix Investment Counsel Portfolio
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
- Putnam Growth Portfolio
- International Growth and Income Portfolio
- Emerging Markets Portfolio
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio
- SunAmerica Balanced Portfolio
- High-Yield Bond Portfolio
- Cash Management Portfolio
You may also allocate money to the 1, 3, 5, 7 and 10 year fixed investment
options. The interest rate may differ from time to time but will never be less
than 3%. Once established, the rate will not change during the selected period.
Your contract value will be adjusted up or down for withdrawals or transfers
from the 3, 5, 7 and 10 year fixed investment options prior to the end of the
selected period.
================================================================================
5. EXPENSES
================================================================================
Each year, we deduct a $35 contract maintenance fee from your contract. This fee
is currently waived if the value of your contract is at least $50,000. We also
deduct insurance charges which equal 1.52% annually of the average daily value
of your contract allocated to the variable portfolios. The insurance charges
include: Mortality and Expense Risk, 1.37%, and Distribution Expense, .15%.
As with other professionally managed investments, there are also investment
charges imposed on contracts with money allocated to the variable portfolios,
which are estimated to range from .63% to 1.90%.
If you take money out in excess of the amount allowed for in your contract, you
may be assessed a withdrawal charge which is a percentage of the money you
withdraw. The percentage declines with each year the money is in the contract as
follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------
YEAR 1 2 3 4 5 6 7 8+
- -----------------------------------------------------------
WITHDRAWAL
CHARGE 7% 6% 5% 4% 3% 2% 1% 0%
- - - - - - - -
- -----------------------------------------------------------
</TABLE>
Each year, you are allowed to make 15 transfers without charge. After your first
15 free transfers, a $25 transfer fee will apply to each subsequent transfer
($10 in Pennsylvania and Texas).
In a limited number of states, you may also be assessed a state premium tax of
up to 3.5% depending upon the state.
The following chart is designed to help you understand the charges in your
contract. The column "Total Annual Charges" shows the total of the 1.52%
insurance charges, the $35 contract maintenance fee and the investment charges
for each variable portfolio. We converted the contract maintenance fee to a
percentage using an assumed contract size of $40,000. The actual impact of this
charge on your contract may differ from this percentage.
The next two columns show two examples of the charges you would pay under the
contract. The examples assume that you invested $1,000 in a contract which earns
5% annually and that you withdraw your money: (1) at the end of year 1, and (2)
at the end of year 10.
<PAGE> 6
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
EXAMPLES:
TOTAL ANNUAL TOTAL ANNUAL TOTAL EXPENSES TOTAL EXPENSES
INSURANCE INVESTMENT TOTAL ANNUAL AT END OF AT END OF
ANCHOR SERIES TRUST PORTFOLIO CHARGES CHARGES CHARGES 1 YEAR 10 YEARS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Appreciation 1.61% .71% 2.32% $ 93 $265
Growth 1.61% .78% 2.39% $ 94 $272
Natural Resources 1.61% .89% 2.50% $ 95 $283
Government and Quality Bond 1.61% .71% 2.32% $ 93 $265
- -----------------------------------------------------------------------------------------------------------------------
SUNAMERICA SERIES TRUST PORTFOLIO
Emerging Markets 1.61% 1.90% 3.51% $105 $378
International Diversified Equities 1.61% 1.35% 2.96% $100 $328
Global Equities 1.61% .95% 2.56% $ 96 $289
International Growth and Income 1.61% 1.60% 3.21% $102 $351
Aggressive Growth 1.61% .90% 2.51% $ 95 $284
Real Estate 1.61% 1.25% 2.86% $ 99 $318
Putnam Growth* 1.61% .91% 2.52% $ 95 $285
Growth/Phoenix 1.61% .73% 2.34% $ 94 $267
Alliance Growth 1.61% .65% 2.26% $ 93 $259
Venture Value 1.61% .79% 2.40% $ 94 $273
Federated Value 1.61% 1.03% 2.64% $ 97 $297
Growth-Income 1.61% .65% 2.26% $ 93 $259
Utility 1.61% 1.05% 2.66% $ 97 $299
Asset Allocation 1.61% .68% 2.29% $ 93 $262
Balanced/Phoenix 1.61% .82% 2.43% $ 95 $276
SunAmerica Balanced 1.61% 1.00% 2.61% $ 96 $294
Worldwide High Income 1.61% 1.10% 2.71% $ 97 $304
High-Yield Bond 1.61% .75% 2.36% $ 94 $269
Corporate Bond 1.61% .91% 2.52% $ 95 $285
Global Bond 1.61% .90% 2.51% $ 95 $284
Cash Management 1.61% .63% 2.24% $ 93 $257
-
-
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
*Formerly named Provident Growth.
For more detailed information, see the Fee Tables and Examples in the
prospectus.
================================================================================
6. TAXES
================================================================================
Unlike taxable investments where earnings are taxed in the year they are earned,
taxes on amounts earned in a Non-qualified contract (one that is established
with after tax dollars) are deferred until they are withdrawn. In a Qualified
contract (one that is established with before tax dollars like an IRA), all
amounts are taxable when they are withdrawn.
When you begin taking distributions or withdrawals from your contract, earnings
are considered to be taken out first and will be taxed at your ordinary income
rate. You may be subject to a 10% IRS tax penalty for distributions or
withdrawals before age 59 1/2.
================================================================================
7. ACCESS TO YOUR MONEY
================================================================================
Earnings may be withdrawn at any time free of a withdrawal charge. After the
first year, the first withdrawal of the year will be free of a withdrawal charge
if it does not exceed the greater of: (1) earnings in your contract as of the
date you make the withdrawal or (2) 10% of the money you have invested for at
least one year and not yet withdrawn, less any withdrawals made during the year.
Although amounts withdrawn using the 10% provision may reduce principal for
purposes of calculating amounts available for future withdrawals of earnings,
they do not reduce the amount of money you invested for purposes of calculating
the withdrawal charge if you withdraw your entire contract value.
Withdrawals in excess of these limits will be assessed a withdrawal charge.
Withdrawals may be made from your contract in the amount of $1,000 or more. You
may request a withdrawal in writing or by establishing systematic withdrawals.
Under systematic withdrawals, the minimum withdrawal amount is $250.
If you withdraw your entire contract value, you will not receive the benefit of
any free withdrawal amount. After your money has been in the contract for seven
full years, there are no withdrawal charges on that portion of the money that
you have invested for at least seven full years. Of course, you may have to pay
income tax and a 10% IRS tax penalty may apply if you are under age 59 1/2.
Additionally, withdrawal charges are not assessed when a death benefit is paid.
================================================================================
8. PERFORMANCE
================================================================================
The value of your annuity will fluctuate depending upon the investment
performance of the portfolio(s) you choose.
The following chart shows total returns for each portfolio for the time periods
shown. These numbers reflect the insurance charges, the contract maintenance fee
and the investment charges. Withdrawals charges are not reflected in the chart.
Past performance is not a guarantee of future results.
<PAGE> 7
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
ANCHOR SERIES TRUST CALENDAR YEAR
PORTFOLIO 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Appreciation 23.50% 23.17% 32.41% (5.60)% 13.72%
Growth 28.36% 23.06% 24.30% (6.27)% 11.22%
Natural Resources (10.10)% 12.20% 15.45% (5.93)% --
Gov't and Quality Bond 7.82% 1.35% 17.49% (4.44)% 3.68%
- ---------------------------------------------------------------------------------------------------------------------------------
SUNAMERICA SERIES TRUST
PORTFOLIO
Emerging Markets** (17.37)% -- -- -- --
Int'l Diversified
Equities 4.71% 7.59% 8.52% (3.68)% --
Global Equities 13.25% 12.37% 17.33% (1.96)% 15.93%
Int'l Growth and
Income** 5.36% -- -- -- --
Aggressive Growth 10.55% 4.33% -- -- --
Real Estate** 17.16% -- -- -- --
Putnam Growth* 30.41% 18.46% 22.83% (3.25)% --
Growth/Phoenix 21.28% 14.12% 30.12% (9.52)% 8.91%
Alliance Growth 29.41% 27.10% 41.58% (3.76)% 9.93%
Venture Value 32.21% 22.86% 35.36% (1.23)% --
Federated Value 29.37% 7.32% -- -- --
Growth-Income 31.85% 22.11% 31.95% (4.20)% 6. 65%
Utility 23.78% 8.26% -- -- --
Asset Allocation 19.93% 17.05% 24.33% (1.80)% 5.11%
Balanced/Phoenix 15.09% 8.18% 25.51% (0.58)% --
SunAmerica Balanced 22.52% 9.39% -- -- --
Worldwide High Income 13.72% 23.38% 19.04% (2.39)% --
High-Yield Bond 12.66% 12.71% 12.44% (6.98)% 11.35%
Corporate Bond 9.14% 2.86% 15.82% (4.73)% 1.64%
Global Bond 8.31% 7.58% 15.83% (6.27)% 4.22%
Cash Management 3.50% 3.31% 3.85% 2.12% 0.83%
-
-
-
-
-
- ---------------------------------------------------------------------------------------------------------------------------------
* Formerly named
Provident Growth.
** Inception to 11/30/97.
Inception date for each
portfolio varies.
</TABLE>
================================================================================
9. DEATH BENEFIT
================================================================================
If you should die during the Accumulation Phase, your beneficiary will receive a
death benefit. The death benefit is the greater of:
(1) the value of your contract, or
(2) the money you put in less any withdrawals, all compounded at 4% annually
(3% if age 70 or older at time of issue), or
(3) the value of your contract on the seventh contract anniversary less any
withdrawals plus any additional money you put in since the seventh
anniversary, all compounded at 4% annually (3% if age 70 or older at time
of issue).
================================================================================
10. OTHER INFORMATION
================================================================================
FREE LOOK: You may cancel your contract within ten days (or longer if required
by your state) by mailing it to our Annuity Service Center. Your contract will
be treated as void on the date we receive it and we will pay you an amount equal
to the value of your contract (unless otherwise required by state law). Its
value may be more or less than the money you initially invested.
ASSET ALLOCATION REBALANCING: If selected by you, this program seeks to keep
your investment in line with your goals. We will maintain your specified
allocation mix in the variable investment portfolios and the 1-year fixed
investment option by readjusting your money on a calendar quarter, semiannual or
annual basis.
SYSTEMATIC WITHDRAWAL PROGRAM: If selected by you, this program allows you to
receive either monthly, quarterly, semiannual or annual checks during the
Accumulation Phase. Systematic withdrawals may also be electronically wired to
your bank account. Of course, withdrawals may be taxable and a 10% IRS tax
penalty may apply if you are under age 59 1/2.
PRINCIPAL ADVANTAGE: If selected by you, this program allows you to obtain
growth potential without any market risk to your principal. We will guarantee
that the portion of your money allocated to the 1, 3, 5, 7 or 10 year fixed
investment options will grow to equal your principal investment when it is
allocated in accordance with the program.
DOLLAR COST AVERAGING: If selected by you, this program allows you to invest
gradually in the equity and bond portfolios from any of the variable investment
portfolios or the 1-year fixed investment option.
AUTOMATIC PAYMENT PLAN: You can add to your contract directly from your bank
account with as little as $20 per month.
CONFIRMATIONS AND QUARTERLY STATEMENTS: You will receive a confirmation of each
transaction within your contract. On a quarterly basis, you will receive a
complete statement of your transactions over the past quarter and a summary of
your account values.
================================================================================
11. INQUIRIES
================================================================================
If you have questions about your contract or need to make changes, call your
financial representative or contact us at:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
Telephone Number: (800) 445-SUN2
If money accompanies your correspondence, you should direct it to:
Anchor National Life Insurance Company
P.O. Box 100330
Pasadena, California 91189-0001
<PAGE> 8
=============================================================
TABLE OF CONTENTS
=============================================================
<TABLE>
<S> <C> <C>
GLOSSARY.......................................... 2
FEE TABLES........................................ 3
Owner Transaction Expenses.................. 3
Annual Separate Account Expenses............ 3
Portfolio Expenses.......................... 3
EXAMPLES.......................................... 4
1. THE POLARIS VARIABLE ANNUITY................ 6
2. ANNUITY INCOME OPTIONS...................... 6
Allocation of Annuity Payments.............. 7
Annuity Payments............................ 7
Transfers During the Income Phase........... 7
Deferment of Payments....................... 7
3. PURCHASING A POLARIS VARIABLE ANNUITY....... 7
Allocation of Purchase Payments............. 7
Accumulation Units.......................... 8
Free Look................................... 8
4. INVESTMENT OPTIONS.......................... 8
Variable Investment Options................. 8
Anchor Series Trust......................... 8
SunAmerica Series Trust..................... 8
Fixed Investment Options.................... 9
Market Value Adjustment..................... 9
Transfers During the Accumulation Phase..... 9
Dollar Cost Averaging Program............... 10
Asset Allocation Rebalancing Program........ 10
Principal Advantage Program................. 11
Voting Rights............................... 11
Substitution................................ 11
5. EXPENSES.................................... 11
Insurance Charges........................... 11
Mortality and Expense Risk Charge........... 11
Distribution Expense Charge................. 11
Withdrawal Charges.......................... 11
Investment Charges.......................... 12
Contract Maintenance Fee.................... 12
Transfer Fee................................ 12
Premium Taxes............................... 12
Income Taxes................................ 12
Reduction or Elimination of Certain
Charges..................................... 12
6. TAXES....................................... 12
Annuity Contracts in General................ 12
Tax Treatment of Distributions--
Non-qualified Contracts..................... 13
Tax Treatment of Distributions-- Qualified
Contracts................................... 13
Diversification............................. 13
7. ACCESS TO YOUR MONEY........................ 13
Systematic Withdrawal Program............... 14
Nursing Home Waiver......................... 14
Minimum Contract Value...................... 14
8. PERFORMANCE................................. 14
9. DEATH BENEFIT............................... 15
10. OTHER INFORMATION........................... 15
Anchor National............................. 15
The Separate Account........................ 15
The General Account......................... 15
Distribution................................ 15
Administration.............................. 16
Legal Proceedings........................... 16
Custodian................................... 16
Additional Information...................... 16
Selected Consolidated Financial Data........ 17
Management Discussion and Analysis.......... 18
Properties.................................. 25
Directors and Executive Officers............ 26
Executive Compensation...................... 28
Security Ownership of Owners and
Management.................................. 28
State Regulation............................ 28
Independent Accountants..................... 29
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL
INFORMATION....................................... 29
FINANCIAL STATEMENTS.............................. 29
APPENDIX A -- CONDENSED FINANCIAL INFORMATION.....
A-1
APPENDIX B -- MARKET VALUE ADJUSTMENT............. B-1
APPENDIX C -- PREMIUM TAXES....................... C-1
</TABLE>
=============================================================
GLOSSARY
=============================================================
We have capitalized some of the technical terms used in this prospectus. To help
you understand these terms, we have defined them in this glossary.
ACCUMULATION PHASE - The period during which you invest money in your contract.
ACCUMULATION UNITS - A measurement we use to calculate the value of the variable
portion of your contract during the Accumulation Phase.
ANNUITANT(S) - The person(s) on whose life (lives) we base annuity payments.
ANNUITY DATE - The date on which annuity payments are to begin, as selected by
you.
ANNUITY UNITS - A measurement we use to calculate the amount of annuity payments
you receive from the variable portion of your contract during the Income Phase.
BENEFICIARY (IES) - The person(s) designated to receive any benefits under the
contract if you or the Annuitant dies.
INCOME PHASE - The period during which we make annuity payments to you.
IRS - The Internal Revenue Service.
NON-QUALIFIED (CONTRACT) - A contract purchased with after-tax dollars. In
general, these contracts are not under any pension plan, specially sponsored
program or individual retirement account ("IRA").
PORTFOLIO(S) - The variable investment options available under the contract.
Each Portfolio has its own investment objective and is invested in the
underlying investments of the Anchor Series Trust or the SunAmerica Series
Trust.
PURCHASE PAYMENTS - The money you give us to buy the contract, as well as any
additional money you give us to invest in the contract after you own it.
QUALIFIED (CONTRACT) - A contract purchased with pretax dollars. These contracts
are generally purchased under a pension plan, specially sponsored program or
individual retirement account ("IRA").
TRUSTS - Refers to the Anchor Series Trust and the SunAmerica Series Trust
collectively.
2
<PAGE> 9
================================================================================
FEE TABLES
================================================================================
OWNER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
WITHDRAWAL CHARGE (AS A PERCENTAGE OF EACH PURCHASE PAYMENT)
<S> <C> <C> <C>
Year 1........... 7% Year 5............... 3%
Year 2........... 6% Year 6............... 2%
Year 3........... 5% Year 7............... 1%
Year 4........... 4% Year 8+.............. 0%
TRANSFER FEE........... No charge for first 15 transfers
each year; thereafter, fee is $25
($10 in Pennsylvania and Texas)
CONTRACT MAINTENANCE FEE*.... $35 ($30 in North Dakota
and Utah)
*waived if contract value is $50,000 or more
</TABLE>
ANNUAL SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF DAILY NET ASSET VALUE)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge............... 1.37%
Distribution Expense Charge..................... 0.15%
-----
TOTAL SEPARATE ACCOUNT EXPENSES............. 1.52%
=====
</TABLE>
PORTFOLIO EXPENSES
ANCHOR SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S TWELVE-MONTH PERIOD ENDED
NOVEMBER 30, 1997)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
====================================================================================================
<S> <C> <C> <C>
Capital Appreciation .65% .06% .71%
----------------------------------------------------------------------------------------------------
Growth .72% .06% .78%
----------------------------------------------------------------------------------------------------
Natural Resources .75% .14% .89%
----------------------------------------------------------------------------------------------------
Government and Quality Bond .62% .09% .71%
====================================================================================================
</TABLE>
SUNAMERICA SERIES TRUST
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE TRUST'S FISCAL YEAR ENDED
NOVEMBER 30, 1997)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
====================================================================================================
<S> <C> <C> <C>
Emerging Markets* 1.25% .65% 1.90%
----------------------------------------------------------------------------------------------------
International Diversified Equities 1.00% .35% 1.35%
----------------------------------------------------------------------------------------------------
Global Equities .76% .19% .95%
----------------------------------------------------------------------------------------------------
International Growth and Income* 1.00% .60% 1.60%
----------------------------------------------------------------------------------------------------
Aggressive Growth .76% .14% .90%
----------------------------------------------------------------------------------------------------
Real Estate* .80% .45% 1.25%
----------------------------------------------------------------------------------------------------
Putnam Growth** .83% .08% .91%
----------------------------------------------------------------------------------------------------
Growth/Phoenix .65% .08% .73%
----------------------------------------------------------------------------------------------------
Alliance Growth .59% .06% .65%
----------------------------------------------------------------------------------------------------
Venture Value .74% .05% .79%
----------------------------------------------------------------------------------------------------
Federated Value .80% .23% 1.03%
----------------------------------------------------------------------------------------------------
Growth-Income .60% .05% .65%
----------------------------------------------------------------------------------------------------
Utility .75% .30% 1.05%
----------------------------------------------------------------------------------------------------
Asset Allocation .61% .07% .68%
----------------------------------------------------------------------------------------------------
Balanced/Phoenix .68% .14% .82%
----------------------------------------------------------------------------------------------------
SunAmerica Balanced .74% .26% 1.00%
----------------------------------------------------------------------------------------------------
Worldwide High Income 1.00% .10% 1.10%
----------------------------------------------------------------------------------------------------
High-Yield Bond .66% .09% .75%
----------------------------------------------------------------------------------------------------
Corporate Bond .70% .21% .91%
----------------------------------------------------------------------------------------------------
Global Bond .72% .18% .90%
----------------------------------------------------------------------------------------------------
Cash Management .54% .09% .63%
====================================================================================================
</TABLE>
* As of the date of this prospectus, the sale of contracts offering the
Emerging Markets, Real Estate and International Growth and Income
Portfolios had not begun. The percentages are based on estimated amounts
for the current fiscal year.
** As of April 16, 1997, the Provident Growth Portfolio was renamed the
Putnam Growth Portfolio, managed by Putnam Investment Management, Inc.
The expenses shown here are those of the former Provident Growth
Portfolio managed by Provident Investment Counsel.
THE ABOVE PORTFOLIO EXPENSES WERE PROVIDED BY THE TRUSTS. WE HAVE NOT
INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
3
<PAGE> 10
================================================================================
EXAMPLES
================================================================================
You will pay the following expenses on a $1,000 investment in each Portfolio,
assuming a 5% annual return on assets and:
(a) surrender of the contract at the end of the stated time period;
(b) if the contract is not surrendered or annuitized.
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
=============================================================================================================
<S> <C> <C> <C> <C>
Capital Appreciation (a) $ 93 (a) $122 (a) $154 (a) $265
(b) $ 23 (b) $ 72 (b) $124 (b) $265
-------------------------------------------------------------------------------------------------------------
Growth (a) $ 94 (a) $124 (a) $157 (a) $272
(b) $ 24 (b) $ 74 (b) $127 (b) $272
-------------------------------------------------------------------------------------------------------------
Natural Resources (a) $ 95 (a) $128 (a) $163 (a) $283
(b) $ 25 (b) $ 78 (b) $133 (b) $283
-------------------------------------------------------------------------------------------------------------
Government and Quality Bond (a) $ 93 (a) $122 (a) $154 (a) $265
(b) $ 23 (b) $ 72 (b) $124 (b) $265
-------------------------------------------------------------------------------------------------------------
Emerging Markets (a) $105 (a) $158 (a) $212 (a) $378
(b) $ 35 (b) $108 (b) $182 (b) $378
-------------------------------------------------------------------------------------------------------------
International Diversified Equities (a) $100 (a) $141 (a) $186 (a) $328
(b) $ 30 (b) $ 91 (b) $156 (b) $328
-------------------------------------------------------------------------------------------------------------
Global Equities (a) $ 96 (a) $130 (a) $166 (a) $289
(b) $ 26 (b) $ 80 (b) $136 (b) $289
-------------------------------------------------------------------------------------------------------------
International Growth and Income (a) $102 (a) $149 (a) $198 (a) $351
(b) $ 32 (b) $ 99 (b) $168 (b) $351
-------------------------------------------------------------------------------------------------------------
Aggressive Growth (a) $ 95 (a) $128 (a) $163 (a) $284
(b) $ 25 (b) $ 78 (b) $133 (b) $284
-------------------------------------------------------------------------------------------------------------
Real Estate (a) $ 99 (a) $139 (a) $181 (a) $318
(b) $ 29 (b) $ 89 (b) $151 (b) $318
-------------------------------------------------------------------------------------------------------------
Putnam Growth (a) $ 95 (a) $128 (a) $164 (a) $285
(b) $ 25 (b) $ 78 (b) $134 (b) $285
-------------------------------------------------------------------------------------------------------------
Growth/Phoenix (a) $ 94 (a) $123 (a) $155 (a) $267
(b) $ 24 (b) $ 73 (b) $125 (b) $267
-------------------------------------------------------------------------------------------------------------
Alliance Growth (a) $ 93 (a) $121 (a) $151 (a) $259
(b) $ 23 (b) $ 71 (b) $121 (b) $259
-------------------------------------------------------------------------------------------------------------
Venture Value (a) $ 94 (a) $125 (a) $158 (a) $273
(b) $ 24 (b) $ 75 (b) $128 (b) $273
-------------------------------------------------------------------------------------------------------------
Federated Value (a) $ 97 (a) $132 (a) $170 (a) $297
(b) $ 27 (b) $ 82 (b) $140 (b) $297
-------------------------------------------------------------------------------------------------------------
Growth-Income (a) $ 93 (a) $121 (a) $151 (a) $259
(b) $ 23 (b) $ 71 (b) $121 (b) $259
-------------------------------------------------------------------------------------------------------------
Utility (a) $ 97 (a) $133 (a) $171 (a) $299
(b) $ 27 (b) $ 83 (b) $141 (b) $299
-------------------------------------------------------------------------------------------------------------
Asset Allocation (a) $ 93 (a) $121 (a) $152 (a) $262
(b) $ 23 (b) $ 71 (b) $122 (b) $262
-------------------------------------------------------------------------------------------------------------
Balanced/Phoenix (a) $ 95 (a) $126 (a) $159 (a) $276
(b) $ 25 (b) $ 76 (b) $129 (b) $276
-------------------------------------------------------------------------------------------------------------
SunAmerica Balanced (a) $ 96 (a) $131 (a) $168 (a) $294
(b) $ 26 (b) $ 81 (b) $138 (b) $294
-------------------------------------------------------------------------------------------------------------
Worldwide High Income (a) $ 97 (a) $134 (a) $173 (a) $304
(b) $ 27 (b) $ 84 (b) $143 (b) $304
-------------------------------------------------------------------------------------------------------------
High-Yield Bond (a) $ 94 (a) $124 (a) $156 (a) $269
(b) $ 24 (b) $ 74 (b) $126 (b) $269
-------------------------------------------------------------------------------------------------------------
Corporate Bond (a) $ 95 (a) $128 (a) $164 (a) $285
(b) $ 25 (b) $ 78 (b) $134 (b) $285
-------------------------------------------------------------------------------------------------------------
Global Bond (a) $ 95 (a) $128 (a) $163 (a) $284
(b) $ 25 (b) $ 78 (b) $133 (b) $284
-------------------------------------------------------------------------------------------------------------
Cash Management (a) $ 93 (a) $120 (a) $150 (a) $257
(b) $ 23 (b) $ 70 (b) $120 (b) $257
=============================================================================================================
</TABLE>
4
<PAGE> 11
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you would
incur directly and indirectly by investing in the contract.
2. For certain Portfolios, the adviser, SunAmerica Asset Management Corp., has
voluntarily agreed to waive fees or reimburse certain expenses, if
necessary, to keep annual operating expenses at or below the lesser of the
maximum allowed by any applicable state expense limitations or the following
percentages of each Portfolio's average net assets: Aggressive Growth
(.90%); Federated Value (1.03%); SunAmerica Balanced (1.00%); Utility
(1.05%); Emerging Markets (1.90%); International Growth and Income (1.60%);
and Real Estate (1.25%). The adviser also may voluntarily waive or reimburse
additional amounts to increase a Portfolio's investment return. All waivers
and/or reimbursements may be terminated at any time. Furthermore, the
adviser may recoup any waivers or reimbursements within two years after such
waivers or reimbursements are granted, provided that the Portfolio is able
to make such payment and remain in compliance with the foregoing expense
limitations.
3. The Examples assume that no transfer fees were imposed. Although premium
taxes may apply in certain states, they are not reflected.
4. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE HISTORICAL ACCUMULATION UNIT VALUES ARE CONTAINED IN
APPENDIX A -- CONDENSED FINANCIAL INFORMATION
5
<PAGE> 12
=============================================================
1. THE POLARIS VARIABLE ANNUITY
=============================================================
An annuity is a contract between you, as the owner, and an insurance company.
The contract provides tax deferral for your earnings, as well as a death benefit
and a guaranteed income in the form of annuity payments beginning on a date you
select. Until you decide to begin receiving annuity payments, your annuity is in
the Accumulation Phase. Once you begin receiving annuity payments, your contract
switches to the Income Phase. If you die during the Accumulation Phase, the
insurance company guarantees a death benefit to your Beneficiary.
The Polaris Variable Annuity Contract is issued by Anchor National Life
Insurance Company ("Anchor National"), a stock life insurance company organized
under the laws of the state of Arizona. Its principal business address is 1
SunAmerica Center, Los Angeles, California 90067-6022. Anchor National conducts
life insurance and annuity business in the District of Columbia and in all
states except New York. Anchor National is an indirect wholly owned subsidiary
of SunAmerica Inc., a Maryland corporation.
During the Accumulation Phase, the value of your annuity benefits from tax
deferral. This means your earnings accumulate on a tax-deferred basis until you
take money out of your contract. The Income Phase occurs if you decide to
receive annuity payments. You select the date on which annuity payments are to
begin.
The contract is called a variable annuity because you can choose among 25
variable investment Portfolios. Depending upon market conditions, you can make
or lose money in any of these Portfolios. If you allocate money to the
Portfolios, the amount of money you are able to accumulate in your contract
during the Accumulation Phase depends upon the investment performance of the
Portfolio(s) you select. The amount of the annuity payments you receive during
the Income Phase from the variable portion of your contract also depends upon
the investment performance of the Portfolios you select for the Income Phase.
The contract also contains 5 fixed investment options. Your money will earn
interest at the rate set by Anchor National. The interest rate is guaranteed by
Anchor National for the time you agree to leave your money in the fixed
investment option. We currently offer fixed investment options for 1, 3, 5, 7
and 10 year periods. If you allocate money to the fixed investment options, the
amount of money you are able to accumulate in your contract during the
Accumulation Phase depends upon the total interest credited to your contract. An
adjustment to your contract will apply to withdrawals or transfers from the 3,
5, 7 and 10 year fixed investment options prior to the end of the selected
period. The amount of annuity payments you receive during the Income Phase from
the fixed portion of your contract will remain level for the entire Income
Phase.
=============================================================
2. ANNUITY INCOME OPTIONS
=============================================================
When you switch to the Income Phase, you will receive regular income payments
under the contract. Annuity payments will be made on a monthly basis unless you
request in writing that payments be made on a quarterly, semiannual or annual
basis. You can choose to have your annuity payments sent to you by check or
electronically wired to your bank.
You select the date on which annuity payments are to begin, which must be the
first day of a month and must be at least two years after the date your contract
is issued. We call this the Annuity Date. You may change your Annuity Date at
least seven days prior to the date that your payments are to begin. However,
annuity payments must begin by the later of your 90th birthday or ten years
after the date your contract is issued. If no Annuity Date is selected, annuity
payments will begin on the later of your 90th birthday or ten years after the
date your contract is issued. Certain states may require you to receive annuity
payments prior to such date. If the Annuity Date is past your 85th birthday, it
is possible that the contract would not be treated as an annuity and you may
incur adverse tax consequences.
The Annuitant is the person on whose life annuity payments are based. You may
change the Annuitant at any time prior to the Annuity Date if you are an
individual designated as the owner of the contract. You may also designate a
second person on whose life annuity payments are based. If the Annuitant dies
before the Annuity Date, you must notify us and designate a new Annuitant.
If you do not choose an annuity income option, annuity payments will be made in
accordance with option 4 (below) for 10 years. If the annuity payments are for
joint lives, then we will make payments in accordance with option 3. We may pay
the annuity in one lump sum if your contract is less than $5,000, where
permitted by state law. Likewise, if your annuity payments would be less than
$50 a month, we have the right to change the frequency of your payment to be on
a quarterly, semiannual or annual basis so that your annuity payments are at
least $50. Annuity payments will be made to you unless you designate another
person to receive them. In that case, you must notify us in writing at least
thirty days before the Annuity Date. You will remain fully responsible for any
taxes related to the annuity payments.
The contract offers 5 annuity income options. Other annuity income options may
be available in the future.
OPTION 1 - LIFE INCOME
Under this option, we will make annuity payments as long as the Annuitant is
alive. Annuity payments stop when the Annuitant dies.
6
<PAGE> 13
OPTION 2 - JOINT AND SURVIVOR ANNUITY
Under this option, we will make annuity payments as long as the Annuitant and a
designated second person are alive. Upon the death of either person, we will
continue to make annuity payments so long as the survivor is alive. You choose
the amount of the annuity payments to the survivor, which can be equal to 100%,
66.66% or 50% of the full amount. Annuity payments stop upon the death of the
survivor.
OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY WITH 10
YEARS GUARANTEED
This option is similar to option 2 above, with the additional guarantee that
payments will be made for at least 10 years. If the Annuitant and designated
second person die before all guaranteed payments have been made, the rest will
be made to the Beneficiary.
OPTION 4 - LIFE ANNUITY WITH 10 OR 20 YEARS
GUARANTEED
This option is similar to option 1 above, with the additional guarantee that
payments will be made for at least 10 or 20 years, as selected by you. Under
this option, if the Annuitant dies before all guaranteed payments have been
made, the rest will be made to the Beneficiary.
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
Under this option, we will make annuity payments for any period of time from 5
to 30 years, as selected by you. However, the period must be for full 12-month
periods. Under this option, if the Annuitant dies before all guaranteed payments
have been made, the rest will be made to the Beneficiary. This option does not
contain an element of mortality risk. Therefore, you will not get the benefit of
the mortality component of the mortality and expense risk charge if this option
if selected.
ALLOCATION OF ANNUITY PAYMENTS
On the Annuity Date, if your money is invested in the fixed investment options,
your annuity payments will be fixed in amount. If your money is invested in the
variable Portfolios, your annuity payments will vary depending on the investment
performance of the Portfolios. If you have money in the fixed and variable
investment options, your annuity payments will be based on the investment
allocations. You may not convert between fixed and variable payments once
annuity payments begin.
ANNUITY PAYMENTS
If you choose to have any portion of your annuity payments come from the
variable Portfolios, the dollar amount of your payment will depend upon three
things: (1) the value of your contract in the Portfolios on the Annuity Date,
(2) the 3.5% assumed investment rate used in the annuity table for the contract
and (3) the performance of the Portfolios you selected. If the actual
performance exceeds the 3.5% assumed rate, your annuity payments will increase.
Similarly, if the actual rate is less than 3.5%, your annuity payments will
decrease. The SAI contains detailed information and sample calculations.
TRANSFERS DURING THE INCOME PHASE
Transfers are subject to the same limitations as transfers during the
Accumulation Phase. (See "Investment Options- Transfers During the Accumulation
Phase"). However, you can only make one transfer each month. You may not
transfer money from the fixed investment options to the variable Portfolios
during the Income Phase. You may transfer money among the variable Portfolios or
among the fixed investment options.
DEFERMENT OF PAYMENTS
We may defer making fixed payments for up to six months, or less if required by
state law. Interest will be credited to you during the deferral period.
=============================================================
3. PURCHASING A POLARIS
VARIABLE ANNUITY
=============================================================
A Purchase Payment is the money you give us to buy the contract, as well as any
additional money you give us to invest in the contract after you own it. You can
purchase a Non-qualified contract with a minimum initial investment of $5,000
and a Qualified contract with a minimum initial investment of $2,000. The
maximum we accept is $1,000,000 without prior approval. Payments in amounts of
$500 or more may be added to your Non-qualified contract ($250 or more for
Qualified contracts) at any time during the Accumulation Phase. You can make
scheduled subsequent Purchase Payments of $20 or more per month by enrolling in
the Automatic Payment Plan.
We may refuse any Purchase Payment. In general, we will not issue a
Non-qualified contract to anyone who is over age 80 or a Qualified contract to
anyone who is age 70 1/2 or older unless you can show that the minimum
distributions required by the IRS are being made.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, you will allocate your Purchase Payment to the
variable investment Portfolios and/or the fixed investment options. If you make
additional Purchase Payments, we will allocate them in the same way unless you
tell us otherwise.
Once we receive your Purchase Payment and a complete application at our
principal place of business, we will issue
7
<PAGE> 14
your contract and allocate your first Purchase Payment within two business days.
If you do not give us all the necessary information, we will contact you to
obtain it. If we are unable to complete this process within five business days,
we will either send back your money or get your permission to keep it until we
get all the necessary information.
ACCUMULATION UNITS
The value of the variable portion of your contract will go up or down depending
upon the investment performance of the Portfolio(s) you choose. In order to keep
track of the value of your contract, we use a unit of measure called an
Accumulation Unit, which works like a share of a mutual fund. During the Income
Phase, we call them Annuity Units.
The value of an Accumulation Unit is determined each day that the New York Stock
Exchange ("NYSE") is open. We calculate an Accumulation Unit value for each
Portfolio after the NYSE closes each day. We do this by:
(1) determining the total value of money invested in the particular
Portfolio;
(2) subtracting from that amount any insurance charges and any other
charges such as taxes; and
(3) dividing this amount by the number of outstanding Accumulation Units.
The value of an Accumulation Unit may go up or down from day to day. When you
make a Purchase Payment, we credit your contract with Accumulation Units. The
number of Accumulation Units credited is determined by dividing the amount of
the Purchase Payment allocated to a Portfolio by the value of the Accumulation
Unit for that Portfolio.
EXAMPLE:
We receive a $25,000 Purchase Payment from you on Wednesday. You want the
money to go to the Global Bond Portfolio. We determine that the value of an
Accumulation Unit for the Global Bond Portfolio is $11.10 when the NYSE
closes on Wednesday. We then divide $25,000 by $11.10 and credit your
contract on Wednesday night with 2252.252 Accumulation Units for the Global
Bond Portfolio.
FREE LOOK
If you change your mind about owning this contract, you can cancel it within ten
days after receiving it (or longer if required by your state) by mailing it back
to our Annuity Service Center at P.O. Box 54299, Los Angeles, California
90054-0299. You will receive back whatever your contract is worth on the day we
receive your request (unless otherwise required by your state). Its value may be
more or less than the money you initially invested. Thus, the investment risk is
borne by you during the free look period.
=============================================================
4. INVESTMENT OPTIONS
=============================================================
VARIABLE INVESTMENT OPTIONS
The contract offers 25 variable investment Portfolios which invest in shares of
the Anchor Series Trust or the SunAmerica Series Trust. These Portfolios are
listed below. Additional Portfolios may be available in the future. SunAmerica
Asset Management Corp., an indirect wholly owned subsidiary of SunAmerica Inc.,
is the investment adviser for both Trusts. The Trusts serve as underlying
investments for other variable contracts sold by Anchor National, its affiliate,
First SunAmerica Life Insurance Company, and other unaffiliated insurance
companies. Neither Anchor National nor the Trusts believes offering shares of
the Trusts in this manner will be disadvantageous to you. We will monitor the
Trusts for any conflicts that may arise between contract owners. Additional
information is contained in the prospectuses for the Trusts.
ANCHOR SERIES TRUST
Wellington Management Company, LLP serves as subadviser to the Anchor Series
Trust Portfolios. Anchor Series Trust has Portfolios in addition to those listed
below which are not available for investment under the contract. The 4 available
Portfolios are:
MANAGED BY WELLINGTON MANAGEMENT COMPANY, LLP
- Capital Appreciation Portfolio
- Growth Portfolio
- Natural Resources Portfolio
- Government and Quality Bond Portfolio
SUNAMERICA SERIES TRUST
Various subadvisers provide investment advice for the SunAmerica Series Trust
Portfolios. The 21 Portfolios and the subadvisers are:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
- Global Equities Portfolio
- Alliance Growth Portfolio
- Growth-Income Portfolio
MANAGED BY DAVIS SELECTED ADVISERS, L.P.
- Venture Value Portfolio
- Real Estate Portfolio
MANAGED BY FEDERATED INVESTORS
- Federated Value Portfolio
- Utility Portfolio
- Corporate Bond Portfolio
8
<PAGE> 15
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT/ GOLDMAN SACHS ASSET MANAGEMENT
INTERNATIONAL
- Asset Allocation Portfolio
- Global Bond Portfolio
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT INC.
- International Diversified Equities Portfolio
- Worldwide High Income Portfolio
MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
- Growth/Phoenix Investment Counsel Portfolio
- Balanced/Phoenix Investment Counsel Portfolio
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
- Putnam Growth Portfolio
- International Growth and Income Portfolio
- Emerging Markets Portfolio
MANAGED BY SUNAMERICA ASSET MANAGEMENT CORP.
- Aggressive Growth Portfolio
- SunAmerica Balanced Portfolio
- High-Yield Bond Portfolio
- Cash Management Portfolio
YOU SHOULD READ THE PROSPECTUSES FOR THE ANCHOR SERIES TRUST AND THE SUNAMERICA
SERIES TRUST CAREFULLY BEFORE INVESTING. THESE PROSPECTUSES CONTAIN DETAILED
INFORMATION ABOUT THE PORTFOLIOS AND ARE ATTACHED TO THIS PROSPECTUS.
FIXED INVESTMENT OPTIONS
The contract also offers 5 fixed investment options. We currently offer fixed
investment options for 1, 3, 5, 7 and 10 year periods. The fixed investment
options offer interest rates that are guaranteed by Anchor National. Interest
rates may differ from time to time due to changes in market conditions but will
not be less than 3%. The interest rates offered for a specified period for new
Purchase Payments may differ from the interest rates offered for money already
in the fixed investment option. Once an interest rate is established, it will
not change during the specified period. The interest rates are set at Anchor
National's sole discretion.
If you have money allocated to the 1, 3, 5, 7 or 10 year fixed investment
options, you can renew for another 1, 3, 5, 7 or 10 year period or put your
money into one or more of the variable Portfolios after the end of the specified
period. Unless you specify otherwise before the end of the period, we will keep
your money in the fixed investment option for the same period you previously
selected. You will receive the interest rate then in effect.
The 1-year fixed investment option is not registered under the Securities Act of
1933 and is not subject to other provisions of the Investment Company Act of
1940.
MARKET VALUE ADJUSTMENT
NOTE: THE FOLLOWING DISCUSSION APPLIES TO THE 3, 5, 7 AND 10 YEAR FIXED
INVESTMENT OPTIONS ONLY.
If you take your money out of the fixed investment options (whether by
withdrawal, transfer or annuitization) before the end of the specified period,
we will make an adjustment to the value of your contract. This adjustment,
called a "market value adjustment," can increase or decrease the value of your
contract. The market value adjustment reflects the differing interest rate
environments between the time you put your money into the fixed investment
option and the time you take your money out of the fixed investment option.
We calculate the market value adjustment by comparing the interest rate you
received on the money you put into the fixed investment option against the
interest rate we are currently offering to contract owners for the period of
time remaining in the specified period. If we do not offer an interest rate for
that period, the interest rate will be determined by linear interpolation
between interest rates for the two nearest periods that are available.
Generally, if interest rates have dropped between the time you put your money
into the fixed investment option and the time you take it out, there will be a
positive adjustment to the value of your contract. Conversely, if interest rates
have increased between the time you put your money into the fixed investment
option and the time you take it out, there will be a negative adjustment to the
value of your contract.
If the market value adjustment is negative, it will be assessed first against
any money remaining in the fixed investment option and then against the money
you take out of the fixed investment option. If the market value adjustment is
positive, it will be added to the amount you take out of the fixed account.
Appendix B provides more information about how we calculate the market value
adjustment and gives some examples of the impact of the adjustment.
TRANSFERS DURING THE ACCUMULATION PHASE
You can transfer money among the Portfolios and the fixed investment options by
written request or by telephone. You can make 15 transfers every year without
charge. We measure a year from the anniversary of the day we issued your
contract. If you make more than 15 transfers in a year, there is a $25 transfer
fee for each transfer thereafter ($10 in Pennsylvania and Texas). Transfers
under Dollar Cost Averaging are included as part of your 15 free transfers each
year. However, transfers under Asset Allocation Rebalancing are not counted
against your 15 free transfers each year.
9
<PAGE> 16
The minimum amount you can transfer is $100. You cannot make a partial transfer
if the value of the Portfolio from which the transfer is being made would be
less than $100 after the transfer. Your request for transfer must clearly state
which investment options are involved and the amount. We will accept transfers
by telephone unless you specify otherwise on your contract application. We have
in place procedures to provide reasonable assurance that instructions given to
us by telephone are genuine. Thus, we disclaim all liability for any claim, loss
or expense from any error. If we fail to use such procedures, we may be liable
for any losses due to unauthorized or fraudulent instructions.
We reserve the right to modify, suspend or terminate the transfer provisions at
any time. We also reserve the right to waive the $100 minimum amount for Dollar
Cost Averaging and Asset Allocation Rebalancing.
DOLLAR COST AVERAGING PROGRAM
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount or percentage from one variable Portfolio or the 1-year fixed investment
option to any other variable Portfolio(s). You can also select to transfer the
entire value in a variable Portfolio or the 1-year fixed investment option in a
stated number of transfers. Transfers may be on a monthly, quarterly, semiannual
or annual basis. You can change the amount or frequency at any time by notifying
us in writing. The minimum amount that can be transferred is $100.
By allocating amounts on a regular schedule as opposed to allocating the total
amount at one particular time, you may be less susceptible to the impact of
market fluctuations. However, there is no assurance that you will make a greater
profit. You are still subject to loss in a declining market. Dollar cost
averaging involves continuous investment in securities regardless of fluctuating
price levels. You should consider your financial ability to continue to invest
through periods of fluctuating prices.
Transfers under the program are included as part of your 15 free transfers each
year. We reserve the right to modify, suspend or terminate this program at any
time.
EXAMPLE:
Assume that you want to gradually move $750 each quarter from the Cash
Management Portfolio to the Aggressive Growth Portfolio over six quarters.
You set up dollar cost averaging and purchase Accumulation Units at the
following values:
<TABLE>
<CAPTION>
- -----------------------------------------
ACCUMULATION UNITS
QUARTER UNIT PURCHASED
- -----------------------------------------
<S> <C> <C>
1 $ 7.50 100
2 $ 5.00 150
3 $10.00 75
4 $ 7.50 100
5 $ 5.00 150
6 $ 7.50 100
- -----------------------------------------
</TABLE>
You paid an average price of only $6.67 per Accumulation Unit over the six
quarters, while the average market price actually was $7.08. By investing
an equal amount of money each month, you automatically buy more
Accumulation Units when the market price is low and fewer Accumulation
Units when the market price is high.
ASSET ALLOCATION REBALANCING PROGRAM
Once your money has been allocated among the investment options, the earnings
may cause the percentage invested in each investment option to differ from your
original percentage allocations. You can direct us to automatically rebalance
your contract to return to your original percentage allocations by selecting our
Asset Allocation Rebalancing Program. Rebalancing may be on a calendar quarter,
semiannual or annual basis. Rebalancing will occur on the last business day of
the month for the period you selected.
Transfers under the program are not counted against your 15 free transfers each
year. We reserve the right to modify, suspend or terminate this program at any
time.
EXAMPLE:
Assume that you want your initial Purchase Payment split between two
Portfolios. You want 50% in the Corporate Bond Portfolio and 50% in the
Growth Portfolio. Over the next calendar quarter, the bond market does very
well while the stock market performs poorly. At the end of the calendar
quarter, the Corporate Bond Portfolio now represents 60% of your holdings
because it has increased in value and the Growth Portfolio represents 40%
of your holdings. If you had chosen quarterly rebalancing, on the last day
of that quarter, we would sell some of your units in the Corporate Bond
Portfolio to bring its holdings back to 50% and use the money to buy more
units in the Growth Portfolio to increase those holdings to 50%.
10
<PAGE> 17
PRINCIPAL ADVANTAGE PROGRAM
The Principal Advantage Program allows you to allocate Purchase Payments to a
fixed investment option and one or more variable Portfolios without any market
risk to your principal. You decide how much you want to invest and when you
would like a return of your principal. We will calculate how much of your
Purchase Payment needs to be allocated to the 1, 3, 5, 7 or 10 year fixed
investment options to ensure that this money will grow to equal the full amount
of your Purchase Payment by the end of the selected period. The rest of your
Purchase Payment may then be divided among the variable Portfolios where it has
the potential to achieve greater growth.
We reserve the right to modify, suspend or terminate this program at any time.
EXAMPLE:
Assume that you want to allocate a portion of your initial Purchase Payment
of $100,000 to the fixed investment option. You want the amount allocated
to the fixed investment option to grow to $100,000 in 7 years. If the
7-year fixed investment option is offering a 7% interest rate, we will
allocate $62,275 to the 7-year fixed investment option to ensure that this
amount will grow to $100,000 at the end of the 7-year period. The remaining
$37,725 may be allocated among the variable Portfolios, as determined by
you, to provide opportunity for greater growth.
VOTING RIGHTS
Anchor National is the legal owner of the Trusts' shares. However, when a
Portfolio solicits proxies in conjunction with a vote of shareholders, we are
required to obtain from you instructions as to how to vote those shares. When we
receive those instructions, we will vote all of the shares we own in proportion
to those instructions. This will also include any shares that we own on our
behalf. Should we determine that we are no longer required to comply with the
above, we will vote the shares in our own right.
SUBSTITUTION
If any of the Portfolios you selected are no longer available, we may be
required to substitute shares of another Portfolio. We will seek prior approval
of the SEC and give you notice before doing this.
=============================================================
5. EXPENSES
=============================================================
There are charges and other expenses associated with the contract that will
reduce your investment return. These charges and expenses are described below.
INSURANCE CHARGES
Each day, we make a deduction for our insurance charges. This is done as part of
our calculation of the value of the Accumulation Units during the Accumulation
Phase and the Annuity Units during the Income Phase. The insurance charges
consist of the mortality and expense risk and the distribution expense charge.
MORTALITY AND EXPENSE RISK CHARGE
This charge is equal, on an annual basis, to 1.37% of the daily value of the
contract invested in a Portfolio. This charge is for our obligation to make
annuity payments, to provide the death benefits and for assuming the risk that
the current charges will be insufficient in the future to cover the cost of
administering the contract.
If the charges under the contract are not sufficient, we will bear the loss. We
will not increase this charge. We may use any profits from this charge to pay
for the costs of distributing the contract.
DISTRIBUTION EXPENSE CHARGE
This charge is equal, on an annual basis, to .15% of the daily value of the
contract invested in a Portfolio. This charge is for all expenses associated
with the distribution of the contract. These expenses include preparing the
contract, confirmations and statements, providing sales support, and maintaining
contract records. If this charge is not enough to cover the costs of
distributing the contract, we will bear the loss.
WITHDRAWAL CHARGES
Withdrawals in excess of your free withdrawal amount, as described in more
detail under "Access To Your Money," will be assessed a withdrawal charge. You
will not receive the benefit of any free withdrawal amount if you withdraw your
entire contract value.
We keep track of each Purchase Payment and assess a charge based on the length
of time a Purchase Payment is in your contract before it is withdrawn. After a
Purchase Payment has been in your contract for seven years, no withdrawal
charges are assessed on withdrawals of that Purchase Payment.
The withdrawal charge is assessed as a percentage of the Purchase Payment you
withdraw, which declines each year the Purchase Payment is in the contract as
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR 1 2 3 4 5 6 7 8+
- -------------------------------------------------------------
WITHDRAWAL 7% 6% 5% 4% 3% 2% 1% 0%
CHARGE
- -------------------------------------------------------------
</TABLE>
If the withdrawal is for only part of the contract, we will deduct the
withdrawal charge from the remaining value in your contract. For purposes of
calculating the withdrawal charge, we treat withdrawals as coming from the
oldest
11
<PAGE> 18
Purchase Payment first. However, for tax purposes, earnings are considered
withdrawn first.
We will not assess a withdrawal charge for money withdrawn to pay a death
benefit or for annuity payments during the Income Phase.
INVESTMENT CHARGES
If you have money allocated to the variable Portfolios, there are deductions
from and expenses paid out of the assets of the various Portfolios. These
investment charges are summarized in the Fee Tables. For more detailed
information, you should refer to the prospectuses for the Anchor Series Trust
and the SunAmerica Series Trust.
CONTRACT MAINTENANCE FEE
During the Accumulation Phase, we will deduct a $35 contract maintenance fee
($30 in North Dakota and Utah) from your contract on each contract anniversary.
This fee is for expenses incurred to establish and maintain your contract. This
fee cannot be increased. If you make a complete withdrawal from your contract,
the entire contract maintenance fee will be deducted prior to the withdrawal.
We will not deduct the contract maintenance fee if the value of your contract is
$50,000 or more when the deduction is to be made. We may discontinue this
practice at any time.
TRANSFER FEE
You can make 15 free transfers every year. We measure a year from the day we
issue your contract. If you make more than 15 transfers a year, we will deduct a
$25 transfer fee on each subsequent transfer ($10 in Pennsylvania and Texas).
PREMIUM TAXES
We are responsible for the payment of premium taxes, if any, charged by some
states and will make a deduction from your contract for them. These taxes are
due either when the contract is issued or when annuity payments begin. It is our
current practice not to charge you for these taxes until annuity payments begin
or a full surrender is made. In the future, we may discontinue this practice and
assess the tax when it is due or upon the payment of the death benefit.
Appendix C provides more information about the premium taxes assessed in each
state.
INCOME TAXES
Although we do not currently deduct any income taxes borne under your contract,
we reserve the right to do so in the future.
REDUCTION OR ELIMINATION OF CERTAIN CHARGES
We will reduce or eliminate the amount of certain insurance charges when the
contract is sold to groups of individuals under circumstances which reduce its
sales expenses. We will determine the eligibility of such groups by considering
the following factors: (1) the size of the group; (2) the total amount of
Purchase Payments we expect to receive from the group; (3) the nature of the
purchase and the persistency we expect in that group; (4) the purpose of the
purchase and whether that purpose makes it likely that expenses will be reduced;
and (5) any other circumstances which we believe to be relevant in determining
whether reduced sales expenses may be expected.
=============================================================
6. TAXES
=============================================================
NOTE: WE HAVE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL
DISCUSSION OF THE SUBJECT. IT IS NOT INTENDED AS TAX ADVICE. YOU ARE CAUTIONED
TO SEEK COMPETENT TAX ADVICE ABOUT YOUR OWN CIRCUMSTANCES. WE DO NOT GUARANTEE
THE TAX STATUS OF THE ANNUITY.
ANNUITY CONTRACTS IN GENERAL
The Internal Revenue Code ("IRC") provides for special rules regarding the tax
treatment of annuity contracts. Generally, you will not be taxed on the earnings
in your annuity contract until you take the money out. Different rules apply
depending on how you take the money out and whether your contract is Qualified
or Non-qualified.
If you do not purchase your contract under a pension plan, specially sponsored
program or an individual retirement account, your contract is referred to as a
Non-qualified contract and receives different tax treatment than a Qualified
contract. In general, your cost basis in a Non-qualified contract is equal to
the Purchase Payments you put into the contract. You have already been taxed on
the cost basis in your contract.
If you purchase your contract under a pension plan, specially sponsored program
or as an individual retirement account, your contract is referred to as a
Qualified contract. Examples of qualified plans are: Individual Retirement
Annuities, Tax-Sheltered Annuities (referred to as 403(b) contracts), H.R. 10
Plans (referred to as Keogh Plans) and pension and profit sharing plans,
including 401(k) plans. Typically you have not paid any tax on the Purchase
Payments used to buy your contract and therefore, you have no cost basis in your
contract.
12
<PAGE> 19
TAX TREATMENT OF DISTRIBUTIONS --
NON-QUALIFIED CONTRACTS
If you make a withdrawal from a Non-qualified contract, the IRC treats such a
withdrawal as first coming from the earnings and then as coming from your
Purchase Payments. For annuity payments, any portion of each payment that is
considered a return of your Purchase Payment will not be taxed. Withdrawn
earnings are treated as income to you and are taxable. The IRC further provides
for a 10% tax penalty on any earnings that are withdrawn other than in
conjunction with the following circumstances: (1) after reaching age 59 1/2; (2)
by your Beneficiary after you die; (3) after you become disabled (as defined in
the IRC); (4) in a series of substantially equal installments made for your life
or for the joint lives of you and your Beneficiary; (5) under an immediate
annuity; or (6) which come from Purchase Payments made prior to August 14, 1982.
TAX TREATMENT OF DISTRIBUTIONS --
QUALIFIED CONTRACTS
Generally, you have not paid any taxes on the Purchase Payments used to buy a
Qualified contract or on any earnings and therefore, any amount you take out as
a withdrawal or as annuity payments will be taxable income. The IRC further
provides for a 10% tax penalty on any withdrawal or annuitization paid to you
other than in conjunction with the following circumstances: (1) after reaching
age 59 1/2; (2) by your Beneficiary after you die; (3) after you become disabled
(as defined in the IRC); (4) in a series of substantially equal installments
made for your life or for the joint lives of you and your Beneficiary; and,
except in the case of an IRA as to the following (5) after you separate from
service after attaining age 55; (6) to the extent such withdrawals do not exceed
limitations set by the IRC for amounts paid during the taxable year for medical
care; and (7) to an alternate payee pursuant to a qualified domestic relations
order.
The IRC limits the withdrawal of Purchase Payments from certain Tax-Sheltered
Annuities. Withdrawals can only be made when an owner: (1) reaches age 59 1/2;
(2) leaves his or her job; (3) dies; (4) becomes disabled (as defined in the
IRC); or (5) in the case of hardship. In the case of hardship, the owner can
only withdraw an amount equal to Purchase Payments and not any earnings.
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity in order to be treated as a variable annuity
for tax purposes. We believe that the variable Portfolios are being managed so
as to comply with these requirements.
The diversification regulations do not provide guidance as to the circumstances
under which you, because of the degree of control you exercise over the
underlying investments, and not Anchor National, would be considered the owner
of the shares of the Portfolios. It is unknown to what extent owners are
permitted to select investments, to make transfers among portfolios or the
number and type of portfolios owners may select from. If any guidance is
provided which is considered a new position, then the guidance would generally
be applied prospectively. However, if such guidance is considered not to be a
new position, it may be applied retroactively. This would mean you, as the owner
of the contract, could be treated as the owner of the variable investment
Portfolios.
Due to the uncertainty in this area, we reserve the right to modify the contract
in an attempt to maintain favorable tax treatment.
=============================================================
7. ACCESS TO YOUR MONEY
=============================================================
Under your contract, money can be accessed in the following ways: (1) by making
a withdrawal, either for a part of the value of your contract or for the entire
value of your contract during the Accumulation Phase; (2) by receiving annuity
payments during the Income Phase; and (3) when a death benefit is paid to your
Beneficiary.
Generally, withdrawals are subject to a withdrawal charge, a market value
adjustment if the money is withdrawn from the 3, 5, 7 or 10 year fixed
investment options and, if you withdraw your entire contract value, a contract
maintenance fee. (See "Expenses" for more complete information).
Your contract provides for a free withdrawal amount. Purchase Payments that are
no longer subject to a withdrawal charge and not previously withdrawn, plus
earnings, may be withdrawn free of a withdrawal charge at any time.
After the first year, the first withdrawal of the year will be free of a
withdrawal charge if it does not exceed the greater of: (1) earnings in your
contract as of the date you make the withdrawal or (2) 10% of the Purchase
Payments you invested for at least one year and not yet withdrawn, less any
withdrawals made during the year.
The portion of a free withdrawal which exceeds the sum of: (1) earnings in the
contract and (2) Purchase Payments which were both no longer subject to the
withdrawal charge schedule and not yet withdrawn is assumed to be a withdrawal
against future earnings. Although amounts withdrawn free of a withdrawal charge
under the 10% provision may reduce principal for purposes of calculating amounts
available for future withdrawals of earnings, they do not reduce the amount you
invested for purposes of calculating the withdrawal charge if you
13
<PAGE> 20
withdraw your entire contract value. As a result, you will not receive the
benefit of any free withdrawal amounts if you make a complete withdrawal of your
contract.
If you make a complete withdrawal, you will receive the value of your contract,
less any applicable fees and charges, as calculated on the day following receipt
by us at our principal place of business of a complete withdrawal request. Your
contract must be submitted as well.
Under most circumstances, partial withdrawals must be for a minimum of $1,000.
We require that the value left in any Portfolio or the fixed investment option
be at least $100 after the withdrawal. Unless you provide us with different
instructions, partial withdrawals will be made pro rata from each Portfolio and
the fixed investment option in which your contract is invested. You must send a
written withdrawal request to us prior to any withdrawal being made.
We may be required to suspend or postpone the payment of a withdrawal for any
period of time when: (1) the NYSE is closed (other than a customary weekend and
holiday closings); (2) trading on the NYSE is restricted; (3) an emergency
exists such that disposal of or determination of the value of shares of the
portfolios is not reasonably practicable; (4) the SEC, by order, so permits for
the protection of contract owners.
Additionally, we reserve the right to defer payments for a withdrawal from the
fixed investment option for the period permitted by law but not for more than
six months.
SYSTEMATIC WITHDRAWAL PROGRAM
This program allows you to receive either monthly, quarterly, semiannual or
annual checks during the Accumulation Phase. You can also choose to have
systematic withdrawals electronically wired to your bank account. The minimum
amount of each withdrawal is $250. Withdrawals may be taxable and a 10% IRS tax
penalty may apply if you are under age 59 1/2. There is no charge for
participating in this program.
This program is not available to everyone. Please check with our Annuity Service
Center, which can provide the necessary enrollment forms. We reserve the right
to modify, suspend or terminate this program at any time.
WITHDRAWAL CHARGES, MARKET VALUE ADJUSTMENTS, INCOME TAXES, TAX PENALTIES AND
CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL YOU MAKE.
NURSING HOME WAIVER
If you are confined to a nursing home for 60 days or longer, we may waive the
withdrawal charge and/or market value adjustment on certain withdrawals prior to
the Annuity Date (not available in Texas). The waiver applies only to
withdrawals made while you are in a nursing home or within 90 days after you
leave the nursing home.
This waiver may not be used during the first 90 days after you purchase your
contract. In addition, the confinement period for which you seek the waiver must
begin after you purchase your contract.
In order to use this waiver, you must submit with your withdrawal request the
following documents: (1) a doctor's note recommending admittance to a nursing
home; (2) an admittance form which shows the type of facility you entered into;
and (3) a bill from the nursing home which shows that the 60 day confinement
requirement has been met.
MINIMUM CONTRACT VALUE
Where permitted by state law, we may terminate your contract if both of the
following occur: (1) your contract is less than $500 as a result of withdrawals
and (2) no Purchase Payments have been made during the past three years. We will
provide you with sixty days written notice and distribute the contract's
remaining value to you.
=============================================================
8. PERFORMANCE
=============================================================
From time to time we may advertise the Cash Management Portfolio's yield and
effective yield. In addition, the other variable investment Portfolios may also
advertise total return, gross yield and yield to maturity information. These
figures are based on historical data and are not intended to indicate future
performance.
More detailed information on the method used to calculate performance for the
Portfolios is contained in the SAI.
The performance of each Portfolio may also be measured against unmanaged market
indices, including but not limited to the Dow Jones Industrial Average, the
Standard & Poor's 500, the Russell 1000 Growth Index, the Morgan Stanley Capital
International Europe, Australia, and Far East Index (EAFE) and the Morgan
Stanley Capital International World Index, and may be compared to that of other
variable annuities with similar objectives and policies as reported by
independent ranking agencies such as Morningstar, Inc., Lipper Analytical
Services, Inc. or Variable Annuity Research & Data Service ("VARDS").
At times Anchor National may also advertise the ratings and other information
assigned to it by independent rating organizations such as A.M. Best Company
("A.M. Best"), Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Insurance Rating Services ("S&P"), and Duff & Phelps. A.M. Best's and Moody's
ratings reflect their current opinion of our financial strength and performance
14
<PAGE> 21
in comparison to others in the life/health insurance industry. S&P's and Duff &
Phelps' ratings measure the ability of an insurance company to meet its
obligations under insurance policies it issues and do not measure the ability of
such companies to meet other non-policy obligations. The ratings do not relate
to the performance of the Portfolios.
=============================================================
9. DEATH BENEFIT
=============================================================
If you should die during the Accumulation Phase of your contract, we will pay a
death benefit to your Beneficiary.
The death benefit is the greater of:
(1) The value of your contract at the time we receive adequate proof of
death,
(2) total Purchase Payments less any withdrawals, all compounded at 4%
annually until the date of death (3% if age 70 or older at time of
issue), or
(3) the value of your contract on the seventh contract anniversary less any
withdrawals plus any additional Purchase Payments since the seventh
anniversary, all compounded at 4% annually until the date of death (3%
if age 70 or older at time of issue).
The death benefit is not paid after you switch to the Income Phase. During the
Income Phase, your Beneficiary(ies) will receive any remaining guaranteed
annuity payments in accordance with the annuity option you choose.
You may select the Beneficiary(ies) to receive any amounts payable on death. You
may change the Beneficiary at any time, unless you previously made an
irrevocable Beneficiary designation. A new Beneficiary designation is not
effective until we record the change.
The death benefit is immediately payable under the contract. If the Beneficiary
elects an annuity option, it must be paid over the Beneficiary's lifetime or for
a period not extending beyond the Beneficiary's life expectancy. If the
Beneficiary is the spouse of the owner, he or she can elect to continue the
contract at the then current value, in which case he or she will not receive the
death benefit.
The death benefit will be paid out when we receive adequate proof of death: (1)
a certified copy of a death certificate; (2) a certified copy of a decree of
court of competent jurisdiction as to the finding of death; (3) a written
statement by a medical doctor who attended the deceased at the time of death; or
(4) any other proof satisfactory to us. We may also require additional
documentation or proof in order for the death benefit to be paid. If the
Beneficiary does not make a specific election within sixty days of our receipt
of such proof of death, the death benefit will be paid in a lump sum.
=============================================================
10. OTHER INFORMATION
=============================================================
ANCHOR NATIONAL
Anchor National and its affiliates, SunAmerica Life Insurance Company, First
SunAmerica Life Insurance Company, 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. Anchor National is an indirect wholly owned
subsidiary of SunAmerica Inc. Anchor National is licensed to do business in the
District of Columbia and in all states except New York.
THE SEPARATE ACCOUNT
Anchor National originally established a separate account, Variable Separate
Account, under California law on June 25, 1981. We redomesticated under Arizona
law on January 1, 1996 and the separate account was assumed by Anchor National.
The separate account is registered with the SEC as a unit investment trust under
the Investment Company Act of 1940.
Anchor National owns the assets in the separate account. However, the assets in
the separate account are not chargeable with liabilities arising out of any
other business Anchor National may conduct. Income, gains and losses (realized
and unrealized) resulting from the assets in the separate account are credited
to or charged against the separate account without regard to other income, gains
or losses of Anchor National.
THE GENERAL ACCOUNT
If you put your money into the fixed investment options, it goes into Anchor
National's general account. The general account is made up of all of Anchor
National's assets other than assets attributable to a separate account. All of
the assets in the general account are chargeable with the claims of any Anchor
National contract owners as well as all creditors. The general account is
invested in assets permitted by state insurance law.
DISTRIBUTION
The contract is sold through registered representatives of broker-dealers.
Commissions are paid to registered representatives for the sale of contracts.
Commissions are not expected to exceed 7% of your Purchase Payment. Under some
circumstances, we may pay a persistency bonus in addition to standard
commissions. Usually the standard commission is lower when we pay a persistency
15
<PAGE> 22
bonus, which is not anticipated to exceed 1.5% annually. Commissions paid to
registered representatives are not directly deducted from your Purchase Payment.
SunAmerica Capital Services, Inc., 733 Third Avenue, 4th Floor, New York, New
York 10017 acts as the distributor of the contracts. SunAmerica Capital
Services, Inc., an affiliate of Anchor National, is registered as a brokerdealer
under the Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc.
ADMINISTRATION
We are responsible for all the administrative servicing of your contract. Please
contact Anchor National's Annuity Service Center at the telephone number and
address provided in the profile section of this prospectus if you have any
comment, question or service request.
We will send out transaction confirmations and quarterly statements. Please
review these documents carefully and notify us of any inaccuracies immediately.
We will investigate all questions and, to the extent we have made an error, we
will retroactively adjust your contract provided you have notified us within
thirty days of receiving the transaction confirmation or quarterly statement, as
applicable. All other adjustments will be made as of the time we receive notice
of the error.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the separate account. Anchor
National and its subsidiaries are engaged in various kinds of routine litigation
which, in management's judgment, are not of material importance to their
respective total assets or material with respect to the separate account.
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, serves as the custodian of the assets of the separate account. Anchor
National pays State Street Bank for services based on a schedule of fees.
ADDITIONAL INFORMATION
Anchor National is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. In accordance with such requirements, we file
reports and other information with the SEC. Such reports and other information
we file can be inspected and copied. Copies can be obtained at the public
reference facilities of the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, or at the regional offices in Chicago and New York. The
addresses of these regional offices are as follows: 500 West Madison Street,
Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of such material also can be obtained by mail from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549,
upon payment of the fees prescribed by the rules and regulations of the SEC at
prescribed rates.
Registration statements have been filed with the SEC, Washington, D.C., under
the Securities Act of 1933 as amended, relating to the contracts offered by this
prospectus. This prospectus does not contain all the information set forth in
the registration statements and the exhibits filed as part of the registration
statements Reference should be made to such registration statements and exhibits
for further information concerning the separate account, Anchor National and its
general account, the Portfolios and the contract.
16
<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data of Anchor National should be
read in conjunction with the consolidated financial statements and notes thereto
and Management's Discussion and Analysis of Financial Condition and Results of
Operations, both of which follow this selected information. Certain items have
been reclassified to conform to the current year's presentation.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net investment income................................... $ 73,201 $ 56,843 $ 50,083 $ 58,996 $ 48,912
Net realized investment losses.......................... (17,394) (13,355) (4,363) (33,713) (22,247)
Fee income.............................................. 213,146 169,505 145,105 141,753 123,567
General and administrative expenses..................... (98,802) (81,552) (64,457) (54,363) (50,783)
Provision for future guaranty fund assessments.......... -- -- -- -- (4,800)
Amortization of deferred acquisition costs.............. (66,879) (57,520) (58,713) (44,195) (30,825)
Annual commissions...................................... (8,977) (4,613) (2,658) (1,158) (312)
-------- -------- -------- -------- --------
PRETAX INCOME........................................... 94,295 69,308 64,997 67,320 63,512
Income tax expense...................................... (31,169) (24,252) (25,739) (22,705) (21,794)
-------- -------- -------- -------- --------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
FOR INCOME TAXES...................................... 63,126 45,056 39,258 44,615 41,718
Cumulative effect of change in accounting for income
taxes................................................. -- -- -- (20,463) --
-------- -------- -------- -------- --------
NET INCOME.............................................. $ 63,126 $ 45,056 $ 39,258 $ 24,152 $ 41,718
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
-----------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
FINANCIAL POSITION
Investments............................................. $ 2,608,301 $2,329,232 $2,114,908 $1,632,072 $2,093,100
Variable annuity assets................................. 9,343,200 6,311,557 5,230,246 4,486,703 4,170,275
Deferred acquisition costs.............................. 536,155 443,610 383,069 416,289 336,677
Other assets............................................ 83,283 120,136 55,474 67,062 71,337
---------- ---------- ---------- ---------- ----------
TOTAL ASSETS............................................ $12,570,939 $9,204,535 $7,783,697 $6,602,126 $6,671,389
========== ========== ========== ========== ==========
Reserves for fixed annuity contracts.................... $ 2,098,803 $1,789,962 $1,497,052 $1,437,488 $1,562,136
Reserves for guaranteed investment contracts............ 295,175 415,544 277,095 -- --
Variable annuity liabilities............................ 9,343,200 6,311,557 5,230,246 4,486,703 4,170,275
Other payables and accrued liabilities.................. 155,256 96,196 227,953 195,134 495,308
Subordinated notes payable to Parent.................... 36,240 35,832 35,832 34,712 34,432
Deferred income taxes................................... 67,047 70,189 73,459 64,567 38,145
Shareholder's equity.................................... 575,218 485,255 442,060 383,522 371,093
---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.............. $12,570,939 $9,204,535 $7,783,697 $6,602,126 $6,671,389
========== ========== ========== ========== ==========
</TABLE>
17
<PAGE> 24
MANAGEMENT DISCUSSION AND ANALYSIS
Management's discussion and analysis of financial condition and results of
operations of Anchor National for the three years in the period ended September
30, 1997 follows. In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, Anchor National cautions readers
regarding certain forward-looking statements contained in this report and in any
other statements made by, or on behalf of, Anchor National, whether or not in
future filings with the Securities and Exchange Commission (the "SEC").
Forward-looking statements are statements not based on historical information
and which relate to future operations, strategies, financial results, or other
developments. Statements using verbs such as "expect," "anticipate," "believe"
or words of similar import generally involve forward-looking statements. Without
limiting the foregoing, forward-looking statements include statements which
represent Anchor National's beliefs concerning future levels of sales and
redemptions of Anchor National's products, investment spreads and yields, or the
earnings and profitability of Anchor National's activities.
Forward-looking statements are necessarily based on estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond Anchor National's
control and many of which are subject to change. These uncertainties and
contingencies could cause actual results to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, Anchor
National. Whether or not actual results differ materially from forward-looking
statements may depend on numerous foreseeable and unforeseeable developments.
Some may be national in scope, such as general economic conditions, changes in
tax law and changes in interest rates. Some may be related to the insurance
industry generally, such as pricing competition, regulatory developments and
industry consolidation. Others may relate to Anchor National specifically, such
as credit, volatility and other risks associated with Anchor National's
investment portfolio. Investors are also directed to consider other risks and
uncertainties discussed in documents filed by Anchor National with the SEC.
Anchor National disclaims any obligation to update forward-looking information.
RESULTS OF OPERATIONS FOR THE FISCAL YEARS 1995, 1996 AND 1997
NET INCOME totaled $63.1 million in 1997, compared with $45.1 million in 1996
and $39.3 million in 1995.
PRETAX INCOME totaled $94.3 million in 1997, $69.3 million in 1996 and $65.0
million in 1995. The 36.1% improvement in 1997 over 1996 primarily resulted from
increased fee income and net investment income, partially offset by higher
general and administrative expenses and increased amortization of deferred
acquisition costs. The 6.6% improvement in 1996 over 1995 primarily resulted
from increased net investment income and significantly increased fee income,
partially offset by increased net realized investment losses and additional
general and administrative expenses.
NET INVESTMENT INCOME, which is the spread between the income earned on invested
assets and the interest paid on fixed annuities and other interest-bearing
liabilities, increased to $73.2 million in 1997 from $56.8 million in 1996 and
$50.1 million in 1995. These amounts equal 2.77% on average invested assets
(computed on a daily basis) of $2.65 billion in 1997, 2.59% on average invested
assets of $2.19 billion in 1996 and 2.95% on average invested assets of $1.70
billion in 1995.
Net investment spreads include the effect of income earned on the excess of
average invested assets over average interest-bearing liabilities. This excess
amounted to $126.5 million in 1997, $142.9 million in 1996 and $108.4 million in
1995. The difference between Anchor National's yield on average invested assets
and the rate paid on average interest-bearing liabilities (the "Spread
Difference") was 2.51% in 1997, 2.25% in 1996 and 2.63% in 1995.
Investment income (and the related yields on average invested assets) totaled
$210.8 million (7.97%) in 1997, compared with $164.6 million (7.50%) in 1996 and
$129.5 million (7.62%) in 1995. These increased yields in 1997 include the
effects of a greater proportion of mortgage loans in Anchor National's
portfolio. On average, mortgage loans have higher yields than that of Anchor
National's overall portfolio. In addition, Anchor National experienced higher
returns on its investments in partnerships. The increases in investment income
in 1997 and 1996 also reflect increases in average invested assets.
Partnership income increased to $6.7 million (a yield of 15.28% on related
average assets of $44.0 million) in 1997, compared with $4.1 million (a yield of
10.12% on related average assets of $40.2 million) in 1996 and $5.1 million (a
yield of 10.60% on related average assets of $48.4 million) in 1995. Partnership
income is based upon cash distributions received from limited partnerships, the
operations of which Anchor National does not influence. Consequently, such
income is not predictable and there can be no assurance that Anchor National
will realize comparable levels of such income in the future.
Total interest expense equalled $137.6 million in 1997, $107.8 million in 1996
and $79.4 million in 1995. The average rate paid on all interest-bearing
liabilities was 5.46% in 1997, compared with 5.25% in 1996 and 4.99% in 1995.
Interest-bearing liabilities averaged $2.52 billion during 1997, compared with
$2.05 billion during 1996 and $1.59 billion during 1995.
The increases in the overall rates paid on interest-bearing liabilities during
1997 and 1996 primarily resulted from the impact of certain promotional one-year
interest rates offered
18
<PAGE> 25
on the fixed account portion of Anchor National's Polaris variable annuity
product. The increase in the overall rates paid on all interest-bearing
liabilities during 1996 was also impacted by the growth in average reserves for
GICs, which generally bear higher rates of interest than fixed annuity
contracts. Average GIC reserves were $340.5 million in 1996 and $60.8 million in
1995. Most of Anchor National's GICs are variable rate and are repriced
quarterly at the then-current interest rates.
GROWTH IN AVERAGE INVESTED ASSETS since 1995 primarily reflects the sales of
Anchor National's fixed-rate products, consisting of both fixed annuity premiums
(including those for the fixed accounts of variable annuity products) and GIC
premiums. Fixed annuity premiums totaled $1.10 billion in 1997, compared with
$741.8 million in 1996 and $284.4 million in 1995. The premiums for the fixed
accounts of variable annuities have increased primarily because of increased
sales of Anchor National's Polaris product and greater inflows into the one-year
fixed account of that product. Anchor National has observed that many purchasers
of its variable annuity contracts allocate new premiums to the one-year fixed
account and concurrently elect the option to dollar cost average into one or
more variable funds. Accordingly, Anchor National anticipates that it will see a
large portion of these premiums transferred into the variable funds.
GIC premiums totaled $55.0 million in 1997, $135.0 million in 1996 and $275.0
million in 1995. GIC surrenders and maturities totaled $198.1 million in 1997,
$16.5 million in 1996 and $1.6 million in 1995. Anchor National does not
actively market GICs, so premiums may vary substantially from period to period.
The large increase in surrenders and maturities in 1997 was primarily due to
contracts maturing in 1997. The GICs issued by Anchor National generally
guarantee the payment of principal and interest at fixed or variable rates for a
term of three to five years. Contracts that are purchased by banks for their
long-term portfolios, or state and local governmental entities either prohibit
withdrawals or permit scheduled book value withdrawals subject to terms of the
underlying indenture or agreement. GICs purchased by asset management firms for
their short term portfolios either prohibit withdrawals or permit withdrawals
with notice ranging from 90 to 270 days. In pricing GICs, Anchor National
analyzes cash flow information and prices accordingly so that it is compensated
for possible withdrawals prior to maturity.
NET REALIZED INVESTMENT LOSSES totaled $17.4 million in 1997, $13.4 million in
1996 and $4.4 million in 1995. Net realized investment losses include impairment
writedowns of $20.4 million in 1997, $16.0 million in 1996 and $4.8 million in
1995. Therefore, net gains from sales of investments totaled $3.0 million in
1997, $2.6 million in 1996 and $0.4 million in 1995.
Anchor National sold invested assets, principally bonds and notes, aggregating
$2.19 billion, $1.28 billion and $1.15 billion in 1997, 1996 and 1995,
respectively. Sales of investments result from the active management of Anchor
National's investment portfolio. Because sales of investments are made in both
rising and falling interest rate environments, net gains from sales of
investments fluctuate from period to period, and represent 0.11%, 0.12% and
0.02% of average invested assets for 1997, 1996 and 1995, respectively. Active
portfolio management involves the ongoing evaluation of asset sectors,
individual securities within the investment portfolio and the reallocation of
investments from sectors that are perceived to be relatively overvalued to
sectors that are perceived to be relatively undervalued. The intent of Anchor
National's active portfolio management is to maximize total returns on the
investment portfolio, taking into account credit interest-rate risk.
Impairment writedowns reflect $15.7 million and $15.2 million of provisions
applied to non-income producing land owned in Arizona in 1997 and 1996,
respectively. The statutory carrying value of this land had been guaranteed by
Anchor National's ultimate Parent, SunAmerica Inc. ("SunAmerica"). SunAmerica
made capital contributions of $28.4 million and $27.4 million on December 31,
1996 and 1995, respectively, to Anchor National through Anchor National's direct
parent in exchange for the termination of its guaranty with respect to this
land. Accordingly, Anchor National reduced the carrying value of this land to
estimated fair value to reflect the full termination of the guaranty. Impairment
writedowns in 1995 include $3.8 million of additional provisions applied to
defaulted bonds. Impairment writedowns represent 0.77%, 0.73% and 0.28% of
average invested assets for 1997, 1996 and 1995, respectively. For the five
years ended September 30, 1997, impairment writedowns as a percentage of average
invested assets have ranged from 0.28% to 2.20% and have averaged 1.16%. Such
writedowns are based upon estimates of the net realizable value of the
applicable assets. Actual realization will be dependent upon future events.
VARIABLE ANNUITY FEES are based on the market value of assets in separate
accounts supporting variable annuity contracts. Such fees totaled $139.5 million
in 1997, $104.0 million in 1996 and $84.2 million in 1995. These increased fees
reflect growth in average variable annuity assets, principally due to the
receipt of variable annuity premiums, increased market values and net exchanges
into the separate accounts from the fixed accounts of variable annuity
contracts, partially offset by surrenders. Variable annuity assets averaged
$7.55 billion during 1997, $5.70 billion during 1996 and $4.65 billion during
1995. Variable annuity premiums, which exclude premiums allocated to the fixed
accounts of variable annuity products, totaled $1.27 billion in 1997, $919.8
million in 1996 and $577.2 million in 1995. Sales of variable annuity products
(which include premiums allocated to the fixed accounts)
19
<PAGE> 26
("Variable Annuity Product Sales") amounted to $2.37 billion, $1.66 billion and
$861.0 million in 1997, 1996 and 1995, respectively. Increases in Variable
Annuity Product Sales are due, in part, to market share gains through enhanced
distribution efforts and growing consumer demand for flexible retirement savings
products that offer a variety of equity, fixed income and guaranteed fixed
account investment choices. Anchor National has encountered increased
competition in the variable annuity marketplace during recent years and
anticipates that the market will remain highly competitive for the foreseeable
future.
NET RETAINED COMMISSIONS are primarily derived from commissions on the sales of
nonproprietary investment products by Anchor National's broker-dealer
subsidiary, after deducting the substantial portion of such commissions that is
passed on to registered representatives. Net retained commissions totaled $39.1
million in 1997, $31.5 million in 1996 and $24.1 million in 1995. Broker-dealer
sales (mainly sales of general securities, mutual funds and annuities) totaled
$11.56 billion in 1997, $8.75 billion in 1996 and $5.67 billion in 1995. The
increases in sales and net retained commissions reflect a greater number of
registered representatives, due to Anchor National's ongoing recruitment of
representatives and to the transfer of representatives from an affiliated
broker-dealer, higher average production per representative and generally
favorable market conditions. Increases in net retained commissions may not be
proportionate to increases in sales primarily due to differences in sales mix.
SURRENDER CHARGES on fixed and variable annuities totaled $5.5 million in 1997,
compared with $5.2 million in 1996 and $5.9 million in 1995. Surrender charges
generally are assessed on annuity withdrawals at declining rates during the
first seven years of an annuity contract. Withdrawal payments, which include
surrenders and lump-sum annuity benefits, totaled $1.06 billion in 1997,
compared with $898.0 million in 1996 and $908.9 million in 1995. These payments
represent 11.22%, 12.44% and 15.06%, respectively, of average fixed and variable
annuity reserves. Withdrawals include variable annuity withdrawals from the
separate accounts totaling $822.0 million in 1997, $634.1 million in 1996 and
$632.1 million in 1995. Management anticipates that withdrawal rates will remain
relatively stable for the foreseeable future.
ASSET MANAGEMENT FEES, which include investment advisory fees and 12b-1
distribution fees, are based on the market value of assets managed in mutual
funds by SunAmerica Asset Management Corp. Such fees totaled $25.8 million on
average assets managed of $2.34 billion in 1997, $25.4 million on average assets
managed of $2.14 billion in 1996 and $26.9 million on average assets managed of
$2.07 billion in 1995. Asset management fees are not proportionate to average
assets managed, principally due to changes in product mix. Sales of mutual
funds, excluding sales of money market accounts, amounted to $454.8 million in
1997, compared with $223.4 million in 1996 and $140.2 million in 1995.
Redemptions of mutual funds, excluding redemptions of money market accounts,
amounted to $412.8 million in 1997, $379.9 million in 1996 and $426.5 million in
1995. The significant increases in sales during 1997 principally resulted from
the introduction in November 1996 of Anchor National's "Style Select Series"
product. Higher mutual fund sales and lower redemptions in 1996 both reflect
enhanced marketing efforts and the favorable performance records of certain of
Anchor National's mutual funds, and heightened consumer demand for equity
investments generally.
GENERAL AND ADMINISTRATIVE EXPENSES totaled $98.8 million in 1997, compared with
$81.6 million in 1996 and $65.3 million in 1995. General and administrative
expenses in 1997 include a $5.0 million provision for estimated programming
costs associated with the year 2000. Management believes that this provision is
adequate and does not anticipate any material future expenses associated with
this project. General and administrative expenses remain closely controlled
through a company-wide cost containment program and continue to represent less
than 1% of average total assets.
AMORTIZATION OF DEFERRED ACQUISITION COSTS totaled $66.9 million in 1997,
compared with $57.5 million in 1996 and $58.7 million in 1995. The increase in
amortization during 1997 was primarily due to additional fixed and variable
annuity sales and the subsequent amortization of related deferred commissions
and other direct selling costs. The decline in amortization for 1996 is due to
lower redemptions of mutual funds from the rate experienced in 1995, partially
offset by additional fixed and variable annuity and mutual fund sales in recent
years and the subsequent amortization of related deferred commissions and other
acquisition costs.
ANNUAL COMMISSIONS represent renewal commissions paid quarterly in arrears to
maintain the persistency of certain of Anchor National's variable annuity
contracts. Substantially all of Anchor National's currently available variable
annuity products allow for an annual commission payment option in return for a
lower immediate commission. Annual commissions totaled $9.0 million in 1997,
$4.6 million in 1996 and $2.7 million in 1995. The increase in annual
commissions since 1995 reflects increased sales of annuities that offer this
commission option. Anchor National estimates that approximately 45% of the
average balances of its variable annuity products is currently subject to such
annual commissions. Based on current sales, this percentage is expected to
increase in future periods.
INCOME TAX EXPENSE totaled $31.2 million in 1997, compared with $24.3 million in
1996 and $25.7 million in 1995, representing effective tax rates of 33% in 1997,
35% in 1996 and 40% in 1995. The higher effective tax rate in 1995
20
<PAGE> 27
was due to a prior year tax settlement. Without such payment, the effective tax
rate would have been 33%.
FINANCIAL CONDITION AND LIQUIDITY
SHAREHOLDER'S EQUITY increased 18.5% to $575.2 million at September 30, 1997
from $485.3 million at September 30, 1996, primarily due to $63.1 million of net
income recorded in 1997 and $18.4 million of net unrealized gains on debt and
equity securities available for sale (credited directly to shareholder's
equity), versus $5.5 million of net unrealized losses on such securities
recorded at September 30, 1996. In addition, Anchor National received a
contribution of capital of $28.4 million in December 1996 and paid a dividend of
$25.5 million in April 1997.
INVESTED ASSETS at year end totaled $2.61 billion in 1997, compared with $2.33
billion at year-end 1996. This 12.0% increase primarily resulted from sales of
fixed annuities and the $44.7 million net unrealized gain recorded on debt and
equity securities available for sale at September 30, 1997, versus the $12.7
million net unrealized loss recorded on such securities at September 30, 1996.
Anchor National manages most of its invested assets internally. Anchor
National's general investment philosophy is to hold fixed-rate assets for
long-term investment. Thus, it does not have a trading portfolio. However,
Anchor National has determined that all of its portfolio of bonds, notes and
redeemable preferred stocks (the "Bond Portfolio") is available to be sold in
response to changes in market interest rates, changes in relative value of asset
sectors and individual securities, changes in prepayment risk, changes in the
credit quality outlook for certain securities, Anchor National's need for
liquidity and other similar factors.
THE BOND PORTFOLIO, which comprises 76% of Anchor National's total investment
portfolio (at amortized cost), had an aggregate fair value that exceeded its
amortized cost by $43.7 million at September 30, 1997. At September 30, 1996,
the amortized cost exceeded the fair value of the Bond Portfolio by $13.8
million. The net unrealized gains on the Bond Portfolio since September 30, 1996
principally reflect the lower prevailing interest rates at September 30, 1997
and the corresponding effect on the fair value of the Bond Portfolio.
At September 30, 1997, the Bond Portfolio (at amortized cost, excluding $6.1
million of redeemable preferred stocks) included $1.82 billion of bonds rated by
Standard & Poor's Corporation ("S&P"), Moody's Investors Service ("Moody's"),
Duff & Phelps Credit Rating Co. ("DCR"), Fitch Investors Service, L.P. ("Fitch")
or the National Association of Insurance Commissioners ("NAIC"), and $124.4
million of bonds rated by Anchor National pursuant to statutory ratings
guidelines established by the NAIC. At September 30, 1997, approximately $1.72
billion of the Bond Portfolio was investment grade, including $650.3 million of
U.S. government/agency securities and mortgage-backed securities ("MBSs").
At September 30, 1997, the Bond Portfolio included $216.9 million (at amortized
cost with a fair value of $227.2 million) of bonds that were not investment
grade. Based on their September 30, 1997 amortized cost, these non-
investment-grade bonds accounted for 1.7% of Anchor National's total assets and
8.5% of its invested assets.
Non-investment-grade securities generally provide higher yields and involve
greater risks than investment-grade securities because their issuers typically
are more highly leveraged and more vulnerable to adverse economic conditions
than investment-grade issuers. In addition, the trading market for these
securities is usually more limited than for investment-grade securities. Anchor
National had no material concentrations of non-investment-grade securities at
September 30, 1997. The following table summarizes Anchor National's rated bonds
by rating classification as of September 30, 1997.
21
<PAGE> 28
RATED BONDS BY RATING CLASSIFICATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ISSUES NOT RATED BY S&P/MOODY'S/
ISSUES RATED BY S&P/MOODY'S/DCR/FITCH DCR/FITCH, BY NAIC CATEGORY TOTAL
-------------------------------------------- ----------------------------------- ---------------------------------
S&P/(MOODY'S)/ ESTIMATED NAIC ESTIMATED PERCENT OF ESTIMATED
[DCR]/HFITCHJ AMORTIZED FAIR CATEGORY AMORTIZED FAIR AMORTIZED INVESTED FAIR
CATEGORY(1) COST VALUE (2) COST VALUE COST ASSETS(3) VALUE
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AAA+ to A-
(Aaa to A3)
[AAA to A-]
GAAA to A-H..... $ 935,866 $ 953,440 1 $142,548 $143,940 $1,078,414 42.07% $1,097,380
BBB+ to BBB-
(Baal to Baa3)
[BBB+ to BBB-]
GBBB+ to
BBB-H......... 494,521 504,442 2 146,548 150,521 641,069 25.01 654,963
BB+ to BB-
(Ba1 to Ba3)
[BB+ to BB-]
GBB+ to BB-H.... 13,080 14,597 3 13,811 13,917 26,891 1.05 28,514
B+ to B-
(B1 to B3)
[B+ to B-]
GB+ to B-H...... 163,603 170,960 4 25,777 27,089 189,380 7.39 198,049
CCC+ to C
(Caa to C)
[CCC]
GCCC+ to C-H.... 0 0 5 0 0 0 0.00 0
C1 to D
[DD]
GDH............. 0 0 6 606 606 606 0.02 606
--------- --------- -------- -------- ---------- ---------
Total rated
issues.......... $1,607,070 $1,643,439 $329,290 $336,073 $1,936,360 $1,979,512
========= ========= ======== ======== ========== =========
</TABLE>
(1) S&P and Fitch rate debt securities in rating categories ranging from AAA
(the highest) to D (in payment default). A plus (+) or minus (-) indicates
the debt's relative standing within the rating category. A security rated
BBB- or higher is considered investment grade. Moody's rates debt securities
in rating categories ranging from Aaa (the highest) to C (extremely poor
prospects of ever attaining any real investment standing). The number 1, 2
or 3 (with 1 the highest and 3 the lowest) indicates the debt's relative
standing within the rating category. A security rated Baa3 or higher is
considered investment grade. DCR rates debt securities in rating categories
ranging from AAA (the highest) to DD (in payment default). A plus (+) or
minus (-) indicates the debt's relative standing within the rating category.
A security rated BBB- or higher is considered investment grade. Issues are
categorized based on the highest of the S&P, Moody's, D&P and Fitch ratings
if rated by multiple agencies.
(2) Bonds and short-term promissory instruments are divided into six quality
categories for NAIC rating purposes, ranging from 1 (highest) to 5 (lowest)
for nondefaulted bonds plus one category, 6, for bonds in or near default.
These six categories correspond with the S&P/Moody's/DCR/Fitch rating groups
listed above, with categories 1 and 2 considered investment grade. The NAIC
categories include $124.4 million (at amortized cost) of assets that were
rated by Anchor National pursuant to applicable NAIC rating guidelines.
(3) At amortized cost.
SENIOR SECURED LOANS ("Secured Loans") are included in the Bond Portfolio and
their amortized cost aggregated $329.3 million at September 30, 1997. Secured
Loans are senior to subordinated debt and equity, and are secured by assets of
the issuer. At September 30, 1997, Secured Loans consisted of loans to 80
borrowers spanning 28 industries, with 17% of these assets (at amortized cost)
concentrated in financial institutions. No other industry concentration
constituted more than 10% of these assets.
While the trading market for Secured Loans is more limited than for publicly
traded corporate debt issues, management believes that participation in these
transactions has enabled Anchor National to improve its investment yield. As a
result of restrictive financial covenants, Secured Loans involve greater risk of
technical default than do publicly traded investment-grade securities. However,
management believes that the risk of loss upon default for its Secured Loans is
mitigated by such financial covenants and the collateral values underlying the
Secured Loans. Anchor National's Secured Loans are rated by S&P, Moody's, DCR,
Fitch, the NAIC or by Anchor National, pursuant to comparable statutory ratings
guidelines established by the NAIC.
MORTGAGE LOANS aggregated $339.5 million at September 30, 1997 and consisted of
73 commercial first mortgage loans with an average loan balance of approximately
$4.7 million, collateralized by properties located in 21 states. Approximately
23% of this portfolio was multifamily residential, 18% was office, 14% was
22
<PAGE> 29
manufactured housing, 13% was hotels, 11% was retail, 11% was industrial and 10%
was other types. At September 30, 1997, approximately 13% and 12% of this
portfolio was secured by properties located in New York and California,
respectively, and no more than 10% of this portfolio was secured by properties
located in any other single state. At September 30, 1997, there were four
mortgage loans with outstanding balances of $10 million or more, which loans
collectively aggregated approximately 17% of this portfolio. At the time of
their origination or purchase by Anchor National, virtually all mortgage loans
had loan-to-value ratios of 75% or less. At September 30, 1997, approximately
23% of the mortgage loan portfolio consisted of loans with balloon payments due
before October 1, 2000. During 1997, 1996 and 1995, loans delinquent by more
than 90 days, foreclosed loans and restructured loans have not been significant
in relation to the total mortgage loan portfolio.
At September 30, 1997, approximately 18% of the mortgage loans were seasoned
loans underwritten to Anchor National's standards and purchased at or near par
from other financial institutions. Such loans generally have higher average
interest rates than loans that could be originated today. The balance of the
mortgage loan portfolio has been originated by Anchor National under strict
underwriting standards. Commercial mortgage loans on properties such as offices,
hotels and shopping centers generally represent a higher level of risk than do
mortgage loans secured by multifamily residences. This greater risk is due to
several factors, including the larger size of such loans and the more immediate
effects of general economic conditions on these commercial property types.
However, due to the seasoned nature of Anchor National's mortgage loan
portfolio, its emphasis on multifamily loans and its strict underwriting
standards, Anchor National believes that it has prudently managed the risk
attributable to its mortgage loan portfolio while maintaining attractive yields.
OTHER INVESTED ASSETS aggregated $143.7 million at September 30, 1997, including
$46.9 million of investments in limited partnerships, $70.9 million of separate
account investments and an aggregate of $25.9 million of miscellaneous
investments, including policy loans, residuals and leveraged leases. Anchor
National's limited partnership interests, accounted for by using the cost method
of accounting, are invested primarily in a combination of debt and equity
securities.
ASSET-LIABILITY MATCHING is utilized by Anchor National to minimize the risks of
interest rate fluctuations and disintermediation. Anchor National believes that
its fixed-rate liabilities should be backed by a portfolio principally composed
of fixed-rate investments that generate predictable rates of return. Anchor
National does not have a specific target rate of return. Instead, its rates of
return vary over time depending on the current interest rate environment, the
slope of the yield curve, the spread at which fixed-rate investments are priced
over the yield curve, and general economic conditions. Its portfolio strategy is
constructed with a view to achieve adequate risk-adjusted returns consistent
with its investment objectives of effective asset-liability matching, liquidity
and safety. Anchor National's fixed-rate products incorporate surrender charges
or other restrictions in order to encourage persistency. Approximately 77% of
Anchor National's fixed annuity and GIC reserves had surrender penalties or
other restrictions at September 30, 1997.
As part of its asset-liability matching discipline, Anchor National conducts
detailed computer simulations that model its fixed-rate assets and liabilities
under commonly used stress-test interest rate scenarios. With the results of
these computer simulations, Anchor National can measure the potential gain or
loss in fair value of its interest-rate sensitive instruments and seek to
protect its economic value and achieve a predictable spread between what it
earns on its invested assets and what it pays on its liabilities by designing
its fixed-rate products and conducting its investment operations to closely
match the duration of the fixed-rate assets to that of its fixed-rate
liabilities. Anchor National's fixed-rate assets include: cash and short-term
investments; bonds, notes and redeemable preferred stocks; mortgage loans; and
investments in limited partnerships that invest primarily in fixed-rate
securities and are accounted for by using the cost method. At September 30,
1997, these assets had an aggregate fair value of $2.48 billion with a duration
of 3.4. Anchor National's fixed-rate liabilities include fixed annuities and
GICs. At September 30, 1997, these liabilities had an aggregate fair value
(determined by discounting future contractual cash flows by related market rates
of interest) of $2.32 billion with a duration of 1.3. Anchor National's
potential exposure due to a relative 10% increase in interest rates prevalent at
September 30, 1997 is a loss of approximately $31.2 million in fair value of its
fixed-rate assets that is not offset by an increase in the fair value of its
fixed-rate liabilities. Because Anchor National actively manages its assets and
liabilities and has strategies in place to minimize its exposure to loss as
interest rate changes occur, it expects that actual losses would be less than
the estimated potential loss.
Duration is a common option-adjusted measure for the price sensitivity of a
fixed-maturity portfolio to changes in interest rates. It measures the
approximate percentage change in the market value of a portfolio if interest
rates change by 100 basis points, recognizing the changes in cash flows
resulting from embedded options such as policy surrenders, investment
prepayments and bond calls. It also incorporates the assumption that Anchor
National will continue to utilize its existing strategies of pricing its fixed
annuity and GIC products, allocating its available cash flow amongst its various
investment portfolio sectors and maintaining sufficient levels of liquidity.
Because the calculation of duration involves estimation and incorporates
assumptions, potential changes in portfolio value indicated by the portfolio's
duration will likely
23
<PAGE> 30
be different from the actual changes experienced under given interest rate
scenarios, and the differences may be material.
As a component of its asset and liability management strategy, Anchor National
utilizes interest rate swap agreements ("Swap Agreements") to match assets and
liabilities more closely. Swap Agreements are agreements to exchange with a
counterparty interest rate payments of differing character (for example,
variable-rate payments exchanged for fixed-rate payments) based on an underlying
principal balance (notional principal) to hedge against interest rate changes.
Anchor National currently utilizes Swap Agreements to create a hedge that
effectively converts fixed-rate liabilities into floating-rate instruments. At
September 30, 1997, Anchor National had one outstanding Swap Agreement with a
notional principal amount of $15.9 million. This agreement matures in December
2024.
Anchor National also seeks to provide liquidity from time to time by using
reverse repurchase agreements ("Reverse Repos") and by investing in MBSs. It
also seeks to enhance its spread income by using Reverse Repos. Reverse Repos
involve a sale of securities and an agreement to repurchase the same securities
at a later date at an agreed upon price and are generally over-collateralized.
MBSs are generally investment-grade securities collateralized by large pools of
mortgage loans. MBSs generally pay principal and interest monthly. The amount of
principal and interest payments may fluctuate as a result of prepayments of the
underlying mortgage loans.
There are risks associated with some of the techniques Anchor National uses to
provide liquidity, enhance its spread income and match its assets and
liabilities. The primary risk associated with Anchor National's Reverse Repos
and Swap Agreements is counterparty risk. Anchor National believes, however,
that the counterparties to its Reverse Repos and Swap Agreements are financially
responsible and that the counterparty risk associated with those transactions is
minimal. In addition to counterparty risk, Swap Agreements also have interest
rate risk. However, Anchor National's Swap Agreements typically hedge
variable-rate assets or liabilities, and interest rate fluctuations that
adversely affect the net cash received or paid under the terms of a Swap
Agreement would be offset by increased interest income earned on the
variable-rate assets or reduced interest expense paid on the variable-rate
liabilities. The primary risk associated with MBSs is that a changing interest
rate environment might cause prepayment of the underlying obligations at speeds
slower or faster than anticipated at the time of their purchase. As part of its
decision to purchase an MBS, Anchor National assesses the risk of prepayment by
analyzing the security's projected performance over an array of interest-rate
scenarios. Once an MBS is purchased, Anchor National monitors its actual
prepayment experience monthly to reassess the relative attractiveness of the
security with the intent to maximize total return.
INVESTED ASSETS EVALUATION routinely includes a review by Anchor National of its
portfolio of debt securities. Management identifies monthly those investments
that require additional monitoring and carefully reviews the carrying values of
such investments at least quarterly to determine whether specific investments
should be placed on a nonaccrual basis and to determine declines in value that
may be other than temporary. In making these reviews for bonds, management
principally considers the adequacy of any collateral, compliance with
contractual covenants, the borrower's recent financial performance, news reports
and other externally generated information concerning the creditor's affairs. In
the case of publicly traded bonds, management also considers market value
quotations, if available. For mortgage loans, management generally considers
information concerning the mortgaged property and, among other things, factors
impacting the current and expected payment status of the loan and, if available,
the current fair value of the underlying collateral.
The carrying values of bonds that are determined to have declines in value that
are other than temporary are reduced to net realizable value and no further
accruals of interest are made. The valuation allowances on mortgage loans are
based on losses expected by management to be realized on transfers of mortgage
loans to real estate, on the disposition and settlement of mortgage loans and on
mortgage loans that management believes may not be collectible in full. Accrual
of interest is suspended when principal and interest payments on mortgage loans
are past due more than 90 days.
DEFAULTED INVESTMENTS, comprising all investments that are in default as to the
payment of principal or interest, totaled $1.4 million at September 30, 1997 (at
amortized cost after impairment writedowns, with a fair value of $1.4 million),
including $0.5 million of bonds and notes and $0.9 million of mortgage loans. At
September 30, 1997, defaulted investments constituted 0.1% of total invested
assets. At September 30, 1996, defaulted investments totaled $3.1 million,
including $1.6 million of bonds and notes and $1.5 million of mortgage loans,
and constituted 0.1% of total invested assets.
SOURCES OF LIQUIDITY are readily available to Anchor National in the form of
Anchor National's existing portfolio of cash and short-term investments, Reverse
Repo capacity on invested assets and, if required, proceeds from invested asset
sales. At September 30, 1997, approximately $1.80 billion of Anchor National's
Bond Portfolio had an aggregate unrealized gain of $46.5 million, while
approximately $139.8 million of the Bond Portfolio had an aggregate unrealized
loss of $2.7 million. In addition, Anchor National's investment portfolio
currently provides approximately $22.5 million of monthly cash flow from
scheduled principal and interest payments. Historically, cash flows from
operations and from the sale of Anchor National's annuity and GIC products have
been more than sufficient in amount to satisfy Anchor National's liquidity
needs.
24
<PAGE> 31
Management is aware that prevailing market interest rates may shift
significantly and has strategies in place to manage either an increase or
decrease in prevailing rates. In a rising interest rate environment, Anchor
National's average cost of funds would increase over time as it prices its new
and renewing annuities and GICs to maintain a generally competitive market rate.
Management would seek to place new funds in investments that were matched in
duration to, and higher yielding than, the liabilities assumed. Anchor National
believes that liquidity to fund withdrawals would be available through incoming
cash flow, the sale of short-term or floating-rate instruments or Reverse Repos
on Anchor National's substantial MBS segment of the Bond Portfolio, thereby
avoiding the sale of fixed-rate assets in an unfavorable bond market.
In a declining rate environment, Anchor National's cost of funds would decrease
over time, reflecting lower interest crediting rates on its fixed annuities and
GICs. Should increased liquidity be required for withdrawals, Anchor National
believes that a significant portion of its investments could be sold without
adverse consequences in light of the general strengthening that would be
expected in the bond market.
PROPERTIES
Anchor National's executive offices and its principal office are in leased
premises at 1 SunAmerica Center, Los Angeles, California. Anchor National,
through an affiliate, also leases office space in Torrance and Woodland Hills,
California. Anchor National's broker-dealer and asset management subsidiaries
lease offices in New York, New York.
Anchor National believes that such properties, including the equipment located
therein, are suitable and adequate to meet the requirements of its businesses.
25
<PAGE> 32
DIRECTORS AND EXECUTIVE OFFICERS
Anchor National's directors and officers as of January 1, 1998 are listed below:
<TABLE>
<CAPTION>
OTHER POSITIONS AND
YEAR OTHER BUSINESS
PRESENT ASSUMED EXPERIENCE WITHIN
NAME AGE POSITION(S) POSITION(S) LAST FIVE YEARS** FROM-TO
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Eli Broad* 64 Chairman, Chief Executive 1994 Co-founded SunAmerica Inc. (SAI)
Officer and President of Anchor in 1957
National
Chairman, Chief Executive 1986
Officer and President of SAI
- ----------------------------------------------------------------------------------------------------------------------------------
Jay S. Wintrob* 40 Executive Vice President of 1991 Senior Vice President 1989-1991
Anchor National (Joined SAI in 1987)
Vice Chairman of SAI 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Victor E. Akin 33 Senior Vice President of Anchor 1996 Vice President, SunAmerica Life 1995-1996
National Companies
Director, SunAmerica Life 1994-1995
Companies
Manager, SunAmerica Life 1993-1994
Companies
Actuary, Milliman & Robertson 1992-1993
Consultant, Chalke Inc. 1991-1992
- ----------------------------------------------------------------------------------------------------------------------------------
James R. Belardi* 40 Senior Vice President of Anchor 1992 Vice President and Treasurer 1989-1992
National (Joined SAI in 1986)
Executive Vice President of SAI 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Lorin M. Fife* 44 Senior Vice President, General 1994 Vice President and General 1994-1995
Counsel and Assistant Secretary Counsel -- Regulatory Affairs of
of Anchor National SAI
Senior Vice President and 1995 Vice President and Associate 1989-1994
General Counsel -- Regulatory General Counsel of SAI
Affairs of SAI (Joined SAI in 1989)
- ----------------------------------------------------------------------------------------------------------------------------------
N. Scott Gillis 44 Senior Vice President and 1994 Vice President and Controller, 1989-1994
Controller of Anchor National SunAmerica Life Companies
Vice President of SAI 1997 (Joined SAI in 1985)
- ----------------------------------------------------------------------------------------------------------------------------------
Jana W. Greer* 45 Senior Vice President of Anchor 1991 Vice President 1981-1991
National and SAI (Joined SAI in 1974)
President of SunAmerica 1995
Marketing, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
Susan L. Harris* 40 Senior Vice President and 1994 Vice President, General 1994-1995
Secretary of Anchor National Counsel -- Corporate Affairs and
Secretary of SAI
Senior Vice President, General 1995 Vice President, Associate 1989-1994
Counsel -- Corporate Affairs General Counsel and Secretary of
and Secretary of SAI SAI
(Joined SAI in 1985)
- ----------------------------------------------------------------------------------------------------------------------------------
Peter McMillan, III* 40 Executive Vice President and 1994 Senior Vice President, 1989-1994
Chief Investment Officer of SunAmerica Investments, Inc.
SunAmerica Investments, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
Edwin R. Reoliquio 40 Senior Vice President and Chief 1995 Vice President and Actuary, 1990-1995
Actuary of Anchor National SunAmerica Life Companies
===================================================================================================================================
* Also serves as a director.
** Unless otherwise noted, officers and positions are with SunAmerica Inc.
</TABLE>
26
<PAGE> 33
<TABLE>
<CAPTION>
OTHER POSITIONS AND
YEAR OTHER BUSINESS
PRESENT ASSUMED EXPERIENCE WITHIN
NAME AGE POSITION(S) POSITION(S) LAST FIVE YEARS** FROM-TO
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Scott H. Richland 35 Vice President and Treasurer of 1994 Vice President and Asst. 1994-1995
Anchor National Treasurer
Senior Vice President and 1997 Vice President and Treasurer of 1995-1997
Treasurer of SAI SAI
Vice President and Asst. 1994-1995
Treasurer of SAI
Asst. Treasurer of SAI 1993-1994
Director, SunAmerica 1990-1993
Investments, Inc.
(Joined SAI in 1990)
- ----------------------------------------------------------------------------------------------------------------------------------
Scott L. Robinson* 51 Senior Vice President of Anchor 1991 Vice President and Controller 1986-1991
National Senior Vice President (Joined SAI in 1978)
and Controller of SAI
- ----------------------------------------------------------------------------------------------------------------------------------
James W. Rowan* 35 Senior Vice President of Anchor 1996 Vice President 1993-1995
National and SAI Assistant to the Chairman 1992
Senior Vice President, Security 1986-1992
Pacific Corp.
===================================================================================================================================
</TABLE>
* Also serves as a director.
** Unless otherwise noted, officers and positions are with SunAmerica Inc.
27
<PAGE> 34
EXECUTIVE COMPENSATION
All of the executive officers of Anchor National also serve as employees of
SunAmerica Inc. or its affiliates and receive no compensation directly from
Anchor National. Some of the officers also serve as officers of other companies
affiliated with Anchor National. Allocations have been made as to each
individual's time devoted to his or her duties as an executive officer of Anchor
National.
The following table shows the cash compensation paid or earned, based on these
allocations, to the chief executive officer and top four executive officers of
Anchor National whose allocated compensation exceeds $100,000 and to all
executive officers of Anchor National as a group for services rendered in all
capacities to Anchor National during 1997:
<TABLE>
<CAPTION>
-------------------------------------------------------------------
CAPACITIES ALLOCATED
NAME OF INDIVIDUAL OR IN WHICH CASH
NUMBER IN GROUP SERVED COMPENSATION
-------------------------------------------------------------------
<S> <C> <C>
Eli Broad Chairman, Chief Executive
Officer and President $1,438,587
Joseph M. Tumbler Executive Vice President 835,680
Jay S. Wintrob Executive Vice President 837,376
James R. Belardi Senior Vice President 357,144
Jana Waring Greer Senior Vice President 630,854
All Executive Officers
as a Group (14) $5,769,122
-------------------------------------------------------------------
</TABLE>
Directors of Anchor National who are also employees of SunAmerica Inc. or its
affiliates receive no compensation in addition to their compensation as
employees of SunAmerica Inc. or its affiliates.
SECURITY OWNERSHIP OF OWNERS AND MANAGEMENT
No shares of Anchor National are owned by any executive officer or director.
Anchor National is an indirect wholly-owned subsidiary of SunAmerica Inc. Except
for Mr. Eli Broad, Chairman and Chief Executive Officer of SunAmerica Inc., the
percentage of shares of SunAmerica Inc. beneficially owned by any director does
not exceed one percent of the class outstanding. At December 15, 1997, Mr. Broad
was the beneficial owner of 10,705,829 shares of Common Stock (5.7% of the class
outstanding) and 13,740,441 shares of Class B Common Stock (84.4% of the class
outstanding). Of the Common Stock, 1,063,773 shares represent restricted shares
granted under SunAmerica Inc.'s employee stock plans as to which Mr. Broad has
no investment power; 1,063,773 shares are registered in the name of a
corporation of which Mr. Broad is a director and has sole voting and dispositive
powers, 97,704 shares are held by a foundation of which Mr. Broad is a director
and shares voting and dispositive powers; and 6,949,512 shares represent
employee stock options held by Mr. Broad which are or will become exercisable on
or before February 15, 1998 and as to which he has no voting or investment
power. Of the Class B Stock, 12,684,210 shares are held directly by Mr. Broad;
and 1,056,231 shares are registered in the name of a corporation as to which Mr.
Broad exercises sole voting and dispositive powers. At December 15, 1997, all
directors and officers as a group beneficially owned 14,338,041 shares of Common
Stock (7.64% of the class outstanding) and 13,740,441 shares of Class B Common
Stock (84.40% of the class outstanding). All share numbers reflect a 3-for-2
stock split paid in the form of a stock dividend on August 29, 1997 to holders
of record on August 20, 1997.
STATE REGULATION
Anchor National is subject to regulation and supervision by the insurance
regulatory agencies of the states in which it is authorized to transact
business. State insurance laws establish supervisory agencies with broad
administrative and supervisory powers. Principal among these powers are granting
and revoking licenses to transact business, regulating marketing and other trade
practices, operating guaranty associations, licensing agents, approving policy
forms, regulating certain premium rates, regulating insurance holding company
systems, establishing reserve requirements, prescribing the form and content of
required financial statements and reports, performing financial, market conduct
and other examinations, determining the reasonableness and adequacy of statutory
capital and surplus, defining acceptable accounting principles, regulating the
type, valuation and amount of investments permitted, and limiting the amount of
dividends that can be paid and the size of transactions that can be consummated
without first obtaining regulatory approval.
During the last decade, the insurance regulatory framework has been placed under
increased scrutiny by various states, the federal government and the NAIC.
Various states have considered or enacted legislation that changes, and in many
cases increases, the states' authority to regulate insurance companies.
Legislation has been introduced from time to time in Congress that could result
in the federal government assuming some role in the regulation of insurance
companies or allowing combinations between insurance companies, banks and other
entities. In recent years, the NAIC has approved and recommended to the states
for adoption and implementation several regulatory initiatives designed to
reduce the risk of insurance company insolvencies and market conduct violations.
These initiatives include investment reserve requirements, risk-based capital
standards, codification of insurance accounting principles, new investment
standards and restrictions on an insurance company's ability to pay dividends to
its stockholders. The NAIC is also currently developing model laws relating to
product design and illustrations for annuity products. Current proposals are
still being debated and Anchor National is monitoring developments in this area
and the effects any changes would have on Anchor National
28
<PAGE> 35
SunAmerica Asset Management is registered with the SEC as a registered
investment advisor under the Investment Advisors Act of 1940. The mutual funds
that it markets are subject to regulation under the Investment Company Act of
1940. SunAmerica Asset Management and the mutual funds are subject to regulation
and examination by the SEC. In addition, variable annuities and the related
separate accounts of Anchor National are subject to regulation by the Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933 and the
Investment Company Act of 1940.
Anchor National's broker-dealer subsidiary is subject to regulation and
supervision by the states in which it transacts business, as well as by the SEC
and the National Association of Securities Dealers ("NASD"). The NASD has broad
administrative and supervisory powers relative to all aspects of business and
may examine the subsidiary's business and accounts at any time.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements of Anchor National as of September 30,
1997 and 1996 and for each of the three years in the period ended September 30,
1997 included in this prospectus have been included in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
================================================================
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
================================================================
<TABLE>
<S> <C>
Separate Account................................. 3
General Account.................................. 4
Performance Data................................. 4
Annuity Payments................................. 8
Annuity Unit Values.............................. 9
Taxes............................................ 12
Distribution of Contracts........................ 16
Financial Statements............................. 16
</TABLE>
================================================================
FINANCIAL STATEMENTS
================================================================
The consolidated financial statements of Anchor National which are included in
this prospectus should be considered only as bearing on the ability Anchor
National to meet its obligations with respect to amounts allocated to the fixed
investment options and with respect to the death benefit and our assumption of
the mortality and expense risks and the risks that the withdrawal charge will
not be sufficient to cover the cost of distributing the contracts. They should
not be considered as bearing on the investment performance of the variable
Portfolios. The value of the variable Portfolios is affected primarily by the
performance of the underlying investments.
29
<PAGE> 36
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
30
<PAGE> 37
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
31
<PAGE> 38
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
32
<PAGE> 39
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
33
<PAGE> 40
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.
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
34
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ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
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.
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.
35
<PAGE> 42
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INVESTMENTS
The amortized cost and estimated fair value of bonds, notes and redeemable
preferred stocks available for sale by major category follow:
<TABLE>
<CAPTION>
AMORTIZED COST ESTIMATED FAIR 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>
AMORTIZED COST ESTIMATED FAIR 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.
36
<PAGE> 43
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INVESTMENTS -- (CONTINUED)
Gross unrealized gains and losses on bonds, notes and redeemable preferred
stocks available for sale 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.
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>
37
<PAGE> 44
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INVESTMENTS -- (CONTINUED)
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.
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
non-investment-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
38
<PAGE> 45
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
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.
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.
39
<PAGE> 46
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
SUBORDINATED NOTES PAYABLE TO PARENT: Fair value is estimated based on the
quoted market prices for similar issues.
The estimated fair values of the Company's financial instruments at September
30, 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.
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.
40
<PAGE> 47
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. SHAREHOLDER'S EQUITY
The Company is authorized to issue 4,000 shares of its $1,000 par value Common
Stock. At September 30, 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
============ ============ ============
<CAPTION>
YEARS ENDED SEPTEMBER 30,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
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 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.
41
<PAGE> 48
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES
The components of the provisions for federal income taxes on pretax income
consist of the following:
<TABLE>
<CAPTION>
NET REALIZED
INVESTMENT GAINS
(LOSSES) OPERATIONS TOTAL
---------------- ------------ ------------
<S> <C> <C> <C>
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>
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.
42
<PAGE> 49
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES -- (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax reporting purposes. The significant
components of the liability for Deferred Income Taxes are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
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>
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.
43
<PAGE> 50
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. RELATED PARTY MATTERS -- (CONTINUED)
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.
10. BUSINESS SEGMENTS
Summarized data for the Company's business segments follow:
<TABLE>
<CAPTION>
TOTAL
DEPRECIATION AND
TOTAL REVENUES AMORTIZATION EXPENSE PRETAX INCOME TOTAL ASSETS
-------------- -------------------- ------------- ---------------
<S> <C> <C> <C> <C>
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>
44
<PAGE> 51
================================================================================
APPENDIX A -- CONDENSED FINANCIAL INFORMATION
================================================================================
<TABLE>
<CAPTION>
INCEPTION TO FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
PORTFOLIOS 11/30/93 11/30/94 11/30/95 11/30/96 11/30/97
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
Capital Appreciation (Inception Date -- 2/9/93)
Beginning AUV................................ $ 10.00 $ 11.14 $ 10.64 $ 14.19 $ 17.63
End AUV...................................... $ 11.14 $ 10.64 $ 14.19 $ 17.63 $ 21.26
End #AUs..................................... 3,606,855 8,462,152 13,247,155 20,470,395 24,889,133
- --------------------------------------------------------------------------------------------------------------------------
Growth (Inception Date -- 2/9/93)
Beginning AUV................................ $ 10.00 $ 10.78 $ 10.41 $ 12.95 $ 16.32
End AUV...................................... $ 10.78 $ 10.41 $ 12.95 $ 16.32 $ 20.31
End #AUs..................................... 1,719,857 3,950,678 5,968,263 7,557,844 9,747,428
- --------------------------------------------------------------------------------------------------------------------------
Natural Resources (Inception Date -- 10/31/94)
Beginning AUV................................ -- $ 10.00 $ 9.27 $ 10.78 $ 12.13
End AUV...................................... -- $ 9.27 $ 10.78 $ 12.13 $ 11.14
End #AUs..................................... -- 51,412 848,159 2,171,050 2,937,198
- --------------------------------------------------------------------------------------------------------------------------
Government and Quality Bond (Inception Date -- 2/9/93)
Beginning AUV................................ $ 10.00 $ 10.32 $ 9.81 $ 11.51 $ 11.94
End AUV...................................... $ 10.32 $ 9.81 $ 11.51 $ 11.94 $ 12.65
End #AUs..................................... 6,479,985 7,008,717 8,504,677 9,176,239 10,047,042
- --------------------------------------------------------------------------------------------------------------------------
Emerging Markets (Inception Date -- 6/2/97)
Beginning AUV................................ -- -- -- -- $ 10.00
End AUV...................................... -- -- -- -- $ 7.97
End #AUs..................................... -- -- -- -- 1,751,922
- --------------------------------------------------------------------------------------------------------------------------
Aggressive Growth (Inception Date -- 6/3/96)
Beginning AUV................................ -- -- -- $ 10.00 $ 10.29
End AUV...................................... -- -- -- $ 10.29 $ 11.51
End #AUs..................................... -- -- -- 3,165,900 7,215,024
- --------------------------------------------------------------------------------------------------------------------------
International Growth and Income (Inception Date -- 6/2/97)
Beginning AUV................................ -- -- -- -- $ 10.00
End AUV...................................... -- -- -- -- $ 10.33
End #AUs..................................... -- -- -- -- 2,721,228
- --------------------------------------------------------------------------------------------------------------------------
International Diversified Equities (Inception
Date -- 10/31/94)
Beginning AUV................................ -- $ 10.00 $ 9.77 $ 10.07 $ 11.39
End AUV...................................... -- $ 9.77 $ 10.07 $ 11.39 $ 11.62
End #AUs..................................... -- 271,316 4,659,066 12,762,343 18,010,557
- --------------------------------------------------------------------------------------------------------------------------
Global Equities (Inception Date -- 2/9/93)
Beginning AUV................................ $ 10.00 $ 10.86 $ 11.43 $ 13.01 $ 15.15
End AUV...................................... $ 10.86 $ 11.43 $ 13.01 $ 15.15 $ 16.90
End #AUs..................................... 3,964,021 11,705,418 12,350,883 15,583,207 18,376,185
- --------------------------------------------------------------------------------------------------------------------------
Real Estate (Inception Date -- 6/2/97)
Beginning AUV................................ -- -- -- -- $ 10.00
End AUV...................................... -- -- -- -- $ 11.44
End #AUs..................................... -- -- -- -- 1,632,804
- --------------------------------------------------------------------------------------------------------------------------
Putnam Growth* (Inception Date -- 2/9/93)
Beginning AUV................................ $ 10.00 $ 9.92 $ 9.79 $ 12.60 $ 14.88
End AUV...................................... $ 9.92 $ 9.79 $ 12.60 $ 14.88 $ 18.47
End #AUs..................................... 4,322,769 7,610,104 8,932,998 10,354,025 11,336,732
- --------------------------------------------------------------------------------------------------------------------------
Growth/Phoenix Investment Counsel (Inception Date -- 2/9/93)
Beginning AUV................................ $ 10.00 $ 10.65 $ 9.79 $ 12.81 $ 14.94
End AUV...................................... $ 10.65 $ 9.79 $ 12.81 $ 14.94 $ 17.63
End #AUs..................................... 6,078,952 10,477,818 11,457,899 12,077,737 11,714,450
- --------------------------------------------------------------------------------------------------------------------------
* Formerly named Provident Growth.
</TABLE>
A-1
<PAGE> 52
<TABLE>
<CAPTION>
INCEPTION TO FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
PORTFOLIOS 11/30/93 11/30/94 11/30/95 11/30/96 11/30/97
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
Alliance Growth (Inception Date -- 2/9/93)
Beginning AUV................................ $ 10.00 $ 10.78 $ 10.53 $ 15.44 $ 19.46
End AUV...................................... $ 10.78 $ 10.53 $ 15.44 $ 19.46 $ 24.51
End #AUs..................................... 2,153,075 4,997,778 10,560,070 18,333,555 24,050,697
- --------------------------------------------------------------------------------------------------------------------------
Venture Value (Inception Date -- 10/31/94)
Beginning AUV................................ -- $ 10.00 $ 9.77 $ 13.29 $ 16.68
End AUV...................................... -- $ 9.77 $ 13.29 $ 16.68 $ 21.30
End #AUs..................................... -- 355,083 11,270,792 29,247,554 44,892,446
- --------------------------------------------------------------------------------------------------------------------------
Federated Value (Inception Date -- 6/3/96)
Beginning AUV................................ -- -- -- $ 10.00 $ 11.00
End AUV...................................... -- -- -- $ 11.00 $ 13.62
End #AUs..................................... -- -- -- 1,021,137 3,095,513
- --------------------------------------------------------------------------------------------------------------------------
Growth-Income (Inception Date -- 2/9/93)
Beginning AUV................................ $ 10.00 $ 10.47 $ 10.09 $ 13.32 $ 16.70
End AUV...................................... $ 10.47 $ 10.09 $ 13.32 $ 16.70 $ 21.41
End #AUs..................................... 4,302,869 8,329,322 12,560,865 18,546,142 24,795,824
- --------------------------------------------------------------------------------------------------------------------------
Utility (Inception Date -- 6/3/96)
Beginning AUV................................ -- -- -- $ 10.00 $ 10.67
End AUV...................................... -- -- -- $ 10.67 $ 12.74
End #AUs..................................... -- -- -- 543,461 1,541,346
- --------------------------------------------------------------------------------------------------------------------------
Asset Allocation (Inception Date -- 7/1/93)
Beginning AUV................................ $ 10.00 $ 10.30 $ 10.17 $ 12.64 $ 14.97
End AUV...................................... $ 10.30 $ 10.17 $ 12.64 $ 14.97 $ 17.98
End #AUs..................................... 3,386,288 10,372,954 15,418,350 19,940,733 25,272,776
- --------------------------------------------------------------------------------------------------------------------------
Balanced/Phoenix Investment Counsel (Inception
Date -- 10/31/94)
Beginning AUV................................ -- $ 10.00 $ 9.95 $ 12.33 $ 13.82
End AUV...................................... -- $ 9.95 $ 12.33 $ 13.82 $ 15.45
End #AUs..................................... -- 51,759 2,441,901 4,583,234 5,415,312
- --------------------------------------------------------------------------------------------------------------------------
SunAmerica Balanced (Inception Date -- 6/3/96)
Beginning AUV................................ -- -- -- $ 10.00 $ 11.04
End AUV...................................... -- -- -- $ 11.04 $ 13.22
End #AUs..................................... -- -- -- 817,039 2,447,948
- --------------------------------------------------------------------------------------------------------------------------
Worldwide High Income (Inception
Date -- 10/31/94)
Beginning AUV................................ -- $ 10.00 $ 9.95 $ 11.36 $ 14.20
End AUV...................................... -- $ 9.95 $ 11.36 $ 14.20 $ 15.98
End #AUs..................................... -- 53,315 1,040,828 3,196,739 6,368,247
- --------------------------------------------------------------------------------------------------------------------------
High-Yield Bond (Inception Date -- 2/9/93)
Beginning AUV................................ $ 10.00 $ 10.98 $ 10.35 $ 11.48 $ 12.99
End AUV...................................... $ 10.98 $ 10.35 $ 11.48 $ 12.99 $ 14.66
End #AUs..................................... 3,812,374 5,370,944 7,075,451 8,358,195 11,443,250
- --------------------------------------------------------------------------------------------------------------------------
Corporate Bond (Inception Date -- 7/1/93)
Beginning AUV................................ $ 10.00 $ 10.12 $ 9.63 $ 11.10 $ 11.65
End AUV...................................... $ 10.12 $ 9.63 $ 11.10 $ 11.65 $ 12.54
End #AUs..................................... 1,152,407 1,643,694 2,623,065 3,059,808 4,235,990
- --------------------------------------------------------------------------------------------------------------------------
Global Bond (Inception Date -- 7/1/93)
Beginning AUV................................ $ 10.00 $ 10.25 $ 9.78 $ 11.20 $ 12.25
End AUV...................................... $ 10.25 $ 9.78 $ 11.20 $ 12.25 $ 13.08
End #AUs..................................... 2,439,405 4,532,386 5,288,158 5,413,149 6,164,455
- --------------------------------------------------------------------------------------------------------------------------
Cash Management (Inception Date -- 2/9/93)
Beginning AUV................................ $ 10.00 $ 10.07 $ 10.27 $ 10.67 $ 11.04
End AUV...................................... $ 10.07 $ 10.27 $ 10.67 $ 11.04 $ 11.43
End #AUs..................................... 2,442,124 8,623,034 8,372,979 8,005,908 11,224,451
==========================================================================================================================
</TABLE>
AUV -- Accumulation Unit Value
AU -- Accumulation Units
A-2
<PAGE> 53
================================================================================
APPENDIX B -- MARKET VALUE ADJUSTMENT
================================================================================
The market value adjustment reflects the impact that changing interest rates
have on the value of money invested at a fixed interest rate. The longer the
period of time remaining in the term you initially agreed to leave your money in
the fixed investment option, the greater the impact of changing interest rates.
The impact of the market value adjustment can be either positive or negative,
and is computed by multiplying the amount withdrawn, transferred or annuitized
by the following factor:
N/12
[(1+I/(1+J+0.005)] - 1
The market value adjustment formula may differ in certain states
where:
I is the interest rate you are earning on the money invested in the
fixed investment option;
J is the interest rate then currently available for the period of time
equal to the number of years remaining in the term you initially agreed
to leave your money in the fixed investment option; and
N is the number of full months remaining in the term you initially
agreed to leave your money in the fixed investment option.
EXAMPLES OF THE MARKET VALUE ADJUSTMENT
The examples below assume the following:
(1) You made an initial Purchase Payment of $10,000 and allocated it to the
10-year fixed investment option at a rate of 7%;
(2) You make a partial withdrawal of $4,000 when 1 1/2 years (18 months)
remain in the 10-year term you initially agreed to leave your money in
the fixed investment option (N=18); and
(3) You have not made any other transfers, additional Purchase Payments, or
withdrawals.
No withdrawal charges are reflected because your Purchase Payment has been in
the contract for seven full years. If a withdrawal charge applies, it is
deducted before the market value adjustment. The market value adjustment is
assessed on the amount withdrawn less any withdrawal charge.
NEGATIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for new
Purchase Payments in the 1-year fixed investment option is 7.5% and the 3-year
fixed investment option is 8.5%. By linear interpolation, the interest rate for
the remaining 2 years (1 1/2 years rounded up to the next full year) in the
contract is calculated to be 8%.
<TABLE>
<C> <C> <S>
N/12
The market value adjustment factor is = [(1+I)/(1+J+0.005)] - 1
18/12
= [(1.07)/(1.08+0.005)] - 1
1.5
= (0.986175) - 1
= 0.979335 - 1
= - 0.020665
</TABLE>
The requested withdrawal amount is multiplied by the market value adjustment
factor to determine the market value adjustment:
$4,000 x (- 0.020665) = -$82.66
$82.66 represents the market value adjustment that will be deducted from the
money remaining in the 10-year fixed investment option.
POSITIVE ADJUSTMENT
Assume that on the date of withdrawal, the interest rate in effect for a new
Purchase Payments in the 1-year fixed investment option is 5.5% and the 3-year
fixed investment option is 6.5%. By linear interpolation, the interest rate for
the remaining 2 years (1 1/2 years rounded up to the next full year) in the
contract is calculated to be 6%.
<TABLE>
<C> <C> <S>
N/12
The market value adjustment factor is = [(1+I/(1+J+0.005)] - 1
18/12
= [(1.07)/(1.06+0.005)] - 1
1.5
= (1.004695) - 1
= 1.007051 - 1
= + 0.007051
</TABLE>
The requested withdrawal amount is multiplied by the market value adjustment
factor to determine the market value adjustment:
$4,000 x (+0.007051)=+$28.20
$28.20 represents the market value adjustment that would be added to your
withdrawal.
B-1
<PAGE> 54
================================================================================
APPENDIX C -- PREMIUM TAXES
================================================================================
Premium taxes vary according to the state and are subject to change without
notice. In many states, there is no tax at all. Listed below are the current
premium tax rates in those states that assess a premium tax. For current
information, you should consult your tax adviser.
<TABLE>
<CAPTION>
QUALIFIED NON-QUALIFIED
STATE CONTRACT CONTRACT
- -----------------------------------------------------------------
- -----------------------------------------------------------------
<S> <C> <C>
California .50% 2.35%
- -----------------------------------------------------------------
District of Columbia 2.25% 2.25%
- -----------------------------------------------------------------
Kansas 0% 2%
- -----------------------------------------------------------------
Kentucky 2% 2%
- -----------------------------------------------------------------
Maine 0% 2%
- -----------------------------------------------------------------
Nevada 0% 3.5%
- -----------------------------------------------------------------
South Dakota 0% 1.25%
- -----------------------------------------------------------------
West Virginia 1% 1%
- -----------------------------------------------------------------
Wyoming 0% 1%
=================================================================
</TABLE>
C-1
<PAGE> 55
- --------------------------------------------------------------------------------
Please forward a copy (without charge) of the Polaris Variable Annuity
Statement of Additional Information to:
(Please print or type and fill in all information.)
----------------------------------------------------------------
Name
----------------------------------------------------------------
Address
----------------------------------------------------------------
City/State/Zip
Date: Signed:
---------------- ----------------------
Return to: Anchor National Life Insurance Company, Annuity Service Center,
P.O. Box 54299, Los Angeles, California 90054-0299.
- --------------------------------------------------------------------------------
<PAGE> 56
STATEMENT OF ADDITIONAL INFORMATION
Fixed and Variable Group Deferred Contracts
issued by
VARIABLE SEPARATE ACCOUNT
DEPOSITOR: ANCHOR NATIONAL LIFE INSURANCE COMPANY
This Statement of Additional Information is not a prospectus; it should be read
with the prospectus relating to the annuity contracts described above, a copy of
which may be obtained without charge by written request addressed to:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS
February 2, 1998
<PAGE> 57
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
Separate Account................................................................ 3
General Account................................................................. 4
Performance Data................................................................ 4
Annuity Payments................................................................ 8
Annuity Unit Values............................................................. 9
Taxes........................................................................... 12
Distribution of Contracts....................................................... 16
Financial Statements............................................................ 16
</TABLE>
-2-
<PAGE> 58
SEPARATE ACCOUNT
Variable Separate Account was originally established by the Anchor
National Life Insurance Company (the "Company") on June 25, 1981, pursuant to
the provisions of California law, as a segregated asset account of the Company.
The separate account meets the definition of a "separate account" under the
federal securities laws and is registered with the Securities and Exchange
Commission (the "SEC") as a unit investment trust under the Investment Company
Act of 1940. This registration does not involve supervision of the management of
the separate account or the Company by the SEC.
The assets of the separate account are the property of the Company.
However, the assets of the separate account, equal to its reserves and other
contract liabilities, are not chargeable with liabilities arising out of any
other business the Company may conduct. Income, gains, and losses, whether or
not realized, from assets allocated to the separate account are credited to or
charged against the separate account without regard to other income, gains, or
losses of the Company.
The separate account is divided into Portfolios, with the assets of each
Portfolio invested in the shares of one of the underlying funds. The Company
does not guarantee the investment performance of the separate account, its
Portfolios or the underlying funds. Values allocated to the separate account and
the amount of variable annuity payments will vary with the values of shares of
the underlying funds, and are also reduced by contract charges.
The basic objective of a variable annuity contract is to provide
variable annuity payments which will be to some degree responsive to changes in
the economic environment, including inflationary forces and changes in rates of
return available from various types of investments. The contract is designed to
seek to accomplish this objective by providing that variable annuity payments
will reflect the investment performance of the separate account with respect to
amounts allocated to it both before and after the Annuity Date. Since the
separate account is always fully invested in shares of the underlying funds, its
investment performance reflects the investment performance of those entities.
The values of such shares held by the separate account fluctuate and are subject
to the risks of changing economic conditions as well as the risk inherent in the
ability of the underlying funds' managements to make necessary changes in their
Portfolios to anticipate changes in economic conditions. Therefore, the owner
bears the entire investment risk that the basic objectives of the contract may
not be realized, and that the adverse effects of inflation may not be lessened.
There can be no assurance that the aggregate amount of variable annuity payments
will equal or exceed the Purchase Payments made with respect to a particular
account for the reasons described above, or because of the premature death of an
Annuitant.
Another important feature of the contract related to its basic objective
is the Company's promise that the dollar amount of variable annuity payments
made during the lifetime of the Annuitant will not be adversely affected by the
actual mortality experience of the Company or by the actual expenses incurred by
the Company in excess of expense deductions provided for in the contract
(although the Company does not guarantee the amounts of the variable annuity
payments).
-3-
<PAGE> 59
GENERAL ACCOUNT
The general account is made up of all of the general assets of the
Company other than those allocated to the separate account or any other
segregated asset account of the Company. A Purchase Payment may be allocated to
the one-year fixed investment option available in connection with the general
account, as elected by the owner at the time of purchasing a contract. Assets
supporting amounts allocated to fixed investment option become part of the
Company's general account assets and are available to fund the claims of all
classes of customers of the Company, as well as of its creditors. Accordingly,
all of the Company's assets held in the general account will be available to
fund the Company's obligations under the contracts as well as such other claims.
The Company will invest the assets of the general account in the manner
chosen by the Company and allowed by applicable state laws regarding the nature
and quality of investments that may be made by life insurance companies and the
percentage of their assets that may be committed to any particular type of
investment. In general, these laws permit investments, within specified limits
and subject to certain qualifications, in federal, state and municipal
obligations, corporate bonds, preferred and common stocks, real estate
mortgages, real estate and certain other investments.
PERFORMANCE DATA
From time to time the separate account may advertise the Cash Management
Portfolio's "yield" and "effective yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of the Cash Management Portfolio refers to the net income generated for
a contract funded by an investment in the Portfolio (which invests in shares of
the Cash Management Portfolio of SunAmerica Trust) over a seven-day period
(which period will be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the
Portfolio is assumed to be reinvested at the end of each seven day period. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. Neither the yield nor the
effective yield takes into consideration the effect of any capital changes that
might have occurred during the seven day period, nor do they reflect the impact
of premium taxes or any withdrawal charges. The impact of other recurring
charges on both yield figures is, however, reflected in them to the same extent
it would affect the yield (or effective yield) for a contract of average size.
In addition, the separate account may advertise "total return" data for
its other Portfolios. Like the yield figures described above, total return
figures are based on historical data and are not intended to indicate future
performance. The "total return" is a computed rate
-4-
<PAGE> 60
of return that, when compounded annually over a stated period of time and
applied to a hypothetical initial investment in a Portfolio made at the
beginning of the period, will produce the same contract value at the end of the
period that the hypothetical investment would have produced over the same period
(assuming a complete redemption of the contract at the end of the period).
Recurring contract charges are reflected in the total return figures in the same
manner as they are reflected in the yield data for contracts funded through the
Cash Management Portfolio. The effect of applicable withdrawal charges due to
the assumed redemption will be reflected in the return figures, but may be
omitted in additional return figures given for comparison.
For periods starting prior to the date the contracts were first offered
to the public, the total return data for the Capital Appreciation, Growth,
Natural Resources and the Government and Quality Bond Portfolios of the separate
account will be derived from the performance of the corresponding Portfolios of
Anchor Trust, modified to reflect the charges and expenses as if the separate
account Portfolio had been in existence since the inception date of each
respective Anchor Trust Portfolio. Thus, such performance figures should not be
construed to be actual historic performance of the relevant separate account
Portfolio. Rather, they are intended to indicate the historic performance of the
four corresponding Portfolios of Anchor Trust, adjusted to provide direct
comparability to the performance of the Portfolios after the date the contracts
were first offered to the public (which will reflect the effect of fees and
charges imposed under the contracts). The Capital Appreciation, Growth, Natural
Resources and Government and Quality Bond Portfolios of Anchor Trust have served
since their inception as underlying investment media for separate accounts of
other insurance companies in connection with variable contracts not having the
same fee and charge schedules as those imposed under the contracts.
Performance data for the various Portfolios are computed in the manner
described below.
CASH MANAGEMENT PORTFOLIO
The annualized current yield and the effective yield for the Cash
Management Portfolio for the 7 day period ending November 30, 1997 were 3.74%
and 3.81%, 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
-5-
<PAGE> 61
EV = value of one Accumulation Unit at the end of the 7 day period
CAC= an allocated portion of the $35 annual Contract
Administration Charge, prorated for 7 days
The change in the value of an Accumulation Unit during the 7 day period
reflects the income received minus any expenses accrued, during such 7 day
period. The Contract Administration Charge (CAC) is first allocated among the
Portfolios and the general account so that each Portfolio's allocated portion of
the charge is proportional to the percentage of the number of accounts that have
money allocated to that Portfolio. The charge is further reduced, for purposes
of the yield computation, by multiplying it by the ratio that the value of the
hypothetical contract bears to the value of an account of average size for
contracts funded by the Cash Management Portfolio. Finally, as is done with the
other charges discussed above, the result is multiplied by the fraction 7/365 to
arrive at the portion attributable to the 7 day period.
The current yield is then obtained by annualizing the Base Period
Return:
Current Yield = (Base Period Return) x (365/7)
The Cash Management Portfolio also quotes an "effective yield" that
differs from the current yield given above in that it takes into account the
effect of dividend reinvestment in the underlying fund. The effective yield,
like the current yield, is derived from the Base Period Return over a 7 day
period. However, the effective yield accounts for dividend reinvestment by
compounding the current yield according to the formula:
365/7
Effective Yield = [(Base Period Return + 1) - 1].
Net investment income for yield quotation purposes will not include
either realized capital gains and losses or unrealized appreciation and
depreciation, whether reinvested or not. The yield quotations also do not
reflect any impact of premium taxes, transfer fees, or withdrawal charges.
The yield quoted should not be considered a representation of the yield
of the Cash Management Portfolio in the future since the yield is not fixed.
Actual yields will depend not only on the type, quality and maturities of the
investments held by the underlying fund and changes in interest rates on such
investments, but also on factors such as an owner's account size (since the
impact of fixed dollar charges will be greater for small accounts than for
larger accounts).
Yield information may be useful in reviewing the performance of the Cash
Management Portfolio and for providing a basis for comparison with other
investment alternatives. However, the Cash Management Portfolio's yield
fluctuates, unlike bank deposits or other investments that typically pay a fixed
yield for a stated period of time.
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<PAGE> 62
OTHER PORTFOLIOS
The Portfolios of the separate account other than the Cash Management
Portfolio compute their performance data as "total return".
The total returns of the various Portfolios for 1 year and since each
Portfolio's inception date are shown below, both with and without an assumed
complete redemption at the end of the period.
<TABLE>
<CAPTION>
TOTAL ANNUAL RETURN (IN PERCENT) FOR
PERIOD ENDING ON NOVEMBER 30, 1997
(RETURN WITH/WITHOUT REDEMPTION)
INCEPTION SINCE
PORTFOLIO DATE 1 YEAR INCEPTION
--------- ---- ------ ---------
<S> <C> <C> <C>
Anchor Series Trust
Capital Appreciation 2/12/93 13.47/20.47 16.60/16.95
Growth 2/19/93 17.37/24.37 15.54/15.90
Natural Resources 10/31/94 -15.32/-8.32 2.17/3.40
Gov't & Quality Bond 2/22/93 -1.05/5.95 4.46/4.99
SunAmerica Series Trust
Aggressive Growth 6/3/96 4.77/11.77 5.91/9.78
International Diversified Equities 10/31/94 -5.11/1.89 3.67/4.86
Global Equities 2/9/93 4.47/11.47 11.04/11.46
Putnam Growth* 2/9/93 17.03/24.03 13.14/13.53
Growth/Phoenix Investment Counsel 2/9/93 10.93/17.93 12.04/12.44
Alliance Growth 2/9/93 18.86/25.86 20.12/20.43
Venture Value 10/31/94 20.61/27.61 26.94/27.72
Federated Value 6/3/96 16.70/23.70 19.25/22.91
Growth-Income 2/9/93 21.11/28.11 16.75/17.09
Utility 6/3/96 12.35/19.35 13.83/17.57
Asset Allocation 7/1/93 13.08/20.08 13.72/14.15
Balanced/Phoenix Investment Counsel 10/31/94 4.70/11.70 14.05/15.03
SunAmerica Balanced 6/3/96 12.62/19.62 16.79/20.49
Worldwide High Income 10/31/94 5.38/12.38 15.34/16.30
High-Yield Bond 2/9/93 5.73/12.73 7.75/8.22
Corporate Bond 7/1/93 0.51/7.51 4.58/5.16
Global Bond 7/1/93 -0.27/6.73 5.62/6.18
Emerging Markets 6/2/97 ----- -27.31/-20.31
International Growth and Income 6/2/97 ----- -3.70/3.30
Real Estate 6/2/97 ----- 7.39/14.39
</TABLE>
- -----------------
* Formerly named Provident Growth.
Total return figures are based on historical data and are not intended to
indicate future performance.
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<PAGE> 63
Total return for a Portfolio represents a single computed annual rate of
return that, when compounded annually over the time period shown and applied to
a hypothetical initial investment in a contract funded by that Portfolio made at
the beginning of the period, will produce the same contract value at the end of
the period that the hypothetical investment would have produced over the same
period. The total rate of return (T) is computed so that it satisfies the
formula:
n
P(1+T) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5, or 10 year period as of
the end of the period (or fractional portion thereof).
The total return figures reflect the effect of both nonrecurring and
recurring charges, as discussed herein. Recurring charges are taken into account
in a manner similar to that used for the yield computations for the Cash
Management Portfolio, described above. The applicable withdrawal charge (if any)
is deducted as of the end of the period, to reflect the effect of the assumed
complete redemption. Because the impact of Contract Administration Charges on a
particular account will generally differ from that assumed in the computation,
due to differences between most actual allocations and the assumed one, as well
as differences due to varying account sizes, the total return experienced by an
actual Portfolio over the same time periods would generally have been different
from those produced by the computation. As with the Cash Management Portfolio
yield figures, total return figures are derived from historical data and are not
intended to be a projection of future performance.
ANNUITY PAYMENTS
INITIAL MONTHLY ANNUITY PAYMENTS
The initial annuity payment is determined by applying separately that
portion of the contract value allocated to the fixed investment option and the
variable Portfolio(s), less any premium tax, and then applying it to the annuity
table specified in the contract for fixed and variable annuity payments. Those
tables are based on a set amount per $1,000 of proceeds applied. The appropriate
rate must be determined by the sex (except where, as in the case of certain
Qualified contracts and other employer-sponsored retirement plans, such
classification is not permitted) and age of the Annuitant and designated second
person, if any.
The dollars applied are then divided by 1,000 and the result multiplied
by the appropriate annuity factor appearing in the table to compute the amount
of the first monthly annuity payment. In the case of a variable annuity, that
amount is divided by the value of an Annuity
-8-
<PAGE> 64
Unit as of the Annuity Date to establish the number of Annuity Units
representing each variable annuity payment. The number of Annuity Units
determined for the first variable annuity payment remains constant for the
second and subsequent monthly variable annuity payments, assuming that no
reallocation of contract values is made.
SUBSEQUENT MONTHLY PAYMENTS
For fixed annuity payments, the amount of the second and each subsequent
monthly annuity payment is the same as that determined above for the first
monthly payment.
For variable annuity payments, the amount of the second and each
subsequent monthly annuity payment is determined by multiplying the number of
Annuity Units, as determined in connection with the determination of the initial
monthly payment, above, by the Annuity Unit value as of the day preceding the
date on which each annuity payment is due.
ANNUITY UNIT VALUES
The value of an Annuity Unit is determined independently for each
Portfolio.
The annuity tables contained in the contract are based on a 3.5% per
annum assumed investment rate. If the actual net investment rate experienced by
a Portfolio exceed 3.5%, variable annuity payments derived from allocations to
that Portfolio will increase over time. Conversely, if the actual rate is less
than 3.5%, variable annuity payments will decrease over time. If the net
investment rate equals 3.5%, the variable annuity payments will remain constant.
If a higher assumed investment rate had been used, the initial monthly payment
would be higher, but the actual net investment rate would also have to be higher
in order for annuity payments to increase (or not to decrease).
The payee receives the value of a fixed number of Annuity Units each
month. The value of a fixed number of Annuity Units will reflect the investment
performance of the Portfolios elected, and the amount of each annuity payment
will vary accordingly.
For each Portfolio, the value of an Annuity Unit is determined by
multiplying the Annuity Unit value for the preceding month by the Net Investment
Factor for the month for which the Annuity Unit value is being calculated. The
result is then multiplied by a second factor which offsets the effect of the
assumed net investment rate of 3.5% per annum which is assumed in the annuity
tables contained in the contract.
NET INVESTMENT FACTOR
The Net Investment Factor ("NIF") is an index applied to measure the net
investment performance of a Portfolio from one day to the next. The NIF may be
greater or less than or equal to one; therefore, the value of an Annuity Unit
may increase, decrease or remain the same.
The NIF for any Portfolio for a certain month is determined by dividing
(a) by (b) where:
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<PAGE> 65
(a) is the Accumulation Unit value of the Portfolio determined as
of the end of that month, and
(b) is the Accumulation Unit value of the Portfolio determined as of
the end of the preceding month.
The NIF for a Portfolio for a given month is a measure of the net
investment performance of the Portfolio from the end of the prior month to the
end of the given month. A NIF of 1.000 results from no change in the value of
the Portfolio; a NIF greater than 1.000 results from an increase in the value of
the Portfolio; and a NIF less than 1.000 results from a decrease in the value of
the Portfolio. The NIF is increased (or decreased) in accordance with the
increases (or decreases, respectively) in the value of a share of the underlying
fund in which the Portfolio invests; it is also reduced by separate account
asset charges.
Illustrative Example
Assume that one share of a given Portfolio had an Accumulation Unit
value of $11.46 as of the close of the New York Stock Exchange ("NYSE") on the
last business day in September; that its Accumulation Unit value had been $11.44
at the close of the NYSE on the last business day at the end of the previous
month. The NIF for the month of September is:
NIF = ($11.46/$11.44)
= 1.00174825
Illustrative Example
The change in Annuity Unit value for a Portfolio from one month to the
next is determined in part by multiplying the Annuity Unit value at the prior
month end by the NIF for that Portfolio for the new month. In addition, however,
the result of that computation must also be multiplied by an additional factor
that takes into account, and neutralizes, the assumed investment rate of 3.5
percent per annum upon which the annuity payment tables are based. For example,
if the net investment rate for a Portfolio (reflected in the NIF) were equal to
the assumed investment rate, the variable annuity payments should remain
constant (i.e., the Annuity Unit value should not change). The monthly factor
that neutralizes the assumed investment rate of 3.5 percent per annum is:
(1/12)
1/[(1.035) ] = 0.99713732
In the example given above, if the Annuity Unit value for the Portfolio
was $10.103523 on the last business day in August, the Annuity Unit value on the
last business day in September would have been:
$10.103523 x 1.00174825 x 0.99713732 = $10.092213
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<PAGE> 66
VARIABLE ANNUITY PAYMENTS
Illustrative Example
Assume that a male owner, P, owns a contract in connection with which P
has allocated all of his contract value to a single Portfolio. P is also the
sole Annuitant and, at age 60, has elected to annuitize his contract under
Option 4, a Life Annuity With 120 Monthly Payments Guaranteed. As of the last
valuation preceding the Annuity Date, P's Account was credited with 7543.2456
Accumulation Units each having a value of $15.432655, (i.e., P's account value
is equal to 7543.2456 x $15.432655 = $116,412.31). Assume also that the Annuity
Unit value for the Portfolio on that same date is $13.256932, and that the
Annuity Unit value on the day immediately prior to the second annuity payment
date is $13.327695.
P's first variable annuity payment is determined from the annuity rate
tables in P's contract, using the information assumed above. From the tables,
which supply monthly annuity payments for each $1,000 of applied contract value,
P's first variable annuity payment is determined by multiplying the monthly
installment of $5.42 (Option 4 tables, male Annuitant age 60 at the Annuity
Date) by the result of dividing P's account value by $1,000:
First Payment = $5.42 x ($116,412.31/$1,000) = $630.95
The number of P's Annuity Units (which will be fixed; i.e., it will not
change unless he transfers his Account to another Account) is also determined at
this time and is equal to the amount of the first variable annuity payment
divided by the value of an Annuity Unit on the day immediately prior to
annuitization:
Annuity Units = $630.95/$13.256932 = 47.593968
P's second variable annuity payment is determined by multiplying the
number of Annuity Units by the Annuity Unit value as of the day immediately
prior to the second payment due date:
Second Payment = 47.593968 x $13.327695 = $634.32
The third and subsequent variable annuity payments are computed in a
manner similar to the second variable annuity payment.
Note that the amount of the first variable annuity payment depends on
the contract value in the relevant Portfolio on the Annuity Date and thus
reflects the investment performance of the Portfolio net of fees and charges
during the Accumulation Phase. The amount of that payment determines the number
of Annuity Units, which will remain constant during the Income Phase (assuming
no transfers from the Portfolio). The net investment performance of the
Portfolio during the Income Phase is reflected in continuing changes during this
phase in the Annuity Unit value, which determines the amounts of the second and
subsequent variable annuity payments.
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<PAGE> 67
TAXES
GENERAL
Section 72 of the Internal Revenue Code of 1986, as amended (the "Code")
governs taxation of annuities in general. An owner is not taxed on increases in
the value of a contract until distribution occurs, either in the form of a
non-annuity distribution or as annuity payments under the annuity option
elected. For a lump sum payment received as a total surrender (total
redemption), the recipient is taxed on the portion of the payment that exceeds
the cost basis of the contract. For a payment received as a withdrawal (partial
redemption), federal tax liability is determined on a last-in, first-out basis,
meaning taxable income is withdrawn before the cost basis of the contract is
withdrawn. For contracts issued in connection with Non-qualified plans, the cost
basis is generally the Purchase Payments, while for contracts issued in
connection with Qualified plans there may be no cost basis. The taxable portion
of the lump sum payment is taxed at ordinary income tax rates. Tax penalties may
also apply.
For annuity payments, the taxable portion is determined by a formula
which establishes the ratio that the cost basis of the contract bears to the
total value of annuity payments for the term of the annuity contract. The
taxable portion is taxed at ordinary income tax rates. Owners, Annuitants and
Beneficiaries under the contracts should seek competent financial advice about
the tax consequences of distributions under the retirement plan under which the
contracts are purchased.
The Company is taxed as a life insurance company under the Code. For
federal income tax purposes, the separate account is not a separate entity from
the Company and its operations form a part of the Company.
WITHHOLDING TAX ON DISTRIBUTIONS
The Code generally requires the Company (or, in some cases, a plan
administrator) to withhold tax on the taxable portion of any distribution or
withdrawal from a contract. For "eligible rollover distributions" from contracts
issued under certain types of Qualified plans, 20% of the distribution must be
withheld, unless the payee elects to have the distribution "rolled over" to
another eligible plan in a direct "trustee to trustee" transfer. This
requirement is mandatory and cannot be waived by the owner. Withholding on other
types of distributions can be waived.
An "eligible rollover distribution" is the estimated taxable portion of
any amount 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.
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<PAGE> 68
Withdrawals or distributions from a contract other than eligible
rollover distributions are also subject to withholding on the estimated taxable
portion of the distribution, but the owner may elect in such cases to waive the
withholding requirement. If not waived, withholding is imposed (1) for periodic
payments, at the rate that would be imposed if the payments were wages, or (2)
for other distributions, at the rate of 10%. If no withholding exemption
certificate is in effect for the payee, the rate under (1) above is computed by
treating the payee as a married individual claiming 3 withholding exemptions.
DIVERSIFICATION - SEPARATE ACCOUNT INVESTMENTS
Section 817(h) of the Code imposes certain diversification standards on
the underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not adequately
diversified, in accordance with regulations prescribed by the United States
Treasury Department ("Treasury Department"). Disqualification of the contract as
an annuity contract would result in imposition of federal income tax to the
owner with respect to earnings allocable to the contract prior to the receipt of
payments under the contract. The Code contains a safe harbor provision which
provides that annuity contracts such as the contracts meet the diversification
requirements if, as of the close of each calendar quarter, the underlying assets
meet the diversification standards for a regulated investment company, and no
more than 55% of the total assets consist of cash, cash items, U.S. government
securities and securities of other regulated investment companies.
The Treasury Department has issued regulations which establish
diversification requirements for the investment portfolios underlying variable
contracts such as the contracts. The regulations amplify the diversification
requirements for variable contracts set forth in the Code and provide an
alternative to the safe harbor provision described above. Under the regulations
an investment portfolio will be deemed adequately diversified if (1) no more
than 55% of the value of the total assets of the portfolio is represented by any
one investment; (2) no more than 70% of the value of the total assets of the
portfolio is represented by any two investments; (3) no more than 80% of the
value of the total assets of the portfolio is represented by any three
investments; and (4) no more than 90% of the value of the total assets of the
portfolio is represented by any four investments. For purposes of determining
whether or not the diversification standards imposed on the underlying assets of
variable contracts by Section 817(h) of the Code have been met, "each United
States government agency or instrumentality shall be treated as a separate
issuer."
MULTIPLE CONTRACTS
Multiple annuity contracts which are issued within a calendar year to
the same contract owner by one company or its affiliates are treated as one
annuity contract for purposes of determining the tax consequences of any
distribution. Such treatment may result in adverse tax consequences including
more rapid taxation of the distributed amounts from such multiple contracts. The
Company believes that Congress intended to affect the purchase of multiple
deferred annuity contracts which may have been purchased to avoid withdrawal
income tax
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<PAGE> 69
treatment. Owners should consult a tax adviser prior to purchasing more than one
annuity contract in any calendar year.
TAX TREATMENT OF ASSIGNMENTS
An assignment of a contract may have tax consequences, and may also be
prohibited by ERISA in some circumstances. Owners should therefore consult
competent legal advisers should they wish to assign their contracts.
QUALIFIED PLANS
The contracts offered by this prospectus are designed to be suitable for
use under various types of Qualified plans. Taxation of owners in each Qualified
plan varies with the type of plan and terms and conditions of each specific
plan. Owners, Annuitants and Beneficiaries are cautioned that benefits under a
Qualified plan may be subject to the terms and conditions of the plan,
regardless of the terms and conditions of the contracts issued pursuant to the
plan.
Following are general descriptions of the types of Qualified plans with
which the contracts may be used. Such descriptions are not exhaustive and are
for general information purposes only. The tax rules regarding Qualified plans
are very complex and will have differing applications depending on individual
facts and circumstances. Each purchaser should obtain competent tax advice prior
to purchasing a contract issued under a Qualified plan.
Contracts issued pursuant to Qualified plans include special provisions
restricting contract provisions that may otherwise be available and described in
this prospectus. Generally, contracts issued pursuant to Qualified plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified contracts.
(A) H.R. 10 Plans
Section 401 of the Code permits self-employed individuals to
establish Qualified plans for themselves and their employees, commonly referred
to as "H.R. 10" or "Keogh" Plans. Contributions made to the plan for the benefit
of the employees will not be included in the gross income of the employees until
distributed from the plan. The tax consequences to owners may vary depending
upon the particular plan design. However, the Code places limitations and
restrictions on all plans and such items as: amounts of allowable contributions;
form, manner and timing of distributions; vesting and nonforfeitability of
interests; nondiscrimination in eligibility and participation; and the tax
treatment of distributions, withdrawals and surrenders.
(B) Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered
annuities" by public schools and certain charitable, educational and scientific
organizations described in
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<PAGE> 70
Section 501 (c)(3) of the Code. These qualifying employers may make
contributions to the contracts for the benefit of their employees. Such
contributions are not includible in the gross income of the employee until the
employee receives distributions from the contract. The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such items as
transferability, distributions, nondiscrimination and withdrawals.
(C) Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to
contribute to an individual retirement program known as an "Individual
Retirement Annuity" ("IRA"). Under applicable limitations, certain amounts may
be contributed to an IRA which will be deductible from the individual's gross
income. These IRAs are subject to limitations on eligibility, contributions,
transferability and distributions. Sales of contracts for use with IRAs are
subject to special requirements imposed by the Code, including the requirement
that certain informational disclosure be given to persons desiring to establish
an IRA.
(D) Corporate Pension and Profit-Sharing Plans
Section 401(a) and 401(k) of the Code permit corporate employers
to establish various types of retirement plans for employees. These retirement
plans may permit the purchase of the contracts to provide benefits under the
plan. Contributions to the plan for the benefit of employees will not be
includible in the gross income of the employee until distributed from the plan.
The tax consequences to owners may vary depending upon the particular plan
design. However, the Code places limitations on all plans on such items as
amount of allowable contributions; form, manner and timing of distributions;
vesting and nonforfeitability of interest; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders.
(E) Deferred Compensation Plans - Section 457
Under Section 457 of the Code, governmental and certain other
tax-exempt employers may establish, for the benefit of their employees, deferred
compensation plans which may invest in annuity contracts. The Code, as in the
case of Qualified plans, establishes limitations and restrictions on
eligibility, contributions and distributions. Under these plans, contributions
made for the benefit of the employees will not be includible in the employees'
gross income until distributed from the plan. However, under a 457 plan all the
plan assets shall remain solely the property of the employer, subject only to
the claims of the employer's general creditors until such time as made available
to an owner or a Beneficiary.
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<PAGE> 71
DISTRIBUTION OF CONTRACTS
Effective as of August 6, 1993, SunAmerica Capital Services, Inc.,
located at 733 Third Avenue, 4th Floor, New York, New York 10017, serves as the
distributor of the contracts pursuant to a distribution agreement. Prior to this
date SunAmerica Securities, Inc. and Royal Alliance Associates, Inc., both
affiliates of SunAmerica Capital Services, Inc. and located at 2201 East
Camelback Road, Phoenix, Arizona 85016 and 733 Third Avenue, 4th Floor, New
York, New York 10017, respectively, served as co-distributors of the contracts.
SunAmerica Capital Services, Inc., SunAmerica Securities, Inc. and Royal
Alliance Associates, Inc. are each an indirect wholly-owned subsidiary of
SunAmerica Inc. and each is registered as a broker-dealer under the Securities
Exchange Act of 1934, as amended, and is a member of the National Association of
Securities Dealers, Inc.
For the year ended November 30, 1997, the aggregate amount of
underwriting commissions paid by the Company to SunAmerica Capital Services,
Inc. was $37,387,377, of which $3,799,597 was retained by them. For the year
ended November 30, 1996, the aggregate amount of underwriting commissions paid
by the Company to SunAmerica Capital Services, Inc. was $36,909,230, of which
$3,757,245 was retained by them. For the year ended November 30, 1995, the
aggregate amount of underwriting commissions paid by the Company to SunAmerica
Capital Services, Inc. was $19,493,608, of which $2,054,297 was retained by it.
Contracts are offered on a continuous basis.
FINANCIAL STATEMENTS
The audited 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 the prospectus. The consolidated financial
statements of the Company should be considered only as bearing on the ability of
the Company to meet its obligation under the contracts for amounts allocated to
the 1, 3, 5, 7 or 10 year fixed investment options. The financial statements of
Variable Separate Account (Portion Relating to the POLARIS Variable Annuity) as
of November 30, 1997 and for each of the two years in the period ended November
30, 1997, are included in this Statement of Additional Information.
Price Waterhouse LLP, 400 South Hope Street, Los Angeles, California
90071, serves as the independent accountants for the separate account and the
Company. The financial statements referred to above have been so included in
reliance on the reports of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
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<PAGE> 72
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
FINANCIAL STATEMENTS
NOVEMBER 30, 1997
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<PAGE> 73
REPORT OF INDEPENDENT ACCOUNTANTS
January 27, 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 POLARIS Variable Annuity)
In our opinion, the accompanying statement of net assets, including the schedule
of portfolio investments, and the related statements of operations and of
changes in net assets present fairly, in all material respects, the financial
position of each of the Variable Accounts constituting Variable Separate Account
(Portion Relating to the POLARIS Variable Annuity), a separate account of Anchor
National Life Insurance Company (the "Separate Account") at November 30, 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.
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<PAGE> 74
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
November 30, 1997
<TABLE>
<CAPTION>
Government International
Capital Natural and Diversified Global Aggressive
Appreciation Growth Resources Quality Bond Equities Equities Growth
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments in Anchor
Series Trust,
at market value $529,028,394 $197,994,732 $32,713,772 $127,144,553 $ 0 $ 0 $ 0
Investments in SunAmerica
Series Trust,
at market value 0 0 0 0 209,218,279 310,582,513 83,032,896
Liabilities 0 0 0 0 0 0 0
----------------------------------------------------------------------------------------------
Net Assets $529,028,394 $197,994,732 $32,713,772 $127,144,553 $209,218,279 $310,582,513 $83,032,896
==============================================================================================
Accumulation units outstanding 24,889,133 9,747,428 2,937,198 10,047,042 18,010,557 18,376,185 7,215,024
==============================================================================================
Unit value of accumulation units $21.26 $20.31 $11.14 $12.65 $11.62 $16.90 $11.51
==============================================================================================
</TABLE>
See accompanying notes to financial statements.
-19-
<PAGE> 75
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
November 30, 1997
(Continued)
<TABLE>
<CAPTION>
Growth/Phoenix
Venture Federated Putnam Investment Alliance Growth- Asset
Value Value Growth Counsel Growth Income Allocation
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments in Anchor
Series Trust,
at market value $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Investments in SunAmerica
Series Trust,
at market value 956,188,606 42,154,698 209,401,610 206,547,066 589,392,040 530,761,442 454,509,449
Liabilities 0 0 0 0 0 0 0
------------------------------------------------------------------------------------------------
Net Assets $956,188,606 $42,154,698 $209,401,610 $206,547,066 $589,392,040 $530,761,442 $454,509,449
================================================================================================
Accumulation units outstanding 44,892,446 3,095,513 11,336,732 11,714,450 24,050,697 24,795,824 25,272,776
================================================================================================
Unit value of accumulation units $21.30 $13.62 $18.47 $17.63 $24.51 $21.41 $17.98
================================================================================================
</TABLE>
See accompanying notes to financial statements.
-20-
<PAGE> 76
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
November 30, 1997
(Continued)
<TABLE>
<CAPTION>
Balanced/Phoenix
SunAmerica Investment Worldwide High-Yield Global Corporate
Balanced Counsel Utility High Income Bond Bond Bond
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments in Anchor
Series Trust,
at market value $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Investments in SunAmerica
Series Trust,
at market value 32,359,325 83,649,784 19,644,306 101,734,353 167,745,561 80,654,148 53,099,569
Liabilities 0 0 0 0 0 0 0
-----------------------------------------------------------------------------------------------
Net Assets $32,359,325 $83,649,784 $19,644,306 $101,734,353 $167,745,561 $80,654,148 $53,099,569
===============================================================================================
Accumulation units outstanding 2,447,948 5,415,312 1,541,346 6,368,247 11,443,250 6,164,455 4,235,990
===============================================================================================
Unit value of accumulation units $13.22 $15.45 $12.74 $15.98 $14.66 $13.08 $12.54
===============================================================================================
</TABLE>
See accompanying notes to financial statements.
-21-
<PAGE> 77
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
November 30, 1997
(Continued)
<TABLE>
<CAPTION>
International Emerging Real Cash
Growth & Income Markets Estate Management
Portfolio Portfolio Portfolio Portfolio TOTAL
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in Anchor
Series Trust,
at market value $ 0 $ 0 $ 0 $ 0 $ 886,881,451
Investments in SunAmerica
Series Trust,
at market value 28,115,381 13,964,137 18,681,133 128,314,920 4,319,751,216
Liabilities 0 0 0 0 0
-----------------------------------------------------------------------
Net Assets $28,115,381 $13,964,137 $18,681,133 $128,314,920 $5,206,632,667
=======================================================================
Accumulation units outstanding 2,721,228 1,751,922 1,632,804 11,224,451
=======================================================
Unit value of accumulation units $10.33 $ 7.97 $11.44 $11.43
=======================================================
</TABLE>
See accompanying notes to financial statements.
-22-
<PAGE> 78
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS 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>
ANCHOR SERIES TRUST:
Capital Appreciation Portfolio 16,780,052 $31.53 $529,028,394 $459,565,512
Growth Portfolio 7,412,595 26.71 197,994,732 169,377,008
Natural Resources Portfolio 2,245,829 14.57 32,713,772 36,654,252
Government and Quality Bond Portfolio 9,186,050 13.84 127,144,553 127,749,079
-------------------------------
886,881,451 793,345,851
-------------------------------
SUNAMERICA SERIES TRUST:
International Diversified Equities Portfolio 18,463,464 11.33 209,218,279 199,016,575
Global Equities Portfolio 19,437,721 15.98 310,582,513 258,023,274
Aggressive Growth Portfolio 7,061,642 11.76 83,032,896 74,377,265
Venture Value Portfolio 44,547,485 21.47 956,188,606 695,675,284
Federated Value Portfolio 3,033,452 13.90 42,154,698 35,800,223
Putnam Growth Portfolio 10,935,174 19.15 209,401,610 134,998,693
Growth/Phoenix Investment Counsel Portfolio 13,223,669 15.62 206,547,066 152,526,676
Alliance Growth Portfolio 26,121,497 22.56 589,392,040 441,177,387
Growth-Income Portfolio 25,496,652 20.82 530,761,442 366,719,261
Asset Allocation Portfolio 28,040,249 16.21 454,509,449 349,477,716
SunAmerica Balanced Portfolio 2,405,912 13.45 32,359,325 27,781,930
Balanced/Phoenix Investment Counsel Portfolio 5,671,291 14.75 83,649,784 69,823,291
Utility Portfolio 1,521,334 12.91 19,644,306 17,028,195
Worldwide High Income Portfolio 7,707,286 13.20 101,734,353 94,844,674
High-Yield Bond Portfolio 14,192,285 11.82 167,745,561 152,811,050
Global Bond Portfolio 7,005,103 11.51 80,654,148 73,746,199
Corporate Bond Portfolio 4,600,337 11.54 53,099,569 48,668,920
International Growth & Income Portfolio 2,700,805 10.41 28,115,381 27,902,919
Emerging Markets Portfolio 1,738,829 8.03 13,964,137 17,212,561
Real Estate Portfolio 1,620,595 11.53 18,681,133 17,498,200
Cash Management Portfolio 11,952,413 10.74 128,314,920 127,260,191
-------------------------------
4,319,751,216 3,382,370,484
-------------------------------
$5,206,632,667 $4,175,716,335
===============================
</TABLE>
See accompanying notes to financial statements.
-23-
<PAGE> 79
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
November 30, 1997
<TABLE>
<CAPTION>
Government International
Capital Natural and Diversified Global Aggressive
Appreciation Growth Resources Quality Bond Equities Equities Growth
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends and capital
gains distributions $ 44,098,428 $ 19,777,512 $ 2,306,553 $ 8,098,656 $ 6,295,820 $ 14,147,538 $ 38,952
------------------------------------------------------------------------------------------------
Total investment income 44,098,428 19,777,512 2,306,553 8,098,656 6,295,820 14,147,538 38,952
------------------------------------------------------------------------------------------------
Expenses:
Mortality risk charge (4,491,426) (1,639,676) (324,456) (1,172,164) (1,942,860) (2,952,260) (605,659)
Administrative expense
risk charge (1,541,176) (562,634) (111,333) (402,213) (666,668) (1,013,031) (207,824)
Distribution expense charge (660,504) (241,129) (47,714) (172,377) (285,715) (434,156) (89,067)
------------------------------------------------------------------------------------------------
Total expenses (6,693,106) (2,443,439) (483,503) (1,746,754) (2,895,243) (4,399,447) (902,550)
------------------------------------------------------------------------------------------------
Net investment income (loss) 37,405,322 17,334,073 1,823,050 6,351,902 3,400,577 9,748,091 (863,598)
------------------------------------------------------------------------------------------------
Net realized gains (losses)
from securities transactions:
Proceeds from shares sold 197,453,030 27,057,227 7,129,197 16,596,967 17,939,338 40,297,116 15,434,574
Cost of shares sold (171,713,723) (22,896,930) (6,839,200) (16,813,095) (16,563,203) (33,306,013) (13,527,772)
------------------------------------------------------------------------------------------------
Net realized gains (losses)
from securities transactions 25,739,307 4,160,297 289,997 (216,128) 1,376,135 6,991,103 1,906,802
------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments:
Beginning of period 48,989,311 14,816,113 1,105,187 (1,326,642) 11,523,299 38,868,171 2,311,661
End of period 69,462,881 28,617,724 (3,940,480) (604,526) 10,201,704 52,559,239 8,655,631
------------------------------------------------------------------------------------------------
Change in net unrealized
appreciation/depreciation
of investments 20,473,570 13,801,611 (5,045,667) 722,116 (1,321,595) 13,691,068 6,343,970
------------------------------------------------------------------------------------------------
Increase (decrease) in net
assets from operations $ 83,618,199 $ 35,295,981 $(2,932,620) $ 6,857,890 $ 3,455,117 $ 30,430,262 $ 7,387,174
================================================================================================
</TABLE>
See accompanying notes to financial statements.
-24-
<PAGE> 80
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
November 30, 1997
(Continued)
<TABLE>
<CAPTION>
Growth/Phoenix
Venture Federated Putnam Investment Alliance Growth Asset
Value Value Growth Counsel Growth Income Allocation
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
------------ ----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends and capital
gains distributions $ 12,284,556 $ 39,883 $ 5,247,220 $ 16,979,065 $ 23,086,017 $ 17,509,019 $ 29,286,192
------------------------------------------------------------------------------------------------
Total investment income 12,284,556 39,883 5,247,220 16,979,065 23,086,017 17,509,019 29,286,192
------------------------------------------------------------------------------------------------
Expenses:
Mortality risk charge (7,485,104) (270,129) (1,825,352) (1,962,026) (4,910,200) (4,342,961) (3,926,667)
Administrative expense
risk charge (2,568,418) (92,691) (626,346) (673,244) (1,684,873) (1,490,232) (1,347,386)
Distribution expense charge (1,100,750) (39,725) (268,435) (288,533) (722,088) (638,671) (577,451)
------------------------------------------------------------------------------------------------
Total expenses (11,154,272) (402,545) (2,720,133) (2,923,803) (7,317,161) (6,471,864) (5,851,504)
------------------------------------------------------------------------------------------------
Net investment income (loss) 1,130,284 (362,662) 2,527,087 14,055,262 15,768,856 11,037,155 23,434,688
------------------------------------------------------------------------------------------------
Net realized gains (losses)
from securities transactions:
Proceeds from shares sold 41,902,820 7,975,085 23,586,742 19,443,794 68,895,096 25,023,738 8,374,215
Cost of shares sold (33,523,543) (6,988,437) (17,012,494) (15,123,314) (55,650,205) (18,334,272) (6,726,439)
------------------------------------------------------------------------------------------------
Net realized gains (losses) from
securities transactions 8,379,277 986,648 6,574,248 4,320,480 13,244,891 6,689,466 1,647,776
------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments:
Beginning of period 96,368,190 1,118,454 44,243,026 40,541,194 74,064,408 79,392,543 62,065,190
End of period 260,513,321 6,354,475 74,402,917 54,020,390 148,214,653 164,042,181 105,031,733
------------------------------------------------------------------------------------------------
Change in net unrealized
appreciation/depreciation
of investments 164,145,131 5,236,021 30,159,891 13,479,196 74,150,245 84,649,638 42,966,543
------------------------------------------------------------------------------------------------
Increase (decrease) in net
assets from operations $173,654,692 $ 5,860,007 $ 39,261,226 $ 31,854,938 $103,163,992 $102,376,259 $ 68,049,007
================================================================================================
</TABLE>
See accompanying notes to financial statements.
-25-
<PAGE> 81
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
November 30, 1997
(Continued)
<TABLE>
<CAPTION>
Balanced/Phoenix
SunAmerica Investment Worldwide High-Yield Global Corporate
Balanced Counsel Utility High Income Bond Bond Bond
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends and capital
gains distributions $ 87,426 $ 3,184,886 $ 96,119 $ 6,528,228 $ 8,389,224 $ 4,754,134 $ 1,908,574
-----------------------------------------------------------------------------------------------
Total investment income 87,426 3,184,886 96,119 6,528,228 8,389,224 4,754,134 1,908,574
-----------------------------------------------------------------------------------------------
Expenses:
Mortality risk charge (214,132) (755,062) (119,691) (823,906) (1,419,905) (741,321) (442,810)
Administrative expense
risk charge (73,477) (259,090) (41,070) (282,713) (487,222) (254,375) (151,944)
Distribution expense charge (31,490) (111,039) (17,602) (121,163) (208,810) (109,018) (65,119)
-----------------------------------------------------------------------------------------------
Total expenses (319,099) (1,125,191) (178,363) (1,227,782) (2,115,937) (1,104,714) (659,873)
-----------------------------------------------------------------------------------------------
Net investment income (loss) (231,673) 2,059,695 (82,244) 5,300,446 6,273,287 3,649,420 1,248,701
-----------------------------------------------------------------------------------------------
Net realized gains (losses)
from securities transactions:
Proceeds from shares sold 1,677,733 5,987,736 2,682,700 24,005,082 43,535,286 7,528,389 3,515,900
Cost of shares sold (1,508,526) (5,263,297) (2,453,626) (22,398,379) (41,891,419) (7,077,927) (3,350,463)
-----------------------------------------------------------------------------------------------
Net realized gains (losses) from
securities transactions 169,207 724,439 229,074 1,606,703 1,643,867 450,462 165,437
-----------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments:
Beginning of period 769,769 8,161,832 355,573 5,794,068 5,818,708 6,045,986 2,378,433
End of period 4,577,395 13,826,493 2,616,111 6,889,678 14,934,511 6,907,949 4,430,649
-----------------------------------------------------------------------------------------------
Change in net unrealized
appreciation/depreciation
of investments 3,807,626 5,664,661 2,260,538 1,095,610 9,115,803 861,963 2,052,216
-----------------------------------------------------------------------------------------------
Increase (decrease) in net
assets from operations $ 3,745,160 $ 8,448,795 $ 2,407,368 $ 8,002,759 $ 17,032,957 $ 4,961,845 $ 3,466,354
===============================================================================================
</TABLE>
See accompanying notes to financial statements.
-26-
<PAGE> 82
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
November 30, 1997
(Continued)
<TABLE>
<CAPTION>
International Emerging Real Cash
Growth & Income Markets Estate Management
Portfolio Portfolio Portfolio Portfolio TOTAL
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income:
Dividends and capital
gains distributions $ 0 $ 0 $ 0 $ 6,022,856 $ 230,166,858
---------------------------------------------------------------------------------------------
Total investment income 0 0 0 6,022,856 230,166,858
---------------------------------------------------------------------------------------------
Expenses:
Mortality risk charge (99,305) (66,962) (55,504) (1,258,400) (43,847,938)
Administrative expense risk charge (34,075) (22,977) (19,046) (431,804) (15,045,862)
Distribution expense charge (14,604) (9,848) (8,162) (185,059) (6,448,229)
---------------------------------------------------------------------------------------------
Total expenses (147,984) (99,787) (82,712) (1,875,263) (65,342,029)
---------------------------------------------------------------------------------------------
Net investment income (loss) (147,984) (99,787) (82,712) 4,147,593 164,824,829
---------------------------------------------------------------------------------------------
Net realized gains (losses) from
securities transactions:
Proceeds from shares sold 405,125 443,735 1,502,627 459,227,553 1,067,620,805
Cost of shares sold (394,473) (469,736) (1,443,444) (458,928,759) (980,198,689)
---------------------------------------------------------------------------------------------
Net realized gains (losses) from
securities transactions 10,652 (26,001) 59,183 298,794 87,422,116
---------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments:
Beginning of period 0 0 0 1,146,984 544,551,458
End of period 212,462 (3,248,424) 1,182,933 1,054,729 1,030,916,329
---------------------------------------------------------------------------------------------
Change in net unrealized
appreciation/depreciation
of investments 212,462 (3,248,424) 1,182,933 (92,255) 486,364,871
---------------------------------------------------------------------------------------------
Increase (decrese) in net
assets from operations $ 75,130 $(3,374,212) $ 1,159,404 $ 4,354,132 $ 738,611,816
=============================================================================================
</TABLE>
See accompanying notes to financial statements.
-27-
<PAGE> 83
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
November 30, 1997
<TABLE>
<CAPTION>
Government International
Capital Natural and Diversified Global Aggressive
Appreciation Growth Resources Quality Bond Equities Equities Growth
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 37,405,322 $ 17,334,073 $ 1,823,050 $ 6,351,902 $ 3,400,577 $ 9,748,091 $ (863,598)
Net realized gains (losses)
from securities transactions 25,739,307 4,160,297 289,997 (216,128) 1,376,135 6,991,103 1,906,802
Change in net unrealized
appreciation/depreciation
of investments 20,473,570 13,801,611 (5,045,667) 722,116 (1,321,595) 13,691,068 6,343,970
-------------------------------------------------------------------------------------------------
Increase (decrease)
in net assets from
operations 83,618,199 35,295,981 (2,932,620) 6,857,890 3,455,117 30,430,262 7,387,174
-------------------------------------------------------------------------------------------------
From capital transactions:
Net proceeds from units
sold 63,814,945 25,522,588 7,473,963 13,954,746 41,819,108 33,005,430 19,057,042
Cost of units redeemed (23,750,681) (9,791,219) (1,283,606) (8,320,472) (7,074,811) (13,340,530) (1,959,770)
Net transfers 44,369,254 23,594,248 3,127,108 5,132,312 25,642,622 24,373,244 25,978,063
Increase (decrease)
in net assets from
capital transactions 84,433,518 39,325,617 9,317,465 10,766,586 60,386,919 44,038,144 43,075,335
-------------------------------------------------------------------------------------------------
Increase in net assets 168,051,717 74,621,598 6,384,845 17,624,476 63,842,036 74,468,406 50,462,509
Net assets at beginning
of period 360,976,677 123,373,134 26,328,927 109,520,077 145,376,243 236,114,107 32,570,387
-------------------------------------------------------------------------------------------------
Net assets at end of period $529,028,394 $197,994,732 $32,713,772 $127,144,553 $209,218,279 $310,582,513 $83,032,896
=================================================================================================
ANALYSIS OF INCREASE
(DECREASE) IN UNITS
OUTSTANDING:
Units sold 3,476,602 1,455,312 617,898 1,168,231 3,619,718 2,052,329 1,838,030
Units redeemed (1,228,940) (532,036) (102,746) (689,911) (602,689) (810,906) (178,584)
Units transferred 2,171,076 1,266,308 250,996 392,483 2,231,185 1,551,555 2,389,678
-------------------------------------------------------------------------------------------------
Increase (decrease) in
units outstanding 4,418,738 2,189,584 766,148 870,803 5,248,214 2,792,978 4,049,124
Beginning units 20,470,395 7,557,844 2,171,050 9,176,239 12,762,343 15,583,207 3,165,900
-------------------------------------------------------------------------------------------------
Ending units 24,889,133 9,747,428 2,937,198 10,047,042 18,010,557 18,376,185 7,215,024
=================================================================================================
</TABLE>
See accompanying notes to financial statements.
-28-
<PAGE> 84
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
November 30, 1997
(Continued)
<TABLE>
<CAPTION>
Growth/Phoenix
Venture Federated Putnam Investment Alliance Growth Asset
Value Value Growth Counsel Growth Income Allocation
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 1,130,284 $ (362,662) $ 2,527,087 $ 14,055,262 $ 15,768,856 $ 11,037,155 $ 23,434,688
Net realized gains (losses) from
securities transactions 8,379,277 986,648 6,574,248 4,320,480 13,244,891 6,689,466 1,647,776
Change in net unrealized
appreciation/depreciation
of investments 164,145,131 5,236,021 30,159,891 13,479,196 74,150,245 84,649,638 42,966,543
-----------------------------------------------------------------------------------------------
Increase (decrease)
in net assets
from operations 173,654,692 5,860,007 39,261,226 31,854,938 103,163,992 102,376,259 68,049,007
-----------------------------------------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 168,731,762 10,426,813 20,321,341 11,819,554 93,785,157 66,298,687 59,042,689
Cost of units redeemed (29,879,481) (3,379,784) (8,456,398) (9,740,821) (25,525,241) (20,766,275) (20,362,730)
Net transfers 155,692,370 18,013,600 4,178,527 (7,838,225) 61,152,805 73,096,855 49,254,654
-----------------------------------------------------------------------------------------------
Increase (decrease)
in net assets
from capital
transactions 294,544,651 25,060,629 16,043,470 (5,759,492) 129,412,721 118,629,267 87,934,613
-----------------------------------------------------------------------------------------------
Increase in net assets 468,199,343 30,920,636 55,304,696 26,095,446 232,576,713 221,005,526 155,983,620
Net assets at beginning
of period 487,989,263 11,234,062 154,096,914 180,451,620 356,815,327 309,755,916 298,525,829
-----------------------------------------------------------------------------------------------
Net assets at end of period $956,188,606 $42,154,698 $209,401,610 $206,547,066 $589,392,040 $530,761,442 $454,509,449
===============================================================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 9,151,286 869,687 1,268,013 757,853 4,375,748 3,588,612 3,620,967
Units redeemed (1,544,744) (292,588) (514,321) (602,007) (1,125,364) (1,074,591) (1,208,246)
Units transferred 8,038,350 1,497,277 229,015 (519,133) 2,466,758 3,735,661 2,919,322
-----------------------------------------------------------------------------------------------
Increase (decrease)
in units outstanding 15,644,892 2,074,376 982,707 (363,287) 5,717,142 6,249,682 5,332,043
Beginning units 29,247,554 1,021,137 10,354,025 12,077,737 18,333,555 18,546,142 19,940,733
-----------------------------------------------------------------------------------------------
Ending units 44,892,446 3,095,513 11,336,732 11,714,450 24,050,697 24,795,824 25,272,776
===============================================================================================
</TABLE>
See accompanying notes to financial statements.
-29-
<PAGE> 85
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
November 30, 1997
(Continued)
<TABLE>
<CAPTION>
Balanced/Phoenix
SunAmerica Investment Worldwide High-Yield Global Corporate
Balanced Counsel Utility High Income Bond Bond Bond
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (231,673) $ 2,059,695 $ (82,244) $ 5,300,446 $ 6,273,287 $ 3,649,420 $ 1,248,701
Net realized gains (losses)
from securities transactions 169,207 724,439 229,074 1,606,703 1,643,867 450,462 165,437
Change in net unrealized
appreciation/depreciation
of investments 3,807,626 5,664,661 2,260,538 1,095,610 9,115,803 861,963 2,052,216
-----------------------------------------------------------------------------------------------
Increase (decrease)
in net assets from
operations 3,745,160 8,448,795 2,407,368 8,002,759 17,032,957 4,961,845 3,466,354
-----------------------------------------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 9,272,164 10,894,722 3,583,011 30,901,544 28,787,123 8,062,445 10,236,124
Cost of units redeemed (1,493,051) (3,296,580) (2,623,327) (3,949,611) (8,833,581) (3,848,065) (2,228,695)
Net transfers 11,811,849 4,269,742 10,478,114 21,371,247 22,094,696 5,181,039 5,981,956
-----------------------------------------------------------------------------------------------
Increase (decrease)
in net assets from
capital transactions 19,590,962 11,867,884 11,437,798 48,323,180 42,048,238 9,395,419 13,989,385
-----------------------------------------------------------------------------------------------
Increase in net assets 23,336,122 20,316,679 13,845,166 56,325,939 59,081,195 14,357,264 17,455,739
Net assets at beginning
of period 9,023,203 63,333,105 5,799,140 45,408,414 108,664,366 66,296,884 35,643,830
-----------------------------------------------------------------------------------------------
Net assets at end of period $32,359,325 $ 83,649,784 $19,644,306 $101,734,353 $167,745,561 $80,654,148 $53,099,569
===============================================================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 787,249 768,683 320,269 2,047,012 2,134,215 648,001 868,904
Units redeemed (126,500) (225,942) (223,501) (253,400) (641,812) (307,787) (187,790)
Units transferred 970,160 289,337 901,117 1,377,896 1,592,652 411,092 495,068
-----------------------------------------------------------------------------------------------
Increase (decrease) in
units outstanding 1,630,909 832,078 997,885 3,171,508 3,085,055 751,306 1,176,182
Beginning units 817,039 4,583,234 543,461 3,196,739 8,358,195 5,413,149 3,059,808
-----------------------------------------------------------------------------------------------
Ending units 2,447,948 5,415,312 1,541,346 6,368,247 11,443,250 6,164,455 4,235,990
===============================================================================================
</TABLE>
See accompanying notes to financial statements.
-30-
<PAGE> 86
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
November 30, 1997
(Continued)
<TABLE>
<CAPTION>
International Emerging Real Cash
Growth & Income Markets Estate Management
Portfolio Portfolio Portfolio Portfolio TOTAL
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (147,984) $ (99,787) $ (82,712) $ 4,147,593 $ 164,824,829
Net realized gains (losses) from
securities transactions 10,652 (26,001) 59,183 298,794 87,422,116
Change in net unrealized
appreciation/depreciation
of investments 212,462 (3,248,424) 1,182,933 (92,255) 486,364,871
-----------------------------------------------------------------------------------
Increase (decrease) in
net assets from operations 75,130 (3,374,212) 1,159,404 4,354,132 738,611,816
-----------------------------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 13,780,789 11,660,679 5,714,592 74,845,717 842,812,735
Cost of units redeemed (97,114) (33,193) (1,148,731) (20,270,825) (231,454,592)
Net transfers 14,356,576 5,710,863 12,955,868 (18,998,081) 600,981,306
-----------------------------------------------------------------------------------
Increase (decrease) in
net assets from capital
transactions 28,040,251 17,338,349 17,521,729 35,576,811 1,212,339,449
-----------------------------------------------------------------------------------
Increase in net assets 28,115,381 13,964,137 18,681,133 39,930,943 1,950,951,265
Net assets at beginning of period 0 0 0 88,383,977 3,255,681,402
-----------------------------------------------------------------------------------
Net assets at end of period $ 28,115,381 $ 13,964,137 $ 18,681,133 $ 128,314,920 $ 5,206,632,667
-----------------------------------------------------------------------------------
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 1,359,331 1,168,066 547,513 6,684,622
Units redeemed (9,246) (3,471) (103,433) (1,801,465)
Units transferred 1,371,143 587,327 1,188,724 (1,664,614)
----------------------------------------------------------------
Increase (decrease) in
units outstanding 2,721,228 1,751,922 1,632,804 3,218,543
Beginning units 0 0 0 8,005,908
----------------------------------------------------------------
Ending units 2,721,228 1,751,922 1,632,804 11,224,451
================================================================
</TABLE>
See accompanying notes to financial statements.
-31-
<PAGE> 87
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
November 30, 1996
<TABLE>
<CAPTION>
Government International
Capital Natural and Diversified Global Aggressive Venture
Appreciation Growth Resources Quality Bond Equities Equities Growth Value
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS:
From operations:
Net investment
income (loss) $ 6,683,216 $ 3,494,209 $ 225,523 $ 5,327,732 $ (189,589) $ 3,162,651 $ (127,227) $ (1,692,102)
Net realized gains
(losses) from
securities
transactions 23,414,274 1,767,853 633,329 (445,581) 861,006 2,403,408 (24,883) 2,376,894
Change in net
unrealized
appreciation/
depreciation
of investments 23,793,774 17,259,322 909,630 (889,640) 9,321,982 24,426,237 2,311,661 79,711,419
------------------------------------------------------------------------------------------------------------
Increase in net
assets
from operations 53,891,264 22,521,384 1,768,482 3,992,511 9,993,399 29,992,296 2,159,551 80,396,211
------------------------------------------------------------------------------------------------------------
From capital
transactions:
Net proceeds from
units sold 76,601,464 23,740,929 9,561,486 27,653,612 54,527,145 39,115,494 19,138,811 163,175,644
Cost of units
redeemed (12,784,433) (3,837,533) (1,065,244) (6,633,414) (3,080,515) (8,799,730) (2,278,942) (9,283,640)
Net transfers 55,273,130 3,644,446 6,924,307 (13,348,877) 37,024,165 15,135,906 13,550,967 103,880,931
------------------------------------------------------------------------------------------------------------
Increase (decrease)
in net assets
from capital
transactions 119,090,161 23,547,842 15,420,549 7,671,321 88,470,795 45,451,670 30,410,836 257,772,935
------------------------------------------------------------------------------------------------------------
Increase (decrease)
in net assets 172,981,425 46,069,226 17,189,031 11,663,832 98,464,194 75,443,966 32,570,387 338,169,146
Net assets at
beginning of period 187,995,252 77,303,908 9,139,896 97,856,245 46,912,049 160,670,141 0 149,820,117
------------------------------------------------------------------------------------------------------------
Net assets at end
of period $360,976,677 $123,373,134 $26,328,927 $109,520,077 $145,376,243 $236,114,107 $32,570,387 $487,989,263
============================================================================================================
ANALYSIS OF INCREASE
(DECREASE) IN UNITS
OUTSTANDING:
Units sold 4,765,562 1,677,049 817,912 2,417,937 5,008,240 2,792,651 1,986,190 11,480,599
Units redeemed (795,327) (270,932) (91,245) (579,841) (282,701) (628,827) (229,445) (646,042)
Units transferred 3,253,005 183,464 596,224 (1,166,534) 3,377,738 1,068,500 1,409,155 7,142,205
------------------------------------------------------------------------------------------------------------
Increase (decrease)
in units outstanding 7,223,240 1,589,581 1,322,891 671,562 8,103,277 3,232,324 3,165,900 17,976,762
Beginning units 13,247,155 5,968,263 848,159 8,504,677 4,659,066 12,350,883 0 11,270,792
------------------------------------------------------------------------------------------------------------
Ending units 20,470,395 7,557,844 2,171,050 9,176,239 12,762,343 15,583,207 3,165,900 29,247,554
============================================================================================================
</TABLE>
See accompanying notes to financial statements.
-32-
<PAGE> 88
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
November 30, 1996
(Continued)
<TABLE>
<CAPTION>
Growth/Phoenix Balanced/Phoenix
Federated Putnam Investment Alliance Growth- Asset SunAmerica Investment
Value Growth Counsel Growth Income Allocation Balanced Counsel
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS:
From operations:
Net investment
income (loss) $ (45,927) $ (1,935,453) $ 9,218,960 $ 9,733,102 $ 4,060,924 $ 8,264,306 $ (41,729) $ 617,491
Net realized gains
(losses) from
securities
transactions (3,715) 3,028,306 2,545,612 4,241,634 2,881,965 712,562 60,508 207,371
Change in net
unrealized
appreciation/
depreciation of
investments 1,118,454 21,943,270 13,399,999 48,511,798 48,512,865 34,266,708 769,769 5,173,131
----------------------------------------------------------------------------------------------------------
Increase in net
assets from
operations 1,068,812 23,036,123 25,164,571 62,486,534 55,455,754 43,243,576 788,548 5,997,993
----------------------------------------------------------------------------------------------------------
From capital
transactions:
Net proceeds from
units sold 6,696,816 20,936,991 21,818,159 93,131,739 66,216,411 61,800,477 6,831,490 24,730,811
Cost of units
redeemed (63,953) (6,599,755) (7,626,629) (9,663,521) (8,604,568) (10,673,978) 1,556,007) (1,651,786)
Net transfers 3,532,387 4,171,906 (5,709,622) 47,853,520 29,425,995 9,326,845 2,959,172 4,146,437
----------------------------------------------------------------------------------------------------------
Increase (decrease)
in net assets
from capital
transactions 10,165,250 18,509,142 8,481,908 131,321,738 87,037,838 60,453,344 8,234,655 27,225,462
----------------------------------------------------------------------------------------------------------
Increase (decrease)
in net assets 11,234,062 41,545,265 33,646,479 193,808,272 142,493,592 103,696,920 9,023,203 33,223,455
Net assets at
beginning of period 0 112,551,649 146,805,141 163,007,055 167,262,324 194,828,909 0 30,109,650
----------------------------------------------------------------------------------------------------------
Net assets at
end of period $11,234,062 $154,096,914 $180,451,620 $356,815,327 $309,755,916 $298,525,829 $9,023,203 $63,333,105
==========================================================================================================
ANALYSIS OF INCREASE
(DECREASE) IN UNITS
OUTSTANDING:
Units sold 672,856 1,613,854 1,626,331 5,705,725 4,586,759 4,629,094 675,529 1,946,479
Units redeemed (6,317) (506,275) (567,756) (588,952) (595,761) (793,782) (150,415) (130,093)
Units transferred 354,598 313,448 (438,737) 2,656,712 1,994,279 687,071 291,925 324,947
----------------------------------------------------------------------------------------------------------
Increase (decrease)
in units outstanding 1,021,137 1,421,027 619,838 7,773,485 5,985,277 4,522,383 817,039 2,141,333
Beginning units 0 8,932,998 11,457,899 10,560,070 12,560,865 15,418,350 0 2,441,901
----------------------------------------------------------------------------------------------------------
Ending units 1,021,137 10,354,025 12,077,737 18,333,555 18,546,142 19,940,733 817,039 4,583,234
==========================================================================================================
</TABLE>
See accompanying notes to financial statements.
-33-
<PAGE> 89
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the POLARIS Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
November 30, 1996
(Continued)
<TABLE>
<CAPTION>
Worldwide High-Yield Global Corporate
Utility High Income Bond Bond Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (26,830) $ 609,853 $ 5,908,541 $ 3,070,442 $ 717,467
Net realized gains (losses) from
securities transactions 1,073 444,184 405,726 779,817 132,082
Change in net unrealized appreciation/
depreciation of investments 355,573 4,945,992 5,610,690 1,810,803 770,471
---------------------------------------------------------------------------------------
Increase in net assets from operations 329,816 6,000,029 11,924,957 5,661,062 1,620,020
---------------------------------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 4,523,252 19,367,963 24,099,082 12,135,788 13,578,677
Cost of units redeemed (25,056) (1,780,947) (5,893,480) (3,222,889) (1,537,267)
Net transfers 971,128 9,991,617 (2,720,348) (7,531,416) (7,137,549)
---------------------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 5,469,324 27,578,633 15,485,254 1,381,483 4,903,861
---------------------------------------------------------------------------------------
Increase (decrease) in net assets 5,799,140 33,578,662 27,410,211 7,042,545 6,523,881
Net assets at beginning of period 0 11,829,752 81,254,155 59,254,339 29,119,949
---------------------------------------------------------------------------------------
Net assets at end of period $ 5,799,140 $ 45,408,414 $ 108,664,366 $ 66,296,884 $ 35,643,830
=======================================================================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 450,097 1,521,018 1,991,539 1,053,412 1,222,601
Units redeemed (2,465) (141,970) (484,674) (278,565) (138,031)
Units transferred 95,829 776,863 (224,121) (649,856) (647,827)
---------------------------------------------------------------------------------------
Increase (decrease) in units outstanding 543,461 2,155,911 1,282,744 124,991 436,743
Beginning units 0 1,040,828 7,075,451 5,288,158 2,623,065
---------------------------------------------------------------------------------------
Ending units 543,461 3,196,739 8,358,195 5,413,149 3,059,808
=======================================================================================
</TABLE>
<TABLE>
<CAPTION>
Cash
Management
Portfolio TOTAL
----------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 2,227,613 $ 59,263,173
Net realized gains (losses) from
securities transactions 2,214,720 48,638,145
Change in net unrealized appreciation/
depreciation of investments (168,487) 343,865,421
----------------------------------
Increase in net assets from operations 4,273,846 451,766,739
----------------------------------
From capital transactions:
Net proceeds from units sold 99,349,340 888,731,581
Cost of units redeemed (20,113,324) (126,776,611)
Net transfers (84,506,732) 226,858,315
----------------------------------
Increase (decrease) in net assets
from capital transactions (5,270,716) 988,813,285
----------------------------------
Increase (decrease) in net assets (996,870) 1,440,580,024
Net assets at beginning of period 89,380,847 1,815,101,378
----------------------------------
Net assets at end of period $ 88,383,977 $ 3,255,681,402
==================================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Units sold 9,156,831
Units redeemed (1,854,726)
Units transferred (7,669,176)
----------------
Increase (decrease) in units outstanding (367,071)
Beginning units 8,372,979
----------------
Ending units 8,005,908
================
</TABLE>
See accompanying notes to financial statements.
-34-
<PAGE> 90
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Variable Separate Account (Portion Relating to the POLARIS Variable Annuity)
of Anchor National Life Insurance Company (the "Separate Account") is a
segregated investment account of Anchor National Life Insurance Company (the
"Company"). The Company is an indirect, wholly owned subsidiary of SunAmerica
Inc. The Separate Account is registered as a segregated unit investment trust
pursuant to the provisions of the Investment Company Act of 1940, as amended.
The Separate Account is composed of twenty-five variable portfolios (the
"Variable Accounts"). Each of the Variable Accounts is invested solely in the
shares of either (1) one of the four currently available investment
portfolios of Anchor Series Trust ("Anchor Trust") or (2) one of the
twenty-one currently available investment portfolios of SunAmerica Series
Trust ("SunAmerica Trust"). The Anchor Trust and the SunAmerica Trust (the
"Trusts") are each diversified, open-end, affiliated investment companies,
which retain investment advisors to assist in the investment activities of
the Trusts. The participant may elect to have payments allocated to any of
five guaranteed- interest funds of the Company (the "General Account"), which
are not a part of the Separate Account. The financial statements include
balances allocated by the participant to the twenty-five Variable Accounts
and do not include balances allocated to the General Account.
The inception date of the International Growth and Income, Emerging Markets,
and Real Estate Portfolios was June 2, 1997. The inception date of the
Aggressive Growth, Federated Value, SunAmerica Balanced, and Utility
Portfolios was June 3, 1996. The inception date of the Natural Resources,
International Diversified Equities, Venture Value, Balanced/Phoenix
Investment Counsel and Worldwide High Income Portfolios was October 31, 1994.
The inception date of the Asset Allocation, Global Bond and Corporate Bond
Portfolios was July 1, 1993. The inception date of the remaining portfolios
was February 9, 1993.
-35-
<PAGE> 91
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The investment objectives and policies of the four portfolios of the Anchor
Trust are summarized below:
The CAPITAL APPRECIATION PORTFOLIO seeks long-term capital appreciation. This
portfolio invests in growth equity securities which are widely diversified by
industry and company and may engage in transactions involving stock index
futures and options thereon as a hedge against changes in market conditions.
The GROWTH PORTFOLIO seeks capital appreciation. This portfolio invests in
growth equity securities and may engage in transactions involving stock index
futures and options thereon as a hedge against changes in market conditions.
The NATURAL RESOURCES PORTFOLIO seeks a total return in excess of the U.S.
rate of inflation as represented by the Consumer Price Index. This portfolio
invests primarily in equity securities of U.S. or foreign companies which are
expected to provide favorable returns in periods of rising inflation.
The GOVERNMENT AND QUALITY BOND PORTFOLIO seeks relatively high current
income, liquidity and security of principal. This portfolio invests in
obligations issued, guaranteed or insured by the U.S. Government, its
agencies or instrumentalities and in corporate debt securities rated Aa or
better by Moody's Investor Service, Inc. or AA or better by Standard & Poor's
Corporation.
Anchor Trust has portfolios in addition to those identified above; however,
none of these other portfolios is currently available for investment under
the Separate Account.
The investment objectives and policies of the twenty-one portfolios of the
SunAmerica Trust are summarized below:
The INTERNATIONAL DIVERSIFIED EQUITIES PORTFOLIO seeks long-term capital
appreciation. This portfolio invests in accordance with country weightings as
determined by the subadvisor in common stocks of foreign issuers which, in
the aggregate, replicate broad country indices.
-36-
<PAGE> 92
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The GLOBAL EQUITIES PORTFOLIO seeks long-term growth of capital. This
portfolio invests primarily in common stocks or securities of U.S. and
foreign issuers with common stock characteristics which demonstrate the
potential for appreciation and engages in transactions in foreign currencies.
The AGGRESSIVE GROWTH PORTFOLIO seeks capital appreciation. This portfolio
invests primarily in equity securities of small capitalization growth
companies.
The VENTURE VALUE PORTFOLIO seeks growth of capital. This portfolio invests
primarily in common stocks.
The FEDERATED VALUE PORTFOLIO seeks growth of capital and income. This
portfolio invests primarily in the securities of high quality companies.
The PUTNAM GROWTH (PREVIOUSLY KNOWN AS PROVIDENT GROWTH PORTFOLIO),
GROWTH/PHOENIX INVESTMENT COUNSEL AND ALLIANCE GROWTH PORTFOLIOS seek
long-term growth of capital. These portfolios invest primarily in common
stocks or securities with common stock characteristics which the advisor
believes have the potential for appreciation.
The GROWTH-INCOME PORTFOLIO seeks growth of capital and income. This
portfolio invests primarily in common stocks or securities which demonstrate
the potential for appreciation and/or dividends.
The ASSET ALLOCATION PORTFOLIO seeks high total return (including income and
capital gains) consistent with preservation of capital over the long term.
This portfolio invests in a diversified selection of common stocks and other
securities having common stock characteristics, bonds and other intermediate
and long-term fixed-income securities and money market instruments (debt
securities maturing in one year or less) in any combination.
The SUNAMERICA BALANCED PORTFOLIO seeks to conserve principal. This portfolio
maintains at all times a balanced portfolio of stocks and bonds.
The BALANCED/PHOENIX INVESTMENT COUNSEL PORTFOLIO seeks reasonable income,
long-term capital growth and conservation of capital. This portfolio invests
primarily in common stocks and fixed-income securities, with an emphasis on
income-producing securities which appear to have some potential for capital
enhancement.
-37-
<PAGE> 93
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The UTILITY PORTFOLIO seeks high current income and moderate capital
appreciation. This portfolio invests primarily in the equity and debt
securities of utility companies.
The WORLDWIDE HIGH INCOME PORTFOLIO seeks high current income and,
secondarily, capital appreciation. This portfolio invests primarily in a
selection of high-yielding fixed-income securities of issuers located
throughout the world.
The HIGH-YIELD BOND PORTFOLIO seeks a high level of current income and,
secondarily, seeks capital appreciation. This portfolio invests primarily in
intermediate and long-term corporate obligations, with emphasis on
higher-yielding, higher-risk, lower-rated or unrated securities.
The GLOBAL BOND PORTFOLIO seeks a high total return, emphasizing current
income and, to a lesser extent, providing opportunities for capital
appreciation. This portfolio invests in high quality fixed-income securities
of U.S. and foreign issuers and engages in transactions in foreign
currencies.
The CORPORATE BOND PORTFOLIO seeks a high total return with only moderate
price risk. This portfolio invests primarily in investment grade fixed-income
securities.
The INTERNATIONAL GROWTH AND INCOME PORTFOLIO seeks growth of capital with
current income as a secondary objective. This portfolio invests primarily in
common stocks traded on markets outside the United States.
The EMERGING MARKETS PORTFOLIO seeks long-term capital appreciation. This
portfolio invests mainly in the common stocks and other equity securities of
companies that its subadvisor believes have above-average growth prospects
primarily in emerging markets outside the United States.
The REAL ESTATE PORTFOLIO seeks to achieve total return through a combination
of growth and income. This portfolio invests primarily in securities of
companies principally engaged in or related to the real estate industry or
which own significant real estate assets or which primarily invest in real
estate financial instruments.
-38-
<PAGE> 94
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The CASH MANAGEMENT PORTFOLIO seeks high current yield while preserving
capital. This portfolio invests in a diversified selection of money market
instruments.
Purchases and sales of shares of the portfolios of the Trusts are valued at
the net asset values of the shares on the date the shares are purchased or
sold. Dividends and capital gains distributions are recorded when received.
Realized gains and losses on the sale of investments in the Trusts are
recognized at the date of sale and are determined on an average cost basis.
Accumulation unit values are computed daily based on the total net assets of
the Variable Accounts.
-39-
<PAGE> 95
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
2. CHARGES AND DEDUCTIONS
Charges and deductions are applied against the current value of the Separate
Account and are paid as follows:
WITHDRAWAL CHARGE: The contract value may be withdrawn at any time during the
accumulation period. Purchase payments that are no longer subject to the
withdrawal charge and not previously withdrawn and earnings in the contract
may be withdrawn free of withdrawal charges at any time. In addition, there
is a free withdrawal amount for the first withdrawal during a contract year
after the first contract year. The free withdrawal amount is the greater of
earnings in the contract or 10% of the purchase payments that have been
invested for at least one year, and not withdrawn, less any withdrawals made
during the year. Should a withdrawal exceed the free withdrawal amount, a
withdrawal charge, in certain circumstances, is imposed and paid to the
Company.
Withdrawal charges vary in amount depending upon the number of years since
the purchase payment being withdrawn was made. The withdrawal charge is
deducted from the remaining contract value so that the actual reduction in
contract value as a result of the withdrawal will be greater than the
withdrawal amount requested and paid. For purposes of determining the
withdrawal charge, withdrawals will be allocated first to investment income,
if any (which may generally be withdrawn free of a withdrawal charge), and
then to the oldest purchase payments first so that all withdrawals are
allocated to purchase payments to which the lowest (if any) withdrawal charge
applies.
Any amount withdrawn which exceeds a free withdrawal may be subject to a
withdrawal charge in accordance with the withdrawal charge table shown below:
<TABLE>
<CAPTION>
Policy Applicable Withdrawal
Year Charge Percentage
---------------------- ---------------------------
<S> <C>
First 7%
Second 6%
Third 5%
Fourth 4%
Fifth 3%
Sixth 2%
Seventh 1%
Eighth and beyond 0%
</TABLE>
-40-
<PAGE> 96
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
2. CHARGES AND DEDUCTIONS (continued)
CONTRACT MAINTENANCE FEE: An annual contract maintenance fee of $35 ($30 in
North Dakota and Utah) is charged against each contract, which reimburses
the Company for expenses incurred in establishing and maintaining records
relating to a contract. The contract maintenance fee will be assessed on
each anniversary during the accumulation phase. 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 surrender or upon
annuitization; however, it reserves the right to deduct any premium taxes
when incurred or upon the payment of the death benefit.
MORTALITY AND EXPENSE RISK CHARGE: The Company deducts mortality and expense
risk charges, which total to an annual rate of 1.37% of the net asset value
of each portfolio, computed on a daily basis. The mortality risk charge is
compensation for the mortality risks assumed by the Company from its
contractual obligations to make annuity payments after the contract has
annuitized for the life of the annuitant and to provide death benefits, and
for assuming the risk that the current charges will be insufficient in the
future to cover the cost of administering the contract.
DISTRIBUTION EXPENSE CHARGE: The Company deducts a distribution expense
charge at an annual rate of 0.15% of the net asset value of each portfolio,
computed on a daily basis. This charge is for all expenses associated with
the distribution of the contract. These expenses include preparing the
contract, confirmations and statements, providing sales support and
maintaining contract records. If this charge is not enough to cover the
costs of distributing the contract, the Company will bear the loss.
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.
-41-
<PAGE> 97
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE POLARIS VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
3. INVESTMENT IN ANCHOR TRUST AND SUNAMERICA TRUST
The aggregate cost of the Trusts' shares acquired and the aggregate proceeds
from shares sold during the year ended November 30, 1997 consist of the
following:
<TABLE>
<CAPTION>
Cost of Shares Proceeds from
Variable Accounts Acquired Shares Sold
--------------------------- --------------- ---------------
<S> <C> <C>
ANCHOR TRUST:
Capital Appreciation Portfolio $ 319,291,871 $ 197,453,030
Growth Portfolio 83,716,917 27,057,227
Natural Resources Portfolio 18,269,714 7,129,197
Government and Quality Bond
Portfolio 33,715,455 16,596,967
SUNAMERICA TRUST:
International Diversified
Equities Portfolio 81,726,832 17,939,338
Global Equities Portfolio 94,083,351 40,297,116
Aggressive Growth Portfolio 57,646,312 15,434,574
Venture Value Portfolio 337,577,753 41,902,820
Federated Value Portfolio 32,673,050 7,975,085
Putnam Growth Portfolio 42,157,298 23,586,742
Growth/Phoenix Investment
Counsel Portfolio 27,739,564 19,443,794
Alliance Growth Portfolio 214,076,671 68,895,096
Growth-Income Portfolio 154,690,162 25,023,738
Asset Allocation Portfolio 119,743,519 8,374,215
SunAmerica Balanced Portfolio 21,037,022 1,677,733
Balanced/Phoenix Investment
Counsel Portfolio 19,915,315 5,987,736
Utility Portfolio 14,038,252 2,682,700
Worldwide High Income Portfolio 77,628,707 24,005,082
High-Yield Bond Portfolio 91,856,810 43,535,286
Global Bond Portfolio 20,573,227 7,528,389
Corporate Bond Portfolio 18,753,987 3,515,900
International Growth & Income 28,297,392 405,125
Emerging Markets 17,682,297 443,735
Real Estate 18,941,645 1,502,627
Cash Management Portfolio 498,951,957 459,227,553
=========== ===========
</TABLE>
-42-
<PAGE> 98
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.
-43-
<PAGE> 99
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The following financial statements are included in Part A of the
Registration Statement:
Consolidated Financial Statements of Anchor National Life
Insurance Company for the fiscal year ended September 30, 1997
The following financial statements are included in Part B of the
Registration Statement:
Financial Statements of Variable Separate Account (Portion
Relating to the POLARIS Variable Annuity) for the fiscal year
ended November 30, 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............................. Filed Herewith
(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.
<TABLE>
<CAPTION>
Name Position
- ---- --------
<S> <C>
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
Lorin M. Fife Director, Senior Vice President,
General Counsel and Assistant
Secretary
Susan L. Harris Director, Senior Vice President
and Secretary
Jana W. Greer Director and Senior Vice President
Scott L. Robinson Director and Senior Vice President
James W. Rowan Director and Senior Vice President
N. Scott Gillis Senior Vice President and Controller
</TABLE>
<PAGE> 100
<TABLE>
<CAPTION>
Name Position
- ---- --------
<S> <C>
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
</TABLE>
- ------------------
* 88 Bradley Road, P.O. Box 4005, Woodbridge, Connecticut 06525
<PAGE> 101
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 of Anchor National Life Insurance Company (Portion
relating to the Polaris Variable Annuity) was 100,535, of which 38,072
were Qualified Contracts and 62,463 were Nonqualified 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
</TABLE>
<TABLE>
<CAPTION>
Net
Distribution Compensation
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.
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.
<PAGE> 102
Item 31. Management Services
Not Applicable.
<PAGE> 103
Item 32. Undertakings
Registrant undertakes to (1) file post-effective amendments to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old for so long as payments under the variable annuity Contracts may be
accepted; (2) include either (A) as part of any application to purchase a
Contract offered by the prospectus forming a part of the Registration Statement,
a space that an applicant can check to request a Statement of Additional
Information, or (B) a postcard or similar written communication affixed to or
included in the Prospectus that the Applicant can remove to send for a Statement
of Additional Information; and (3) deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form N-4 promptly upon written or oral request.
Further, Registrant undertakes to deduct mortality and expense risk
charges, distribution expense charges, withdrawal charges (contingent deferred
sales charges), contract maintenance fees and transfer fees that are in the
aggregate (1) reasonable in relation to the risks assumed by the Company and (2)
reasonable in amount as compared with other variable annuity products. Those
determinations are based on the Company's analysis of publicly available
information about similar industry practices, and by taking into consideration
factors such as current charge levels and benefits provided, the existence of
expense charge guarantees and guaranteed annuity rates.
Item 33. Representation
The Company hereby represents that it is relying upon a No-Action Letter
issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been complied
with:
1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including
the prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in connection
with the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase
the contract specifically to bring the redemption restrictions imposed
by Section 403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed
statement acknowledging the participant's understanding of (1) the
restrictions on redemption imposed by Section 403(b)(11), and (2) other
investment alternatives available under the employer's Section 403(b)
arrangement to which the participant may elect to transfer his contract
value.
<PAGE> 104
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
29th 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 Post-Effective Amendment
to the 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)
SCOTT GILLIS* Senior Vice President
- -------------------- and Controller
N. Scott Gillis (Principal Accounting Officer)
JAMES R. BELARDI* Director
- --------------------
James R. Belardi
LORIN M. FIFE* Director
- --------------------
Lorin M. Fife
JANA W. GREER* Director
- --------------------
Jana W. Greer
/s/ SUSAN L. HAEEIS Director January 29, 1998
- --------------------
Susan L. Harris
PETER MCMILLAN* Director
</TABLE>
<PAGE> 105
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
- --------------------
Peter McMillan
JAY S. WINTROB* Director
- --------------------
Jay S. Wintrob
JAMES W. ROWAN* Director
- ---------------------
James W. Rowan
* By: /s/ SUSAN L. HARRIS Attorney-in-Fact
--------------------
Susan L. Harris
</TABLE>
Date: January 29, 1998
<PAGE> 106
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
(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 Agreements
(9) Opinion/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
(15) Powers of Attorney
</TABLE>
<PAGE> 1
UNANIMOUS WRITTEN CONSENT
OF THE EXECUTIVE COMMITTEE OF THE BOARD OF DIRECTORS OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
Pursuant to the Bylaws of this corporation, the undersigned,
constituting all of the members of the Executive Committee of the Board of
Directors of ANCHOR NATIONAL LIFE INSURANCE COMPANY, a California corporation
(this "Corporation"), hereby unanimously consent in writing to and hereby adopt
the following resolutions on behalf of the Corporation, effective this 1st day
of April 1992:
WHEREAS, this Corporation has previously authorized Variable
Separate Account in accordance with the insurance laws of the State of
California, to provide the investment medium for contracts to be issued
by the Corporation as may be designated as participating therein; and
WHEREAS, this Corporation is in the process of designing new
flexible payment individual and group deferred annuity contracts
("Contracts") to be marketed under the name "Polaris", or such other
name and with such product features as may be selected by the officers
of this Corporation;
NOW, THEREFORE BE IT RESOLVED, that the Contracts are hereby
designated as participating in the above-referenced Separate Account;
RESOLVED FURTHER, that the officers of this Corporation be,
and they hereby are, authorized:
i) to take whatever actions are necessary to see to
it that the Contracts are registered under the provisions of
the Securities Act of 1993 to the extent that they shall
determine that such registration is necessary;
ii) to take whatever actions are necessary to assure
that such Separate Account is properly registered with the
Securities and Exchange Commission under the provisions of the
Investment Company Act of 1940;
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;
<PAGE> 2
iv) to apply for exemption from those provisions of
the aforementioned Acts and the rules promulgated thereunder
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;
v) to take whatever actions are necessary to assure
that the Contracts are filed with the appropriate state
insurance regulatory authorities and to prepare and execute
all necessary documents to obtain approval of the insurance
regulatory authorities;
vi) to prepare or have prepared and executed all
necessary documents to obtain approval of, or clearance with,
or other appropriate actions required by, any other regulatory
authority that may be necessary in connection with the
foregoing matters;
vii) to enter into agreements with appropriate
entities for the provision of administrative and other
required services on behalf of the Separate Account and for
the safekeeping of assets of such Separate Account; and
RESOLVED FURTHER, 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 fully set forth herein if (i) in the
opinion of the officers of this Corporation the adoption of the
resolutions is advisable; and (ii) the Corporate Secretary or Assistant
Secretary of this Corporation evidences such adoption by inserting into
these minutes copies of such resolutions; and
RESOLVED FURTHER, that the officer of this Corporation, and
each of them are hereby authorized to prepare and to execute the
necessary documents and to take such further actions as may be deemed
necessary or appropriate, in their discretion, to implement the purpose
of the foregoing resolutions.
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the date stated above.
/s/ELI BROAD
----------------------------
Eli Broad
/s/NORMAN J. METCALFE
----------------------------
Norman J. Metcalfe
/s/ROBERT P. SALTZMAN
----------------------------
Robert P. Saltzman
<PAGE> 1
EXHIBIT 3A
DISTRIBUTION AGREEMENT
----------------------
THIS AGREEMENT, entered into as of this 6th day of August, 1993, 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 Royal Alliance Associates, 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. 811-3959); and
WHEREAS, the Contracts to be issued by Anchor are registered with the
Commission under the Securities Act of 1933 (the "Act") (File No. 33-47472) 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. and Royal Alliance Associates, 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:
<PAGE> 2
1. The Distributor will serve as distributor on an agency basis
for the Contracts which will be issued by Anchor through the Separate
Account.
2. The Distributor will, either directly or through an affiliate,
provide information and marketing assistance to licensed insurance
agents and broker-dealers on a continuing basis. The Distributor shall
be responsible for compliance with the requirements of state
broker-dealer regulations and the Securities Exchange Act of 1934 as
each applies to Distributor in connection with its duties as
distributor of said Contracts. Moreover, the Distributor shall conduct
its affairs in accordance with the 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. and Royal Alliance Associates, Inc. with respect to
the Contracts.
4. Warranties
(a) Anchor represents and warrants to the Distributor
that:
(i) Registration Statements on Form N-4 (and, if
applicable, Form S-1) for each of the Contracts
identified on Attachment A have been filed with the
Commission in the form previously delivered to the
Distributor and that copies of any and all amendments
thereto will be forwarded to the Distributor at the
time that they are filed with the Commission;
(ii) The Registration Statement and any further
amendments or supplements thereto will, when they
become effective, conform in all material respects to
the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, and the rules and
regulations of the Commission under such Acts, and
will not contain an untrue statement of a material
fact or omit to state a material fact required to be
stated therein or necessary to make
- 2 -
<PAGE> 3
the statements therein not misleading; provided,
however, that this representation and warranty shall
not apply to any statement or omission made in
reliance upon and in conformity with information
furnished in writing to Anchor by the Distributor
expressly for use therein;
(iii) Anchor is validly existing as a stock life
insurance company in good standing under the laws of
the State of 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
- 3 -
<PAGE> 4
(vii) There are no material legal or governmental
proceedings pending to which Anchor or the Separate
Account is a party or of which any property of Anchor
or the Separate Account is the subject, other than as
set forth in the Prospectus relating to the
Contracts, and other than litigation incident to the
kind of business conducted by Anchor, if determined
adversely to Anchor, would individually or in the
aggregate have a material adverse effect on the
financial position, surplus or operations of Anchor.
(b) The Distributor represents and warrants to Anchor
that:
(i) It is a broker-dealer duly registered with the
Commission pursuant to the Securities Exchange Act of
1934 and a member in good standing of the National
Association of Securities Dealers, Inc., and is in
compliance with the securities laws in those states
in which it conducts business as a broker-dealer;
(ii) The performance of this Agreement and the
consummation of the transactions herein contemplated
will not result in a breach or violation of any of
the terms or provisions of or constitute a default
under any statute, any indenture, mortgage, deed of
trust, note agreement or other agreement or
instrument to which the Distributor is a party or by
which the Distributor is bound, the Certificate of
Incorporation or 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
- 4 -
<PAGE> 5
required to be stated therein or necessary to make
the statements therein not misleading.
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.
- 5 -
<PAGE> 6
11. The Distributor makes no representations or warranties
regarding the number of Contracts to be sold by licensed broker-dealers
and insurance agents or the amount to be paid thereunder. The
Distributor does, however, represent that it will actively engage in
its duties under this Agreement on a continuous basis while there is an
effective registration statement with the Commission.
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
- 6 -
<PAGE> 7
wholly owned subsidiary of SunAmerica Inc. This Agreement shall
terminate, without the payment of any penalty by either party:
(a) at the option of Anchor, upon sixty days' advance
written notice to the Distributor; or
(b) at the option of the Distributor upon 90 days'
written notice to Anchor; or
(c) at the option of Anchor upon institution of formal
proceedings against the Distributors by the National
Association of Securities Dealers, Inc. or by the Commission;
or
(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
- 7 -
<PAGE> 8
person for any legal or other expenses reasonably incurred by the
Distributor or such controlling person in connection with investigating
or defending any such loss, claim, damage, liability or action,
provided, however, that Anchor will not be liable in any such case to
the extent that any such loss, claim, 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
/s/ ROBERT P. SALTZMAN
By: ----------------------------------------
Robert P. Saltzman
President
VARIABLE SEPARATE ACCOUNT
By: ANCHOR NATIONAL LIFE
INSURANCE COMPANY
/s/ ROBERT P. SALTZMAN
By: ---------------------------------
Robert P. Saltzman
President
SUNAMERICA CAPITAL SERVICES, INC.
/s/ PETER HARBECK
By: ----------------------------------------
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 August 6, 1993 regarding the sale of the following
contracts funded in Variable Separate Account:
1 . Polaris
<PAGE> 1
EXHIBIT 3B
ANCHOR NATIONAL LIFE INSURANCE COMPANY
1 SunAmerica Center
Los Angeles, CA 90067-6022
Mailing Address:
P. O. Box 54299
Los Angeles, CA 90054-0299
- --------------------------------------------------------------------------------
SELLING
AGREEMENT
<PAGE> 2
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 oligations 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 acordance 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
editors' 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 f 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.
<PAGE> 3
(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.
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
hereof, unless such material has been provided by, or approved
in writing in advance of uch 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
<PAGE> 4
financial situation and needs.
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
<PAGE> 5
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.
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
<PAGE> 6
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
(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
<PAGE> 7
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.
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.
<PAGE> 8
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.
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: ____________________________________
Peter Harbeck, President
"BROKER/DEALER":
__________________________________________
By: ______________________________________
<PAGE> 9
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.
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Signature:
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Signature:
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Signature:
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Signature:
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Signature:
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Signature:
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Signature:
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Signature:
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Signature:
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Signature:
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Signature:
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<PAGE> 10
- --------------------------------------------------------------------------------
COMPANY STATE(S) TAX I.D. NO.
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Signature:
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Signature:
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Signature:
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Signature:
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Signature:
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Signature:
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Signature:
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Signature:
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Signature:
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Signature:
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Signature:
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Signature:
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Signature:
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<PAGE> 11
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> 12
EXHIBIT 1
Commission Schedule
This Commission Schedule is hereby incorporated in and made a part of the
Selling Agreement dated as of _________________________ ("Agreement") by and
between Anchor National Life Insurance Company ("Insurer"), SunAmerica Capital
Services, Inc. and __________________________________ together with its duly
licensed insurance affiliates indicated on Annex I to the Agreement
(collectively, "Broker/Dealer").
1. 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.
2. 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.
3. 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.
4. The following commission rates shall apply to Contracts issued by Insurer.
Commissions are paid in respect of the aggregate purchase payments received and
accepted by the Insurer with complete application information and documentation
as required by the Insurer or as a subsequent purchase payment under a Contract
after the Contract is in force. In addition, if an annual trail commission is
applicable, it will be payable in quarterly installments. The trail commission
installment for each calendar quarter will be calculated based on the Contract
Value as of the end of such quarter. Trail commissions are not payable on any
Contract that has been surrendered, annuitized or under which a death benefit
has been paid.
AMERICAN PATHWAY II CONTRACTS. Commissions will be paid in the amount of
five-and-one-half percent (5.5%). Commissions are paid only on the subsequent
purchase payments received and accepted by the Insurer under a contract which is
in force.
ICAP II CONTRACTS. Commissions will be paid in the amount of five percent (5%).
ICAP II GROUP CONTRACTS. Commissions will be paid in the amount of five percent
(5%).
With respect to any ICAP II Group Contracts, the following commission
chargebacks will apply:
(1) Upon termination of the Contract, all commissions paid on
premiums received in the 12 months prior to termination of the
Contract will be deemed 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; and
(2) If, within the first four years of the Contract, any
participant under the Contract retires or terminates
employment resulting in a withdrawal of the participant's
funds from the Contract, all commissions paid on behalf of
such participant's contributions will be deemed 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; if no premium information is available with
respect to that participant, the charge back will be
calculated based upon the amount of the withdrawal of funds.
<PAGE> 13
POLARIS/POLARISII CONTRACTS (OTHER THAN POLARIS UNALLOCATED GROUP CONTRACTS).
With respect to Polaris/PolarisII Contracts issued to persons age 80 or younger
(at date of issue), commissions will be paid pursuant to one or more of the
options set forth below, as selected by Broker/Dealer or General Agent. If more
than one commission option is chosen, Broker/Dealer agrees that Subagents may
select from the specified commission options at the time a Contract is sold,
which selection may not be changed at a later time. If more than one commission
option is selected, Broker/Dealer must also specify a "default" commission
option, which will apply in the event the Subagent does not select a commission
option at the time of the sale of a Contract. If Broker/Dealer does not specify
a "default" commission option, the "default" commission option shall be Option
2.
<TABLE>
<CAPTION>
Options Commission Rate Annual
Trail Commission
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Option 1 6.00% None
- ------------------------------------------------------------------------------------------
Option 2 5.25% For Contracts in force from 15 through 84 months,
.25% annually, payable in .0625% quarterly installments.
For Contracts in force from 87 months or
longer, .40% annually, payable in .10%
quarterly installments.
- ------------------------------------------------------------------------------------------
Option 3 2.50% For Contracts in force 15 months or longer,
1.00% annually, payable in .25% quarterly installments.
- ------------------------------------------------------------------------------------------
</TABLE>
The following commission option(s) is(are) selected: [ ] Option 1
[ ] Option 2
[ ] Option 3
If more than one commission option has been selected, a "default" commission
option must be selected (choose one only): [ ] Option 1
[ ] Option 2
[ ] Option 3
With respect to Polaris/PolarisII Contracts (other than Polaris Unallocated
Group Contracts) sold to persons age 81 through 90 (at date of issue),
commissions will be paid as set forth below, including the applicable annual
trail commission.
<TABLE>
<CAPTION>
Issue Commission Rate Annual
Age Trail Commission
- --------------------------------------------------------------------------------
<S> <C> <C>
81-85 1.50% For Contracts in force 15 months or longer,
.80% annually, payable in .20% quarterly
installments.
- --------------------------------------------------------------------------------
86-90 1.25% For Contracts in force 15 months or longer,
.80% annually, payable in .20% quarterly
installments.
- --------------------------------------------------------------------------------
</TABLE>
With respect to any Polaris/PolarisII Contract sold with a Nursing Home
Endorsement to an owner who is, at the time of sale, confined to a nursing home
as such term is defined in the endorsement and the owner exercises his or her
rights under the endorsement to surrender the Contract within two years of the
date of issuance, 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.
<PAGE> 14
ANCHOR ADVISOR CONTRACTS. Commissions will be paid pursuant to the one or more
of the options set forth below, as selected by Broker/Dealer or General Agent.
If more than one commission option is chosen, Broker/Dealer agrees that
Subagents may select from the specified commission options at the time a
Contract is sold, which selection may be changed at a later time. If more than
one commission option is selected, Broker/Dealer must also specify a "default"
commission option, which will apply in the event the Subagent does not select a
commission option at the time of the sale of a Contract. If Broker/Dealer does
not specify a "default" commission option, the "default" commission option shall
be Option 1.
<TABLE>
<CAPTION>
Options Commission Rate Annual Trail Commission Commission Chargeback
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Option 1.00% on purchase payments For Contracts in force 15 Upon termination of the
received during first 6 months or longer, annual Contract during first six
months after issuance; .50% trail commissions will be months after issuance, all
on purchase payments paid in the amount of 1.00% commissions paid on purchase
received during the second of account value, payable payments received will be
6 months after issuance. in .25% quarterly deemed unearned and shall be
installments. returned to the Insurer upon
demand or, in the absence of
such demand charged back to
the recipient of the
commission. Upon termination
of the Contract during
second six months after
issuance, 50% of all
commissions paid on purchase
payments received will be
deemed 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.
If, on the first Contract
anniversary, withdrawals
exceed 50% of the aggregate
purchase payments, .50% of
the amount withdrawn will be
deemed unearned and shall
return to the Insurer upon
demand or, in the absence of
such demand, charged back to
the recipient of the
commission.
- --------------------------------------------------------------------------------------------------------------
Option 2 None For Contracts in force None
3 months or longer, annual
trail commissions will be
paid in the amount of 1.00% of
account value, payable in .25%
quarterly installments.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The following commission option(s) is(are) selected: [ ] Option 1
[ ] Option 2
If more than one commission option has been selected, a "default" commission
option must be selected (choose only one): [ ] Option 1
[ ] Option 2
<PAGE> 15
POLARIS UNALLOCATED GROUP. Commissions will be paid pursuant to one or more of
the options set forth below, as selected by Broker/Dealer or General Agent. If
more than one commission option is chosen, Broker/Dealer and General Agent agree
that their Subagents may select from the specified commission options at the
time a Contract is sold, which selection may not be changed at a later time. If
more than one commission option is selected, Broker/Dealer or General Agent must
also specify a "default" commission option, which will apply in the event the
Subagent does not select a commission option at the time of the sale of a
Contract. If Broker/Dealer or General Agent do not specify a "default"
commission option, the "default" commission option shall be Option 2.
<TABLE>
<CAPTION>
Options Commission Rate Annual
Trail Commission
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Option 1 4.50% None
- -----------------------------------------------------------------------------------------
Option 2 4.00% For Contracts in force from 15 months or longer,
.20% annually, payable in .05% quarterly installments.
- -----------------------------------------------------------------------------------------
Option 3 .80% For Contracts in force 15 months or longer,
.80% annually, payable in .20% quarterly installments.
- -----------------------------------------------------------------------------------------
</TABLE>
The following commission option(s) is(are) selected: [ ] Option 1
[ ] Option 2
[ ] Option 3
If more than one commission option has been selected, a "default" commission
option must be selected (choose one only): [ ] Option 1
[ ] Option 2
[ ] Option 3
POLARIS UNALLOCATED GROUP TAKEOVER VERSION. Commissions will be paid in the
amount of one percent (1%) on the initial purchase payment. Annual trail
commissions for Contracts in force 3 months or longer will be in the amount of
one percent (1%) annually, payable in .25% quarterly installments. No
commissions will be paid on subsequent purchase payments.
SEASONS CONTRACTS. With respect to Seasons Contracts issued to persons age 80 or
younger (at date of issue), commissions will be paid pursuant to one or more of
the options set forth below, as selected by Broker/Dealer or General Agent. If
more than one commission option is chosen, Broker/Dealer agrees that Subagents
may select from the specified commission options at the time a Contract is sold,
which selection may not be changed at a later time. If more than one commission
option is selected, Broker/Dealer must also specify a "default" commission
option, which will apply in the event the Subagent does not select a commission
option at the time of the sale of a Contract. If Broker/Dealer does not specify
a "default" commission option, the "default" commission option shall be Option
2.
<TABLE>
<CAPTION>
Options Commission Rate Annual
Trail Commission
- ------------------------------------------------------------------------------------
Option 1 6.00% None
- ------------------------------------------------------------------------------------
<S> <C> <C>
Option 2 5.25% For Contracts in force from 15 through 84 months,
.25% annually, payable in .0625% quarterly
installments.
For Contracts in force from 87 months or
longer, .40% annually, payable in .10%
quarterly installments.
- ------------------------------------------------------------------------------------
Option 3 2.50% For Contracts in force 15 months or longer,
1.00% annually, payable in .25% quarterly
installments.
- ------------------------------------------------------------------------------------
</TABLE>
The following commission option(s) is(are) selected: [ ] Option 1
[ ] Option 2
[ ] Option 3
<PAGE> 16
If more than one commission option has been selected, a "default" commission
option must be selected (choose one only): [ ] Option 1
[ ] Option 2
[ ] Option 3
With respect to Seasons Contracts sold to persons age 81 through 90 (at date of
issue), commissions will be paid as set forth below, including the applicable
annual trail commission.
<TABLE>
<CAPTION>
Issue Commission Rate Annual
Age Trail Commission
- -------------------------------------------------------------------------------
<S> <C> <C>
81-85 1.50% For Contracts in force 15 months or
longer, .80% annually, payable in .20%
quarterly installments.
- -------------------------------------------------------------------------------
86-90 1.25% For Contracts in force 15 months or
longer, .80% annually, payable in .20%
quarterly installments.
- -------------------------------------------------------------------------------
</TABLE>
Broker/Dealer, on behalf of itself and its Affiliates, acknowledges and agrees:
(1) to Insurer's policies with respect to commission chargebacks which are
provided for in the Agreement and herein; and (2) that it has selected the above
commission options, which can not be modified without providing Insurer a newly
executed commission schedule.
"BROKER/DEALER":
________________________________________
By: ____________________________________
Name:
Its:
<PAGE> 1
EXHIBIT 4
Anchor National Life Insurance Company
A STOCK COMPANY -- LOS ANGELES, CALIFORNIA
CONTRACT NUMBER P04925ILKE0
PARTICIPANT POLARIS PAGES
EXECUTIVE OFFICE ANNUITY SERVICE CENTER
11601 WILSHIRE BOULEVARD P.O. BOX 54299
LOS ANGELES, CA 90025 LOS ANGELES, CA 90054-0299
ANCHOR NATIONAL LIFE INSURANCE COMPANY (the "Company" or "Anchor National")
agrees to provide benefits to the Participant in the Group Contract, subject to
the provisions set forth in this Contract and in consideration of the
Participant's Enrollment Form and Purchase Payments We receive.
This Contract is evidence of coverage under the Group Contract if a Participant
Enrollment Form is attached. The coverage will begin as of the Certificate Date,
shown on the Certificate Data Page.
The value of amounts allocated to the Separate Account during the accumulation
and annuity periods is not guaranteed, and will increase or decrease based upon
the investment experience of the Fund underlying the Separate Account.
TEN DAY RIGHT TO EXAMINE CERTIFICATE - You may return this Certificate to our
Annuity Service Center within 10 days after you receive it. The Company will
refund the Contract Value for the valuation period in which the Certificate is
received. Upon such refund, the Certificate shall be void.
THIS IS A LEGAL CONTRACT. READ IT CAREFULLY.
/s/ SUSAN L. HARRIS /s/ ROBERT P. SALTZMAN
--------------------- ----------------------
Susan L. Harris Robert P. Saltzman
Secretary President
ALLOCATED FIXED AND VARIABLE
GROUP ANNUITY CERTIFICATE
Non-Participating
<PAGE> 2
TABLE OF CONTENTS
Contract Data Page Page 3
Definitions Page 5
General Provisions Page 7
Conformity With State Laws; Changes in Law; Assignment; Misstatement
of Age or Sex; Written Notice; Proof of Age, Sex or Survival;
Non-Participating; Periodic Reports; Premium Taxes; Change of Annuitant;
Deferment of Payments; Suspension of Payments; Purchase Payments;
Substitution of Fund; Separate Account
Accumulation Provisions Page 9
Separate Account Accumulation Value; Number of Accumulation Units;
Accumulation Unit Value (AUV); Fixed Account Accumulation Value; Fixed
Account Guarantee Period Options; Market Value Adjustment
Charges and Deductions Page 11
Contract Administration Charge; Contingent Deferred Sales Charge;
Expense Risk Charge; Distribution Expense Charge; Mortality Risk Charge;
Guaranteed Death Benefit Risk Charge; Market Value Adjustment
Transfer Provision Page 12
Transfers of Accumulation Units Between Variable Accounts; Transfers
of Accumulation Units To and From the Fixed Account
Withdrawal Provision Page 13
Contingent Deferred Sales Charge
Death Benefit Provision Page 15
Proof of Death; Amount of Death Benefit; Beneficiary; Death of
Participant
Annuity Provisions Page 17
Payments to Participant; Fixed Annuity Payments; Amount of Fixed
Annuity Payments; Amount of Variable Annuity Payments
Annuity Options Page 19
<PAGE> 3
CERTIFICATE DATA PAGE
Certificate Number: Annuity Service Center
P04925ILKEO (KEOGH) P.O. BOX 54299
LOS ANGELES, CA 90054-0299
Participant:
POLARIS PAGES
Annuitant:
POLARIS PAGES
Beneficiary:
Annuity Date: Date of Issue:
APRIL 01, 2037 DECEMBER 14, 1992
Age at Issue: First Purchase Payment
$10,000.00
Maximum Age at Maturity:
85
Funds: Fixed Account-
SUNAMERICA SERIES TRUST Subsequent Guarantee Rate:
ANCHOR SERIES TRUST (3.0%)
Annual Contract Administration Charge:
$35.00
Separate Account:
MARKET VALUE ADJUSTMENT
All payments and values based on the Fixed Account are subject to a Market Value
Adjustment formula, the operation of which may result in upward and downward
adjustments in amounts payable. The Market Value Adjustment formula will not be
applied for:
(1) the payment of the Death Benefit,
(2) the amounts withdrawn to pay fees or charges, nor
(3) amounts withdrawn within 30 days after the end of the Guarantee Period.
<PAGE> 4
PURCHASE PAYMENT ALLOCATION
Variable Separate Account Options
SunAmerica Anchor
Series Trust Series Trust
Fixed Account Options
Guarantee
Period
<PAGE> 5
DEFINITIONS
ACCUMULATION UNIT
A unit of measurement used to compute the Contract Value in a Variable Account
prior to the Annuity Date.
ANNUITY SERVICE CENTER
As specified on the Certificate Data Page.
ANNUITANT
The natural person on whose life the annuity benefit for the Certificate is
based.
ANNUITY DATE
The date on which annuity payments to a Participant are to start. The latest
possible Annuity Date will be set by Us.
ANNUITY UNIT
A unit of measurement used to compute annuity payments in a Separate Account.
CERTIFICATE
This form which described Your interest in the Group Contract.
CERTIFICATE DATE
The date Your Certificate is issued, shown on the Certificate Date Page.
CONTRACT HOLDER
The individual or entity who has applied for the Group Contract on behalf of the
Participants.
CONTRACT VALUE
The sum of Your share of the Variable Accounts' Accumulation Values and Fixed
Account Accumulation Values.
CONTRACT YEAR
A year starting from the Certificate Date in one calendar year and ending on the
Certificate Date in the succeeding calendar year.
CURRENT INTEREST RATE
The sum of the Subsequent Guarantee Rate and the Excess Interest Rate declared
by Us for any Guarantee Period.
DEFERRED ANNUITY
An annuity Contract under which the start of annuity payments is deferred to a
future date.
EXCESS INTEREST RATE
A rate of interest declared by Us in excess of the Subsequent Guarantee Rate for
any Guarantee Period.
FIXED ACCOUNT
Amounts allocated to the Fixed Account under the Certificate are allocated to
and made a part of the general account assets of the Company. Amounts allocated
to the Fixed Account for any Guaranteed Period will be credited with interest at
the Subsequent Guarantee Rate, and in addition, an Excess Interest Rate which We
may declare at Our discretion.
FIXED ANNUITY
A series of periodic payments for the benefit of a Participant of predetermined
amounts that do not vary with investment experience. Such payments are made out
of the general account of the Company.
FUND
A collective term used to represent an investment entity, which may be selected
by the Participant to be an underlying investment of the Participant's
Certificate.
GUARANTEE PERIOD
The period for which the Current Interest Rate is credited.
<PAGE> 6
IRC
The Internal Revenue Code of 1986, as amended, as the same may be amended or
superceded.
PARTICIPANT
The person named in a Certificate who is entitled to exercise all rights and
privileges of ownership under a Certificate.
PAYEE
Any person receiving payment of annuity benefits under this Certificate during
the Annuity Period.
PURCHASE PAYMENTS
Payments made by or on behalf of the Participant to the Company for the
Certificate.
SEPARATE ACCOUNT
A segregated asset account named on the Certificate Data Page, established by
the Company in accordance with California law. The Separate Account consists of
several Variable Accounts, each investing in a separate Series of the Fund. The
Prospectus should be read for complete details regarding Separate Account
contracts.
SERIES
A separate investment portfolio of a 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.
SUBSEQUENT GUARANTEE RATE
The rate of interest established by the Company for the applicable subsequent
Guarantee Period, but in no event less than the rate specified on the
Certificate Data Page.
VALUATION PERIOD
The period beginning at the close of business of the New York Stock Exchange on
each day that the New York Stock Exchange is open for business and ending at the
close of the next succeeding business day of the New York Stock Exchange.
VARIABLE ACCOUNT
A division of the Separate Account, the assets of which consist of a specified
Series of a Fund. The available Variable Accounts are shown on the Certificate
Data Page.
VARIABLE ANNUITY
A series of periodic payments which vary in amount according to the investment
experience of a Variable Account.
WE, OUR, US, THE COMPANY
Anchor National Life Insurance Company.
YOU, YOUR
The Participant.
<PAGE> 7
GENERAL PROVISIONS
CONFORMITY WITH STATE LAWS
This Certificate will be interpreted under the law of the state in which it is
delivered. Any provision which, on the Certificate Date, is in conflict with the
law of such state is amended to conform to the minimum requirements of such law.
A detailed statement of how We calculate the values in this Certificate has been
filed with the insurance department where the Certificate was delivered. These
values are at least as great as those required by law.
CHANGES IN LAW
If laws governing this Certificate or the taxation of benefits under the Group
Contract change, We will amend the Group Contract and this Certificate to comply
with these changes.
ASSIGNMENT
The Participant may assign this Certificate before the Annuity Date, but We will
not be bound by an assignment unless it is in writing and We have received it.
Participant's rights and those of any other person referred to in this
Certificate will be subject to the assignment. We assume no responsibility for
the validity or tax consequences of any assignment.
MISSTATEMENT OF AGE OR SEX
If the age or sex of any Annuitant has been misstated, future payments will be
adjusted using the correct age and sex, according to Our rates in effect on the
date that annuity payments were determined. Any overpayment from the Fixed
Account, plus interest at the rate of 4% per year, will be deducted from the
next payment(s) due. Any underpayment from the Fixed Account, plus interest at
the rate of 4% per year, will be paid in full with the next payment due. Any
overpayment from the Variable Accounts will be deducted from the next payment(s)
due. Any underpayment from the Variable Accounts will be paid in full with the
next payment due.
WRITTEN NOTICE
Any notice We send to the Participant will be sent to Participant's address
shown in the Participant Enrollment Form unless the Participant requests
otherwise. Any written request or notice to Us must be sent to our Annuity
Service Center, as specified on the Certificate Data Page.
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 Certificate depends on the Annuitant being alive, the
Company may require satisfactory proof of survival.
NON-PARTICIPATING
This Contract does not share in Our surplus.
PERIODIC REPORTS
The Company will furnish each Participant with a statement of the Variable and
Fixed Account balances periodically.
PREMIUM TAXES
The Company may deduct from the Contract Value any premium or other taxes
payable to a state or other government entity. Should We advance any amount so
due, We are not waiving any right to collect such amounts at a later date. The
Company will deduct any withholding taxes required by applicable law.
CHANGE OF ANNUITANT
Prior to the Annuity Date, the Participant may change the Annuitant. To be
effective, such a change must be received by Us in a written form acceptable to
Us.
DEFERMENT OF PAYMENTS
We may defer making payments from the Fixed Account for up to 6 months.
Interest, subject to state requirements, will be credited during the deferral
period.
<PAGE> 8
SUSPENSION OF PAYMENTS
We may suspend or postpone any payments from the Variable Accounts if any of the
following occur:
(a) The New York Stock Exchange is closed.
(b) Trading on the New York Stock Exchange is restricted.
(c) An emergency exists such that it 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.
PURCHASE PAYMENTS
Purchase Payments are flexible. This means that You, subject to Company declared
minimums and maximums, may change the amounts, frequency or timing of Purchase
Payments. Purchase Payments may be allocated among one or more of the Fixed
Account Options and one or more Variable Accounts of the Separate Account in
accordance with instructions from You. We reserve the right to specify the
minimum that may be allocated to a Variable Account under the Certificate.
SUBSTITUTION OF FUND
If the shares of any of the Funds or any Series of the Fund should no longer be
available for investment by the Separate Account or if, in the judgment of the
Company's Board of Directors, further investment in the shares of a Fund is no
longer appropriate in view of the purpose of the Contract, the Company may
substitute shares of another mutual fund for Fund shares already purchased or to
be purchased in the future by Purchase Payments under the Contract. No
substitution of securities may take place without prior approval of the
Securities and Exchange Commission and under such requirements as it may impose.
SEPARATE ACCOUNT
The Separate Account is a separate investment account of the Company. It is
shown on the Contract Data Page. The assets of the Separate Account are the
property of the Company. However, they are not chargeable with the liabilities
arising out of any other business the Company may conduct. Each Variable Account
is not chargeable with liabilities arising out of any other Variable Account.
<PAGE> 9
ACCUMULATION PROVISIONS
SEPARATE ACCOUNT ACCUMULATION VALUE
The Separate Account Accumulation Value under the Certificate shall be the sum
of the values of the Accumulation Units held in the Variable Accounts for the
Participant.
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 Accumulation Unit Value for that Variable Account as of the Valuation Period
in which the Purchase Payment or transfer amount is received.
The number of Accumulation Units will be adjusted for withdrawals,
annuitizations, transfers, and charges. Adjustments will be made as of the
Valuation Period in which We receive all requirements for the transaction, as
appropriate.
ACCUMULATION UNIT VALUE (AUV)
The AUV of a Variable Account for any Valuation Period is calculated by
subtracting (2) from (1) and dividing the result by (3) where:
(1) is the total value at the end of the given Valuation Period of
the assets attributable to the Accumulation Units of the
Variable Account minus the total liabilities;
(2) is the cumulative unpaid charge for assumption of mortality,
expense distribution expense and guaranteed death benefit
expense risks (See CHARGES AND DEDUCTIONS);
(3) is the number of Accumulation Units outstanding at the end of
the given Valuation Period.
FIXED ACCOUNT ACCUMULATION VALUE
The Fixed Account Accumulation Value under a Certificate shall be the sum of all
monies allocated or transferred to the Fixed Account, reduced by any applicable
premium taxes, plus all interest credited on the Fixed Account during the period
that the Certificate has been in effect. This amount shall be adjusted for
withdrawals, annuitizations, transfers, and charges.
FIXED ACCOUNT GUARANTEE PERIOD OPTIONS
For any amounts allocated to the Fixed Account, the Participant will select the
duration of the Guarantee Period(s) from those listed on the Certificate Data
Page. Such amounts will earn interest at the Current Interest Rate for the
chosen duration, compounded annually during the entire Guarantee Period. In no
event will the Current Interest Rate be less than the Subsequent Guarantee Rate
specified on the Certificate Data Page.
You may allocate Purchase Payments, or make transfers from the Variable Account
Options, to the Fixed Account at any time prior to the latest Annuity Date.
However, no Guarantee Period other than one year may be chosen which extends
beyond the latest Annuity Date. For thirty (30) days following the date of
expiration of the current Guarantee Period, You may renew for the same or any
other Guarantee Period at the then Current Interest Rate or may transfer all or
a portion of the amount to the Variable Accounts. Transfers from the Fixed
Account may take place thirty (30) days following the end of a Guarantee Period
without being subject to Market Value Adjustment (MVA). If the Participant does
not specify a Guarantee Period at the time of renewal, We will select the same
Guarantee Period as has just expired, so long as such Guarantee Period does not
extend beyond the latest Annuity Date. If such Guarantee Period does extend
beyond the latest Annuity Date, We will choose the longest period that will not
extend beyond such date. If a renewal occurs within one year of the latest
Annuity Date We will credit interest up to the latest Annuity Date at the then
Current Interest Rate for the one year Guarantee Period.
<PAGE> 10
MARKET VALUE ADJUSTMENT
Except on the latest Annuity Date of the chosen Guarantee Period, any amount
withdrawn, transferred or annuitized prior to the end of that Guarantee Period
may be subject to a MVA. The MVA will be calculated by multiplying the amount
withdrawn, transferred or annuitized by the formula described below:
{(1+I)/(1+J+0.005)} to the n/12-1 power
I= The interest rate currently in effect for that Guarantee Period.
J= The Current Interest Rate available for the Guarantee Period equal to the
number of years (rounded up to an integer) remaining in the current Guarantee
Period at the time of withdrawal, transfer or annuitization. In the
determination of J, if the Company currently does not offer the applicable
Guarantee Period, then the rate will be determined by linear interpolation of
the current rates for the nearest two Guarantee Periods that are available.
N= The number of full months remaining in the current Guarantee Period at the
time the withdrawal or annuitization request is processed.
There will be no Market Value Adjustment on withdrawals from the Fixed Account
in the following situations: (1) Death Benefit paid upon death of the
Participant; (2) amounts withdrawn to pay fees or charges; and (3) amounts
withdrawn from the Fixed Account within thirty (30) days after the end of the
Guarantee Period.
<PAGE> 11
CHARGES AND DEDUCTIONS
We will deduct the following charges from the Certificate:
CONTRACT ADMINISTRATION CHARGE
The charge specified on the Certificate Data Page will be deducted on each
Certificate 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 Certificate anniversary. We reserve the right to assess a charge on a
class basis which is less than the charge specified on the Certificate Data
Page.
CONTINGENT DEFERRED SALES CHARGE
This charge may be deducted upon withdrawal of the Contract Value, in whole
or in part. See WITHDRAWAL PROVISIONS.
EXPENSE RISK CHARGE
On an annual basis this charge equals 0.35% of the average daily total net asset
value of the Variable Accounts. This charge is to compensate Us for assuming the
expense risks under the Certificate.
DISTRIBUTION EXPENSE CHARGE
On an annual basis this charge equals 0.15% of the average daily total net asset
value of the Variable Account. This charge is to compensate Us for all
distribution expenses associated with the Certificate.
MORTALITY RISK CHARGE
On an annual basis this charge equals 0.9% of the average daily total net asset
value of the Variable Account. This charge is to compensate Us for assuming the
mortality risks under the Certificate.
GUARANTEED DEATH BENEFIT RISK CHARGE
On an annual basis this charge equals 0.12% of the average daily total net asset
value of the Variable Account. This charge is to compensate Us for the risk
assumed as a result of contractual obligations to provide an enhanced minimum
guaranteed Death Benefit prior to the Annuity Date.
MARKET VALUE ADJUSTMENT
See MARKET VALUE ADJUSTMENT section.
<PAGE> 12
TRANSFER PROVISION
Prior to the Annuity Date, You may transfer all or part of Your Contract Value
to any of the Variable Accounts or the Fixed Account, subject to certain
restrictions.
We reserve the right to charge a fee for transfers if the number of transfers
exceeds the limit specified by Us.
Transfers will be effected at the end of the Valuation Period in which We
receive Your request for the transfer.
TRANSFERS OF ACCUMULATION UNITS BETWEEN VARIABLE ACCOUNTS
Both prior to and after the Annuity Date, You may transfer all or a portion of
Your investment in one Variable Account to another Variable Account. A transfer
will result in the purchase of Accumulation Units in a Variable Account and the
redemption of Accumulation Units in the other Variable Account.
The minimum amount which can be transferred between Variable Accounts and the
amount that can remain in the Variable Account is subject to Company limits.
TRANSFERS OF ACCUMULATION UNITS TO AND FROM THE FIXED ACCOUNT
Both prior to and after the Annuity Date, You may transfer all or any part of
the Contract Value from the Variable Account(s) to the Fixed Account of the
Certificate. After the Annuity Date no transfers from the Fixed Account to the
Variable Account are allowed. For transfers from the Fixed Account prior to the
Annuity Date see ACCUMULATION PROVISIONS - FIXED ACCOUNT ACCUMULATION VALUE.
The amount transferred to the Fixed Account from a Variable Account will be
equal to the annuity reserve for the Payee's interest in that Variable Account.
The annuity reserve is the product of (a) multiplied by (b) multiplied by (c),
where
(a) is the number of Annuity Units representing the
Participant's interest in the Variable Account;
(b) is the Annuity Unit Value for the Variable Account; and
(c) is the present value of $1.00 per payment period as of the
age of the Annuitant at the time of transfer for the Annuity
Option, determined using the 1983a Annuity Mortality Tables
with interest at 3.5% per year.
Amounts transferred to the Fixed Account will be applied under the Annuity
Option at the age of the Annuitant at the time of the transfer. All amounts and
Annuity Unit Values will be determined as of the end of the Valuation Period
preceding the effective date of the transfer.
<PAGE> 13
WITHDRAWAL PROVISION
Prior to the Annuity Date while the Annuitant is living, You may withdraw all or
part of the Contract Value amounts under this Certificate by informing Us at Our
Annuity Service Center. For full withdrawal, this Certificate must be returned
to Our Annuity Service Center.
Absent written notification to the contrary, withdrawals and any applicable
charge will be deducted from the Contract Value in proportion to its allocation
among the Fixed Account and the Variable Accounts. Withdrawals will be based on
values at the end of the Valuation Period in which the request for withdrawal
and the Certificate (in the case of a full withdrawal), are received at the
Annuity Service Center. Unless the SUSPENSION OF PAYMENTS or DEFERMENT OF
PAYMENTS sections are in effect, payment of withdrawals will be made within
seven days. Market Value Adjustment may be applied to withdrawals.
CONTINGENT DEFERRED SALES CHARGE
Withdrawal of all or part of the Contract Value may be subject to a Contingent
Deferred Sales Charge (CDSC). However, no CDSC is made on an amount withdrawn
which is considered to be a withdrawal of earnings.
In addition, for the first withdrawal of a Contract Year, no Contingent Deferred
Sales Charge is applied to such part of the withdrawal which does not exceed the
larger of (a) earnings in the Certificate or (b) the Free Corridor. The Free
Corridor is equal to 10% of the sum of Purchase Payments made more than one year
prior to the date of withdrawal, are still subject to CDSC, and are not yet
withdrawn. The portion of a free withdrawal, which exceeds the sum of earnings
attributable to the Participant and premiums which are both no longer subject to
CDSC and not yet withdrawn, is assumed to be a withdrawal against future
earnings. We reserve the right to allow the Free Corridor to include all
Purchase Payments still subject to CDSC which are not yet withdrawn. If this is
done, it will apply to all Participants and Participants will be notified of
such change.
For the purpose of determining the CDSC, a withdrawal will be attributed to
amounts in the following order: (1) earnings in the Certificate, (2) Purchase
Payments which are both no longer subject to CDSC and are not yet withdrawn, and
(3) Purchase Payments subject to CDSC. Purchase Payments, when withdrawn, are
assumed to be withdrawn on a first-in first-out (FIFO) basis. The charge applied
to any withdrawal subject to CDSC will depend on the age of the Purchase
Payments to which the withdrawal is attributed.
<TABLE>
<CAPTION>
Number of Full Contract Years Elapsed Contingent
Between Contract Year of Withdrawal Deferred
and Contract Year of Purchase Payment Sales Charge
======================================== ===============
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7+ 0%
</TABLE>
The CDSC will be assessed against the Variable Accounts and the Fixed Account in
the same proportion as the remaining Contract Value is allocated unless the
allocation is specified by the Participant. If the remaining Contract Value is
insufficient to cover the Contingent Deferred Sales Charge, any remaining
balance will be deducted from the dollar amount requested.
In addition to a CDSC, a withdrawal from the Fixed Account may also incur a
Market Value Adjustment. See ACCUMULATION PROVISIONS - MARKET VALUE ADJUSTMENT
for further details.
<PAGE> 14
DEATH BENEFIT PROVISION
We will pay a Death Benefit to the Beneficiary upon Our receiving due proof that
the Participant died prior to the Annuity Date. The Beneficiary may elect to
receive a single sum distribution or to receive annuity payments. If a single
sum payment is requested, payment will be in accordance with any applicable laws
and regulations governing payments on death. If an Annuity Option is desired, an
Option must be elected within 60 days of Our receipt of due proof of the
Participant's death at our Annuity Service Center; otherwise a single sum
payment will be made at the end of such 60 day period. Funds will remain
allocated pursuant to the last allocation and instructions in effect at the
Participant's death until Our Annuity Service Center receives new written
instructions.
PROOF OF DEATH
Due Proof of Death means:
1. a copy of a certified death certificate; OR
2. a copy of a certified 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
Participant at the time of death; OR
4. any other proof satisfactory to Us.
AMOUNT OF DEATH BENEFIT
The amount of the Death Benefit is equal to the greater of:
1. the Contract Value at the end of the Valuation Period during which We
receive at Our Annuity Service Center due proof of the Participant's
death and an election of the type of payment to be made; OR
2. the total amount of Purchase Payments compounded at 4% interest, minus
the sum of
(a) the total amount of partial withdrawals and partial
annuitizations compounded at 4% interest, and
(b) premium taxes incurred, compounded at 4%; OR
3. After the seventh Contract Year, the Contract Value at the seventh
Certificate Anniversary compounded at 4% interest, plus (a) any
Purchase Payments since the seventh anniversary,
compounded at 4% minus the sum of
(b) the total amount of partial withdrawals and partial
annuitizations since the seventh anniversary, compounded at
4%, and
(c) premium taxes incurred since the seventh anniversary,
compounded at 4%.
If the Participant was age 70 or older on the date of issue, both (2) and (3)
above will be compounded at 3%, rather than 4%. If the Death Benefit is paid on
the death of a Participant who was not originally named in the application and
was age 70 or older on the date of issue, both (2) and (3) above will be
compounded at 3% rather than 4%.
BENEFICIARY
The Beneficiary is as stated in the Participant Enrollment Form unless later
changed by the Participant. If two or more persons are named, those surviving
the Participant will share equally unless otherwise stated. If the Annuitant
survives the Participant, and there are no surviving Beneficiaries, the
Annuitant will be deemed the Beneficiary. If the Participant is also the
Annuitant and there are no surviving Beneficiaries at the death of the
Participant, the Death Benefit will be paid to the estate of the Participant.
While the Participant is living and before the Annuity Date, the Participant may
change the Beneficiary by written notice in a form satisfactory to Us. The
change will take effect on the date We receive the notice.
<PAGE> 15
DEATH OF PARTICIPANT
If the Participant dies before the Annuity Date, the Beneficiary will have
the following options;
1. Collect the Death Benefit in a lump sum payment; OR
2. Collect the Death Benefit in the form of one of the Annuity Options.
The payments must be over the life of the Beneficiary or over a period
not extending beyond the life expectancy of the Beneficiary. This
option must be selected and payments commence within one year after
Participant's death, OR
3. Receive the entire Contract Value adjusted for Contingent Deferred
Sales Charge and Market Value Adjustment, if applicable, within 5 years
of the date of death of the Participant, OR
4. If the Beneficiary is the Participant's spouse, the Beneficiary may
continue the Contract in force.
If there is no surviving Beneficiary, the Death Benefit will be paid in a lump
sum to the Participant's estate. If there is more than one surviving
Beneficiary, the Beneficiaries must choose to receive their respective portions
of the Death Benefit according to either (1), (2) or (3) above.
<PAGE> 16
ANNUITY PROVISIONS
PAYMENTS TO PARTICIPANT
Unless otherwise requested by the Participant, the Company will make annuity
payments to the Participant. If the Participant wants the annuity payments to be
made to some other Payee, We will make such payments subject to the following:
(a) A written request must be filed at the Annuity Service Center.
(b) Such request must be filed not later than thirty (30) days before
the due date of the first annuity payment.
Any such request is subject to the rights of any assignee. No payments available
to or being paid to the Payee while the Annuitant is alive can be transferred,
commuted, anticipated or encumbered.
FIXED ANNUITY PAYMENTS
To the extent a fixed Annuity Option has been elected, the proceeds payable
under this Certificate less any applicable premium taxes, shall be applied to
the payment of the Annuity Option elected at whichever of the following is more
favorable to the Payee: (a) the annuity rates based upon the applicable tables
in the Certificate; or (b) the then current rates provided by the Company on
Contracts of this type on the Annuity Date. In no event will the fixed annuity
payments be changed once they begin.
AMOUNT OF FIXED ANNUITY PAYMENTS
The amount of each Fixed Annuity payment will be determined by applying the
portion of the Contract Value allocated to Fixed Annuity Payments less any
applicable premium taxes, charges and the MVA to the annuity table applicable to
the Annuity Option chosen.
AMOUNT OF VARIABLE ANNUITY PAYMENTS
(a) FIRST VARIABLE PAYMENT: The dollar amount of the first monthly
annuity payment will be determined by applying the portion of the
Contract Value allocated to Variable Annuity Payments, less any
applicable Premium Taxes, to the annuity table applicable to the
Annuity Option chosen. If more than one Variable Account has been
selected, the value of the Participant's interest in each Variable
Account is applied separately to the annuity table to determine the
amount of the first annuity payment attributable to the 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.
(c) VALUE OF EACH VARIABLE ANNUITY UNIT: The initial value of an
Annuity Unit of each Variable Account was arbitrarily set at $10
when the Variable Accounts were 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 Net Investment Factor for any Variable Account for any Valuation Period is
determined by dividing (a) by (b) and then subtracting (c) from the result
where:
(a) is the net result of:
(1) the net asset value of a Series of the Fund share
held in the Variable Account determined as of the end
of the Valuation Period, plus
(2) the per share amount of any dividend or other
distribution declared by the Series of the Fund on
<PAGE> 17
the shares held in the Variable Account if the
"ex-dividend" date occurs during the Valuation
Period, plus or minus
(3) a per share credit or charge with respect to any
taxes paid or reserved for by the Company during the
Valuation Period which are determined by the Company
to be attributable to the operation of the Variable
Account (no federal income taxes are applicable under
present law)
(b) is the net asset value of a Series of the Fund share held in
the Variable Account determined as of the end of the preceding
Valuation Period; and
(c) is the asset charge factor determined by the Company for the
Valuation Period to reflect the Expense Risk Charge,
Distribution Expense Charge, Mortality Risk Charge, and
Guaranteed Death Benefit Risk Charge.
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 at the end of the
Valuation Period immediately preceding 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.
<PAGE> 18
ANNUITY OPTIONS
Upon written election filed with the Company at its Annuity Service Center, all
or part of the Contract Value may be applied to provide one of the following
options or any Annuity Option that is mutually agreeable. The portion of the
Contract Value which is in the Fixed Account immediately prior to the Annuity
Date, applied to an annuity may be subject to a Market Value Adjustment. See
ACCUMULATION PROVISIONS - MARKET VALUE ADJUSTMENT for further details.
OPTION 1 - LIFE ANNUITY, LIFETIME MONTHLY PAYMENTS GUARANTEED
Monthly payments payable to the Payee 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 the Beneficiary.
OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY
Monthly payments payable to the Payee during the joint lifetime of the Annuitant
and a designated second person and during the lifetime of the survivor.
If a reduced payment to the survivor is desired, Variable Annuity payments, will
be determined using either one-half or two-thirds of the number of each type of
Annuity Unit credited to the Certificate. Fixed monthly payments, will be equal
to either one-half or two-thirds of the fixed monthly payment payable during the
joint lifetime of the Annuitant and the designated second person.
OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY - 120 MONTHLY PAYMENTS GUARANTEED
Monthly payments payable to the Payee during the joint lifetime of the Annuitant
and designated second person 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, any remaining guaranteed
annuity payments will be continued to the Beneficiary named on the Annuity
Option Selection Form. In the event of death of the Annuitant and the designated
second person under this option, the Certificate provides that in certain
circumstances, the discounted value of the remaining guaranteed annuity
payments, if any, will be calculated and paid in one sum.
OPTION 4 - LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED
An annuity payable monthly to the Payee 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 under OPTION 3 above. In the event of death
of the Annuitant under this option, the Certificate provides that in certain
circumstances, the discounted value of the remaining payments, if any, will be
calculated and paid in one sum.
OPTION 5 - FIXED PAYMENTS FOR A SPECIFIED PERIOD CERTAIN
Fixed monthly payments payable to the Payee for any specified period of time
(three (3) years or more, but not exceeding thirty (30) years), as elected. The
election must be made for full twelve month periods. In the event of death of
the Payee under this option, the Certificate provides that in certain
circumstances, the discounted value of the remaining payments, if any, will be
calculated and paid in one sum.
BASIS OF COMPUTATION
The actuarial basis for the Table of Guaranteed Annuity Rates is the 1983a
Annuity Mortality Table, without projection with interest at 3.5%. The Table of
Guaranteed Annuity Rates does not include any applicable premium tax.
<PAGE> 19
OPTIONS 1 & 4 - TABLE OF MONTHLY
INSTALLMENTS PER $1,000
(Monthly installments for ages not shown will be furnished upon request.)
<TABLE>
<CAPTION>
Option 1 Option 4 Option 4
Life Annuity Life Annuity
Age of (w/120 payments (w/240 payments
Payee Life Annuity guaranteed) guaranteed)
Male Female Male Female Male Female
<S> <C> <C> <C> <C> <C> <C>
55 4.99 4.54 4.91 4.51 4.66 4.38
56 5.09 4.62 5.00 4.58 4.72 4.44
57 5.20 4.71 5.10 4.66 4.78 4.51
58 5.32 4.80 5.20 4.75 4.85 4.57
59 5.44 4.90 5.31 4.84 4.91 4.64
60 5.57 5.00 5.42 4.93 4.97 4.70
61 5.71 5.11 5.54 5.03 5.04 4.77
62 5.86 5.23 5.67 5.14 5.10 4.84
63 6.02 5.36 5.80 5.25 5.16 4.91
64 6.20 5.49 5.94 5.37 5.22 4.98
65 6.38 5.64 6.08 5.50 5.28 5.05
66 6.58 5.79 6.23 5.63 5.33 5.12
67 6.79 5.95 6.38 5.77 5.38 5.19
68 7.02 6.13 6.54 5.91 5.43 5.25
69 7.26 6.32 6.71 6.07 5.48 5.32
70 7.52 6.53 6.87 6.23 5.52 5.37
71 7.80 6.75 7.04 6.40 5.55 5.43
72 8.09 6.99 7.22 6.58 5.59 5.48
73 8.41 7.26 7.39 6.76 5.62 5.52
74 8.75 7.54 7.57 6.95 5.64 5.56
75 9.12 7.85 7.75 7.14 5.66 5.60
76 9.51 8.18 7.92 7.34 5.68 5.63
77 9.92 8.54 8.09 7.54 5.70 5.66
78 10.37 8.94 8.26 7.74 5.71 5.68
79 10.85 9.36 8.42 7.94 5.72 5.70
80 11.37 9.82 8.57 8.13 5.73 5.71
81 11.92 10.32 8.71 8.32 5.74 5.72
82 12.50 10.87 8.85 8.50 5.74 5.73
83 13.12 11.46 8.97 8.67 5.75 5.74
84 13.78 12.09 9.09 8.83 5.75 5.74
85 14.47 12.78 9.20 8.97 5.75 5.75
</TABLE>
<PAGE> 20
OPTION 2 - TABLE OF MONTHLY INSTALLMENTS PER $1,000
(Monthly installments for ages not shown will be furnished upon request.)
Joint and Survivor Life Annuity
<TABLE>
<CAPTION>
Age of
Male
Payee Age of Female Payee
55 60 65 70 75 80 85
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
55 4.16 4.34 4.51 4.66 4.78 4.86 4.92
60 4.27 4.51 4.76 4.99 5.19 5.33 5.44
65 4.35 4.66 4.99 5.34 5.66 5.92 6.11
70 4.42 4.78 5.20 5.67 6.16 6.60 6.96
75 4.47 4.86 5.35 5.95 6.63 7.33 7.95
80 4.50 4.92 5.46 6.17 7.04 8.04 9.02
85 4.52 4.95 5.53 6.31 7.34 8.63 10.05
</TABLE>
OPTION 5 - TABLE OF MONTHLY INSTALLMENTS PER $1,000
Fixed Payment for Specified Period
<TABLE>
<CAPTION>
Number Mo. Number Mo. Number Mo. Number Mo.
of Yrs. Payment of Yrs. Payment of Yrs. Payment of Yrs. Payment
<S> <C> <C> <C> <C> <C> <C> <C>
3 29.19 10 9.83 17 6.47 24 5.09
4 22.27 11 9.09 18 6.20 25 4.96
5 18.12 12 8.46 19 5.97 26 4.84
6 15.35 13 7.94 20 5.75 27 4.73
7 13.38 14 7.49 21 5.56 28 4.63
8 11.90 15 7.10 22 5.39 29 4.53
9 10.75 16 6.76 23 5.24 30 4.45
</TABLE>
<PAGE> 1
[ANCHOR NATIONAL LOGO]
Anchor National Life New Business Documents New Business Documents
Insurance Company with checks: without checks:
1 Sun America Center P. O. Box 100330 P. O. Box 54299
Los Angeles, CA 90067-6022 Pasadena, CA 91189-0001 Los Angeles, CA 90054-0299
- --------------------------------------------------------------------------------
PARTICIPANT ENROLLMENT FORM R-5325NB (3/97)
DO NOT USE HIGHLIGHTER. Please Print or type.
A. PARTICIPANT [ ]Mr. [ ]Mrs. [ ]Ms. [ ]Miss. [ ]Dr. [ ]Sr. [ ]Jr.
-----------------------------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL
-----------------------------------------------------------------
STREET ADDRESS CITY STATE ZIP CODE
MO DAY YR. [ ]M [ ]F
----------------- ---------- ------------------------ ---------
DATE OF BIRTH SEX SOC.SEC OR TAX ID NUMBER TELEPHONE
NUMBER
MO DAY YR.
-----------------
ANNUITY DATE
JOINT PARTICIPANT
(IF ANY, MUST BE SPOUSE) ________________________________________
LAST NAME FIRST NAME MIDDLE INITIAL
-----------------------------------------------------------------
STREET ADDRESS CITY STATE ZIP CODE
MO DAY YR. [ ]M [ ]F
----------------- ---------- ------------------------ ---------
DATE OF BIRTH SEX SOC.SEC OR TAX ID NUMBER TELEPHONE
NUMBER
B. ANNUITANT _________________________________________________________________
(Complete only LAST NAME FIRST NAME MIDDLE INITIAL
if different _________________________________________________________________
from STREET ADDRESS CITY STATE ZIP CODE
participant)
MO DAY YR. [ ]M [ ]F
----------------- ---------- ------------------------ ---------
DATE OF BIRTH SEX SOC.SEC OR TAX ID NUMBER TELEPHONE
NUMBER
C. BENEFICIARY _________________________________________________________________
LAST NAME FIRST NAME MIDDLE INITIAL RELATIONSHIP
D. TYPE OF [ ] NONQUALIFIED.
CONTRACT If nonqualified, is this a 1035 Exchange? [ ] YES [ ] NO
If yes, please complete a "Request for Transfer or 1035
Exchange" (G-2500NB).
[ ] QUALIFIED, as indicated below.
Is this a direct transfer? [ ] YES [ ] NO
If yes, please complete a "Request for Transfer or 1035
Exchange" (form G-2500NB). Please note:
An appropriate retirement plan/prototype must be established
for purposes of qualified monies.
[ ] IRA [ ] IRA rollover [ ] IRA transfer
[ ] SEP [ ] 401 retirement plan
[ ] Terminal funding [ ] 403(b) plan [ ] 457 plan
[ ] Other
E. PURCHASE [ ] INITIAL PAYMENT: $_____________________
PAYMENT(S) Minimum initial payment is [$5,000] for nonqualified
contracts; [$2,000] for qualified contracts.
Payments may be wired or mailed. Make check payable to
Anchor National Life Insurance Company.
[ ] AUTOMATIC PAYMENTS: $_____________________
To establish automatic bank drafts for future
payments, include a completed "Automatic Payment
Authorization" form (G-2233POS), and a voided check.
F. SPECIAL [ ] SYSTEMATIC WITHDRAWAL: Check the box at left and include a
FEATURES "Systematic Withdrawal Application" form (R-5550SW).
[ ] AUTOMATIC DOLLAR COST AVERAGING: Check the box at left and
include a completed "Dollar Cost Averaging Application" form
(R-5551DCA).
R-5325NB(3/97) PLEASE COMPLETE AND SIGN REVERSE SIDE. Group Allocated
<PAGE> 2
- --------------------------------------------------------------------------------
PARTICIPANT ENROLLMENT FORM R-5325NB(3/97) SIDE 2
- --------------------------------------------------------------------------------
G. TELEPHONE Do you wish to authorize telephone transfers subject to the
TRANSFERS conditions set forth below? [ ] YES [ ] NO
AUTHORIZATION (If no election is indicated the Company will default to yes
for transfers.)
If indicated above, I authorize the Company to accept telephone
instructions for transfers in any amount among subaccounts from
anyone providing proper identification subject to restrictions
and limitations contained in the contract and related
prospectus, if any. I understand that I bear the risk of loss
in the event of a telephone instruction not authorized by me.
The Company will not be responsible for any losses resulting
from unauthorized transactions if it follows reasonable
procedures designed to verify the identity of the caller and
therefore, the Company will record telephone conversations
containing transaction instructions, request personal
identification information before acting upon telephone
instructions and send written confirmation statements of
transactions to the address of record.
H. INVESTMENT __PORTFOLIO__ __MANAGER__ __PORTFOLIO__ __MANAGER__
INSTRUCTIONS __%Cash Management SunAmerica Asset Mgmt. Corp.
(Allocations __%Alliance Growth Alliance Capital Mgmt. L.P.
must be __%Government & Quality Bond Wellington Mgmt. Co., LLP
expressed in __%Growth Wellington Mgmt. Co., LLP
whole percent- __%Corporate Bond Federated Investors
ages and total __%Growth/Phoenix Inv. Counsel Phoenix Investment Counsel, Inc.
allocation __%Global Bond Goldman Sachs Asset Mgmt.
must equal __%Putnam Growth Putnam Investment Mgmt., Inc.
100%) __%High-Yield Bond SunAmerica Asset Mgmt. Corp.
__%Real Estate Davis Selected Advisers, L.P.
__%Worldwide High Income Morgan Stanley Asset Mgmt., Inc.
__%Natural Resources Wellington Mgmt. Co., LLP
__%SunAmerica Balanced SunAmerica Asset Mgmt. Corp.
__%Capital Appreciation Wellington Mgmt. Co., LLP
__%Balanced/Phoenix Inv. Counsel Phoenix Investment Counsel, Inc.
__%Aggressive Growth SunAmerica Asset Mgmt. Corp.
__%Asset Allocation Goldman Sachs Asset Mgmt.
__%Int'l. Growth and Income Putnam Investment Mgmt., Inc.
__%Utility Federated Investors
__%Global Equities Alliance Capital Mgmt. L.P.
__%Growth-Income Alliance Capital Mgmt. L.P.
__%Int'l. Diversified Equities Morgan Stanley Asset Mgmt., Inc.
__%Federated Value Federated Investors
__%Emerging Markets Putnam Investment Mgmt., Inc.
__%Venture Value Davis Selected Advisers, L.P.
FIXED ACCOUNT OPTION GUARANTEE PERIODS
% 1 yr. % 3 yr. % 5 yr. % 7 yr. %10 yr.
---- ----- ----- ----- ------
I. SPECIAL
INSTRUCTIONS ________________________________________________________________
J. STATEMENT OF This Certificate [ ] WILL [ ] WILL NOT replace an existing life
PARTICIPANT insurance or annuity contract.
(If this will replace an existing policy, please indicate name of
issuing company and contract number below.)
_____________________________ ___________________________
COMPANY NAME CONTRACT NUMBER
I hereby represent my answers to the above questions to be
correct and true to the best of my knowledge and belief and
agree that this Enrollment Form shall be a part of any
Certificate issued by the Company. I VERIFY MY UNDERSTANDING
THAT ALL PAYMENTS AND VALUES PROVIDED BY THE CERTIFICATE, WHEN
BASED ON INVESTMENT EXPERIENCE OF VARIABLE ACCOUNT(S), ARE
VARIABLE AND NOT GUARANTEED AS TO DOLLAR AMOUNT. I UNDERSTAND
THAT ALL PAYMENTS AND VALUES BASED ON THE GENERAL ACCOUNT ARE
SUBJECT TO A MARKET VALUE ADJUSTMENT FORMULA, WHICH MAY RESULT
IN UPWARD AND DOWNWARD ADJUSTMENTS IN AMOUNTS PAYABLE. I
ACKNOWLEDGE RECEIPT OF THE CURRENT PROSPECTUSES FOR POLARIS,
INCLUDING THE SUNAMERICA SERIES TRUST AND ANCHOR SERIES TRUST
PROSPECTUSES. I HAVE READ THEM CAREFULLY AND UNDERSTAND THEIR
CONTENTS.
Signed at______________________________________ _____________
CITY STATE DATE
_____________________________ ______________________________
PARTICIPANT'S SIGNATURE REGISTERED REPRESENTATIVE'S
SIGNATURE
_____________________________
JOINT PARTICIPANT'S SIGNATURE
(IF APPLICABLE)
K. LICENSED/ Will this Certificate replace in whole or in part any existing
REGISTERED life insurance or annuity contract? [ ] YES [ ] NO
REPRESENT-
ATIVE --------------------------------------------- ----------------
INFORMATION REPRESENTATIVE'S LAST NAME FIRST NAME M. I. SOC. SEC. NUMBER
----------------------------------------------------- --------
REPRESENTATIVE'S STREET ADDRESS CITY STATE ZIP CODE
--------------------------- ----------------------------------
BROKER/DEALER FIRM NAME REPRESENTATIVE'S TELEPHONE NO.
-------------------------------
LICENSED AGENT ID NUMBER
FRAUD WARNING: ANY PERSON WHO WITH INTENT TO DEFRAUD OR KNOWING
THAT HE IS FACILITATING A FRAUD AGAINST AN INSURER, SUBMITS AN
APPLICATION OR FILES A CLAIM CONTAINING A FALSE OR DECEPTIVE
STATEMENT MAY BE GUILTY OF INSURANCE FRAUD.
R-5325NB(3/97)
<PAGE> 1
EXHIBIT 6A
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.
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
<PAGE> 2
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
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
<PAGE> 3
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.
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
<PAGE> 4
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
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
<PAGE> 5
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 6B
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.
Section 7. Filing Proxies. At all meetings of shareholders,
the proxies shall be filed with and be verified by the Secretary
<PAGE> 2
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.
<PAGE> 3
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.
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
<PAGE> 4
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
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
<PAGE> 5
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.
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.
<PAGE> 6
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
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
<PAGE> 7
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.
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.
<PAGE> 8
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-SST
FUND PARTICIPATION AGREEMENT
----------------------------
AGREEMENT, made on this 16th day of September, 1992, 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 on behalf of
VARIABLE SEPARATE ACCOUNT (f/k/a "AMERICAN PATHWAY II - SEPARATE ACCOUNT OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY," ("Variable Account"), a separate
account of Anchor existing pursuant to the laws of the State of California, and
SUNAMERICA SERIES TRUST ("Fund"), an open-end management investment company
established pursuant to the laws of the Commonwealth of Massachusetts under a
Declaration of Fund dated September 11, 1992, which is composed of multiple
investment series ("Portfolios").
WITNESSETH:
WHEREAS, Anchor, by resolution, has established the Variable Account on
its books of account for the purpose of funding certain variable annuity
contracts issued by it; and
WHEREAS, the Variable Account is divided into various portfolios
("Divisions") under which the income, gains and losses, whether or not realized,
from assets allocated to each such Division are, in accordance with the
applicable variable annuity contracts, credited to or charged against such
Division without regard to any income, gains or losses of other Divisions or
separate accounts of Anchor; and
WHEREAS, the Variable Account is registered with the Securities and
Exchange Commission as a unit investment trust under the Investment Company Act
of 1940 ("Act"); and
WHEREAS, the Fund, a registered, open-end, diversified management
investment company, is divided into various Portfolios, each Portfolio being
subject to separate investment objectives and restrictions which may not be
changed without a majority vote of the shareholders of each such Portfolio; and
WHEREAS, the Variable Account desires to purchase shares of the Fund in
connection with the issuance of certain variable annuity contracts to be
marketed under the name Polaris (collectively with other contracts and policies
that may be funded through the Fund, "Contracts"); and
WHEREAS, the Fund agrees to make shares of certain of its Portfolios
available to serve as underlying investment media for the corresponding
Divisions of the Variable Account; and
<PAGE> 2
WHEREAS, SUNAMERICA SECURITIES, INC., and ROYAL ALLIANCE ASSOCIATES,
INC. (collectively, "Distributors"), which serve as the distributors for the
Contracts funded in the Variable Account pursuant to an agreement with Anchor on
behalf of itself and the Variable Account are each a broker-dealer registered as
such under the Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc.;
NOW, THEREFORE, in consideration of the foregoing and of mutual
covenants and conditions set forth herein and for other good and valuable
consideration, Anchor (on behalf of itself and the Variable Account) and the
Fund hereby agree as follows:
1. The Contracts funded by the Variable Account will provide for the
allocation of net amounts among certain Divisions of the Variable Account for
investment in the shares of the particular portfolio of the Fund underlying each
such Division. The selection of a particular Division is to be made (and such
selection may be changed) in accordance with the terms of the applicable
Contract.
2. No representation is made as to the number or amount of such
Contracts to be sold. Anchor, pursuant to its agreement with Distributors, will
make reasonable efforts to market those Contracts it determines from time to
time to offer for sale and, although it is not required to offer for sale new
Contracts, Anchor will accept payments and otherwise service existing Contracts
funded in the Variable Account.
3. Fund shares to be made available to the respective Divisions of the
Variable Account shall be sold by each of the respective Portfolios of the Fund
and purchased by Anchor for that Division at the net asset value 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 Portfolio of the
Fund shall be ordered in such quantities and at such times as determined by
Anchor to be necessary to meet the requirements of those Contracts having
amounts allocated to the Division for which the Fund Portfolio shares serve as
the underlying investment medium. Orders and 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 to be made
available to the appropriate Division(s) under the Contracts are registered at
all times under the Securities Act of 1933 ("1933 Act").
4. The Fund will redeem the shares of the various Portfolios when
requested by Anchor on behalf of the corresponding Division of the Variable
Account at the net asset value next computed after receipt of each request for
redemption, as established in accordance with the provisions of the then current
prospectus of
- 2 -
<PAGE> 3
the Fund. The Fund will make payment in the manner established from time to time
by the Fund for the receipt of such redemption requests, but in no event shall
payment be delayed for a greater period than is permitted by the Act.
5. Transfer of the Fund's shares will be by book entry only. No stock
certificates will be issued to the Variable Account. Shares ordered from a
particular Portfolio to the Fund will be recorded in an appropriate title for
the corresponding Division of the Variable Account.
6. The Fund shall furnish notice promptly to Anchor of any dividend or
distribution payable on its shares which are subject to this Agreement. All of
such dividends and distributions as are payable on each of the Portfolio shares
in the title for the corresponding Division of the Variable Account shall be
automatically reinvested in additional shares of that Portfolio of the Fund. The
Fund shall notify Anchor of the number of shares so issued.
7. All expenses incident to the performance of the Fund under this
Agreement shall be paid by the Fund. The Fund shall ensure that all of its
shares which are subject to this Agreement are registered and authorized for
issue in accordance with applicable federal and state laws prior to their
purchase by the Variable 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
shareholders,, the preparation of all statements and notices required by any
federal or state law or any taxes on the issue or transfer of the Fund's shares
subject to this Agreement.
8. Anchor, either directly or through Distributors, shall make no
representations concerning the Fund's shares which are subject to this Agreement
other than those contained in the then current prospectus of the Fund and in
printed information subsequently issued by the Fund as supplemental to such
prospects.
9. Anchor and the Fund acknowledge that in the future, the Fund's
shares may become available for investment by separate accounts of other
insurance companies, which may or may not be affiliated persons (as that term is
defined in the Act) of Anchor (collectively with Anchor, "Participating
Insurers"). In such event, (a) the Fund shall undertake that its Board of
Trustees ("Board") will monitor the Fund for the existence of material
irreconcilable conflicts that may arise between the Contract owners of
Participating Insurers, for the purpose of identifying and remedying any such
conflict and (b) paragraphs 10, 11 and 12 shall apply. In discharging its
responsibilities under paragraphs 10, 11 and 12 hereinafter, Anchor will
cooperate and coordinate, to the extent necessary, with the Board and with other
Participating
- 3 -
<PAGE> 4
Insurers. The Fund agrees that it will require, as a condition to participation,
that all Participating Insurers shall have obligations and responsibilities
regarding conflicts of interest corresponding to those that are agreed to herein
by Anchor pursuant to such paragraphs 10, 11 and 12 and pursuant to this
paragraph 9.
10. Anchor shall provide pass-through voting privileges to all variable
Contract owners so long as the U. S. Securities and Exchange Commission
continues to interpret the Act to require passthrough voting privileges for
variable Contract owners. Anchor shall be responsible for assuring that the
Variable Account calculates voting privilege in a manner consistent with
separate accounts of other Participating Insurers, as determined by the Board.
Anchor will vote shares for which it has not received voting instructions in the
same proportion as it votes shares for which it has received instructions.
11. Anchor will report to the Board any potential or existing conflicts
of which it is or becomes aware between any of its Contract owners or between
any of its Contract owners and Contract owners of other Participating Insurers.
Anchor will be responsible for assisting the Board in carrying out its
responsibilities to identify material conflicts by providing the Board with all
information available to it that is reasonably necessary for the Board to
consider any issues raised, including information as to a decision by Anchor to
disregard voting instructions of its Contract owners.
12. The Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly by it to
Anchor and other Participating Insurers. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance tax,
or securities laws or regulations, or a public ruling, private letter ruling, or
any similar action by insurance, tax, or securities regulatory authorities; (c)
an administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any Portfolio are being managed; (e) a
difference in voting instructions given by variable annuity Contract owners and
variable life insurance Contract owners or by Contract owners of different
Participating Insurers; or (f) a decision by a Participating Insurer to
disregard the voting instructions of variable Contract owners.
13. If it is determined by a majority of the Board or a majority of its
disinterested Trustees that a material irreconcilable conflict exists that
affects the interests of Anchor Contract owners, Anchor shall, in cooperation
with other Participating Insurers whose Contract owners' interests are also
affected by the conflict, take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, which
- 4 -
<PAGE> 5
steps could include: (a) withdrawing the assets allocable to the Variable
Account from the Fund or any portfolio and reinvesting such assets in a
different investment medium, including another Portfolio of the Fund, or
submitting the question of whether such segregation should be implemented to a
vote of all affected Contract owners and, as appropriate, segregating the assets
of any particular group (e.g., annuity Contract owners or life insurance
Contract owners) that votes in favor of such segregation, or offering to the
affected Contract owners of the option of making such a change; and (b)
establishing a new registered management investment company or managed separate
account. Anchor shall take such steps at its expense if the conflict affects
solely the interests of the owners of Anchor Contracts, but shall bear only its
equitable portion of any such expense if the conflict also affects the interest
of the Contract owners of one or more Participating Insurers other than Anchor,
provided: that this sentence shall not be construed to require the Fund to bear
any portion of such expense. If a material irreconcilable conflict arises
because of Anchor's decision to disregard Contract owner voting instructions and
that decision represents a minority position or would preclude a majority vote,
Anchor may be required, at Fund's election, to withdraw the Variable Account's
investment in the Fund, and no charge or penalty will be imposed against the
Variable Account as a result of such a withdrawal. Anchor agrees to take such
remedial action as may be required under this paragraph 13 with a view only to
the interests of its Contract owners. For purposes of this paragraph 13, a
majority of the disinterested members of the Board shall determine whether or
not any proposed action adequately remedies any irreconcilable conflict, but in
no event will Fund be required to establish a new funding medium for any
variable Contracts. Anchor shall not be required by this paragraph 13 to
establish a new funding medium for any variable Contract if an offer to do so
has been declined by vote of a majority of affected Contract owners.
14. This Agreement shall terminate:
(a) at the option of Anchor or the Fund upon 60
days' advance written notice to all other
parties to this Agreement; or
(b) at the option of Anchor if any of the Fund's
shares are not reasonably available to meet
the requirements of the Contracts funded in
the Variable Account as determined by
Anchor. Prompt notice of election to
terminate shall be furnished by Anchor; or
(c) at the option of Anchor upon institution of
formal proceedings against the Fund by the
Securities and Exchange Commission; or
- 5 -
<PAGE> 6
(d) upon the vote of Contract owners having an
interest in a particular Division of the
variable Account to substitute the shares of
another investment company for the
corresponding Fund Portfolio 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 action to replace
the Fund's shares; or
(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 funded in the Variable Account.
Prompt notice shall be given by each party
to all other parties in the event that the
conditions stated in subsections (b), (c) or
(d) of this paragraph 14 should occur.
15. Notwithstanding any other provisions of this Agreement, the
obligations of the Fund hereunder are not personally binding upon any of the
trustees, shareholders, officers, employees or agents of the Fund; resort in
satisfaction of such obligations shall be had only to the assets and property of
the Fund and not to the private property of any of such Fund's trustees,
shareholders, officers, employees or agents.
16. This Agreement shall be construed in accordance with the laws of
the State of California.
- 6 -
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ANCHOR NATIONAL LIFE INSURANCE COMPANY
/s/ ROBERT P. SALTZMAN
By: ----------------------------------------
Robert P. Saltzman
President and Chief Executive Officer
VARIABLE SEPARATE ACCOUNT
(f/k/a AMERICAN PATHWAY II - SEPARATE
ACCOUNT OF ANCHOR NATIONAL LIFE INSURANCE
COMPANY)
BY: ANCHOR NATIONAL LIFE INSURANCE COMPANY
/s/ Robert P. Saltzman
By: ---------------------------------
Robert P. Saltzman
SUNAMERICA SERIES TRUST
/s/ Robert P. Saltzman
By:-----------------------------------------
Robert P. Saltzman
Acknowledged and Agreed:
ROYAL ALLIANCE ASSOCIATES, INC.
/s/ Susan L. Harris
By: ------------------------------- Dated: September 16, 1992
SUNAMERICA SECURITIES, INC.
/s/ Susan L. Harris
By: ------------------------------- Dated: September 16, 1992
<PAGE> 8
EXHIBIT 8-AST
FUND PARTICIPATION AGREEMENT
----------------------------
AGREEMENT, made on this 1st day of August, 1992, 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 on behalf of
VARIABLE SEPARATE ACCOUNT (f/k/a "AMERICAN PATHWAY II - SEPARATE ACCOUNT OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY," ("Variable Account"), a separate
account of Anchor existing pursuant to the laws of the State of California, and
ANCHOR SERIES TRUST ("Fund"), an open-end management investment company
established pursuant to the laws of the Commonwealth of Massachusetts under a
Declaration of Trust dated August 26, 1983 and amended as of September 1, 1988,
and January 19, 1990, and which is composed of multiple investment series
("Portfolios").
WITNESSETH:
WHEREAS, Anchor, by resolution, has established the Variable Account on
its books of account for the purpose of funding certain variable annuity
contracts issued by it; and
WHEREAS, the Variable Account is divided into various portfolios
("Divisions") under which the income, gains and losses, whether or not realized,
from assets allocated to each such Division are, in accordance with the
applicable variable annuity contracts, credited to or charged against such
Division without regard to any income, gains or losses of other Divisions or
separate accounts of Anchor; and
WHEREAS, the Variable Account is registered with the Securities and
Exchange Commission as a unit investment trust under the Investment Company Act
of 1940 ("Act"); and
WHEREAS, the Fund,, a registered, open-end, diversified management
investment company, is divided into various Portfolios, each Portfolio being
subject to separate investment objectives and restrictions which may not be
changed without a majority vote of the shareholders of each such Portfolio; and
WHEREAS, the Variable Account desires to purchase shares of the Fund in
connection with the issuance of certain variable annuity contracts to be
marketed under the name Polaris (collectively with other contracts and policies
that may be funded through the Fund, "Contracts"); and
WHEREAS, the Fund agrees to make shares of certain of its Portfolios
available to serve as underlying investment media for the corresponding
Divisions of the Variable Account; and
<PAGE> 9
WHEREAS, SUNAMERICA SECURITIES, INC., and ROYAL ALLIANCE ASSOCIATES,
INC. (collectively, "Distributors"), which serve as the distributors for the
Contracts funded in the Variable Account pursuant to an agreement with Anchor on
behalf of itself and the Variable Account are each a broker-dealer registered as
such under the Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc.; and
WHEREAS, the Fund's shares are available for investment by separate
accounts of other insurance companies, which may or may not be affiliated
persons (as that term is defined in the Act) of Anchor; and
WHEREAS, the Fund has undertaken that its Board of Trustees ("Board")
will monitor the Fund for the existence of material irreconcilable conflicts
that may arise between the Contract owners of separate accounts of insurance
companies that invest in the Fund, for the purpose of identifying and remedying
any such conflict;
NOW, THEREFORE, in consideration of the foregoing and of mutual
covenants and conditions set f orth herein and for other good and valuable
consideration, Anchor (on behalf of itself and the Variable Account) and the
Fund hereby agree as follows:
1. The Contracts funded by the Variable Account will provide for the
allocation of net amounts among certain Divisions of the Variable Account for
investment in the shares of the particular portfolio of the Fund underlying each
such Division. The selection of a particular Division is to be made (and such
selection may be changed) in accordance with the terms of the applicable
Contract.
2. No representation is made as to the number or amount of such
Contracts to be sold. Anchor, pursuant to its agreement with Distributors, will
make reasonable efforts to market those Contracts it determines from time to
time to offer for sale and, although it is not required to offer for sale new
Contracts, Anchor will accept payments and otherwise service existing Contracts
funded in the Variable Account.
3. Fund shares to be made available to the respective Divisions of the
Variable Account shall be sold by each of the respective Portfolios of the Fund
and purchased by Anchor for that Division at the net asset value 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 Portfolio of the
Fund shall be ordered in such quantities and at such times as determined by
Anchor to be necessary to meet the requirements of those Contracts having
amounts allocated to the Division for which the Fund Portfolio shares serve as
the underlying investment medium. Orders and payments for shares purchased will
be sent promptly to the Fund and will be made payable in the manner
- 2 -
<PAGE> 10
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 to be made
available to the appropriate Division(s) under the Contracts are registered at
all times under the Securities Act of 1933 ("1933 Act").
4. The Fund will redeem the shares of the various Portfolios when
requested by Anchor on behalf of the corresponding Division of the Variable
Account at the net asset value next computed after receipt of each request for
redemption, as established in accordance with the provisions of the then current
prospectus of the Fund. The Fund will make payment in the manner established
from time to time by the Fund for the receipt of such redemption requests, but
in no event shall payment be delayed for a greater period than is permitted by
the Act.
5. Transfer of the Fund's shares will be by book entry only. No stock
certificates will be issued to the Variable Account. Shares ordered from a
particular Portfolio to the Fund will be recorded in an appropriate title for
the corresponding Division of the Variable Account.
6. The Fund shall furnish notice promptly to Anchor of any dividend or
distribution payable on its shares which are subject to this Agreement. All of
such dividends and distributions as are payable on each of the Portfolio shares
in the title for the corresponding Division of the Variable Account shall be
automatically reinvested in additional shares of that Portfolio of the Fund. The
Fund shall notify Anchor of the number of shares so issued.
7. All expenses incident to the performance of the Fund under this
Agreement shall be paid by the Fund. The Fund shall ensure that all of its
shares which are subject to this Agreement are registered and authorized for
issue in accordance with applicable federal and state laws prior to their
purchase by the Variable 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
shareholders, the preparation of all statements and notices required by any
federal or state law or any taxes on the issue or transfer of the Fund's shares
subject to this Agreement.
8. Anchor, either directly or through Distributors, shall make no
representations concerning the Fund's shares which are subject to this Agreement
other than those contained in the then current prospectus of the Fund and in
printed information subsequently issued by the Fund as supplemental to such
prospects.
- 3 -
<PAGE> 11
9. Anchor shall provide pass-through voting privileges to all variable
Contract owners so long as the U. S. Securities and Exchange Commission
continues to interpret the Act to require passthrough voting privileges for
variable Contract owners. Anchor shall be responsible for assuring that the
Variable Account calculates voting privilege in a manner consistent with
separate accounts of other insurance companies that are invested in the Fund,
which other insurance companies may or may not be affiliated with Anchor
(collectively with Anchor, "Participating Insurers"), as determined by the
Board. Anchor will vote shares for which it has not received voting instructions
in the same proportion as it votes shares for which it has received
instructions.
10. Anchor will report to the Board any potential or existing conflicts
of which it is or becomes aware between any of its Contract owners, or between
any of its Contract owners and Contract owners of other Participating Insurers.
Anchor will be responsible for assisting the Board in carrying out its
responsibilities to identify material conflicts by providing the Board with all
information available to it that is reasonably necessary for the Board to
consider any issues raised, including information as to a decision by Anchor to
disregard voting instructions of its Contract owners.
11. The Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly by it to
Anchor and other Participating Insurers. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance tax,
or securities laws or regulations, or a public ruling, private letter ruling, or
any similar action by insurance, tax, or securities regulatory authorities; (c)
an administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any Portfolio are being managed; (e) a
difference in voting instructions given by variable annuity Contract owners and
variable life insurance Contract owners or by Contract owners of different
Participating Insurers; or (f) a decision by a Participating Insurer to
disregard the voting instructions of variable Contract owners.
12. If it is determined by a majority of the Board or a majority of its
disinterested Trustees that a material irreconcilable to conflict exists that
affects the interests of Anchor Contract owners, Anchor shall, in cooperation
with other Participating Insurers whose Contract owners' interests are also
affected by the conflict, take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, which steps could include: (a)
withdrawing the assets allocable to the Variable Account from the Fund or any
portfolio and reinvesting such assets in a different investment medium,
including another Portfolio of the Fund, or submitting the question of whether
such
- 4 -
<PAGE> 12
segregation should be implemented to a vote of all affected Contract owners and,
as appropriate, segregating the assets of any particular group (e.g., annuity
Contract owners or life insurance Contract owners) that votes in favor of such
segregation, or offering to the affected Contract owners of the option of making
such a change; and (b) establishing a new registered management investment
company or managed separate account. Anchor shall take such steps at its expense
if the conflict affects solely the interests of the owners of Anchor Contracts,
but shall bear only its equitable portion of any such expense if the conflict
also affects the interest of the Contract owners of one or more Participating
Insurers other than Anchor, provided: that this sentence shall not be construed
to require the Fund to bear any portion of such expense. If a material
irreconcilable conflict arises because of Anchor's decision to disregard
Contract owner voting instructions and that decision represents a minority
position or would preclude a majority vote, Anchor may be required, at Fund's
election, to withdraw the Variable Account's investment in the Fund, and no
charge or penalty will be imposed against the Variable Account as a result of
such a withdrawal. Anchor agrees to take such remedial action as may be required
under this paragraph 12 with a view only to the interests of its Contract
owners. For purposes of this paragraph 12, a majority of the disinterested
members of the Board shall determine whether or not any proposed action
adequately remedies any irreconcilable conflict, but in no event will Fund be
required to establish a new funding medium for any variable Contracts. Anchor
shall not be required by this paragraph 12 to establish a new funding medium for
any variable Contract if an offer to do so has been declined by vote of a
majority of affected Contract owners.
13. In discharging its responsibilities under paragraphs 9, 10 and 12
hereinabove, Anchor will cooperate and coordinate, to the extent necessary, with
the Board and with other participating Insurers. The Fund agrees that it will
require, as a condition to participation, that all Participating Insurers shall
have obligations and responsibilities regarding conflicts of interest
corresponding to those that are agreed to herein by Anchor pursuant to such
paragraphs 9, 10 and 12 and pursuant to this paragraph 13.
14. This Agreement shall terminate:
(a) at the option of Anchor or the Fund upon 60 days'
advance written notice to all other parties to this
Agreement; or
(b) at the option of Anchor if any of the Fund's shares
are not reasonably available to meet the requirements
of the Contracts funded in the Variable Account as
determined by Anchor. Prompt notice of election to
terminate shall be furnished by Anchor; or
- 5 -
<PAGE> 13
(c) at the option of Anchor upon institution of formal
proceedings against the Fund by the Securities and
Exchange Commission; or
(d) upon the vote of Contract owners having an interest
in a particular Division of the Variable Account to
substitute the shares of another investment company
for the corresponding Fund Portfolio 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 action to replace the Fund's shares; or
(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 funded in the Variable Account. Prompt
notice shall be given by each party to all other
parties in the event that the conditions stated in
subsections (b), (c) or (d) of this paragraph 14
should occur.
15. Notwithstanding any other provisions of this Agreement, the
obligations of the Fund hereunder are not personally binding upon any of the
trustees, shareholders, officers, employees or agents of the Fund; resort in
satisfaction of such obligations shall be had only to the assets and property of
the Fund and not to the private property of any of such Fund's trustees,
shareholders, officers, employees or agents.
16. This Agreement shall be construed in accordance with the laws of
the State of California.
- 6 -
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ANCHOR NATIONAL LIFE INSURANCE COMPANY
/s/ ROBERT P. SALTZMAN
By: ----------------------------------------
Robert P. Saltzman
President and Chief Executive Officer
VARIABLE SEPARATE ACCOUNT
(f/k/a AMERICAN PATHWAY II - SEPARATE
ACCOUNT OF ANCHOR NATIONAL LIFE INSURANCE
COMPANY)
BY: ANCHOR NATIONAL LIFE INSURANCE COMPANY
/s/ Robert P. Saltzman
By: ---------------------------------
Robert P. Saltzman
ANCHOR SERIES TRUST
/s/ Robert P. Saltzman
By:-----------------------------------------
Robert P. Saltzman
Acknowledged and Agreed:
ROYAL ALLIANCE ASSOCIATES, INC.
/s/ Susan L. Harris
By: ------------------------------- Dated: September 15, 1992
SUNAMERICA SECURITIES, INC.
/s/ Susan L. Harris
By: ------------------------------- Dated: September 15, 1992
<PAGE> 1
EXHIBIT 9
[ROUTIER, MACKEY AND JOHNSON, P.C. LETTERHEAD]
December 14, 1992
OPINION AND CONSENT OF COUNSEL
Having examined and being familiar with the articles of incorporation
and by-laws of Anchor National Life Insurance Company ("Anchor National"), the
applicable resolutions relating to Variable Separate Account (the "Account"),
and other pertinent records and documents, it is our opinion that (i) Anchor
National is a duly organized and existing stock life insurance company under
the laws of the State of California; (ii) the Account is a duly organized and
existing Separate Account of Anchor National and is registered as a unit
investment trust under the Investment Company Act of 1940 (File No. 811-3859);
and (iii) the variable annuity contracts being registered by this Registration
Statement under the Securities Act of 1933 (File No. 33-47473) will, upon
issuance thereof, be legally issued and respresent binding obligations of
Anchor National.
We hereby consent to the use of our Opinion of Counsel in the
Registration Statement on Form N-4 on behalf of the Account.
ROUTIER, MACKEY AND JOHNSON, P.C.
1700 K Street, N.W. Suite 1003
Washington, D.C. 20006
By: /s/ MARK J. MACKEY
------------------------------
Mark J. Mackey
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus and Statement of Additional
Information constituting part of this Registration Statement on Form N-4 for
Variable Separate Account (Portion Relating to the POLARIS Variable Annuity) of
Anchor National Life Insurance Company, of our report dated November 7, 1997
relating to the consolidated financial statements of Anchor National Life
Insurance Company, and of our report dated January 27, 1998 relating to the
financial statements of Variable Separate Account (Portion Relating to the
POLARIS Variable Annuity) of Anchor National Life Insurance Company, which
appear in such Prospectus and Statement of Additional Information,
respectively. We also consent to the references to us under the headings
"Independent Accountants" and "Financial Statements" in such Prospectus and
Statement of Additional Information, respectively.
PRICE WATERHOUSE LLP
Los Angeles, California
January 28, 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 corporation); Imperial Premium Funding, Inc. (a
Delaware corporation); and SunAmerica Financial Resources, Inc. (a Delaware
corporation).
Updated As of 10/21/97
<PAGE> 1
EXHIBIT NO. 15
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned directors of ANCHOR
NATIONAL LIFE INSURANCE COMPANY ("Company"), a stock life insurance company
organized under the laws of the State of California, hereby constitute and
appoint ROBERT P. SALTZMAN, SUSAN L. HARRIS and LORIN M. FIFE, or any of them,
their true and lawful attorneys and agents, to do any and all acts and things
and to execute any and all instruments that said attorneys and agents may deem
necessary or advisable to enable AMERICAN PATHWAY II - SEPARATE ACCOUNT OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY ("Separate Account") to comply with any
rules, regulations and requirements of the Securities and Exchange Commission,
and in connection with any variable annuity contracts that may be registered
under the Securities Act of 1933, as amended ("1933 Act"), and/or the
Investment Company Act of 1940, as amended (the "1940 Act"), and offered in
connection with the Separate Account, to comply with any rules, regulations and
requirements of the Securities and Exchange Commission under the 1933 Act or the
1940 Act or under any other federal securities laws, including specifically,
but without limiting the generality of the foregoing, power and authority to
sign the name of the undersigned directors to any instrument or document filed
as part of or in connection with or in any way related to (i) any action taken
to comply with any rules, regulations or requirements of the Securities and
Exchange Commission under the federal securities laws; (ii) any application for
and the securing of any exemptions from the federal securities laws; (iii) the
registration of additional variable annuity contracts under the 1933 Act and/or
the 1940 Act, if registration is deemed necessary; and (iv) any and all
amendments to any registration statement that may be filed in connection with
the variable annuity contracts. The undersigned hereby ratifies and confirms
all that said attorneys and agents shall do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney on the date indicated.
GRANTING OF POWER OF ATTORNEY
-----------------------------
Directors of Anchor National Life Insurance Company
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ELI BROAD April 22, 1992
- ------------------------
Eli Broad
/s/ JAMES R. BELARDI April 22, 1992
- ------------------------
James R. Belardi
/s/ LORIN M. FIFE April 22, 1992
- ------------------------
Lorin M. Fife
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ SUSAN L. HARRIS April 22, 1992
- ------------------------
Susan L. Harris
April , 1992
- ------------------------
Clark P. Manning, Jr.
/s/ NORMAN J. METCALFE April 22, 1992
- ------------------------
Norman J. Metcalfe
/s/ SCOTT L. ROBINSON April 22, 1992
- ------------------------
Scott L. Robinson
/s/ ROBERT P. SALTZMAN April 22, 1992
- ------------------------
Robert P. Saltzman
/s/ JAY S. WINTROB April 22, 1992
- ------------------------
Jay S. Wintrob
Attorneys-In-Fact
-----------------
/s/ ROBERT P. SALTZMAN April 22, 1992
- ------------------------
Robert P. Saltzman
/s/ SUSAN L. HARRIS April 22, 1992
- ------------------------
Susan L. Harris
/s/ LORIN M. FIFE April 22, 1992
- ------------------------
Lorin M. Fife
</TABLE>
