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File Nos. 2-86837
811-3859
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 31 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ X ]
Amendment No. 24
(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)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
--
X on March 31, 1999 pursuant to paragraph (b) of Rule 485
--
60 days after filing pursuant to paragraph (a)(1) of Rule 485
--
on [ ] pursuant to paragraph (a)(1) of Rule 485
--
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VARIABLE SEPARATE ACCOUNT
Cross Reference Sheet
PART A - PROSPECTUS
Incorporated herein by reference to Post-Effective Amendment No. 30 under the
Securities Act of 1933 (the 33 Act) and No. 23 under the Investment Company Act
of 1940 (the 40 Act), to Registration Statement File Nos. 2-86837 and 811-3859
filed on Form N-4 on December 15, 1999.
<PAGE> 3
PART B - STATEMENT OF ADDITIONAL INFORMATION
Incorporated herein by reference to Post-Effective Amendment No. 30 under the
Securities Act of 1933 (the 33 Act) and No. 23 under the Investment Company Act
of 1940 (the 40 Act), to Registration Statement File Nos. 2-86837 and 811-3859
filed on Form N-4 on December 15, 1999.
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.
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AMERICAN PATHWAY II
PROSPECTUS
DECEMBER 29, 1999
Incorporated herein by reference to Post-Effective Amendment No. 30 under the
Securities Act of 1933 (the 33 Act) and No. 23 under the Investment Company Act
of 1940 (the 40 Act), to Registration Statement File Nos. 2-86837 and 811-3859
filed on Form N-4 on December 15, 1999.
<PAGE> 5
STATEMENT OF ADDITIONAL INFORMATION
VARIABLE SEPARATE ACCOUNT
INDIVIDUAL DEFERRED VARIABLE BENEFIT AND FIXED BENEFIT ANNUITY
FLEXIBLE PURCHASE PAYMENT - NON-PARTICIPATING CONTRACT
ANCHOR NATIONAL LIFE INSURANCE COMPANY
March 31, 2000
This Statement of Additional Information is not a prospectus,
but should be read in conjunction with the American Pathway II Prospectus, dated
March 31, 2000, as it may be supplemented, a copy of which may be obtained
without charge by writing to Anchor National Life Insurance Company, Service
Center, P.O. Box 54299, Los Angeles, California 90054-0299, or by calling (800)
445-SUN2.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
TOPIC PAGE
<S> <C>
Variable Account Accumulation Provision .....................................3
Performance Data ............................................................4
Taxes .......................................................................6
Distribution of Contracts...................................................10
Financial Statements........................................................11
</TABLE>
2
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VARIABLE ACCOUNT ACCUMULATION PROVISIONS
ACCUMULATION UNITS - The number of accumulation units purchased for a
contract owner ("Owner") with respect to his or her initial purchase payment is
determined by dividing the amount credited to each Variable Account by the
accumulation unit value for that Variable Account next computed following
acceptance of the application (generally the next business day after receipt of
payment by the Company). In the event that an application fails to recite all
necessary information, the Company will promptly request that the Owner furnish
further instructions and will hold the initial purchase payment in a suspense
account, without interest, for a period not exceeding five business days from
receipt of the application at the Company. If the necessary information is not
received within five business days, the Company will return the initial purchase
payment to the prospective Owner unless the prospective Owner, after being
informed of the reasons for the delay, specifically consents to the Company
retaining the initial purchase payment until the application is made complete.
The number of accumulation units purchased with respect to subsequent purchase
payments is determined by dividing the amount credited to each Variable Account
by the applicable accumulation unit value for the valuation period next
determined following receipt of the payment by the Company. The accumulation
unit value of each Variable Account varies in accordance with the investment
experience of that Variable Account, and is affected by the investment
experience of the respective Fund series, by expenses and by the deduction of
certain charges.
VALUE OF AN ACCUMULATION UNIT - The accumulation unit value of each
Variable Account was arbitrarily set at $10 when the Variable Account was
established. The value of an accumulation unit may increase or decrease from one
valuation period to the next. All Variable Accounts are valued as of the close
of general trading on the New York Stock Exchange. The value for any valuation
period is determined by multiplying the value of an accumulation unit for the
last prior valuation period by the net investment factor for that Variable
Account for the current valuation period. The value of an accumulation unit is
independently computed for each Variable Account using the net investment factor
applicable to that Variable Account.
NET INVESTMENT FACTOR - This is an index used to measure the investment
performance of a Variable Account from one valuation period to the next. For
each Variable Account, the net investment factor for a valuation period is found
by dividing (a) by (b), and reducing the result by (c):
Where (a) is:
The net asset value as of the end of the current valuation
period of a share of the series of the Fund in which the
assets of the Variable Account are invested, plus the per
share amount of any dividends and other distributions on those
shares since the end of the immediately preceding valuation
period;
Where (b) is:
The net asset value of a share of the specified series of the
Fund as of the end of the immediately preceding valuation
period;
And where (c) is:
The deduction for mortality, expense and distribution expense
risks, that shall remain constant at .00356% for each day in
the current valuation period. The maximum daily deduction for
mortality, expense risks and distribution risks is equivalent
to an annual rate of 1.30%.
To the extent that the net investment factor is less than 1, the
accumulation unit value will decrease. To the extent that the net investment
factor is greater than 1, the accumulation unit value will increase.
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PERFORMANCE DATA
Performance data for the various Variable Accounts are determined in
the manner described below.
CASH MANAGEMENT ACCOUNT
The annualized current yield and the effective yield for the Cash
Management Account for the 7 day period ended December 31, 1999 with and
without the Enhanced Death Benefit ("EDB") were as follows:
Current Yield Effective Yield
------------- ---------------
A. With EDB: 3.80% 3.88%
B. Without EDB: 3.90% 3.97%
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 - CMF)/(SV)
where:
SV = value of one Accumulation Unit at the start of a 7 day period
EV = value of one Accumulation Unit at the end of the 7 day period
CMF = an allocated portion of the $30 annual Contract Maintenance
Fee, prorated for 7 days
The change in the value of the Accumulation Unit during the 7 day
period reflects the income received, minus any expenses incurred during such 7
day period. The Contract Maintenance Fee ("CMF") is first allocated among the
Fixed and Variable Accounts so that each Account's allocated portion of the
charge is proportional to the percentage of the number of Owners' accounts that
have money allocated to that investment portfolio. The portion of the CMF
allocable to the Cash Management Account is further reduced, for purposes of the
yield computation, by multiplying it by the ratio that the value of the
hypothetical contract bears to the value of an account of average size for
contracts funded by the Cash Management Account. Finally, as is done with the
other charges discussed above, the result is multiplied by the fraction 7/365 to
arrive at the portion attributable to the 7 day period.
The current yield is then obtained by annualizing the Base Period
Return:
Current Yield = (Base Period Return) x (365/7)
The Cash Management Account also quotes an "effective yield" that
differs from the current yield given above in that it takes into account the
effect of dividend reinvestment in the Cash Management Series. The effective
yield, like the current yield, is derived from the Base Period Return over a 7
day period. However, the effective yield accounts for dividend reinvestment by
compounding the current yield according to the formula:
Effective Yield = [(Base Period Return + 1)365/7 - 1].
Net investment income for yield quotation purposes will not include
either realized capital gains and losses or unrealized appreciation and
depreciation, whether reinvested or not. The yield quotations also do not
reflect any impact of premium taxes, transfer fees, or withdrawal charges.
The yields quoted should not be considered a representation of the
yield of the Cash
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Management Account in the future since the yield is not fixed. Actual yields
will depend not only on the type, quality and maturities of the investments held
by the Cash Management Account and changes in interest rates on such
investments, but also on factors such as a contract owner's account size (since
the impact of fixed dollar charges will be greater for small accounts than for
larger accounts).
Yield information may be useful in reviewing the performance of the
Cash Management Account and for providing a basis for comparison with other
investment alternatives. However, the Cash Management Account's yield
fluctuates, unlike bank deposits or other investments that typically pay a fixed
yield for a stated period of time.
ALL OTHER VARIABLE ACCOUNTS
The Variable Accounts other than the Cash Management Account compute
their performance data as "total return." The total returns of the various
Variable Accounts over the last 1, 5, and 10 year periods, and since their
inception, are shown below, both with/without an assumed complete redemption at
the end of the period.
TOTAL ANNUAL RETURN (IN PERCENT) FOR PERIODS ENDING ON
DECEMBER 31, 1999
(RETURN WITH/WITHOUT REDEMPTION)
<TABLE>
<CAPTION>
WITHOUT ENHANCED INCEPTION SINCE
DEATH BENEFIT DATE 1 YEAR 5 YEARS 10 YEARS INCEPTION
- ---------------- --------- ------ ------- -------- ---------
<S> <C> <C> <C> <C> <C>
Growth 2/07/84 40.54/45.54% 29.66/30.02% 19.79% 18.83%
Growth-Income 2/07/84 2.85/7.85% 19.24/19.73% 13.13% 14.68%
High-Yield Bond 2/07/84 -7.98/-2.98% 6.86/7.62% 8.24% 9.74%
U.S. Government 11/20/85 -6.46/-1.46% 4.72/5.54% 5.92% 6.34%
Asset Allocation 3/31/89 3.88/8.88% 15.18/15.74% 10.98% 11.19%
International 5/03/90 56.11/61.11% 22.51/22.95% N/A 14.38%
<CAPTION>
WITH ENHANCED INCEPTION SINCE
DEATH BENEFIT DATE 1 YEAR 5 YEARS 10 YEARS INCEPTION
- ---------------- --------- ------ ---------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Growth 2/07/84 40.39/45.39% 29.56/29.92% 19.69% 18.73%
Growth-Income 2/07/84 2.74/7.74% 19.14/19.63% 13.03% 14.58%
High-Yield Bond 2/07/84 -8.07/-3.07% 6.76/7.52% 8.14% 9.64%
U.S. Government 11/20/85 -6.60/-1.60% 4.62/5.44% 5.82% 6.24%
Asset Allocation 3/31/89 3.77/8.77% 15.08/15.64% 10.88% 11.09%
International 5/03/90 55.96/60.96% 22.41/22.85% N/A 14.28%
</TABLE>
- ----------
These figures show the total return hypothetically experienced by
contracts funded through the various Variable Accounts over the time periods
shown.
In October 1997, the Company began to offer an optional enhanced death
benefit to existing and new policyholders. Choice of this benefit results in a
0.10% increase in the Mortality Risk Charge and slightly reduced annual
returns. Therefore, figures are shown both with and without election of the
enhanced death benefit.
Total return for a Variable Account represents a computed annual rate
of return that, when compounded annually over the time period shown and applied
to a hypothetical initial investment in a contract funded by that Variable
Account made at the beginning of the period, will produce the same contract
value at the end of the period that the hypothetical investment would have
produced over the same period. The total rate of return (T) is computed so that
it satisfies the formula:
<TABLE>
<CAPTION>
P(1+T)n = ERV
<S> <C>
where:
P = a hypothetical initial payment of $1000
T = average annual total return
n = number of year
ERV = ending redeemable value of a hypothetical $1000
payment made at the beginning of the 1, 5, or 10 year
periods at the end of the 1, 5, or 10 year periods
(or fractional portion thereof).
</TABLE>
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The total return figures given above reflect the effect of both
non-recurring and recurring charges, as discussed herein. Recurring charges are
taken into account in a manner similar to that used for the yield computations
for the Cash Management Account, described above. The applicable withdrawal
charge (if any) is deducted as of the end of the period, to reflect the effect
of the assumed complete redemption in the case of the first of the two sets of
figures given in the table for each Variable Account, tax qualification status
and time period. Because the impact of Contract Maintenance Fee on a particular
contract owner's account would generally have differed from those assumed in the
computation, due to differences between most actual allocations and the assumed
ones, as well as differences due to varying account sizes, the total return
experienced by an actual account over these same time periods would generally
have been different from those given above. As with the Cash Management
Account's yield figures, total return figures are derived from historical data
and are not intended to be a projection of future performance.
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 income payments under the income 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 income 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 income 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
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by a covered employee from a plan qualified under Section 401(a) or 403(a) of
the Code, or from a tax-sheltered annuity qualified under Section 403(b) of the
Code (other than (1) annuity payments for the life (or life expectancy) of the
employee, or joint lives (or joint life expectancies) of the employee and his or
her designated Beneficiary, or for a specified period of ten years or more; and
(2) distributions required to be made under the Code). Failure to "roll over"
the entire amount of an eligible rollover distribution (including an amount
equal to the 20% portion of the distribution that was withheld) could have
adverse tax consequences, including the imposition of a penalty tax on premature
withdrawals, described later in this section.
Withdrawals or distributions from a contract other than eligible
rollover distributions are also subject to withholding on the estimated taxable
portion of the distribution, but the owner may elect in such cases to waive the
withholding requirement. If not waived, withholding is imposed (1) for periodic
payments, at the rate that would be imposed if the payments were wages, or (2)
for other distributions, at the rate of 10%. If no withholding exemption
certificate is in effect for the payee, the rate under (1) above is computed by
treating the payee as a married individual claiming 3 withholding exemptions.
DIVERSIFICATION - SEPARATE ACCOUNT INVESTMENTS
Section 817(h) of the Code imposes certain diversification standards on
the underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not adequately
diversified, in accordance with regulations prescribed by the United States
Treasury Department ("Treasury Department"). Disqualification of the contract as
an annuity contract would result in imposition of federal income tax to the
owner with respect to earnings allocable to the contract prior to the receipt of
any payments under the contract. The Code contains a safe harbor provision which
provides that annuity contracts, such as your contract, 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."
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MULTIPLE CONTRACTS
Multiple annuity contracts which are issued within a calendar year to
the same contract owner by one company or its affiliates are treated as one
annuity contract for purposes of determining the tax consequences of any
distribution. Such treatment may result in adverse tax consequences including
more rapid taxation of the distributed amounts from such multiple contracts. The
Company believes that Congress intended to affect the purchase of multiple
deferred annuity contracts which may have been purchased to avoid withdrawal
income tax treatment. Owners should consult a tax adviser prior to purchasing
more than one annuity contract in any calendar year.
TAX TREATMENT OF ASSIGNMENTS
An assignment of a contract may have tax consequences, and may also be
prohibited by ERISA in some circumstances. Owners should therefore consult
competent legal advisers should they wish to assign their contracts.
QUALIFIED PLANS
The contracts offered by this prospectus are designed to be suitable
for use under various types of Qualified plans. Taxation of owners in each
Qualified plan varies with the type of plan and terms and conditions of each
specific plan. Owners, Annuitants and Beneficiaries are cautioned that benefits
under a Qualified plan may be subject to the terms and conditions of the plan,
regardless of the terms and conditions of the contracts issued pursuant to the
plan.
Following are general descriptions of the types of Qualified plans with
which the contracts may be used. Such descriptions are not exhaustive and are
for general information purposes only. The tax rules regarding Qualified plans
are very complex and will have differing applications depending on individual
facts and circumstances. Each purchaser should obtain competent tax advice prior
to purchasing a contract issued under a Qualified plan.
Contracts issued pursuant to Qualified plans include special provisions
restricting contract provisions that may otherwise be available and described in
this prospectus. Generally, contracts issued pursuant to Qualified plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified contracts.
(a) H.R. 10 PLANS
Section 401 of the Code permits self-employed individuals to
establish Qualified plans for themselves and their employees, commonly
referred to as "H.R. 10" or "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 on such items as: amounts of allowable
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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. Purchasers of contracts for use with an H.R. 10 Plan should
obtain competent tax advice as to the tax treatment and suitability of
such an investment.
(b) TAX-SHELTERED ANNUITIES
Section 403(b) of the Code permits the purchase of
"tax-sheltered annuities" by public schools and certain charitable,
education and scientific organizations described in Section 501(c)(3)
of the Code. These qualifying employers may make contributions to the
contracts for the benefit of their employees. Such contributions are
not includible in the gross income of the employee until the employee
receives distributions from the contract. The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by
the Code. Furthermore, the Code sets forth additional restrictions
governing such items as transferability, distributions,
nondiscrimination and withdrawals. Any employee should obtain competent
tax advice as to the tax treatment and suitability of such an
investment.
(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. Purchasers
of contracts to be qualified as IRAs should obtain competent tax advice
as to the tax treatment and suitability of such an investment.
(d) ROTH IRAS
Section 408(a) of the Code permits an individual to contribute
to an individual retirement program called a Roth IRA. Unlike
contributions to a regular IRA under Section 408(b) of the Code,
contributions to a Roth IRA are not made on a tax-deferred basis, but
distributions are tax-free if certain requirements are satisfied. Like
regular IRAs, Roth IRAs are subject to limitations on the amount that
may be contributed, those who may be eligible and the time when
distributions may commence without tax penalty. Certain persons may be
eligible to convert a regular IRA into a Roth IRA, and the taxes on the
resulting income may be spread over four years if the conversion occurs
before January 1, 1999. If and when the contracts are made available
for use with Roth IRAs, they may be subject to special requirements
imposed by the Internal Revenue Service ("IRS"). Purchasers of the
contracts for this purpose will be provided with such supplementary
information as may be required by the IRS or other appropriate agency.
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(e) CORPORATE PENSION AND PROFIT-SHARING PLANS
Sections 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 interests; nondiscrimination in
eligibility and participation; and the tax treatment of distributions,
withdrawals and surrenders. Purchasers of contracts for use with
corporate pension or profit sharing plans should obtain competent tax
advice as to the tax treatment and suitability of such an investment.
(f) 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. As of January 1, 1999, all 457 plans of state
and local governments must hold assets and income in trust (or
custodial accounts or an annuity contract) for the exclusive benefit of
participants and their Beneficiaries.
DISTRIBUTION OF CONTRACTS
The contracts are offered on a continuous basis through SunAmerica
Capital Services, Inc., located at 733 Third Avenue, 4th Floor, New York, New
York 10017. SunAmerica Capital Services, Inc. is registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended, and is a member of the
National Association of Securities Dealers, Inc. The Company and SunAmerica
Capital Services, Inc. are each an indirect wholly owned subsidiary of
SunAmerica Inc. No underwriting fees are paid in connection with the
distribution of the contracts.
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FINANCIAL STATEMENTS
The consolidated financial statements of the Company as of September
30, 1998 and 1997 and for each of the three years in the period ended September
30, 1998 are incorporated herein by reference to Post-Effective Amendment No. 29
under the Securities Act of 1933 (the 33 Act) and No. 22 under the Investment
Company Act of 1940 (the 40 Act) to this Registration Statement file No.
2-86837 and 811-3859 filed on form N-4 on December 15, 1999. Effective
December 31, 1999, the Company changed its fiscal year end from September 30 to
December 31. Reflecting this change, also incorporated herein by reference to
the above stated Registration Statement is the audited Transition Report of the
Company as of and for the three month period ended December 31, 1998.
Effective December 31, 1999, Variable Separate Account changed its
fiscal year end from November 30 to December 31. Reflecting this change,
included in this Statement of Additional Information are the Variable Separate
Account (Portion Relating to the AMERICAN PATHWAY Variable Annuity) audited
financial statements as of and for the one month period ended December 31, 1999
and as of November 30, 1999 and for each of the two fiscal years in the period
ended November 30, 1999.
Documents incorporated by reference for filing purposes will still
appear at the end of this document when it is distributed upon request.
PricewaterhouseCoopers LLP, 400 South Hope Street, Los Angeles,
California 90071, serves as the independent accountants for the Separate Account
and the Company. The financial statements referred to above included in this
Statement of Additional Information have been so included in reliance on the
reports of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
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VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE AMERICAN PATHWAY VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND NOVEMBER 30, 1999
<PAGE> 17
REPORT OF INDEPENDENT ACCOUNTANTS
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 AMERICAN PATHWAY Variable
Annuity)
In our opinion, the accompanying statement of net assets, including the schedule
of portfolio investments, and the related statements of operations and of
changes in net assets present fairly, in all material respects, the financial
position of the Variable Account constituting Variable Separate Account (Portion
Relating to the AMERICAN PATHWAY Variable Annuity), a separate account of Anchor
National Life Insurance Company (the "Separate Account") at December 31, 1999
and November 30, 1999, the results of their operations for the one month ended
December 31, 1999 and for the fiscal year ended November 30, 1999, and the
changes in their net assets for the one month ended December 31, 1999 and for
the two fiscal years ended November 30, 1999 and November 30, 1998, in
conformity with accounting principles generally accepted in the United States.
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 auditing standards generally accepted in the
United States, 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 December 31, 1999 and
November 30, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Los Angeles, California
March 3, 2000
<PAGE> 18
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the AMERICAN PATHWAY Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Growth International Growth-Income Asset Allocation
Series Series Series Series
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Assets:
Investments in Anchor Pathway Fund,
at market value $1,141,306,961 $ 273,472,318 $ 865,115,835 $ 120,323,480
Liabilities 0 0 0 0
-------------- -------------- -------------- --------------
Net Assets $1,141,306,961 $ 273,472,318 $ 865,115,835 $ 120,323,480
============== ============== ============== ==============
Accumulation units outstanding 7,310,016 7,396,232 9,754,309 3,824,081
============== ============== ============== ==============
Series Without Enhanced Death Benefit:
Net Assets $1,104,688,035 $ 263,764,998 $ 836,413,848 $ 116,870,316
Accumulation units outstanding 7,074,981 7,133,139 9,430,010 3,714,099
Unit value of accumulation units $ 156.14 $ 36.98 $ 88.70 $ 31.47
Series With Enhanced Death Benefit:
Net Assets $ 36,618,926 $ 9,707,320 $ 28,701,987 $ 3,453,164
Accumulation units outstanding 235,035 263,093 324,299 109,982
Unit value of accumulation units $ 155.80 $ 36.90 $ 88.50 $ 31.40
</TABLE>
<TABLE>
<CAPTION>
U.S. Government/ Cash
High-Yield Bond AAA-Rated Management
Series Securities Series Series TOTAL
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Assets:
Investments in Anchor Pathway Fund,
at market value $ 70,673,156 $ 61,756,659 $ 75,000,117 $ 2,607,648,526
Liabilities 0 0 0 0
-------------- -------------- -------------- ---------------
Net Assets $ 70,673,156 $ 61,756,659 $ 75,000,117 $ 2,607,648,526
============== ============== ============== ===============
Accumulation units outstanding 1,599,792 2,574,425 3,774,146
============== ============== ============== ===============
Series Without Enhanced Death Benefit:
Net Assets $ 68,957,793 $ 60,396,170 $ 72,139,960
Accumulation units outstanding 1,560,881 2,517,588 3,629,946
Unit value of accumulation units $ 44.18 $ 23.99 $ 19.87
Series With Enhanced Death Benefit:
Net Assets $ 1,715,363 $ 1,360,489 $ 2,860,157
Accumulation units outstanding 38,911 56,837 144,200
Unit value of accumulation units $ 44.08 $ 23.94 $ 19.83
</TABLE>
See accompanying notes to financial statements.
<PAGE> 19
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the AMERICAN PATHWAY Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Growth International Growth-Income Asset Allocation
Series Series Series Series
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Assets:
Investments in Anchor Pathway Fund,
at market value $1,031,722,826 $ 239,753,729 $ 865,456,606 $ 120,105,395
-------------- -------------- -------------- --------------
Liabilities 0 0 0 0
-------------- -------------- -------------- --------------
Net Assets $1,031,722,826 $ 239,753,729 $ 865,456,606 $ 120,105,395
============== ============== ============== ==============
Accumulation units outstanding 7,394,747 7,479,289 9,923,248 3,912,401
============== ============== ============== ==============
Series Without Enhanced Death Benefit:
Net Assets $ 998,742,823 $ 231,418,208 $ 836,643,120 $ 116,723,723
Accumulation units outstanding 7,157,890 7,218,730 9,592,209 3,802,018
Unit value of accumulation units $ 139.53 $ 32.06 $ 87.22 $ 30.70
Series With Enhanced Death Benefit:
Net Assets $ 32,980,003 $ 8,335,521 $ 28,813,486 $ 3,381,672
Accumulation units outstanding 236,857 260,559 331,039 110,383
Unit value of accumulation units $ 139.24 $ 31.99 $ 87.04 $ 30.64
</TABLE>
<TABLE>
<CAPTION>
U.S. Government/ Cash
High-Yield Bond AAA-Rated Management
Series Securities Series Series TOTAL
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Assets:
Investments in Anchor Pathway Fund,
at market value $ 72,583,426 $ 63,416,897 $ 70,787,649 $ 2,463,826,528
-------------- -------------- -------------- ---------------
Liabilities 0 0 0 0
-------------- -------------- -------------- ---------------
Net Assets $ 72,583,426 $ 63,416,897 $ 70,787,649 $ 2,463,826,528
============== ============== ============== ===============
Accumulation units outstanding 1,659,097 2,629,805 3,573,852
============== ============== ============== ===============
Series Without Enhanced Death Benefit:
Net Assets $ 70,828,387 $ 62,044,327 $ 68,324,852
Accumulation units outstanding 1,618,900 2,572,769 3,449,288
Unit value of accumulation units $ 43.75 $ 24.12 $ 19.81
Series With Enhanced Death Benefit:
Net Assets $ 1,755,039 $ 1,372,570 $ 2,462,797
Accumulation units outstanding 40,197 57,036 124,564
Unit value of accumulation units $ 43.66 $ 24.06 $ 19.77
</TABLE>
See accompanying notes to financial statements.
<PAGE> 20
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the AMERICAN PATHWAY Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Market Value
Variable Accounts Shares Per Share Market Value Cost
- ----------------- ------ --------- ------------ ----
<S> <C> <C> <C> <C>
Growth Series 20,828,178 $ 54.80 $1,141,306,961 $ 788,618,441
International Series 13,509,034 20.24 273,472,318 186,811,799
Growth-Income Series 29,874,835 28.96 865,115,835 827,329,087
Asset Allocation Series 9,107,133 13.21 120,323,480 119,422,848
High-Yield Bond Series 7,028,104 10.06 70,673,156 87,455,192
U.S. Government / AAA-Rated
Securities Series 6,120,351 10.09 61,756,659 68,099,157
Cash Management Series 6,827,274 10.99 75,000,117 75,413,974
-------------- --------------
$2,607,648,526 $2,153,150,498
============== ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 21
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the AMERICAN PATHWAY Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
SCHEDULE OF PORTFOLIO INVESTMENTS
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Market Value
Variable Accounts Shares Per Share Market Value Cost
- ----------------- ------ --------- ------------ ----
<S> <C> <C> <C> <C>
Growth Series 21,092,938 $ 48.91 $1,031,722,826 $ 798,238,768
International Series 13,675,890 17.53 239,753,729 188,943,778
Growth-Income Series 30,425,905 28.44 865,456,606 842,625,997
Asset Allocation Series 9,327,798 12.88 120,105,395 122,307,959
High-Yield Bond Series 7,296,710 9.95 72,583,426 90,804,919
U.S. Government / AAA-Rated
Securities Series 6,258,935 10.13 63,416,897 69,673,145
Cash Management Series 6,472,154 10.94 70,787,649 71,555,798
-------------- --------------
$2,463,826,528 $2,184,150,364
============== ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 22
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the AMERICAN PATHWAY Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE ONE MONTH ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Growth International Growth-Income Asset Allocation
Series Series Series Series
------------- ------------- ------------- -------------
Investment income:
<S> <C> <C> <C> <C>
Dividends and capital gains distributions $ 0 $ 0 $ 0 $ 0
------------- ------------- ------------- -------------
Total investment income 0 0 0 0
------------- ------------- ------------- -------------
Expenses:
Mortality risk charge (741,784) (174,801) (580,535) (81,100)
Expense risk charge (324,531) (76,475) (253,984) (35,481)
Distribution expense charge (139,084) (32,775) (108,851) (15,206)
Enhanced death benefit charge (2,983) (769) (2,425) (289)
------------- ------------- ------------- -------------
Total expenses (1,208,382) (284,820) (945,795) (132,076)
------------- ------------- ------------- -------------
Net investment income (loss) (1,208,382) (284,820) (945,795) (132,076)
------------- ------------- ------------- -------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 15,180,200 3,759,140 15,687,601 2,963,235
Cost of shares sold (11,052,578) (2,782,683) (15,372,332) (2,987,774)
------------- ------------- ------------- -------------
Net realized gains (losses) from
securities transactions 4,127,622 976,457 315,269 (24,539)
------------- ------------- ------------- -------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 233,484,058 50,809,951 22,830,609 (2,202,564)
End of period 352,688,520 86,660,519 37,786,748 900,632
------------- ------------- ------------- -------------
Change in net unrealized appreciation/
depreciation of investments 119,204,462 35,850,568 14,956,139 3,103,196
------------- ------------- ------------- -------------
Increase (decrease) in net assets from operations $ 122,123,702 $ 36,542,205 $ 14,325,613 $ 2,946,581
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
U.S. Government/ Cash
High-Yield Bond AAA-Rated Management
Series Securities Series Series TOTAL
-------------- -------------- -------------- -------------
Investment income:
<S> <C> <C> <C> <C>
Dividends and capital gains distributions $ 0 $ 0 $ 0 $ 0
-------------- -------------- -------------- -------------
Total investment income 0 0 0 0
-------------- -------------- -------------- -------------
Expenses:
Mortality risk charge (48,798) (42,646) (50,001) (1,719,665)
Expense risk charge (21,349) (18,658) (21,875) (752,353)
Distribution expense charge (9,150) (7,996) (9,375) (322,437)
Enhanced death benefit charge (146) (116) (201) (6,929)
-------------- -------------- -------------- -------------
Total expenses (79,443) (69,416) (81,452) (2,801,384)
-------------- -------------- -------------- -------------
Net investment income (loss) (79,443) (69,416) (81,452) (2,801,384)
-------------- -------------- -------------- -------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 2,720,051 1,705,196 3,996,004 46,011,427
Cost of shares sold (3,378,286) (1,876,370) (4,027,249) (41,477,272)
-------------- -------------- -------------- -------------
Net realized gains (losses) from
securities transactions (658,235) (171,174) (31,245) 4,534,155
-------------- -------------- -------------- -------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period (18,221,493) (6,256,248) (768,149) 279,676,164
End of period (16,782,036) (6,342,498) (413,857) 454,498,028
-------------- -------------- -------------- -------------
Change in net unrealized appreciation/
depreciation of investments 1,439,457 (86,250) 354,292 174,821,864
-------------- -------------- -------------- -------------
Increase (decrease) in net assets from operations $ 701,779 $ (326,840) $ 241,595 $ 176,554,635
============== ============== ============== =============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 23
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the AMERICAN PATHWAY Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Growth International Growth-Income Asset Allocation
Series Series Series Series
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 245,172,552 $ 32,975,428 $ 253,395,145 $ 28,741,994
------------- ------------- ------------- -------------
Total investment income 245,172,552 32,975,428 253,395,145 28,741,994
------------- ------------- ------------- -------------
Expenses:
Mortality risk charge (7,616,791) (1,663,739) (7,422,759) (1,025,990)
Expense risk charge (3,332,346) (727,886) (3,247,457) (448,871)
Distribution expense charge (1,428,148) (311,951) (1,391,767) (192,373)
Enhanced death benefit charge (30,112) (7,057) (30,097) (3,540)
------------- ------------- ------------- -------------
Total expenses (12,407,397) (2,710,633) (12,092,080) (1,670,774)
------------- ------------- ------------- -------------
Net investment income 232,765,155 30,264,795 241,303,065 27,071,220
------------- ------------- ------------- -------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 185,430,066 44,878,440 162,784,398 26,915,795
Cost of shares sold (130,635,653) (38,996,974) (125,615,450) (23,441,579)
------------- ------------- ------------- -------------
Net realized gains (losses) from
securities transactions 54,794,413 5,881,466 37,168,948 3,474,216
------------- ------------- ------------- -------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 181,579,316 6,210,187 208,464,161 18,831,587
End of period 233,484,058 50,809,951 22,830,609 (2,202,564)
------------- ------------- ------------- -------------
Change in net unrealized appreciation/
depreciation of investments 51,904,742 44,599,764 (185,633,552) (21,034,151)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from operations $ 339,464,310 $ 80,746,025 $ 92,838,461 $ 9,511,285
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
U.S. Government/ Cash
High-Yield Bond AAA-Rated Management
Series Securities Series Series TOTAL
------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 15,724,038 $ 6,124,727 $ 4,171,640 $ 586,305,524
------------- ------------- ------------- -------------
Total investment income 15,724,038 6,124,727 4,171,640 586,305,524
------------- ------------- ------------- -------------
Expenses:
Mortality risk charge (679,157) (569,436) (597,243) (19,575,115)
Expense risk charge (297,131) (249,128) (261,294) (8,564,113)
Distribution expense charge (127,342) (106,769) (111,983) (3,670,333)
Enhanced death benefit charge (2,279) (1,638) (2,189) (76,912)
------------- ------------- ------------- -------------
Total expenses (1,105,909) (926,971) (972,709) (31,886,473)
------------- ------------- ------------- -------------
Net investment income 14,618,129 5,197,756 3,198,931 554,419,051
------------- ------------- ------------- -------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 40,390,860 27,457,866 115,888,661 603,746,086
Cost of shares sold (42,605,158) (28,705,329) (115,628,136) (505,628,279)
------------- ------------- ------------- -------------
Net realized gains (losses) from
securities transactions (2,214,298) (1,247,463) 260,525 98,117,807
------------- ------------- ------------- -------------
Net unrealized appreciation (depreciation)
of investments:
Beginning of period (2,687,390) (1,889,996) 336,688 410,844,553
End of period (18,221,493) (6,256,248) (768,149) 279,676,164
------------- ------------- ------------- -------------
Change in net unrealized appreciation/
depreciation of investments (15,534,103) (4,366,252) (1,104,837) (131,168,389)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from operations $ (3,130,272) $ (415,959) $ 2,354,619 $ 521,368,469
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 24
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the AMERICAN PATHWAY Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE ONE MONTH ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Growth International Growth-Income Asset Allocation
Series Series Series Series
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (1,208,382) $ (284,820) $ (945,795) $ (132,076)
---------------- ---------------- ---------------- ----------------
Net realized gains (losses) from
securities transactions 4,127,622 976,457 315,269 (24,539)
Change in net unrealized appreciation/
depreciation of investments 119,204,462 35,850,568 14,956,139 3,103,196
---------------- ---------------- ---------------- ----------------
Increase (decrease) in net assets from
operations 122,123,702 36,542,205 14,325,613 2,946,581
---------------- ---------------- ---------------- ----------------
From capital transactions without
enhanced death benefit:
Net proceeds from units sold 707,956 213,372 446,350 50,864
Cost of units redeemed (11,227,444) (2,630,128) (12,283,947) (1,793,646)
Net transfers (1,739,330) (493,824) (2,239,426) (973,132)
---------------- ---------------- ---------------- ----------------
Increase (decrease) in net assets from
capital transactions (12,258,818) (2,910,580) (14,077,023) (2,715,914)
---------------- ---------------- ---------------- ----------------
From capital transactions with
enhanced death benefit:
Net proceeds from units sold 2,720 591 4,880 355
Cost of units redeemed (162,413) (57,273) (224,831) (13,867)
Net transfers (121,056) 143,646 (369,410) 930
---------------- ---------------- ---------------- ----------------
Increase (decrease) in net assets from
capital transactions (280,749) 86,964 (589,361) (12,582)
---------------- ---------------- ---------------- ----------------
Total increase (decrease) in net assets from
capital transactions (12,539,567) (2,823,616) (14,666,384) (2,728,496)
Increase (decrease) in net assets 109,584,135 33,718,589 (340,771) 218,085
Net assets at beginning of period 1,031,722,826 239,753,729 865,456,606 120,105,395
---------------- ---------------- ---------------- ----------------
Net assets at end of period $ 1,141,306,961 $ 273,472,318 $ 865,115,835 $ 120,323,480
================ ================ ================ ================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Series without enhanced death benefit:
Units sold 4,801 6,237 5,079 1,727
Units redeemed (75,809) (76,825) (141,548) (58,097)
Units transferred (11,901) (15,003) (25,730) (31,549)
---------------- ---------------- ---------------- ----------------
Decrease in units outstanding (82,909) (85,591) (162,199) (87,919)
Beginning units 7,157,890 7,218,730 9,592,209 3,802,018
---------------- ---------------- ---------------- ----------------
Ending units 7,074,981 7,133,139 9,430,010 3,714,099
================ ================ ================ ================
Series with enhanced death benefit:
Units sold 18 17 57 12
Units redeemed (1,099) (1,687) (2,610) (444)
Units transferred (741) 4,204 (4,187) 31
---------------- ---------------- ---------------- ----------------
Increase in units outstanding (1,822) 2,534 (6,740) (401)
Beginning units 236,857 260,559 331,039 110,383
---------------- ---------------- ---------------- ----------------
Ending units 235,035 263,093 324,299 109,982
================ ================ ================ ================
</TABLE>
<TABLE>
<CAPTION>
U.S. Government/ Cash
High-Yield Bond AAA-Rated Management
Series Securities Series Series TOTAL
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (79,443) $ (69,416) $ (81,452) $ (2,801,384)
---------------- ---------------- ---------------- ----------------
Net realized gains (losses) from
securities transactions (658,235) (171,174) (31,245) 4,534,155
Change in net unrealized appreciation/
depreciation of investments 1,439,457 (86,250) 354,292 174,821,864
---------------- ---------------- ---------------- ----------------
Increase (decrease) in net assets from
operations 701,779 (326,840) 241,595 176,554,635
---------------- ---------------- ---------------- ----------------
From capital transactions without
enhanced death benefit:
Net proceeds from units sold 25,373 20,056 21,287 1,485,258
Cost of units redeemed (1,146,825) (1,203,690) (3,626,251) (33,911,931)
Net transfers (1,434,278) (144,949) 7,186,045 161,106
---------------- ---------------- ---------------- ----------------
Increase (decrease) in net assets from
capital transactions (2,555,730) (1,328,583) 3,581,081 (32,265,567)
---------------- ---------------- ---------------- ----------------
From capital transactions with
enhanced death benefit:
Net proceeds from units sold 0 3,662 1,000 13,208
Cost of units redeemed (18,393) (4,575) (1,351) (482,703)
Net transfers (37,926) (3,902) 390,143 2,425
---------------- ---------------- ---------------- ----------------
Increase (decrease) in net assets from
capital transactions (56,319) (4,815) 389,792 (467,070)
---------------- ---------------- ---------------- ----------------
Total increase (decrease) in net assets from
capital transactions (2,612,049) (1,333,398) 3,970,873 (32,732,637)
Increase (decrease) in net assets (1,910,270) (1,660,238) 4,212,468 143,821,998
Net assets at beginning of period 72,583,426 63,416,897 70,787,649 2,463,826,528
---------------- ---------------- ---------------- ----------------
Net assets at end of period $ 70,673,156 $ 61,756,659 $ 75,000,117 $ 2,607,648,526
================ ================ ================ ================
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Series without enhanced death benefit:
Units sold 591 852 1,080
Units redeemed (26,208) (49,990) (182,787)
Units transferred (32,402) (6,043) 362,365
---------------- ---------------- ----------------
Decrease in units outstanding (58,019) (55,181) 180,658
Beginning units 1,618,900 2,572,769 3,449,288
---------------- ---------------- ----------------
Ending units 1,560,881 2,517,588 3,629,946
================ ================ ================
Series with enhanced death benefit:
Units sold 0 153 51
Units redeemed (420) (191) (68)
Units transferred (866) (161) 19,653
---------------- ---------------- ----------------
Increase in units outstanding (1,286) (199) 19,636
Beginning units 40,197 57,036 124,564
---------------- ---------------- ----------------
Ending units 38,911 56,837 144,200
================ ================ ================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 25
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the AMERICAN PATHWAY Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Growth International Growth-Income Asset Allocation
Series Series Series Series
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 232,765,155 $ 30,264,795 $ 241,303,065 $ 27,071,220
--------------- --------------- --------------- ---------------
Net realized gains (losses) from
securities transactions 54,794,413 5,881,466 37,168,948 3,474,216
Change in net unrealized appreciation/
depreciation of investments 51,904,742 44,599,764 (185,633,552) (21,034,151)
--------------- --------------- --------------- ---------------
Increase (decrease) in net assets from
operations 339,464,310 80,746,025 92,838,461 9,511,285
--------------- --------------- --------------- ---------------
From capital transactions without
enhanced death benefit:
Net proceeds from units sold 13,100,876 3,101,237 13,436,793 2,523,920
Cost of units redeemed (131,492,615) (31,530,857) (121,983,041) (22,315,136)
Net transfers (17,909,381) (4,438,860) (29,366,689) (3,467,977)
--------------- --------------- --------------- ---------------
Increase (decrease) in net assets from
capital transactions (136,301,120) (32,868,480) (137,912,937) (23,259,193)
--------------- --------------- --------------- ---------------
From capital transactions with
enhanced death benefit:
Net proceeds from units sold 244,663 27,398 70,854 16,838
Cost of units redeemed (3,139,584) (1,035,441) (2,819,358) (371,653)
Net transfers 1,535,683 589,778 1,344,053 138,716
--------------- --------------- --------------- ---------------
Increase (decrease) in net assets from
capital transactions (1,359,238) (418,265) (1,404,451) (216,099)
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets from
capital transactions (137,660,358) (33,286,745) (139,317,388) (23,475,292)
Increase (decrease) in net assets 201,803,952 47,459,280 (46,478,927) (13,964,007)
Net assets at beginning of period 829,918,874 192,294,449 911,935,533 134,069,402
--------------- --------------- --------------- ---------------
Net assets at end of period $ 1,031,722,826 $ 239,753,729 $ 865,456,606 $ 120,105,395
=============== =============== =============== ===============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Series without enhanced death benefit:
Units sold 106,290 125,490 158,990 83,909
Units redeemed (1,124,346) (1,238,410) (1,423,871) (747,714)
Units transferred (143,990) (185,282) (329,367) (114,423)
--------------- --------------- --------------- ---------------
Increase (decrease) in units outstanding (1,162,046) (1,298,202) (1,594,248) (778,228)
Beginning units 8,319,936 8,516,932 11,186,457 4,580,246
--------------- --------------- --------------- ---------------
Ending units 7,157,890 7,218,730 9,592,209 3,802,018
Series with enhanced death benefit:
Units sold 1,858 1,008 661 597
Units redeemed (25,992) (39,577) (32,294) (12,361)
Units transferred 14,400 24,544 16,366 4,976
--------------- --------------- --------------- ---------------
Increase (decrease) in units outstanding (9,734) (14,025) (15,267) (6,788)
Beginning units 246,591 274,584 346,306 117,171
--------------- --------------- --------------- ---------------
Ending units 236,857 260,559 331,039 110,383
=============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
U.S. Government/ Cash
High-Yield Bond AAA-Rated Management
Series Securities Series Series TOTAL
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 14,618,129 $ 5,197,756 $ 3,198,931 $ 554,419,051
--------------- --------------- --------------- ---------------
Net realized gains (losses) from
securities transactions (2,214,298) (1,247,463) 260,525 98,117,807
Change in net unrealized appreciation/
depreciation of investments (15,534,103) (4,366,252) (1,104,837) (131,168,389)
--------------- --------------- --------------- ---------------
Increase (decrease) in net assets from
operations (3,130,272) (415,959) 2,354,619 521,368,469
--------------- --------------- --------------- ---------------
From capital transactions without
enhanced death benefit:
Net proceeds from units sold 1,426,041 1,211,804 1,498,214 36,298,885
Cost of units redeemed (14,151,044) (13,908,469) (41,669,609) (377,050,771)
Net transfers (9,435,709) (2,651,691) 44,373,459 (22,896,848)
--------------- --------------- --------------- ---------------
Increase (decrease) in net assets from
capital transactions (22,160,712) (15,348,356) 4,202,064 (363,648,734)
--------------- --------------- --------------- ---------------
From capital transactions with
enhanced death benefit:
Net proceeds from units sold 3,860 34,919 21,729 420,261
Cost of units redeemed (439,078) (370,879) (3,103,222) (11,279,215)
Net transfers (697,580) (103,834) 3,552,013 6,358,829
--------------- --------------- --------------- ---------------
Increase (decrease) in net assets from
capital transactions (1,132,798) (439,794) 470,520 (4,500,125)
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets from
capital transactions (23,293,510) (15,788,150) 4,672,584 (368,148,859)
Increase (decrease) in net assets (26,423,782) (16,204,109) 7,027,203 153,219,610
Net assets at beginning of period 99,007,208 79,621,006 63,760,446 2,310,606,918
--------------- --------------- --------------- ---------------
Net assets at end of period $ 72,583,426 $ 63,416,897 $ 70,787,649 $ 2,463,826,528
=============== =============== =============== ===============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Series without enhanced death benefit:
Units sold 34,677 50,256 77,574
Units redeemed (320,670) (576,570) (2,141,269)
Units transferred (205,338) (109,978) 2,291,458
--------------- --------------- ---------------
Increase (decrease) in units outstanding (491,331) (636,292) 227,763
Beginning units 2,110,231 3,209,061 3,221,525
--------------- --------------- ---------------
Ending units 1,618,900 2,572,769 3,449,288
Series with enhanced death benefit:
Units sold 82 1,421 1,127
Units redeemed (9,790) (15,345) (159,734)
Units transferred (15,639) (4,292) 182,778
--------------- --------------- ---------------
Increase (decrease) in units outstanding (25,347) (18,216) 24,171
Beginning units 65,544 75,252 100,393
--------------- --------------- ---------------
Ending units 40,197 57,036 124,564
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 26
VARIABLE SEPARATE ACCOUNT
(Portion Relating to the AMERICAN PATHWAY Variable Annuity)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
Growth International Growth-Income Asset Allocation
Series Series Series Series
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 140,936,602 $ 55,186,652 $ 171,521,590 $ 21,790,889
Net realized gains (losses) from
securities transactions 36,100,628 6,770,497 48,041,283 6,314,535
Change in net unrealized appreciation/
depreciation of investments (4,153,331) (35,151,898) (99,061,374) (16,945,240)
--------------- --------------- --------------- ---------------
Increase in net assets from operations 172,883,899 26,805,251 120,501,499 11,160,184
--------------- --------------- --------------- ---------------
From capital transactions without
enhanced death benefit:
Net proceeds from units sold 11,310,144 3,843,803 13,409,149 2,037,565
Cost of units redeemed (136,909,441) (44,436,282) (149,042,375) (32,041,051)
Net transfers (38,843,723) (23,032,791) (47,914,350) (5,598,877)
--------------- --------------- --------------- ---------------
Decrease in net assets from capital
transactions (164,443,020) (63,625,270) (183,547,576) (35,602,363)
--------------- --------------- --------------- ---------------
From capital transactions with
enhanced death benefit:
Net proceeds from units sold 60,352 12,582 86,117 48,439
Cost of units redeemed (2,262,899) (658,863) (1,708,249) (554,229)
Net transfers 22,440,174 6,419,902 26,173,576 3,571,081
--------------- --------------- --------------- ---------------
Increase in net assets from capital
transactions 20,237,627 5,773,621 24,551,444 3,065,291
--------------- --------------- --------------- ---------------
Total decrease in net assets from
capital transactions (144,205,393) (57,851,649) (158,996,132) (32,537,072)
Increase (decrease) in net assets 28,678,506 (31,046,398) (38,494,633) (21,376,888)
Net assets at beginning of period 801,240,368 223,340,847 950,430,166 155,446,290
--------------- --------------- --------------- ---------------
Net assets at end of period $ 829,918,874 $ 192,294,449 $ 911,935,533 $ 134,069,402
=============== =============== =============== ===============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Series without enhanced death benefit:
Units sold 129,681 183,727 177,384 73,780
Units redeemed (1,575,198) (2,089,593) (1,984,051) (1,157,060)
Units transferred (439,113) (1,139,794) (638,965) (206,053)
--------------- --------------- --------------- ---------------
Decrease in units outstanding (1,884,630) (3,045,660) (2,445,632) (1,289,333)
Beginning units 10,204,566 11,562,592 13,632,089 5,869,579
--------------- --------------- --------------- ---------------
Ending units 8,319,936 8,516,932 11,186,457 4,580,246
=============== =============== =============== ===============
Series with enhanced death benefit:
Units sold 733 591 1,180 1,604
Units redeemed (25,136) (30,359) (22,792) (19,293)
Units transferred 256,158 295,902 348,315 128,582
--------------- --------------- --------------- ---------------
Increase in units outstanding 231,755 266,134 326,703 110,893
Beginning units 14,836 8,450 19,603 6,278
--------------- --------------- --------------- ---------------
Ending units 246,591 274,584 346,306 117,171
=============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
U.S. Government/ Cash
High-Yield Bond AAA-Rated Management
Series Securities Series Series TOTAL
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 12,298,068 $ 5,389,473 $ 3,085,616 $ 410,208,890
--------------- --------------- --------------- ---------------
Net realized gains (losses) from
securities transactions (722,281) (1,360,571) (359,346) 94,784,745
Change in net unrealized appreciation/
depreciation of investments (8,779,751) 1,375,704 (204,232) (162,920,122)
--------------- --------------- --------------- ---------------
Increase in net assets from operations 2,796,036 5,404,606 2,522,038 342,073,513
--------------- --------------- --------------- ---------------
From capital transactions without
enhanced death benefit:
Net proceeds from units sold 1,562,604 945,018 922,605 34,030,888
Cost of units redeemed (22,720,142) (18,518,179) (44,573,172) (448,240,642)
Net transfers (4,224,512) 8,495,231 33,786,324 (77,332,698)
--------------- --------------- --------------- ---------------
Decrease in net assets from capital
transactions (25,382,050) (9,077,930) (9,864,243) (491,542,452)
--------------- --------------- --------------- ---------------
From capital transactions with
enhanced death benefit:
Net proceeds from units sold 75 1,887 7,924 217,376
Cost of units redeemed (307,333) (80,126) (931,892) (6,503,591)
Net transfers 3,229,001 1,763,618 2,800,630 66,397,982
--------------- --------------- --------------- ---------------
Increase in net assets from capital
transactions 2,921,743 1,685,379 1,876,662 60,111,767
--------------- --------------- --------------- ---------------
Total decrease in net assets from
capital transactions (22,460,307) (7,392,551) (7,987,581) (431,430,685)
Increase (decrease) in net assets (19,664,271) (1,987,945) (5,465,543) (89,357,172)
Net assets at beginning of period 118,671,479 81,608,951 69,225,989 2,399,964,090
--------------- --------------- --------------- ---------------
Net assets at end of period $ 99,007,208 $ 79,621,006 $ 63,760,446 $ 2,310,606,918
=============== =============== =============== ===============
ANALYSIS OF INCREASE (DECREASE)
IN UNITS OUTSTANDING:
Series without enhanced death benefit:
Units sold 34,384 40,919 49,397
Units redeemed (498,009) (794,063) (2,358,982)
Units transferred (82,677) 355,501 1,792,405
--------------- --------------- ---------------
Decrease in units outstanding (546,302) (397,643) (517,180)
Beginning units 2,656,533 3,606,704 3,738,705
--------------- --------------- ---------------
Ending units 2,110,231 3,209,061 3,221,525
=============== =============== ===============
Series with enhanced death benefit:
Units sold 2 80 424
Units redeemed (6,835) (3,422) (49,216)
Units transferred 71,015 75,343 149,185
--------------- --------------- ---------------
Increase in units outstanding 64,182 72,001 100,393
Beginning units 1,362 3,251 0
--------------- --------------- ---------------
Ending units 65,544 75,252 100,393
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 27
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE AMERICAN PATHWAY VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Variable Separate Account (Portion Relating to the PATHWAY Variable
Annuity) of Anchor National Life Insurance Company (the "Separate
Account") is a segregated investment account of Anchor National Life
Insurance Company (the "Company"). The Company is an indirect, wholly
owned subsidiary of American International Group, Inc. ("AIG"), an
international insurance and financial services company. At December 31,
1998, the Company was a wholly owned indirect subsidiary of SunAmerica
Inc., a Maryland corporation. On January 1, 1999, SunAmerica Inc. merged
with and into AIG in a tax-free reorganization that has been treated as
a pooling of interests for accounting purposes. Thus, SunAmerica Inc.
ceased to exist on that date. However, immediately prior to the
effectiveness of the merger, substantially all of the net assets of
SunAmerica Inc. were contributed to a newly formed subsidiary of AIG
named SunAmerica Holdings, Inc., a Delaware corporation. SunAmerica
Holdings, Inc. subsequently changed its name to SunAmerica Inc. The
Separate Account is registered as a segregated unit investment trust
pursuant to the provisions of the Investment Company Act of 1940, as
amended.
The Separate Account is composed of seven variable series (the "Variable
Accounts"). Each of the Variable Accounts is invested solely in shares
of a designated series of the Anchor Pathway Fund (the "Fund"). The Fund
is a diversified, open-end, affiliated investment company, which retains
an investment adviser to assist in the investment activities of the
Fund. The contractholder may elect to have payments allocated to a
guaranteed-interest fund of the Company (the "General Account"), which
is not a part of the Separate Account. If no election is made, the
payments will be invested according to the contractholder's last
allocation instructions. The financial statements include balances
allocated by the contractholder to the seven Variable Accounts and do
not include balances allocated to the General Account.
The inception date of the Growth Series, Growth-Income Series,
High-Yield Bond Series and Cash Management Series Portfolios was
February 7, 1984. The inception date of the U.S. Government/AAA-Rated
Securities Series Portfolio was November 20, 1985. The inception date of
the Asset Allocation Series Portfolio was March 31, 1989. The inception
date of the International Series Portfolio was May 3, 1990.
The investment objectives and policies of the seven series of the Fund
are summarized below:
The GROWTH SERIES seeks growth of capital. This portfolio invests
primarily in common stocks or securities with common stock
characteristics.
The INTERNATIONAL SERIES seeks long-term growth of capital. This
portfolio invests in securities of issuers domiciled outside the United
States.
1
<PAGE> 28
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE AMERICAN PATHWAY VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The GROWTH-INCOME SERIES seeks growth of capital and income. This
portfolio invests primarily in securities which demonstrate the
potential for appreciation and/or dividends.
The ASSET ALLOCATION SERIES seeks high total return (including income
and capital gains) consistent with preservation of capital over the long
term. This portfolio invests in a diversified selection of common stocks
and other equity-type securities (such as convertible bonds and
preferred stocks), bonds and other intermediate and long-term
fixed-income securities and money market instruments (debt securities
maturing in one year or less) in any combination.
The HIGH-YIELD BOND SERIES seeks a high level of current income and
secondarily seeks capital appreciation. This portfolio invests primarily
in intermediate and long-term corporate obligations, with emphasis on
higher-yielding, higher-risk, lower-rated or unrated securities.
The U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES seeks a high level of
current income consistent with prudent investment risk and preservation
of capital. This portfolio invests primarily in a combination of (i)
securities guaranteed by the U.S. Government and (ii) other debt
securities rated AAA by Standard & Poor's Corporation or Aaa by Moody's
Investors Service, Inc. or that have not received a rating but are
determined to be of comparable quality by the investment adviser.
The CASH MANAGEMENT SERIES seeks high current yield while preserving
capital. This portfolio invests in a diversified selection of money
market instruments.
Purchases and sales of shares of the series of the Fund are valued at
the net asset values of the shares on the date the shares are purchased
or sold. Dividends and capital gains distributions are recorded when
received. Realized gains and losses on the sale of investments in the
Fund are recognized at the date of sale and are determined on an average
cost basis.
In October, 1997, the Company began to offer an enhanced death benefit
to existing and new policyholders. Choice of this benefit results in a
0.10% increase in the Mortality Risk Charge (Note 2), and therefore in
slightly reduced accumulation unit values. The two accumulation unit
values for each Variable Account are computed daily based on the total
net assets applicable to policies with and without the enhanced benefit,
respectively. The accumulation unit values, the transactions, the number
of units and the separate account assets related to policies with and
without the enhanced death benefit are shown separately in the financial
statements.
2
<PAGE> 29
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE AMERICAN PATHWAY VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
2. CHARGES AND DEDUCTIONS
Charges and deductions are applied against the current value of the
Separate Account and are paid as follows:
WITHDRAWAL CHARGES: The contract value may be withdrawn at any time
during the accumulation period. There is a free withdrawal amount for
the first withdrawal during a contract year after the first contract
year. The free withdrawal amount equals 10% of the total of purchase
payments made more than one year prior to the date of withdrawal. Should
a withdrawal exceed the free withdrawal amount, a contingent deferred
sales charge of 5% is imposed on the excess for the first five contract
years and paid to the Company.
The withdrawal charge is deducted from the remaining contract value so
that the actual reduction in contract value as a result of the
withdrawal will be greater than the withdrawal amount requested and
paid. For purposes of determining the withdrawal charge, withdrawals
will be allocated to the oldest purchase payments first so that all
withdrawals are allocated to purchase payments to which the lowest (if
any) withdrawal charge will apply.
CONTRACT ADMINISTRATION CHARGE: An annual contract administration charge
of $30 is charged against each contract, which reimburses the Company
for expenses incurred in establishing and maintaining records relating
to a contract. The contract administration charge will be assessed on
each anniversary of the issue date of the contract prior to the date
when annuity payments begin. In the event that a total surrender of
contract value is made, the entire charge will be assessed as of the
date of surrender.
TRANSFER FEE: A transfer fee of $25 ($10 in Pennsylvania and Texas) is
assessed on each transfer of funds in excess of fifteen transactions
within a contract year.
PREMIUM TAXES: Premium taxes or other taxes payable to a state or other
governmental entity will be charged against the contract values. Some
states assess premium taxes at the time purchase payments are made;
others assess premium taxes at the time annuity payments begin. The
Company currently intends to deduct premium taxes at the time of
surrender, upon death of the contractholder or upon annuitization;
however, it reserves the right to deduct premium taxes when incurred.
Premium taxes generally range from 0% to 3.5%.
MORTALITY RISK CHARGE: The Company deducts a mortality risk charge,
which equals an annual rate of 0.80% of the net asset value of each
series, computed on a daily basis. The mortality risk charge is
compensation for the mortality risks assumed by the Company from its
contractual obligations to make annuity payments after the contract has
annuitized for the life of the annuitant
3
<PAGE> 30
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE AMERICAN PATHWAY VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
CHARGES AND DEDUCTIONS (continued)
and to provide a death benefit if the contractholder dies prior to the
date annuity payments begin. If the contractholder elects the optional
enhanced guaranteed minimum death benefit, the mortality risk premium
will equal an annual rate of 0.90% of the net asset value of each
series, computed on a daily basis.
EXPENSE RISK CHARGE: The Company deducts an expense risk charge, which
equals an annual rate of 0.35% of the net asset value of each series,
computed on a daily basis. The expense risk charge is compensation for
the risk assumed by the Company that the cost of administering the
contracts will exceed the amount received from the contract
administration charge.
DISTRIBUTION EXPENSE CHARGE: The Company deducts a distribution expense
charge at an annual rate of 0.15% of the net asset value of each series,
computed on a daily basis. The distribution expense charge is designed
to compensate the Company for assuming a distribution expense risk due
to the guarantee that the withdrawal charge stated in the Contract will
not be increased.
SEPARATE ACCOUNT INCOME TAXES: The Company currently does not maintain a
provision for taxes, but has reserved the right to establish such a
provision for taxes in the future if it determines, in its sole
discretion, that it will incur a tax as a result of the operation of the
Separate Account.
4
<PAGE> 31
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE AMERICAN PATHWAY VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
3. INVESTMENT IN ANCHOR AMERICAN PATHWAY FUND
The aggregate cost of the shares acquired and the aggregate proceeds
from shares sold during the one month ended December 31, 1999 consist of
the following:
<TABLE>
<CAPTION>
Cost of Shares Proceeds From
Variable Accounts Acquired Shares Sold
- ----------------- -------------- -------------
<S> <C> <C>
Growth Series $ 1,432,251 $15,180,200
International Series 650,704 3,759,140
Growth-Income Series 75,422 15,687,601
Asset Allocation Series 102,663 2,963,235
High-Yield Bond Series 28,559 2,720,051
U.S. Government/AAA-Rated
Securities Series 302,382 1,705,196
Cash Management Series 7,885,425 3,996,004
</TABLE>
The aggregate cost of the shares acquired and the aggregate proceeds
from shares sold during the year ended November 30, 1999 consist of the
following:
<TABLE>
<CAPTION>
Cost of Shares Proceeds From
Variable Accounts Acquired Shares Sold
- ----------------- -------------- -------------
<S> <C> <C>
Growth Series $280,534,863 $185,430,066
International Series 41,856,490 44,878,440
Growth-Income Series 264,770,075 162,784,398
Asset Allocation Series 30,511,723 26,915,795
High-Yield Bond Series 31,715,479 40,390,860
U.S. Government/AAA-Rated
Securities Series 16,867,472 27,457,866
Cash Management Series 123,760,176 115,888,661
</TABLE>
5
<PAGE> 32
VARIABLE SEPARATE ACCOUNT
(PORTION RELATING TO THE AMERICAN PATHWAY VARIABLE ANNUITY)
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
4. FEDERAL INCOME TAXES
The Company qualifies for federal income tax treatment granted to life
insurance companies under subchapter L of the Internal Revenue Service
Code (the "Code"). The operations of the Separate Account are part of
the total operations of the Company and are not taxed separately. The
Separate Account is not treated as a regulated investment company under
the Code.
5. FISCAL YEAR CHANGE
Effective December 31, 1999, the Separate Account changed its fiscal
year end from November 30 to December 31. Accordingly, the financial
statements include the results of operations for the transition period,
which are not necessarily indicative of operations for a full year.
Results for the comparable prior period are summarized below.
<TABLE>
<CAPTION>
One month ended
December 31, 1998
-----------------
<S> <C>
Total investment income $ 0
-------------
Net investment income (loss) (2,587,567)
Net realized gains from securities transactions 8,993,807
Change in net unrealized appreciation/depreciation
of investments 128,182,000
-------------
Increase in net assets from operations $ 134,588,240
=============
</TABLE>
6
<PAGE> 33
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- ----------------------------------------------
(a) Financial Statements
- ---------------------------
The following financial statements are included in Part B of the
Registration Statement:
Consolidated Financial Statements of Anchor National Life
Insurance Company for the fiscal year ended September 30, 1998.
Audited Transition Report of Anchor National Life Insurance
Company as of and for the three months ended December 31, 1998.
Audited Financial Statements of Variable Separate Account
(Portion Relating to the AMERICAN PATHWAY Variable Annuity) for
the one month ended December 31, 1999 and for the fiscal year
ended November 30, 1999.
(b) Exhibits
- ----------------
<TABLE>
<S> <C> <C>
(1) Resolutions Establishing Separate Account...... ***
(2) Custody Agreements............................. **
(3) (a) Distribution Contract...................... ***
(b) Selling Agreement.......................... ***
(4) Variable Annuity Contract...................... ***
(5) Application for Contract....................... ***
(6) Depositor - Corporate Documents
(a) Certificate of Incorporation............... ***
(b) By-Laws.................................... ***
(7) Reinsurance Contract........................... **
(8) Fund Participation Agreement................... ***
(9) Opinion of Counsel............................. ***
Consent of Counsel............................. ***
(10) Consent of Independent Accountants............. *
(11) Financial Statements Omitted from Item 23...... **
(12) Initial Capitalization Agreement............... **
(13) Performance Computations....................... **
(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............................. ****
(27) Financial Data Schedules....................... **
</TABLE>
* Filed Herewith
** Not Applicable
*** Filed on January 29, 1998, Post-Effective Amendments 27 and 20 to this
Registration Statement
**** Filed on January 27, 1997, Post-Effective Amendment 26 and 19 to this
Registration Statement
***** Filed on December 29, 1999, Post-Effective Amendment 29 and 22 to this
Registration Statement
Item 25. Directors and Officers of the Depositor
- -------------------------------------------------
The officers and directors of Anchor National Life Insurance
Company are listed below. Their principal business address is 1 SunAmerica
Center, Los Angeles, California 90067-6022, unless otherwise noted.
Name Position
- ---- --------
Eli Broad Chairman, President and
Chief Executive Officer
Jay S. Wintrob Director and Executive
Vice President
James R. Belardi Director and Senior Vice President
Jana W. Greer Director and Senior Vice President
Susan L. Harris Director, Senior Vice President
and Secretary
<PAGE> 34
N. Scott Gillis Director and Senior Vice President
Edwin R. Raquel Senior Vice President and Chief
Actuary
Mark H. Gamsin Director and Senior Vice President
Scott H. Richland Vice President
J. Franklin Grey Vice President
Edward P. Nolan* Vice President
Gregory M. Outcalt Senior Vice President and Controller
P. Daniel Demko, Jr. Vice President
Kevin J. Hart Vice President
David Bechtel Vice President and Treasurer
Stewart R. Polakov Vice President
- ------------------
* 88 Bradley Road, P.O. Box 4005, Woodbridge, Connecticut 06525
Item 26. Persons Controlled By or Under Common Control With Depositor or
- -------------------------------------------------------------------------
Registrant
- ----------
The Registrant is a separate account of Anchor National Life
Insurance Company (Depositor). For a complete listing and diagram of all persons
directly or indirectly controlled by or under common control with the Depositor
or Registrant, see Exhibit 14 of the Initial Registration Statement of Variable
Annuity Account Seven and Anchor National Life Insurance Company, (File Nos.
333-65965 and 811-09003)(N-4) and (333-65953)(S-1), which is incorporated herein
by reference. As of January 4, 1999, Anchor National became an indirect
wholly-owned subsidiary of American International Group, Inc. ("AIG"). An
organizational chart for AIG can be found in Form 10-K, SEC file number
001-08787 filed March 31, 1999.
Item 27. Number of Contract Owners
- ------------------------------------
As of December 31, 1999, the number of Contracts funded by the
Variable Separate Account was 34,105, of which 16,783 were owners of Qualified
Contracts and 17,322 were owners of Non-Qualified Contracts.
Item 28. Indemnification
- -------------------------
None.
Item 29. Principal Underwriter
- --------------------------------
SunAmerica Capital Services, Inc. serves as distributor to the
Registrant.
SunAmerica Capital Services, Inc. also acts as the principal underwriter
to the following:
- Presidential Variable Account One
- FS Variable Separate Account
- Variable Annuity Account One
- FS Variable Annuity Account One
- Variable Annuity Account Four
- Variable Annuity Account Five
- Variable Annuity Account Seven
- SunAmerica Income Funds
- SunAmerica Equity Funds
- SunAmerica Money Market Funds, Inc.
- Style Select Series, Inc.
- SunAmerica Strategic Investment Series, Inc.
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, General Counsel
and Assistant Secretary
Peter Harbeck Director
James Nichols Vice President
Susan L. Harris Secretary
Debbie Potash-Turner Controller
Net
Distribution Compensation
</TABLE>
<PAGE> 35
<TABLE>
Name of Discounts and on Redemption Brokerage
Distributor Commissions Annuitization Commission Commissions*
- ------------ -------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
SunAmerica None None None None
Capital
Services, Inc.
</TABLE>
- ------------------
* Distribution fee is paid by Anchor National Life Insurance Company.
<PAGE> 36
Item 30. Location of Accounts and Records
- --------------------------------------------
Anchor National Life Insurance Company, the Depositor for the
Registrant, is located at 1 SunAmerica Center, Los Angeles, California
90067-6022. SunAmerica Capital Services, Inc., the distributor of the Contracts,
is located at 733 Third Avenue, 4th Floor, New York, New York 10017. Each
maintains those accounts and records required to be maintained by it pursuant to
Section 31(a) of the Investment Company Act and the rules promulgated
thereunder.
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02100, maintains certain accounts and records pursuant to the
instructions of the Registrant.
Item 31. Management Services
- -----------------------------
Not Applicable.
Item 32. Undertakings
- ----------------------
Registrant undertakes to (1) file post-effective amendments to
this Registration Statement as frequently as is necessary to ensure that the
audited financial statements in the Registration Statement are never more than
16 months old for so long as payments under the variable annuity Contracts may
be accepted; (2) include either (A) as part of any application to purchase a
Contract offered by the prospectus forming a part of the Registration Statement,
a space that an applicant can check to request a Statement of Additional
Information, or (B) a postcard or similar written communication affixed to or
included in the Prospectus that the Applicant can remove to send for a Statement
of Additional Information; and (3) deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form N-4 promptly upon written or oral request.
Item 33. Representation
- ------------------------
a) The Company hereby represents that it is relying upon a No-Action Letter
issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been
complied with:
1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including
the prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in
connection with the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase the
contract specifically to bring the redemption restrictions imposed by
Section 403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed
statement acknowledging the participant's understanding of (1) the
restrictions on redemption imposed by Section 403(b)(11),
<PAGE> 37
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.
b) REPRESENTATION PURSUANT TO SECTION 26(e) OF THE INVESTMENT COMPANY ACT OF
1940: The Company and Registrant represent that the fees and charges to be
deducted under the variable annuity contract described in the prospectus
contained in this registration statement are, in the aggregate, reasonable
in relation to the services rendered, the expenses expected to be incurred,
and the risks assumed in connection with the contract.
<PAGE> 38
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 24 day of March, 2000.
VARIABLE SEPARATE ACCOUNT
(Registrant)
By: ANCHOR NATIONAL LIFE INSURANCE COMPANY
(Depositor)
By: /S/ JAY S. WINTROB
----------------------------------------
Jay S. Wintrob
Executive Vice President
By: ANCHOR NATIONAL LIFE INSURANCE COMPANY
(Depositor, on behalf of itself and
Registrant)
By: /S/ JAY S. WINTROB
----------------------------------------
Jay S. Wintrob
Executive Vice President
As required by the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed by the following persons
in the capacity and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
ELI BROAD* President, Chief
- ------------------------ Executive Officer and
Eli Broad Chairman of the Board
(Principal Executive
Officer)
MARC H. GAMSIN* Senior Vice President
- ------------------------ and Director
Marc H. Gamsin
N. SCOTT GILLIS* Senior Vice President
- ------------------------ and Director
N. Scott Gillis
JAMES R. BELARDI* Director
- ------------------------
James R. Belardi
</TABLE>
<PAGE> 39
<TABLE>
<S> <C> <C>
JANA W. GREER* Director
- ------------------------
Jana W. Greer
/S/ SUSAN L. HARRIS Director March 24, 2000
- ------------------------
Susan L. Harris
JAY S. WINTROB* Director
- ------------------------
Jay S. Wintrob
</TABLE>
* By: /S/ SUSAN L. HARRIS Attorney-in-Fact
----------------------
Susan L. Harris
Date: March 24, 2000
** KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below hereby constitutes and appoints SUSAN L. HARRIS AND CHRISTINE A. NIXON or
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
as fully to all intents as he might or could do in person, including
specifically, but without limiting the generality of foregoing, to (i) take any
action to comply with any rules, regulations or requirements of the Securities
and Exchange Commission under the federal securities laws; (ii) make
application for and secure any exemptions from the federal securities laws;
(iii) register additional annuity contracts under the federal securities laws,
if registration is deemed necessary. The undersigned hereby ratifies and
confirms all that said attorneys-in-fact and agents or any of them, or their
substitutes, shall do or cause to be done by virtue thereof.
**/s/ GREGORY M. OUTCALT Senior Vice President March 24, 2000
- ------------------------ and Controller
Gregory M. Outcalt
<PAGE> 40
EXHIBIT INDEX
Exhibit Description
- ------- -----------
Exhibit 10 Consent of Independent Accountants
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Registration Statement on
Form N-4 for Variable Separate Account (Portion Relating to the PATHWAY
Variable Annuity) of Anchor National Life Insurance Company of our report dated
November 19, 1999 and November 9, 1998, relating to the financial statements of
Anchor National Life Insurance Company, and the use of our report dated
March 3, 2000, relating to the financial statements of Variable Separate
Account (Portion Relating to the PATHWAY Variable Annuity), which appear in
such Statement of Additional Information. We also consent to the incorporation
by reference of our report dated November 9, 1998, relating to the financial
statements of Anchor National Life Insurance Company, into the Prospectus which
constitutes part of this Registration Statement. We also consent to the
reference to us under the heading "Financial Statements" in such Statement of
Additional Information.
PricewaterhouseCoopers LLP
Los Angeles, California
March 24, 2000
